Category Archives: Federal Budget

Labor Conditions in the Nursing Home Industry:  An American Disgrace

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Dave Kingsley

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

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

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

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

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

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

Magnolia, Arkansas and the Greenhouse Cottages of Wentworth Place

    Greenhouse Cottages of Wentworth, Magnolia, Arkansas

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

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

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

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

Wages at the Greenhouse Cottages of Wentworth

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

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

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

Is a Huge Increase in Reimbursement Justified without Consideration of Workers

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

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

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Dave Kingsley

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

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

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

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

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

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

The Harm Done by Misinformation

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

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

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

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Max Skidmore

What About Social Security?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Dave Kingsley

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

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

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

Propaganda

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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