Review: The Poverty Industry

One of my clients recently recommended that I read Professor Daniel Hatcher‘s The Poverty Industry. So I did. Now I understand why my client was so adamant that I read the book, and with the same urgency, I recommend that you do the same.

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Hatcher addresses the “poverty industry,” akin to the military industrial complex of which President Eisenhower warned. But it’s worse than that:

In 2011, the defense industry spent in excess of $134 million on government lobbying efforts. Impressive. But the healthcare industry spent almost four times that amount – more than half a billion dollars, including a significant focus on lobbying related to government healthcare problems for the poor. The defense industry also spent almost $24 million in 2011 on campaign contributions, but the healthcare industry multiplied that amount by almost eleven. In fact, campaign contributions made only on behalf of hospitals and nursing homes were about equal to all the campaign contributions made on behalf of the entire defense industry.

Not many Americans are aware of the extent to which private interests are intimately involved in healthcare aspects of what Hatcher refers to as “fiscal federalism.” Most of us believe that the federal government provides money to states, and permits states to deliver those funds to vulnerable populations in a manner most meaningful to the particular circumstances of those populations. But private contractors are interjected into this relationship, creating the iron triangle and the worrisome statistics noted above.

Contractors like MAXIMUS and PCG (the Public Consulting Group) operate internationally, helping governments’ take advantage of financial opportunities. What opportunities that we talking about? Taking Social Security benefits from children in the foster care system.  Taking Medicaid payments for nursing home care, and applying them to state general fund coffers or other projects that have absolutely no linkage to care of the elderly. (By the way, such contractors are often also hired by the federal government for audit activities, creating a scenario in which they are responsible for checking off on their own behavior.)

One of the examples Hatcher shares in the book hits close to home. The Marion County Health & Hospital Corporation in Indianapolis began buying for-profit nursing homes throughout Indiana. It then contracted with American Senior Communities to manage them. Owning the nursing homes permitted the claiming of more federal dollars, which would presumably be used to increase the quality of care nursing home residents were receiving. (Note that Indiana rates abysmally in regard to the quality of care experienced by nursing home residents.) In fact, the Indiana General Assembly passed a bill that would require any additional federal dollars to be spent on nursing homes. However, Governor Frank O’Bannon vetoed the bill, allowing the federal dollars to be routed elsewhere. Ultimately, they were used to fund Eskenazi Hospital. Quality of care in Indiana’s nursing homes is still deplorable.

The Poverty Industry describes numerous other examples of private companies – often with shareholders to keep in mind – working with the government to take advantage of those to whom the money was intended. It is a great eye-opener, and is likely to disturb you like no other non-fiction book on the market. I strongly recommend that everyone read this and then look into how their own state manages public benefits coming from the federal government.

Banking by the Disabled

This afternoon, I listened to a webinar produced by the Real Economic Impact Network regarding trends in banking by people with disabilities. It discussed the National Disability Institute’s (NDI) recent report, Banking Status and Financial Behaviors of Adults with Disabilities. The report was generated based upon the findings of the FDIC’s 2015 national survey.

Although it may not sound scintillating, banking issues have interested me since I finished Lisa Servon’s The Unbanking of America. Unbanking, or not having a bank account and instead using alternative resources to handle money, is not in and of itself a negative. In fact, if one has low income and few assets, refraining from the use of a bank account may be rational. However, not using mainstream banking services also comes with downsides, such as an inability to access lines of credit.

NDI’s report, unsurprisingly, finds that households in which at least one person has a disability are more likely to be unbanked or underbanked.  The exact number – 46% of households affected by disability – was larger than I expected. Moreover, the report determined that the particular type of disability affecting a household does not significantly influence the household’s banking status.

Another interesting section involved the manner in which households engage in financial transactions. While 71% of households without disability made electronic payments from their bank account, only 46% of households with disability did the same. This disparity remains statistically significant whether or not the household with a disability is unbanked or underbanked. To me, a person with a mobility disability, it is much easier to make financial transactions electronically. I expected it would also be easier and safer for individuals with other disabilities, such as visual impairments and intellectual disabilities. In fact, one of the worries discussed on today’s webinar was whether the trend to engage in even more banking online will adversely affect people with disabilities lacking the technology to participate.

The entire report is definitely worth reviewing. In addition to presenting the data, NDI also makes policy suggestions to improve the financial health of people with disabilities. For example, NDI suggests that ABLE accounts could serve as placeholders for those unable to access savings accounts by nature of means testing for public benefits. Check out the report and let me know what you think!