State-sponsored racketeering of the poor

(Review of The Poverty Industry, by Daniel Hatcher, June 2016)

Foster children aren’t people. To state governments they are a “revenue generating mechanism”. States actively seek out disabled, removed and orphaned children to apply for and seize their federal benefits without their knowledge, and without giving them any of the money. Daniel Hatcher has discovered a whole industry sector, combining private companies and government that do nothing but generate profits out of the misery of unfortunate children, nursing home patients, and the poor caught in minor crimes. This nightmare of a book is staggeringly well documented with the states’ and the firms’ own proud documents. Everyone in power knows it goes on. And it gets worse by the day with their enthusiastic encouragement.

States are arrogant about keeping their poverty activities private. They claim once a child is in custody, the sovereign right of the state supersedes any court proceedings seeking accountability. That includes due process, denied to victims. They claim seizing a child’s assets helps support children. It is both illegal and unconstitutional, but whatever.

The company MAXIMUS seems to be the biggest private player, with 13,000 employees dedicated to maximizing revenues for Human Services agencies in the US, Canada, Australia, …. And they commit fraud. Soon after admitting to fraudulently filing Medicaid claims, they won a contract to help prevent Medicaid fraud. (This is also typical in Washington, which charges military vendors with billions in fraud, then awards them additional billions in new contracts. And some of those military contractors are now players in the poverty industry.) Private companies have penetrated essentially every corner of the poverty industry. Former governors and congressmen sit on company boards, and these private companies even review the bids to run various facets of government agencies.

-State agencies do not permit foster children to have any assets. Anything of value is seized by the State. This drops them into instant poverty, maximizing the state’s claim on federal funds.
-Federal law says the states have the clear obligation to pay for foster care. Children do not. Yet, after taking children’s assets, Iowa charges children $250 a month for its services.
-State agencies are the “least preferred” payees of Social Security, but the states just apply as the sole possible payee, taking the money without the knowledge of the victim.
-States use money laundering techniques much like check-kiting to steal Medicaid billions every year. So there is no money to treat the poor, while the states reap fortunes.
-The governor of New Hampshire scammed Medicaid payments to be 40% of the state budget, and put the money in the general fund, taking it away from patients, robbing them twice.
-Indiana built a 37 acre, $200 million hospital by actively collecting nursing home patients and keeping federal money meant to care for them.
-Total takings by state agencies from foster children alone is a quarter of a billion dollars a year, with a large cut going to private firms maximizing the take for their client states.
-Private firms batch process social security applications directly to Washington without vetting by their state “overseers”. An expected percentage will always be accepted.
-Putting children on psychotropic drugs without prescriptions allows more children per foster home, reduces costs, and gets the state higher rates for (now) higher needs victims. The same goes for nursing home patients.
-Auditing the private sector auditors, the federal government found that that they cost five times as much as the fraud they uncover.

After the billions in foster care and Medicaid scams, section three of The Poverty Industry details how private companies tear apart families and keep children in poverty by pursuing fathers for repayment of welfare. They lose their jobs, their reputations and their children. Looking at the vendor contracts, courts have to agree the primary focus of the State was revenue, not child wellbeing or family unity, so the contractors win. Having read the horrors of state racketeering and fraud in previous sections, this was practically comic relief.

The book ends with the resurgence of debtor prisons for the poor, fueled by the astonishing list of fees private contractors can legally add to fines. Once in the vortex, the poor are never able to recover. They lose jobs, income, drivers’ licenses, homes, even the right to vote. They are even fined for being fined. Interest is added like on credit cards. The collection agency tacks on its own fee of 25–40% to each new penalty it piles on. A hundred dollar fine that can’t be paid instantly can grow to thousands almost overnight, even with the victim in jail.

You cannot read The Poverty Industry without disgust. It is revolting, abhorrent and criminally insane. Page after page of untrammeled relentless evil greed becomes hard to stomach. That this is allowed to go on is itself a scandal. As you read, you think: this can’t continue for 220 pages. It starts out terrible; how much more can there be? But it does go on and it does get more sickening with every page. The Poverty Industry should be the foundation of congressional hearings, documentary films and investigative reports. It is a damning, overdue condemnation of the states and their private sector contractors. It is cruel and unusual punishment for the most needy, least equipped and least knowledgeable. And the poverty industry just laughs all the way to the bank.

David Wineberg