By:

Max Skidmore

As I mentioned earlier, the reaction to Social Security is perhaps the most glaring and irrational of all the obvious irrationalities of Republican conservatives. The program is enormously efficient, with administrative costs less than one cent of each dollar it receives in income. It is arguably the most popular government program in American history, and is far more than a mere retirement program, because it also provides life insurance and coverage for disability.

Not only do some 64 million Americans receive Social Security checks, the checks help beneficiaries of all ages. Almost a third of America’s Social Security checks go to people younger than retirement age. Of retirees, about half of retired couples count on Social Security for half or more of the total income. Of retirees who are unmarried, even more, some 70% get half or more of their income from the system. To put it another way, almost 9 out of 10 Americans who are 65 or older receive Social Security benefits. More than a fifth of retired married couples, in fact, and almost half of elderly singles, receive almost no income except Social Security, which accounts for 90% or more of all their income.

Although there certainly are complexities involved, Social Security’s fundamental principles are quite simple. Wages in covered employment up to $142,800 (for 2021; it varies annually) are subject to a 6.2% tax (FICA). Most employment in the U.S. is covered. The employer matches the amount deducted from wages. That means that an amount equal to 12.4% of each employee’s wages goes into trust funds; a portion of that payment goes to the Disability Insurance Trust Fund, and the rest to the Old-Age and Survivors’ (OASI) Trust Fund. Benefits for eligible  retirees, eligible spouses, other dependents, and the disabled are paid out from the trust funds. The small administrative costs of the system also come from the trust funds. The remainder is invested in government bonds. Those bonds regularly pay interest back into the trust funds.

Remember this also: Social Security’s benefits are inflation protected. They do not lost value as prices rise, and keep pace with inflation, Moreover, one cannot “outlive” Social Security payments, as can happen with private savings. The payments continue, inflation protected, as long as the beneficiary lives.

Think of the enormous damage that would occur if  its opponents managed to do away with Social Security. Think of the millions of Americans who are kept above the poverty line because of Social Security. Among retirees, that figure is around 38%, or more than a third of all retirees in the United States, who would be thrust into extreme poverty without their Social Security.

By law, benefits must come from the trust funds. If the balances in the funds, including incoming monies, were ever inadequate, benefits would be reduced. If that were to happen, though, there would be so much pressure that Congress surely would boost FICA rates to cover the shortfall.

In no instance, do Social Security benefits come from general revenues. Thus, those budget hawks who argue for benefit reductions to help “balance the budget,” either do not understand how the system works, or are deliberately being deceptive. Under current law, reducing benefits would simply build up larger trust fund balances; it would not affect the deficit.

In other words, balancing the budget by reducing benefits would require a change in the law that would divert Social Security money away from the trust funds. That is, workers still would pay for Social Security, but instead of receiving promised benefits, their payments would go to subsidize the wealthy, who profit from steady reductions in their rates of taxation.

Those advocating austerity, if they even think about it, apparently consider this to be fair¾that is, low to middle income workers would be expected to have “skin in the game,” and do the lion’s share of reducing the deficit that results from continuing reductions of tax on the wealthy. That certainly would be wealth redistribution, but it would be redistribution upward; diverting income away from those who have less to those who control the vast majority of wealth in the American economy.

It is correct that for some years reported projections have called for the trust funds to be depleted, usually in the 2030s. The projections come from the annual reports of the Board of Trustees of the trust funds. The Board consists of four ex officio members: the secretaries of health and human services, of labor, and of the treasury along with the commissioner of Social Security. Additionally, the full board includes two more members appointed from the public. If the reported shortfalls were to materialize, at the worst, benefits could be reduced¾and the reduced benefits still would be greater than today’s benefits. Reductions could easily be avoided: taxes could be increased slightly, for example, or the cap on earnings subject to FICA could be raised. Better yet, the cap could be completely removed.

In any case, despite many of the experts, I submit that the worst scenario is unlikely to happen. All the reporting relies on the Trustees’ “Intermediate,” or “alternative II” projections. The reporting virtually never reveals that the reports each year include three projections, not merely the Intermediate. Alternative I is the “low-cost” projection, and it almost always calls for no shortfall. In the past, the performance of the trust funds have generally been closer to the low-cost projection¾the one that projects no shortfall¾than to the more pessimistic one. In fact, recently, even during the pandemic, the trust funds have performed better than the Intermediate projection would have it. Despite this, only the Intermediate projection, with its persistent shortfalls, forms the basis for virtually all reported information on the program’s future.

The Trustees, in fact, produce three separate projections. They say that the Intermediate one is the one they believe most likely to come to pass, but caution that these are simply estimates, not prophecies.

Their Alternative One, or “low-cost” projection, generally calls for no shortfall at all (to be precise, in the 2020 report, it does call for a small and brief shortfall in the 2080s, but that shortfall  quickly vanishes). Hardly anyone, though, has heard of a projection other than the Intermediate. One indication that the Intermediate Projections tend to be too pessimistic, is that even during the pandemic, the trust funds have performed far better than the reported projections have anticipated.

So the question of Social Security’s sustainability is certainly one of political will, not economics. The American economy can easily handle any feasible circumstance. The shortfall from Republican tax cuts, for example, is far greater than any of the Intermediate projections for Social Security.

Thus, the future appears quite bright. Most of what people hear about Social Security’s sustainability is influenced by conservative propaganda that reflects billions of dollars spent to convince the public that Social Security “won’t be there when you retire.” If you hear nonsense about immigrants, even illegal immigrants, come into the country and immediately begin to collect Social Security, what you are hearing is not only wrong, but it completely misrepresents how the program functions. No one collects Social Security unless it is based on a worker’s wages. All benefits are based on a worker’s having worked in covered employment. Ten years of wages are required.

 Social Security is not “going broke.” If the trust funds were depleted, there still would be money coming in to finance benefits. “Bankruptcy” is not an appropriate term for  a program of the federal government that cannot “go broke,” since it can create money as it needs it to pay any bills that it incurs. Remember, when you hear dire warnings about Social Security, those warnings are almost assuredly the result of well-financed propaganda from Social Security’s opponents. Ignore them.

By:

Dave Kingsley

Monetizing Health Care and the Commodity Fetish of Hyper-capitalism

In this age of hyper-capitalism, anything that can be monetized will be monetized.  Financiers are very good at finding ways to turn normal human activity into an investment.  There is no better example of this than A Place for Mom – a private equity-owned firm.  Although this company’s massive advertising blitz featuring Joan Lunden and her ilk have led the public to believe that it is a charitable service, it is a for profit enterprise paid by nursing homes to refer patients to them.

In addition to monetizing every facet of medical care and turning the elderly into commodities, corporations like A Place for Mom are allowed to operate unfettered and free to engage in deceptive advertising.  Due to a lack of regulation, they are also able to operate behind a veil of secrecy.

Free is not Free to Providers & Taxpayers

Essentially, A Place for Mom is paid the equivalent of one month of Medicaid reimbursement for every patient they refer to a facility. As a researcher, I called this outfit and asked if they would tell me the name of facilities to which they made referrals. As everyone knows, there are good, bad, and very bad nursing homes. They will tell me or any other member of the taxpaying public nothing – bupkus, nada.  The information I requested is not public and will not be made available to either potential customers or any citizen requesting it. It is important to know if these types of referral services have deals with specific facilities and what those arrangements would entail. 

Like the long-term care system in general, it is not possible to evaluate these services in practically all states except the state of Washington.  We don’t know if they have a pattern of referring to facilities with poor reputations and desperate for patients to fill beds.  Because their employees sit in cubicles and sell services, their knowledge of long-term care is unknowable.  I was told by one employee that she had only been on the job for one day and had no background in the field senior housing or elder care. That was a lucky break. I’m certain she was educated quickly on what she could reveal to callers.

Regulation & Transparency is Needed

Referral services are escaping regulation in most states. The State of Washington has enacted legislation with record keeping and reporting requirements (https://app.leg.wa.gov/rcw/default.aspx?cite=18.3308&full=true).  Disclosure and records of relationships with both patients and facilities are required by the statute. This could serve as model legislation for initial attempts to regulate and monitor referral services.

The Washington statute doesn’t appear to include public access to the records for investigative journalism, research, and other purposes.  That is, in my view, a weakness that needs to be overcome in future legislature.

Jobs Override the Health & Well-being of Elders & the Disabled

The state of Kansas has provided a $30 million subsidy to A Place for Mom’s shop in the vacated Sprint Campus in Overland Park.  The Gray Panthers of Kansas & Missouri pressured the governor’s office to either squelch these subsidies or support legislation that would force transparency and disclosure of relationships with providers and clients.  Governor Kelly has shown little interest in working with the Gray Panthers on monitoring referral services.  Her letter to the Gray Panthers indicates that the overriding issue for her are the jobs A Place for Mom will bring to Kansas.

By:

Dave Kingsley

Media, Image, & Distortion of Reality

The first known outbreak of COVID in the United States occurred at the Kirkland, Washington long-term care facility owned by Life Care Centers of America, Inc.  Consequently, the company has gained some fame in the mainstream media and has been treated sympathetically as a victim.  Coincidentally, the Kirkland facility also had a CMS Nursing Home Compare quality rating of 5 – the highest – which added credibility to the image of victimhood.  Here is how CBS 60 Minutes Correspondent Bill Whittaker introduced the company on the November 1, 2020 60 Minutes program:

“On the morning of February 29 the world turned its attention from news of the coronavirus in China and Europe, to the Seattle suburb of Kirkland. What was predicted by public health experts had arrived: the first COVID-19 outbreak in the United States. And it was spreading in the most vulnerable of places — transforming a 5-star, skilled nursing facility into the first hot-zone in the country.”

https://www.cbsnews.com/news/covid-19-outbreak-nursing-facility-kirkland-washington-60-minutes-2020-11-01/

The gist of an interview by Whittaker during the program with Nancy Butner, a Life Care Centers VP, was this: the federal government was at fault. When the company called the federal government and asked them to send nurses and other personnel, instead a team of inspectors was sent.  The feds didn’t ride to the rescue.  Given that Life Care Centers, Inc. is one of the largest long-term care chains in the U.S. and funded through Medicaid and Medicare to staff and manage its facilities, this is an odd defense.

Is Life Care Centers, Inc. a Five-Star Company?

Life Care Centers owns and operates 230 long-term care facilities and is typically listed by trade publications as one of the four or five largest chains in the United States.  The company is owned by one man – billionaire Forrest J. Preston – which is an anomaly among the biggest chains. Furthermore, it is the company’s responsibility to properly staff its facilities, implement infectious disease control protocols, and train employees.  It was well known in early January that a rapidly spreading novel virus was spreading in Asia and would most likely make its way to the United States.

A 5-Star rating in one or a few facilities should be considered in context of the Life Care Centers track record.  Out of seven Life Care Centers facilities in Kansas, four are rated 1 – the lowest rating.  However, the Andover facility is a “special focus facility,” which means it is worse than the lowest rating and is so bad that no one should be referred there.  The Overland Park facility has a 2 rating but a “red hand,” which means that patient had suffered abuse.  The Atchison facility has a 5 rating.  So, out seven facilities in one state, all but one has been rated 2 or below, with most being a 1or special focus facility. 

At this time, the Andover, special focus facility, still has half of its beds occupied, which makes one wonder why the state allows it to continue to operate.  Reading the inspection report will literally make you sick (Find Healthcare Providers: Compare Care Near You | Medicare). Furthermore, two of the largest COVID outbreaks attracting media attention in Kansas occurred at Burlington and Kansas City, Kansas Life Care Centers facilities.

Perhaps there is a modicum of validity to the CMS 5-Star rating system, but it is possible on a good day, with the right inspector, to luck out and receive a 5.  Perhaps the highest rating is deserved in one facility while most of the others are rated low.  However, treatment and prevention of infectious diseases should be a corporate-wide policy.  I would, therefore, take the 5 at Kirkland with a grain of salt.

A Huge Case of Fraud by Life Care Centers:  Settled by the Department of Justice for $145 Million

The best way to rob a long-term care facility is to own one.*  On Monday, October 24, 2016, the U.S. Department of Justice announced that it had “resolved allegations” that Life Care had “violated the False Claims Act by knowingly causing skilled nursing facilities to submit false claims to Medicare and TRICARE for rehabilitation therapy (https://www.justice.gov/opa/pr/life-care-centers-america-inc-agrees-pay-145-million-resolve-false-claims-act-allegations). It is impossible to know how many $millions Forrest L. Preston was able to pocket above and beyond the $145 million.

Nor do we know how widespread this type of fraud is in the long-term care industry.  The DOJ brought this action against Life Care Centers because of two whistle blower employees (the whistle blower reward was $29 million).

Given that white collar crime is not usually punished (see Professor Jennifer Traub, Big Dirty Money), it is likely that large amounts of fraudulent billing is robbing patients of funds for care and employees’ of pay. The message from these types of settlements is that there is not much risk or hazard in committing fraud. 

Dirty money flowing into the pockets of owners/investors expands pressure on federal and state budgets.  Consequently, it is more difficult in the legislative process to increase expenditures for actual care. So, a billionaire owning a chain of long-term care facilities and submitting fraudulent claims is not only robbing the government but is also robbing patients and employees.  That simple truth didn’t make it into the 60 Minutes idealized view of Life Care Centers of America, Inc.

*Expropriated from University of Missouri, Kansas City economics professor Bill Black who published a book entitled “The Best Way to Rob a Bank, is to Own One.”

By

Dave Kingsley

The best article to date on the COVID pandemic in long-term care facilities appeared this morning in the Wall Street Journal (Anna Wilde Mathews, Jason Douglas, Jon Kamp, and Dasi Yoon, “Covid-19 Took Deadly Aim At World’s Nursing Homes,” https://www.wsj.com/articles/covid-19-stalked-nursing-homes-around-the-world-11609436215?mod=searchresults_pos1&page=1). It is not another emotional story of some scandalous facility – the kind of stories we’ve had in the United States for 70 years. Rather it discusses the catastrophe in the broader context of system failure.

I believe the article could have gone further in its unmentioned but more or less implied critique of the various subsystems of the overall system, e.g. the industry, regulators, aging enterprises such as AARP, and legislators. These mutually reinforcing subsystems were not singled out for the type of scathing criticism they deserve. That’s a problem and weakness in the reporting. Nevertheless, the article was clear that most of the 120,000 estimated deaths was preventable.

The cross cultural comparison presented by the authors cited a study in the Journal of Post-Acute and Long-Term Medicine, in which a dozen member countries of the Organization for Economic Cooperation & Development were studied and compared. Not surprisingly, COVID-19 deaths were concentrated in long-term care facilities across the world. But some countries – mostly Asian countries – greatly reduced the effects of the scourge in their long-term care facilities.

As stated in the article:

The devastating toll wasn’t inevitable. Countries such as South Korea managed to limit the deaths among nursing home residents by avoiding widespread community outbreaks and moving quickly to prevent infections from spreading inside the facilities. Even as it faces a recent surge of Covid-19 cases, the entire east Asian nation has still reported only about 70 long-term care deaths.

Dr. Samir Sinha, Director of health policy and research and the National co-chair of the National institute of Aging said “We left the barn door open.” The authors continued to point out that most nations failed – especially the U.S. – in taking precautions and reacting slowly. It was well-known that infectious diseases are a significant threat to patients in long-term care facilities.

As I indicated, this article has its weakness by not focusing heavily on the industry’s gross negligence (by placing investors over stakeholders), or on lax regulation of the Center for Medicare and Medicaid Services and the various state agencies that appeared to be protecting and carrying water for the industry. Furthermore, the authors misrepresented the Trump Administration’s COVID in Nursing Homes Commission by stating that “it called for a more muscular response, including greater help for nursing homes with staffing, testing, and protective gear.” In fact, the Commission was a whitewash of the industry’s negligence and used by the Trump Administration as propaganda. Seema Verma issued a press release claiming it validated the great job done by the Administration.

Although the WSJ article was apparently not a call for an independent commission to determine why 120,000 mostly preventable deaths occurred, it should be a bit of help in motivating the public, legislators, and advocates to call for such an entity. The death of so many patients in long-term care is one of the greatest medical catastrophes in U.S. history. To not hold responsible parties accountable will present a grave danger to elderly and disabled patients in long-term care institutions.