Medicaid Moguls Show Privitization Isn't Everything

By Gabe Pressman
|  Tuesday, Aug 2, 2011  |  Updated 7:45 PM EDT
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Medicaid Moguls Show Privitization Isn't Everything

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There was a time when the watchword for fiscal conservatives was privatize. It would reduce fraud and abuse and government wastefulness.

But, as a major story in The New York Times reveals, privatization can be expensive and wasteful too. So maybe it’s not the answer to a taxpayer’s dream.

Medicaid, according to the Time account, "created quite a nice life for the Levy brothers from Flatbush, Brooklyn.

They ran a Medicaid-financed non-profit organization serving the developmentally disabled. The Levy brothers, Philip and Joel, took down annual salaries of about $1 million a year. They had luxury cars financed with taxpayer money. They helped a daughter buy a co-op apartment.

They passed on college tuition bills for their children to their organization, the Young Adult Institute Network. It’s a group that has collected more than 1 billion dollars from Medicaid in the last decade and run homes with a total of 700 beds.

The organization, the Times said, had some admirers. It hired people devoted to the care of the children entrusted to this group. But, nevertheless there was little or no accountability. One former high official in the Office of Mental Retardation and Developmental Disabilities referred to the people who draw big salaries in non-profit agencies as “Medicaid moguls.” The Levy brothers both retired in June.

If there is a villain in this story, it may be privatization itself. That’s the way two close observers of the government scene view it. Susan Lerner of Common Cause told me: “It’s a case of over-privatization and lack of oversight by the government over the operations of these agencies that live on government money.

“This story is a perfect example of the spreading practice of privatizing and how unfair this is to the public that has to pay for it.  It’s hard to believe but there is a movement to privatize prisons.  The people of New York and America are being deluded into thinking that government is bad and private ownership and control good.”      

I asked Hank Sheinkopf, a long-time adviser to government and political leaders: what’s your reaction to this story of Medicaid abuse? He said: “This reminds me of the police chief in the movie ‘Casablanca.’ He was shocked that there was gambling going on.

 “By doling out government money, we’ve created a class of entrepreneurs who profit from an operation meant to help the poor. These guys are not doing anything illegal. They’re just getting their hands on some government money.”

Sometimes, with the best intentions, the goal becomes distorted. If the aim is to curb abuse in the allocation of government money for health care for the poor, we need greater vigilance in both areas: government and private industry.

It’s infuriating to think there are people profiteering on medical care for the poor.  It’s disheartening that the government hasn’t been able to nail all the profiteers.

There was an old song about money being the root of all evil. That needn’t be. When it comes to caring for the sick or poor, we need a simple approach. Whether the private sector or government, we need to be guided by one principle: to do good.

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