The Nursing Home Industry Lies, Cheats, and Steals with Government Help:  It’s Time to Stop the Wankery and Demand the Truth!

By:

Dave Kingsley

Wankery:” Definition: (Noun; Vulgar Slang British)  “Pretentious, contemptible, stupid, behavior or material.”  https://www.lexico.com/en/definition/wankery

A Message to Advocates, Activists, Journalists, & Politicians

Over the years, I have observed many legislative hearings regarding nursing home abuse and neglect. In practically every hearing, industry lobbyists claim that Medicaid reimbursement is too low. Therefore, they conclude, the public, patients, and their family members can’t expect better care.  Usually, they pull out their standard narrative of “low net” or “a thin margin.”  In essence, they are claiming that the industry is made up of incompetent businesspeople who have a tendency to invest in losing businesses.

Unfortunately, leading advocates and scholars invited to testify invariably fail to confront the industry’s hardship plea as a lie, which it is.  Basically, Medicaid is fueling a real estate industry undergirded by at least $300 billion worth of revenue producing commercial real estate.  Revenue flowing through thousands of facilities (buildings) is enhanced by a plethora of other businesses billing Medicaid and Medicare for therapies, pharmaceuticals, labor contracting, dietary provisions, management services, and anything else providers can dream up as a cost to taxpayers and as a flow of cash to one of their businesses.

Here is how it works:  the corporate entity (LLC, LP, etc.) with the license to operate a facility, i.e., provide care, also pays for services to other corporate entities owned by the same investors who own the licensed facility.  These are called “related parties.”  The LLC with the license is making a lease payment to the LLC which owns the property.  Often, nurses and nurses’ assistants are provided by a labor contractor – another LLC.  Management of a licensed facility is often provided by a management firm owned by the owners of the licenses, the properties.  This is a form of theft, but it’s legal thievery because the industry has a powerful lobby.

Payments to these related party entities increase operating expenses, lowers net operating revenue, and often result in net operating losses.  Net income therefore is often far lower for each facility because parent corporations are sucking out a huge proportion of revenue through an array of corporations.  So, lobbyists will deceitfully tell legislators that the overall “median” net income percentage (net income divided by total revenue) is a half percent or some such nonsense.

Furthermore, people not well-educated in corporate finance (which, understandably, is most people) won’t know that net income isn’t a valid metric for determining capital flowing from customers – in this case, the government – to shareholders.  A host of accounting gimmicks hide cash flow that certainly does not appear in net income.  However, that is a discussion for a later blog post.  Suffice it to say, low nets and thin margins are the warp and woof of industry propaganda – swallowed, or at least not confronted, by most everyone from advocacy groups to scholars, to journalists.

What Could We Afford if Excess Extraction of Taxers’ Money by the Nursing Home Industry Were Identified & Stopped?

We know that the nursing home business is lucrative for investors, shareholders, and executives.  We know from financial reports submitted to the Securities & Exchange Commission by publicly listed nursing home corporations that executives receive millions per year in compensation and Wall Street investors such as BlackRock and Vanguard are the largest shareholders in publicly traded nursing home stock. 

BlackRock and Vanguard are the leading asset managers on the Planet.  They would not be investing your pension, college endowment, 401K, or other assets in an industry with a track record of paltry returns. 

Some my research colleagues and I have been investing a huge amount of time compiling financial reports (otherwise known as cost reports) to various state agencies.  These reports are pervasively false, misleading, and often fraudulent.  Invariably state agencies fail to audit these documents and legislators seem oblivious to pervasive industry deception. 

Excess cash pouring out of Medicaid and Medicare through licensed skilled nursing/long-term care facilities into investors hidden behind a veil of secrecy could be utilized to keep people out of these God-awful places in the first instance or to make life comfortable for those of us who will be or are now institutionalized under horrible conditions.

The number one duty of advocates is to tell the truth to power and to force the industry to stop lying, cheating, and stealing money that could be directed toward decent, humane, treatment of disabled Americans needing assistance with basic, every day, living.  It is time to get our messaging in order.

Leading Bioethicists Do Not Believe that the Elderly Have Equal Rights in the U.S. Medical Care System

By:

Dave Kingsley

Nursing Homes & COVID:  200,000 Fatalities in One Institutionalized Population

Last week, the U.S. officially recognized a COVID death toll of one million U.S. residents.  An estimated 200,000 or 20 percent of those deaths have occurred in nursing homes. At any given time, individuals in long-term care/skilled nursing institutions comprise approximately three-tenths of one percent of the U.S. population.  One would think that an investigation would be under way to determine how such a tragedy could occur in one institutionalized population and who is accountable.

There is no doubt that a huge proportion of these deaths were preventable.  However, due to neglect and greed of corporate providers, paid by taxpayers to care for patients in LTC/SKN facilities, and lax government regulation, COVID was allowed to sweep through institutions housing frail elderly and disabled Americans. This resulted in the largest mass fatality of an institutionalized population in the history of the United States.   

Appallingly, interest in accountability for this human rights atrocity on the part of politicians, the media, the medical professions, government agencies, or any other relevant interest group is nonexistent.  Even two commissions on nursing homes – one specifically charged with investigating COVID in LTC/SKN institutions and one under the auspices of the National Academies Science Engineering & Medicine (NASEM released a report barely a month ago) – ignored the issue of industry culpability.

The industry is culpable.  It was well-known that a novel virus was likely to make its way to the United States eventually.  For decades, scientists have been sounding alarms.  Asian countries learned from the SARS pandemic and issued guideline for protecting patients from raging viral pandemics.  Those guidelines were ignored by the U.S. nursing home industry.

Indifference to an unnecessary mass fatality event is occurring in a context of long-developing denigration of the worthiness and value of elderly and disabled Americans.  Religions and their leaders have been absent from and seemingly uninterested in the plight of institutionalized people needing nursing care. Indeed, many deplorable facilities are affiliated with major religious organizations.

And then there is the question of bioethics and decline of Enlightenment and Judeo-Christian ethics as they pertain to persons needing medical care.  Indeed, the current dominant bioethics movement supports withholding beneficial medical care from the elderly for the sake of the market economy and what they erroneously see as federal budgetary constraints.

The Elderly & Human Rights in a Neoliberal Capitalist Society

As a highly visible extremist Catholic majority on the nine member U.S. Supreme Court “legislates” on human rights for a population of 340 million citizens, a small group of America’s most prominent and powerful bioethicists are engaged behind the scenes in a chilling, ageist movement – mostly in academic journals. Few Americans are aware of the proposals for “rationing” medical care concocted by Daniel Callahan of the prestigious Hasting Center on Bioethics, celebrity physician Zeke Emmanuel, and other well-known bioethicists.[1]

The underlying philosophical/ethical, foundation of these physicians’-academicians’ rationale is a toxic, perverse, combination of utilitarianism and neoliberal economics rather than a profound and humane theoretical framework calling for reinforcement of universal human rights based on Enlightenment values and ethics.  The essence of their reasoning is that the U.S. cannot afford all the medical care needed by the U.S. population, therefore some needed care should be directed away from the elderly to young populations who are of more value to society, i.e., from the less productive to the more productive.

A review of the literature clearly exposes two unexamined and flawed premises of this horrifying philosophical/ethical position: (1) the U.S. economic system cannot absorb the cost of needed medical care for all citizens, and (2) the elderly are not as worthy as younger cohorts.  Proponents argue from these premises to the conclusion that it is OK to shorten the lives of elderly Americans for the sake of reducing costs.

Integral to their position is the concept of a “decent minimum level of medical care.”[2]  Schneiderman defines a decent level of medical care as:

“…a level of medical care that enables a person to acquire an education, seek or hold a job, or raise a family.  Or, if the person, because of impaired health, is unable to meet any of these goals, to attain a reasonable level of function within the person’s limits and respectful of the person’s dignity, as well as a reasonable level of comfort, whether it be from pain or other forms of suffering.”[3]

This statement clearly expresses an opinion contrary to humanistic ethics that grew out of the Enlightenment and formed the philosophical underpinnings of liberal democracy. The bioethicists in this movement have a perspective of human beings through the lens of bioethical utilitarianism in which their right to medical care is reduced to their worth in a radical free-market economic system.  As Schneiderman states: “Without the support of society, the individual would not prosper; in return, I argue, the individual has a duty to recognize society’s needs for productive citizenry.”[4]  He proceeds to claim that “The success of the society depends on the productivity and contributions of its individual members.”[5]

The Context of Rationing Bioethics

As prior quotes suggest, a powerful group of bioethicists are valuing humans for the purposes of medical care based on their value to the economic system.  Without operationalizing “productivity” and “contribution,” they presuppose a declining value of aging human beings because of less engagement in and usefulness to the economic sector of society. Wisdom, life experience, leadership ability, and other contributions needed by an enlightened, democratic society are not only discounted, but given no worth whatsoever. 

As Zeke Emmanuel, the most famous bioethicist in the U.S., wrote in the Atlantic, it is best to die by 75 because life is not worth living past that age and all productivity and contributions cease.[6] Dr. Emmanuel equates “living too long” with living beyond our 75th birthday.  He claims that longevity “robs us of our creativity and ability to contribute to work, society, the world.”  That it “transforms how people experience us, relate to us, and most importantly remember us.  Dr. Emmanuel believes we are, after age 75, “no longer remembered as vibrant and engaged but as feeble, ineffectual, even pathetic.

Culling the Herd:  Let the Old Die

At some point in U.S. history, elders were no longer seen as important to the survival of the family, community, and nation.  That sociology and history – the history of transformation of valued elders to useless, dependent old people – has been covered elsewhere.  In radical free market economic systems, individuals not needed are vulnerable.  Public policy tends to reflect the power of industrialists and the economic values guiding politicians.

It has not been uncommon for media personalities to suggest that people dying in nursing homes were probably near death anyway.  So, not a big loss.  As Bill O’Reilly on FOX put it, “they had one foot in the grave any way.”  Some suggested that diseases “cull the herd,” and who better to go than old people. 

In a country as wealthy and advanced as the United States, there is absolutely no reason to deny health care to citizens and other residents based on their worthiness as human beings.  There should be no place in a humane society for “deserving” and “undeserving” people in need of medical care.  Medical ethics require nothing less than deference to physician-patient decisions about needed, beneficial, care.  Unfortunately, in the privatized system now dominating U.S. medicine, the needs of shareholders and executives take precedence over people with medical needs.


[1] See e.g., Daniel Callahan (2009) Taming the Beloved Beast.  Princeton University Press; Lawrence J. Schneiderman (2011) “Rationing Just Medical Care,” American Journal of Bioethics, Volume 11, Number 7, 7-14.; Norman Daniels (2013) “Global Aging and the Allocation of Health Care Across the Life Span” American Journal of Bioethics, American Journal of Bioethics, Volume 13, 2013, 1-2.

[2] Schneiderman, ibid, page 8.

[3] Schneiderman, ibid, page 8.

[4] Schneiderman, Ibid, page 8.

[5] Schneiderman, Ibid, page 8.

[6] Ezekiel J. Emmanuel (2014) “Why I Hope to Die at 75,” The Atlantic, October,2014 Issue. https://www.theatlantic.com/magazine/archive/2014/10/why-i-hope-to-die-at-75/379329/.

Data Analytics, The Stock Market, & Healthcare Justice

By:

Dave Kingsley

Current public relations carried on by the hospital and nursing home
industries are based on bogus claims designed to mislead the public. The
variety of wealthy lobbying organizations for the medical-industrial complex
are promoting false narratives based on either an invalid interpretation of
financial data (intentional) or making claims of hardship, e.g. “low net
margins” that are not supported by solid, scientific, factual information
(also intentional).

Big and increasingly dominant hospital and nursing home corporations have
sophisticated data analytic departments on which they rely for management
decisions affecting cash flow and shareholder interests. These multi-billion-dollar
companies determine razor thin margins acceptable for minimal staffing, pay,
food quality, training, and equipment. Even the smaller chains are implementing
productivity enhancement efforts with software designed to determine maximum
acceptable acuity levels for billing and cash flow.

Unfortunately, providers of long-term/skilled nursing care (i.e. nursing
homes operators) are not applying advanced technology and data analytics to
quality of care. I follow industry trade publications and financial reports and
can find no evidence that providers are employing sophisticated analyses to
efforts for optimizing the health and quality of care at a cost that returns a
reasonable value to executives and shareholders rather than a return that can
pass muster with regulators and legislators.

Because much essential financial data pertaining to tax supported medical
care operations are hidden from public view or nearly impossible to wrest out
of government agencies, advocates for patient and employee justice in hospitals
and nursing homes are in an asymmetrical fight with lobbyists. Because the
nursing home industry is more of a real estate/finance industry than a
medical/patient care industry, the lobbying power in federal and state
legislatures constitutes a juggernaut that can only be defeated through an
organized advocacy effort that fights for transparency and fully utilizes what
is available now to feed into a truthful narrative for media, legislative, and
research actions.

What Is The Stock Market Telling Us About The Financial Condition of
Nursing Homes & Hospitals After Two Years of COVID?

Some data pertaining to the financial condition of nursing homes and
hospitals are readily available from the U.S. Securities & Exchange
Commission (SEC). I have been tracking the stock of publicly listed
corporations with operations in nursing homes and hospitals. Most nursing home
corporations listed on a public exchange are real estate investment trusts
(REITs) that are becoming increasingly powerful in the long-term care/skilled
nursing business (they trade and lease real estate but also operate
facilities).

The last three months have not been good for the equities market. Stock
prices have been falling precipitously. But that’s not the case for stocks of
corporations in the business of providing tax funded medical care.

Brookdale Senior Living & The Ensign Group

Let’s consider the two biggest nursing home operators listed on a public
exchange that are not REITS: Brookdale Senior Living and The Ensign Group.
Since late November, the DOW has dropped approximately 3%, the S&P has
declined by 6.5%, and the NASDAQ has fallen by 17%. But these nursing home
corporations have gone in the opposite direction.

Closing price of Brookdale November 29, 2021 – $6.30 Close on February 26,
2022 – $7.00

Closing price of Ensign November 29, 2021 – $77.20 Close on February 26,
2022 – $82.19

So, Brookdale stock is up by 11% and Ensign stock is up 6.5% during the same
period we’ve seen a drop in the markets like we haven’t seen since March of
2020 when they crashed due to COVID but recovered rather quickly.

Most of the REITs heavily involved in the nursing home business have seen
their stock rise during the time that the market has been falling rapidly.
Welltower, the big one, is up 1%. Ventas, the other big one, is up nearly 8%.

Publicly listed hospital corporations are doing well also. HCA stock has
climbed from $229 in late November to $253 at the close yesterday – a 10.5%
increase. Tenet jumped from $74.46 to $85.71 since November 29th – a 15%
increase!

Why is the stock of these hospital and nursing home corporations doing so
well when the market is in correction territory? The primary reason is this:
they are heavily subsidized by the taxpayers. Indeed, their prices are set by
state agencies much like like utility company rates are set. They submit their
costs and are reimbursed for those costs plus increases for inflation and
healthy percentage increases above costs. Furthermore, they are structured for
each facility to pay lease expenses and other ancillary expenses to other
corporations they own.

Don’t believe the industry’s hardship pleas. That is all a lie. It is a
scurrilous behavior indeed for the American Health Care Association – the
nursing home industry lobby – and the American Hospital Association to be
putting out false information to snow the taxpayers who are so generous with
their subsidies for executive pay and shareholder dividends.

A Simple Truth: Nursing Homes are Run By Financiers – Not Medical Professionals

By:

Dave Kingsley

Nursing Home Investors Care about Cash Flow. They are Not Into Charitable Care.

It’s amazing to me how far nursing home industry lobbyists are getting with their hardship pleas. At this time they are being rewarded by legislatures for letting their workforce deteriorate to a crisis level. There are some simple truths – perhaps simple logic – regarding why qualified, competent medical professionals are hard to find these days.

Let’s start with the cutting edge of corporate finance: the “time value of money.” Investors calculate their free cash flow over five years before investing their money. Their decision is based on yearly cash flow discounted to the present time. This means that they determine what a dollar is worth at the present time versus what it will be worth in 1, 2, 3, 4, or 5 years if invested in a project or business. I won’t bother my readers with the formula for determining “net present value,” but debt financing of real estate and tax arbitrage play a major role in that calculation.

In the case of the nursing home industry, real estate is debt financed. Reimbursement for capital costs such as depreciation and interest typically exceed payment on loan principal and flow into the cash channel that will be “earnings” pocketed by investors. At some point, principals will equal and begin to exceed returns from real estate and debt tax advantages. The property will be flipped at that point.

Keeping food costs low, paying substandard wages, dangerously low staffing, and putting sick, fragile, elderly and disabled people in a room with a stranger are techniques for increasing cash flow from Medicare, Medicaid, self pay, managed care, and whatever other form of third party payer reimbursing care.

Why Would Investors Be in The Nursing Home Business if It Weren’t A Profitable Business?

Because privatized, tax-funded, medical care is financialized (finance overrides medical care) decisions regarding care are frequently and generally based on financial metrics. The quality of care is confined within the parameters of expected cash flow (discussed above). Furthermore, with “cash as King,” immediacy of returns rather than long-term planning and reinvestment for a better medical care system in the future drives decision making about staffing and overall conditions in acute care, long-term, and skilled nursing facilities.

The problem is this: the public, the media, and legislators do not have a good overall view of how the nursing home system works from a financial perspective. Federal and state agencies have been derelict in making accessible, understandable, financial and ownership data available to researchers and the public in general. California is more advanced in this regard than other states but still has a way to go in making the system fully transparent in that state.

In the past few weeks, I reviewed 2020 cost reports of 205 facilities in San Diego, San Bernardino, and Orange counties. I entered data regarding revenue, net income, number of beds, and the proportion of revenue from various third party payers (e.g., Medicare, Medicaid, Managed Care, etc.). As opposed to the claim from a Kansas nursing home lobbyist that providers have a median net income of 1/2 percent, I’m finding a median of close to 7% even though many claims of losses look dubious to me. Furthermore, net income is not a reflection of earnings or cash flow. Depreciation and interest are expensed on the income statement even though these are not cash expenses.

Nothing in the cost reports will tell us how much cash is extracted through real estate transactions. Nor do they indicate how much cash is flowing into parent corporations and holding companies. We know how much that is for public listed corporations – most of which are real estate investment trusts – because we can easily access financial reports they file with the SEC. As my colleague Charlene Harrington and I have pointed out, they were not hurt by COVID in 2020 (“COVID-19 had little financial impact on publicly traded
nursing home companies “J Am Geriatr Soc. 2021;1–4. https://doi.org/10.1111/jgs.17288). We will soon have an article in The International Journal of Healthcare Research regarding the robust financial performance of The Ensign Group since issuing a IPO in 2007.

The late Roy Christensen, founder of both Genesis and The Ensign Group, and his family have become fabulously wealthy by channeling money out of their large chain of facilities into stock options, stock awards, and executive pay. The Ensign Group is rapidly acquiring facilities and undertaking financial maneuvers like spin offs for the purpose of moving property around without incurring capital gains and corporate income taxes. They have also channeled a large share of their hundreds of millions in stock over the years into a variety of family trusts, which keeps their wealth intact and away from the IRS.

Justice Delayed Is Justice Denied for A Nursing Home Whistle Blower & Taxpayers

By:

Dave Kingsley

In 2011, a nurse employed in two nursing homes owned by Consulate Health Care, LLC, a notoriously bad nursing home chain in the state of Florida, filed a whistleblower lawsuit against the company. She filed the suit for what she saw as the company’s obvious fraud in billing the federal government.  It was not until 2017 that a jury awarded a $347 million judgment in favor of Medicare and the whistle blower.  That is an eyepopping amount.  Because fraudulent billing is so pervasive throughout the nursing home industry, it is not unusual to see $30, $40, or even $140 million settlements between DOJ and nursing home corporations.  But this outfit must have been into some big-time fraud.

    However, the story does not end well for taxpayers footing the bill for healthcare in America.  A federal judge threw out the jury’s award.  The appeal judge’s reasoning is dumfounding and shocking. According to The News-Press of Fort Myers, Florida, the judge “overturned the jury’s verdict, citing lack of evidence of a corporate scheme and noting that state and federal regulators appeared to view the disputed practices with ‘leniency or tolerance or indifference, or perhaps with resignation.’”  In essence, the judge stated that the government just didn’t care if the company was engaging in obvious fraud!

    Although an appeals court reinstated $255 million of the judgment, in the final analysis, the company was able to engage in a legal maneuver by taking a part of the company into bankruptcy.  This month – 10 years after the lawsuit was initiated – the whistleblower and the government settled for a mere $4.7 million. 

    I will be following this story and discussing the outcome of the bankruptcy.  The judgement is filled with legalese and jargon.  But it appears that Consulate will be moving forward with little more than a minor glitch in its operations.  The company didn’t even get a slap on the wrist – it was more like a kiss on the cheek.  And that part about the government didn’t seem to give a damn doesn’t surprise me at all.  Having interacted extensively with state and federal agencies ostensibly regulating public funded healthcare corporations on our behalf, I’m jaded enough to believe it.

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

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, Electric Vehicles, and Nursing Homes

By:

Dave Kingsley

Why would any capitalist believe that government funded medical care is amenable to capitalist fundamentals.  It’s nonsensical, even crazy, to think that “free markets,” “competition,” “buyer-seller negotiation” (bargaining over price), and so forth are relevant to medical care.  The results of this delusion – that Medicare and Medicaid can be administered through a “free market” – are: (1) bizarre, costly, and insulting advertising blitzes during Medicare open enrollment, (2) excessive costs due to payouts to shareholders and executives, (3) corrupt politics, which is also driving up costs, (4) dearth of R&D and innovation, and (5) lack of access for many citizens and residents who pay taxes that help fund the system.  I’m amazed that the public tolerates this corrupt, inefficient, unfair, and costly system.

    For a comparison to what is happening in the medical-industrial complex, consider the merging electric vehicle industry – about which I’m thrilled – as an example of real capitalism.  The traditional auto industry failed to move quickly enough toward vehicles that reduce the kind of emissions posing a threat to the future of the human species.  Hence, companies like Tesla have disrupted the staid auto manufacturing business.  Either Ford and GM will move much faster or will shrink into oblivion.  It is exciting to see upstart companies like Rivian (recent IPO & a contract to build delivery vehicles for Amazon), Lucid, and Archimoto challenge big auto and other gas vehicle manufacturers. We have a whole new exciting industry that is designing and building electric vehicles, inducing battery technology, spawning charging station manufacturers (e.g., ChargePoint), and creating well-paying jobs.

    Compare the Medicare-Medicaid funded, tax advantaged, nursing home industry to the rapidly emerging electric vehicle industry. The primordial roots of the industry can be dated to 1950 when the Social Security Act was amended to authorize federal funds for medical care (almshouses were state and local eleemosynary institutions and did not receive federal funds). It wasn’t long before federal lending began to boost a private, for profit, real estate industry – justified by a façade of medical care.  Medical delivery was based on the total institutional, industrial, model because efficiency and economy trumped professional medical standards. In 1965, massive amounts of federal and state dollars began to flow into the industry, which grew into a major sector of the commercial real estate industry and the medical industrial complex.

    There has been no innovation to speak of in the design of facilities and delivery of care in the nursing home industry since 1950.  The same substandard, disgraceful, care delivered in 2021 is essentially the same standard of care that has been delivered for the past 70 years. Conversely, financial innovation since the 1980s has been breathtakingly swift.  The “shareholder as supreme” theory of management and financialization throughout the economic system overtook a publicly funded nursing home system.

    What we now have is trillions of dollars funneled into the medical industrial complex – including the nursing home sector – without a correlative expectation that providers deliver a standard of care that is comparable to the money they are paid.  The nursing home industry operates in collaboration with government in a cartel like arrangement in which prices are guaranteed but labor floats in the low-wage service market.  Entry into the market is restricted and those providers privileged with a license are guaranteed an excessive return.  Owners, executives and their families are becoming fabulously rich in this system while patients suffer from low grade care without concern for professional medical standards. 

There is no disruption and innovation in a system like this.  Hence, it is not a capitalistic system at all.  It is government funded privilege accorded to select groups of shareholders. The tax codes are not incentivizing them to invest in capital and operational improvements. Rather, they have been able to arbitrage tax provisions into enhanced revenue streams without any other purpose than increasing shareholder returns.

Watch For Future Posts:

“The General Welfare Clause in the U.S. Constitution: What Should be Public and What Should be Private in a Democratic Republic with a Capitalist Economic System.”

“Taxpayers & Tax Codes: What Should Residents of the United States Expect for the Money They Spend on Medical Care?”

“Conservative Industrialists Have A Narrative and a Political Strategy. Advocates, Liberals, and Progressive Legislators Do Not.”

“Framing & Narratives Do Not Have to Be Based On Deceits, Falsehoods, and Propaganda. The Truth and Scientific, Objective Data & Information Work Well.”

Corporate Greed in an Increasingly Complex Healthcare System

By:

Dave Kingsley

Healthcare is a Cash Cow & U.S. Corporations Are Getting Better at Fleecing the Public

    I was looking at an AFL-CIO list of CEOs and their 2020 compensation – ranked from highest to lowest.  The $6 million to $20 million compensation packages for CEOs of nursing home corporations during 2020 – the year of COVID – had sort of blown my mind.  But nothing shocked me like the $199+ million 2020 compensation package awarded to the CEO of 1Life Healthcare, a rather new company.

    It is difficult to understand what 1Life does and why its needed in the healthcare system.  The company claims that it derives “net revenue from multiple stakeholders, including consumers, employers, and health networks.”  Apparently, it charges a per member fee for consulting services and care provided through its clinics and telehealth system.  The description of the company’s business model in its 10-K report to the SEC is a jumble of jargon and alphabet soup labels.

    This definition will not do justice to the business 1Life is in, but I will be elaborating on it in future posts:  the company is a layer of medical services between physicians groups, employers, and health networks for the purpose of increasing efficiency and effectiveness of publicly funded programs (I consider employer provided health insurance a publicly funded program because the government spends at least $200 billion per year in providing tax write downs for employers and employees). Like so many other services such as pharmacy benefit managers, nursing home referral services, and managed care organizations (see Centene Corporation below), this company will add excess costs, waste, and inefficiency to the U.S. healthcare system but do nothing to improve the overall health of Americans.

    Have you heard of Centene Corporation?  This St. Louis company rose from 48th to 24th on the Fortune 500 in 2020.  With revenues of $111 billion in 2020, it paid it’s CEO $24 million last year.  What does Centene do?  It derives its revenue from Medicaid by managing Medicaid programs for various states.  It is known as an MCO – another unnecessary layer of complexity in the healthcare system and an inefficient, wasteful rip off.  I will be following this company along with others in the years ahead.

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

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.”

Liberals & Democrats Need to Change the Conversation: Too Much of Our Federal Medical Care Funding is Flowing to the Wealthy

By:

Dave Kingsley

Rogue Corporations Scamming the System

You may have never heard of Centene Corporation. But we need to talk about this company which derives most of its revenue from Medicaid – medical care for the poor. With revenue of $111 billion in 2020, it is 24th on the Fortune 500 ranking of corporations (by size of revenues). CEO Michael Neidorff earned $25 million last year – among the five or six highest paid executives in corporate America. Not bad for “welfare medicine.”

Compensation for the top four Centene executives and the board of directors totaled $64 million in 2020. The board includes former congressmen Tommy Thompson (also former head of HHS) and Richard Gephardt. Two very powerful former members of congress.

So, what exactly does this company do for Medicaid? It is known as a “managed care organization” or MCO. The idea underlying the MCO concept is that private, for-profit corporations can do a better and more economical job of managing government funded medical care than government employees. Evidence overwhelmingly points in the other direction but the myth nevertheless persists.

Humana, Cigna, and other corporations have jumped into the MCO business. Let’s face it, the $600 billion+ Medicaid budget has opened opportunities for corporations to rake off untold billions for wealthy investors, executives, and board members, while poor people in states that have expanded Medicaid are humiliated through character tests such as proof they aren’t taking drugs, or too lazy to look for a job. Poor people in Arkansas for instance are facing administrative road blocks and state bureaucracies that see their role as keeping people from receiving benefits.

I’m certain that wealthy executives and investors are enjoying their concierge medicine while poor people can’t get treatment for an abscessed tooth, screening for cancer, diabetes, or medical care that most of us take for granted. This is what the Democrats and liberals need to be screaming about – not means testing and making people prove they are worthy of medicine taken for granted by every citizen in most affluent countries. No doubt, progressives in the U.S. House of Representatives are doing just that. However, silence on this issue from most senators and congresspersons on the Democratic side of aisle is deafening. Forget the now cruel Republican Party. There is no hope there.