The Poverty Industry

The Exploitation of America's Most Vulnerable Citizens

Daniel L. Hatcher

• Publisher: NYU Press
• Year: 2016
• ISBN:
  9781479863112
• Topic: Politics & International Relations
• Subtopic: Social Policy
• Index: Politics & International Relations

Government aid doesn’t always go where it’s supposed to. Foster care agencies team up with companies to take disability and survivor benefits from abused and neglected children. States and their revenue consultants use illusory schemes to siphon Medicaid funds intended for children and the poor into general state coffers. Child support payments for foster children and families on public assistance are converted into government revenue. And the poverty industry keeps expanding, leaving us with nursing homes and juvenile detention centers that sedate residents to reduce costs and maximize profit, local governments buying nursing homes to take the facilities’ federal aid while the elderly languish with poor care, and counties hiring companies to mine the poor for additional funds in modern day debtor’s prisons. In The Poverty Industry, Daniel L. Hatcher shows us how state governments and their private industry partners are profiting from the social safety net, turning America’s most vulnerable populations into sources of revenue. The poverty industry is stealing billions in federal aid and other funds from impoverished families, abused and neglected children, and the disabled and elderly poor. As policy experts across the political spectrum debate how to best structure government assistance programs, a massive siphoning of the safety net is occurring behind the scenes.In the face of these abuses of power, Hatcher offers a road map for reforms to realign the practices of human service agencies with their intended purpose, to prevent the misuse of public taxpayer dollars, and to ensure that government aid truly gets to those in need.

Part I

How the Poverty Industry Is Siphoning Aid from the Vulnerable

1

Agency Purpose versus Agency Self-Interest

Conflict in Serving the Vulnerable

“They’re my advocates? No they’re not. To me, they’re against me.”

—Quote from teenage foster child about a foster care agency taking his Social Security survivor benefits1

Alex and Ryan share unfortunate histories in the Maryland foster care system.2 Both boys, now young men, were shuffled between multiple placements and they struggled with the transition to adulthood. Both Alex and Ryan suffered through their parents’ deaths while in state custody, and then had the only remaining connection to their deceased parents—their Social Security survivor benefits—taken by the foster care agency without their knowledge.

As described in the introduction, Alex was twelve when he entered foster care following his mother’s death. During his six years in foster care, Alex was moved several times between temporary placements. Soon after losing his mother, Alex’s father also died. Unknown to Alex, he was then eligible to receive Social Security survivor benefits. The Baltimore County Department of Social Services (BCDSS) was charged with protecting Alex’s interests, but the agency sidestepped that obligation when it saw the potential money it could obtain from the boy. Without telling Alex, the agency applied for the survivor benefits on Alex’s behalf, applied to become his representative payee to gain access to the funds, and then took every payment Alex received.

If the agency applied fiduciary discretion to use Alex’s money in his best interests, the payments could have been used to help him prepare for the difficult transition to independence: saved for college or to pay for vocational training; used to purchase specialized tools or equipment for Alex’s future chosen profession; saved to help pay future rent or to purchase a car—now virtually a necessity for independent living; or simply conserved in a savings account for the many unforeseen expenses that Alex would encounter. However, the agency ignored Alex’s needs and simply took the boy’s money.

Ryan’s experiences were very similar to those of Alex. Ryan did not understand how the Baltimore City foster care agency could take his survivor benefits that were left to him by his deceased father. He expressed frustration, but also determination: “You know, the thing is, they are survivor benefits. I am a survivor.”3 And he explained his feelings in more detail:

When I first wanted to move where I am now, they didn’t want to do it, meaning they were fighting me. They thought I was better where I was in a group home, than be in a foster home where I was in a much better school, and getting the help I needed. For now, they’re supposed to be here for me, but everything that benefits me they’re fighting. My parents have passed away, you know. I loved my parents to death. I just lost my big brother. If my parents pass away, they would want me to have their work benefits, and DSS, they don’t need it . . . You know, the thing is, they are survivor benefits. I am a survivor . . . Everyone’s passed away, besides my Aunt. I wish that I’d be able to get this, so I can move on with my life, and stop having to fight for everything that benefits me. That’s what they (BCDSS) have been doing. They’re my advocates? No they’re not. To me, they’re against me.4

Both Alex and Ryan filed court actions in an effort to stop the agencies from taking their money. The boys’ cases are discussed in more detail in chapter 3, and illustrate the lengths to which a child welfare agency will go to convert a child’s funds into agency revenue. The details provide a stark example of a human service agency turning its power against the interests of its child beneficiaries by ignoring its legal and ethical obligations.

The experiences of Alex and Ryan are unfortunately emblematic of tens of thousands of foster children across the country who are being used in the same revenue strategy. And their experiences are also emblematic of the numerous other methods developed by states and their agencies, with the assistance of private contractors, to convert funds intended to help struggling families and individuals into state revenue and private profit. The boys’ experiences thus provide an excellent backdrop to consider the conflict between the intended benign purpose and fiscal self-interests of agencies created to serve the vulnerable.

The Vulnerable

Impoverished and Fragile Families

By 2009, after the financial crisis hit, circumstances facing vulnerable populations were already looking grim. Cities participating in the 2009 U.S. Conference of Mayors Hunger and Homelessness Survey reported a 26 percent average increase in demand for hunger assistance, the largest increase in almost 20 years—including an increase in hunger assistance requests from middle-class families who used to donate food. More than three out of every four cities reported an increase in family homelessness.5

By 2012, circumstances for low-income families were worsening. More than 70 percent of cities reported increases in family homelessness, and almost two-thirds of cities were turning away homeless families with children from emergency shelters due to lack of resources.6 By 2013, family homelessness again increased, emergency food assistance requests continued to increase, and the percentage of the total food assistance requests coming from families increased to almost 60 percent.7

According to 2012 census data, 9.5 million families in the U.S. were living below the poverty line, up from 7.7 million families in 2005. The families living in poverty included 33.1 million individuals (adults and children) within those families—so an average family size of about 3.5 individuals. Almost one out of 4 children under six years of age were living in families under the poverty threshold.

And the numbers are likely underestimated because the official poverty line is recognized as being too low for what families actually need. The poverty line is based on how much money families spent on food in the 1950s. Mollie Orshansky was working for the Social Security Administration and she was assigned to report on child poverty. There was no measure at the time, so she created her own by using a Department of Agriculture report from 1955 that found families spent about a third of their income on food. Her approach was to determine the amount a poor household spent on food, and multiply it by three. To determine the amount, she used the cheapest estimated food plan developed by the Department of Agriculture only for “temporary or emergency use”:

Orshansky based her poverty thresholds on the economy food plan—the cheapest of four food plans developed by the Department of Agriculture. The actual combinations of foods in the food plans, devised by Agriculture Department dietitians using complex procedures, constituted nutritionally adequate diets; the Agriculture Department described the economy food plan as being “designed for temporary or emergency use when funds are low.”8

Thus, because the official poverty line is too low, families and children who are a little above the poverty line still face incredible difficulties. Families up to 150 percent of the poverty line, if not higher, are often classified as low-income. In 2012, 35 percent of children in the United States lived below 150 percent of the poverty line.

Abused and Neglected Children

Studies show a strong link between poverty and foster care. For example, the Third National Incidence Study of Child Abuse and Neglect found that children in families with annual incomes below $15,000 were much more likely to experience maltreatment than those in families making $30,000 or more—not just twice as much, but 22 times more likely to experience maltreatment. The most common form of maltreatment is neglect, with almost four-fifths (78.3 percent) of maltreated children experiencing neglect rather than some form of physical or mental abuse according to a 2012 federal report. Children in poor families are forty-four times as likely to experience some form of neglect.

Further, the parents of abused and neglected children often face numerous difficulties in addition to poverty, including homelessness, domestic violence, poor education, substance abuse, mental illness, and lack of healthcare. State practices often treat such circumstances of poverty as grounds for child removal.

As the parents of foster children struggle, the children face even more difficulties both in foster care and as they try to transition to independence when aging out of the system. Children in the child welfare system can encounter insufficient services, underfunded agencies, overworked caseworkers, chaotic juvenile courts, poorly run group homes, and inadequately monitored placements. And children removed from their families due to abuse or neglect unfortunately sometimes encounter abuse or neglect again after entering the foster care system.

Then, as the children age out of care, the difficulties continue. The statistics facing former foster children are daunting. More than half of the children experience unemployment, almost three-fifths make less than $10,000 in annual income, 43 percent lack health insurance, 25 percent experience homelessness, 25 percent don’t graduate from high school, just 2 percent obtain a bachelor’s degree, and almost 70 percent of young women receive food stamps.9 And former foster boys in particular encounter barriers to employment and difficulties tied to involvement with the criminal justice system. A 2010 study found that by age 24, nearly 60 percent of former foster males had been convicted of a crime, and by age 26 almost 75 percent of the young men had been incarcerated and 82 percent had been arrested.10

The Disabled Poor

About 28 percent of disabled individuals are living below the poverty line according to 2010 census data. Further, while people’s circumstances can change and they can fluctuate in and out of poverty, disabled individuals who are poor are more likely to stay persistently poor.

Of those who are disabled, the mentally ill face a particularly difficult connection with poverty. If you suffer from mental illness, you are more likely to be poor. And if you are poor, you are more likely to suffer from mental illness. The causal connection travels both ways and can form a vicious cycle. For example, cities in the 2012 U.S. Conference of Mayors Hunger and Homelessness Survey reported that an average of 30 percent of the homeless were severely mentally ill, and almost 20 percent of the homeless were physically disabled. Also, a strong connection exists between mental illness and substance abuse. According to the Journal of the American Medical Association, about half of people with mental illness also struggle with addiction to alcohol or drugs. According to the Bureau of Justice Statistics, more than half of all prison and jail inmates struggle with mental health issues.11 And it’s worse for women, with almost three-quarters of women in state prisons suffering from mental health problems.

However, despite the enormous need, state funding for the mentally ill has been slashed. After the financial crisis of 2008, when economic struggles for individuals and families intensified, mental health services declined. A report by the National Alliance on Mental Illness found that states cut in excess of $1.6 billion in funds for mental health services from FY2009 to FY2012.12

The Elderly Poor

Under a new poverty measure developed by the Census Bureau that takes into account out-of-pocket medical care costs, more than 15 percent of the 41 million elderly in the United States are living in poverty. Almost half of the elderly are struggling to live on less than 200 percent of the poverty level.13 Deep or extreme poverty—defined as income of less than $5,700 per year—has also increased among the elderly. According to a report by the National Women’s Law Center, deep poverty increased by 23 percent among elderly men and 18 percent for elderly women from 2011 to 2012.14

Further, the conditions of housing and care for low-income aging adults can often be described as dismal. Poor quality care and low staffing levels often plague nursing facilities for older Americans. Nursing homes use psychotropic drugs for off-label uses at alarming rates, often to sedate the elderly as a way to reduce staffing needs and increase profits. And needed care is often lacking. For example, according to the New York Times, a Wisconsin study found that dental care for nursing home residents was so bad that almost a third of the residents had teeth that were broken to the gums, with the roots visible.15 Similarly, a study in upstate New York found that only 16 percent of nursing home residents received any oral care whatsoever.16 A 2013 audit by the U.S. Department of Health and Human Services Office of Inspector General (OIG) found that in 37 percent of stays in skilled nursing facilities, the facilities did not provide needed services or failed to develop required care plans. The OIG audit also “found a number of egregious examples of poor quality care that were related to wound care, medication management, and therapy.” For example:

Another beneficiary was given an antipsychotic drug when she did not have a diagnosis for psychosis and her care plan did not indicate that she had a mood disorder. The physician noted that the beneficiary was confused while on the drug, but he still increased the dosage. A month later, the beneficiary’s family complained that the physician and SNF staff were trying to sedate the beneficiary with the drug.17

A 2014 OIG audit exami...