Multisystemic Therapy® (MST) and Nurse-Family Partnership® (NFP) are two of the most effective social interventions ever developed. MST is an intensive family counseling program that prevents juvenile offending and reduces juvenile recidivism. Multiple rigorous outcomes evaluations prove that MST results in 59% fewer re-arrests, 68% fewer days of incarceration, 57% fewer drug-related arrests, and 43% fewer days on adult probation.
NFP provides pre- and post-natal care by home-visiting nurses to first-time poor and low-income mothers. Meta-analysis of numerous rigorous outcomes evaluations prove that NFP participants experience improved prenatal health, fewer childhood injuries, fewer subsequent pregnancies, increased intervals between births, increased maternal employment, and improved school readiness.
However, despite the fact that MST and NFP have both been around for more than thirty years, they still reach less than 5% of their respective eligible populations. We desperately need them to become much more widely available, but relentless fundraising and advocacy over many years haven’t been able to amass the enormous resources and expertise needed to scale them commensurate with unmet population needs.
What would happen if they reached 50% in, say, ten years?
It’s widely accepted that incarcerating children leads to poor life outcomes, including violence and recidivism. Expanding MST to half of all eligible families could effectively dismantle the “school-to-prison pipeline,” which swallows up some 60,000 at-risk youth every year. MST could keep most of these troubled kids safely at home and in school, with greatly improved prospects.
From 1996-2013, NFP served more than 77,000 participants. By 2031, NFP projects those enrollments will have the direct effect of preventing “an estimated 500 infant deaths, 10,000 preterm births, 13,000 dangerous closely spaced second births, 4,700 abortions, 42,000 child maltreatment incidents, 36,000 intimate partner violence incidents, 90,000 violent crimes by youth, 594,000 property and public order crimes (e.g., vandalism, loitering) by youth, 36,000 youth arrests, and 41,000 person-years of youth substance abuse.” Scaling NFP would transform correspondingly more lives.
But reaching only 1 out of 20 eligible families is never going to move the needle. When problems are overwhelmingly difficult, EARN co-founder and chief executive Ben Mangan says, “we often declare success despite the fact that our impact is embarrassingly small compared to the size of the problems we are trying to solve.” The president and CEO of The California Endowment, Dr. Robert K. Ross, shares a trenchant example: “the juvenile justice and criminal justice systems trudge along, engaging in business as usual and all but ignoring the evidence-based practices that are staring them in the face—programs that cost less and keep communities safer.” And while Congress appropriated $2.1 billion for the Maternal, Infant and Early Childhood Home Visiting (MIECHV) program, Jon Baron, the former president of the Coalition for Evidence-Based Policy (and current vice president of evidence-based policy at the Laura and John Arnold Foundation) informed a key subcommittee chairman that the law had been written so broadly that it “allowed a number of unproven and/or ineffective program models to qualify as ‘evidence based.’”
The direct and long-term savings from MST and NFP far exceed the cost of providing them. Nationwide, the average annual cost of out-of-home placement for one juvenile offender is nearly $90,000, while MST costs less than $10,000 per family. From 2004-2013, the Florida Redirection Project provided MST (and two similar programs) to nearly 10,000 at-risk youth and their families. Sending those kids into juvenile detention facilities, group homes and other “residential placements” would have cost the state nearly $247 million. Instead, two independent evaluators determined that, by keeping more than 70% of Redirection program completers safely at home and in school, Florida spent only $65.4 million, saving the state more than $181 million. The Annie E. Casey Foundation has bemoaned the fact that “no state has ‘scaled up’ any of these evidence-based models to serve all or nearly all youth who could benefit.”
The same is true for NFP, which prevents $7.30 in future federal and state governmental expenditures over 18 years for every $1 invested. By 2031 (just 14 years from now), NFP projects the 77,000 enrollments in NFP from 1996-2013 will reduce estimated spending for Medicaid, welfare and food stamps by $3 billion, at an aggregate cost of roughly $1.6 billion for NFP’s services.
These facts, which have been confirmed by multiple rigorous cost-benefit analyses over many years, make innovations like MST and NFP quite special. I call this select group of well-proven prevention and early-intervention programs that can more than pay for themselves “certified evidence-based programs,” or CEBPs. As the two charts above show, we know how well these two programs work, how much they save, and when and where those savings come from to an extent far beyond programs that have not acquired similar levels of evidence.
Still, it’s all well and good to say that we know, with the highest levels of confidence that social science can muster, that CEBPs work exceptionally well and save much more than they cost. But capitalizing on those potential savings to expand CEBPs by orders of magnitude will be neither simple nor straightforward. I’ve presented the case for doing so in a new report Scale Finance: Industrial-Strength Social Impact Bonds for Mainstream Investors, published by the Center for Community Development Investments at the Federal Reserve Bank of San Francisco.
Scaling CEBPs commensurate with unmet needs within a decade will require exponentially greater amounts of investment than existing SIBs have been able to raise. The only place to get that kind of funding is from mainstream capital markets, which have remained a bridge too far for current SIBs. Leaders from across the social investment sector say that SIBs are “incomprehensible to mainstream investors.” I concur with Rod Schwartz’s assessment that this must change before “banks, investment banks, insurers, private equity firms, the venture capital industry, [and] fund managers” can “get off the side-lines and get into social investing.”
Scale Finance SIBs would focus on the accelerated expansion of a defined set of proven programs to effectively eradicate, over time, some of our most pervasive, intractable and ruinously expensive social problems that we already know how to fix. Asset owners and fund managers would work with CEBP developers to scale a select group of proprietary programs like MST and NFP that could be expanded with high model fidelity at their maximum feasible growth rates. Repayment of principal plus risk-adjusted, market-rate returns would be contingent upon the achievement of agreed social impacts and governmental savings that substantially exceed program and financing costs.
The paper shows how Scale Finance SIBs could dramatically reduce the mass incarceration of juvenile offenders, which costs approximately $5.7 billion every year. A SIB pro forma is presented for a prototypical state that currently spends $100 million annually on juvenile detention and other custodial placements. (There are more such states than you might think.) In the example provided, a Scale Finance SIB raising $65.6 million from mainstream investors could replicate Florida Redirection to provide MST and related CEBPs to 5,000 at-risk families over five years, cut placements in half, pay investors a 10% annualized return, and return net savings of nearly $91 million to the state.
Scale Finance would be a market-driven, commercially-focused version of the standard SIB model that would satisfy the fiduciary obligations of mainstream investors. Since the returns—financial and societal—would be in “lock-step”, Scale Finance could also provide the kind of ample and enduring deal flow that has been the foremost obstacle to the institutionalization of outcomes-based funding. Sir Ronald Cohen and William A. Sahlman suggest that successful social impact investing requires investors to “find the same courage the early institutional backers of the venture capital industry found.” The objective of Scale Finance would be to help mainstream capital markets find this courage, so they can build a robust 21st century social infrastructure that the public sector is no longer willing to build or sustain through direct spending or sensible borrowing.
While I readily agree with those who think government should fund these programs directly, I’m convinced (for reasons discussed in the paper) that it’s not capable of doing so. Given the choice between continuing to abandon 95% of the people who need these proven programs and asking mainstream investors to try, I choose the latter.