It's easy to spot and criticize outright fraud, but much harder when the rules are rigged to help your friends, making what should be fraud perfectly legal and above board.
Democrats have been dabbling in outright fraud wherever they can, but both parties, when they control the system, will play the game of helping their buddies while using high-minded rhetoric to paper over what amounts to a grift.
Such has been the case in Indiana. A program intended to put extra money into a notoriously bad nursing home system actually diverts about half the money to the hospital systems that own the nursing homes as investments they can profit from.
Hospitals and healthcare systems are a top lobbying group in Indiana because they are everywhere, and healthcare tends to be the largest industry in many rural areas. So state legislators and governors are very sensitive to their lobbying efforts and like to keep the executives fat and happy.
So when the Legislature approved a program to up Medicaid reimbursements to nursing homes to improve the sorry state of many of them — the conditions in some are notoriously bad, with patients suffering from easily preventable illnesses and neglect — the whole system was hijacked to become a piggy bank for the hospitals that own, but do not run, the majority of the state's nursing homes.
The money Indiana is using to funnel billions into nursing homes and their owners comes mostly from the feds, so there is no appetite to reform the system. When a bill to make the system at least more transparent was proposed, a powerful Republican chair pulled it from committee and killed it. The point was to keep the grift hidden.
Notably, hospital administrators are the ONLY public employees in Indiana whose salaries are undisclosed. I wonder why.
As a result, billions of dollars meant to improve nursing home care are being diverted to executive salaries and hospital operating funds (and capital investments), with no impact on patient care as intended.
After the Indy Star investigated the ripoff, the Office of the Inspector General looked into the problem and found that the system didn't work as intended. The language was in bureaucrat-speak, but the message was clear. The nursing homes should keep the money, not the owners.
Assistant Regional Inspector General Tate Clark: “The payments are intended to help the nursing facility care for the beneficiaries, maintain financial stability and support the access to quality services for the resident. When a greater share of those payments is retained by participating facilities, those facilities are better positioned to invest in staffing services and resources that support the resident care.”
This problem has been around forever, it seems, and the first Trump administration tried to rein it in, to no avail. Seema Verma, Trump’s first CMS administrator (and a former Indiana Medicaid consultant), argued in 2019:
“We have seen a proliferation of payment arrangements that mask or circumvent the rules where shady recycling schemes drive up taxpayer costs and pervert the system.”
In other words, this is a scheme to use Medicaid to pad the pockets of the right people, not to take care of patients.
None of this seems to matter. Everybody in Indiana government knows about the grift and is fine with it. It's legal, if scummy, and when the OIG pointed it out, their response was essentially "thanks, but no thanks."
The result is exactly what you expect: Indiana is at the bottom of the barrel in nursing home care as it builds hospitals at astronomical costs — including a $750 million palace — and has rural hospital administrators bringing home millions of dollars a year.
Indiana's nursing staffing per resident in the homes is 48th in the country, and worse, its nursing hours per resident are dead last — the very problem this program was meant to address is as bad as ever. The Indy Star, in its original investigation, documented deadly falls, life-threatening infections, fatal attacks by other residents, and even amputations that should not have been necessary.
All of this is possible because there is a toxic blend of factors: the money is "free" because it is federal; the beneficiaries are politically powerful; the critics within the state are in the party out of power; and the people being hurt are politically weak.
Yet the program is sold as helping just those people. Everybody in Indiana wants the nursing homes to improve, so the grift is protected. Nobody pays a political price.
It's a common theme, as is the fact that there is never any accountability, at least until some level of fraud is so outrageous and easily filmed for consumption by the populace. The perpetrators here wear suits and speak the language that everybody responds to: compassion. The Somali fraud is far less sophisticated, and the perpetrators are much easier to identify and dislike. Your rural hospital administrator is your neighbor and seems nice enough.
The throughline, though, is the same: tax dollars are considered "free money" and disposable. Help your political friends, and everybody's back gets scratched. And the people who are the "intended" beneficiaries turn out just to be a convenient excuse for the grift.
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