Think welfare programs are overly tolerant of fraudsters? Wait until you see how kind they are to low-quality providers.
Consider the Ensign Group. As the largest owner of federally certified nursing home facilities, it gets most of its revenue from the government. Taxpayers aren’t getting much from that arrangement. A recent investigation by the investment firm Hunterbrook shows that these programs are failing to protect vulnerable elderly residents from chronic, sometimes deadly neglect at nursing homes.
One ventilator-dependent Ensign resident died after becoming unable to breathe and pounding the wall for a nurse who never came. The family is suing Ensign for wrongful death. Another Ensign resident suffocated after a bed rail pinned and suspended them upside down. By the time staff arrived, the resident was “completely purple and black” with early signs of rigor mortis.
An Ensign facility was found to have allowed maggots to infest a living resident. Another allowed ants to overrun a nonverbal resident with Alzheimer’s disease. “They crawled on her face, neck, legs, and swollen-shut eyes,” investigators report. “They left bites all over her body.”
An Ensign resident complained of “persistent hygiene and medical failures,” “wet paper towels in place of toilet paper,” “recurring infections,” and another resident who “cried and screamed after going a day without food, without being changed, left in a soaking wheelchair.”
Ensign executives literally extol “customer second” as a core corporate value. It is no coincidence that a company that derives most of its revenue from the government explicitly tells employees to put their welfare ahead of customers.
But the problem isn’t Ensign, at least in particular. Medicare and Medicaid spend more than $400 billion annually on long-term care services and supports. That’s 60% of all long-term care spending and more than $80,000 per recipient.
The real problem is that government cannot discipline low-quality providers, and it cannot promote market competition. When government develops and implements quality controls for care, providers are almost always the most vocal — and powerful — people in the room. And they wield that power to protect their revenues. Typically, that means ensuring that low-quality providers can keep drawing government subsidies.
In Overcharged: Why Americans Pay Too Much for Health Care, law professors Charles Silver and David Hyman chronicle the long history of this dynamic undermining quality. Nursing-home chains Mariner and Sava administered anti-psychotic “chemical restraints” just to keep residents quiet. Medicaid and Medicare kept subsidizing them even as the companies paid settlements in 2010 and again in 2021.
In 2017, after Hurricane Irma struck Florida, the Rehabilitation Center at Hollywood Hills’s emergency cooling system failed, causing 14 residents to die in the heat, some with body temperatures near 110 degrees. That mass-casualty event led Florida officials to shut down the facility. But Medicare and Medicaid continued to subsidize the owners’ other facilities.
George Houser operated three Georgia nursing homes so deplorable that a federal judge remarked that if they were prisons, they would have violated the Eighth Amendment. Residents endured leaky roofs, hunger, and filth. State inspectors issued multiple citations. Private buyers would have fled.
Medicaid and Medicare, however, continued to funnel nearly $33 million to Houser between 2004 and 2007. Georgia finally pulled the plug in 2007. But it took a 2012 criminal fraud conviction (plus imprisonment) to ensure Medicare and Medicaid would never subsidize him again.
The problem is that the government rewards low-quality care where market competition would not. Ensign, for example, paid $47 million last year to settle claims that it defrauded Medicare and Medicaid, yet those programs keep paying the company. The federal government even gave the company’s ant-infested facility a five-star rating.
RESTORING AMERICA: STATES NEED AN AGENDA ON SERIOUS MENTAL ILLNESS
Quality improves when buyers care enough to punish low quality. As author David Goldhill observed after an avoidable hospital infection killed his father, providers who had to collect from grieving families rather than an uncaring government would soon find the money to keep patients safe. Buyers certainly care. Government simply doesn’t.
It was market competition that gave us the maxim that the customer is always right. That’s because market competition contains and channels personal greed toward socially beneficial ends. When greed runs amok, it is because a clueless government opened the cage.
Michael F. Cannon is director of health policy studies at the Cato Institute.