People with Intellectual and Developmental Disabilities (I/DD), an umbrella term that includes severe chronic disabilities that can be physical, cognitive, or both, consume half of all Medicaid spending in the U.S. Yet this fact is rarely brought up in debates over health care costs and ways to innovate within the health and human services system.

Government agencies have grown comfortable with a systematic underfunding of human services. This may be because they do not understand the true costs of providing care to people with complex medical and social service needs. Supplemental funding from foundations and other private sources on which they have relied to meet some of their needs is drying up, and state budget are barely growing. A recent study of funding trends in Pennsylvania found that between FY1993-1994 and FY2013-2014, the general state budget increased by about 90%, but funding for intellectual disability services increased by only 23-24% (study available by request made to www.par.net).

A group of I/DD private provider agencies recently reported that for the years 2012, 2013, and 2014, roughly one-third of them had expenses that exceeded revenues. An agency that experiences such losses must subsidize the inadequate funding in some manner. Some agencies have dipped into their reserves. This is not a sustainable way of conducting business, and it puts needy people -- the I/DD population--at risk.

The I/DD industry is not a healthy one for providers. It operates with a 1.6% margin on an annual basis, and it has no control over its prices. It can't raise taxes like a school district, and it can't increase prices like a hospital. It has to rely on the kindness of governmental entities, which has been notably lacking over the past 20 years.

A free market approach and an alignment of the I/DD sector with health and human services programs that permit providers set their own prices may be the only innovation that will sustain the field. Unless providers are able to gain some control over the pricing of their services and unless governmental funders recognize the health issues that affect individuals with intellectual disability, providers will not succeed, and individuals with intellectual disability will lose supports and services. While the industry is not yet dead, it may be in the throes of a terminal condition, which could put thousands of the most vulnerable people at risk in the U.S.

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