[ Creating a sane healthcare system will depend on building a
massive common movement to free our economy from Wall Street’s
wealth extraction.]
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WE DESERVE MEDICARE FOR ALL, BUT WHAT WE GET IS MEDICARE FOR WALL
STREET  
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Les Leopold
January 3, 2024
Common Dreams
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_ Creating a sane healthcare system will depend on building a massive
common movement to free our economy from Wall Street’s wealth
extraction. _

Supporters of Medicare for All protest outside of PhRMA headquarters
in Washington, D.C. on April 29, 2019., (Photo: Win McNamee // Common
Dreams)

 

The United States health care system—more costly
[[link removed].] than
any on earth—will become ever more so as Wall Street increasingly
extracts money from it.

Private equity funds own
[[link removed].] approximately
9% of all private hospitals and 30% of all proprietary for-profit
hospitals, including 34% that serve rural populations. They’ve also
bought up nursing homes and doctors’ practices and are investing
more year by year. The net impact? Medical costs to the government and
to patients have gone up while patients have suffered more adverse
medical results, according to two current studies.

_The Journal of the American Medical Association_ (JAMA) recently
published
[[link removed]] a
paper which found:

Private equity acquisition was associated with increased
hospital-acquired adverse events, including falls and central
line–associated bloodstream infections, along with a larger but less
statistically precise increase in surgical site infections.

This should not come as a surprise. Private equity firms in general
operate as follows: They raise funds from investors to purchase
enterprises using as much borrowed money as possible. That debt does
not fall on the private equity firm or its investors, however.
Instead, all of it is placed on the books of the purchased entity. If
a private equity firm borrows money and buys up a nursing home or
hospital chain, the debt goes on the books of these healthcare
facilities in what is called a leveraged buyout.

To service the debt, the enterprise’s management, directed by their
private equity ownership, must reduce costs, and increase its cash
flow. The first and easiest way to reduce costs is by reducing the
number of staff and by decreasing services. Of course, the quality of
care then suffers. Meanwhile, the private equity firm charges the
company fees in order to secure its own profits.

With so much taxpayer money sloshing around in the system, hedge funds
also are cashing in.

An even larger study of private equity and health
[[link removed]] was completed this
summer and published in the _British Medical Journal _(BMJ). After
reviewing 1,778 studies it concluded that after private equity firms
purchased healthcare facilities, health outcomes deteriorated, costs
to patients or payers increased, and overall quality declined.

One former executive at a private equity firm that owns an
assisted-living facility near Boulder, Colorado, candidly described
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the firm was refusing to hire and retain high-quality caregivers:
“Their position was: We are trying to increase our profitability.
Care is an ancillary part of the conversation.”

Medicare Advantage
[[link removed]] Creates Wall
Street Advantages

Congress passed the Medicare Advantage program in 2003. Its proponents
claimed it would encourage competition and greater efficiency in the
provision of health insurance for seniors. At the time, privatization
was all the rage as the Democratic and Republican parties competed to
please Wall Street donors. It was argued that Medicare, which was
actually much more efficient
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private insurance companies, needed the iron fist of profit-making to
improve its services. These new private plans were permitted to
compete with Medicare Part C (Medigap) supplemental insurance.

In 2007, 19% of Medicare recipients enrolled in Medicare Advantage
plans. By 2023 enrollment had risen to 51%
[[link removed].].
These heavily marketed plans are attractive because many don’t
charge additional monthly premiums, and they often include dental,
vision, and hearing coverage, which Medicare does not. And in some
plans, other perks get thrown in, like gym memberships and preloaded
over-the-counter debit cards for use in pharmacies for health items.

How is it possible for Medical Advantage to do all this and still make
a profit?

According to a report by the Physicians for a National Health Program
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it’s very simple—they overcharge the government, that is we, the
taxpayers, “by a minimum of $88 billion per year.” The report says
it could be as much as $140 billion.

In addition to inflating their bills to the government, these HMO
plans don’t pay doctors outside of their networks, deny or slow
needed coverage to patients, and delay legitimate payments. As Dr.
Kenneth Williams, CEO of Alliance HealthCare, said
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Medicare Advantage plans, “They don’t want to reimburse for
anything — deny, deny, deny. They are taking over Medicare and they
are taking advantage of elderly patients.”

Enter Hedge Funds

With so much taxpayer money sloshing around in the system, hedge funds
also are cashing in. They have bought large quantities of stock in the
healthcare companies that are milking the government through their
Medicare Advantage programs. They then insist that these healthcare
companies initiate stock buybacks, inflating the price of their stock
and the financial return to the hedge funds. Stock buybacks are a
simple way to transfer corporate money to the largest stock-sellers.

(A stock buyback is when a corporation repurchases its own stock. The
stock price invariably goes up because the company’s earnings are
spread over a smaller number of shares. Until they were deregulated in
1982, stock buybacks were essentially outlawed because they were
considered a form of stock price manipulation.)

United Healthcare, for example, is the largest player in the Medicare
Advantage market, accounting for 29%
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all enrollments in 2023. It also has handsomely rewarded its hedge
fund stock-sellers to the tune of $45 billion
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stock buybacks since 2007, with a third of that coming since March
2020. Cigna, another big Medicare Advantage player, just announced
a $10 billion stock buyback
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These repurchases are also extremely lucrative for United
Healthcare’s top executives, who receive most of their compensation
through stock incentives. CEO Andrew Witty, for example, hauled
in $20.9 million in 2022 compensation
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of which $16.4 million came from stock and stock option awards.

Those of us fighting for Medicare for All have much in common with
every worker who is losing his or her job as a result of leveraged
buyouts and stock buybacks.

A look at the pharmaceutical industry shows where all this is heading.
Between 2012 and 2021, fourteen of the largest publicly traded
pharmaceutical companies spent $747 billion on stock buybacks and
dividends, more than the $660 billion they spent on research and
development, according to a report
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economists William Lazonick and Öner Tulum. Little wonder that drug
prices are astronomically high in the U.S.

And so, the gravy train is loaded and rolling, delivering our tax
dollars via Medicare Advantage reimbursements to companies like United
Healthcare and Big Pharma, which pass it on to Wall Street private
equity firms and hedge funds.

It’s Not Just Healthcare

In researching my book, _Wall Street’s War on Workers_
[[link removed]], we found that private equity firms and
hedge funds are undermining the working class through leveraged
buyouts and stock buybacks. When private equity moves in, mass layoffs
(just like healthcare staff cuts and shortages) almost always follow
so that the companies can service their debt and private equity can
extract profits. When hedge funds insist on stock repurchases, mass
layoffs are used to free up cash in order to buy back their shares. As
a result, between 1996 and today, we estimate that _more than 30
million workers have gone through mass layoffs._

Meanwhile, stock buybacks have metastasized throughout the economy. In
1982, before deregulation, only about 2% of all corporate profits went
to stock buybacks. Today, it is nearly 70%.

Those of us fighting for Medicare for All, therefore, have much in
common with every worker who is losing his or her job as a result of
leveraged buyouts and stock buybacks. Every fight to stop a mass
layoff is a fight against the same Wall Street forces that are
attacking Medicare and trying to privatize it. Creating a sane
healthcare system, therefore, will depend on building a massive common
movement to free our economy from Wall Street’s wealth extraction.

To take the wind out of Medicare Advantage and Wall Street’s
rapacious sail through our healthcare system, we don’t need more
studies. It’s time to outlaw leveraged buyouts and stock buybacks.

_[LES LEOPOLD is the executive director of the Labor Institute
[[link removed]] and author of the forthcoming
book “Wall Street’s War on Worker s: How Mass Layoffs and Greed
Are Destroying the Working Class and What to Do About It.
[[link removed]]”
Read more of his work on his substack here
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_Licensed under Creative Commons (CC BY-NC-ND 3.0). _

* Healthcare
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* Medicare for All
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* M4A
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* Wall Street
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* health insurance
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* Private healthcare
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* Healthcare for Profit
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