Category Archives: Medical-Financial-Industrial Complex

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

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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

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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

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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.

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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

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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?

The Medical-Financial-Industrial Complex & the Maldistribution of Wealth in the United States

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By:

Dave Kingsley

Introduction

In the previous post, my colleague Kent Comfort presented a case study pertaining to the disappearance of middle-class wealth into the Medical-Financial-Industrial complex black hole.  Even frugal, hardworking individuals who believe they have saved enough for retirement often find their assets depleted quickly due to high-cost, industrial medicine.  In this and future posts, we will be explaining how wealth is being maldistributed in the United States and how the government-funded industrial-medical system is helping to drive wealth from the bottom 90% to the top 1%.

The shift in wealth and the influence of U.S. medicine on the flow of assets from the lower socio-economic classes to the wealthiest class is a threat to the economic system and socio-cultural stability.  According to the PEW Research Foundation, “The wealth divide among upper-income families and middle- and lower-income families is sharp and rising (https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality).

Since the 2008 economic crash, most of the growth in U.S. family/individual net wealth has gone to the upper 5 percent.  The share of U.S. wealth owned by the bottom 90 percent of the population fell from 33 percent to 23 percent.  Wealth of the top 1% increased from 30 to 40 percent (https://equitablegrowth.org/the-distribution-of-wealth-in-the-united-states-and-implications-for-a-net-worth-tax/). This macroeconomic factor not only an economic injustice, it is a threat to the U.S. capitalistic system and democracy.

You pay taxes, premiums, and out of pocket expenses to fund large reimbursements to insurers, providers, and vendors, i.e., the insurance, hospital, medical device, pharmaceutical, nursing home, and other ancillary medical services industries. And yet, health care in the United States can bankrupt you.  Indeed, many people have been bankrupted through exorbitant hospital and nursing home costs. 

If the money you would like to leave to your heirs disappears in the U.S. industrial medical system, you would probably like to know where it goes.  It doesn’t go back to the Medicare, Medicaid, Obamacare, and VA programs ostensibly paying for your treatment.  Those programs are replenished through federal and state taxes – with the heaviest burden falling on the middle and lower classes.

So where, other than treatment, does all that money you pay in taxes and spend out of pocket for health care go?  The simple answer is, it goes to shareholders in one form or other.  In the 1970s and 80s, the country decided that private enterprise, operating in a “free market,” would be the most efficient and effective medical care delivery system.  What we got was an inefficient, ineffective, corrupt, and far too expensive industrial medicine system that funnels your hard-earned assets into the pockets of high-net-worth individuals and ultra-rich individuals and families.

From Your Family to Their Family:  How Laws Have Been Engineered to Keep Upper Income Wealth Growing While Everyone Else’s Continues to Shrink

Wealthy individuals despise two things: taxes and inflation. In fact, Leona Helmsley was jailed for telling an ugly truth: “We don’t pay taxes, the little people pay taxes.”  By little people, she meant most of us who are not rich.  Hence, the wealthy purchase politicians that protect their wealth from inflation and taxes – “purchased politicians” include practically all elected legislators in both parties. 

Shareholders in the industrial medical system tend to be high-net-worth individuals ($30 million or more in assets) or ultra-rich families worth hundreds of millions and billions. Inordinately complex federal and state tax laws have complexified corporate and individual finances, which works to the advantage of owners and shareholders.  For instance, throughout the past few decades, the state of South Dakota has amended its trust laws and has become a haven for wealthy individuals and families seeking trust laws that protect their wealth from inheritance and other forms of taxation.

It future posts, we will be taking a deeper dive into how Medicaid and Medicare funds are fueling the flow of wealth up the SES ladder.  For instance, more of those funds are flowing into family trusts than people realize.  In fact, the amount of nursing home ownership by family trusts is extensive and unnoticed by the public.  We will expose which chains are funneling a considerable amount of revenue into family and individual trusts.

How The U.S. Medical System Transfers Working Class Wealth to the 1%: A Case Study

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By:

Kent Comfort

Mary’s Story: This Could Be You!

Mary Beacher has just retired after four decades of working for a large regional printing company as a type setter. She went to work for this company two months after graduating from high school. It was the best employer in her town, and she counted her lucky stars that she was able to secure a job there. And she worked hard to be a dependable model employee.

When she first started working for the company, they had an employee pension plan that the company paid into on behalf of all workers. In the 1980s, that pension plan converted into a 401k account for each individual employee, with their pension accruals transferring over to this new financial instrument. Mary did not understand the nuances of this. She just trusted her employer to look out for her retirement nest egg when she would reach that time. Mary would receive a statement annually that showed the value of her personal retirement fund. And her excitement grew every year after about 30 years had passed, because the amount it had grown was very impressive to her.

When retirement day finally came, Mary learned she had just over $500,000 waiting for her to fund her way of life. She had always made a very modest salary, and she was not a financial expert in any way, so this seemed like more money than she could ever imagine she would need to support her modest lifestyle. She had no plans for moving away from the small community she had always lived in. Almost everyone that mattered to her lived there. Where would she go?

Three years into her new leisurely life, Mary had the misfortune of experiencing some serious health problems. Since she lived alone and her only daughter lived far away with her own family, Mary did not have any family close by to provide care and support, and she was not able to look after herself because of her ailment. Her doctor recommended she look into skilled nursing care at a local nursing home that was owned by a national chain. Her doctor’s reasoning was that since the facility was owned by a huge company, it must be safe. He had heard occasional complaints from families of residents, but nothing that alarmed him. As elderly folks are commonly inclined, she took her doctor’s advice and allowed herself to become a resident, hopefully for only a short while until her health improved and she could go back home.

Mary’s health did not improve. Some would say the primary reason for this was the environment she was in was depressing and she felt like no one was really watching out for her or cared about her. And sadly, she was more right than wrong about this feeling.

The biggest shock came when she learned that the monthly cost of her staying in this facility was over $10,000. She no longer had health insurance from her employer after she retired. She was enrolled with Medicare, but she was not eligible for coverage from that source because her case was not about rehabilitation. She was a skilled nursing client. She discovered she would have to foot the bill for her care on her own until all her funds were exhausted. Then she would qualify for Medicaid in her state because she could claim to be in a state of poverty at that point.

And that is the story about how the Mary Beachers all over America have their entire personal wealth extracted through health industry policies, all of which are legal. Mary’s personal wealth did not go into government accounts. It went into the accounts of the large, very wealthy corporations that own the senior care properties all over the country. And that money then flows to a very small number of wealthy families who own these corporations. Due to very favorable tax laws and policies, these families pay a lower percentage of taxes than Mary did when she was earning her salary at the printing company!

So, let’s recap Mary’s situation. Her hard-earned personal wealth, from four decades of being a trusted and loyal employee at a local printing plant, in a very short time period was transferred entirely to a wealthy family through the legal policies of the American health services system.

And this could happen to you as long as our policies and systems remain as they are today. But that is not the end of the story….

See: The Medical-Financial-Industrial Complex & the Maldistribution of Wealth in the United States by Dr. David Kingsley on this blog site.