Medicaid is a Disgrace

By:

Dave Kingsley

The Medicaid Program Has Roots in Segregation & Racial Hatred

Among economically wealthy and technologically advanced countries in the world, Medicaid is a medical system unique to the United States.  The program was conceived and forced on the American people by segregationists in the Democratic Party during the Johnson Administration.  Segregationist Congressman Wilbur Mills, powerful chairman of the House Ways & Means Committee in the 1950s and 60s, was able to hold President Johnson’s Medicare legislation hostage until he agreed to a poverty medical care system which gave states considerable power over administration of programming and qualifying criteria.

Segregationists from states such as Arkansas, Alabama, Georgia and other states of the deep South saw poverty medicine for which people would have to prove to a state agency that they were eligible, as a means for keeping poor people – especially poor African Americans – from receiving health care. In the 1960s, the segregationist South was still the agricultural South which relied on cheap labor.  Furthermore, intense Jim Crow hatred of Southern African American citizens was incompatible with anything that might raise their status above a level of serfdom and humanize them. (See Jill Quadagno One Nation: Why the U.S Has No National Health Insurance, 2005, pp. 13-14; Gerard Boychuk, National Health Insurance in the United States and Canada:  Race, Territory, and the Roots of Difference, 2008, pp. 59-79; my chapter “Implementation of Medicaid-Funded Long-Term Care:  The Impact of Prior History on the Development of the Nursing Home Industry,” in Max Skidmore & Biko Koenig, Anti-Poverty Measures in America, 2019).

Medicaid is means-tested.  Americans must prove that they are impoverished to qualify.  This characteristic of the program has made state agencies and their bureaucrats the gateway to medical care for poor people who are required to experience the humiliating process of proving that they are too poor to get health care without government welfare.  One’s poverty must be so deep that only the poorest of the poor can qualify. In most states, the program is stigmatizing as legislatures and bureaucracies pile on humiliating barriers such as “proof of looking for work,” drug testing, and other criteria that should have nothing to do with receiving needed medical care.

Funding for Long-term & Skilled Nursing (Nursing Homes)

It is often said that placing nursing home funding in Medicaid for individuals unable to self-pay the daily rate in most facilities – or have spent down their life savings until they are impoverished – was an afterthought – that there was no purpose or rationale to making it a Medicaid program.  That was the position taken by Bruce Vladeck in his excellent but now outdated history of the system. (Unloving Care: The Nursing Home Tragedy, 1980).  I don’t believe that. 

It is my opinion that legislators like Mills and Senator Kerr from Oklahoma could foresee the major real estate industry that nursing home care would spawn.  Privatization (corporatization) was well on it way when Congressman Mill and Senator Kerr conceived and were able to get the Kerr-Mills medical program for seniors through congress in 1960.  It was also means-tested and was the precursor to Medicaid.  Nursing homes care was an integral component of Kerr-Mills.  Kerr had ties to the nursing home industry and Mills was an ardent believer in utilizing government funds and tax codes for incentivizing private economic expansion (as opposed to expansion of government, non-profit growth).

Medicaid has Become a Perverse Toxic Program that Enriches Investors & Corporate Executives

In December 2021, the Center for Medicaid & Medicare Services announced that Medicaid expenditures had reached $671 billion.  A large proportion of these funds reimburse corporations for nursing home care, which is mostly substandard and despicable.  Revenue for the industry includes not only the ample reimbursement member companies receive for patient care but also all of the capital gains from real estate which derives value from a license to operate a nursing home.

Although states and the federal government tolerate and even facilitate a veil of secrecy regarding finance and the flow of capital through lending institutions and from reimbursement, enough evidence can be found to suggest that substandard care is enriching corporations and executives.  For instance, Welltower, a major Real Estate Investment Trust and operator of nursing homes paid its CEO $20 million in 2020.  Investors in publicly listed nursing home related corporations have received high earnings during COVID.  Stock of the publicly listed corporations in the business has continued to increase while the markets have been decreasing.

A huge amount of capital flowing through the Medicaid system isn’t reinvested in a better health care system.  It is pocketed.  Much of what is pocketed can’t be seen because the government allows investors in privately held companies hide their finances.

Another Commission to Study the Nursing Home System Isn’t the Answer

People who are appointed to prestigious commissions to study the nursing home system aren’t given to speaking truth to power.  Indeed, appointing a group of academics and other professionals to a commission sponsored by the National Academy of Sciences and important foundations will not solve the problem we all have, i.e., dread of ever being in a nursing home.

It is very risky for most people on a commission to tell the truth, which is that the medical system in the United States is driven by greed.  Money in politics is resulting in domination of government bureaucracies and legislators by the very people who need to be regulated.  Money is power and has become an increasing factor in U.S. politics. 

Recommendations to tweak this that or the other thing in a system so corrupt and inefficient that nothing less than total transformation will change much of anything will likely only reinforce that system. Recommendations to increase staffing will be resisted by the industry and frustrate advocates, unions, and the public because any change will be window dressing.

I don’t want to see a recommendation for “more transparency.”  I want the privately held companies to open their books and provide the same information that publicly listed companies provide to the Securities and Exchange Commission.  The truth of the matter is that the nursing home industry, indeed the entire health care industry, has become financialized.  Taxpayers are not receiving the increase in productivity and quality that matches the tax dollars they are forced to pay for their own care.

Liz Fowler – New Top CMS Official – Is Too Deeply Enmeshed with the Medical-Industrial Complex

By:

Dave Kingsley

The Industry-Government Revolving Door

I remember a trip to the White House in 2012 with a group sponsored by the Committee to Preserve Social Security & Medicare. The purpose of the trip was to lobby against proposed cuts in SS and MC – two highly successful and popular government programs (funded mostly by the beneficiaries of the programs). President Obama had earlier almost caved into Republican demands for devastating cuts in both programs. Subsequently, the President appointed a commission (The Simpson-Bowls Commission) loaded with budget cutters and deficit hawks intent on recommending deep cuts to the programs.

We were in a room with all of the top Obama White House staff, which included Liz Fowler. At the time, I had not heard of Ms. Fowler. It didn’t take long for me to learn that she was President Obama’s point person on the Affordable Care Act. The route to that job, I soon learned, was from a John Hopkins PhD in Health Care Policy & Management, through the major health insurance company WellPoint, and then to the Senate Finance Committee under Chairman Max Baucus – a staging point for moving from government service to a high paid job lobbying – a revolving door between the Senate and K-Street.

It is my belief that Senator Baucus “put” Liz Fowler in the White House to insure that President Obama did the right thing vis a vis industry in the design of a health care program that would funnel enormous amounts of business to private insurers and pharmaceutical corporations. Indeed, she left the White House soon after passage of the law for a job with Johnson & Johnson – a major corporate beneficiary of Obamacare.

Liz Fowler’s Move Back to Government

Liz Fowler’s bio (posted by CMS) conveniently excised her first career at WellPoint (https://www.cms.gov/about-cms/leadership/center-medicare-medicaid-innovation). Furthermore, it says nothing about her years with J&J after leaving the Obama White House. It is interesting to note that the bio says, “She also played a key role drafting the 2003 Medicare Prescription Drug, Improvement and Modernization Act (MMA).” My question is, “Was she working for WellPoint at the time?” The MMA propelled the Republican mission of privatizing Medicare forward at a breathtaking pace. It also included a new prescription drug plan (Part D) in which government negotiation of drug prices with major pharmaceutical companies was disallowed.

Ms. Fowler’s new job at CMS is not insignificant. Indeed, as Deputy Administrator and Director of the Center for Medicare and Medicaid Innovation (CMS Innovation Center), she will have a say over the kinds of innovation in care we need to see in delivery of medical services in nursing homes, hospitals, and clinics. Financial innovation in the nursing home industry has been vast in the past 40 years while innovation in care for patients has been practically nil.

Advocates Need to Seek Liz Fowler’s Removal from CMS

Taxpayers deserve to be represented by government officials who best represent their interests. Innovation in government funded healthcare will require a considerable amount of financial innovation that is fair to patients and taxpayers, availability of data, and transparency. Let’s take the big one: negotiation of drug prices. The excessive costs of pharmaceuticals reflects a toxic, perverse, symbiotic relationship between government and industry. That is not capitalism – it is statism – a necessarily corrupt and debauched form of economics.

Nursing home innovation will require major changes in operations that will humanize treatment and raise standards of medical ethics – which are sorely lacking at this time. Those innovations will reduce the amount of excess capital flowing from treatment facilities to investors.

Much needed innovations include data collection processes that provide valid and reliable data for evaluating the effectiveness of industry’s utilization of tax dollars versus excessive investor extraction of taxpayer provided capital. Also, data will be of no use to advocates, scholars, and the public in general if it is not readily accessible. That is not the case now, which is inexcusable in a super-wealthy country with unlimited resources for providing something as simple as a sophisticated, easily accessed, data system.

Unless Ms. Fowler has had an epiphany and a conversion experience, she does not, as a top official, belong in an agency taxpayers and program beneficiaries depend on for regulation, patient protection, and systems for monitoring provider activity. The tactic of corporate shills in government is the “tweak,” which typically changes little and reinforces corrupt, inhumane, and costly programs. The U.S. healthcare system is a disgrace and an embarrassment because of a corrupt relationship between industry and government the likes of which have never seen in U.S. history. It is time to stop thinking that the system can be transformed or even improved while the revolving door continues to revolve.

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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.

Labor Shortages in Hospitals & Nursing Homes are Due to Greed. Now the Medical Industrial Complex is Pushing to Lower Standards to Fill Vacant Slots.

By:

Dave Kingsley

Irresponsible Hospital and Nursing Home Corporations Value Shareholders Over Medical Care

    Nursing home corporations and executives have pocketed a fabulous amount of wealth throughout the history of publicly funded long-term and skilled nursing care.  Their business model includes enhanced cash flow through suppression of labor costs.  Therefore, their labor relations have been based on fast food wages, poor working conditions, and high turnover.

    Rather than invest in a highly professional, stable, competent workforce, the industry has pervasively extracted excessive cash for the purpose of protecting and enhancing shareholder value.  Unfortunately, the public is unaware of the lucrative trade in real estate and sophisticated leveraging of tax codes that add to the wealth of high high-net worth individuals and corporations owning and operating nursing home chains.  In addition, rewarded through generous reimbursement from Medicaid and Medicare, most corporations paid high dividends and high executive compensation rather than invest in their employees.

    Acute care workers have been poorly treated also. Owners of hospitals have put their nursing staffs in untenable and abusive working conditions due to their paramount concern with shareholders over ethical medical care.  A colleague forwarded this video to me today – it is worth watching: https://www.nytimes.com/2022/01/19/opinion/covid-nurse-burnout-understaffing.html?smid=em-share.

The Kansas Legislature is Rushing to Lower Professional Standards in Nursing Home Employment to Accommodate an Industry that Has Failed to Develop a Professional, Stable Workforce

    Kansas House Bill 2477 has sailed through the House without any significant opposition today.  This bill allows operators to skirt training, licensing, and competency standards that some legislators and citizens won through years of hard fighting.

    The current Kansas advocacy community has failed to educate legislators, the public, and the press on the history of industry neglect of their workers while extracting a massive amount of wealth for investors.  There is no excuse for the irresponsibility demonstrated by well-reimbursed nursing home corporations, but they are not being held accountable and it appears that there is no demand that they be held accountable.

    Despite failing their patients and employees, the nursing home industry has had two banner years financially during the COVID pandemic.  Now they will be rewarded again with hardly a murmur from any quarter we should be able to rely on for speaking truth to power.

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.”

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.

What are the Causes of Outrageously Expensive U.S. Medical Care? Institutional Racism, Propaganda, & Privatization are Some Primary Causes.

By:

Dave Kingsley

Why Do Americans Put Up With Their Inferior, Costly, Medical Care System?

My colleague Kent Comfort’s post today is a story to which most Americans can relate – astounding and inexplicable charges for an emergency room visit or a seemingly simple procedure in a hospital or clinic.  Why do the American people put up with the most costly, inefficient, and corrupt medical system among countries with developed economies?

The simple answer is that we have been indoctrinated to believe that we have the best medical care system possible in the best of all possible worlds.  We are even told that we have the best medical care in the world.  The alternative, according to propagandists, is the dreaded socialism – never mind that the British National Health Service is government owned and operated, exceedingly fair to the population, and costs much less than U.S. medical care. Also, over the past few decades, London and the British Iles in general have become engines of global finance and capitalism.  While Margaret Thatcher was on her privatization tear, she made it very clear that she would not touch the NHS.

Propaganda and conditioning of people in nation states are ordinary across the globe.  Governments in advanced industrial nations are sophisticated and effective in selling policies and programs that are not in the public’s best interests. Although the British National Health Service is among the best in the world at a cost of $4,653 per capita compared to the U.S., paying $11,072 and struggling with a wasteful system failing a large part of the population, the ole “socialism is bad” propaganda rears its ugly head at the mention of a national, single payer system. What we are told (and far too many people believe) is that we can’t afford to do better. Apparently, we can only afford to pay more to do worse.

The real historical circumstances leading to the embarrassingly bad U.S. medical care system have nothing to do with “socialism.”

I will make the case that the current industrial medical system in the United States has its roots and initial conditions in Jim Crow, Southern Democrat opposition to health care equality for African Americans that would most certainly occur in a federally administered, single-payer, universal medical care system.  Furthermore, the American Medical Association, Northern Republicans, and Southern Democrats waged a rabid and successful war against President Truman’s single payer plan through a well-financed propaganda campaign.

The AMA would not even recognize the right of African American physicians to practice medicine and excluded them from its all-white, politically reactionary organization.  Furthermore, the AMA was a powerful force in state politics and could exercise considerable control over education and licensure, which are determinate of physician income.  Hence, a white supremacist and powerful group of physicians joined forces with other racist and reactionary forces to stymie Harry Truman’s national health care plan.

Had the Southern Democrats supported President Truman in his quest for a single-payer, universal health care system, it would have made it through congress and be as much a part of the U.S. government and economy as the National Health Service is an integral part of British society.  The Senators and Congressmen from the South were white populists and supportive of New Deal programs for whites such as Social Security (agricultural & domestic workers were excluded), the Hill Burton hospital construction program (hospitals funded under Hill-Burton were allowed to remain segregated well into the 1960s), and other programs that benefitted whites.

Poverty medicine, Medicaid, Exclusion, and Lower Tier Care

Under the leadership of Arkansas Congressman Wilbur Mills, one of the most powerful congressmen in U.S. history, the single payer Medicare system for the elderly was accompanied into law by the means-tested, poverty Medicaid system.  Mills was a bigot and signatory to the Southern Manifesto (signed by all Southern Democrats in congress), which was a protest against Brown v. Board of Education.

As Chairman of the House Ways & Means Committee, Mills maneuvered Medicaid into existence to prevent expansion of Medicare to younger age groups.  Furthermore, the states’ role in Medicaid would allow for harassment, stigmatization, and lower tier medicine, all of which would help keep African Americans in an inferior status in Southern states.

Privatization and the Monetization of Poverty

Poverty is paying off for some of the largest corporations in the United States. Medicaid is a cash cow for providers running for profit hospitals, nursing homes, and medical supply companies.  For instance, the Centene Corporation is in the business of managing Medicaid programs for states.  Centene executives were paid a combined $64 million in 2020.  The company’s CEO was one of the highest paid executives among the Fortune 500 executives.

In the weeks ahead, we will be further making the case that Americans have been conditioned to believe that the health care system they have is the best they can afford and deserve.  That’s false.  We will expose the corporations making excess earnings, paying high dividends, and providing poor care.

Medical Care Rip Offs in the U.S. Medical Care System

By:

Kent Comfort

This is a true account of an actual incident. The names have been changed because the reader has no reason to know who they actually are.

Paul and Rhonda Martin were involved in a bad auto accident several years ago that resulted in Rhonda being transported by ambulance to a regional hospital emergency room, followed by an overnight stay for “observation. Rhonda was quickly examined for any sign of injury that may need immediate attention or treatment. Nothing serious was determined.

Rhonda was released at noon the next day. Other than the muscle aches and pains that would be expected from such an incident, she had no new complaints and was very ready to be dismissed so she could return home.

Because this was an auto related incident, the medical coverage that was part of the auto insurance policy was the source of responsibility for all charges related to medical care. Paul and Rhonda had sufficiently high limits on their policy to easily cover all expenses. No out of pocket payment was required. That’s the end of this story, right? That would be wrong.

When the bills started coming in the mail, that Sunday afternoon outing ending in a vehicle crash generated nearly $40,000 in expenses and revenue for all parties involved with providing care to Rhonda. The hospital ER visit and overnight stay alone totaled just over $35,000. And there was no treatment or procedures performed, no medications prescribed, and only dinner and breakfast were provided in the hospital room. And Rhonda stated that they were not that delicious!

When Paul reviewed the hospital statement, he was alarmed at some of the items listed and their charges. One charge in particular stood out as a very likely error. It was over $11,000 for a neurologist. Rhonda was not examined by any neurologist. The closest they came to contact with medical personnel was a brief visit by an intern in training and a couple of nurses.

Paul called the hospital business office to clear up the mistake. The clerk initially agreed with Paul that the statement needed closer scrutiny and verification of charges. Paul received a call the next day, and here is what he was told.

“The $11,000 charge is correct. This is due to the fact that there was a neurologist on site, and if Rhonda had needed that level of care it was present. The charge is for the presence of this level of care if needed. And that is standard policy.” Hence, the hospital insisted that the charge was not a mistake at all!

Even though the Martins considered such a response to be alarming, and even unethical in their view, there was no financial impact on them because if it. Paul even called the auto insurance company and they brushed it off as inconsequential and assured Paul there was no reason to be concerned. They would pay the bill as presented and that would be the end of the story. But here again, that would also be wrong. Fortunately for both Paul and Rhonda, the injuries never amounted to anything more than a few aches and pains that were just a memory three weeks later.

A little over two years later, the Martins received a letter in the mail informing them that a class action lawsuit had been filed against the hospital for excessive and questionable charges to clients. They were invited to join the suit as plaintiffs by filling out an enclosed form and returning it by a stated deadline date. They were surprised by this turn of events, and promptly completed the form and mailed it back in the enclosed envelope. Approximately six months later, they received an unremarkable looking postcard that referenced the class action status and required a signature and return. It was so innocuous in appearance that it would have been very easy to overlook and toss in the trash.

The next communication regarding the lawsuit was a letter announcing that the case was successfully completed, and a substantial judgement had been won on behalf of the plaintiff group. After all matters were settled, payments would be disbursed to all plaintiff clients in the near future. No dollar amounts were disclosed in the letter.

Enough time elapsed after that communication that the Martins almost forgot anything was still in process. And then nearly a year later, after they had just returned from a trip, they sifted through the pile of mail that had accumulated during their absence. There was, once again an innocuous looking envelope with no revealing identification visible. It was cleverly presented to look like typical junk mail containing advertisements. Paul and Rhonda have always been diligent about opening all their mail. And this time it really paid off. Enclosed was a check for their portion of the settlement, amounting to over $20,000! And that is almost the end of the story!

Many questions arise from the facts presented here. For example:

  • Why did the hospital think they could get by with assessing such outrageous charges for essentially no services of consequence provided?
  • Why do auto insurance companies accept these excessive charges without raising any questions on behalf of their clients?
  • Is it correct to assume that auto insurance rates are much higher than they should or to be because of their lack of prudence?
  • How many people who received an invitation to join the class action suit may have been inclined to just toss the letter?
  • Even more disturbing, how many people may have thought the envelope containing the check was junk mail and tossed it?
  • Has it become standard practice in the American medical industrial complex that a common solution for adjusting costs includes class action lawsuits?

This is a very brief list for what could easily become a very long list of questions about how broken the American medical service delivery process truly is. The final question might be is there anything that can be done about it in our present sociopolitical environment?