Financial Capital Drives The Covid-19 Pandemic

Financial capital drives the COVID-19 pandemic

© Meredeth Turshen and Annie Thébaud-Mony

Since the Declaration of Alma Ata, a ground-breaking call for “Health for All by the Year 2000” issued by WHO and UNICEF in 1978, the UK, France and the US have moved in the opposite direction. Rejecting demands for strong public health systems and government-run, universal, comprehensive services based on democratically-managed primary health care, these countries pursued, at differing speeds, first privatization, then commercialization and finally financialization of health services. Financialization leverages private sources of capital and turns exchanges of goods and services into financial products. Embedded in a philosophy of medical neoliberalism, financialization drives the flawed response to the COVID-19 pandemic, deepening income, class, racial and ethnic divides. Though not the only factor, financial capital accelerates this public health crisis in nursing homes, endangering communities at large.

Trends in health service systems: UK, France and US

The UK created the National Health Service (NHS) in 1948 as a publicly funded, publicly delivered and publicly accountable health care system. It has since veered far off course. Margaret Thatcher laid the groundwork for private sector management and marketization of the NHS in the 1980s. Outsourcing was introduced in 1983, requiring health authorities to set up competitive bidding arrangements for their cleaning, catering and laundry services—and some social care services. The NHS and Community Care Act of 1990 expected NHS hospitals and community health services to operate as trusts and function like businesses in a marketplace. Financialization came with the introduction of the Private Finance Initiative (PFI) in 1992. Here’s how it works: a consortium of bankers, builders and service operators raises money on the government’s behalf in return for contracts to design and build hospitals and operate the supporting facilities for 30 years. Each hospital they build is liable for the debt incurred, while the PFI consortia profit. In 2012 the Health and Social Care Act effectively dismantled the NHS and replaced it with a new agency, Public Health England.

The French health care system is a model of compulsory national health insurance that provides health care coverage to all legal residents. It combines public and private health care financing with a public-private mix in the provision of health care services. Since the 1990s, financial actors have transformed the system, becoming the chief providers of funds for debt refinancing, short-term needs and capital expenditures; they also introduced financial language, metrics and priorities to enable shifts in financing. These changes undermined the stability of the system, which faced a debt estimated at $37 billion in 2020. In June 2019, even before the COVID-19 pandemic exposed great service disparities across economic and ethnic lines, strikers at more than 50 hospitals around the country warned that budget cuts were leading the health system to the brink of collapse and putting patients’ lives at risk. The underlying problem is the debt incurred by reliance on private equity financing.

The United States has repeatedly rejected legislation to establish either a national health service or national health insurance, maintaining instead a mix of public and private, for-profit and “nonprofit” insurers and health care providers. The 2010 Affordable Care Act (ACA or Obamacare) legislates a marketized system based on private health insurance subsidized by the government. The ACA health insurance exchanges generated successive waves of mergers in the health insurance market, decreasing competition among insurers and raising health insurance premiums, the opposite of what ACA intended. According to a Rand Corporation study, private insurers paid hospitals an average of 247% more for services than what Medicare would have paid. Despite ACA, 29.2 million people under the age of 65 have no health insurance (10.8 percent of the 2019 population), a figure thought to have increased by over 5 million as people lost jobs that carried health insurance. Mergers across the health care industry followed the repeal in 1999 of the Glass-Steagall Act of 1933. As commercial banks, investment banks, securities firms and insurance companies consolidated, private equity firms assembled medical empires, leading to hospital closures, higher prices and suffering, especially in underserved communities.

COVID-19 deaths in nursing homes

These different health care systems have in common the growing privatization of facilities that care for the aged. Deregulation policies enabled the transformation of a public service for the elderly into a for-profit enterprise. The value of the global long-term care market, which is highly privatized and financialized, was $1 trillion in 2019. The ownership and business models of residential care providers play a central role in the financial instability and mission failures of these homes, where a disproportionate number of COVID-19 deaths have occurred.

As of 26 October 2020, the US leads the world with 8,635,966 confirmed cases of COVID-19 and 225,229 deaths (about 67 deaths per 100,000 population); in France, there were 1,130,143 cases and 34,673 deaths (52 per 100,000); and in the UK, 876,840 cases and 44,986 deaths (68 per 100,000) (Johns Hopkins University data). Although it is difficult to find firm numbers, nursing home residents and staff account for perhaps 50% of coronavirus deaths in each of the three countries. Nursing home financing offers a better analysis of these statistics than does the usual ascription of old age and underlying health conditions. The UK leads in private ownership; in 2019, the private sector provided 84% of care home beds. In the US, 70% of certified nursing facilities were for profit; and in France, 30% of EHPAD (Etablissement d’hébergement pour personnes âgées  dépendantes), the most common type of residential care for senior citizens, belonged to the private sector.

Three factors are determinant in care homes’ high numbers of COVID-19 deaths: for-profit operation, government failure to enforce regulations, and poor management. Linkages between ownership and quality are well documented. To keep costs low and profits high, for-profit homes understaff their facilities, underpay their workers, and provide lower-quality care. Even during the pandemic, regulators have not enforced infection control standards, and managers do not provide adequate training or protection for staff and patients. These determinants of morbidity and mortality are salient in care homes in the three countries.

For-profit operation: From 1990, the UK required local councils to spend 85% of their funding on purchasing care services from private providers. At the same time, the government targeted the care sector for austerity policies, leaving providers without their main source of funding to face financial collapse. Private equity stepped in, and care homes began to borrow heavily, employ complicated corporate structures, and use cost-cutting measures such as tax avoidance. This business model, which insulates the equity firms from responsibility for debt repayment, was initially successful, but it left the homes unstable and liable to financial turmoil. When a company fails, it leaves people at risk. In 2011 Southern Cross, a large national care home provider that had 9% of the market nationally and 30% of all placements within the northeast, went under, leaving underfunded local councils to accommodate 37,000 people.

Failure of government regulation: The US government has oversight over most nursing homes–about 2.5 million residents–because Medicaid funds 60% of long-term care. When President Trump took office in January 2017, work stopped on new federal regulations that would have forced the health care industry to prepare for an airborne infectious disease pandemic such as COVID-19. To date no specific federal regulations protect health care workers. The nursing home industry is a target of the administration’s aggressive deregulation agenda, and nursing homes have seen reduced regulation, less frequent inspection, lower fines for violations, and decreased regulatory spending. Simultaneously, the nursing home industry deploys a battery of lobbyists, many with close ties to the administration, in its pursuit of tax breaks, federal cash infusions, and protection against lawsuits.

Only in May 2020 did the federal government start tracking COVID-19 infections and deaths in nursing homes. Each of the five biggest for-profit companies—Genesis HealthCare, Life Care Centers of America, Ensign Group, SavaSeniorCare and Consulate Health Care—which operate more than 850 facilities in 40 states, has seen coronavirus outbreaks at multiple facilities. Genesis HealthCare, the nation’s largest nursing home operator, has reported more than 1,500 deaths across 187 facilities. In May 2020, Genesis received $300 million in grants and loans from the government. Staffing levels are the most critical factor in providing quality care to residents, and workers complain that Genesis provides grossly substandard nursing care. Private equity nursing homes have a disproportionate share of COVID-19 cases and deaths among staff.

Poor management: In France, “Government carelessness in managing the health crisis has taken a tragic turn in these establishments,” writes Philippe Baqué of the coronavirus deaths in EHPADs. Nursing homes have long faced a lack of resources; in the current crisis, the shortage of tests and personal protective equipment and the denial of patient access to specialized treatment raised illness and death rates. The French government underestimated the severity of the epidemic and was late in taking into account the rapid spread of the virus in care homes.

The largest private groups managing EHPADs in France are Korian (25,000 beds), Orpea (20,000 beds) and DomusVi (17,000 beds). Korian is the leader and among the most profitable: in the first half of 2020, its revenue rose 6.2% ($2.2 million), its real estate portfolio is valued over $2.7 billion. Reports of serious deficiencies in Korian nursing homes were all over the French news at the height of the pandemic in April. Korian refused to recognize the existence of COVID-19 cases in Clamart. In a nursing home managed by Korian in Mougins, there were 37 deaths. At a Korian home in Mée-sur-Seine at least 20 residents died. In Korian’s EHPAD in Marseilles, respiratory infections began circulating in early March, but only staff were tested; management refused all questions from family about workers testing positive and cases and deaths among residents. On April 26, the Korian CEO announced 606 deaths in EHPADs managed by Korian. On May 19, a joint criminal investigation was opened following complaints from families concerning several nursing homes in Hauts-de-Seine.

The US, France and UK are among the governments that choose to protect the financial interests of conglomerates over the lives of elderly care homes residents and the nursing assistants, as well as support staff like cleaners, garbage collectors — so-called essential workers who have to leave their homes and take mass transport to their jobs every day, leading to an inequitably experienced health disaster that could have been avoided.

As the global death total tops 1.1 million, the growing COVID-19 pandemic is out of control, and many unknowns remain about its evolution. We need to understand the role of private equity in this crisis. Governments disguise their failure to organize coherent care, and private health care providers divert our attention to the economic fallout of lockdowns. Health workers have taken their demands to the streets; trade unionists in the US, UK and France recognize their dual roles as essential workers and citizens, and, concerned about the choices being made in the organization of work and working conditions, are demanding relief.

The real needs are for massive government investment in expansion of the public health sector, health worker training and recruitment, an overhaul of working conditions, and the creation of a health democracy to oppose an inhuman bureaucracy. Health professionals must build a common front with users of health services to demand that the health and human needs of patients, as well as the working and living conditions of caregivers, be placed at the heart of a reorganized public health system. Prevention cannot depend solely on a vaccine; it also requires reducing social inequities in health and health care. These policies should be national and international social and economic priorities in accordance with the principles of the Alma Ata Declaration.

Meredeth Turshen is Professor Emerita, E.J. Bloustein School of Planning & Public Policy, Rutgers University,

Annie Thébaud-Mony is Emerita director of research at the National Institute of Health and Medical Research of France (INSERM), specialist in occupational health (,