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President’s Message

The Kaiser Family Foundation’s Role in Today’s Health Care System

Drew E. Altman, Ph.D., President and Chief Executive Officer. Updated: May 2013  

Also read Drew Altman’s essay on Kaiser and the Affordable Care Act.

This essay discusses the choices we have made about our mission and our somewhat unorthodox approach to philanthropy.  It is a revised version of an essay published in the journal Health Affairs in 1998.  Of course, I believe deeply in what we are doing at Kaiser, but I offer this and update it every few years for interested readers with the caveat that our choices are not necessarily the right ones for others.  Each foundation has a different set of opportunities by virtue of its history and donor intent, its size, geographic location, the character of its board and staff leadership, and other factors.  I have always believed that our society is best served by having foundations that do different things.

First, a few basics about foundations, the constraints under which they operate, and the choices they have.

Foundation Primer

A private foundation is an organization endowed with a substantial sum of money left by a wealthy individual or family to be used for a philanthropic or charitable purpose.  That purpose typically is quite broad, and the recorded intent of the donor, somewhat like the U.S. Constitution, is living language that must be interpreted by successive generations of foundation executives and trustees in light of changing circumstances and opportunities.

Private foundations are established to advance the philanthropic interests of the donor.  But of course, establishing a private foundation is also one of several options available to wealthy persons under the tax code to protect some of their money from taxation.  So that wealthy persons cannot use the establishment of a private foundation to protect their wealth from the Internal Revenue Service (IRS), the law requires that foundations annually spend an amount equal to five percent of their overall assets (at Kaiser we spend much more).  For example, a foundation with $100 million in assets would be required to pay out $5 million per year for philanthropic purposes.  If that sounds low, note that most foundations seek to maintain the real value of their assets to benefit society in perpetuity.  This requires earning a return on invested assets sufficient to cover the five percent annual payout requirement, money management costs, and inflation.  This is achievable over a long period of time but not easily.  Although we have chosen to spend substantially more than five percent at Kaiser since we established the modern day KFF in 1991 — and as an operating foundation, we actually have a lower IRS payout requirement —  that threshold is not unreasonable.  As a more mature organization, in 2013 we are more focused on sustaining our endowment.  We benefit from support from many grant-making foundations to supplement our own resources.

Contrary to what (in my experience) is popular perception, the law gives private foundations wide latitude in many areas, including work on public policy.  The most important restrictions are that foundations not engage in activities aimed at influencing elections or in direct lobbying to influence legislation.  However, foundations have virtually unrestricted freedom to fund and/or provide non-partisan information, analysis and research on policy issues.  Foundations can be liberal, conservative, neutral or eclectic.  This is as it should be: foundations are an important part of an independent sector that should represent the full range of views and beliefs in our society.

The general image of foundations in most people’s minds is that of grantmakers who review proposals, make grants (usually to universities, community organizations, or other nonprofits), and monitor those grants.  Viewed as funders, foundations have generally been expected to be fairly quiet— if not invisible— supporters of the good works of others.  The image is so firmly rooted that foundations that depart from the more conventional style often raise eyebrows in the foundation world and elsewhere, though less so in recent years when more foundations have sought a higher profile.  In fact, however, foundations have a wide range of choices for how they accomplish their missions.  They can make grants (and in making them, open themselves up to all applicants or limit themselves exclusively to solicited or commissioned work); they can conduct research themselves or run their own programs; and they can be as visible or even controversial as they deem useful to accomplishing the goals that their board and staff set for the organization.  There are also a variety of new forms of philanthropy with new names, such as “venture philanthropy.”  But many foundations have been in the business of incubating and rigorously evaluating new ventures since I have been in the field.  Some even take governance positions with the ventures they are involved with.  To me this has more to do with new players entering the field — a very welcome development — and new names for old ideas, than new inventions in philanthropy.

Foundations have the latitude to make a wide range of choices as circumstances and opportunities change, and in no sector of our society have circumstances and opportunities been changing faster than in health and health care.

How Kaiser Determined Its Strategic Direction

This was the challenge that we confronted when we remade the Kaiser Family Foundation in the early 1990s.  At that time we asked one overriding question: “How can we best have an impact with (then) about $30 million to spend each year in a rapidly changing, trillion-dollar healthcare system?”  Nor were we large enough to try to change things through direct action — by undertaking large, multi-site demonstration programs, supporting large numbers of community organizations, or bankrolling the development of new independent national institutions — as some larger foundations do.  With a $2.6 trillion health system now, our strategy from 20 years ago is even more relevant.

Just as important, not only was the U.S. health care system bigger than it was in the 1980s, but it was a radically different one as well.  When I was a vice president at the Robert Wood Johnson Foundation in the early 1980s, we saw ourselves as key players in a largely not-for-profit health care community that had great interest in working with the philanthropic community, and in the demonstration, research, and training projects that foundations funded.  Those days are largely gone.  Today’s health care system is dominated by large commercial interests driven by investors’ demand for profit by nonprofits almost equally focused on revenues, and by government policy decisions that often are shaped by larger ideological, political, and budgetary concerns.  For better and worse, health care has become big money and big politics, and health foundations initially struggled to adapt.

We saw a glaring need in this changing health care system for an independent, trusted, and credible source of information that could provide analysis, balanced discussion, and expert commentary in a field otherwise dominated by large interests, and we have tried to play that role.  While foundations certainly have agendas — ours is to help improve health policies and programs for people in greatest need — it is our independence, our lack of a commercial or political interest, and our efforts to provide the most accurate information possible (both from us and others) that gives us an opportunity to play a special role.  We maintain a steadfast commitment to never take a position on a policy issue or to become a combatant ourselves on one side or the other in the “health care wars.”

The Foundation’s Strategy

From this basic decision about a strategic direction came most of the characteristics of the Kaiser Family Foundation today.

Information

We are in the information, not the grantmaking business.  While most foundations see their principal product as grants, we see ours as information — from the most sophisticated research, to basic facts and numbers, to the highest quality health journalism, to information young people can use to protect their health.

We focus our work on the major health policy issues facing the nation.  This means that, unlike most foundations, we do not completely control our own agenda.  We need to “be there” with information and analysis and timely journalism on whatever major health policy issues are on the national agenda.  However, over time, we have also chosen to focus on other issues that are critically important but may not decide elections or make or break budgets or appear as frequently on the national news — such as HIV/AIDS and minority health.  We have also chosen to make a major commitment to address the health issues facing youth, primarily through information campaigns conducted in partnership with entertainment media organizations and increasingly, a broad range of other partners.

Overall, we try to inform discussion and debate on major issues that affect millions of people, and to elevate the national level of debate on health issues.  Our approach is almost equal parts policy research and communications: developing new information on national health issues, synthesizing the best information from others, and helping to explain health policy issues to an understandably confused public ourselves and with news organization partners.

When you step back from our many projects and programs, we basically do four things: we are a producer of policy analysis and research ourselves, including both our policy research and our polling and survey research operations; we are a “go to” clearinghouse and synthesizer of news and information for the health policy community; we organize and help run large-scale public health information campaigns, both in the U.S. and around the world; and we operate a major health news service dedicated to producing the best in-depth coverage of health care and health policy called Kaiser Health News (KHN), the nation’s first not-for-profit health policy news service. KHN is a foundation program and its journalists are foundation employees, but it is also a fully credentialed news service and operates with full editorial independence. For many years we were primarily a U.S.-focused health foundation with a special interest in South Africa.  Today we are a U.S.-focused foundation with a growing global role that focuses on U.S. global health policy.

Internal Culture

We are a professional organization, staffed by experts in health policy, public opinion research, media, communications, journalism, and other areas in which we operate.  To encourage an entrepreneurial spirit and avoid the internal “fiefdoms” that have historically been a problem in many foundations, we do not have separate budgets for program areas; our uncommitted funds each year go to the best opportunities we can identify across all of our program interests.  This has created an entrepreneurial environment which has generally served us well.

We also have a very actively involved Board of Trustees.  The Trustees provide oversight, approve all major funding and investment decisions, and work with the CEO and staff to set directions and determine strategy.  Board members serve two five-year terms.  Because we are an operating foundation, our Trustees have an extra responsibility; we are directly accountable for the work that we do.  We also work to keep past Trustees involved with KFF: for example, by inviting them to retreat meetings.

Audiences

We have a clear sense of audience: policymakers, opinion leaders and the media are our core audience, and we try to reach the general public through our news service. We work to put the fruits of health services and health policy research into formats that our audiences can readily digest.

While we produce a lot of our own research and analysis, I believe that our most important contribution to the research community is as a representative, translator, and an information broker.  Like the adage about the tree falling in the forest, studies that are only read by those of us in the policy research community who follow a particular issue will not have much impact. and most of the most relevant and timely research in health policy is never published in journals, but can be found instead in policy reports and other publications and communications put out by a small number of organizations in our field. We need more and better research on health issues to be sure, but even more, we need better communication of the research and policy analysis that is done.

For this reason, the Kaiser Family Foundation places a special premium on communications and uses a wide range of strategies to cut through the information overload in health.  These include operating a variety of large-scale online information resources, including kff.org, our main organizational website, kaiserhealthnews.org, our free, health news and information service, as well as several specialized websites.  Our overall goal is to provide free access to the same kind of information and events insiders have to national and global audiences interested in health policy.

Our philosophy has always been to integrate communications into our program activities. So communication is everybody’s job at our Foundation and is viewed as a central part of everything we do.  The job of drafting a press release, answering a reporter’s question, designing public-service campaigns or putting something on the web is not something simply handed off to a communications officer at the end of the hall; everybody is involved.

Profile

We have sought a somewhat higher profile than many other foundations have, though a few others have followed suit in recent years.  It is a fact of life that if policymakers and persons in the media don’t know who you are, they are not likely to pay much attention to what you do or say.  A clear identity was also especially important in our case to distinguish ourselves from Kaiser Permanente, with whom we have no connection, except for the founding family name we share and the occasional misdirected letters I get from the HMO’s enrollees — both disgruntled and pleased.

In 2003 we completed construction of a new building in Washington, D.C., which is adding tremendously to our ability to communicate about health issues.  The building was financed with very low-interest, AAA rated tax-exempt District of Columbia bonds.  It is located in downtown Washington, D.C. just a few blocks from the White House and the National Press Club.  The new building is the home of our Washington, D.C. offices and Washington, D.C.-based staff; our Barbara Jordan Conference Center, named after our former Trustee, which we use to facilitate discussion and debate about health issues; a fully equipped studio with the latest in broadcasting and webcasting technology; and an interactive health exhibit lobby — a street-level space designed to provide visitors with up-to-the-minute information on our programs and information.  We are making our conference and broadcast facilities available to other non-profit organizations with no facilities or technical fees charged.

Thousands of events have already been held in the building since we opened it in late March of 2003.

Style

To accomplish our goal of developing the Kaiser Family Foundation as a special and, we hope, needed information resource, we became an operating foundation.  This means that foundation staff direct most of our major programs and conduct much of the work in-house.  For example, foundation staff direct the Kaiser Commission on Medicaid and the Uninsured, our fellowship programs for health journalists, our media partnerships with both entertainment and news organizations, and KHN, which is a Foundation program staffed by Foundation employees, but is editorially independent.  Likewise, the many national surveys and polls on health issues we conduct each year are designed and analyzed in house, sometimes with the involvement of outside partners.  This is fairly typical of our operating style.  We develop and manage Foundation programs and conduct much of the work in-house; we work with outside partners; and we commission work from outside experts through contracts.

We became an operating foundation because doing so was inherent in achieving the most basic goal we set out to accomplish when we began to chart a new direction for the foundation in the early 1990s.  The goal was to build an institution which itself played a special and hopefully permanent role as a trusted source of information on the national health care scene: This is the very definition of direct charitable activity under IRS rules.  Every operating program we create at Kaiser represents an investment in the development of this organizational capacity, which continues today.  Our purpose was and is to build an institution we felt was needed as a counterweight to health care’s vested interests and as a data-based voice for people in a health system driven by money and politics.

Media Partnerships

We have developed a broad range of partnerships with media organizations, from The Washington Post, to National Public Radio, to USA Today, to Viacom, MTV, BET, Univision, and Fox.  With news organizations, we undertake joint, in-depth, special projects such as our polls with The Washington Post, with whom we have conducted twenty-one major survey projects.  In our projects with The Post and NPR, for example, the Foundation and the news organization pick the topics and design the survey instruments together, and then jointly analyze the results.  Then, as they should, the news organizations have editorial control over the content of their reports and cover the results as they see fit, but always substantially.

Our partnerships with entertainment organizations combine our research capacity, subject knowledge, and ability to provide information through toll-free telephone numbers and websites with the entertainment organizations production capacity, creative talent, and audience reach.  These partnerships have involved more than a billion dollars in media commitments since we began.  They have won multiple Emmy and Peabody awards.  They have also gone global.  We have helped to organize and run an effort to mobilize media around the world to do much more on HIV/AIDS called the Global Media AIDS Initiative, as well as comprehensive regional media campaigns involving hundreds of media organizations in Africa, the Caribbean, and Russia/Ukraine.

One of the main ways in which Kaiser Health News distributes its content is through partnerships with news organizations.  KHN, which launched June 1 of 2009, now distributes stories virtually every day through major national news organizations with whom it works, including The Washington Post, National Public Radio, The New York TimesUSA Today, and many many more.

Assessing Kaiser’s Role

I am often asked how we know whether our efforts are having an impact.  In some cases, it is relatively easy to judge.  For example, it is clear that the Kaiser Commission on Medicaid and the Uninsured has become an authoritative source of analysis and information on health care for low-income people and has played a significant role in debates about these issues, or that our Daily Health Policy Report on KHN is widely read and valued.  In most cases, however, success or failure is more difficult to assess.

Foundations are not accountable in the traditional sense.  They do not make a profit or a loss that can be evaluated by investors.  Unlike government agencies, they are not constantly scrutinized by the press or by legislative bodies that must approve their programs and budgets, though in a world of instant feedback on the web and in the blogs, outside scrutiny has certainly increased.  This difference gives foundations their freedom to take risks and to try new things not generally possible in the commercial or public sectors.  But it also means that accountability is essentially self-imposed; the evaluation of performance and impact is a judgment call that must be made by a foundation’s board and staff.  The Kaiser Family Foundation is trying to play a special role as an independent, trusted source of information and analysis on the national health care scene, and we evaluate our performance against that objective.  We believe that role is sorely needed in the health care system today, and, based on the reception our work receives, we are convinced that we are on the right course for us.

It bears noting, however, that choosing to be an information provider has real implications for a foundation.  First, information is costly; there is a trade-off between an emphasis on grants and an emphasis on information, because both take resources.  Analysts, policy and media and polling experts, web experts and journalists staffing a full-fledged news service all need to be paid, and it takes a real investment in in-house staff expertise to know what information to produce, how to organize it, and how to get it into the right hands.  Second, even the best analysis and most balanced report can be unwelcome by those who have a special interest or an ideological point of view.  We are, I would like to believe, influential and respected.  But we may not be loved in the same way traditional grantmakers can be, because it is in the very nature of our mission to sometimes be inconvenient to all sides.  In terms of the potential for both attention and criticism, there is a big difference between being the source of information and analysis and front page stories yourself and funding the work of others.  It is the difference between direct and indirect accountability.  For foundations interested in moving in a direction similar to ours, the willingness to invest in staff capacity and expertise and an understanding that the role by its nature can bring criticism from time to time are necessary preconditions for success and peace of mind.

Finally, a philosophical comment on foundations and their role in health.  An insiders’ debate has been bubbling just beneath the surface for years between those who believe that foundations should be quiet charities that support the good work of others and those who believe that foundations should play a more proactive role in whatever areas they choose to work and with whatever operating styles they chose to have.  I believe that the nation is best served by having a strong independent sector and that foundations should take leadership in that sector.  Nonpartisan does not mean timid or invisible, and there is no way to play a meaningful role in today’s health care system without occasionally raising someone’s ire.  I also believe that society is best served by having foundations of different kinds, with different philosophies and program agendas.

The need for an aggressive independent sector and for a strong foundation role is perhaps greater in health than in any other area.  In no field is there a greater need for an independent voice that is not driven by the desire to make money or to win votes.  In no field would a role as simply a charity be less useful; foundation funds are a drop in the bucket in today’s $2+ trillion health care system.

At the same time, it is also important to be realistic about what foundations can and cannot achieve in today’s health care system.  During the years I have both worked in the foundation world and viewed it from the outside, I have often felt that foundations are overly impressed with their own importance.  In health, the challenge to foundations is to understand that we are bit players in a giant health care system, but also that we can have a unique and vitally important role to play.