Last month, the Louisiana
Health Cooperative announced it would cease operations at the end of the year.
It is one of 23 state-based entities created under the auspices of the Patient
Protection and Affordable Care Act (“Obamacare”) by borrowing taxpayer dollars
to provide health insurance now required by law. Only one is (barely) making
money; most are losing considerable sums and the biggest loser already has
closed, with many more expected to join it and Louisiana’s in the future.
Of course, these projects were
doomed from the start, undone by the same flawed ideology behind Obamacare. Recognize
that Obamacare is at heart a wealth redistribution scheme, designed to provide
low- or no-cost health insurance to a segment of the population while the vast
majority pay for the subsidization through higher taxes and also suffer higher
insurance rates and deductibles. It secondarily is an enrichment scheme for
health insurers and providers, by artificially creating business for these.
Only incidentally does it affect overall health outcomes – and more
likely in a negative rather than positive way because most insurance
offered under Obamacare has been from Medicaid, not
the commercial market.
As Obamacare continues to push up
premiums beyond what would be expected from normal medical inflation due to a
supply squeeze on providers and from regulatory costs, it has given
larger insurers an advantage in cost control – putting at disadvantage
precisely organizations like the co-ops while industry consolidation puts more
upward pressure on premiums and deductibles. But a hallmark of Obamacare is to
ignore reality to favor ideology, and its wish that creating these co-ops as
mechanisms to increase competition to hold down prices remains an article of
unfulfilled faith.
So the $56 million taxpayers tossed
in for the Louisiana version, and likely the billions spent on other states’,
never may be recovered. Yet a handful made out in the state: a few individuals
connected to the organization who served as its officers also simultaneously having
their employers awarded generous contracts to perform certain services for the
entity. After one individual affiliated with a firm awarded a consultant contract
served as its chief executive officer (who some years before had been forced to
pay a settlement for insider stock trading), his successor was state Rep. Greg Cromer, who
drew a 2013 and 2014 salary of over $100,000. All in all, at least $3.6 million
seems to have went to such individuals who had an existing fiduciary duty with or
policy-making position over the organization.
However, that is not a violation of
state law, where only disclosure is required. Board members did disclose their
consultant relationships, and Cromer did report his position and $100,000+
salary in his personal
financial disclosure forms mandated for legislators. (Current Louisiana
State University Board of Supervisors member, former state legislator, and New
Orleans city official at the time of her service Ann Duplessis also was a
director, but while drawing no direct compensation, she illegally
failed to report her relationship to the group.) Still, when taxpayer
dollars are involved in their revenues regardless whether federal, state, or
local in origin, caution dictates that officers and directors of these have no
relationship with contracting parties or government.
That’s because “non-profits” are
that in spirit only. For one thing, they are allowed to have a “profit” as long
as the excess of revenues over expenditures goes to certain uses. For another,
no set restrictions exist on making expenditures, only that the generally and
reasonably serve the purpose of the organization. So, for example, employees
can enjoy generous salaries and benefits that translate into high
administrative expenses, including contractual arrangements, without repercussions.
The Louisiana Health Cooperative
shows just how living off the taxpayer may provide insufficient incentives to
hold down costs. Its 2013
Internal Revenue Service Form 990 (the latest available; apparently
contravening the law it did not meet its May 15 deadline to submit its year
2014 form) shows its expenses as almost 15 times revenues, with most of that expense
going to contracts, about half of that amount connected to a board member
and/or officer.
This is not to say dishonesty occurred
in its dealing with the loan proceeds. It is to say that the decision-making
process using taxpayer dollars may have been warped in favor of certain, even
qualified, interests over others because of these affiliations, and that a lack
of incentives for prudence in spending may have affected the patterns of the
organization’s expenditures, with these leading to its demise and waste of
taxpayer money. In fact, the very presence of such funding with little connection to the principals' own fortunes may have encouraged the starting up such an enterprise of such dubious chances of success.
In the interest of fairness and
honesty and to compel best fiduciary performance, Louisiana law should include
this stipulation regarding consultancy contracts for nonprofits, including a
prohibition on former officeholders who held policy control over an
organization spanning two years after their service in these offices from
participation. It’s a reasonable restriction to increase confidence that tax
dollars, regardless of source and form, get spent wisely.
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