By MATTHEW HOLT
Two weeks ago I wrote an April Fool’s piece that claimed that Elon Musk and DOGE were going to nationalize American health care to save some money. That piece was half-joking but full-serious.
If you look at what Musk is complaining about there are two major areas of “waste, fraud and abuse” in government spending.
One is people directly employed by government agencies. Most of the people I’ve ever met in government work damn hard and for much less money than they’d get in the private sector. But you can of course find stories about useless government bureaucrats, who don’t do any work and pad their expense accounts. Those stories are probably about as true as Reagan’s pink Cadillac driving welfare queen in that there is some basis in reality for there being a tiny minority of bad actors, but the politics has far outrun the truth. (BTW that Welfare Queen article by Josh Levin in Slate is remarkable and very long!)
The other major area where Musk claims to be finding fraud is in work contracted out. There are of course lots of types of government work contracted out. If, like me, you’re old enough to remember the Iraq war, you probably are thinking of beltway bandits like Halliburton supplying any number of services to the military. (Remember when the Cheneys were baddies?). Another is the Blue Cross & Blue Shield plans who were the original contractors processing Medicare & Medicaid claims. Funnily enough they couldn’t actually deliver on that so in turn they outsourced it to Ross Perot at EDS and others like ACS, later Conduent. But there’s a ton more across every agency.
Musk & DOGE have been running around in the most ham-fisted way imaginable, axing both actual employees–including 20,000 of the 80,000 working at HHS– and allegedly slashing $150 billion in contracts. Of course on closer examination, many of the “contracts” were already over, or were made up. DOGE has been a pathetic piece of performance art that would be funny if it hadn’t ruined so many careers of people doing great work, or killed so many desperately poor children in poor countries.
The clever people at Brookings, (Elaine Kamarck and Paul Light) in a detailed piece on the topic, came up with an estimate of the ratio between direct employees and contractors.
As you can see the number of civil servants (actual employees) has stayed about 2m for nearly 15 years. The amount of contractors has bounced around but been nearly 2.5 times that number.
For the 4-5m jobs in the contract sector GAO has estimated that the 2023 cost was a tad under $800 billion a year, with 60% of that going to Defense.
However, there is a third category of government “contractors”. These are private companies providing services to private individuals for whom a third party is paying. Sometimes the third party is the government, like CMS paying Medicare claims. Sometimes it’s a private entity like an employer paying another one, like a hospital–but the costs are subsidized on both sides by the government. Or sometimes the same transaction is both paid for by the government and a private individual, such as Medicare paying for some costs while a private Medigap plan pays for the rest.
Musk and DOGE have basically ignored this.
You can see where I am going here.
These are not “contracts” and they don’t show up in the GAO’s analysis. If they did the total would be well over $2 trillion in health care alone. But they do represent government spending.
And every day in health care there is news about ways that private companies are being “over- compensated” for what they provide for that spending.
I’m not even going to talk about United HealthGroup and Medicare Advantage here. After all, even the Trump DOJ seems to think they’re guilty of upcoding and fraudulent risk adjustment.
But there’s plenty of other examples
Caught with its hand in the cookie jar last month was the nation’s biggest Medicaid plan, Centene. Medicaid is a state-based program, so if someone moves from one state to another, the state and Federal government are supposed to stop paying the Medicaid plan in one state, and instead pay the plan in another. Centene of course knows this, but the WSJ found out that it was telling its local plans not to inform the state that its members had moved away.
One Centene supervisor urged some of the company’s case managers in February to keep Medicaid recipients enrolled after they moved. “Please DO NOT close cases when you learn a member has moved out of state,” the supervisor said in a Microsoft Teams message. “If the member shows eligible and are out of state, they can still can [sic] utilize some of the benefits.” Centene’s spokesman said the company is required to maintain coverage for members until the state decides whether to disenroll a beneficiary.
Centene was collecting about $150m a year for those patients who weren’t even living in its coverage area, and lying to the taxpayer about it. The WSJ makes clear that they weren’t alone. United, AetnaCVS, Molina and Elevance were all doing the same thing. Nice pure profit if you can get it!
In semi-related news, some of the more corrupt states are joining in. For instance, Centene paid a $67m fine in Florida for overcharging Medicaid for its PBM services. Presumably that money should have gone back to the Florida taxpayer, but the regime in Florida told Centene to give $10m of that money to a dark money public “charity” that is the pet project of its founder, a Ms. Casey DeSantis. Who apparently is married to the governor of Florida and would like to be the next one!
Look I know you’re all shocked that Florida Republicans and their friendly lapdog corporations are involved in this type of corruption, but it’s possible that something not too dissimilar is happening in the blue collar Democratic stronghold of Pittsburgh, PA.
There we find another type of government “contractor”, the University of Pittsburgh Medical Center. UPMC has been building an empire for decades. I’ve written about its major league baseball style executive salaries, and others have exposed its corporate jets. But while UPMC has all the affectations of a massive for-profit corporation, Beckers reports that 70% of its revenue comes from government programs. But what advantage does being a non-profit bring for UPMC that the rest of Pittsburgh citizens don’t receive? Yup, no need to pay property tax. On the $2.1 billion-worth of land they own.
So when the mayor of Pittsburgh comes asking for the city’s share, UPMC isn’t exactly taking the high road.
To protect its status, the hospital giant is putting its thumb on the scale in Pittsburgh’s hotly contested mayoral race, in which the democratic primary election is taking place on May 20. The incumbent, Ed Gainey, was elected in 2021 and has been a vocal critic of the medical center’s growing portfolio of tax-exempt properties, alleging that the center is misusing its nonprofit status by granting tax exemptions to ineligible properties. The progressive mayor is facing a stiff challenge from County Controller Corey O’Connor, who is running as the top choice of the Pittsburgh development and real estate communities, raking in cash from local real estate moguls, longtime Republican donors, and notably, hospital board members. That includes board members of the University of Pittsburgh Medical Center and its associated Children’s Hospital Foundation. All together, these members and their families have contributed at least $25,000 toward O’Connor’s mayoral campaign so far this year, according to campaign finance records.
This doesn’t strike me as the behavior of a worthy neutral charitable organization, and frankly neither does the behavior of many other major health care systems. To quote myself (yeah, yeah, I know its still plagiarism),
Over the last 30 years America’s venerable community and parochial hospitals merged into large health systems, mostly to be able to stick it to insurers and employers on price. Blake Madden put out a chart of 91 health systems with more than $1bn in revenue this week and there are about 22 with over $10bn in revenue and a bunch more above $5bn. You don’t need me to remind you that many of those systems are guilty with extreme prejudice of monopolistic price gouging, screwing over their clinicians, suing poor people, managing huge hedge funds, and paying dozens of executives like they’re playing for the soon to be ex-Oakland A’s. A few got LA Dodgers’ style money.
Particularly galling is the amount of money sloshing around in their hedge funds. I have made a very, very rough estimate that there’s probably $500 billion in the “reserves” of the big hospital systems and the non-profit Blues plans, but it might be $1 trillion.
So what’s my answer?
Nationalize the lot of them.
If the hospitals and doctors were part of government agencies like the VA or the US Marine Corps, all of this theft and corruption would either disappear, or be managed by OIGs and others.
There’d be no need for them to have those hedge funds. Or the payments to private insurance companies. That money could be used for good rather than profit.
Salaries could be adjusted to reflect those paid to high paid public sector employees. If the President of the USA gets $400k a year, why does the CEO of a regional medical center need $14m? For that matter a clinical service line head at the VA can make up to $400k a year, which doesn’t sound crazy low. Obviously there would have to be a ton of adjustments which would probably include making medical school free, but overall being a physician would still be a high paid profession–as it is in the rest of the world. And we could return to them a ton of power and autonomy that has been stolen from them by health plans and administrators.
Now I know this will come as an anathema to most Americans. They will correctly say that SpaceX (despite Musk being its nominal CEO) was able to put rockets in orbit much cheaper than NASA did.That may be true in many areas of the economy but it’s not true in health care. We spend way, way more per head than countries with government-delivered systems.
Finally, a nationalized health system would enable us to remove some of the biggest inequities and idiocies in our current government based insurance system. Exhibit A is Medicaid. Having one Federal government program for people over 65 and the disabled (Medicare) and an entirely different state-based one (Medicaid), which spends 1/2 of its money on people who are over 65 and disabled and who are also in the Federal program is plain stupid and always has been.
A nationalized system would remove the second class status of the ⅓ of our citizens who don’t have Medicare or good private insurance, and would enable our clinical professionals to practice medicine the way they wanted to when they were young and idealistic.
Obviously getting American health care from here to there via nationalization–a British word from the 1940s that barely has any meaning here–is close to impossible.
But tell me it isn’t the right thing to do. Even if you only care about reducing waste, fraud and corruption.
Matthew Holt is the Founder, Publisher and an Author at THCB
