Category Archives: corporate welfare

Welfare through the looking glass

The New York Times Economix blog reminds us that the word “welfare” hasn’t always had negative connotations:

…“the image of the poor person in the 1930s was the agrarian farmer, down on his luck, but not complaining.” Think of Tom Joad, the protagonist of John Steinbeck’s novel “The Grapes of Wrath.”

Starting in the mid-1960s, however, that image began to change: poverty –- especially welfare — became seen by many as largely an African-American phenomenon. It was also during this decade that the word “welfare,” which previously did not have a negative connotation, became “a political epithet.

As the blog notes, however, poverty wasn’t actually a “largely African-American phenomenon”.  There have always been more whites than blacks on welfare.  The blog blames this misperception on “the media”.

I suppose that’s plausible.  But where did the media get the idea?  My bet would be that they got it from the conservative political movement.  Conservatives have always disliked social programs and discovered decades ago that they could disrupt them and defund them by appealing to racial fears and hatreds.  Not incidentally, this gained a lot of votes too  (see Nixon–southern strategy; Reagan—welfare queen).

By promoting the “misperception” conservatives did indeed end the federal government’s primary welfare program, Aid to Families with Dependent Children (AFDC) by enacting the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Henceforth there would only be Temporary Assistance to Needy Families (TANF).

Twelve years later we realize that the “misperception” about race and poverty wasn’t the only thing we didn’t understand about the conservative approach to welfare.  Not only did they transform welfare for the little guy.  They transformed it for the big guys, too.    The wealthy and powerful have always received outsized welfare payments in the form of subsidies, protection from competition, and so forth.  But under the new conservative plan, the wealthy began to receive massive public assistance.  Consider the 2003 Medicare Modernization Act, the 2005 Energy Act, two major tax cuts, just for instance.  As the Bush years came to a close the federal government was presiding over perhaps the largest welfare program ever attempted.  None of it temporary (or at least not intended to be).  None of it contingent on work or need.  None of it contingent on the existence of children–dependent or not.  And the vast majority of it benefiting the rich.

Of course, none of the programs were called “welfare”.  It wasn’t Aid to Pharmaceutical Companies in Need of Executive Bonuses Act, or Exxon Relief and Responsibility Act, or the Wink and Nod as Financial Executives Loot a Housing Bubble Act.  But it was welfare nonetheless.   However the recent economic downturn and collapse of the capital markets has made it more difficult to disguise the welfare payments.

Investment bank and insurance company executives who last year extracted hundreds of millions in cash out of their businesses based on what we now know were phony paper profits, now prostrate themselves before the taxpayers, begging for relief.  And the relief is in the hundreds of billions of dollars in guarantees and cash infusions.  By way of comparison the TANF program operates out of the government’s petty cash fund, costing taxpayers a mere $16.5 billion per year.

The spectacle would seem ludicrous except that the executives demanding the bail outs know they hold the economy hostage.  “Fork over the dough, buster.  Or the economy gets it.”  I think organized crime perfected this technique long ago.  First, seize control of a company, max out the credit lines and pay the cash to yourself; then torch the place, collect the insurance money, and walk away.  The CEOs appearing before Congress are at the insurance collection stage (“we need the money to rebuild—for the good of everyone!!”).

If this keeps up, welfare for the wealthy could start to develop some negative connotations.

Fortunately for the conservative movement, their welfare/extortion scheme is unraveling at exactly the moment that they have been relegated to minority status throughout government.  Thus they can return to doing what they do best:  complain about irresponsible government spending (welfare!) without having, as Sarah Palin might put it, actual responsibilities



Filed under corporate welfare, dignity, radical right

Medicare Smackdown

As we progressives dream of universal health coverage, one overriding fear clouds the horizon. Who can take on the health insurance lobby? Based on a vote in the House of Representatives last week, one worthy opponent appears to be American Medical Association. The House voted Tuesday on a plan to restrain Medicare spending. One option was to cut reimbursements to the insurance industry’s favorite program, Medicare Advantage; the other option was to cut reimbursements to physicians by 10%. The vote result: AMA lobby-355; insurance lobby-59.

Take that, Humana!

Even more astonishing, Bush has threatened to veto the law should it get to his desk, but Senate Republicans so far have successfully filibustered it.

My question: how in the world did the GOP end up going to the mat to defend the health insurance industry against the docs? In an election year, no less. Bush and the GOP of course will say they are desperately, desperately, concerned about budget deficits and tough choices have to be made.

Right. This, from the $5 trillion man.

The answer is that the modern GOP hates and fears social insurance programs like Social Security and Medicare. Remember that Bush’s first priority when it came to using his political capital from the 2004 election was an attempt to privatize Social Security. Now he’s now willing to alienate a powerful constituency, the docs, to force fellow Republicans to defend Medicare Advantage, the GOPs attempt to privatize Medicare.

How does Medicare Advantage privatize Medicare? Here’s a brief history:

  • 1997- Congress enacts “Medicare Choice (Part C) allowing private insurers to offer a competing product to traditional Medicare. Medicare had always offered a fixed benefit package; private insurers could offer different types of policies as long as they were at least a good as traditional Medicare.
  • 1997-2003 – few people enroll in Medicare Choice
  • 2003 – Congress overhauls Medicare Choice and renames it Medicare Advantage. New rules permit increased payments to private insurers and richer benefit packages to enrollees (dental, vision, lower co-pays) in effect paying insurers to market Medicare Advantage and rewarding seniors who enroll in private Medicare.
  • 2008 – It works. Humana reports that 66% of its profits come from Medicare Advantage policies. Seniors like it too; enrollment hits 25% of all Medicare beneficiaries.

One problem. Medicare Advantage costs taxpayers 13-17% more per enrollee than traditional Medicare. Thus, the budget problem.

I just have to laugh at this. Let’s take a step back and ask “why were private insurers brought into Medicare to begin with?” To lower costs, of course! But it turns out that, given a level playing field, insurers weren’t very interested. So Congress sweetened the pot. Paid them to write Medicare policies and paid beneficiaries to enroll in private Medicare. The fact that the entire enterprise accomplishes exactly the opposite of it’s stated intention is apparently irrelevant to Bush and the GOP. They are so delighted with the program, they are willing to cut physician’s reimbursements by 10% to defend the program.

So what will happen? I don’t think there is any chance physician fees will be cut and the GOP doesn’t want to cut them. They just got maneuvered into a bad political situation. Likely Congress will gets some cut in privatized Medicare and will punt on everything else. But I’d like to hope that this entire episode highlights that the problem of healthcare cost isn’t going to be solved by private insurers.

One other thing: the GOP is far more interested in delivering loot to the insurance industry than it is in solving actual problems.

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Filed under corporate welfare, healthcare finance, social insurance

“Medicare Wastes Billions”

…so reads the banner headline in the Register Guard. What’s this story about?

“Millions of Americans with respiratory diseases have relied on oxygen equipment, delivered to their homes, to help them breathe. A basic setup, deliveries of small oxygen tanks for three years, can be bought from pharmacies and other retailers for as little as $3,500.

Unless, that is, the buyer is Medicare, the government health care program for older Americans.

Despite enormous buying power, Medicare pays … as much as $8,280.”

Those damn government bureaucrats!

But wait, if I actually follow the article to page 4 and read further, it turns out that officials and politicians are trying to cut the costs but “they have encountered a powerful foe:

“…the companies that sell these devices, who ask their elderly customers to serve, in effect, as unpaid lobbyists, calling and writing to their representatives in Congress, protesting at rallies, and even participating in political attacks against individual lawmakers who take on the issue.

It seems to me that a headline reading “Companies Force Medicare to Waste Billions” might have been more informative. Or maybe the headline actually used by the original publisher of the piece, the NY Times: “Oxygen Manufacturers Fight to Keep a Medicare Boon.

Am I picking nits here? I don’t think so because there is a big difference between believing government did the wrong thing due to the general incompetence of government officials, and believing government did the wrong thing due to pressure from private interests. One view leads to a desire to reduce the power of government officials (cut taxes!); the other suggests that private interests have too much influence (cut influence of lobbyists!!).

In any event, the problem doesn’t end with oxygen equipment manufacturers a few billion dollars wasted a year:

“Physician groups, medical device manufacturers, insurance companies and other businesses have rallied aging voters to protest even minor legislative changes (in Medicare reimbursements).

“These industries rely on a basic threat: If you mess with us, we can turn the seniors against you,” said former Senator Alan K. Simpson, Republican of Wyoming, who tried cutting Medicare payments while he was in Congress.

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Filed under corporate welfare, healthcare finance