Our cover story this issue is an investigation of ResCare, a national corporate chain that runs group homes for the disabled and the mentally retarded. As Eyal Press and Jennifer Washburn document in sometimes gruesome detail, deinstitutionalization has come full circle, from notorious state-run warehouses like Willowbrook, to community institutions run by nonprofits, and now, back to mini-warehouses run by corporations for the benefit of shareholders. An exposé of the scandal of group homes in one community, Washington, D.C., has just won The Washington Post the Pulitzer Prize. As writers Press and Washburn reveal, the scandal is national.
There are two subtexts to this story, which we intend to continue pursuing. The first is the displacement of community institutions that serve a variety of health, education, and criminal justice needs, by for-profit corporations. These institutions are more than service agencies. They perform a civic and advocacy role. Although the nonprofit and charitable sector has its share of frauds and incompetents, on the whole it is an important part of America's civic infrastructure. As hospitals, group health plans, nursing homes, public schools, child care programs, and even prisons become targets for corporate profiteering, one of the lesser-noticed casualties is the denuding of civic institutions, at a time when political and civic participation are dwindling due to other causes as well. Another hidden cost is the demoralization of people whose lifework is hands-on caring for vulnerable populations.
In past years, the Prospect has addressed the health of America's civil and philanthropic institutions in an occasional series titled "The Tocqueville Files." Beginning with this issue, we will resume regular coverage of these questions, thanks to two generous grants, from the Nathan Cummings Foundation and an anonymous donor. This coverage will explore charity, philanthropy, the new wealth and its distribution, the role of nonprofits and for-profits, and the health of civil society. Our earlier series began with a seminal article by Robert Putman, "The Strange Disappearance of Civic America" [TAP, Winter 1996], which became part of his forthcoming book, Bowling Alone. We will soon be publishing a short adaptation of that book, and commentaries.
The other subtext of the ResCare story is the collusion of often conservative state governments and ideologues in the granting of necessarily public responsibilities to private entrepreneurs who are willing to slash costs at the expense of clients and who are less directly accountable to public oversight. Press and Washburn recount how the state of Indiana and ResCare agreed to a reimbursement rate for care of the retarded so low that it drove out of the market more conscientious and ethical community providers. This is the price of privatization coupled with budget austerity. Something similar has occurred as Medicare reimbursements to hospitals have been cut back, as part of a conservative-led federal budget balance. Patients experience doctors and nurses with less time to treat them, and hospital stays that are sometimes dangerously foreshortened. For-profit HMOs, with fewer ethical constraints than their nonprofit predecessors, are more than happy to expand market share by serving as the instruments of this ruthless cost-cutting. The promise that institutions will be rendered accountable by competitive discipline through the consumer's ability to "shop around" is a fantasy; since all providers are laboring under the same cost constraints, patients are often locked into their current health plan by dint of pre-existing medical conditions or employer provision of insurance. And of course, severely disabled people are hardly sovereign consumers. From the corporate point of view, the beauty is that accountability is diffused. The consumer doesn't really know whom to blame.
The next great for-profit bonanza is public education, where Wall Street is fairly slavering over the prospect of taking over a $300-billion "industry." Though the political right uses inner-city kids as poster children for the voucher crusade--voucher advocate Clint Bolick likes to declaim, "Let my people go"--the eventual goal, as sponsors make clear, is to voucherize all of public education. But if you marry the current craze for standardized testing to vouchers, something nasty intrudes. A difficult kid is harder to teach than an easy one. For-profit voucher schools want repeat business, they want to maximize profits for their shareholders, and they want to demonstrate measurable improvements in outcomes. In the same way that for-profit HMOs target healthier pools of subscribers, it will be irresistible for corporate-owned voucher schools to target easier kids, who will consume fewer resources and yield higher "performance" in the form of test scores. Just as "risk selection" became a key business strategy of for-profit health plans, marketing to easier kids is inherent in the logic of for-profit education. This will leave the public system, stripped of resources, with the hardest cases, and the for-profits to scornfully point to more public "failures."
The more that nonprofit institutions have to compete with for-profits, the more they start emulating the language and norms of the marketplace. It is one thing for nonprofits to become more "businesslike," in the sense of being run more competently. It is quite another to maximize income and "market share" at the expense of those being served. The moral of the story is that certain institutions, most notably in health and education, need to be nonprofit or public because they inherently don't lend themselves to market forms of discipline. They need to be community-based rather than corporate, more directly accountable to government and community scrutiny, and adequately funded. ¤