By:

Dave Kingsley

Stealing from Taxpayers is Kleptocratic Behavior in Any Government

    After the collapse of the Soviet Union, Russia began to transition from totalitarian communism to an oligarchy of politically connected apparatchiks and mobsters from the Soviet era.  The productive sectors of the economy such as oil and gas and manufacturing were looted in a crude takeover by a powerful criminal cabal including the KGB and high officials of the Communist Party.  There was nothing subtle about it.  The economy was dismantled and carried off by an in-group of thieves and criminal enterprises.  The health and lifestyle of the Russian people dropped precipitously.  There was no longer any pretense about an economy designed for the rise of the workers.  That era was over and kleptocracy became de rigueur.[1]

    As Soviet Communism was failing, the United States was transitioning from a “golden age of capitalism” to a dark age of government regulatory retrenchment, Wall Street dominance, loss of faith in government for the general welfare, a sinking middle class, stagnant working-class wages, and deteriorating population health.  The kleptocratic facet of the current U.S. economic dark age is far more refined than the brutish nature of the Russian oligarchy.  The conditioning of the American people has been sophisticated and in most instances difficult to recognize.

    The kleptocrats of Russia merely took what they wanted right out in the open.  U.S. kleptocrats applied an abstruse intellectual justification for weakening government checks and balances, dismantling regulatory agencies, and privatizing government services.  Mythical beliefs about a nonexistent free market were generated in leading universities and sold to legislators and the public.  Hence, a thing no more real than a unicorn was concocted by academic economists and marketed as the ultimate decision maker.  The idea of “the market” was reified into an entity – an entity has never been observed or measured – endowed by theorists with complete knowledge and the ability to make the best decision about how government should work vis a vis private industry.[2] Indeed, it has been working increasingly well for the rich and powerful.

A Kleptocrat by Any Other Name is Still a Kleptocrat: An Example

    The late multi-billionaire Peter G. Peterson along with Stephen Schwartzman, founded the Blackstone Group, a financial services conglomerate.  Mr. Peterson dedicated a billion dollars to the privatization of Social Security and Medicare.  The trillions of dollars expended by the SS Trust Fund and Medicare program make an inviting target for a vulture capitalist.  Unfortunately, Peterson had a stellar reputation inside the Washington, D.C. beltway where cliques of corporate and individual wealth roam. His front groups such as the Committee for a Responsible Federal Budget (CRFB), the Concord Coalition, and the Peter G. Peterson Foundation, jelled into a highly influential network of “go to” organizations for public policy.

    Maya MacGuinness, CEO of CRFB, is frequently the only person quoted when federal budgeting is covered in leading mainstream publications such as the New York Times.  Her mantra is that Social Security and Medicare are leading causes of budget deficits. This is not true and she either knows that and is lying or she is seriously incompetent and ill informed.  Either way, representatives of mainstream media – including PBS – are irresponsible for consulting her.

    Medicare is undergoing rapid privatization, and an increasing amount of public funds are diverted from care to a bevy of private for-profit financial intermediaries.  This has increased the cost of Medicare.  But this increased expenditure is not devoted to better care.  Rather it is siphoned off into shareholder earnings and benefits a few wealthy individuals.

    Medicare wasn’t privatized solely under the influence of Peter G. Peterson.  The Medicare Modernization Act of 2003 included Part D – a prescription drug benefit – and was pushed by Big Pharma.  The insurance industry pushed the act because it included Part C –  privatization of the entire program under what has become known as Medicare Advantage.

    Social Security remains un-privatized and administered at a cost of ½ of 1 percent of revenue.  Wall Street would love to privatize it in the same manner as Medicare and earn huge management fees that would rake off up to 25% of revenue, which has been the experience in the privatized Chile SS program.

Nursing Home Kleptocrats

    Investors have a vast interest in frail elderly and disabled Americans institutionalized in the disgraceful U.S. nursing home system.  They can get by with a minimal, substandard, quality of care while extracting and pocketing optimal amounts of cash.  It is a shabby business carried out by sleazy businessmen in a weakly regulated government funded skilled nursing system.

    A richly funded propaganda machine and political contributions are responsible for a veil of secrecy around the corruption of an industry with little interest in optimal care of the people in their charge and from whom they are expropriating assets that would otherwise be passed to their heirs, thereby causing even more maldistribution of wealth.  While tunnelling excess amounts of government provided revenue through subsidiaries and shell companies, they have effectuated a first-class propaganda machine that has sold lies about financial hardship and underfunding from government.  I even see this lie promoted in peer reviewed journals – mostly from economists.

    Propaganda works.  The industry lobby has an effective PR campaign that leads the public to believe that it is tough to make money running nursing homes.  They rely on the lack of financial literacy among most people by noting a general low operating margin reported by most facilities. These misleading statements regarding nursing home facility cost reports submitted to state regulators and CMS are often taken at face value by academics, the media, and advocates.  Consequently, supposedly peer reviewed publications include findings from data dumps of information taken from facility-specific reports. 

Right Wing Fanaticism Didn’t Shrink Government.  However, It Did Shrink Democracy.

    A well-known anti-government fanatic once said that he wanted to shrink government down to a size small enough that he could drag it into the bathroom and drown it in the toilet.  Cute.  Grover Nordquist is the guy we are talking about here.  Although he is clearly an idiot, politicians have lived in mortal fear of his condemnation and avoided any hint that they might raise taxes – meaning individual and corporate taxes.  Reaganites, Nordquististas,  Paul-groupies (Ron and Rand) and indeed the libertarian extremist, government hating, right-wing of American politics believe that taxes feed “the beast.”  So, they were successful in collapsing individual income tax brackets, lowering corporate income taxes, and devolving taxes to the states in the form of regressive sales, excise, and user taxes.  At the same time, executive branch agencies with the purpose of protecting the public from corruption and abuse and implementing legislation have been weakened considerably.

    The middle- and lower-income classes are not paying lower taxes.  Billionaires and corporations are.  Furthermore, an increasing amount of middle- and lower-class income and wealth is being distributed to families and individuals with the highest level of income and wealth (think “spend downs” in nursing homes).  Along with privatization of government services – especially healthcare – a weakened regulatory system has been conducive to a refined form of looting through Medicare, Affordable Care Act, Medicaid, Pentagon/defense budgeting, and a multitude of other forms of privatization.  Well, maybe not so refined, if we just take a closer look at it.

    Without a robust federal regulatory framework, the rights of Americans are now trampled by special interests who have been able to tilt the tax codes in their favor and takeover government services at costs higher than would be if the services were provided by federal agencies.  One unfortunate result of this form of looting is that Americans are increasingly gouged by health insurers and paying more than their peers in Asia and Europe, but their overall health is worsening. 

The U.S. Supreme Court is About to Seriously Dilute Executive Branch Regulatory Power

    Federal laws can be sweeping and complex.  The Clean Water Act, the Occupational Safety & Health Act, and the Medicare Modernization Act are examples of laws that have induced systemic change in U.S. government and society.  These laws cannot anticipate, nor can they address every contingency in day-to-day implementation.  Congress has traditionally considered technically qualified agency personnel to be responsible for filling in the “gaps” in highly complex legislation.

    Industries affected by major legislative changes have typically fought administrative regulations issued by the EPA, OSHA, FDA, and a host of other regulatory agencies.  They have attempted to blunt regulations through the courts, propaganda, and the political process. However, in the 1984 case Chevron USA, Inc v. The Natural Resources Defense Council, Inc., the Supreme Court enhanced the legitimacy and legality of agency regulations and strengthened Executive Branch oversight.  The Court held that deference should be accorded to administrative agencies with the technical capability and scientific knowledge for addressing ambiguous issues in legislation.

    That precedent is likely to be overturned when the Court hands down decisions on two cases already heard this session: Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce.  The cases concern regulations issued by National Marine Fisheries Service (NMFS) under the Magnuson-Stevens Fishery Conservation and Management Act (MSA).  The forthcoming decisions will address two major questions:

 1. Should Chevron v. Natural Resources Defense Council be overruled?

2. Does statutory silence concerning controversial powers expressly but narrowly granted elsewhere in the statute constitute an ambiguity requiring deference to the agency?[3]

     The six conservative idealogues on the court are expected to answer question 1 in the affirmative and question 2 in the negative. This is a particularly horrendous prospect for the U.S. healthcare system, which has outsourced trillions of dollars to some of the largest corporations in the United States.  These corporate behemoths with very deep pockets or trade associations with vast resources will take their dislike of particular regulations into court and will often find  friendly judges who will interpret regulations in their favor even though they – the judges – will have no scientific credentials to make technial decisions.  This has already occurred in the Alliance for Hippocratic Medicine v. U.S. Food & Drug Administration[4], which was heard before the Supreme Court last week. 

    In that case, a federal judge in West Texas issued a ruling that overrides the scientific research undertaken by the FDA in the approval process for mifepristone (also known as “RU486” and “Mifeprex”) – more commonly called “an abortion pill.”  The S.C. will no doubt find that there is no standing to sue on the part of the anti-abortion doctors.  Nevertheless, the question of whether a judge can override reasonable regulations issued by the FDA will be left open.  That is where this case intersects with the Chevron deference principle that will most likely be overturned.

    This does not bode well for women’s reproductive rights specifically and for healthcare in the U.S. generally.  As these court cases pertain to kleptocracy, a corporate friendly and extreme right-wing majority on the S.C. is in a position to neuter federal agencies and strengthen the hand of kleptocrats.

Summary

    Acts of government sanctioned cheating and stealing from the American people are permeating the multi-trillion-dollar government funded healthcare system.  As government funded medical care is increasingly privatized and corporations in the business become bigger and more powerful than the agencies regulating them, more funds will be diverted illegally from care into owners’ pockets.  For instance, I’ve noticed an increasing number of nursing home facilities maltreating and underpaying employees, which discourages applicants for work and induces turnover.  At the same time, they contract for labor from subsidiaries of their parent/holding companies at an extremely high rate.  We have examples of facilities contracting with related parties for 50 to 63 percent of their labor.  State and federal agencies have failed to even notice let alone deal with this egregiously illicit practice.

    This example of labor contracting is only one of many, many forms of cheating.  MCOs often deny authorization for physician prescribed treatment in their networks to keep their cost below capitation rates.  Hiding and distorting information on cost reports, overcharging for services, upcoding therapy services, funneling funds through shell companies to hide excessive extraction of funds, and pressuring congress through bribes (campaign contributions) to unjustifiably increasing reimbursement, i.e., rent seeking are a few more examples of cheating and stealing.  It should come at no surprise that the American people pay two to three times more per capita for healthcare than the people of our Asian and European peer countries with universal, single payer, government managed healthcare systems.

    My purpose in writing this blog post is to encourage attention to psycholinguistics in advocacy, scholarship, and public discourse in general.  Professionals and scholars are reticent about applying terms such as kleptocratic to behaviors that are best described as that.  The media avoids harsh and condemnatory terminology – even when it called for in describing events and acts.

    Stealing is stealing, thievery is thievery, whether they happen through a home/business break-in, or through cheating on forms submitted to the federal and state governments.  White collar crime is unfortunately placed on a higher plane and is less punishable than street crime generally committed by the poor and powerless members of society. How we describe behaviors and what we call them has significant influence on how they are perceived and treated in political discourse and the criminal justice system.

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[1] Terms such as plutocracy, oligarchy, and kleptocracy are not mere words and are not used in this blog for name calling.  In public discourse words should be taken seriously and utilized in a technically correct manner as scholars in political philosophy would theoretically utilize them.. Kleptocracy is defined as: “ a form of government by individuals who primarily seek personal gain at the expense of those they govern.” Kleptocracy | Definition, Examples, Kleptocratic Leaders, Dekleptification, & Facts | Britannica.”  Given this broad definition of kleptocratic behavior, examples of it abound in the U.S. and are manifested even more crudely in Russia.  Terms such as oligarchy, plutocracy, and kleptocracy can all apply to any one government in any one nation state. Oligarchy pertains to rule by a small number of individuals sans democracy.  Plutocracy is rule by the wealthy – also contrary to democratic governance.  As wealth is distributed away from the masses to a small number of superrich individuals, plutocracy is intensified and becomes more salient in political processes.  Hence, the system becomes more oligarchic because the power is posited in a smaller number of individuals.  The intersectionality of plutocracy and oligarchy is of importance in this discussion.  Furthermore, the correlative increase of rule by the few in their private interest, contrary to the public interest, and the concentration of wealth in a tiny minority leads to corruption on a wide scale.  Therefore, resources that could be dedicated to elevating the health and lifestyle of the masses are diverted to a wealthy few.  For instance, government tax receipts flowing from wage and salary earners have been increasingly and excessively diverted to shareholders at the expense of government services intended to improve the health and welfare of all classes of U.S. residents.  Kleptocratic behavior is expressed in the healthcare system by the proliferating number of financial intermediaries such as insurance companies, pharmacy benefit managers, etc. who drain resources from care without adding effectiveness and efficiency to the overall system.

[2] Reification is a frequent fallacy in pseudoscientific thought processes.  Naming and describing something abstractly do not prove that the thing exists concretely.  The free market as an abstraction is a description of trillions of daily interactions in which people buy and sell things.  It is fallacious to call all of those interactions a thing.

[3] Relentless, Inc. v. Department of Commerce | Oyez

[4] AllianceForHippocraticMedicineComplaint.pdf (windows.net)