This article is from Dollars & Sense: Real World Economics, available at http://www.dollarsandsense.org
This article is from the
March/April 2021 issue.
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The numbers are bleak. About 0.5% of the U.S. population lives in nursing homes (1.5 million people). This small group of people account for 40% (probably more) of the almost 400,000 U.S. Covid-19 deaths. By December 2020, residents of Genesis Health Care nursing homes were almost 3,000 of those deaths.
Why?
A common answer is, well, residents of nursing homes are older and, generally, in less good health than the population at large. But this “explanation” obscures more than it reveals about the actual story behind this slaughter. The bigger story is the nursing home industry itself, the way it is organized, the nature and limits of industry regulation and, of course, the financial incentives that structure this industry today and have done so for more than a half century. The story of Genesis Health Care—the largest operator of skilled nursing facilities in the United States—has much to teach us about this industry and the disaster of Covid-19. The firm both shaped and was shaped by the financial dynamics of caring by the dollar, seeking profits through providing health care for the elderly.
Genesis: A Story of Biblical Proportions
In the beginning—1985—the creators of Genesis Health Ventures, who came from within the skilled nursing facility industry, envisioned a new model of care for the elderly, an Edenic world that would build, according to the International Directory of Company Histories, “a comprehensive network of managed care facilities and services designed to help senior citizens maintain their independence and mobility.” The new Eden “would be good for its patients, and for its bottom line.”
Before Genesis came on the scene, most skilled nursing facilities were similar to traditional nursing homes and typically focused on providing patients with long-term stays. But these kinds of facilities were costly, and their profit margins were low. And as Genesis CEO and co-founder Michael Walker once said: “No one wants to end up in a nursing home.”
Genesis pioneered a new model of care that they claimed would be better for patients, as well as the company’s bottom line: get patients in the door, use medications from the firm’s pharmacy subsidiary, get them into rehabilitation services provided by another subsidiary of the firm, get them out and home or to a less intensive care facility, often again a subsidiary, and get the next group of patients in. This was a continuous-flow model of health care provision, based on the demographics of aging that ensured new (and growing) demand for the services that a re-envisioned skilled nursing facility could provide. It was also one that sought scale in order to maximize profits.
Building the New Eden: Horizontal and Vertical Integration
A Brief History of the Nursing Home Industry
Unlike hospitals, where the for-profit model is relatively recent (the majority of hospitals were still nonprofit in the 1980s), the bulk of nursing homes, or skilled nursing facilities, have been organized on a for-profit basis for many decades. The provision of medical services; the manufacture, distribution and utilization of medical supplies; and the logistics of caring for the elderly are primarily driven by the search for profitable investment.
The widely reported failure of the industry to protect patients from Covid-19 is one more chapter in the continued saga of inadequate care, patient neglect, and regulatory violations in the pursuit of profit. Congressional investigations in the late 1990s (patient abuse complaints doubled between 1996–2000) and again in 2007 found skilled nursing home facilities deficient in a variety of quality-of-care measures, most importantly infection control, as well as frequently inadequate staffing levels, which often resulted in serious patient illness or even death. The General Accounting Office (GAO) 2020 report, “Infection Control Deficiencies were Widespread and Persistent in Nursing Homes Prior to Covid-19 Pandemic,” again documented widespread failures of patient care beginning prior to the pandemic and continuing into 2020.
How Did We Get Here: The Begats
The passage of the Social Security Act in 1935 begat the first wave of skilled nursing home growth, and proprietary facilities began to replace the older model of not-for-profit nursing homes. Money in the hands of older people defined a potential market for health care and supervision rather than the pre-existing simple provision of room and board.
The market was slow to develop, however, until the 1946 Hill-Burton Act provided low-cost federal financing for the construction of new nursing homes. From 1939 to 1950, the number of skilled nursing facilities increased tenfold. More importantly for the industry’s profits, occupancy rates—the all-important ratio of skilled nursing facility residents to beds—had more than doubled from the 1939 level of only 35%. The link between federal health policy and the for-profit care of the elderly had been established.
As late as the 1950s and 1960s, however, the nursing home industry was significantly different from that of today. Although, as noted above, largely organized along for-profit lines, nursing homes were primarily a family business. Medical supplies were purchased from outside vendors and medical services were provided by non-affiliated physicians. The business model was based on owning the land and buildings and overseeing the operations of the skilled nursing facility as a stand-alone business.
The passage of the Medicare and Medicaid Act in 1965 begat a fundamental reorganization of the nursing home industry. The first, most obvious impact was simply the growth in the number of skilled nursing facility beds. At the time Medicaid and Medicare were established, there were 460,000 skilled nursing facility beds in the United States. In 1973, only eight years after he Act, the number of skilled nursing facility beds more than doubled to 1.1 million. Gross revenues for skilled nursing facilities increased 14 times over, with more than half of these monies coming from the federal government.
But the changes in the political economy of the industry were much more than simply a matter of size. The industry was reorganized. Chains that owned 20, 50, 100, or more skilled nursing facilities sprouted up like mushrooms after the Spring rain of federal money, replacing small, family-owned outfits. Medicaid’s cost-plus reimbursement system, under which skilled nursing facilities were reimbursed at a profitable rate for care with no ceiling on the total cost per patient, assured a steady stream of profits to participants in the industry. In addition, the Centers for Medicare and Medicaid Services (CMS) “relaxed” the compliance standards for skilled nursing facilities to be eligible for reimbursements. The result was a rapid growth in beds and facilities.
In fact, the late 1960s and early 1970s saw a stock market boom—in nursing home stocks! Wall Street soon saw Medicare and Medicaid as a risk-free source of revenue. In 1966 there were less than a dozen publicly-traded nursing home chains, by 1969 there were 58, and by 1970 there were 90. The best known, the so-called “Fevered Fifty,” promised investors returns of 20-25% a year.
But this federal largesse begat another change in the industry. In the late 1990s, Congressional Republicans and the Clinton administration, concerned about the impact of rising Medicaid payments on the federal budget, significantly revised the cost-plus payment system to reduce Medicaid outlays to skilled nursing facilities, Most of the reductions came from limiting federal matching payments to states. However, the new reimbursement structure did not extend to ancillary services.
The short-term result was the use of strategic bankruptcy filings by five of the largest skilled nursing facility chains from 1998–2000, the three years immediately following the new reimbursement system. A second, long-term result was the penetration of the skilled nursing industry by private equity (PE): by 2004, four of the 10 largest skilled nursing facility chains had been bought by private equity firms.
Private Equity Enters the Skilled Nursing Facility World
Private equity (PE) can best be understood as an extractive industry—the extraction of cash by acquiring and reorganizing the operations of other businesses. The skilled nursing home industry’s apparently guaranteed cash flow, coupled with a growing population of potential customers and significant real estate assets, was too good an opportunity for PE firms to pass up. The CEOs and management teams of skilled nursing facility chains made the usual argument: PE ownership and management would bring efficiencies to the industry that were beyond the scope of existing skilled nursing facilities and would, at the same time, improve the quality of care for residents.
What do we know about the validity of these claims?
In the early 2000s some studies provided limited support for the chain model of skilled nursing home ownership, including chains owned by PE firms, and showed higher financial returns in terms of the number of occupied beds and the number of years without detriment to patient care. At one point, Florida’s Agency for Health Care Administration even claimed that “There is no evidence to support that the quality of nursing home care suffers when a facility is owned by a private equity firm or an investment company.”
However, by 2012 the benefits of PE-owned skilled nursing facilities were being called into question. The most extensive and longer-term analysis, whose results were published in Health Care Management Review, looked at data from 18,000 nursing homes from 2000–2007, and found declining and inferior care quality in PE-owned skilled nursing facility chains. These findings are particularly persuasive because of the inclusion of larger and longer established PE chains, and the inclusion of the scores that these facilities received through the Centers for Medicare and Medicaid Services’ five-star rating system (CMS rates all individual skilled nursing facilities on this scale, ranging from a low of one star to a high of five stars).
Acquisition by PE firms did increase skilled nursing home facility efficiency as measured by volume (the rate of new admissions), which is an important driver of profitability. But acquisition by PE firms also resulted in a lower five-star ranking compared to the facility’s pre-acquisition score. This ratings drop was driven by a decline in frontline nursing staff, certified nursing assistants, and licensed practical nurses. There was also an increased rate of readmissions to hospitals from PE-owned skilled nursing facilities compared to both non-PE owned chains and not-for profit skilled nursing facilities.
But private equity still ended up on top: The net result was increased annual revenue of almost $800,000 per facility.
Sources: Rohit Pradhan et al., “Private Equity Ownership and Nursing Home Financial Performance,” Health Care Management Review, May 2012; Atul Gupta et al., “Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes,” NYU Stern School of Business, Nov. 12, 2020 (available at ssrn.com).
Genesis had a relatively humble beginning. It began in 1985 with a company valuation of $32 million and just nine skilled nursing facilities, a far cry from the value and scale of the major chains at the time. However, in the short span of 1985–1988, Walker built this new model, starting with acquiring the related businesses to create the new Eden. Genesis expanded both horizontally and vertically, buying other skilled nursing facilities and adding rehabilitation and pharmacy operations as profit centers to its available services. These additional services are usually more profitable than actual in-patient care.
Genesis also acquired a company called Physician Services. This addition allowed Genesis to become the first company in the industry to employ its own primary care physicians for its patients. The continuous-flow model was thus extended into the diagnostic and prescription functions of the company.
In 1991, Walker took the company public through an Initial Public Offering (IPO). At that point, Genesis owned more than 40 skilled nursing facilities and 13 life-care communities scattered across multiple states, mostly in the Northeast. The IPO price valued Genesis at almost $2.5 billion, or more than 75 times its starting value of $32 million in 1985.
This rapid expansion did not, of course, come cheaply. Genesis, like the other newly emerging chains, needed to borrow money to finance new acquisitions in order to achieve economic scale quickly. Banks (and investors) were happy to lend. The cost-plus payment model that was part of Medicaid legislation assured Genesis and its investors a steady stream of profits. As a 1969 article in Barron’s had made plain: “Nobody can lose money in this industry.”
By 1996, five years after Genesis’s IPO, the company brought in $650 million in revenue a year and employed more than 25,000 people. In that same year, Genesis’s new CFO, George Hager, won the Cain Brothers award for “creative financial solutions.” Among Hager’s creative solutions was the decision to establish a real estate investment trust for some 37,000 of Genesis’s beds. This off-balance-sheet financing gave a significant boost to the company’s revenues.
Just two years later, Genesis’s annual profits reached $1 billion, and the company acquired MultiCare, another skilled nursing home chain, in a deal valued at $1.4 billion. The acquisition doubled the number of facilities and beds owned or operated by Genesis. But more than expanding their market share, Genesis was also looking for a change in their mix of customers. At the time, about 60% of the company’s patients were Medicaid recipients. Of MultiCare’s patients, in contrast, only 32% were Medicaid recipients, and the remaining 68% were either Medicare or private-pay patients. Both Medicare and private payers (non-Medicare insurers) reimbursed at twice the Medicaid rate for in-patient care, making it possible for Genesis to further boost their profits.
The Snake in the Garden
How did a company with $1 billion in revenue pull off a $1.4 billion acquisition? Another creative financial solution. Genesis turned to private equity firms Cypress Group and Texas Pacific Group for financing, and in exchange these firms took effective control of the company. Cypress had been founded by former Lehman Brothers bankers, and Texas Pacific Group was already an active private equity investor in the health care industry. The deal valued MultiCare at 10.5 times earnings before interest, taxes, depreciation, and amortization (EBITDA). This acquisition price was significantly above the usual 6–8 times EBITDA that was common in skilled nursing home mergers. In addition, Genesis paid the partnership an additional $50 million for MultiCare’s pharmacy business and another $24 million for its rehabilitation business. Both the costs of the acquisition and the additional payments resulted in additional debt, raising Genesis’s total debt load to over $1 billion. Two years later, Genesis filed for bankruptcy.
Wandering in the Wilderness
The official company history says it was the reduction of payment rates under Medicaid and Medicare that triggered the bankruptcy in 2000. However, this narrative ignores the reality of more than $1 billion in debt carried by Genesis. The company was not alone in bankruptcy court: It appeared that the entire skilled nursing industry—or at least what had been called “the fevered fifty” portion, the hot skilled nursing home stocks of the late 1960s and early 1970s—was going under. Genesis was joined in bankruptcy filings by MultiCare, and preceded by Vencor Inc. of Kentucky, Sun Healthcare Group of New Mexico, and Integrated Health Services of Maryland, among others.
What had actually happened was the collapse of the then-dominant skilled nursing business model. That model was based on the cost-plus payments received under Medicaid that allowed skilled nursing facilities to receive a steady flow of government payments that covered any procedures, medications, ancillary services, etc. that were provided to a patient. With the new Medicaid payment system, the very feature that attracted private equity to the industry—reliable cash flow from taxpayers that assured profitable per resident returns and thus rewarded rapid growth—was called into question.
However, despite the claims of Genesis and others, the revenues it generated remained sufficient to cover costs—but at a lower rate of profitability. The Government Accountability Office’s analysis of the revised reimbursement system’s impact highlighted the fact that providing more ancillary services would allow Genesis (and others) to continue to enjoy a steady flow of profits:
Routine [inpatient] services (which include general nursing, room and board, and administrative overhead) were subject to cost limits, but payments for ancillary services and capital-related costs were virtually unlimited. Because higher ancillary service costs triggered higher payments, facilities had no financial incentive to furnish only clinically necessary services and little incentive to deliver them efficiently.
Genesis illustrates the case nicely: In 2000–2002, total company revenue grew 12.7%. Their in-patient services revenue grew only 8.4%, while revenue from Genesis’s pharmacy services grew almost 20%. Although the financial problems for Genesis’s business model and that of the other four largest skilled nursing bankruptcy filers were real, the bankruptcy path was a strategic choice. It was a course of action designed to restructure debts or avoid debt payments and/or to gain leverage in debt renegotiations. It also opened up the skilled nursing industry to further penetration by private equity firms.
Seeking Canaan
In 2003 Genesis emerged from bankruptcy, and returned to its long-time business strategy of growing by both vertical and horizontal integration. They quickly acquired skilled nursing facilities, assisted and independent living facilities, and that old reliable revenue generator, rehabilitation clinics.
Genesis grew rapidly for the next few years. Private equity firms as well as Genesis management took notice—and sought to extract cash and spin off assets. In 2006, Genesis management, led by now CEO George Hager, approached the Genesis board with a proposed leveraged buyout (LBO) that valued the company at about $1.5 billion. The board, however, sought outside advice from Goldman Sachs. The result was a bidding war in which a syndicate of Formation Capital and JER Partners outbid both management and a competing private equity firm, Fillmore Capital Partners. Less than 10 years after the company relied on private equity to finance its acquisition of MultiCare, Genesis returned to private equity control in a deal valued at about $2 billion in 2007.
As noted earlier, what attracts private equity, as well as Genesis’s management, to the skilled nursing facility industry is cash flow. The fact that Genesis raked in $10,000 for each of its occupied beds made it an attractive acquisition. In addition, the company’s concentration in the Northeast was a plus, since Medicaid pay rates were above the U.S. average in that region.
The private equity firms had considerable experience with the health care industry and proceeded to reorganize Genesis to squeeze as much value as possible out of the company’s existing assets. From the perspective of private equity, Genesis was a bundle of different assets, the most valuable of which was real estate. After all, land can be put to many uses beyond that of housing a skilled nursing facility. And Genesis had a lot of real estate: the company owned 65% of its facilities, often in prime locations.
In 2011, Genesis, under the aegis of their private equity owners, sold their real estate assets for $2.4 billion. The buyer was a real estate investment trust (REIT) known as Health Care Real Estate Investment Trust. The REIT then leased the facilities back to Genesis. First-year lease payments were set at $198 million and would increase at an annual rate of 3.5%. Stripping out real estate was sort of like selling your furniture to pay your mortgage: money up front but an empty shell going forward.
Genesis was not the only, or even the first, in the skilled nursing industry to make use of the REIT structure to divide operations from property. This Operating Company/Property Company structure has several advantages, from the perspective of the owners if not the patients. First, it becomes very difficult for patients, or their families, to sue the operating company for significant damages because it does not have substantial assets and residents cannot reach through to the assets held by the property company. Second, in the Genesis/Health Care REIT deal (as in others) much of the profits of the operating company are effectively transferred to the property company, via lease payments and a range of management services agreements, further insulating them from litigation. This structure benefits the private equity firm owners as they extract value from what in essence becomes an operating shell that functions as a flow-through financial structure. An additional benefit of the Operating Company/Property Company structure is the reduction of corporate income taxes that would otherwise be owed by a combined company, because REITs are subject to a lower corporate tax rate. Finally, this structure allows the operating company to take on additional debt, which is often necessary because of the cash drain into the property company owned by the private equity firms. So, on top of its other advantages, this structure is a sophisticated form of asset stripping.
In 2014, Genesis was sold to investors as an operating company by the private equity syndicate (Formation Capital and JER Partners) and, after a merger in 2015 with Skilled Healthcare Group, the company again emerged from private equity, becoming a listed company on the New York Stock Exchange. As a result of the merger, by 2015 Genesis was the largest health care chain in the United States with over 50,000 beds, which was 30% more beds than the next largest chain, Manor Care. The firm had also expanded beyond its market in the Northeast into California and elsewhere.
Hager continued to expand Genesis, and for a while this strategy seemed to work. By the end of 2017, Genesis had 70,000 employees and a company valuation of over $5 billion. And Hager was doing well. In 2017 he was paid 45 times the median salary of those 70,000 employees, and more than three times the average CEO compensation in the skilled nursing industry.
(It’s worth noting that women of color comprise about half of the employees in the skilled nursing industry, and they’re typically paid $25,000–$30,000 a year.)
However, all of this growth often came at the expense of quality of care. In 2017, Genesis was fined $53.6 million by the U.S. Department of Justice (DOJ) for “upcoding” Medicare patients’ treatments. Upcoding means assigning an inaccurate billing code to a medical service to increase the reimbursement amount. In short, fraud.
Nonetheless, growth continued. In 2018 Genesis warned of possible bankruptcy, but this appears to have been another effort to avoid upcoming debt payments and/or persuade creditors to restructure the debt. At that time, Genesis leased over three-quarters of the facilities they operated and was carrying over $1.5 billion in debt. And Hager’s salary continued to climb, reaching a CEO/median employee salary ratio of 72:1 with $2.5 million compensation in 2018.
In 2019 the Genesis board of directors rewarded Hager with yet another raise, bringing his annual salary to $3 million, resulting in a CEO/median employee compensation ratio of 95:1. In contrast, the other four executives at Genesis saw their salaries decrease by 15% from 2018 to 2019. Each of the eight Board members received more than $250,000 for making these difficult decisions. Of course, Hager, as CEOs generally do, had the balance of power in choosing board members.
Plague
Genesis and Hager were doing well, so what could go wrong?
A lot, as it turns out.
Beginning in March 2020, Covid-19 began spreading rapidly in Genesis’s Burlington, Vt. Health and Rehab Center. This outbreak occurred shortly after the state, under the leadership of Attorney General T. J. Donovan, reached a $740,143 settlement with Genesis to resolve “allegations of neglect that resulted in serious injury to three residents and the death of a fourth,” according to the attorney general’s website. (Donovan had received $8,000 in political donations from Genesis, a significant contribution to his $49,000 reelection campaign expenditures.) Although the impetus for the investigation had been inadequate staffing, particularly of registered nurses, the staffing level only increased from 0.5 registered nurse hours per patient per day to 0.6 hours after the settlement. Both numbers are well below the Center for Medicare and Medicaid Service’s (CMS) minimum of 0.75 registered nurse hours per patient per day.
During the course of 2020, one in six Covid-19 deaths in Vermont came from Genesis’s Burlington facility. (According to the New York Times, the Burlington center was “known as the nursing home of last resort,” even before the pandemic hit.) But it was not the only Genesis facility that contributed to Vermont deaths; their Rutland and Berlin facilities also reported high numbers of Covid-19 cases and deaths. Relatives of a patient at the Burlington facility who later died from Covid-19 reported that, when they were finally allowed to visit, there was a lack of personal protective equipment for staff, and some staffers failed to wear masks. Genesis claimed that there was never a shortage of PPE at the facility.
But Vermont, sadly, was not alone among the victims of Genesis. New Hampshire found that one in five Covid-19 deaths occurred in three Genesis facilities, and Connecticut reported that 235 of the state’s 286 Covid-19 deaths were in nursing homes. Again, Genesis facilities were heavily involved. A New Jersey analysis of Covid-19 deaths found that facilities owned by private equity firms, including those owned by Genesis, had a higher rate of both deaths and cases than facilities that were not owned by private equity.
Nationally, Genesis had reported more than 1,500 Covid-19 deaths by mid-2020 when total U.S. Covid-19 deaths were still below 100,000; and by mid-December Genesis reported over 2,800 Covid-19 deaths. This latter number was undoubtedly an undercount because several of Genesis’s facilities had a policy of not reporting a Covid-19 death if a facility resident was sent to a hospital because of Covid-19 and subsequently died there rather than in the Genesis facility.
Genesis, like the rest of the skilled nursing industry, responded to the pandemic and the ensuing crisis by urging Congress to grant both financial relief and legal insulation from possible Covid-19 lawsuits. The company hired a friend of former President Donald Trump to lobby for additional Covid-19 funds and joined the push—led by a lobbyist who was the former chief of staff for Senator Mitch McConnell—to get a federal liability shield law enacted.
Exodus
By mid-2020, the failure of Genesis was marked enough that the firm was one of five nursing home chains to receive a Congressional inquiry letter from the House’s Select Subcommittee on the Coronavirus Crisis as part of their investigation into Covid-19 and nursing homes. The inquiry asked the company to provide a large range of information, covering staffing (noting the high frequency of understaffing in for-profit skilled nursing facilities such as Genesis), protective measures to stem the spread of Covid-19, revenue received from Medicaid and Medicare, compensation for senior officers, and more.
As the pandemic worsened, Genesis’s new admissions declined, causing its all-important occupancy rate to drop and revenues to plunge. Relatives of residents began to demand accountability. Genesis’s finances continued to deteriorate throughout 2020. In the second quarter of 2020, Genesis reported negative earnings, and although the company received at least $300 million in Covid-19 support from the federal government, by the third quarter of 2020 Genesis was warning of possible bankruptcy.
By September 2020, Genesis was seeking to sell several of its Vermont facilities in a desperate effort to raise cash. Nonetheless, in October 2020, only one month before Genesis reported a 2020 third quarter loss of over $60 million, the board handed CEO Hager a $5 million “retention bonus.” With that added to his regular CEO compensation, Hager had now achieved the S&P 500 “respectable” CEO/median employee compensation ratio of 251:1. All of this was soon reflected in Genesis’s stock price, which dropped sharply during 2020. Late in the year, with the stock price falling below $1, Genesis was warned by the NYSE that failure to get the price back above the $1 mark would result in delisting.
Genesis was delisted from the NYSE on January 1, 2021. Five days later, Hager was out as CEO.
The Industrialization of Housework
In the 18th and 19th centuries, feminists, socialists, and others interested in the gender division of labor talked and wrote extensively on the “emancipation of women.” Much of this analysis focused on the potential for industrializing housework and allowing women to move beyond the confines of the house and seek waged employment.
This line of thinking has helped develop the idea of a care economy, which has rapidly grown in the last few decades, due to the movement of care work out of the house and into waged work. Much of the theoretical and practical work has been focused on early childhood. Some countries, for example the Nordic countries, have socialized much of both early childhood care work and its financing. Others, the United States and the United Kingdom being prime examples, have commodified the care work of childhood. In these countries, a use value—the necessity of caring for the next generation—has become an exchange value, with families purchasing day care services in the marketplace, if they can afford it.
To date, there has been less focus on care labor at the other end of life. But here, too, we have walked down the path of making high-quality elder care an exchange value to be purchased, rather than a use value to receive as a citizen.
Revelations: Nursing Homes and the Care Economy
This article has said little about the actual work that occurs in skilled nursing facilities, the care of older people who, at least in our current health care system, are not able to remain in their homes without significant assistance from others. This work, carried out primarily by women, especially women of color, is part of what economists have labeled “the care economy.”
It is the care economy that has been the locale of much of women’s waged labor, whether caring and educating the young, or tending to the ill or the elderly. This work is often underpaid and unrecognized by policymakers. The story of Genesis, and the failure of the for-profit skilled nursing home industry in the face of Covid-19, offers an opportunity to overcome that neglect.
If we are to learn from the story of Genesis and the lethal impact of Covid-19 on our system of caring for the elderly, we must think carefully and clearly about the failings of our current system of caring for those aged members of our society who are not able to fully take care of themselves.
As a first, immediate step, CMS should render skilled nursing facilities with repeated violations ineligible to receive additional hospital-discharged patients or receive any payments under Medicaid until they correct these violations. Medicaid is the primary payer for more than 60% of skilled nursing home residents, and most of these residents are discharged from hospitals. This step alone would go a significant way toward remedying the disaster of skilled nursing facilities and Covid-19.
But we need to go much further.
The for-profit and fragmented nature of the U.S. health care system leaves the poor, and especially the elderly poor, who are dependent on Medicaid, at risk. As in many other policy areas, we discriminate between the elderly eligible for Medicare and/or able to draw on other resources and the elderly poor. In contrast, several other countries, particularly the Nordic countries, have universal, tax-based long-term care systems. In the United States, on the other hand, long-term care insurance is yet another commodity that can, for a price, be purchased in the market.
All of us reading this article should remember the statement by the founder of Genesis that “No one wants to end up in a nursing home.” Taking this seriously means that we need to explore how we can create more options for elderly people who—almost always—want to stay in their own home. In the United States today, the care work that allows many older people to stay outside of a nursing home falls disproportionately on women. This pattern has been exacerbated during the Covid-19 pandemic as more women have left the labor force to care for both the young and the old. Many of the jobs these women have left may not be there on the other side of the pandemic. And the impact will be harshest on low wage and women of color workers.
Even in good times, this care labor is treated as a free good. Many of the long-term care social policies in other rich, industrialized countries illustrate other, more human and humane approaches to caring for the elderly. For example, Denmark, with 20% of the population over 65, (compared to 15.5% in the United States) has a national policy of keeping people in their own homes for as long as possible. This policy is implemented through a visiting nurse system and the use of technologies such as digital medicine boxes. There is much to explore in how to organize this facet of care work in a manner that is humane for clients and caregivers alike. The lethal impact of for-profit skilled nursing facilities, often in the hands of private equity, should impel us to think and act now.
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