Category Archives: WELFARE MEDICINE

Do You Know Where the Taxes You Pay for Medicaid Are Going?

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By:

Dave Kingsley

A Medicaid Disgrace:  Nursing Home Companies Make Big Bucks Off of Poor Peoples’ Medical Care

    Medicaid expenditures by Federal and State governments are approaching $1 trillion per year. All of it has been privatized with hundreds of billions of public dollars funneled into the nursing home industry alone.  That’s unfortunate because tax paying Americans pay dearly for privatized government services.  While healthcare accounts for about one-fifth of U.S. GDP, peer countries spend half to one-third of that amount on much fairer and more effective government-administered healthcare systems.

    It is important that we expose the excessive extraction of government funds from Medicaid by private companies and some nonprofit entities engaged in Medicaid contracting with states.  Corporations such as Centene, UnitedHealth, Aetna, Humana and Molina have captured the bulk of primary, preventative, and acute care Medicaid contracts.  They have an incentive to deny care and control their networks to keep their costs low. In upcoming posts, I will cover that facet of Medicaid.

    Nursing home Medicaid contracting involves a conglomeration of LLCs, Real Estate Investment Trusts, Public Corporations, sole proprietorships, nonprofits, and private equity owned chains. It is a big industry with net patient revenue of approximately $200 billion.  This does not include earnings from real estate, dietary services, labor contracting, and other services sold by parent/holding companies to the nearly 15,000 nursing home facilities in the U.S.  For instance, in 2022, the total cost of dietary services noted as expenses in cost reports totaled $12 billion. This is a money maker because parent companies buy in bulk, negotiate a favorable deal, and charge their facilities – the state contracting entities – full price.

If You Have Seen One Nursing Home Chain, You Have Seen One Nursing Home Chain. 

    The nursing home industry is comprised of diverse legal, and financial structures run by a variety of characters and investing entities.  Some of the characters have become quite notorious for accumulating great wealth while providing appalling care.  A couple of the better-known investor/owners with unsavory reputations are Ephram Lahasky and Forrest Preston.  Lahasky’s name appears in our research on ownership all over the United States.  He’s been denied a license to operate by the state of Vermont and has been sued by the Attorney General of New York.  Preston is the sole owner of one of the largest chains in the U.S. – The Life Care Centers of America. Both of these guys continue to run substandard nursing homes unabated. There are plenty others that are somewhat less noticeable but just as bad or worse.

    Infamous operators aside, documents available regarding publicly listed companies provide the best insight into the industry’s extraction of taxpayers’ dollars that could otherwise be applied to decent and humane care as opposed to the warehousing care that is pervasive in the highly profitable nursing home business. There are financial advantages to companies listed on a stock exchange.  Capital is available from investors through the sale of stock.  If the stock price increases, so does the availability of capital for expansion, return to shareholders, and executive compensation. 

In the right business, stock becomes attractive, appreciates, and provides a nice return.  The nursing home business is the right business because taxpayers guarantee revenue and ensure robust net incomes that are shielded from ordinary business cycles and economic crises such as caused by the COVID pandemic.

The Ensign Group: $4.2 Billion in Medicaid & Medicare Nursing Home Business Per Year

    The Ensign Group is one of the largest nursing home chains in the U.S. It is listed on the NASDAQ. The advantage of publicly listed companies to the taxpayers is transparency.  Public companies are required to file financial statements with the Securities & Exchange Commission.   CMS data and financial reports submitted to the SEC by the Ensign Group suggests that outstanding returns do not equate with high quality care.

As information from Ensign’s latest SEC 10K and Proxy Statements and data from the CMS ProviderInfo file suggests, this $4.2 billion corporation is making a handsome return on very poor-quality service. CMS Nursing Home Care Compare rates facilities on a scale of 1 to 5 with 1 being the lowest on a variety of factors such as nursing hours of care per resident day, turnover, patient care overall, and so forth. Of the 268 Ensign affiliated facilities in the July 2024 ProviderInfo file, 22% were rated 1 and 32% were rated 2 – only 1.5% were rated 5. So, over half of this company’s facilities are rated at the bottom in quality while their investors and executives are richly rewarded.

In view of Ensign’s appallingly low performance on care ratings, let’s look at the following financial data they reported to the SEC: (1) return on shareholder value, (2) stock repurchase, (3) cash on the balance sheet, (4) executive pay, and (5) net cash provided by operating activities. It is important to keep in mind that approximately half of the 56 million shares of stock are owned by three asset management firms BlackRock, Vanguard, and State Street.

$100 Invested in Ensign in 2019 was worth $296 at the end of 2024.

The Ensign Groups 10K touts the company’s cumulative stockholder return from 2019 through 2024 per $100 invested in 2019. The chart below indicates that Ensigns outperformed the NASDAQ Composite and peer companies. A $100 dollar in 2019 was worth $296.63 in 2024.

Stock buybacks drain money from production/service and raises the price of stock.

Ensign noted in its financial report that it invested $20,000,000 in a stock buyback in 2024. Stock buybacks raise the price of the stock and enrich shareholders and executives. Money that could be reinvested in business operations and improved care is extracted for the purpose of rewarding investors. Investors have indeed been quite positive toward Ensign stock. When the market tanked in November of 2021 due to COVID and the Federal Reserve’s monetary tightening, Ensign stock was selling at $75 per share. Today it is trading at over $140 per share.

Don’t believe industry propaganda – nursing homes are not “running on a thin margin.”

Ensign’s 2024 cash flow statement notes net cash from operating activities of $324 million. Their balance sheet indicates cash and cash equivalents of close to a half billion dollars ($464,598 million).

Executives are richly rewarded for impressive financial performance and disgraceful performance on their contract with taxpayers. Five top executives’ compensation totaled $110 million over 3 years.

As the table below demonstrates, the compensation of Ensign’s five corporate executives totaled nearly $110 million over the past three years. It is notable that actual salary for all of the top executives/officers are less than $1 million while their total compensation ranges from $4 to over $11 million per year. Corporations receive a tax advantage for keeping executive salary below $1 million and putting the bulk on stock awards, stock options, bonuses, and perks. Therefore executives have an incentive to keep costs (services) low and poor while increasing shareholder value.

Summary

Data pertaining to one large nursing home chain only scratches the surface of the financial reality of privatized, government sponsored, healthcare in America. The initial purpose of Medicaid was to keep states in control of government funded medical care for poor people. Throughout the 1940s, 50s, and 60s, bigoted Southern Democrats had outsized legislative power to block a single payer, universal healthcare system managed by the federal government. Their goal was to keep African Americans in an inferior position. They were able in the 1940s to include a segregation clause in the Hill-Burton Hospital Survey & Construction program and block President Truman’s plan for single-payer, universal medical care.

After Truman’s fight for equitable healthcare along the lines of programs adopted by European governments and countries with advancing economies in Asia, the Democrats gave up and went along with a “Rube Goldberg” government healthcare system designed to discriminate against black Americans and enhance the power of states over the federal government in the realm of medical care. Consequently, American government sponsored medicine became divided along race and class lines. That did not stop venal politicians from pouring increasing amounts of taxpayer dollars into Medicaid and turning it into a cash cow for their corporate patrons.

Note: The Ensign Groups 10K and Proxy Statements can be found here: The Ensign Group, Inc. – Financials – SEC Filings. The CMS ProviderInfo file is available on the CMS website or through a request to dkingsley@tallgrasseconomics.org.

MEDICAID:  AN AMERICAN MEDICAL CARE DISGRACE

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By: 

Dave Kingsley

Everyone But the Totally Uninsured Receives Government Subsidized Medical Care. Only the Poor are Stigmatized

    Practically all medical care in the U.S. is subsidized by federal and state governments – mostly by the federal government.  The taxes to pay for these subsidies are collected from workers’ paychecks, sales taxes on what they buy, and property taxes that are paid by homeowners or added into rent/lease payments. And yet, it is only Medicaid, a medical care program for the poor, that is stigmatized. But the poor pay taxes too. Indeed, a disproportionate share of taxes.

    The biggest tax subsidy is awarded to companies providing health insurance for their employees.  When companies can write down their federal income taxes, they are actually getting money from the government – they are legally allowed to keep money that they owe the government.  That is why these “breaks” are called tax expenditures.

    Indeed, the $251 billion in tax write downs for corporations providing health insurance is the largest tax expenditure by far.[1] Furthermore, this deduction is a transfer of wealth from lower income Americans (who earn their employee benefits) to wealthier classes who increase their assets from equities and compensation in the healthcare industry.  In costing labor, employers trade benefits for wages.  In fact, in many negotiations in which I was on the negotiating team, we often settled wage disputes by offering to “sweeten the health insurance package.”

    The poor pay more than their fair share of taxes that keep governments running.  In the U.S. taxes on capital have been continuously reduced while at the same time taxes on consumption and labor have increased. This puts the heaviest burden on the lowest income groups and  lightens higher income groups’ tax load.  Nevertheless, Medicaid recipients are treated like freeloaders and “lesser thans” while everyone receiving other forms of subsidized healthcare are considered solid, upstanding Americans by politicians blaming poor people and the elderly for budget deficits.

“What We Do unto the Least of These”

    Capitalist America as it has evolved can be harsh and unforgiving for the unfortunate, which could be any of us.  With job loss, we can find ourselves struggling to keep a roof over our head and food on the table.  At the very least we could lose our health insurance.  The Affordable Care Act is not affordable for the unemployed.  If you live in a state that has not expanded Medicaid, i.e., has not made residents with incomes below 120% of poverty eligible for Medicaid, you must have children and be in extreme poverty to qualify.  If not, you will not be eligible for any healthcare program.

    Let’s say a person lives in a state that has expanded Medicaid.  And let’s say that person lives in a so-called “red state” like Arkansas or Missouri.  The governors and legislators of those states will humiliate them and create administrative barriers to establishing eligibility for no other reason than they assume they are a cheater until they prove otherwise.  These legislatures are dominated by pious Christians who despise poor people despite their prophet’s admonishment “what you do unto the least of these; you do unto me.”  It is easy to bully poor people for the purpose of impressing constituents with bravado about controlling wasteful spending.

    The poor are despised by right-wing politicians and a large portion of Christian America. Certainly, we don’t see the powerful Christian Church Industry – otherwise known as “faith based” institutions – closing ranks to take up the cause of their less fortunate brethren. Their prophet did that but for the most part they seem reticent about exerting their influence.

Transfer of Wealth from the Poor to the Wealthy

    Conservatives claim that poverty in the U.S. is far lower than officially measured by the federal government due to transfer in the form of welfare such as Medicaid, child tax credits, and the Earned Income Tax Credit.  There are several problems with the conservative wealth transfer argument. First, the poor struggle day-to-day to survive due to paltry benefits and continued threats of loss of those benefits and actual loss due to administrative complexities that are hard to navigate in a hostile political environment. 

    Second, transfers to the poorest of the poor are paltry compared to the transfers to the upper classes in the form of such mechanisms as capital gains write downs, untaxed cash flow, earnings on unrealized gains, and investments in tax free municipal bonds – to name a few “loopholes” for the rich. The hypocrisy of politicians claiming to save “we the people” money by bullying poor people on Medicaid is palpable in legislatures these days.  Congresswoman Vicki Hartzler of Missouri is a wealthy owner of an Agri Corp that receives hundreds of thousands of dollars in undeserved federal farm subsidies.  Nevertheless, she is a loud voice for clamping down on benefits for the voiceless, the powerless, and the defenseless who need those benefits for their health and often for their very survival.

WATCH FOR UPCOMING BLOG POSTS:

“Lucrative Medicaid Funded Nursing Home Care”

“Finding the Roots of Medicaid in the History of Slavery & Jim Crow”

“Corporate Medical Care Benefits:  The Privatization of Medicaid”

“The Poor as a Government Healthcare Class:  A Uniquely American Idea”

“The Injustice of the ‘120% of Poverty Gap’ in States That Have Not Expanded Medicaid”

[1] Tax Expenditures | U.S. Department of the Treasury.  Other big tax expenditures include the mortgage interest deduction, and a variety of corporate real estate write downs, including depreciation.  There is no doubt that the tax codes are a major factor in the maldistribution of wealth.

H.H.C. OF MARION COUNTY v. TALEVSKI DECISION ISSUED ON THURSDAY:  THE SUPREME COURT HANDS NURSING HOME PATIENTS AND THEIR FAMILIES A MAGNIFICENT HUMAN RIGHTS VICTORY!

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BY:

Dave Kingsley

Thanks to Susie and Ivanka Talevski, Seven Supreme Court Justices, and Individuals and Organizations Filing Amicus Briefs, the Federal Nursing Home Rights Act Has Been Strongly Reinforced.

    In a decision written by Justice Ketanji Brown Jackson and reported on Thursday, the U.S. Supreme Court held that unambiguous provisions of the Federal Nursing Home Rights Act (FNHRA) are enforceable by private individuals under Section 1983 of the Civil Rights Act of 1871 (H.H.C. of Marion County v. Talevski[1]). This is a big deal because it means that practices such as use of chemical restraints and arbitrary transfer are illegal and a cause for action in federal courts.  Patients and their families cannot be restricted only to medical malpractice suits in state courts and/or to state administrative remedies.

    Susie Talevski, an attorney, initially filed a suit in Federal District Court on behalf of her mother Ivanka after her father Gorgi Talveski was arbitrarily transferred to a facility an hour and a half from their home.  The transfer occurred after the Talveski family consulted with outside physicians and hired a neurologist to evaluate the regimen of drugs administered to Mr. Talveski.  It appeared that his health deteriorated after the drug regimen was initiated and improved after six powerful psychotropic medications were terminated from the regimen.

    In conversations with Susie and her colleagues in Indiana, I’ve learned that it is very difficult to navigate the Indiana tort liability laws and even make it into state courts with a suit against a nursing home.  As in most states, awards for victims of medical malpractice are capped and not more than a hand slap in Indiana.

    Furthermore, as most of us who advocate for nursing home patients know, there is no real remedy at the state level in most states for any type of redress when abuse and neglect occur. Administrative remedies through state agencies tend to end up in the “nothing to see here” file.

    In the final analysis, patients and families have the best chance for redress in federal courts when nursing homes illegally violate rights granted by FNHRA.  I applaud Susie’s courage in fighting this case all the way to Supreme Court.  In agreement with H.H.C. of Marion County’s claim that she didn’t have standing to sue in federal court, the district court threw out her case.  She appealed to the 7th Circuit, which overturned the decision of the district court. H.H.C. of Marion County appealed, and the Supreme Court granted certiorari.

H.H.C. of Marion County v. Talevski Should not be Below the Radar, but it is.

    On Thursday, the Supreme Court voting rights decision and the indictment of former President Donald Trump grabbed all of the headlines and H.H.C. of Marion County v. Talveski seems to have escaped media notice. I hope this case is discussed widely and in depth by advocates and scholars.  The back story and the legal implications of the case are far more extensive and complicated than I want to deal with in this brief blog post. Protection of the right to be free from chemical restraints and capricious behavior of nursing home providers should not be left to state tort law and/or the whim of state agencies, many of which have a propensity to protect the interests of the industry at the expense of patients and families.  Certainly, Indiana has one of the most anti-consumer torts laws in the U.S. 

    It was shocking to read the argument of the U.S. Solicitor General on behalf of the provider (H.H.C. of Marion County) before the Supreme Court.  She claimed that administrative channels at the state level were sufficient to insure FNHRA rights. This naivete on his part is one more example of how out of touch federal administrative agencies are in assuming that individuals are not in serious jeopardy of having their rights violated or ignored within individual states.

The ”Medicaid Unwinding:” An Orwellian Euphemism for Abject Cruelty & Profound Ignorance

    Fortunately, the Talevski family, the 7th Circuit, and seven Supreme Court justices could see that individual civil rights granted to all U.S. citizens by Congress should be protected in the federal courts under the Civil Rights Act of 1871, Section 1983.  The precedents for this case have pertained mostly to Medicaid rights in general. 

    During COVID, the Federal Matching Percentage (FMAP) for state Medicaid programs was increased by a hefty percentage for the purpose of preventing the administrative burden on Medicaid beneficiaries who are required to reapply each year and prove their eligibility for the program.  As a condition for receiving the FMAP uplift, states could not disenroll individuals from the Medicaid program.  The number of people receiving Medicaid benefits, i.e., had access to medical care, grew at a vast rate.  That program ended on May 1st, and now the so-called unwinding, i.e., kicking people off, has resulted in a precipitous drop in enrollees. 

  With weak state regulation of healthcare providers, it is likely that states will regularly violate the rights of U.S. residents to medical care.  Especially in states with far-right wing legislatures, harassment of poor individuals and families needing medical care and other assistance is ordinary and ongoing.  In Arkansas, a state that tried for a waiver from CMS to force Medicaid enrollees to undergo drug tests, the current governor, Sara Huckabee Sanders, has come up with “Arkansas Renew” as the Orwellian label for her disenrollment program.

    All realms of human rights and civil rights are critically important if we are to retain a semblance of Democracy.  Drugging and disappearing people into out of the way institutions is one of the most chilling and horrifying practices imaginable in any society.  Certainly, it is characteristic of fascist, authoritarian governments.  That it happens on behest of corporations attempting to optimize return for shareholders, executives, and other special interests, doesn’t make it any less odious.

[1] https://www.supremecourt.gov/opinions/22pdf/21-806_2dp3.pdf.

UnitedHealth Corporation is Piling Up Cash & Buying Back Stock. But the American Peoples’ Health for Which they are Paid to Improve is Deteriorating

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The Basics of UnitedHealth Financial Performance in 2022

With revenues of $324.2 billion in 2022, UnitedHealth (UH) is the fifth largest corporation in the United States (behind Walmart, Amazon, Apple, and CVS Health). Practically all of UH business is related to tax-funded health care such as Medicare and Medicaid. As one of the largest players in the move toward Medicare and Medicaid managed care, this company has had phenomenal growth in the past two decades (as have CVS Health and Centene Corporation).

UH revenue increased by 26% between 2020 and 2022 (from $257.1 billion to $324.2 billion). The company’s 2022 balance sheet notes $23.4 billion in cash and cash equivalents – an increase of $2 billion over 2021.

Capital Resources & Uses of Liquidity: No Indication of Allocation to Employee Wages & Working Conditions, R&D, or Improved Care

The Company’s 10-K states that “Increased cash flows provided by operating activities were primarily driven by changes in working capital accounts and increased net earnings.” (page 28). Given UH’s massive revenues from government expenditures and a robust operating margin of 8.8%, taxpayers, need to be aware of how the company’s surplus capital is allocated. Like any corporation, UH has debt obligations but expects to finance those from current operations. So, accumulated capital is available for other purposes.

On page 78, the 10-K indicates that he board of directors (which includes Washington, D.C. policy maven and healthcare influencer Gail Wilensky – see below) authorized expenditures of $7 billion for common stock repurchases in addition to $5 billion in 2021 and $4.5 billion in 2020. So, the company pumped up its share price during COVID-era by repurchases of stock totaling $16.5 billion.

In addition to a 2022 stock repurchase of $7 billion, UH increased the company’s quarterly cash dividend $5.80 per share to $6.60 per share. With 950 million share outstanding, approximately $6.27 billion in cash was paid to shareholders. Over 20% of the stock is owned by three asset management firms – Vanguard (8.44%), BlackRock (7.4%) and FMR LLC (5.165) – indeed, Institutional investors/asset managers own the bulk of the equities market. Retail investors own less than 10% of the equities traded on U.S. exchanges.

Stock Buy Backs Were Illegal in the U.S. Until 1982. They Should Still be Illegal – Especially When They Are Repurchased With Earnings From Tax Funded Medical Care

Stock repurchases are a thinly veiled form of stock manipulation and insider trading. Furthermore, this form of financialization of corporate activity benefits a small number of very wealthy Americans but is damaging to the overall economy. Earnings passed through to shareholders without retaining cash for employees, R&D, and long term investment puts downward pressure on economic growth and wages and fuels maldistribution of wealth, which has reached crisis proportions in the U.S.

Taxpayers have a right to fairness and equity in the use of capital earned through tax funded healthcare. They must demand that stock repurchases stop. Furthermore, the people of the U.S. have a right to a fair allocation of excess cash earned through healthcare for which they are taxed.

Board Members & Executives Should Be Held Accountable: It’s Not Their Money

Until the early 1980s, executives were compensated mostly in the form of salaries. As executive and board compensation has evolved, salary is now a small part of corporate compensation. Most executives and board members receive pay in the form of stock options and incentive stock awards. Philosophically, executives merit compensation if they enhance shareholder value and corporate financial success. As this philosophy has taken hold in the U.S. over the past 40 years, these rewards have become disconnected from productivity.

The boards and executives of healthcare corporations are focused on earnings and cash flow in the short term – not on reinvestment of excess earnings in long term improvement in the health of the U.S. population. As a matter of fact, life expectancy has been declining in the U.S. Although most states have contracted with these mammoth corporations to improve the cost and output of Medicaid systems, there is no substantial evidence that is happening. Furthermore, Medicaid, the poor peoples’ medicine they are charged with improving, is still stigmatizing and dehumanizing.

Each year, recipients are forced to run an administrative gauntlet of humiliating and frustrating reapplication that is much different than anything higher SES Americans experience in application for entitled health care. It appears that heart disease, poor prenatal care, diabetes, drug addiction, and other major chronic and acute diseases have not been reduced by Medicaid managed care. Nor is there evidence that a massive shift of U.S. healthcare dollars to corporations will lower the outrageous per capita cost of healthcare.

Despite failure to improve the overall healthcare of Americans, corporate boards continue to reward executives with lavish salaries and shareholders with high dividends. They justify that on financial grounds – not on success in improving overall health of the people.

Concentrated Wealth Leads Inevitably to Concentrated Power: Connecting Dots Inside the Washington, D.C. Beltway

Corporations are vying in the Washington, D.C. maze of politics, lobbying, and corruption to capture as much of the trillions in Medicaid, Medicare, Obamacare, and other forms of government healthcare expenditures. They can pay for the influence they need in chasing ever increasing expenditures for healthcare.

I noticed that one Gail Wilensky, PhD is a UH board member. This caught my attention because Dr. Wilensky is a very influential policy maven about town in Washington. She has a very thick resume consisting of scholarly publications, served as a chair of MedPAC, held other high level government positions, and is generally a highly respected healthcare influencer. However, she receives about a half million in compensation per year as a UH board member and has accumulated over 51,000 shares of UH stock, which closed at $481.90 today (3/27/2023). Hence, the stock that she hasn’t sold and is still holding is worth about $24.6 million.

Dr. Wilensky also serves on the board of Quest Diagnostics and a smaller healthcare corporation (ViewRay). The following is her biography appearing on the Quest Diagnostics website:

“Dr. Wilensky, is a Senior Fellow at Project HOPE, an international non-profit health foundation, which she joined in 1993. From 2008 through 2009, Dr. Wilensky served as President of the Defense Health Board, an advisory board in the Department of Defense. From 1997 to 2001, she was the chair of the Medicare Payment Advisory Commission. From 1995 to 1997, she chaired the Physician Payment Review Commission. In 1992 and 1993, Dr. Wilensky served as a deputy assistant to the President of the United States for policy development relating to health and welfare issues. From 1990 to 1992, she was the administrator of the Health Care Financing Administration where she directed the Medicare and Medicaid programs. Dr. Wilensky is a director of UnitedHealthcare Group and ViewRay, Inc. She served as a director of Manor Care Inc. from 1998 until 2009, Gentiva Health Services, Inc. from 2000 until 2009, Cephalon Inc. from 2002 to 2011 and SRA International, Inc. from 2005 to 2011. Dr. Wilensky also served as a Commissioner of the World Health Organization’s Commission on the Social Determinants of Health and as the Non-Department Co-Chair of the Defense Department’s Task Force on the Future of Military Health Care. She has been a director of Quest Diagnostics since January 1997. Dr. Wilensky has extensive experience, including in strategic planning, as a senior advisor to the U.S. government and private enterprises regarding healthcare issues and the operation of the U.S. healthcare system.”

Dr. Wilensky is merely one example, one individual among the ethically challenged thousands, caught up in the government-to-corporation-to government loop. Going from Senate staffer to the Senate Finance committee and on to K Street and a lobbying job for Big Pharma, United Health, or some other powerful Wall Street entity has become normalized. The American people are paying the price for the consequent maldistribution of power and wealth in taxes and poor health. The poor pay more.

Centene Corporation’s Annual Financial Report Indicates That Poverty is Profitable for Investors

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The Biggest Player in Poverty Medicine Had a Banner Year in 2022

    Among all U.S. corporations, Centene Corporation is ranked 20th in revenue. It is also a major player in the Medicaid Managed Care business.  The other leading corporations contracting with states in the $800 billion Medicaid program include United Health, Aetna/CVS, Anthem, and Molina. Most states have moved or will be moving to managed care and contracting with an MCO.  The big five have approximately half of that business now.  It is likely that the Medicaid MCO market will become increasingly concentrated and oligopolistic over the next few years.

    Centene can be said to be solely in the Medicaid managed care business.  According to its recently released annual 10-K report to the Securities and Exchange Commission, 97% of Centene 2022 revenues of $144 billion were derived from Medicaid and Medicare contracting – practically all of it from Medicaid.  The company’s cash flow statement notes $6.3 billion net cash from operating activities, which is a major indicator of “profitability.”  However, that is not the whole story regarding enhancement and protection of shareholder value.

Taking Care of Shareholders by Keeping Stock Price Propped Up

    Cash and cash equivalents on Centene’s balance sheet increased from $10.8 billion in 2020 – the early stages of the ongoing COVID pandemic – to $12.7 billion at the end of 2022. Taxpayers need to ask questions about how that hoard of cash is allocated.  I have tracked the company’s stock since late November of 2021 when the equities market began to tank.  It closed at $73.77 on November 29, 2021 and has been quite resilient despite the market decline since that time – trading in the high $70s and $80s.

    The strength of Centene’s stock price is most likely due to a $3 billion stock buyback. In 2022, the company’s board “authorized increases to the Company’s existing stock repurchase program, including $3.0 billion in June 2022 and an additional $2.0 billion in December 2022.” (see page, 34 of 10-K*).  With those increases, the Company was authorized to repurchase up to $6.0 billion.

    Stock repurchases, which are thinly disguised forms of stock manipulation/insider trading, were unfortunately deregulated during the Clinton Administration.  This financial maneuver benefits only shareholders and executives and does nothing for long-term investment in workers, R&D, patient quality, and other productive activities.  The benefits for executives and board members who have been awarded generous stock options involve strategies for exercising their right to sell stock based on insider knowledge (of which the public is unaware).

    Since the financial deregulation allowing loose rules about stock buybacks a corporate buyback frenzy has been underway. Free money handed out by the Federal Reserve from 2008 until Fed Chair Powell reversed course to quell inflation pumped $trillions into speculative finance, much of which was borrowed for stock repurchase. Consequently, the U.S. economy has been damaged and wealth has become increasingly maldistributed by the diversion of cash to a wealthy few that could be reinvested in long-term growth benefitting employees and overall economic growth. It seems to me to be the height of governmental irresponsibility to not regulate this kind of activity on the part of corporations which are rewarded for managing poor peoples’ health care.

Politically Powerful Board Members & Executive Board Compensation

    The revolving door from government to business is starkly obvious on the Centene board, which includes two powerful former congressmen – Tommy Thompson and Richard Gephardt. Mr. Thompson is also a former Secretary of Health and Human Services.  The Centene Proxy Statement for 2022 has not been issued to the public yet (we expect to see it within a month).  However, the 2021 Proxy Statement indicates that Mr. Thompson’s compensation in cash and stock totaled $403,046.  Mr. Gephardt’s compensation totaled $426,923.  The fine print below the compensation table states that both Mr. Thompson’s and Mr. Gephardt’s compensation included use of the company aircraft and other perks.

Executive Compensation

    The late Michael Neidorff had been Chief Executive and Chairman of the Board in 2019, 2020, and 2021 with compensation for those years of $26.4 million, $24.9 million, and $20.6 million respectively.  His replacement, Sarah M. London joined the board in 2021 as vice chairman and received 2021 compensation of $15.2 million.  The seven top executives received a total of $80 million in compensation in 2021.

Conclusion

    Medicaid expenditures in the U.S. will reach $1 trillion within the next few years.  Along with expenditure on military activities, this poverty program will remain one of the two biggest programs funded by U.S. income tax payers.  With expansion of Medicaid under the Affordable Care Act, we anticipate that growth of tax-funded  poverty medical care will be rapid in the years ahead.  This raises the question of evaluation of these expenditures and public discourse about the quality of care.

    My initial foray into availability of state and federal data regarding the effectiveness and regulation of MCOs leaves me with considerable doubt about what taxpayers and legislators know about outsourcing medical care for poor people.  It is not difficult for me to uncover the inordinate executive compensation packages, stock buyback information, and financial performance metrics reported by major providers.  However, medical and ethical, questions arise regarding the justification for cash out to investors and executives given the care provided.  I will be sharing my research pertaining to Medicaid expenditures on this blog in the weeks, months, and years ahead. 

*The Centene 10-K can be accessed at https://investors.centene.com/all-filings?cat=1.

SCOTUS ALERT!  THE CASE OF HEALTH AND HOSPITAL CORPORATION OF MARION COUNTY v. TALEVSKI IS BEING HEARD BY THE SUPREME COURT TODAY

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By:

Dave Kingsley

Today the Supreme Court is hearing Health & Hospital Corporation of Marion County v. Talevski.  If the S.C. overturns the 7th Circuit decision in this case, it will not be merely “earth shaking” for nursing home patients, it will be an 8.0 earthquake followed by a tsunami for all Medicaid beneficiaries. For decades, the court has upheld the right of beneficiaries of Social Security programs whose rights are violated by states to seek redress through the federal courts.  Overturning this body of law has grave implications for beneficiaries of such programs as Aid to Families with Dependent Children (AFDC, replaced by Temporary Aid to Needy Families or TANF), Medicaid/Medicare funded long-term and skilled nursing care, and the Children’s Health Insurance Program (CHIP).

In addition to the derogation of human and civil rights resulting from an S.C. reversal of a body of law upholding rights such as those delineated in Federal Nursing Home Reform Act (FNHRA), the dimension of this case of major concern to me is the enhancement of states’ rights and corporate power in federally funded health and welfare programs.  The nursing home industry and major corporations such as The Ensign Group, UnitedHealth Group, Molina, Centene, Anthem, and Aetna/CVS violate regulations with impunity now – imagine how they will ride roughshod over states and beneficiaries if the 7th Circuit decision goes down.

The facts of Talevski v. HHC involve an elderly dementia patient by the name of Gorgi Talevski who was managed with psychotropic drugs and transferred from a facility in violation of FNHRA requirements.  Although the family fought the psychotropic constraints and transfer through state and CMS procedures and guidelines, they were frustrated by agency inaction and lack of relief.  The facility, HHC of Marion County, is part of a chain of facilities owned by the State of Indiana.

Ivanka Talevski, Mr. Talevski’s wife filed a suit in federal court (their daughter Susie is the attorney in the case).  The district court held that federal programs legislated in accordance with Congress spending powers do not provide for beneficiaries’ relief in federal courts and dismissed the action.  On appeal, the 7th Circuit reversed the district court’s decision and found in favor of Mr. Talevski.

The specific question in this case is whether patients whose FNHRA rights are violated can seek redress through the federal courts or whether their only recourse is appeal to state and federal agencies and/or through a personal liability suit. The 7th Circuit, citing precedence, decided that patients can sue a state in federal court when they incur clear violations of their FNHRA rights and reversed and remanded the case back to the district court.

It is likely that the six-member majority of extremist ideologues on the Supreme Court will overturn the opinion of the7th Circuit – a relatively conservative court with 7 members appointed by Republican presidents and 3 appointed by Democratic Party Presidents. The ideology and decisions of the S.C. conservative majority have been synchronized with the Republican Party and the reactionary conservatives now dominating the party.  Extremist conservatives have been in a decades-long crusade to dismantle the administrative state.  Their intention is to loosen all restraints on corporate behavior.

*6 F. 4th 7713 – Court of Appeals, 7th Circuit 2021.  Can be accessed at: https://scholar.google.com/scholar_case?case=10683715986232030526&q=talevski+v+health+and+hospital+corporation+of+marion+county&hl=en&as_sdt=6,26.  See also: https://www.scotusblog.com/case-files/cases/health-and-hospital-corporation-of-marion-county-indiana-v-talevski/; https://www.brennancenter.org/our-work/research-reports/supreme-court-shadow-docket

CENTENE CORPORATION, AMERICA’S 26TH LARGEST CORPORATION AND A MEDICAID CONTRACTING FIRM, REPORTS STRONG 3RD QUARTER EARNINGS

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Dave Kingsley

Centene Corporation’s Business & 3rd Quarter Results

Centene Corporation contracts with states to manage Medicaid programs.  Two-thirds of the company’s revenue flows from means-tested, welfare, programs.  The other one-third of its revenue is derived from Medicare, Tri-Care, and their prison contracting subsidiary Centurion.  Basically, the bulk of this corporation’s business is poverty medicine. 

Centene purchased a non-profit organization in the 1990s and took it private.  In 2001, the company issued an IPO.  In a mere two decades, Centene increased its revenue to $111 billion (2021 revenue).  In 2021, Fortune magazine placed it at 24th in the “Fortune 500.”  Ahead of Centene was Anthem at 23rd with revenues of $122 billion, at 22nd was General Motors with revenue of $122.5 billion. As an illustration of the rapid growth of this poverty-medicine company, in 2018, it was ranked 63rd in the “Fortune 500,” with revenue of $48.6 billion.

Centene’s 3rd quarter revenue of $35.9 billion was a 11% increase over their 2021 3rd quarter revenue of $32.4 billion.  The company is on track to increase its 2022 revenue to $135 billion.  According to the 3rd quarter report, “The increase was driven by organic Medicaid growth, primarily due to the ongoing suspension of eligibility redetermination, 22% membership growth in the Medicare business, and [our] acquisition of Magellan Health, Inc. (Magellan), partially offset by the PANTHERx divestiture.”

Centene is predicting (called guidance in finance lingo) an increase in 2022 earnings per share of $5.65 to $5.75.  The company’s stock which is trading above $81 per share as I write this, has been outperforming the DOW & S&P since the equities market moved lower at a rapid rate in late November of 2021.  On November 29, 2021, Centene closed at $73.77 and has been incrementally moving up while the overall market has been moving down.

Executives, Board Members, & Shareholders

The recently retired Centene CEO/Chairman John Neidorff is one of the highest paid corporate executives in the United States.  Over the past 3 years his compensation has totaled $72,033,192.  He owns 1.5% of 560 million outstanding shares of Centene stock – today worth over $80 per share.  Hence, his wealth in stock alone is worth approximately $680 million.

Sarah London – Neidorff replacement as CEO – earned $15 million in 2021 before her promotion to CEO.  The eleven 2021 board members earned from $335,000 to $426,000.  In 2021, two powerful former congressmen on the board, Richard Gephardt and Tommy Thompson, were paid $426,923 and $403,046 respectively. 

An activist investor (Quinten Koffey of Politan Capital Management) acquired 2 percent of the stock and made a successful move to oust Neidorff.  London, his successor, was most likely in on the move.  The board has been restructured as part of the company’s long-term plan to improve its profit margin (https://www.healthcaredive.com/news/neidorff-retire-centene-activist-investor-board-shakeup/611465/).

Medicaid is a Disgrace

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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.

Which Politicians & Political Organizations Receive the Most Money From the Nursing Home Lobby?

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Dave Kingsley

The AHCA/NCAL has invested $millions in politicians and the Democratic and Republican Parties in the past few years. This is an investment that returns large financial rewards and weak regulation to its corporate funders. This appalling corruption is costing lives of patients in long-term and skilled nursing care.

Summary of Overall Spending of Nursing Home Lobby in 2017-2018 is shown below. Later years will be posted soon. I don’t want to overwhelm readers with data in one post. The expenditures below total $1,221,772.

SectorDescriptionTotal Expenditures
AdministrativeMiscellaneous administrative$4,398
ContributionsContributions to federal candidates$623,617
ContributionsContributions to committees$317,000
ContributionsContributions to joint fundraising committees$121,000
ContributionsContributions to national parties$115,000
ContributionsContributions to state & local candidates$12,600
ContributionsMiscellaneous contributions$10,000
FundraisingFundraising fees$17,533
UnclassifiableUnclassifiable$624
From OpenSecrets.org:https://www.opensecrets.org/political-action-committees-pacs/american-health-care-assn/C00006080/expenditures/2018.

Politicians & Political Entities Receiving the Largest Donation from the Nursing Home Lobby:

RankVendor/RecipientTotal Expenditures
1Team Ryan$45,000
2Democratic Congressional Campaign Cmte$35,000
3National Republican Senatorial Cmte$30,000
3Democratic Senatorial Campaign Cmte$30,000
5National Republican Congressional Cmte$20,000
6McCarthy Victory Fund$15,000
7Hoyer’s Majority Fund$10,000
7Montanans for Tester$10,000
7Young for Iowa$10,000
7Committee for Hispanic Causes-BOLD PAC$10,000
7Friends of Sherrod Brown$10,000
7Support to Ensure Victory Everywhere PAC$10,000
7Friends of Jim Clyburn$10,000
7Nancy Pelosi for Congress$10,000
7Bridge Pac$10,000
7Friends of Chris Murphy$10,000
7Ameripac: the Fund for A Greater America$10,000
7James E Clyburn Research & Scholarship Foundation$10,000
7Heidi for Senate$10,000
7Scalise Leadership Fund$10,000
7Stabenow for US Senate$10,000
7People for Ben$10,000
7Victory by Investing Building & Empowering PAC$10,000
7Stivers for Congress$10,000
7Pac To the Future$10,000
OpenSecrets.org

Lobbying inside the Washington, D.C. beltway and all 50 state capitols is responsible for continuation of low quality care in America’s nursing homes. It’s that simple. The highly profitable industry is providing low quality and deadly care because they can. We will keep the data flowing to the public as long as this blog exists. The 2019-2021 AHCA lobbying data will be posted within the next 24 hours.

The New York Times Slams CMS & The 5 Star Rating System for Nursing Homes

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Dave Kingsley

A Much Needed Expose of What Some of Us Already Know

In a prominently displayed, above the fold, article today entitled “How Nursing Homes Hide Their Most Serious Lapses,” New York Times writers laid out a case against the CMS process for inspecting and rating nursing homes on their 5-Star rating system (with 1 being the worst and 5 the best). Those of us dealing regularly through research or advocacy with nursing homes, state agencies, and CMS are not surprised by what these investigators uncovered and I, for one, am happy to see the public informed about the sham 5-Star system.

Essentially, the NYT investigative journalists concluded that serious infractions uncovered in inspections often do not appear in reports on the CMS website “Nursing Home Compare,” and frequently immediate jeopardy and actual harm findings are appealed by the operators in a secretive administrative hearing process from which families are excluded. So what you see on the CMS website is often not what you get. Even if serious infractions make it into the public inspection reports on NHC, they often don’t affect a facilities 5-Star rating.

The Most Important Take Away: Agencies of Government Are Under The Thumb of The Industry

The nature of the appeals process in which owners can hang up a finding for a year or more behind a veil of secrecy often keeps the public in the dark about some very serious negligence and abuse cases in facilities in which our loved ones reside or are about to be placed. A former CMS attorney quoted in the article said this: “Once I realized that people wouldn’t see cases that are on appeal, I thought, why would anyone ever look at this again.” Presumably, he is saying you might never know that an inspector found your frail elderly mother laying in a pool of blood in the parking lot, or that a the staff placed a patient with a positive test for COVID in the room with your grandfather.

Here is the dirty little secret about government agencies such as CMS and the various state agencies charged with regulating nursing homes and protecting patients and looking after the interests of the taxpaying public: they work for the industry. That is who they protect. I have spent years trying to pry needed – and what should be public – information out of the Kansas Department of Aging and Disability Services (KDADS), CMS, and other various and sundry regulatory agencies. They will stonewall like no agency of government that has gone before them has stonewalled. I swear, if you called KDADS and asked for their address, they would tell you to file a Kansas Open Records request. If you ask for anything more serious than that, even a KORA won’t get it for you.

I have heard staff members at KDADs claim that the industry isn’t reimbursed well enough and is struggling financially, which is absolutely false – that is why these agencies hide financial information from the public. But public information you can find tells a totally different story than what you hear from the industry and their shills in government.

Flaws in The Article: The Writers Didn’t Talk to The Right People And A Less Than Serious Research Claim

Only a couple of “experts” were quoted in the article: the former attorney for CMS mentioned above and Dr. David Gifford, the medical director for the industry and a corporate shill. The people I respect and the people with real knowledge of how the system works are experts like Professor Charlene Harrington (UCSF), Richard Malott with the Long-Term Care Community Coalition, Lori Smetanka with the National Consumer Voice, Lydia Nunez – an Ombudsman from Texas, Margaret Farley and Lenette Hamm with Kansas Advocates for Better Care and others who fight nursing home inspection/quality problems day in and day out.

The NYT writers claimed that “researchers have found a connection between better inspection results and greater profits.” That makes absolutely no sense to me. Given the solid financial data we have – which is only for publicly listed companies – that is not what I would conclude. Some very profitable operations are providing very poor care.

Furthermore, the article indicated that “The Times analyzed nursing homes’ financial statements from 2019 and found that four- and five-Star facilities were much more profitable than lower-rated facilities.” I would like to know where they found the needed financial information from closely held corporations to make that determination. Did they see an income statement, balance sheet, and cash flow statement? If they did, I would like to know where they found them. I’m very skeptical of this research. Using a qualitative, ranking measure as a predictor of profit – a measure with equal intervals – is sketchy to say the least. The ranking data from inspections give noisy data a whole new meaning.

Nevertheless, I was happy to see the article appear in the NYT. We need to debunk so much of what is purveyed by the industry and the government in regard to the safety and health of patients in nursing homes.