How Private Equity Is Making Your Health Care Worse

Author of Ethically Challenged, Laura Katz Olson, discusses how private equity is investing heavily in healthcare and subsequently lowering the quality of care.

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When did private Equity really start to dip its toe into the healthcare industry which is what like 20 percent of the United States economy, something like that? It was definitely not only 20% of the US economy but it's significant that Medicare and Medicaid for example are significant percentages of the federal and state budgets. So you know, like Willie Sutton says, why do you rob banks because that's where the money is. And that's why private Equity is going into health care because that's where the money is. and lots of money. Unfortunately, I mean on our show we're advocates for single-payer. So let me answer your question, which I didn't. Sure about. They did a little bit in health care in the 1990s and a little bit in the early 21st century. But since 2015 they've just been accelerating dramatically. And as they have more and more of what they call dry powder. Oh, should I explain what that is? Yeah, go ahead. Okay. Public Pension funds University endowments and non-profit endowments are the major investors in private equity. And they have invested in these private Equity firms and they I'm sorry I lost track of what I was. You were mentioning what dry powder is. Yeah so they started to get more and more dry powder which is the money that these investors are giving them and they have to spend it. And so this money is growing and growing and the money is sitting there and they finally decided that hey Health Care has a lot of benefits to it. Including the fact that it's very profitable. So by about 2015, they started investing seriously in the healthcare sector. And this is probably around the same time that some of these Pension funds begin to move more into the stock market and into the investment sphere. Is that correct? Well, the Pension funds started moving away from the stock market to private equity right? okay. That's yes gotcha okay. I just read this morning that there's an average of about 14 of them and this is just an average of their pension fund money now in private equity. And they keep investing more and more money. Is it because they perceive it as less risky? It's definitely riskier. right, but the perception might be that it's less. Because but based on your knowledge of your research it definitely seems riskier. But no it's definitely riskier and another problem is that it's a liquid. Iou know the private Equity Fund keeps this money for you know decades. But the reason they're investing more and more is that they believe and I emphasize the belief that they're getting high rates of return.