Unforeseen Consequences: Medicaid and the Funding of Nonprofit Service Organizations

Medicaid reimbursements have become a key source of funding for nonprofit social service organizations operating outside the medical care sector, as well as an important tool for states seeking resources to fund social service programs within a devolving safety net. Drawing on unique survey data of more than one thousand nonprofit social service agencies in seven urban and rural communities, this article examines Medicaid funding of nonprofit social service organizations that target programs at working-age, nondisabled adults. We find that about one-quarter of nonprofit service organizations-mostly providers offering substance abuse and mental health treatment in conjunction with other services-report receiving Medicaid reimbursements, although very few are overly reliant on these funds. We also find Medicaid-funded social service nonprofits to be less accessible to residents of high-poverty neighborhoods or areas with concentrations of black or Hispanic residents than to residents of more affluent and white communities. We should expect that the role of Medicaid within the nonprofit social service sector will shift in the next few years, however, as states grapple with persistent budgetary pressures, rising Medicaid costs, and decisions to participate in the Medicaid expansion provisions contained within the 2010 Patient Protection and Affordable Care Act.