Fuentes Announces Legislation Aimed at Reducing Costs of Health Care Services

(TRENTON) – Assemblyman Angel Fuentes (D-Camden/Gloucester) has introduced legislation to create a five-year pilot program that allows private entities to fund public policy initiatives through pay-for-success contracts known as a Social Impact Bond.

Assemblyman Fuentes’ bill A3289 seeks to attract private funding for public programs aimed at reducing the cost of providing healthcare to low-income and uninsured residents. The Economic Development Authority (EDA) will administer the program and oversee a study commission established by the bill. If the cost-saving goals outlined by the study commission are met, backers will receive a return on their investment.

“Providing adequate healthcare to our neediest residents can be costly to service providers, governments and residents,” said Assemblyman Fuentes. “This bill seeks to reduce healthcare costs in the long run while increasing the wellness of our residents without raising taxes.”

The study commission will aid the EDA by issuing annual reports detailing the progress of the program, and determining a non-profit to receive the investment funds from private investors.

Social Impact Bonds (SIB) have been used in Britain to fund OneService, a non-profit committed to reducing recidivism and helping recent parolees adjust to life outside of prison. In August, New York City announced a partnership with Goldman Sachs for $9.6 million over four years to see social service provider MDRC’s “Adolescent Behavioral Learning Experience” – a program designed to reduce adolescent recidivism rates – implemented at Rikers Island.

If recidivism among adolescents at the prison is not reduced by more than 10%, Goldman Sachs receives no return on its investment, with no public funds jeopardized. However, Goldman Sachs stands to realize profits of up to $2.1 million if recidivism is reduced by 20% and the city saves over $20 million in incarceration costs.

“This could revolutionize the way we fund social change, shifting the financial risk of implementing these programs from the public to private investors,” added Assemblyman Fuentes. “If we can reduce the shared cost of healthcare, everyone wins. At the same time, we’re improving people’s health and well-being while saving taxpayer money.”

Assemblyman Fuentes’ legislation will be the first of its kind to fund healthcare initiatives through Social Impact Bonds. The State of Massachusetts is exploring two bonds – one to help juveniles transition from the justice system to adult life, and the other to house the chronically homeless. These pilots could open the door for Social Impact Bonds to generate capital for a number of initiatives throughout our state and across the country.