GIVING THANKS FOR PRESIDENT BIDEN

We should all be giving thanks for President Biden. He and his administration have taken historic steps to protect America’s democracy politically and economically. He is leading the charge to restore fairness and competitiveness in the U.S. economy. He is finding creative ways to support local governments in states where right-wing Republican Governors and legislatures are blocking progressive local policies. Biden has nominated, and the Democrats in the Senate have confirmed, over 150 very diverse judges. He is tackling economic inequality by enforcing our tax laws so the rich pay what they owe.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. Please click on the Subscribe Today button to continue receiving notification of my posts.)

I hope you are finding many things to give thanks for this Thanksgiving, despite the troubled state of the world and our democracy. We should all be giving thanks for the accomplishments of President Biden and his administration.

President Biden and his administration have taken historic steps, with remarkable success, in the fight to protect America’s democracy politically and economically, including standing up for workers and consumers. His administration has resurrected the idea that government can promote economic growth by regulating businesses, investing in ordinary Americans, and protecting workers and consumers. This was the American social contract that was in place from 1933 to 1980. Since 1980, Republicans have torn up that social contract and instead deregulated business, including ignoring antitrust laws that had blocked the growth of huge, monopolistic companies. The result has been that trillions of dollars have been taken from lower- and middle-class workers and consumers and given to the richest 1% of Americans. [1]

President Biden has been leading the charge to restore fairness and competitiveness in the U.S. economy. The economy is displaying remarkably strong growth and a dramatic increase in jobs (13.2 million) (both are stronger than under President Trump). With Biden’s support, workers have made dramatic gains. For example, the United Auto Workers have reached an agreement with the auto makers that includes a 25% wage increase over the next 4.5 years, along with cost-of-living adjustments that will bring the increases up to an estimated 33%. [2]

In 2021, Biden signed an Executive Order requiring agencies throughout the executive branch to promote competition in the economy. His administration is reinvigorating the enforcement of antitrust laws that had been mostly ignored for the past 40 years. It has focused on opposing large monopolistic corporations’ proposed mergers and acquisitions that would make them even larger and more powerful. The filing of antitrust litigation or the threat to do so has stopped the merger of big publishers Simon & Schuster and Penguin Random House, the anti-competitive partnership of Jet Blue and American Airlines, as well as several proposed mergers in the health care, energy, and technology sectors of the economy. Antitrust investigations of Apple, Ticketmaster, and Visa are underway. In 2023, the value of completed mergers is down 40% from the average of the past five years largely because of the administration’s focus on enforcement of antitrust laws. [3]

Biden and his administration have also focused broadly on reducing anti-worker and anti-consumer business practices. It is working to reduce junk fees, eliminate non-compete clauses in most employment contracts, and end mandatory arbitration clauses in many consumer contracts. His administration has broken up the hearing aid cartel making hearing aids cheaper and more readily accessible. It has issued new regulations on broadband service providers and railroad corporations. It has revived the prohibition on directors serving simultaneously on the boards of competitors, which can lead to anti-competitive behavior in the market place and insider trading in the stock market. It won an $85 million settlement from agricultural giant Cargill and others for collusion to suppress workers’ wages.

The Biden administration is finding creative ways to support local governments in states where right-wing Republican Governors and legislatures are blocking progressive local policies. For example, in 2011, Wisconsin Republicans blocked local governments from requiring employers to offer paid sick leave, as Milwaukee had done. Fifteen states have passed similar laws including Texas, which has also blocked local governments from expanding voting options, taking some Covid response measures, and regulating local oil and gas drilling. In Florida, the state is controlling what local schools can teach and what books they can have. In Georgia, the state criminalized the provision of food and water to people waiting to vote at local polling places. And the list goes on and on. [4]

Perhaps the most dramatic step Biden has taken to support local governments is making federal funding available directly to them instead of having it flow through state governments, as has traditionally been the case. For example, the 2021 American Rescue Plan Act sent $130 billion directly to municipalities along with $220 billion to state governments. The 2021 Bipartisan Infrastructure Law includes $196 billion for surface transportation grants that municipalities can apply for directly. The 2022 Inflation Reduction Act includes a novel mechanism that allows municipalities to take advantage of tax credits for renewable energy projects.

Biden has nominated, and the Democrats in the Senate have confirmed, over 150 judges who may well be called on to protect our democracy (particularly around the 2024 elections) and our rights in the face of the right-wing and authoritarian onslaught from Republicans and former President Trump. In addition to the quality of these judges (in stark contrast to some who were nominated and approved under Trump and President George W. Bush), they are much more diverse than those nominated and confirmed under those Republican Presidents. Of Biden’s first 150 judges, 100 are women and 98 are people of color. [5]

President Biden is tackling economic inequality by enforcing our tax laws so the rich pay what they owe. The 2022 Inflation Reduction Act provided new funding for the IRS to enhance enforcement. In just a few months, it has recovered $38 million in delinquent taxes from 175 high-income taxpayers. It is estimated that for each dollar the IRS spends auditing the top 1% of taxpayers it will recover $3.18; from the top 0.1%, it will recover $6.29 for each $1 spent. A study in 2021 estimated that the 1% of people with the highest incomes failed to report more than 20% of their earnings to the IRS. [6]

These are just some examples of the many steps President Biden and his administration have taken to promote fairness and competition in our economy, as well as to re-establish our democracy’s promise of equal opportunity for all. These actions are guided by his principles and values for our economy, our society, and our democracy. A subsequent post will put his actions in this larger context.

[1] Richardson, H. C., 10/30/23, “Letters from an American blog,” https://heathercoxrichardson.substack.com/p/october-30-2023

[2] Richardson, H. C., 10/26/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/october-26-2023)

[3] Norris, W., 10/29/23, “Winning the anti-monopoly game,” Washington Monthly (https://washingtonmonthly.com/2023/10/29/winning-the-anti-monopoly-game/)

[4] Norris, W., 4/4/23, “How Biden is using federal power to liberate localities,” Washington Monthly (https://washingtonmonthly.com/2023/04/04/how-biden-is-using-federal-power-to-liberate-localities/)

[5] Puzzanghera, J., 11/19/23, “For Biden, a full court press to fill US bench,” The Boston Globe

[6] Richardson, H. C., 10/30/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/october-30-2023)

HOW PRIVATE EQUITY VULTURES HAVE CORRUPTED U.S. HEALTH CARE Part 2

This is the third in a series of posts on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes because there’s a fundamental conflict between caring for patients and maximizing return for investors. The first post in this series presented an overview of the for-profit U.S. health care system. The second one and this one focus on the role of the extreme capitalism of private equity firms.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: My new, more user-friendly website presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. Please click on the Subscribe Today button to continue receiving notification of my posts.)

In addition to buying hospitals (see this previous post), private equity (PE) firms have also been heavily involved in providing outsourced, contracted staffing for hospitals and emergency room services. Not surprisingly (given the PE business model), two large PE-owned medical staffing providers have filed for bankruptcy this year, creating health care chaos. In May, Envision Healthcare filed for bankruptcy with $7.7 billion in debt. In September, American Physician Partners (APP) filed for bankruptcy. It had 160 contracts providing emergency room, hospital, and/or intensive care staff and services to healthcare providers. Those contracts involved over 2,500 physicians plus other staff at over 100 sites in 29 states. In less than three months, it shut down those 160 contracts and let go or transitioned those thousands of health care staff. [1] The bankruptcy revealed, among other things, that between 2018 and 2023 APP had underpaid eight physicians by a total of $14 million. [2]

As part of the chaos of these two bankruptcies, many of the firms’ hospital and emergency room physicians either lost up to two months of pay for work they had performed or received it a month or two late. Lapses in essential employer-paid malpractice insurance coverage were also a major issue for physicians. For clinicians who were not U.S. citizens, which were a third of staff at some locations, their work visas are valid only with a specific employer. When their employer changed because of the bankruptcy, their visas became invalid and had to be transferred to a new employer, a process that takes more time than the notice some of the staff were given. One doctor noted that her emergency room practice had experienced four ownership transitions in her 13 years at the trauma center of a major hospital in Illinois.

One notable patient impact of private equity firms’ ownership of medical staffing companies is the occurrence of surprise billing. This occurs when a patient with insurance gets a surprise (often quite large) bill because they unknowingly got treatment from a medical professional who was not part of their covered network of providers. The classic case of this is a patient who goes to the emergency room in a hospital in the network covered by their health insurer. While there, the patient gets treated by a physician who is an employee of a third-party medical staffing company owned by a PE firm. This physician is outside the patient’s approved network, so he or she gets billed by the PE firm for whatever it wants to charge for the physician’s services.

PE firms and their fake grassroots advocacy groups like Doctor Patient Unity have spent millions of dollars on campaign contributions, lobbying, and advertising campaigns to block regulation of their health care practices and billing. For example, until 2019, they were successful in blocking regulation of surprise out-of-network billing of patients for PE firms’ employees. Their success was in part due to their campaign contributions of at least $32,700 and $63,600 respectively to two key members of the U.S. House, Richard Neal (D-MA) and Kevin Brady (R-TX), who were the leaders of the powerful Ways & Means Committee. When a ban on most surprise billing was finally enacted, it exempted ground ambulances and public payers.

To avoid regulation, some PE firms have focused on segments of the health care system that lack clinical standards and strong government oversight, such as nursing homes and eating disorder and autism treatment facilities. PE firms bought nursing homes early in the 2000s and then largely abandoned them after extracting all the profits they could. They typically left behind financially struggling facilities, which were, not coincidentally, where more than one-fifth of all Covid deaths occurred, affecting both patients and staff. [3]

In conclusion, private equity firms buy health care providers because they can generate big short-term profits. PE firms drastically cut costs, push to maximize revenue (sometimes illegally), and manipulate real estate and other assets to maximize their return. Patient outcomes are not a concern.

For-profit health care dangerously incentivizes denials of care and other practices not in patients’ best interests. There is a fundamental conflict between caring for patients and maximizing return for investors. [4] The private equity business model should have been regulated out of business years ago. In particular, PE firms should never have been allowed to buy pieces of the health care system.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to ban private equity firms from our healthcare system. Furthermore, ask them to regulate the PE business generally to eliminate its harmful and unproductive extreme capitalism practices.

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your US Representative at http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1] Muoio, D., 9/20/23, “Hospital, ED staffer American Physician Partners files for Chapter 11 bankruptcy,” Fierce Healthcare (https://www.fiercehealthcare.com/providers/hospital-ed-staffer-american-physician-partners-files-chapter-11-bankruptcy)

[2] Tkacik, M., 7/29/23, “Shock treatment in the emergency room,” The American Prospect (https://prospect.org/health/2023-07-29-shock-treatment-emergency-room/)

[3] Goozner, M., Nov./Dec. 2023, “How America bungled the pandemic,” Washington Monthly (https://washingtonmonthly.com/2023/10/29/how-america-bungled-the-pandemic/)

[4] Tkacik, M., & Dayen, D., 7/31/23, “A sick system,” The American Prospect (https://prospect.org/health/2023-07-31-sick-system-business-health-care/)

HOW PRIVATE EQUITY VULTURES HAVE CORRUPTED U.S. HEALTH CARE Part 1

This is the second in a series of posts on how the U.S. health care system has been privatized and financialized so that profits rather than patients have become the perverse and pervasive priority. The result is a system that has very high costs and poor outcomes because there is a fundamental conflict between caring for patients and delivering value to investors. The first post in this series presented an overview of the for-profit U.S. health care system. This one focuses on the role of the extreme capitalism of private equity firms.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org. Please click on the Subscribe Today button to continue receiving notification of my posts. I plan to retire this site at some point.)

An important piece of the for-profit privatization of the U.S. health care system is the role of private equity (PE) “investors.” “Investors” is in quotes because these financial manipulators aren’t investing in anything except their own short-term profits. They are not investing in the companies they buy; they are looking to maximize their short-term profits and have no qualms about the companies going bankrupt – in some cases that is their plan.

The private equity model involves using mostly borrowed money to buy a company. The debt and interest of the borrowed money are then made the responsibility of (and often an overwhelming burden for) the purchased company. This forces the purchased company to engage in (often severe) cost-cutting to be able to make the payments on the debt. This cost-cutting typically involves major cuts to the number of and compensation for employees, as well as reductions in the quality of the company’s products or services. In addition, the company’s assets, such as real estate, are often sold off to raise money to pay for the debt or provide payments to the private equity buyer. The success or failure of the company is largely irrelevant as long as the PE firm can extract a high return. PE firms regularly use bankruptcy to get rid of costs and liabilities while, nonetheless, holding onto their questionably acquired gains.

U.S. laws and policies aid and abet this process by granting tax benefits to having debt, including the very high levels of debt that private equity buyouts create. PE firms are also much more loosely regulated than publicly owned companies or mutual funds that sell shares to the public. Given their private ownership, PE firms have basically no requirements for public disclosures or transparency. And PE firms have learned how to expertly manipulate the bankruptcy laws to shortchange workers and customers (in the examples here doctors, nurses, and patients) while preserving benefits for themselves.

For the last 20 years, private equity firms have been buying health care companies. The PE model of maximizing profits with no regard for the purchased company or its customers or employees, means that this has undermined the quality, access, timeliness, and affordability of health care for many Americans. PE firms’ health care system purchases include hospitals, home care and hospice providers, diagnostic and imaging labs, pharmaceutical and medical device companies, dialysis and fertility clinics, physicians’ practices, and urgent and specialty care centers. In 2018, there were 800 PE health deals representing over $100 billion in value. The subsequent cost-cutting has led to the loss of 1.3 million jobs since 2009. [1] Many communities have lost their local hospital or other medical services providers creating health care deserts that require people to travel tens or hundreds of miles to get medical care, including emergency room services.

For example, in 2006, a consortium of three private equity firms bought Hospital Corporation of America (HCA). To maximize profits for its PE owners, HCA manipulated billing to garner unwarranted revenue and refused to serve patients who didn’t pay in advance. Physicians in other PE-owned hospitals or clinics have been pressured to maximize patient volume by, among other things, restricting the time they spend with each patient. They have also been pressured to push products and treatments, some of which were unnecessary, while being required to be parsimonious with medical and other supplies. This is all typical of the revenue maximization and cost cutting that occurs under PE firm ownership, maximizing profits at any cost. Emergency room (ER) physicians also report being pushed to inappropriately admit patients when hospital beds were open and being asked to meet quotas for the number of admissions.

Here’s how a not atypical acquisition, in June 2019, of a community hospital played out in Watsonville, California. A PE firm, Halsen Healthcare, bought the community hospital for around $40 million. The hospital’s real estate was immediately sold to an Alabama real estate investment trust called Medical Properties Trust for $55 million. The hospital then had to pay $5 million a year to rent back the property. Under PE ownership, the hospital immediately stopped paying vendors and quickly ran out of essential supplies from printer paper to hospital gowns to surgical supplies. Within six months, doctors at the hospital were not getting paid; some quit. Halsen also stopped paying nurses’ health insurance premiums and froze employee’s retirement savings accounts. Sometime in the spring of 2020 it stopped paying rent. Somehow, the hospital managed to limp along until it filed for bankruptcy in late 2021, when, among other things, it owed $40 million on unpaid rent and loans. [2]

Similarly, Steward Health Care and its private equity owner, Cerberus Capital Management, did several hospital real estate transactions with Medical Properties Trust using real estate investment trusts (REITs). REITs are specialized investment vehicles that receive tremendous tax advantages under U.S. tax laws. Their use by PE firms for hospitals’ real estate allows the PE firms to extract hundreds of millions of dollars from each hospital purchase, but typically leaves the hospitals financially crippled. Between 2015 and 2021, Medical Properties Trust did hospital REIT transactions with at least seven PE firms for over a dozen hospitals or hospital chains. Investigations have revealed schemes and scams, as well as outright criminality, that have enriched PE firms and friendly CEOs of the hospitals they own. The CEO of Medical Properties Trust itself is still making about $16 million a year even though the price of the company’s stock has declined nearly 75% since January 2022. Meanwhile, countless hospitals whose real estate is owned by Medical Properties Trust and its REITs have gone bankrupt or slashed services and employee pay to make rent payments.

My next post will describe some other parts of the health care system that PE firms have bought and the effects this has had on patients, doctors, nurses, and other health care workers.

[1] Feng, R., 6/3/22, “The pain profiteers,” The American Prospect (https://prospect.org/culture/books/pain-profiteers-mariner-olson-reviews/)

[2] Tkacik, M., 5/23/23, “Quackonomics: Medical Properties Trust spent billions buying community hospitals in bewildering deals that made private equity rich and working-class towns reel,” The American Prospect (https://prospect.org/health/2023-05-23-quackonomics-medical-properties-trust/)

HOW TO BECOME A BILLIONAIRE

There are basically five ways to become a billionaire and none of them are legitimate in ethical, free market capitalism. Furthermore, while it’s fine for people who work hard and are innovative to get rich, getting rich to the tune of billions has substantial social costs. Billionaires have effectively bought our policy makers (including Supreme Court justices) and have gotten incredibly favorable treatment in tax laws and other policies. They have purchased or built mainstream and social media outlets that spew right-wing propaganda. The existence of billionaires, therefore, undermines the common good and our democracy.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org. Please click on the Subscribe Today button to continue receiving notification of my posts. I plan to retire this site at some point.)

For the last 30 – 40 years, the American economy has been consistently producing and enriching billionaires while the typical worker’s wages have been nearly stagnant. As Bob Reich highlights in a recent blog, there are basically five ways to become a billionaire and none of them are legitimate in ethical, free market capitalism. [1]

One way to become a billionaire is to own or run a monopolistic business. For example, Jeff Bezos, who founded and built Amazon, is worth over $100 billion. For being innovative and a good manager, he deserves to be rich. However, the billions come from Amazon’s monopolistic practices. The federal government and 17 states have charged Amazon with using its monopolistic power to inflate prices, stifle competition, and effectively blackmail organizations that want to (and often need to) sell via Amazon’s platform. Bezos also benefits from several patents granted by the government that many potential competitors feel are too broad and contribute to Amazon’s monopolistic power.

For 40 years, the government has failed to enforce antitrust laws to prevent monopoly power. Other examples of billionaire monopolists include Larry Page and Sergey Brin of Google, Bill Gates and Steve Ballmer of Microsoft, and Mark Zuckerberg of Facebook. Under President Biden, antitrust enforcement is being reinvigorated.

A variation on this theme is to own or run a business that is deemed “too big to fail” and therefore gets bailed out by the government when business goes badly. The government spent trillions bailing out big banks during the 2008 financial collapse. As a result, Jamie Dimon, CEO of JPMorgan Chase, is worth $1.7 billion. There are dozens of other billionaires in finance and investment businesses who might well not be billionaires today if the government hadn’t bailed out the big banks and financial companies in 2008.

A second way to become a billionaire is to illegally get and use investment information not available to the public, i.e., to engage in insider trading. For example, Steven A. Cohen is worth an estimated $17.5 billion. He founded S. A. C. Capital Advisors which pleaded guilty to insider trading in 2013 and paid $1.8 billion in penalties. Cohen was banned from managing other people’s money for two years. Nine of his employees were found guilty of insider trading that the Justice Department described as “substantial, pervasive, and on a scale without known precedent in the hedge fund industry.” Cohen walked away with a fine but billions of dollars. He changed the name of the firm to Point72 Asset Management and continued to manage money, primarily his own.

Insider trading is endemic among corporate executives and board members. Frequently, they illegally sell or buy their company’s stock just before or after a major announcement that affects the stock price. Corporate executives and board members often know inside information about competitors (i.e., other companies in the same line of business as they are) and buy or sell a competitor’s stock based on this information. A previous post described what appeared to be insider trading by executives at companies developing Covid vaccines and treatments, as well as by members of Congress (who had non-public information) during the early days of the pandemic. To reduce insider trading and increase competition the Biden administration is more aggressively enforcing the existing ban on directors serving simultaneously on the boards of competitors.

A third way to become a billionaire is to get politicians to enact policies that are beneficial for wealthy people. The tax cut law of 2017 is a perfect example. Wealthy Republican donors threatened members of Congress and President Trump that if they didn’t pass tax cuts the donors would withhold contributions in the upcoming elections in 2018. For example, the Koch brothers spent $20 million in campaign contributions and lobbying to promote a tax cut. The 2017 law’s tax cuts are estimated to save them $1 billion a year in taxes. And this doesn’t include the benefits they get from favorable tax treatment of offshore profits and from cuts in the estate tax.

The fourth way to become a billionaire is to defraud investors. Adam Neumann conned investors into putting hundreds of millions of dollars into his office-sharing startup company, WeWork. While the company never made a profit, Neumann bought buildings that he leased back to the company and lived a jet-setting lifestyle, that included a $60 million private jet.

Other CEOs that have defraud investors and/or customers are Elizabeth Holmes and Sam Bankman-Fried. Holmes has been convicted of fraud via her firm, Theranos, and is now in jail. Bankman-Fried was just found guilty of fraud for his actions at the crypto currency exchange FTX. And then, of course, there’s Donald Trump, now on trial for business fraud, among other things.

The fifth way to become a billionaire is to receive money from rich parents or other relatives. It’s estimated that 60% of the wealth in the U.S. was obtained this way. Two key policies are responsible, both heavily promoted by campaign contributions and lobbying by the wealthy. First, when assets, including stocks or mutual fund shares, are passed on to heirs neither the giver nor recipient has to pay taxes on their increase in value since they were received or purchased. So, as hypothetical examples, Bill Gates or Warren Buffett can give a billion dollars of his company’s stock (that he got years ago for say $10,000) to his child and no one ever has to pay any tax on the gain in its value. Furthermore, the estate tax is so minimal and easy to dodge that less than 0.2% of estates pay any estate tax. And, of course, there is no wealth tax in the U.S.

In addition, wealthy people avoid paying the income tax they owe (despite the cutting of the top tax rate in half over the last 45 years). The Internal Revenue Service (IRS) (until very recently) has been starved of the resources it needs to enforce our tax laws and make the wealthy pay. From 2010 to 2021, Republicans cut IRS funding by 19% and currently are trying to cut the IRS’s increased funding in President Biden’s 2022 Inflation Reduction Act (IRA). A study in 2021 estimated that the 1% of people with the highest incomes failed to report more than 20% of their earnings to the IRS. With the new funding in the IRA, the IRS has, in just a few months, recovered $38 million in delinquent taxes from 175 high-income taxpayers. It is estimated that for each dollar the IRS spends auditing the top 1% of taxpayers it will recover $3.18; for the top 0.1%, it will recover $6.29 for each $1 spent. [2]

[1] Reich, R., 10/26/23, “Do billionaires have a right to exist?” (https://robertreich.substack.com/p/billionaires-dont-have-a-right-to)

[2] Richardson, H. C., 10/30/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/october-30-2023)