The Public Good Newsfeed – August 4th, 2016: Medicare and Civil Rights, Justice Brandeis’ Legacy, and more…

placeholderA selection of recent news stories with an ILSR insight into “The Public Good.”

Stories in this Newsfeed:

Learning from Finland | Hospital outsourcing Increases Hospital Infections | Privatizing Prisons Increases Recidivism

Wage Theft and Income Inequality | The Shameful Story of Health Insurance Cooperatives | Other People’s Money

Medicare and Civil Rights | A Pioneering Examination of Privatization


2Learning from Finland

In the 1980s the international ranking of Finland’s educational system was similar to that of the United States: mediocre.  Both U.S. and Finnish governments responded by revamping their school systems.  The United States emphasized competition among schools and teachers, the creation of competing private charter schools and standardized tests that became a key in evaluating teachers and schools.  We closed poorly performing schools, undermined teacher unions and reduced the autonomy of school districts and teacher security.

Finland moved in the opposite direction. It emphasized cooperation among schools and teachers, gave more autonomy to schools and teachers, eliminated standardized tests and encouraged unions.  If a school or teacher is performing poorly, more resources are invested, not less.

In Finland the teaching profession is highly respected. A Finnish teacher must have a Masters degree and undergo rigorous teacher training. There is little turnover among teachers.  School administrators must be professional educators.

Finland also tries to ensure that the child who comes to school is well-nourished and lives in a stable and loving environment.  All parents have parental leave on full salary.  There is universal health care.  Finland’s child poverty rate is a quarter that of the United States.

By the early 2000s Finnish schools had advanced to the top ranking on international performance tests.  U.S. schools remained average.

Pasi Sahlberg is one of Finland’s most well-known educators.  To learn more about the history and experience, read the new edition of his widely-read book Finnish Lessons 2.0.

A good introduction to Sahlberg’s perspective on teachers can be found here, and here.


3Hospital Outsourcing Increases Hospital Infections

In the last 20 years hospitals in the United States, Canada and Britain have lowered costs by outsourcing many non-medical functions, including cleaning and food preparation. During this same period the risk of infection has soared. Indeed, according to the U.S. Centers for Disease Control (CDC), healthcare-associated infections are one of the top ten causes of American deaths.

Empirical evidence connects these two trends.

In 2009 Canada’s Centre for Disease Control (CDC) investigated the sources of persistent and lethal infection out-breaks at the Nanaimo Regional General Hospital in British Columbia.  The CDC found, “There were insufficient numbers of cleaning staff to meet the basic daily needs of the facility and they were not adequately trained in appropriate cleaning procedures for a health care facility.”

In the United States a research team at Cornell University examined rates of a particularly nasty hospital-acquired infection, Clostridium difficile, in general acute-care hospitals in California. They found the number of cases “increases with the amount of outsourcing.” Hospitals that outsource half their cleaning staff experiencing double the number of cases of those that have all such employees on their own payroll.

The reasons for the connection are relatively straightforward.  In 2014 Jane Lethbridge Director of the Public Services International Research Unit explained what 20 years of contracting out by Britain’s National Health Service has wrought, “Contracting out pushes wages down, creates a high turnover of staff and problems with general recruitment. Other processes that result from outsourcing – particularly the pressure on time and the focus on specific tasks – also lead to a very fragmented way of delivering the cleaning service. Before cleaning services were outsourced, the cleaners would have taken more time, talked to nurses, chatted to patients, and there would have been a much greater degree of teamwork in the ward and hospital.”

In his 2013 book, Cleaning Up: How Hospital Outsourcing Is Hurting Workers and Endangering Patients Dan Zuberi finds that cleaning and cafeteria support staff are undertrained, overworked and underpaid. In addition outsourced support staff managers work remotely, so they are unable to communicate in person with hospital workers. Any problems that arise must go through the third-party staffing company, instead of being addressed directly by hospital staff.

In 2008, after series of infection outbreaks, Scotland banned the outsourcing of hospital housekeeping and brought cleaning back in house. Infection cases dropped dramatically.  In 2012, Health Secretary Nicola Sturgeon proudly noted,  “ the overall level of infections has reduced by one third since 2006 and cases of some types of infection which cause particular concern, such as C.diff and MRSA blood stream infections, have fallen by over 75%.”


4Privatizing Prisons Increases Recidivism

Private prisons now house about 8.4 percent of U.S. prisoners. In 2014, New Mexico and Montana contracted with private prison companies to incarcerate 44 percent and 39 percent of the states’ prisoners, respectively. In the same year, the Federal Bureau of Prisons (BOP) contracted with private prison companies to incarcerate 19 percent of all federal prisoners.

Privatizing prisons neither helps prisoners nor society.  As a new report by In the Public Interest, How Private Prisons Increase Recidivism explains why,  “… private prison companies seek to create an environment that maximizes their own revenues and profits.”  Contracts with private prisons perversely create a disincentive for states to reduce incarceration.  “To reduce normal business risks around fluctuating prison populations, private prison companies add occupancy guarantee clauses to many contracts, which compel states and local governments to pay the companies for unused beds if the population drops below a certain threshold, typically around 90 percent of a facility’s capacity.”

The report offers abundant data that private prisons also increase recidivism.  A study of 3,532 Minnesota prisoners released between 2007 and 2009 found that incarcerating a person in a private prison increased the chances of the person being rearrested by 13 percent, and increased the chances of the person being re-convicted by 22 percent.

A study of 22,000 Oklahoma prisoners released between 1997 and 2001 found that incarcerating people in private prisons increased the likelihood of recidivism by up to 17 percent.

Read the report here.


1Wage Theft and Income Inequality

After World War II workers’ wages rose in lockstep with increases in worker productivity, resulting in broadly shared prosperity and relative income equality.  After 1975 the relationship diverged.  The vast proportion of the financial benefits from improved productivity has gone to shareholders and top executives, resulting in unprecedented income inequality and persistently stagnating wages.

Productivity and Worker's Compensation
Source: Economic Policy Institute
Income Gains
Source: Center on Budget and Policy Priorities


5The Shameful Story of Health Insurance Cooperatives

In a recent Journal of American Medicine article President Obama proposed creating a “public option” for those parts of the nation served by only 2 or 3 health insurance companies.  As most of us know, the public option, which originally meant a government-owned option, was initially part of the American Care Act but was quickly abandoned under pressure from private insurance companies.  Instead the ACA offered an alternative: a network of new health insurance cooperatives.

Twenty-three coops ultimately were financed by the ACA.  As of July 2016, 13 had gone under.

Adam Cancryn, writing in SNL, tells the dispiriting story. Senator Kent Conrad (D -ND), whose state had witnessed many successful co-ops in various industries, designed the initial plan.  Conrad’s plan called for $10 billion of government grants distributed with few restrictions among nonprofit, member-owned health insurance startups.   Competing against big for-profit insurers is difficult, Conrad reasoned.  Co-ops needed as much financing and freedom of action as possible. As Cancryn observes, “Startups in any industry can take years to reach profitability; doing so in the health insurance arena can be near impossible without heavy financial backing. Oscar Insurance Corp., the high-profile startup backed by Google, has reportedly raised more than $350 million since its founding in 2012. It has yet to turn a profit.”

Private insurance company opposition resulted in a significant cut in the program’s funding in the final bill to $6 billion and transformed the no-strings-attached grants into loans.  Adding insult to injury, Congress also banned co-ops from using their federal money for marketing! They would have to compete against the Aetnas and Anthems with minimal funds and almost no way to promote themselves. In 2011 Congress slashed the program’s funding to $3.4 billion and in 2013 to just $2.4 billion.

One of the law’s positive provisions was the creation of a fund to support insurers during the unpredictable first years of the new health exchanges. If a company enrolled riskier customers than the average, which co-ops tended to do, the government would reimburse them for their losses.  The exchange population turned out to be far more expensive than expected.   Co-ops desperately needed reimbursements.  In 2015, at the last minute, the federal government announced it would pay them just 12.6 percent of what they were owed.  The Kentucky Health Cooperative, for example, received $9.7 million of the $77 million expected.

Read Cancryn’s detailed report here.


6Other People’s Money

After Woodrow Wilson’s election in 1912, Louis Brandeis (who was responsible for much of Wilson’s New Freedom program) wrote a series of articles for Harper’s Weekly.  In 1914, the articles were collected in book form and published under the title Other People’s Money–and How the Bankers Use It.

Brandeis’ central thesis was that the large banking houses were colluding with businessmen to create monopolies in America’s major industries.  With a tsunami of data, Brandeis argued that trusts not only stifled competition, but operated inefficiently and corrupted the political process.

Wilson relied on Brandeis to develop rules and institutions that could restrain and curtail the power of large corporations and their incestuous partners, giant banks.  The result was the Federal Reserve Act, the Clayton Antitrust Act, and the Federal Trade Commission. As Melvin Urosky, author of one of the best biographies of Louis Brandeis wrote in the New York Times in 2009, “These measures allowed Congress to take away banks’ control over currency, banned interlocking directorates (in which banker representatives controlled other corporations), and established rules of fair competition.”

In his preface to the 1914 edition of Other People’s Money, Norman Hapgood, a central figure in the political and social muckraking of the Progressive Era prophesied that victory would not come easily. He predicted “many, many years during which active citizens will be struggling for those principles which are here so clearly, so eloquently set forth…”

The 1920s proved him correct, as banks found it relatively easy to get around the new rules, especially with Republican administrations that did not seem to believe in market regulation.”  Urofsky noted that Other People’s Money was reissued in 1933 in an inexpensive edition.  Several of the key laws enacted during the New Deal were informed and inspired by Brandeis’ thinking, particularly the Glass-Steagall Act that separated commercial banking from investment banking, and the Securities Exchange Acts, that established the Securities and Exchange Commission to regulate the stock markets.

As Hapgood might have forecast, the 1990s and early 2000s were an eerie replay of the 1920s as Democratic and Republican administrations dismantled corporate and banking restraints created during the New Deal.  Law Professor Jonathan Rosen’s excellent new book argues that Brandeis himself knew that regulations alone could not solve the problem of concentrated corporate power.   For that we needed structural reform that would break up large corporations to reduce their political and economic power and enable genuine competition and innovation.

Many of the details in Other People’s Money may be dated, but its central ideas remain relevant. It is still in print more than 100 years later, but is also widely and freely available on the web.


7Medicare and Civil Rights

July 1, 2016 marked the 50th anniversary of Medicare. In the current issue of Poverty and Race, David Barton Smith, author of The Power to Heal: Civil Rights, Medicare and the Struggle to Transform America’s Health System explains that it also represented one of the greatest victories of the civil rights movement.  “Almost overnight the nation’s hospitals were transformed from our most racially and economically segregated private institutions into our most integrated ones.”

A 1964 court decision that redefined private and non profit health institutions as public entities with same obligation for racial integration as those imposed by the Supreme Court in 1954 on schools enable the transformation

Title VI in Medicare prohibited discrimination in institutions receiving its money, but Smith notes, “No one anticipated that its vague prohibition of discrimination, dependent on local complaints from vulnerable patients and their families, unsupported by any funding to staff a response, engage in enforcement, levy penalties or even to collect information from hospitals would do much. Indeed, the issue of the Title VI requirement never came up in the congressional discussions around Medicare’s passage. “

“In this rare and perhaps unique case, well-hidden below the surface, an amorphous coalition of civil rights advocates in the HEW bureaucracy and grass roots movement activists in local communities seized control of the Title VI Medicare certification process for hospitals,” Smith observes. “That seizure caught hospitals, legislators, and many top government officials by surprise.”

Hundreds of volunteers and federal employees feverishly worked to complete the certification of hospitals before Medicare went into operation. Southern hospitals defended their segregated hospitals as offering blacks and whites a “choice. “Freedom of choice” was the last defense offered by hospitals that resisted and wanted to remain segregated,” writes Smith. “Hospitals were integrated not by changing people’s attitudes or feelings but by eliminating choices. One door replaced the “colored” and “white” entrances and one waiting room and cafeteria replaced similarly labeled facilities. The message of the Medicare inspectors to the hospitals and their patients was, you don’t have to participate in the Medicare program or receive care in a hospital that Medicare pays for. However, if you choose to do so, everyone has to be treated the same. Universal entitlements are not free market goods.”


8A Pioneering Examination of Privatization

Almost 40 years ago Pulitzer Prize Winning Princeton Professor Paul Starr wrote a brilliant, deeply probing and still enormously useful essay on the then embryonic privatization movement.

Before most others, Starr grasped the historic importance of that movement, noting “it is a mistake to define and dismiss the movement as simply a replay of traditional opposition to state intervention and expenditure. The current wave of privatization initiatives opens a new chapter in the conflict over the public-private balance.”

A few paragraphs from Starr’s 14,000-word essay, The Meaning of Privatization, may convey a flavor of his perspective and approach.  I hope they also whet your appetite for more.

“The public sphere may be conceived of as the open and visible–the sphere of public life, public theater, the public marketplace, public sociability. The public sphere also may be conceived of as that which applies to the whole people or, as we say, the general public or the public at large, in which case the public may consist of an aggregate or a mass who have no direct contact or social relation–the very opposite of a sphere of sociability. Or the public sphere may be conceived specifically as the domain circumscribed by the state, although exactly where to draw the state’s boundaries may be difficult indeed…”

“If, to many Americans, private means better, it is partly because of long-existing restrictions on the scope and quality of public provision. We commonly limit public services to a functional minimum and thereby guarantee that people will consider the private alternative a step up. This niggardliness shows itself in ways large and small. In the 1960s, one congressman who was indignant over the costs of a public housing program succeeded in persuading his colleagues specifically to forbid flower boxes as an unnecessary extravagance. The restricted quality of public provision is a self-reinforcing feature. Because the poor are the principal beneficiaries of many programs, the middle-class public opposes expenditures to produce as high a quality of service as they must pay for privately; and because the quality is held down, the poor as well as the middle class develop a contempt for the public sector and an eagerness to escape it. The movement toward privatization reflects and promotes this contempt, and therein lies part of its political danger…”

“Some individual proposals for privatization have considerable merit, but the overall message is clearly to call into doubt the nation’s capacity and need for collective provision. The possibilities for change being discussed are not symmetrical. Privatization advocates raise questions exclusively about the adequacy of the public sector; the comparable questions about the private sector do not receive the same attention. Even though privatization is logically distinct from questions of distributive justice, the privatization debate puts the advocates of more generous public programs entirely on the defensive. This one-sidedness is why I am opposed to privatization. I am opposed to the political consequences that are likely to flow from pursuing privatization as a solution to the difficulties of administering democratic government…”

“Ultimately I fear that one form of privatization does entail another–that as we move public provision into the private sector, we move from the realm of the open and visible into a domain that is more closed to scrutiny and access. And in the process, whether or not intending to change, we are likely to narrow our involvements, interests, and vision of a good society and a good life.”

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David Morris

David Morris is co-founder of the Institute for Local Self-Reliance and currently ILSR's distinguished fellow. His five non-fiction books range from an analysis of Chilean development to the future of electric power to the transformation of cities and neighborhoods.  For 14 years he was a regular columnist for the Saint Paul Pioneer Press. His essays on public policy have appeared in the New York TimesWall Street Journal, Washington PostSalonAlternetCommon Dreams, and the Huffington Post.