Tagged: Public Benefits


The Fleecing of America’s Poor: Dan Hatcher’s The Poverty Industry



Having written about and represented many poor fathers in child support cases, I am familiar with the way federal and state child support policy undermines families. I understand how laws requiring recipients of public benefits to identify the fathers of their children and “cooperate” in child support enforcement hurt fragile family relationships. And I am aware that aspects of public functions like child support enforcement have been privatized in many states; I know this development has often resulted in prioritizing “revenue-maximization” over sound family policy.

But I had no idea about the extent of the harm caused by the broad web of contracts between the state and private industry to maximize profits from public benefits owed to vulnerable citizens until I read Dan Hatcher’s book, The Poverty Industry: The Exploitation of America’s Most Vulnerable Citizen’s (NYU Press 2016). I should start this review with two disclosures. Dan is a friend and has been my colleague for over ten years at the University of Baltimore law school. I have also followed this book from its inception to its publication. But my enthusiastic review here will echo much of the praise he has received in the many positive reviews of The Poverty Industry in both the academic and popular press.

In this book, Dan describes what he calls “Poverty’s Iron Triangle”– the relationship between the federal government, state government, and private contractors that cash-strapped states hire to provide services and maximize federal aid. As he describes it, “The revenue strategies begin with state human service agencies. Facing shrinking budgets, the agencies subvert their service missions to their own fiscal interests and turn their intended beneficiaries into revenue tools.” But “the revenue strategies often do not provide the agencies with additional fiscal capacity . …. Human service agencies extract funds from their own impoverished beneficiaries, states take aid funds from their agencies, and the private contractors in turn take their cut.”

Hatcher begins the book with stories of two boys in foster care in Maryland, Alex and Ryan. Both boys, now adults, had lived in multiple foster homes and “aged out” of foster care without adequate education or other resources to support themselves. Both were designated beneficiaries of their fathers’ social security survivor benefits. But, without their knowledge or consent, the foster care agencies entrusted with their care applied for the benefits in the boys’ names and converted the benefits to agency revenue. Both boys were Hatcher’s clients. He uses their own words to describe both the financial and emotional harm to children that result when the state engages in these practices.

Hatcher returns to Alex and Ryan in a later chapter where he lays out the incentives state foster care agencies have to remove children like Alex and Ryan from their homes. These incentives trump the agency’s mission to provide assistance to impoverished families accused of neglecting their children. Removing children, rather than supporting their families to provide safe homes, opens multiple federally financed “revenue streams” from which the agency, with the help of private contractors, can draw. Federal funding is linked to the number of children in need of services. The more children identified and the more services they need, the more revenue to the state. These funds often do not go toward helping the identified children; the money goes to the agency but often ends up diverted to the state’s general budget.

Depending upon the condition of the child or, often enough, the aggressiveness of private contractors like MAXIMUS, Inc., the agency may become eligible for a range of federal programs or other payments intended to benefit the child directly or increase aid to the agency to provide services to the child. These include federal assistance that comes directly to the agency by virtue of the child’s placement in foster care–Foster Care Assistance, Medicaid Assistance (enhanced by eligibility for therapeutic, psychiatric and pharmaceutical benefits) and Adoptions Assistance. Revenue can also be diverted to the state from benefits designated for the individual child by virtue of his/her parents’ payments or benefits. These include parent-paid child support payments, Veteran’s Dependent Benefits, Social Security Survivor or Disability Benefits and assets the child may own.

I have to admit that the level of detail in this part of the book, while a testament to Dan’s painstaking research, will likely be challenging for most readers. It is often difficult to follow  the many federal statutes that underlie these benefit schemes. The illustrations and graphs Hatcher includes do help in understanding how an agency and private contractor can “mine” for so many potential benefits that may ultimately be diverted for other uses.

Later chapters lay out the ways in which theses schemes are expanded to include benefits for the sick and the elderly, particularly Medicaid. Through the use of freedom of information requests and other careful digging, Hatcher reveals how private contractors refer to children, the sick and the elderly as “units” whose eligibility for services is maximized to increase revenue. These contractors use “data analytics, algorithms, prioritization and dissection” to increase the range of services each “unit” is eligible for and, thus, increase revenue. For example, private contractors encourage the diagnosis of mental health issues in children and the elderly for therapeutic and drug treatment to tap into broader Medicaid or Social Security Disability benefits. These chapters includes specific state examples to illustrate the complicity of various state actors and the lack of oversight necessary to uncover these schemes.

The final chapters of the book look ahead to warn about the expanding risk of government and private industry collusion to use poor kids and others receiving public benefits as “revenue tools.” These chapters also include broad suggestions for reforms to realign “the practices of human service agencies with their intended missions.” The usual punch line in an article or book about governments failing poor families is an argument for more public funding. Hatcher shifts that focus. Instead, he argues that the first step for politicians and policymakers who want to reform and improve social services is to understand the way the poverty industry is misusing existing funds.

One concern after reading the book is the risk in exposing these practices. Given the many examples of misused funds in the book, why wouldn’t those who argue for “small government” use these abuses as support for cutting federal funds for the poor? But Hatcher makes clear that cutting funds is not the route to reform. Instead, by exposing these practices, he calls for more agency accountability and less reliance on private industry to perform public functions. Knowing what has gone wrong is the first step toward creating a structure that will fulfill the critical mission of these agencies—to provide a safety net for the most vulnerable and promote more promising futures for abused and neglected children.

The depth of knowledge Dan brings to this project is extraordinary. It reflects his many years as a passionate advocate for foster children.  This advocacy has included representing individual clients against state agencies in trial and appellate courts as well as testifying before Congress and other legislative bodies with resulting law reform. But his passion for protecting the poor and vulnerable never interferes with his meticulously researched descriptions and assessments of these public private relationships.

Indeed Dan’s credibility and authority on these issues is demonstrated by the inquiries he has received from Congressional offices seeking ideas about how to address the problems he has identified in the book. Dan recently described to me a trip to Capitol Hill he made at the request of a mid-western Senator. Walking into the Congressional hearing room designated for the meeting, he found about twenty-five Senate staffers who had read his book and were ready to take notes on how to draft reform legislation. Can any of us engaged in legal scholarship, often with the modest hope that it will be read, envision a more satisfying scene? Remember that scene and The Poverty Industry the next time someone asks you why law schools should continue to fund and support legal scholarship.


Jane C. Murphy is the Laurence M. Katz Professor at the University of Baltimore School of Law.







Special Kids, Special Parents

First, many thanks to my exceptional and delightful colleague, Danny Citron, for inviting me to blog on Concurring Opinions. My blogging goal is to get you to focus on how law and policy could attend to the needs of family caregivers of special needs children. “Four in ten adults in the U.S. are caring for an adult or child with significant health issues,” according to a new Pew Research Center study. One would think that this large and growing population of family caregivers would command some attention. If they refused to do the job, after all, millions of frail elderly people, permanently-disabled veterans, and chronically-ill and disabled children could be left with nobody to meet their physical, emotional or medical needs. Social welfare organizations and institutions would be overrun, and social provision expenditures would skyrocket.

Refusing to do the job is not an option for many family caregivers, of course, for thousands of reasons, including love, duty and generosity of spirit. But many pay a price in terms of physical health, social isolation, and economic security. In my work about families raising children with special needs, I argue that we need to find ways to spread the costs so that they do not continue to fall almost exclusively on family members who step up.

Here are three examples of law and policy being blind (or at least astigmatic) to the impact of care-giving on these parents. First, when a child’s parents divorce or separate, family law entitles the parent who lives with the child to child support and, in some unusual situations, alimony. Child support is calculated on the basis of the child’s needs, and alimony is determined based on what the payee needs. Both assume that, ordinarily, both of the child’s parents will be economically productive. Where the parent’s special care-giving responsibilities interfere with that parent earning a living, however, child support and alimony are not usually adjusted–there’s no “chalimony.” Second, the public benefits system picks up very little of slack for parents when special care-giving responsibilities interfere with the parent’s earning capacity. Worse yet, since the mid-1990s, states became subject to increasingly stringent requirements in federal law about tying public benefits to the efforts of recipients to get and hold employment. A different route is not unimaginable: in 2009, a stipend was enacted for family caregivers of veterans left permanently disabled during their service in recent wars. Nothing similar, however, exists for parents. Third, if a child’s special needs affect his or her ability to benefit from school, federal law has guaranteed since the mid-1970s that the child will nonetheless be provided with a “free and appropriate public education.” The statute is not blind to the child’s caregivers; in fact, it gives parents specific rights in terms of participating in planning the child’s educational program. What it does not do, however, is make sure that parents can exercise their rights in ways that make sense if their lives are over-stressed because they are caring for special needs children.

As my work continues, I’m looking for additional examples of law and policy that attend to the needs of family caregivers for special needs children, and to those that don’t. If you can suggest a new avenue of research, please let me know.