Category Archives: Macroeconomics

Capitalism Exists Only Weakly in America These Days. Consequently, An Economic Dystopia Has Developed

Posted on by

By:

Dave Kingsley

Words & Mindsets Matter: It is Time to Change the Narrative

    The U.S. economic system is in bad shape. Economic growth is sluggish, wealth has become badly maldistributed, and government policy has been tilted in favor of Wall Street and capital at the expense of Mainstreet and labor. Because of a perverse, toxic, mythical free market mindset –  generated by economic departments in elite universities [i], –  the public has been conditioned to swallow a “government is bad, corporations are good” mantra. This potent narrative has had unfortunate social and political consequences. These consequences are becoming increasingly serious.

    Over the past few decades, the productive economy consisting of manufacturing, and small and medium sized businesses of all sorts has been been diminished, while the financial services industry has blossomed into a dominating economic force.  The valuing of maximized short term returns for shareholders over a healthy economy and the public interest is a barrier to a real capitalist system for a democratic society.

    By leveraging their immense wealth, massive corporations and the superrich have rigged the political system in their favor. Consequently, politicians have become increasingly venal and driven solely by campaign contributions and protecting their tenure in office. The media’s shallow and transitory coverage of this system is highly influenced by deceitful, sophisticated, and well-funded propaganda.

    As an ardent capitalist with considerable experience in the business world, I’m horrified by what is passed off as capitalism these days.  What we are witnessing is not truly free market capitalism functioning in accordance with the U.S. constitution and a democratic society.  Nor are we experiencing the proper role of government in regulating business for the purpose of protecting and enhancing population health and welfare. Federal, state and local legislatures are failing the American people while politicians scramble to meet the narcissistic needs of the wealthy and powerful who keep them in office.

    For instance, healthcare now constitutes 20% of the U.S. economy, much of which is not productive.  Practically all healthcare is underwritten by taxpayers with burdensome out of pocket expenses for patients.  But about half of national expenditures on medical services are excessive and extractive in the form of dividends, executive pay, stock buybacks, and price manipulation.  That is why about 10% or less of GDP in capitalist countries like Canada, France, the UK, Japan, and Korea is due to healthcare – these countries have government run medical care,

     Unlike the residents of our peer countries, Americans can and do go bankrupt due to medical expenses.  An inferior medical program for poor people doesn’t exist in the typical developed country, but that is what Medicaid is in the U.S.  It should not be acceptable to deny access to medical care because of poverty while the wealthy have concierge care and while taxpayers fund government largess for enriching the already rich (For instance, the CEO of UnitedHealth has been receiving at least $30 million per year in compensation).

Ethical Deterioration: A Consequence of a Financialized, Winner Take All Economy

    Yesterday, the former president of the United States claimed on television that the loans he received through deceit and fraud were justifiable because he paid the loans back and that his behavior was victimless.  Both statements are false,[2] and he knows that.  But let’s assume that he paid the loans back. Is the “crime” still victimless?  What are the effects of a powerful political leader’s cavalier attitude toward business ethics?  What does this behavior signal to the rest of the country?

    I’ve noticed over the past few decades that conflicts of interest and other unethical behavior are increasingly met with indifference in business, science, the media and practically every other institution of society.  Unethical data manipulation in scientific studies – especially in pharmaceutical research – is more widespread than we heretofore imagined.[3]  Individuals are lying or ignoring their egregious conflicts of interest and getting by with it.[4]

    Some behavior considered unethical – even illegal –  in the past has been legalized and normalized.  For instance, stock buybacks are a form of insider trading and a practice that was illegal until 1982. In September, Cigna announced a $10 billion stock buyback, which propelled their shares up 17% on the day of the announcement.[5] “Swiss giant Novartis announced plans to buy back up to $15 billion worth of its shares over two years, while US-based Bristol-Myers Squibb also authorized a $15 billion buy back.”[6]  These examples are merely the proverbial tip of the iceberg. Major medical care corporations are expending hundreds of millions worth of their excessive returns from taxpayer funded healthcare programs each year on stock buybacks and dividends instead of investing it in a more fair, efficient, and effective medical delivery system.

If we are going to change the economy for the better, we have to change narratives that undergird a “government is bad,” “privatization is good,” Belief System

    It is the duty of thinking Americans to look honestly at the real economic system and call it what it is – an increasing conglomeration of taxpayer capitalized enterprises with stagnant wages and a sinking middle class. It is up to all of us to stop ignoring reality and believing this economic system is “the best there is in the best of all possible worlds.”

    When I speak to professional groups and legislators, I make it a point to emphatically tell them that UnitedHealth, Centene, The Ensign Group – indeed the entire network of pharmaceutical, nursing home, health insurance, and privatized hospital systems – are not capitalistic enterprises.  Strange libertarianism and Friedmanomic fanaticism have taken over our economy and our lives with very little pushback.

    No doubt, a large proportion of my audiences consciously believes what I’m saying, but subconsciously doesn’t believe it.  Narratives work well when the public has been inundated with signals that are processed subliminally.  The dominant flow of memes coming from industrial propaganda sources through the media, education system, and day-to-day political-economic activities are effective because they are met with little organized resistance.

[i] Basically, I’m referring to the University of Chicago Economics Department and the late Milton Friedman – their star scholar – and the other economic celebrities and universities all across America mimicking the fanatical Chicago School free market ideology, which subsumes the “efficient market hypothesis,” “the agency theory of management,” “the virtues of deregulation,” and the notion that policy for diverting income and wealth to the superrich will “trickle down” to the lower SES quintiles.

[2] See, e.g.: Dan Alexander, “Donald Trump’s Great Escape: How the Former President Solved His Debt Crisis,” Forbes, July 20, 2022. 

[3] See, e.g.: Charles Piller, “Probe of Alzheimer’s studies finds ‘egregious misconduct,” Science, Vol. 382, October 2023, p. 251.  The journal Science is delivered to my home weekly.  Issues consistently include articles pertaining to cheating by scientists and the necessity for journals to retract articles submitted by the culprits that are caught.

[4] An example of conflict of interest that I discovered and fought to no avail occurred in the Gerontology Department at Kansas State University.  Professor Gayle Doll was the administrator of a state grant providing incentive funds to nursing homes who were improving their “homelike culture.”  Professor Doll also served on the board of one of the largest for-profit nursing home chains in the State of Kansas to which she awarded incentive funds.  My complaints about this egregious conflict of interest were met with indifference by officials and advocates.

[5] This was announced in the New York Times business section, which I read daily.

[6] Nick Dearden, 2024, Pharmanomics: How Big Pharma Destroys Global Health. New York: Verso, p.63.

PRIVATIZED HEALTHCARE: A FREE MARKET OR A FIXED MARKET & FREE RIDE FOR CORPORATIONS?

Posted on by

By: Dave Kingsley

Time to Debunk the “Free Market Myth.”

    The American, healthcare system operates on the faulty assumption that private corporations will deliver medical care more effectively and efficiently than government. The pseudoscientific belief that a “free market” system will result in a higher caliber of service at a lower price is serving as justification for outsourcing medical care to corporate America. Consequently, the American people are paying more for medical care than U.S. peer countries and getting less care overall.

    The free market myth is easily debunked for several reasons: (1) the healthcare market isn’t competitive – prices are set through politics rather than through competition in a real market;[i] (2) investors extract excessive cash through financial engineering and political influence without reinvesting a reasonable amount for long-term improvement and innovation; (3) an oligopolistic trend is leading to a small number of powerful and dominant players in the marketplace; and 4) patients are not consumers and cannot negotiate prices for their medical care.

   When speaking to legislators or professional organizations, I’m becoming increasingly emphatic in telling them that outsourcing medical care to private industry is not capitalism. They need to quit thinking that it is. Furthermore, there is no evidence that government  does a worse job of running medical care systems.  Conversely, there is evidence that public run hospitals and nursing homes are managed better and at a lower cost than profit seeking entities. Indeed, handing over medical care to the likes of UnitedHealth, CVS/Aetna, and nursing home corporations has resulted in rigged markets, suppressed labor, and overpriced goods and services.  Economic power and the concentration of markets into an ever smaller number of corporate behemoths are draining healthcare resources into upper income wealth and harming the health and well-being of U.S. citizens.

The Trillion Dollar Medicaid Program is Dominated by Five Corporations: That’s an Oligopoly – not a Free Market

    An oligopoly is a structure in which entry into the market and prices are unduly influenced by a few big players.[ii] Although, the government – via the taxpayers – provide all of the funds for the massive Medicaid program, five corporations manage half of all state Medicaid funds.  As managed care organizations (MCOs), UnitedHealth, CVS/Aetna, Centene, Elevance, and Molina –  the “Big Five.”[iii] – are receiving half of the dollars flowing into Medicaid.

    Mega corporations such as UnitedHealth and CVS/Aetna are rapidly growing healthcare conglomerates spreading their influence across the entire healthcare industry through sales of Medicare Advantage and a wide array of other products and services in the $5 trillion healthcare sector of the U.S. economy.  Molina, Centene, and Elevance have focused more on Medicaid in growing their businesses than the “big two,” but are nevertheless finding lavish returns in the Medicaid space.

    The rapid growth and size of these MCOs presents the typical hazards of oligopolistic market structures: price fixing, continuous reduction in quality of service for the purpose of increased extraction of capital for shareholders, rent seeking through political lobbying, and media influence.  In 2000, none of the big five were in the top 30 of the Fortune 500.  By June of 2023, all but Molina had advanced into the top 25. 

    UnitedHealth with $324 billion in revenue is the 5th largest corporation in the U.S. behind Walmart, Amazon, Apple, and Exxon Mobil.  CVS/Aetna, slightly behind UnitedHealth with $322 billion in revenue, is 6th on the Fortune 500.  Elevance is ranked at 22 ($156 billion in revenue) and Centene is at 25 ($144 billion in revenue).[iv] In the past few years these companies have engaged in stock buybacks worth tens of billions, paid their CEOs from $20 to $30 million per year (not to mention board members and other executives), paid robust dividends, have had impressive increases in the value of their stock, and have expended huge sums in national and state legislatures and political campaigns for pursuing their interests over the public interest.

Medicaid is Characterized by Weak Regulation and Discrimination Against Low Income Americans

    Medicaid is poverty medicine.  It is lower tier medicine and far too often provides low quality and neglectful care.  Only the very poor can get Medicaid and in many states – including where the big five have contracts – beneficiaries are humiliated by government officials in the process of proving they are poor enough to qualify for benefits, and suffer the same humiliation in maintaining eligibility.

    Powerful corporations with weak federal and state regulators opens the door to abuse of people who qualify for Medicaid benefits.  The HHS Office of Inspector General has found that denials are excessively high and that states are doing far too little to monitor the common practice of denying care for the purpose of increasing returns on capitated rates.[v]

    In a free market, consumers have bargaining power.  If they are not satisfied with a price or the quality of a product or service, they can take their business elsewhere.  Furthermore, it is assumed that the two parties haggling over prices have equal access to all the information of relevance in the negotiations. In the rigged U.S. health care system, the lowest income strata eligible for healthcare benefits are stigmatized as lazy and dishonest. Their strength in the political process is nonexistent.

    In an oligopoly, choices are few and collusion between the providers regarding pricing puts buyers at a disadvantage.  Opportunities to shop around and haggle over the prices of medical procedures are not feasible when buyers depend on professional advice provided by sellers – often in emergency situations. Benefits and distribution of funds throughout the system are not driven by the power of people to bargain. Rather it is a system of winners and losers in the political process. In the current corrupt political process, wealth is power. Therefore, residents in the lowest economic strata have the least amount of power and are treated accordingly.

Rent Seeking

    Rent seeking is a synonym for excessive extraction – a technical economic term which refers to companies that “seek to gain added wealth without any reciprocal contribution of productivity.”[vi] In the case of Medicaid, U.S. residents have a right to receive the quality of care for which they are paying at the best possible price.  Unfortunately, there are no real evaluations of what taxpayers  are receiving given the amount of their tax dollars going to investors and lavish executive and board compensation.[vii]

     Corporations can take excess cash from public funded healthcare when industry lobbies buy unjust influence over the political process.  In 2023, United Health alone spent $1,246,462 on political contributions and $8,990,00 on lobbying.[viii] When U.S. campaign and lobbying expenditures are added up, contributions from corporations in the health insurance, real estate, finance, hospital, and nursing home industries sum to billions in political payouts for enhancing shareholder value at the expense of healthcare quality and equity. 

It’s All About the Narrative, Nay the Propaganda

    No other economically advanced country in the world has a separate medical system of inferior quality for poor people, denies access to a large number of poor citizens it is supposed to serve,  and diverts immense amounts of the program’s funds to the wealthiest citizens.  The U.S. does this very thing with very little pushback from the public. Why?

    A narrative without opposition simply works.  Misguided, faux conservatives have a simplistic view that can be reduced to this:  “Government bad, profit seeking corporation good.”  Whether it’s libertarianism, extremist-rightwing-Christian Nationalists, or conservatives in general, all forms of private enterprise are considered special and even holy among some groups.  President Reagan was responsible for selling the idea that government was responsible for societal problems and that we needed to look to capitalist enterprises to save us.

    Chicago school economics which are more theology than science and its patron Saint Milton Friedman became de rigueur in the 1970s.  The notion that government should step back and turn over its functions to corporations caught on with a boost from Ronald Reagan and Margaret Thatcher.  Throughout the 1980s Friedmanomics jelled into a fanatical and aggressive “starve the beast” movement. 

    Even the New Democrats formed in the Clinton era bought into the need to scale back previously institutionalized and cherished New Deal and Great Society programs.  During his administration’s ostensible “reform of welfare,” President Clinton announced that the “era of big government is over.” Most of the scaling back was directed at poor peoples’ programs.

The Consequences of Government Funded Healthcare Privatization are Dire & Getting Worse

    Most Americans have heard that the U.S. spends two to three times as much on healthcare per capita than peer countries in Europe and Asia.  Also, a large proportion of the population feels the burden of health insurance premiums, co-pays, and deductibles.  In peer countries, bankruptcy due to medical bills and total lack of access to medical care for millions do not occur.  Taxpaying residents of the U.S. are forced to choose between necessities such as food and needed medication for diabetes and other illnesses.  Corporations force the people responsible for their revenue, i.e., the taxpayers, into these dire situations while they pay CEOs tens of millions of dollars in revenue, buyback tens of billions of dollars in stock and pay robust dividends to investors.    

The corporate exploitation of Americans is not inconsequential.  The amount of wealth passed up from lower SES groups to the wealthiest Americans is creating a dangerous maldistribution of overall wealth in the U.S. economic system.  Indeed, life expectancy is declining, public confidence in institutions of government is weakening, and democracy is becoming less sustainable. The question is, “When will taxpayers say enough?” UnitedHealth, CVS/Aetna, and the variety of other corporations profiting from Medicaid, Medicare, Obamacare, and a plethora of tax write downs will grab whatever the traffic will bear.

[i] For excellent insights into pricing through politics (i.e., “rent seeking), see Nobel Prize winning economist Joseph Stiglitz’s discussion The Price of Inequality, pp. 28-51.

[ii] For a more elaborate discussion of the meaning of oligopoly and the implication of this market structure for a specific sector such as healthcare see: https://www.investopedia.com/terms/o/oligopoly.asp.

[iii] See for instance.: https://ccf.georgetown.edu/2021/02/23/medicaid-managed-care-2020-results-for-the-big-five/

[iv] These data are from: https://fortune.com/ranking/fortune500/2023/search/.

[v] https://www.oig.hhs.gov/oei/reports/OEI-09-19-00350.pdf

[vi] https://www.investopedia.com/terms/r/rentseeking.asp

[vii] It is important to note that shareholders, executives, and board members are particularly well compensated when stock prices rise.  Therefore, stock buybacks are driven by placing the culture of wealth enhancement over a culture of service to the public, employees, and communities.

[viii] https://www.opensecrets.org/orgs/unitedhealth-group/summary?id=D000000348

Labor Conditions in the Nursing Home Industry:  An American Disgrace

Posted on by

By:

Dave Kingsley

What is U.S. Policy Regarding a Living Wage for Healthcare Workers

   It is difficult to establish exactly what CMS and state agencies are doing these days to audit, investigate, and regulate the nursing home industry.  But I think we can safely say that it is very little.  One thing we know is that the long-term care business is labor intensive.  Hands on, direct care is the sine qua non of nursing home operations.  Without the workers who risked their lives during COVID (approximately 2000 died because of the pandemic), corporations could not have continued to earn robust returns for their investors.

    Labor issues in the nursing home industry are escaping notice of legislatures, the media, scholars, and reform commissions.  Consequently, the public in general is unaware of the injustices perpetrated on workers in the form of poverty wages and poor working conditions – including violation of labor rights under the National Labor Relations Act.  Although operators were provided with lavish amounts of COVID relief, it appears that workers did not share in these allocations even when large amounts of revenue were extracted on behalf of investors.

High Poverty Areas of the U.S. and Poverty Wages:  The Injustice of Place and Internal Colonization

    Large regions within the United States such as the Mississippi and Arkansas Deltas, South Texas, and Appalachia, and large ghettos and barrios are beset with high levels of poverty, low economic development, and a dearth of opportunities through education and upward mobility.  These areas lack cultural amenities and healthcare access.  The poor whites residing in the poorest areas of the U.S. have been losing ground in their overall health and life expectancy.  In some places, people of color are in the majority and have historically had poor health care access and shorter lives.

    One would think that an injection of government funds through long-term care services and other healthcare programs e.g., Medicare and Medicaid would significantly contribute to a rise in the standard of living in these impoverished, economically underdeveloped places.  In other words, the trillions of dollars in federal and state budgets dedicated to healthcare should provide an economic boost to economically disadvantaged areas. However, rather than contributing to development of impoverished counties and regions, the long term care industry is exploiting them through excessively low wages.

Magnolia, Arkansas and the Greenhouse Cottages of Wentworth Place

    Greenhouse Cottages of Wentworth, Magnolia, Arkansas

In my last blog post, I wrote about the shockingly low wages paid to CNAs doing 80% of the work in Alta Vista Nursing & Rehab –  an Ensign Group facility (see “NAFTA and Working Home Wages in the Rio Grande Valley”).  Most nursing home corporations along the corridor consisting of cities such as Brownsville, Harlingen, McAllen, and other cities with sister cities across a bridge to Mexico are paying poverty wages while extracting robust amounts of earnings and COVID relief money (more about them in a later post).

    I am hypothesizing that pricing and reimbursement of industry for services are uniform across states without regard for the price of labor and yet set a floor under returns to the industry that advantages investors. Conversely, labor costs are allowed to float in local labor markets.  This is an injustice.  Labor in poor areas is suppressed while rich areas benefit from wages at the high end.  As I collect data on wages, hours, and working conditions in the nursing home industry, I’m seeing this pattern.  Let’s take Greenhouse Cottages of Wentworth Place in Magnolia, Arkansas as an example.

    Magnolia is a community of 10,000 people located in Columbus County, Arkansas, which is one of the poorest counties in Arkansas with poverty level nearing 25%.  The county is not far from the Louisiana border in South Central Arkansas.  Greenhouse Cottages of Wentworth Place is a large facility with 135 beds and 2022 revenue of $11,648,420.  Based on its income statement, the facility had operating income (operating net) of $719,547.

    In addition to operating income, $522,998 in nonpatient revenue from COVID relief was noted on the facility’s income statement.  Hence, with a net income of $1,242,998, the company had a 10.7% net income in 2022.  However, the company claimed $7,198,189 in expenses to its real estate entity, therapy services company, home office allocations, and employee leasing (i.e., outsourcing labor to its labor contracting service).  $6,163,519 of claimed related parties expenditures were allowed by the state.

Wages at the Greenhouse Cottages of Wentworth

    An examination of wages for the Greenhouse Cottages of Wentworth reveals exceeding low nursing wages for a company with an impressive net income and huge payouts to subsidiaries of the parent corporation.  In 2022, the average RN wage was $34.48.  Looking at RN wages at the facility for years 2016 through 2022, the average hourly wage for RNs increased from $31.62 to the 2022 wage of $34.48.  If $31.62 in 2016 kept pace with inflation, it would be equivalent to $39.61 in 2022.

    In 2016, CNAs were paid $10.57 at the facility.  That low base amount rose slightly above inflation over the years ($13.93 versus $12.49 in 2021).  In 2022, CNA pay averaged $15.71 due to President Biden’s Executive Order raising the minimum wage for federal contractors to $15.00 per hour. 

    Over the three years that COVID was raging, the facility received $3,548,321 in COVID relief.  There is no evidence that this was shared with the workers.  I suspect that we will find that to be a standard practice throughout the nursing home industry.

Is a Huge Increase in Reimbursement Justified without Consideration of Workers

    As lobbyists and propagandists for the industry with negligeable pricing research and  evidence continue to claim that reimbursement is too low, CMS proposes that operators be rewarded with a $2.2 billion increase due to a 6.4% “net market basket update to the payment rates” (see “CMS SNF Final Rule Seen as Insufficient for Payment Rates While Advancing Unfair Measures, Skilled Nursing News, July 31,2023).  Given massive amounts of COVID relief funneled into the industry and ongoing subpar pay for the direct care workforce, we need clear and decipherable data and rationale for this increase.

Misinformation About Social Security & Medicare is Harming America’s Elderly

Posted on by

By:

Dave Kingsley

Scapegoating the Elderly for U.S. Budget Deficits & Debt

Pie charts, bar charts, tables, graphs, and other depictions of the federal budget abound in the media. These pictorial representations of what Congress budgets for such things as education, agriculture, health care, and so forth invariably include all of Social Security and Medicare. Hence, they are consistently wrong. None of the expenditures for Social Security are budgeted and have absolutely no impact on the budget or deficits. Less than half of Medicare expenditures are budgeted because beneficiaries pick up a large amount of the costs.

Social Security benefits are “earned” by beneficiaries who have paid in during their working years through a payroll tax. Benefits for each beneficiary are actuarily tracked and payouts are based on what is paid in.

Dr. Max Skidmore, University of Missouri Curators’ Distinguished Professor of Political Science (Emeritus) explains the history and functioning of Social Security in an accompanying blog post today. Dr. Skidmore is a leading expert on Social Security and colleague of those of us contributing to this blog (see e.g. his book Securing America’s Future: A Bold Plan to Preserve and Expand Social Security with a Foreword by former senator George McGovern).

Over Half of Medicare is Paid for by Beneficiaries Through Payroll Taxes, Premiums, and Out of Pocket Expenses. All of Social Security is Off Budget Because it is Earned by Beneficiaries.

In calendar year 2021, Medicare expended $839.3 billion, of which $405.4 billion (48.3%) was budgeted. None of the $1.14 trillion expended by Social Security for earned benefits are part of the federal budget. Hence, my estimation is that of an approximately $5.5 trillion 2022 FY budget, only $.405 trillion (7.4%) was budgeted for all of Social Security (0%) and Medicare (7.4%).

The Harm Done by Misinformation

Claims that the elderly are receiving the biggest share of the annual budget dampens the public’s support for much needed assistance with out-of-pocket Medicare costs, home health care, housing assistance (including assisted living), and other essential services and financial needs for daily living. Financial moguls such as the late multi-billionaire Peter G. Peterson and conservative politicians have been leading a propaganda war against Social Security and Medicare from their inception in the 1930s and 1960s.

Many seniors are suffering due to the cost of pharmaceuticals and co-pays, deductibles, and premiums. Transportation, housing, food, along with medical care and other costs for the needs of daily living are robbing a huge proportion of the growing 65+ population of a decent life in their elderhood. The blatant falsehoods coming from some super rich Wall Streeters and conservative politicians are causing pain for hardworking people who are being denied a decent quality of life. We intend to fight back!

Does the Attack on Social Security by Conservatives Make Any Sense? Read What One of America’s Leading Experts on Social Security Has to Say.

Posted on by

By:

Max Skidmore

What About Social Security?

The Social Security Act became law in 1935 and created a system of “social insurance.” Workers pay into trust funds through deductions from wages, and employers match the workers’ contributions. Benefits are calculated on the thirty-five years of highest earnings. The maximum amount of wages subject to Social Security (FICA) tax for 2023 is $160,200. The system began to pay benefits in 1940.

Originally, the Act called only for retirement benefits, but through the years the system expanded to include payments to spouses, survivors, and the disabled. Thus, Social Security now provides life insurance, as well as retirement, and also protects against lost wages resulting from disability before one reaches retirement age.

Roughly a third of Social Security’s checks go to people younger than retirement age; that is, to survivors of deceased wage earners and to the disabled. The elderly are not the only ones who benefit from Social Security. Virtually the entire population does¾either through receipt of benefits, insurance coverage, or being freed from the necessity of caring for their elderly relatives.

Benefits are indexed to inflation, so that purchasing power remains constant through the years. Moreover, benefits continue through the lives of beneficiaries, however long they may live; one cannot outlive benefits.

As limited as the benefits are (and it would be an excellent idea and easily achievable to expand, not reduce, them), most retired Americans receive a substantial portion of their income from Social Security. For the average retiree, Social Security accounts for nearly a third of the total. More than a third of America’s retired elderly, in fact, count on Social Security for half or more of their total income. Substantial numbers of retired people have no income at all except for their Social Security. For millions of Americans, the benefits they receive from Social Security enable them to escape poverty and live in reasonable comfort.

Despite scare propaganda from groups who would profit from privatization, the system’s finances are sound. The highly publicized times for depletion of the trust funds vary from year to year, and are always based on “intermediate projections” from the annual reports from the system’s Board of Trustees. The trustees, themselves, caution in their reports that depletion years are to be considered only as estimates based on a huge number of assumptions. They are not to be taken literally.

Nevertheless, commentators  generally treat them as firm and unquestionable, and mistakenly refer to the trust funds’ impending “bankruptcy.”  This is nonsense. The projections are extremely cautious, and likely are quite pessimistic. “Bankruptcy” is not an appropriate term for a federal, tax-funded, program. FICA taxes in would continue to come in, regardless of trust fund balances. Moreover, the trustees always publish a “low-cost,” more optimistic, projection that tends to present the future of the trust funds as secure in the long run. The conditions that the low-cost options project are just as likely as the Intermediate projections to materialize. If conditions were to become less favorable to Social Security, however, it would be a simple matter to adjust tax rates, lift or remove the cap, etc. Dire warnings about “unsustainability,” are scare propaganda designed to frighten the public in hopes that they will accept unwarranted modifications to the system based on conservative ideology, not finances.

Social Security is remarkable, it keeps millions from poverty, provides them with independence, and all the while it operates at far lower expense (less than 1% for administration) than any other income-transfer system. Also, it is off budget. Lowering benefits would not affect the deficit or the national debt; it would merely build up bigger trust funds, while continuing to tax workers, but providing them with nothing for their taxes. It would not provide balance to the budget.

Why, then, is there any opposition to such an efficient and worthwhile system? Why are Republicans such as Senator Ron Johnson urging that the system should require re-authorization every year, or else vanish?

Johnson, of course, will never be considered as among the more able or thoughtful senators. Senator Rick Scott, though, until this November, was chair of the National Republican Senatorial Committee, an official Republican organization. He proposed that Social Security and Medicare be authorized only for five-year periods, ceasing to exist if Republicans gain control and fail to re-authorize them.

Most egregious of all, and openly revealing the obvious betrayal by Republicans of the decades-long consensus regarding the value of Social Security, are the bullying threats from Senator John Thune. Thune currently is number two among the hierarchy of Senate Republicans. It has just been announced that he intends to hold the debt ceiling hostage. That is, he intends to block any elevation of the debt ceiling unless there are cuts to Social Security. This reveals the reckless cruelty of current Republicans. Incidentally, it also reveals that the dangers of the “debt ceiling” that performs no useful function; it saves not one dollar, and creates opportunities to cause chaos. It only permits irresponsible politicians, such as Thune, to create mischief.

Some of the opposition arises from investment bankers and other wealthy groups who might benefit from privatization. Most, however, comes from extreme conservatives who simply do not like government programs, regardless of their many vital functions. Do they not recognize how cruel it would be to slash the incomes of those who count on it, including those of very limited income?

The cruelty is the point. Many conservatives do not ignore the cruelty that they would cause; rather, they welcome it. Ronald Reagan began to redistribute income upward, and his party has since continued to do so with a vengeance. Until recently, they generally kept their intentions hidden. Now, though, they are openly expressing their hostility to the less fortunate of their constituents. Republicans no longer find their motto embarrassing, no longer do they find it necessary to disguise it. It is, “Soak the poor, and reward the rich,” and clearly and overtly is a common theme of their proposals. They recognize few, if any, “deserving poor.” To be poor is to be fair game. Anyone who wants to avoid institutionalized cruelty should just go out and get rich.

As the Herblock cartoon in 1964  put it (portraying the message from Republican presidential candidate, Senator Barry Goldwater), the poor should simply go out and inherit department stores.

Did You Know?

Posted on by

By:

Dave Kingsley

  • On July 30, 1943, Marie-Louise Girard was the last woman guillotined in France.  Her crime:  assisting women with abortion.  Many of the women she was helping had been raped by Nazi occupiers.  A 1988 movie, Story of Women, dramatizes her life.

  • Between 1908 and the present time, approximately 400,000 U.S. residents have been forcibly sterilized by state and federal government bureaucracies.  The U.S. Supreme Court upheld the constitutionality of state sterilization laws in the 1927 case of Buck v. Bell, Superintendent 274 U.S. 200.  Oliver Wendell Holmes wrote the majority opinion in which he stated the following: It is better for all the world, if instead of waiting to execute degenerate offspring for crime, or to let them starve for their imbecility, society can prevent those who are manifestly unfit from continuing their kind. The principle that sustains compulsory vaccination is broad enough to cover cutting the Fallopian tubes.  Three generations of imbeciles are enough.

    Buck v. Bell     is still extant case law – it has never been overturned.  The state of Oregon carried out a state ordered sterilization in 1981.  Over the past few decades evidence of involuntary hysterectomies and tubal ligations carried out on ICE detainees and women prisoners in the California prison system has been consistently surfacing.
     
  • Louisiana House Bill 813, which has cleared the Louisiana House Committee on Criminal Justice by a vote of 7 to 2, defines abortion as homicide, which would carry a penalty of life in prison without the possibility of parole.  Critics of the legislation have argued that the bill will even outlaw use of IUDs as a contraceptive.

  • Aging prisoners have been the fastest growing demographic in the vast U.S. prison system. Human Rights Watch estimates that the age 65 or older inmate population grew an astonishing 94 times faster than the total sentenced prisoner population between 2007 and 2010. The older prison population increased by 63 percent, while the total prison population grew by 0.7 percent during the same period.
    Source: (https://www.hrw.org/report/2012/01/27/old-behind-bars/aging-prison-population-united-states).

Why Are We Putting Up With Medical-Industrial Grifters And Politicians Who Collaborate With Them?

Posted on by

By:

Dave Kingsley

Who Pays for Medicare, Medicaid, and the Affordable Care Act?

The answer to this subtitle, “Who Pays for Medicare, Medicaid, and the Affordable Care Act?” is “You and I do. We all do.” We pay through our income taxes, payroll taxes, sales taxes, property taxes, premiums, deductibles, and co-pays. We pay more than enough to provide all of us with first class medical care from the prenatal stage of life to the end of life. I can provide an overwhelming amount of evidence to support a claim that I will make in this and subsequent posts: we are getting far less for our money than we deserve because of greed supported by government/corporate corruption and propaganda.

Furthermore, corporations paid with taxes to underwrite our healthcare are allowed by federal and state governments to display their disdain for us with bizarre and insulting ad blitzes featuring carnival barkers like Joe Namath, Jimmie J. J. Walker, William Shatner, George Foreman, and other clownish characters with no self respect and the same amount of respect for us. You are paying for this incredible insult to your intelligence. If you are wondering why Medicare Advantage (MA) costs the Medicare program more than traditional Medicare, this is one reason.

Medicare has evolved into an incomprehensible Rube Goldberg morass of traditional and MA components incomprehensible to ordinary people. Enrolling in the program involves a lot of good luck or expert help for avoiding traps that could haunt you down the road if your health status changes. Even worse, hardly anyone knows that the MA program is an ongoing effort (facilitated by both political parties) to end traditional Medicare and rig the system in the favor of big insurance over beneficiaries. It’s succeeding with a swiftness beyond the wildest dreams of the corporate sponsors of the cleverly named Medicare Modernization Act of 2003.

How Much Are You Paying For Government-Funded Healthcare?

In considering what you pay for federal/state collaboration with corporate America for medical care – which is practically all medical care in the U.S. – let’s consider the macro level numbers first and then discuss what it costs you – the resident/citizen/beneficiary. Annual expenditures for Medicare were approaching $1 trillion per year in 2020 and will no doubt reach that milestone this year. Medicaid expended $655 billion in 2020 and premium subsidies for the Affordable Care Act totaled $55 billion, medical care for post 9/11 veterans is estimated to cost $60 billion per year, tax deductions (expenditures) for employer sponsored health insurance is the largest tax expenditure at $227 billion, household out of pocket spending reached over $406 billion. With these expenditures and hospital, drug, physician/clinical services, the U.S. expended approximately $4 trillion for medical care in 2020 (https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet).

We can only estimate total expenditures but $4 trillion is an acceptable official estimate, which would be approximately $11,700 per capita and 18% of GDP. This is double the expenditures of U.S. peer countries in Europe and Asia, which have universal, single payer systems rather the U.S. privatized model that blocks millions of our fellow citizens and residents from medical care.(https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/).

I believe however that when tax expenditures are considered, $4 trillion, or $11,700 per capita and 18% of GDP significantly underestimates the total expenditure for medical care in the U.S. corporatized, for profit system. Corporations receive significant streams of revenue through the tax codes, which burdens ordinary wage and salary earning Americans by increasing their tax burden while reducing the capital gains taxes of corporations and high net worth individuals. There has been no attempt to enumerate the total amount of benefits accorded to medical care corporations for real estate depreciation, interest on debt, executive compensation, and other forms of federal and state tax expenditures. I’ve already noted the $227 billion for employer provided health insurance and included that in the $4+ trillion total.

One Egregious Example Of Corporate Greed Among Many

It is past time that the American people were told about the excessive executive compensation, unnecessary increases in shareholder value through stock buybacks, stock splits, and other manipulation of stock prices. Taxpayers need to be clearly enlightened about how much of their money is going to medical care versus going to shareholders, executives, advertisers, and other wasteful expenditures that we can expect in a privatized public-funded medical care – technically known as the medical-loss ratio. The Centene Corporation is one of many examples of greed and corruption unquestioned by the people sent to congress to oversee our rights as taxpayers and citizens.

Centene, which derives its revenue from Medicaid – poverty medicine – paid its CEO Michael Neidorff $24 million in 2020. The total compensation for Centene executives and board members (which includes former congressman and HHS Secretary Tommy Thompson and former congressman Richard Gephardt) was slightly more than $64 million. Much of this compensation is paid in stock options and stock awards. The first $500,000 of executive compensation is tax deductible, hence tax maneuvers (tax arbitrage) through stock awards/option are beneficial to corporate earnings.

It is not uncommon these days for high paid corporate executives to have their stock awards diverted into individual and family trusts or some entity set up for tax avoidance. Having analyzed the proxy statements of several health care corporations, I’ve come to realize how fabulously wealthy many families and individuals have become in corporations earning most of their revenue from government funded medical programs.

What Should Excessive Government-Funded Medical Expenditures Mean to You?

It may escape peoples’ attention that the budget in their state is strapped because of the cost of Medicaid due to massive numbers of residents unable to obtain access to care through some form of insurance. State revenue is primarily derived from income, property, and sales taxes. In most states, consumers pay at least 4 or 5 percent sales taxes on everything they buy – including food and clothing. Some states like Texas and Florida have no income taxes and therefore have high sales taxes. The burden of sales and property taxes is inversely proportional to income and wealth. Higher income people have a lighter burden. Although poor people who have the greatest burden for taxes are funding poor peoples’ medicine while wealthy individuals benefit financially from Medicaid have a lighter tax burden. Furthermore, program beneficiaries are treated as second class citizens in the health care system. Indeed, millions of poor people can’t even qualify for Medicaid or the Affordable Care Act and are essentially uninsured.

What does it mean to anyone in a society in which some of their fellow human beings are forced to pay taxes but denied medical care or accorded only low tier medicine for no other reason than they are poor? The public’s acquiescence in and acceptance of this injustice is mind boggling and disturbing.

In addition to state and federal income taxes paid by wage and salary earners, most every worker pays nearly 3% of every paycheck for Medicare (1.45% deducted from wages/salary and 1.45% submitted by the employer). These payroll taxes fund the Medicare hospital trust fund (Part A). At age 65, citizens qualify automatically for hospital benefits but are charged a premium for physician services (Part B), which will be $170.10 per month in 2022 (deducted from Social Security). Coverage for drug benefits (Part D) will cost around $37.00 per month. In spite of these costs, a major medical catastrophe can bankrupt you.

Hundreds of billions of tax expenditures for depreciation, employer provided health insurance, and generous tax avoidance provisions too numerous to mention flow from income taxes deducted from wage and salary earners’ paychecks – labor is taxed heavier so that capital can avoid taxes.

Budget Deficit & Inflation Propaganda

The monied elites are undeservedly rewarded through privatized, government-funded (with your taxes), medical care. Consequently, these programs do add significantly to U.S. debt and deficits. However, debts and deficits don’t bother me as much as the blame heaped on programs that benefit the American people for “running up the deficit.” The power elite owns the media and controls legislators through obscene amounts of political expenditures and can perpetuate big lies for the purpose of cutting benefits and increasing their share of program expenditures.

Here is some truth: Of the total expenditures on Medicare in 2020, 57% was paid by beneficiaries through their payroll taxes, premiums, co-pays, and deductibles (See page 10, 2020 Medicare Trustees’ Report). I submit to readers that the corruption of privatization and politics accounts for the other 43%. For instance, the Medicare Modernization Act of 2003, which legislated the drug benefit into existence, prohibits negotiation of drug prices. Very little serious discussion occurs regarding excessive payouts to shareholders and executives and lack of price controls in all phases of medical care.

That budget deficits and debts – often blamed on Social Security and Medicare – are running up inflation is one of the big lies foisted on the American people through clever, highly paid, public relations firms. Not one cent of Social Security is paid out of the U.S. Treasury. All of it – 100% – is paid for by beneficiaries through taxes they pay while earning a wage or salary. As I explained above, less than half of the funds for Medicare is transferred from the U.S. Treasury. That would not be necessary if corporations, i.e. shareholders and executives, weren’t lining their pockets with your taxes.

Why Are the American People Putting Up With The Medical Industrial Complex & The Politicians Supporting Its Greed & Corruption?

We could write books about the incessant propaganda and conditioning heaped on the American public. Suffice it say at this point that “we the people” are victims of clever framing, narratives, and political strategies. The Medical-Industrial juggernaut has unlimited amounts of money to spend on lobbying, paying off legislators (both Democrats and Republicans), and grooming the media. Taxpaying citizens and residents are sitting ducks. Therefore, they have been conditioned to believe that they don’t deserve anything better and should thank their lucky stars for the kindness and beneficence of the elites for any healthcare they do have. And if they are paying taxes and have no healthcare paid for with their taxes, too bad. That’s life.

There is an answer to the sorry state of affairs in the U.S. medical care system. Citizens must become informed, organized, and force their legislators to answer for the money they are receiving from Big Pharma, the American Hospital Association, and every other big money, medical-industrial group, roaming the halls of legislatures and paying for political campaigns and other goodies for legislators.

Paid professionals as advocates need a narrative and political strategy that might be risky. Speaking truth to power necessitates exposure of powerful people such as Congressman Richard Neal, current chairman of the powerful House Ways & Means Committee and a poster child for medical-industrial graft. He holds hearings on the disgraceful nursing home situation in this country without any intention of seriously reforming the system. If you don’t believe me, just Google him.

The Tallgrass Economics Blog will be focusing on propaganda, framing, narratives, political strategies, and how citizens can fight the corruption in a government-funded medical care system they pay for. We believe that the Democratic Party, liberals, and progressives could step up their political communication skills. We also believe that the great people in nonprofits advocating for reform of tax funded medicine need to come together and call out the politicians who are helping corporations fleece the hard working, patriotic, people of America.

Capitalism Can Only Thrive in a Robust Democracy. As Democracy Weakens, Capitalism Rots

Posted on by

By:

Dave Kingsley

Democracy is becoming weaker in the United States and the economic system is becoming increasingly corrupt and inefficient. 

    The primary hallmarks of a well-functioning capitalistic system are competitive free-markets, disruption of stagnant companies and industries by innovative startup companies, widespread opportunities for entrepreneurship, and a government with the political will to regulate the economy and business on behalf of the people and the general welfare.  These characteristics have been alternatively strengthened and weakened in the United States over the past 200+ years.

    Currently, the super-rich, and major corporations representing a burgeoning oligarchy have plied their increasing share of the wealth to government capture. Consequently, the U.S. government and a large proportion of the corporate world have settled into a destructive, money-driven, relationship.  Over the past few decades, the amount government largess channeled into corporations, their shareholders, and executives has accelerated. It is important to recognize this as one major underlying cause of what may be the twilight of American democracy and a free enterprise system.

We Cannot Overlook the Role of Religion in the Rise of Anti-Democratic Corruption

    I believe that a major cause of deteriorating democratic systems in this country is the money washing over elections and office holders. Our seriously corrupted political system is due in large part to dominance of the Supreme Court by a Christian-theistic-fascistic movement which has a propensity to throw its weight behind a strongman leader and a conservative, wealthy, white, elite.   For instance, Citizens United is merely a convoluted decision handed down for the purpose of legitimating the purchase of legislators by oligarchs and entire industries.

    Recent world history has taught us that major elements of modern Christianity are prone to collaboration with fascist autocrats.  Examples of Christian leadership’s deference to and support of strongmen abound.  The most recent example of course is the Christian white nationalist movement’s strong backing of the vile Donald J. Trump. The Catholic Church has a well-known history of providing comfort and aide to fascists throughout Latin America. 

    During the fascist-Nazi movement of the 1930s, the Catholic church was all too often willing to place its imprimatur on German, Italian, Spanish, (European) Nazism, and fascism.  Following the Holocaust, ratlines set up by Catholic priests helped shuttle war criminals such a Mengele and Eichmann to Latin America.

    Most Christians and Christian leaders in the United States are opposed to the vicious, vile politics of Donald Trump and today’s Republican Party.  Unfortunately, they are far too passive, unorganized, and quiet.  I say to them: “Please do not underestimate the organization, money, passion and commitment of the proto-fascist Christian white nationalists promoting Trump and Republican candidates.” 

    The Wasteful, Corrupt, U.S. Healthcare System is a Symptom of a Sick Political System

    There is a reason Americans pay two to three times per capita for healthcare than peer countries in the advanced, industrialized sphere of the global economy:  corruption.  How many ways can we document the claim that corruption is at the root of the wasteful, inefficient, U.S. healthcare system?  In so many ways that they are too numerous to mention in one blog post.  I will discuss some in this post and many more in future posts, but I first want to say as a capitalist that privatization and healthcare are not compatible.  Medical care cannot be reduced to an industrialized, free market model and at the same time optimize the health and wellbeing of the U.S. population.

    As dark money as well as money right out in the open began to flood into the political system, the American people were conditioned to believe that traditional government programs on behalf of the general welfare were necessarily wasteful and inefficient.  We were sold the myth that private enterprise is more competent than government bureaucracy.

    Actual practice – for instance in the case of the military, infrastructure, Social Security and Medicare – belie this deceit.  Nevertheless, practically every facet of the public domain supported by taxpayers has been handed over to private corporations.  That includes the publicly funded healthcare system.  The mind-boggling amount of capital that has flowed from the pockets of ordinary, non-wealthy, Americans into the holdings of the 1% is so excessive that it will be difficult for those hardworking, every day, Americans to grasp.

    Officially, healthcare accounts for $5 trillion or 20% of the U.S. economy.  I think it is more than that due to the generous tax reductions gifted to corporations, boards of directors and executives in the healthcare industry.  In my view, practically all revenue streaming into corporations providing medical services is coming from government sources – taxpayers – such as Medicare, Medicaid, the VA, and Obamacare.  At the same time, lobbying and campaign contributions keep costs spiraling up while care deteriorates and shareholders, boards, and executives pocket immense amounts of dividends, stock-growth, and compensation.

    The Finance-Insurance-Real Estate (FIRE) lobby, Big Pharma, device manufacturers, physician associations, the nursing home industry, and other powerful representatives of industries benefitting from corruption and excessive payouts can see the limitless government largesse available to them and have their representatives crawling all over our Nation’s capitol and the legislatures of the 50 states.  Legislators of both major political parties have become dependent on campaign contributions from the medical-industrial complex.

    In future blog posts, we will be documenting the inordinate corruption overtaking the government funded U.S. healthcare system.  See the coming post regarding 1Health Healthcare and the Centene Corporation.  Two of a very large number of scandalous and yet typical cases of healthcare rip offs at the expense of “we the people.”

We Must Demand the Truth about the Federal Budget: It’s Important for Funding Medicare, Medicaid, and Other Federal Programs for the Elderly

Posted on by

By:

Dave Kingsley

Political Economy Accounts for the Effects of Propaganda – Orthodox Economics Do Not

The focus of this blog is on economics, finance, and politics – we could more aptly say that we conduct research and write about “political economy.”  As opposed to orthodox economics – overwhelmingly taught in the academy and practiced by most professional economists these days – political economy considers the cultural, historical, and political, context of the economy.

In the current cultural context, an increasingly high tolerance of lying, and intentionally misinforming the public has been developing since the Reagan Revolution. A survival of the fittest, winner take all, hyper-competitive capitalism has become intertwined with money in politics, boosting venal politics. This is having a major effect on how federal spending is presented to the public.

Propaganda

 Propaganda has become a noticeable feature of public discourse on federal funding. By propaganda, I’m referring to intentional disinformation, i.e., lying, plus the individuals and organizations that wittingly and unwittingly disseminate it. As the venality of politics increases, there is a proportional increase in significant amounts of propaganda. For instance, in the past few decades, the late Wall Street mogul Peter G. Petersen funded several “inside-the-Washington, D.C.-beltway think tanks” for the purpose of selling the public on the belief that this country – the richest country on the planet – can’t afford to fund a decent level of retirement security, e.g., Social Security, SSI, medical care, e.g., long-term care, housing, and other programs for a dignified and humane old age.

I have already blogged somewhat about Petersen’s phalanx of organizations such as The Committee for a Responsible Federal Budget, The Concord Coalition, and The Bipartisan Policy Committee.  The boards of these organizations include prestigious individuals from government, the military, business, and super-rich families. Former congresspersons who have behaved suitably while in office often serve as board members or high paid executives of these special interest “think tanks” which pass themselves off as legitimate research institutions, when in fact they are propaganda machines.

Petersen’s Billions for Propaganda Have Had a Huge Impact on Budget Beliefs

If you are looking for information on the federal budget, you can find some nice looking, colorful, pie charts online that are simple, easy to understand, and wrong.  The pie chart below is nothing less than a lie. This representation of the 2019 budget has been typical of what has been disseminated over the past several decades. The 2020 budget will be atypical due to COVID and would muddy the waters somewhat on this post, which addresses enduring concerns.

The above chart illustrates the percentage of “federal spending” that is allocated to major categories such as Social Security and defense.  This is typical of what one finds when Googling the federal budget.  This chart is disseminated by the Committee on Budget & Policy Priorities (https://www.cbpp.org/research/policy-basics-introduction-to-the-federal-budget-process).  The CBPP is usually on the progressive side of issues, but they are on board with the pervasive misinformation regarding the budget.  Unfortunately, misinformation about the federal budget dominates public discourse.

Social Security is “Off Budget” by Law:  It Only Makes Sense that it Would Be.

What’s wrong with the information on the above chart?  Although the data are purportedly “budget data,” they are not.  The title of the chart is “Federal Spending FY 2019,” which is a rather slick maneuver, because it appears in a document entitled “Introduction to the Federal Budget Process.”  No doubt, Social Security is a component of federal spending, but it has nothing to do with the budget.  “In the 1983 Social Security Amendments a provision was included mandating that Social Security be taken “off-budget” starting in FY 1993” (https://www.ssa.gov/history/BudgetTreatment.html#:~:text=Research%20Notes%special%20Studies%20by%20the%20Historian%27s,%20%24567%20billion%20%201%20more%20rows%20).

Expenditures on Social Security are from a dedicated payroll tax, benefits are actuarially determined based on individual accounts, and no general fund transfers are made to the program, which cannot run a deficit or borrow money. Benefits would be reduced if revenue could not meet payout earned by beneficiaries.  So, to display it as 23% of the federal budget is false. Furthermore, prior to 2020 and the COVID crisis, Trust Fund balance of $3 trillion had accumulated.  This was not counted against the deficit.

In 2019, Only 42.6% of Medicare ($339.8 billion) was Transferred from the General Fund.

The pie chart above pertains to a mythical budget of $4.4 trillion (see bar chart below).  Medicare is shown as 14%.  However, only 42.6% ($339 billion) of total Medicare expenditures of $796.2 billion is appropriated through the federal budget process. 

Instead of 14% of the total federal budget of $4.4 trillion, Medicare is less than 8%.  That is, if the federal budget is actually $4.4 trillion, which it isn’t.  Social Security must be eliminated.  There can be no argument about that.  Approximately $1.5 trillion in tax expenditures should be added, which would result in a total budget of nearly $5 trillion.

Tax expenditures are subsidies provided to corporations and individuals through the tax code.  “The Congressional Budget Act of 1974 (Public Law 93-344) requires that a list of “tax expenditures” be included in the budget” (https://home.treasury.gov/system/files/131/Tax-Expenditures-2021.pdf, p. 1).  You may have noticed that they never show up on impressive pie charts? So, for instance, subsidies to employers for health insurance provided by employers to their employees ($228 billion – the biggest tax expenditure) are not included in charts provided by think tanks.  Capital gains, employer defined benefits and defined contribution programs, accelerated depreciation, and a large number of other tax subsidies, most of which benefit high net worth individuals and corporations (including the long-term care industry), are major subsidies that cost taxpayers and put pressure on other forms of revenue.

Although Social Security & Medicare are a Small Part of the Federal Budget – they are Blamed for the Deficit

Social Security is not part of the $5 trillion federal budget.  So, the $339.8 billion transfer from the general fund for Medicare, which had total expenditures of $796 billion, mostly paid for with premiums, co-pays, deductibles (out of pocket or OOP expenses), and the payroll tax is on budget.  Hence, the entire $1.8 trillion expended on Social Security and Medicare only accounts for 6.8% of the entire federal budget.

The media will parrot press releases produced by the organizations responsible for budget propaganda.  Advocates, and activists have a duty and obligation to debunk and rebut these lies about cherished programs for the elderly.

The Financial Performance of “Nursing Home” Corporations during the COVID Pandemic, Part I: The Ensign Group

Posted on by

By:

Dave Kingsley

Introduction

The long-term care industry is paid by federal and state governments to care for medically fragile patients. That is an awesome responsibility. Historically, the industry has failed to provide the level of quality expected in a wealthy, humane, democratic society.  But the irresponsibility and negligence of so-called “nursing home” corporations in the face of a deadly pandemic has resulted in a human tragedy of incomprehensible proportions. Let’s call what happened what it is: gross negligence.

The public needs to know about the providers who have failed the patients in their care.  Hence, with this post, I will commence a series of highlights of companies in the business.  These posts are designed to illustrate the variety of corporations structured as publicly listed corporations, family trusts, private equity firms, family offices, sole proprietorships, and real estate investment trusts (REITs). One purpose of this series is to demonstrate the wide variety of ownership structures.

Throughout the COVID pandemic, I have been interviewed by various journalists about facilities with egregious amounts of COVID infections and deaths.  One task that I assisted members of the press with was tracking down ownership, which is often opaque and somewhat difficult to determine.  Initially, I’m highlighting two of those facilities and their owners: (1) Riverbend in Kansas City, Kansas, owned by The Ensign Group (ENSG) and Avocado Acute Care in San Diego, California, owned by the Jacob Graff Family Trust. This first post pertains solely to The Ensign Group.

The Ensign Group & the Riverbend Post-Acute & Rehabilitation Center

Riverbend Post-Acute & Rehabilitation Center came to the attention of the Kansas City media early in the sweep of the COVID pandemic through long-term care facilities.  According to the Kansas City Star, thirty patients had died from COVID in the facility as early as April.  I was contacted by Fox4 television reporters working on a story about a notorious loss of life in the facility early in the pandemic.

I was interviewed on air about the industry in general, but at the time I was not that knowledgeable about Riverbend ownership.  However, it did not take long to pin down The Ensign Group (ENSG) as the ultimate owner, which is a “holding company” and one of a handful of publicly listed owners in the business.

With over 200 facilities, The ENSG is one of the major players in the long-term care industry.  Given that it wasn’t formed until 1999, it is a rather young company.  Nevertheless, its revenue recently surpassed $2 billion.  Furthermore, a review of its annual 10-K and quarterly 10-Q reports filed with the SEC suggests that it has had robust earnings per share, has accumulated several hundred million dollars in cash and equivalents, and has very little debt (debt to equity ratio is at .15 versus 1.45 for the industry) – a very good position to be in these days.

How is it doing in this pandemic?  According to its third quarter 2020 10-Q filing, revenue was $599,255,000 compared to same quarter of 2019, which was $512,109,000.  It is doing stunningly well.  The ENSG reported 3rd quarter long-term debt of $113,322,000 compared to $325,217,000 as of December 31, 2019.

…earnings per share for the quarter was $0.77, representing an increase of 97.4% over the prior year quarter and adjusted diluted earnings per share for the quarter was $0.78, an increase of 95.0% over the prior year quarter.


https://investor.ensigngroup.net/news-releases/news-release-details/ensign-group-reports-third-quarter-results

At last check today I noticed that ENSG stock today was listed at $74.37 per share – near an all-time high. Here is what the Forex website had to say about the stock:

We wrote about the Ensign Group (ENSG) back in September and stated that gains may be only starting. The premise for our bullishness was the fact that earnings were increasing significantly and the technicals were following suit. Well, this momentum continued in the third quarter as the company reported adjusted net income of $44 million on sales of just under $600 million. In fact, record earnings over the past few quarters have resulted in management increasing its 2020 guidance significantly. Updated guidance for this year comes in at $3.12 per share on sales of approximately $2.435 billion. The maintaining of the top-line numbers illustrates that margins continue to increase. Management expects to do $3.50 in earnings per share in 2021 which would be a 12% increase over this year if met.


https://www.forexabuzz.com/2020/12/ensign-group-market-continues-to-love-this-stock-nasdaqensg/

The annual 10-K reports and 10-Q filings are hundreds of pages of financial and other information. Suffice it to say that the ENSG has been an excellent investment. It is difficult to understand the lack of preparation by management for a pandemic they knew was coming. The 2020 proxy report indicates the CEO’s 2019 compensation was $6 million. Lobbyists for the industry will claim that providers are operating on a low margin, which is a lie and needs to be debunked by advocates. I suggest that advocates never buy the excuse that low quality and grossly neglectful care is caused by a provider’s financial hardship.

 I will conclude with this:  providers have received an immense injection of federal funds through the CARES act and other supplemental payments from the Center for Medicare & Medicaid Services.  No doubt the ENSG has taken advantage of the lending facility provided by the Federal Reserve and Treasury Department and has probably received some outright grants worth $millions.  It is not feasible at this time to sort out just how these programs have enhanced cash flow, but I will be working on this issue in the months ahead.