By Todd Young and John Delaney
arguments about funding levels.
The right accuses the left of spending inefficiently, while the left shoots back that the right doesn’t care enough to spend more. For generations, politicians of every political stripe have measured compassion by inputs into our social safety net, rather than gauging the outcomes of those Americans who have become trapped in it.
Washington’s lack of focus on results, as much as anything, explains why our nation’s social programs have not made further progress in addressing perennial challenges that face low-income and at-risk Americans — challenges such as chronic homelessness, recidivism, reintegrating the long-term unemployed into the work force, and myriad public health issues. Today, we have an opportunity to recalibrate our focus on successful outcomes, while simultaneously driving more resources to these challenges and saving taxpayer money.
It might sound far-fetched, even a bit contradictory — how do you spend more and save more at the same time? Through the development of a new policy innovation called a social-impact bond, it’s possible.
First developed in the United Kingdom within the past decade, social-impact bonds are now widely used in that country. Slowly, they are being adopted at the state and local level in the United States. A few weeks ago, we introduced — with broad bipartisan support — the first detailed legislative proposal to adapt social-impact bonds for use at the federal level: the Social Impact Bond Act.
While not strictly a bond in the traditional rate-and-term sense, a social-impact bond would unleash private-sector working capital to expand existing, scientifically proven social interventions. As with traditional bonds, the principal would typically be repaid by the government to private-sector investors with a modest return on investment. Here’s the catch: The evidence-based interventions that we propose scaling up must drive government costs down, and in every instance an independent evaluator must validate that the intervention actually delivers to beneficiaries agreed upon positive social outcomes before investor principal or interest is returned. In short, the government only pays for success, and only pays investors out of realized taxpayer savings.
Consider the real-world example of the Nurse-Family Partnership program, a nonprofit program established in the 1970s that sends licensed nurses for home visits with pregnant women on Medicaid. The nurses work with the expectant mother on prenatal care and screenings, and continue to visit the family for regular checkups until the child is two years old. Four decades of rigorously evaluated data on this program tells us that served children are more likely to be healthier from birth through adolescence. Consequently, beneficiaries’ expected Medicaid costs are dramatically reduced.
A handful of states have looked at using social-impact bonds to expand Nurse-Family Partnership from their larger cities to their statewide population. Let’s approximate that the projected cost of running the program in a particular state is $10,000 per child, but the projected Medicaid savings is $20,000 per child. A social-impact bond would raise the $10,000 in working capital from private investors, use the money to expand and administer the program, and then evaluate the results. If the desired outcomes of healthier children and lowered Medicaid costs were achieved, the government could repay the investors $11,000 per child (a healthy 10 percent return) and still show net savings of $9,000 per child (a whopping 45 percent reduction in spending).
The result: A renewed focus on outcomes that actually improve lives, more resources driven to our nation’s pressing social challenges, and taxpayer savings to boot. Every American comes out a winner.
Social-impact bonds have the power to fundamentally transform our nation’s social safety net. They will improve outcomes for citizens, drive innovation in social services, and save taxpayer money — a triple bottom line. While innovative states and cities are already finding ways to use them, our legislative proposal aims to entice investors to scale up programs that work by simultaneously capturing savings at the federal, state and local levels — savings which can be used to reward positive outcomes.
We invite our colleagues, Republican and Democrat, to shift our collective focus from arbitrary inputs to successful outcomes, and join in this unique opportunity to meaningfully improve lives while advancing fiscal responsibility.
Rep. Todd Young is an Indiana Republican. Rep. John Delaney is a Maryland Democrat.