How Private Equity Extracts Profit from Social Safety Net Systems - Non Profit News | Nonprofit Quarterly

"Take the old example of Ross Perot: Before he was a presidential candidate, he made his fortune producing welfare forms for the federal government. Today, this dynamic has evolved into sophisticated disaster capitalism, where public benefit systems create ideal conditions for private equity extraction that devastate both vulnerable communities and nonprofits."

"By "technical debt," I mean government dependency on third-party, private firms for the maintenance, upgrades, and/or replacements of information technology systems. Public systems are underfunded until they fail, private contractors are brought in as emergency measures [and] extract maximum value. This has become a Trojan horse through which private equity penetrates public services."

"For instance, when Massachusetts revised Medicaid's personal care attendant payment system, networks of disability advocacy organizations and community support groups found their operations disrupted. Similarly, when unemployment insurance systems crashed during COVID-19, nonprofits serving displaced workers were forced into crisis-management mode."

"There is an old, established pattern in this arena. Back in the 1970s, Perot made his money, as The Washington Post explained, by winning contracts to "screen the claims, pay the checks and rule on disputes, becoming the middleman between the government and millions of Americans who receive federal assistance.""

Public benefit systems and social services have become targets for private equity extraction, creating a form of disaster capitalism that monetizes poverty. Underfunded government IT and operational systems accumulate technical debt, prompting emergency contracting and long-term privatization when failures occur. Centralization and privatization of assessment and payment functions systematically displace community-based organizations and disability advocates, as contractors treat vulnerable populations as markets to capture. Historical examples, including welfare-processing contracts and recent Medicaid and unemployment insurance disruptions, illustrate a recurring pattern of profit-driven intermediaries inserting themselves between the state and people who rely on public assistance.

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