Cost-shifting and Long-Term Care Homes

If the COVID 19 pandemic has illustrated nothing else, it has revealed the lethal failings of a system whose business model is predicated on cost shifting to maximize profit.

High death rates, woeful suffering in both the physical and psychological sense, systemic neglect and failings of moral duties, managerial disarray coupled with an abdication of regulatory oversight and the obligation to inspect; these have all been on display in the tragic plight of Canada’s institutionalized elderly during the time of COVID 19.

Most of us are familiar with the broad outlines of the story by now.  It makes for sad reading.  My intention is to illustrate how the warehousing of elderly residents in a for-profit institutional setting reveals how the kind of cost shifting Karl Kapp* spoke so eloquently about over fifty years ago, permeates this sector.  In fact, I would suggest, that the only way this business can be run at a profit at all is for companies in the LTC sector to transfer costs off their balance sheets and on to residents, family members, staff and the broader society.

The neoliberal model enshrines efficiency above all else and makes cost containment an overriding priority.  How do you do that in an LTC setting?  Relatively easily, as it turns out.

First, you pay the staff and orderlies meager wages and employ a great deal of casual and contract labor.  Lacking decent compensation and having little stability in their employment relationship, the staff are forced to work in multiple care homes to gain sufficient hours and earn a livable wage.  Amid a population of extremely vulnerable and fragile elderly residents, employing a low-wage and casual labor force was a fatal decision when a lethal pathogen began to circulate.  They, unintentionally, became vectors of transmission as they moved from one care home to another, scraping out an income to feed and support their own families but infecting the residents.  Cost-shifting strategy one: low ball the wages of your staff in order to reduce overhead.

Secondly, you rely on the good nature and kindness of many relatives who habitually visit their family members to provide care, nurturing and comfort on a daily basis.  If you are not employing enough trained, attentive staff, the extended family, if armed with a conscience, predictably steps in to provide the care they desire for their loved ones.  In the absence of a company commitment to providing a genuine level of compassionate care consistent with its self-advertised mission, the family members become your unofficial secondary labor force, feeding Grandpa and attending to his personal needs.  Effectively, you offload duties that are properly the responsibility of the paid staff to family members who come to realize that, “if they don’t do it, no one else will.”  When the lock-down was declared in early March, preventing family members from visiting and providing the routine but critical tasks to which they had become accustomed, the stingy resourcing of the management of some LTC homes was shown to have been altogether inadequate.  Huge numbers of people died needlessly and often in conditions of complete squalor and neglect.   Cost-shifting strategy two:  rely on the fundamental caring instincts of children and relatives to carry out tasks and duties that should properly fall on your books.

When you run a skeletal operation while seeking to earn a profit from the care of elderly residents, the demands that naturally arise for individual care, attention, and social interaction, can easily overwhelm the limited bandwidth of the staff on duty.  As the Canadian military personnel assigned to care homes during the pandemic put it: “people are often sedated with narcotics when they are likely just sad and need support.” According to some credible investigative journalism published in the Ottawa Citizen and elsewhere, nearly a third of residents in long term care across Canada are routinely being prescribed sedatives and anti-psychotic drugs.  Some recent research has indicated that the “off-label” practice is questionable when the underlying condition is dementia, and nor is it the case that appropriate consent is always secured beforehand.  As one lawyer involved in the issue put it, “given the vulnerability of residents in long-term care, they often believe they cannot speak up when given medication they have not consented to.”**  Cost-shifting strategy three:  compensate for under-staffing and the lack of time and attention to the legitimate needs of residents by, in part, sedating them and thereby reducing the demands they will place on your operation.

Here is the point about cost shifting that Kapp so presciently made over half a century ago, and that other political economists have increasingly begun to make:  if your business model only works (i.e. you earn a profit) by systematically off-loading your costs to other people, actors, organizations etc., then you shouldn’t be engaged in it.  The transfer of detrimental outcomes, financial liabilities, risks etc., to other people, society, or the natural environment, socializes costs which, if properly mitigated, would otherwise render your business uneconomic.  COVID 19 has ruthlessly exposed the net welfare loss to society from these kinds of business decisions which are routinely justified by invoking ‘efficiency’ considerations.  The fact that we have had, in a number of instances, to deploy members of the Canadian Forces to staff LTC homes in several provinces tells us a huge amount about the ethical and moral lapses in the standard operating practices of some companies in this sector.  In the case of Long Term Care homes, I would submit that these services can not be reasonably provided in a for-profit model and that any humane and honest analysis that looks at this approach from the perspective of the welfare of the resident/family/front-line staff, would reach the same conclusion.  Regrettably, generations of politicians in Canada from all parties have actively facilitated the profit seeking behavior of the companies engaged in this sector.  Some have even ended up on the Boards of firms in the LTC sector.  Sadly, the factors inherent in the heartrending example of long term care homes, have been repeated throughout our economy and are at the root of the climate crisis, massive income inequalities, and widespread population health dysfunction and damage (notably obesity).  The pandemic must be the occasion for a serious rethink about the sustainability of the neoliberal capitalist model that presently governs our economic relations and serves as the underlying DNA of many western societies.

*  Karl Kapp, The Social Costs of Private Enterprise (1950), Cambridge, MA:  Harvard University Press.

**  Jane Meadus Consent to Treatment in Long Term care Homes, Staff lawyer and the Institutional Advocate at Advocacy Centre for the Elderly (ACE).

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