Private Actors in Social Security

By Irina Becker

Different to most European countries, the United States of America are neither a welfare, nor a social security state. Traditionally, there is a big scepticism in the society against political solutions of social problems. Private forms of organization are preferred to state or bureaucratical institutions. Besides, in the society dominates a big willingness to make donations in order to close the gaps in social politics of the State. 68% of the Americans belong to a non-political association as a member or as a sponsor. Honorary post and the roots of voluntarism can be traced back to the foundation of the State. Voluntarism reached its peak in the 19^th century. Nowadays, private charity or social activities can not substitute social State programs, but still have an important function in complementing them. Actually, there is the tendency to reactivate private participation.

Voluntarism, in the American understanding, includes to be embedded in private-entrepreneurial as well as in state structures. Consequently, the private sector is not an "independent", but an "interdependent sector", dependent from political decisions and financial contributions from State and economy. It has to face discussions about the dimension of its professionalization, the character of welfare-organizations as economic enterprises and the question of their efficiency.

Characteristics and Dimension of the Private Welfare Sector

A systematic general overview about the broad field of welfare organizations and activities in the U.S. in regard to their form of organization, function, ways of finanziation and regional activity does not exist (see: Murswieck, 1988). Already when talking about the total number of charity organizations only exist estimates, going back on informations from the Inland-Revenue Office ("Internal Revenue service"), who registered 1,024,648 different organizations in 1990. Murswieck distinguishes between non-profit organizations and non-charitable organizations. As a seperate category among the non-charitable organizations, the welfare activities of enterprises, profession- and trade organizations and of the trade-unions can be seen. Especially this sector of "corporate philanthropy" plays an important part in the reactivation and stimulation of private sector initiatives. It is also known as the so-called welfare capitalism.

Private foundations are another special form of organization. They normally do not spend money directly for philanthropic services, but by promoting mainly science and educational projects, they nevertheless indirectly have an important function in public issues. Especially in the health sector they could hardly be substituted. Actually, there are more than 25,000 different foundations, some of them expressing real community spirit, whereas others are only self-serving foundations, which are used to save taxes and to keep the control over one´s company. The Tax Reform Act from 1969 led to stronger regulations and more transparency in this field.

As a further characteristic of organizations can be marked their regional extension. Some big national organizations, like churches, the Young Men´s Christian Organization -YMCA-, the Red Cross, etc. coexist with many smaller ones, which stay local. But an increasing part of the latter is trying to reach national extension and the number of umbrella organizations rises in order to let more single organizations be able to participate on public and private finanzing sources.

Finally, the category of organizations that "overtake" others has to be mentioned, for example commercial "Fund Raiser", like the "United Way". It was founded in 1970 as a national umbrella organization with the objection to organize the splitted charity collections. It also gets support from the big business. To this sector also belong organizations like the "Independent Sector", which works as a junction between non-profit groups and the governmental bureaucracy; the "National Center for Citizen Involvement", which functions as a national clearing agency for communities and self-helping groups; the "National Commitee for Responsive Philanthropy"- a representation of interests for minorities and female groups or "watchdog-organizations", like the "Council of better Business Bureaus" and the "National Information Bureau", which monthly or once every year evaluate the most important welfare organizations according to a self-composed codex of standards of behaviour.

In fact, another instrument of control does not exist because the statutory regulations of the State did not prove to be useful. With a number of 44-55 million members working on a honorary base and donations of about 54 billion US $, the important function of this private sector and its dimension is self-documented. It can hardly be substituted by State-programs, but State contributions are an important element of this sector.

The Non-Profit Organizations

According to Salamon, furthermore it has to be distinguished between four different types of non-profit organizations (see:Murswieck,1988):

1. Those, who mainly provide benefits for their own members (e.g. worker associations or social associations in the field of leisuretime and recovery).
2. Organizations with religious functions.
3. Organizations that pursue public or charitable objects and whom´s main task is to transmit money ressources to other charity-organizations (e.g. the "United Way" mentioned above).
4. Those organizations with public or charitable purposes that not only endow their own members with benefits, but also offer them to the general public.

This last category can be seen as the real charity-organizations. They are not only exempted from the income tax, but also contributions to them are tax deductable. The total number of such organizations is estimated at about 375,000 in 1988.

Formerly, the traditional charity-organizations were independent. Nowadays, most of them depend on State-contributions. One reason for this is the fact, that since the sixties, the State more and more turned to private associations for the realization of its social programs. This led to the development of a so-called "Third-Party-Government"-level, which renders a distinction between private and State activity more difficult.

According to calculations, State-contributions make up to 35% of the organizations´ incomes (in contrast to about 20% are private donations). These organizations, especially the smaller local organizations and projects, are those who suffer most, everytime the State cuts benefits. For example the saving measures of the Reagan-Government in the eighties led to the necessity of more effective and economical structures in the organizations. The private welfare sector had to carry the consequences of these budget-cutting measures imposed by the Reagan administration.

The Health Sector

The American health-system is mainly free-market organized. There is no compulsory health-insurance. But regulations from the State partly have far-reaching influence. Nearly all Americans have a health-insurance, either a state program or a private one. Private health-insurance protection is offered by four different types of organizations:

• The profit-orientated health-insurance enterprises
• The charitable Blue-Cross Organization, which offers hospital benefits and has a market-share of 41% and the charitable Blue-Shield Organization, which offers benefits for ambulant cases (market-share:35%)
• The company health-insurancies (market-share: 18%)
• The so-called prepaid health plans, especially in the form of health Maintenance Organizations – HMOs (market-share:6%).

In 80% of the cases, health insurance is bound to employment. Also in the field of continued payment of wages during illness there does not exist a unitary state regulation, and private insurers dominate here as well.

The State tries to gain influence on quality and costs of the private provision within the scope of its own financed and administrated health-programs.

Consequences for the Politics of Social Welfare in the U.S.

The development of a viable set of private-sector welfare programs as an alternative to public social welfare programs has had far-reaching consequences for the politics of social welfare in the United States and can be seen as a burden for the development of a state social-legislation. The dual nature of social welfare, because of its public and private sponsors, has changed the content of policy debate, caused shifts in political loyalities, and complicated the social policy process. The division of responsibility for social welfare programs between the public and private sectors has reduced the power of both to influence social welfare decisions.

The existence of two social welfare systems has divided the population into those served by private-sector plans and those served by public programs (mainly: the disabled, elderly and unemployed).

Bibliography

Epstein, William M.: Welfare in America.How Social Science fails the Poor, Madison/Wisconsin, 1997.

Holtfrerich, Carl-Ludwig: Wirtschaft USA. Strukturen, Institutionen und Prozesse, München/Wien,1991.

Murswieck, Axel: Sozialpolitik in den USA, Opladen, 1988.

Murswieck, Axel: Die Sozialpolitik in den USA: ein Weg für die Zukunft?In: ApuZ 19, S.33-35.

Weir, Margaret/ Shola Orloff, Ann/ Skocpol, Theda: The Politics of Social Policy in the United States, Oxford, 1988.

Wersich, Rüdiger B. (Hrsg.): USA-Lexikon, Erich Schmidt Verlag, 1996.