The August Review

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, about nine percent). 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, so the 5 percent requirement is not unreasonable. 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 perhaps 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. 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 the Kaiser Family Foundation was substantially remade in the early 1990s. At that time we asked one overriding question: "how can we best have an impact with (then) about $30-$40 million to spend each year in a rapidly changing, trillion-dollar healthcare system?" With a little more than half a billion dollars in assets, we believed that adding another $30-$40 million a year in conventional grants to such a vast health care system was not a recipe for playing a special national role. 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. 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 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, 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 foundations have been struggling to adapt. We saw a glaring need in this changing health care system for an independent, trusted, and credible source of information, 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-as we see it, it is our independence and our lack of a commercial or political interest, and our commitment to providing the most accurate information possible, that gives us an opportunity to play a special role. 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 an operating foundation, and 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 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 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 teenagers, primarily through information campaigns conducted in partnership with entertainment media organizations, which are described below. Overall, we try to inform discussion and debate on major issues that affect millions of people, especially the most vulnerable and disadvantaged, and to elevate the national level of debate on health issues. Our agenda is almost equal parts policy research and public education: 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. Since 1988 we have also operated a major program in South Africa, our largest international involvement. Our work in South Africa is directed to helping that nation develop a more equitable health care system and a successful democracy. Our South Africa enterprise receives a substantial share of our funds and is work to which we are deeply committed. The loveLife program-South Africa's HIV prevention program for youth which we have both helped organize and fund-is the largest project with which we are involved in any area of the Foundation's work. (For more information on our work in South Africa, see the South Africa section of this website.) INTERNAL CULTURE. We are a professional organization, staffed by experts in health policy, communications 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 funds 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 are the ultimate authority at the Foundation. They 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 four-year terms. Since 1991, I can count on one hand the number of times a board member has missed a meeting. Indeed, our Trustee committee meetings-audit, investment, operations and trustee selection-are almost always meetings of the whole Board. Because we are an operating foundation, our Trustees feel that they have an extra fiduciary 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 an annual retreat meeting each March. AUDIENCES. We have a clear sense of our three audiences: policymakers, the media, and the general public. We work to put the fruits of health services and health policy research into formats that these three 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 research community who follow a particular issue will not have much impact. We need more and better research on health issues to be sure, but even more, we need better communication of the research 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, and kaisernetwork.org, our free health policy information service. Kaisernetwork.org provides four daily news summary reports on developments in health, webcasts of hundreds of major health policy events each year, special video/audio coverage of particularly important events, such as this year's international AIDS conference in Bangkok, and many other services. Our 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 ads 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. This year 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 new Barbara Jordan Conference Center-a state-of-the-art conference facility 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 public exhibition space designed to provide visitors with up-to-the-minute information on health policy and public health. We are making our conference and broadcast facilities available to other non-profit organizations with no facilities or technical fees charged. We are excited about adding this new dimension to our organization; and hundreds 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 have become 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 three fellowship programs for health journalists, our media partnerships with both entertainment and news organizations, and kaisernetwork.org. Likewise, the majority of 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 some of the work in-house; we work with outside partners; and we commission work from outside experts through contracts. These contracts, while not grants, still have the effect of providing support from the Foundation for many in the fields in which we work and with whom we share overlapping interests. For some projects, we also confer substantial decision-making authority on outside groups. For example, the Kaiser Commission on Medicaid and the Uninsured is overseen by a distinguished bipartisan group of commissioners. Likewise, an independent national selection committee decides which journalists we pick every year to participate in our Media Fellowship program. MEDIA PARTNERSHIPS. We have developed a broad range of partnerships with media organizations, from The Washington Post, to National Public Radio, to Viacom. With news organizations, we undertake joint, in-depth, special projects such as our polls with National Public Radio and The Washington Post. In our projects with The Post and NPR, the Foundation, the news organization, and our colleagues at Harvard University pick the topics and design the survey instruments together, and then jointly analyze the results. Then, as they should, the news organizations have complete editorial control over the content of their reports and cover the results as they see fit. 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. Some of these partnerships, such as our current campaign with Viacom to raise awareness about HIV/AIDS, represent the largest media campaigns of their kind (Viacom has made media commitments totaling more than $250 million for the first two years of our KNOW HIV/AIDS Campaign). They have won several awards, including the 2002 Emmy for Public Service for our campaign with MTV. All of the key elements of these joint ventures are formalized in a contract between the Foundation and the media partner. 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. 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. 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 source of information and analysis on the national health care scene, and we evaluate our performance against that objective. We believe that 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, writers, editors, designers, and media experts 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 are not 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 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 will 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 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 $1.6 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 have a unique and vitally important role to play.