The Value of Funding Social Drivers of Health

By | June 6, 2023

As we continue to focus on delivering health in a manner that is equitable, we have come to realize the importance of social drivers of health, known as those diseases of life, that occur outside of the physiologic realm and impact an individual’s health and wellness. Presently, investments in methodologies that address these conditions have revolved around governmental funded social services and philanthropy.

However, there are conceptual models of financing being discussed through more of a free market approach. The idea of Social Impact Bonds are not new, but now the idea has spread to Social Drivers of Health Bonds. These bonds would work as any other bond investment with the returns being driven by the decrease in cost to a set population. At the root of this idea is the notion that financing for social good may be accomplished by methodologies other than social taxation.

In such a model, the fund would give a return based on the improvement of costs. For this to be accomplished, the population of those impacted by the new models of services would need to be large enough and with elevated costs. The Medicaid population is one such situation. Though conceptually there appears to be merit in such a design, it is complicated by many factors.

Medicaid services are delivered by private sector managed care organizations (MCOs), so one could view these bonds as a tax on them. However, if the MCOs were allowed to be the organizations raising the bonds, it would be their choice on how to finance their offered services, and in fact, might be viewed in a manner to diversify their financial risk, even at the expense of possible profits.

The more difficult situation is how do you attribute the benefit of services to the lowering of costs when many interventions are implemented simultaneously? For example, when one is addressing issues such as transportation, poor housing conditions, health literacy, etc., all at the same time, it is hard to know which intervention itself created the most value versus the holistic approach itself. This situation would lead to the dilemma of identifying whether the funding of services through these bonds would really create a return? Which, in theory, should be the dollars raised to fund the financial structure. Additionally, in theory, investing in social services would have a much greater impact on the entire community not just those under the Medicaid plan. Bottom line, it would have a big impact on the greater good!

Regardless of the difficulties, or even if Social Drivers of Health Bonds do take root in our financing models, the positive aspect of the conversation and innovation is steeped in our desire to figure out not only what is needed, but also how to finance it. When we continue to manage the polarity of health equity, social needs, communalism vs individualism, and the private sector, it is reassuring to see that the focus on financing such activities is being discussed in an innovative manner.

For us to be successful, both the health outputs of designed models and the financing must be coupled in a manner that meets the needs of those served while maintaining the balance of all such polarities. Let us continue to be creative on the financing component of social needs.