South Dakota faces some serious problems with providing sufficient long-term care options to its aging population. We're headed for the baby-boom retirement, and even though our baby-boomers have been jogging and aerobicizing like crazy, their aging will still bring an increase in the number of people requiring health care assistance of some sort, whether in an assisted-living setting or full-time nursing home care. Making matters worse is the decreasing labor pool to choose from. More old people needing care, fewer young people to take care of them -- not a good economic recipe.
In addition to growing demand, nursing home costs (like other health care costs) may be going up fast because of increased litigation costs. One would think the free market solution would be to provide better care that people can't sue over. But according to the headliner in today's New York Times [Charles Duhigg, "More Profit and Less Nursing at Many Homes," New York Times, 2007.09.23], the large private investment firms that have bought up 9% of the nation's nursing homes in the past few years have a better solution: create a Byzantine ownership structure that makes it impossible to determine who actually owns the nursing homes and bears responsibility for wrongdoing. That way the owners cut cut nursing staff, let more old folks die, and insulate themselves from legal action by family members and regulatory agencies alike, ensuring a steady flow of dividends to the contented shareholders.
The Times article is not pleasant reading. The Times analyzed federal government data on over 15,000 nursing homes, including "1,200 nursing homes purchased by large private investment groups since 2000" [Duhigg, sidebar]. It found the facilities owned by private investment groups have fewer nurses (professional staff is always such a burdensome expense), more health deficiencies, more residents losing functionality and mobility, and more residents suffering from depression.
For providing this inferior care, these nursing homes ought to receive the free market's punishment of less business and lower profits, right? Oops, wait a minute:
The typical large chain owned by an investment company in 2005 earned $1,700 a resident, according to reports filed by the facilities. Those homes, on average, were 41 percent more profitable than the average facility. [Duhigg]Given that financial performance, the investment groups say they should be lauded for saving the industry. "Legal and regulatory costs were killing this industry," argues Arnold M. Whitman, a principal with Formation Properties I, one such investment group that has been buying (and selling for a tidy return) nursing homes. And we sure don't want to kill any industries. So instead, we kill Grandma. [Oops, sorry -- more hyperbole. Why do we liberals get so emotional over petty things like valuing profits over human life?]
Duhigg offers another valuable insight from Mr. Whitman:
If investors are barred from setting up complex structures, “this industry makes no economic sense,” Mr. Whitman said. “If nursing home owners are forced to operate at a loss, the entire industry will disappear.”
Hmm... "operate at a loss" appears to be shorthand for "be held accountable for insufficient staffing, moldy food, and bedsores."
Mr. Whitman appears to be saying that the free market can't provide even inferior care for Grandma and Grandpa without complicated legal structures to hide its failings from legal scrutiny. I think Adam Smith said something about that: if the free market can't do the job, society has a right and duty to do the job through its government.
Today's New York Times article gives a good example from one specific subset of the health care industry of why blind adherence to free-market theology in health care without at least strict regulation, if not full funding and control, by the government leads to immoral treatment of our fellow citizens at the hands of profiteers.
Rather than free-market morality, I think this post brings up a different moral conundrum... what's the best way for society to adjust to an ever-increasing life expectancy?
ReplyDeleteThe trouble, essentially, is this:
1) All people, while alive, consume resources.
2) People who are capable of work can generally create enough resources to sustain themselves and usually a few others (aka family).
3) The age to which the average person lives is increasing... however the age to which the average person is capable of being a productive worker (ie the age of retirement) is not increasing (or at least not as quickly).
4) Thus it is conceivable that we could be confronted with needing more resources to be consumed than our workers are capable of producing. What is the moral way to solve that dilemma?
For example, what do we do if life expectancy gets so high that we can't afford to feed children because we have to feed all of our retired parents and grandparents instead?
No, no, no. This post brings up the free-market morality question. Even if we do divert ourselves to determining whether or not Grandma gets to consume any more resources (i.e. live), the free market proves here that it lacks the morality to make that decision. The free market now chooses to divert resources to profits for shareholders rather than food and nurses to keep Grandma from dying in humiliating filth and agony. Don't let David distract you, gentle readers: this post is all about the free-market morality question.
ReplyDeleteI'm sorry, but I have an issue with government being the "end-all, be-all" solution to all the problems that we're facing.
ReplyDeleteJesse "The Mind" Ventura, despite his antics whie Minnesota governor, did leave one nugget of truth...
"If the government is going to do it FOR you, the government is going to do it TO you."
I'm not sure a complete government take-over of nursing homes is necessary, but this article demonstrates at the very least the need for transparency in how businesses operate so the government can regulate what's going on. And I think even Gov. Ventura would have a hard time saying that what those private investment groups are doing to senior citizens is better than what government does for/to us when it runs programs.
ReplyDeleteThese homes are getting Medicare payments, correct? Then in that case, the goverment should withold payment if these places aren't up to spec.
ReplyDelete"this post is all about the free-market morality question."
ReplyDeleteWell, the life-expectancy morality question is at least interesting to me. If the trend continues, some day we will have to choose between feeding our great-great-grandma or our infant son. But you don't want to talk about that... so let's talk about those rotten corporations.
Your claim is that because some corporations are getting high profits out of shabby care, therefore the free market model is flawed.
I don't see that conclusion at all...
I had assumed that you understood the basic principles of the free market... for any product, the consumer wants the best quality for the lowest price, and the corporation wants the highest profit. In order for the free market to work, you have to examine the product. And if the product is shabby (as it is with these nursing homes) you have to raise hell with the corporation or take your business elsewhere.
You, by pointing out how terrible some corporations act, are thereby being the consumer's advocate... and contributing to progress in the free market with free-market principles. Raising the awareness of those who are buying care from the derelict facilities should solve the problem by itself. The consumers will either insist on better care, shop elsewhere, or show that they themselves don't care about Grandma's health or life.
[And if you visit nursing homes frequently, you yourself might come to the conclusion that some of these people are living 'past their time.' Merely keeping one's heart and lungs going for as long as possible seems to miss the point when motor skills and brain activity is absent. But you're the guy who's adamantly pro-life (except when it comes to the life of a human being inside a womb).]
The free market still works here. Making corporations accountable is a necessary part of the process.
The biggest threat to our liberty is the idea that the government has to "do something" to every little nuisance in our lives. It's that same urge to "do something" that prompts school superintendents to bring in sham consultants, prompts congressmen to pass federal education legislation, prompts governors to buy laptops for high schoolers, prompts basketball parents to build a new gym, and prompts the capitol to subsidize an unpopular state fair. The government should only "do something" as a last resort; not a first resort. Make a law only when every conceivable attempt to use the free market has failed... and hardly ever should the government actually take over the administration of any product.