Ethical Dilemmas in Nonprofit Healthcare Funding
"My wife and I managed to raise the funds to cover her treatment, but situations like Theresa were common every day, where people had the wrong diseases. And by the 'wrong diseases,' I mean conditions for which funding hadn't been earmarked. Earmarking may seem like smart business or smart philanthropy on paper, but it doesn't make any sense when you're looking the person in the eye. Yet, this is how we deliver health care to millions of people the world over."
~ Dr. Andrew Bastawrous
What is Earmarking?
According to the Internal Revenue Service (IRS), a grant by a private foundation is Earmarked if it’s, “given under an agreement (oral or written) that the grant will be used for specific purposes.”At a basic level, the process of earmarking involves separating all or a portion of total revenue—or revenue from a tax or group of taxes—and allocating it to a designated purpose.
Why do Nonprofits Use Earmarked Funds?
Nonprofit organizations use earmarks to receive government aid that’s difficult to get through traditional competitive bidding.However, concern has been raised that earmarks are a means for members of Congress and private businesses to direct money toward personal projects. For-profit companies have created new charities for the sole purpose of receiving federal earmarked grants. In a more subtle manner, some companies have been caught channeling money to businesses through established nonprofits (especially universities).
Pablo Eisenberg, a senior fellow at the Georgetown Public Policy Institute, explains that, “Nonprofit groups are to be created only to promote public interest, not just as receptacles to accept government aid for corporate interests.” Evidently, charitable groups that channel large proportions of their earmarked funds to for-profit companies are not supporting public benefit.
Earmarking for Health: From Theory to Practice
The World Health Organization (WHO) explains that earmarking is increasingly used as an instrument of public health policy and has become a large part of the global discussion on domestic resource mobilization for health—especially for countries transitioning from donor support to achieve health system goals.
Despite the prevalence of earmarked funds in global health policy, few studies have examined empirical evidence of earmarking policies and which country contexts are conducive to the beneficial use of earmarking.
To this end, the WHO developed the paper Earmarking for Health: From Theory to Practice in part as a tool to help authorities consider important factors before deciding whether to implement earmarking.
As of 2017, at least 80 countries earmark for health
Despite the prevalence of earmarked funds in global health policy, few studies have examined empirical evidence of earmarking policies and which country contexts are conducive to the beneficial use of earmarking.
To this end, the WHO developed the paper Earmarking for Health: From Theory to Practice in part as a tool to help authorities consider important factors before deciding whether to implement earmarking.
What the WHO Research Finds:
- The success of earmarking in healthcare depends on a country's political priorities and budget processes
- In most cases, earmarked funds are unlikely to bring a significant and sustained increase in the priority placed on health in a government's federal budget
- Earmarking funds introduces rigidity into the budget process for philanthropic organizations (which can lead to severe inefficiencies)
- Earmarked funds are most effective with "broad expenditure purposes" and "more flexible revenue-expenditure links" put in place. This way, philanthropic organizations have the ability to allocate their funds based on the needs of their patients
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