Health Insurance corporations have already won reform
Last August 6, when the Congressional recess for the month of August began, a Business Week article by Chad Terhune and Keith Epstein, disclosed that the Health Insurance Industry had already won the healthcare/insurance reformation.
Congress might as well gone on the month’s vacation because it was all over but the shouting. Actually, there was no reason for all those Town Hall Meetings across the nation. There was no “debate” to be had. The Town Hall Meetings were just window dressing. The die had already been cast before the August Congressional recess even begun.
The Business Week article is rather long and I strongly recommend you take the time to read and try to understand it. I will try of highlight extracts from it here to give you an idea how the underbelly of politics works. The subtitle of the article by Terhune and Epstein reads:
How UnitedHealth and rival carriers, maneuvering behind the scenes in Washington, shaped health-care reform for their own benefit
The article begins with:
As the health reform fight shifts this month from a vacationing Washington to congressional districts and local airwaves around the country, much more of the battle than most people realize is already over. The likely victors are insurance giants such as UnitedHealth Group (UNH), Aetna (AET), and WellPoint (WLP). The carriers have succeeded in redefining the terms of the reform debate to such a degree that no matter what specifics emerge in the voluminous bill Congress may send to President Obama this fall, the insurance industry will emerge more profitable. Health reform could come with a $1 trillion price tag over the next decade, and it may complicate matters for some large employers. But insurance CEOs ought to be smiling.
UnitedHealth, last July,
… parked a shiny 18-wheeler outfitted with high-tech medical gear near the Capitol and invited members of Congress aboard. Inside the mobile diagnostic center, which enables doctors to examine distant patients via satellite television, Representative Jim Matheson (D-UT) didn’t disguise his wonderment. “Fascinating, fascinating,” said the Democrat from Utah. “Amazing.”
UnitedHealth’s intent to impress fiscally conservative Democrats like Matheson, a leader of the House of Representatives’ Blue Dog Coalition, was at the heart of UnitedHealth’s strategy. “It boils down to ensuring that whatever overhaul Congress passes this year will help rather than hurt huge insurance companies.”
He was impressed. While Congressional Democrats and Republicans threw barbs at each other on TV big insurance companies were quietly focused on what they saw as their central challenge: shaping the views of moderate Democrats.
The industry has already accomplished its main goal of at least curbing, and maybe blocking altogether, any new publicly administered insurance program that could grab market share from the corporations that dominate the business. UnitedHealth has distinguished itself by more deftly and aggressively feeding sophisticated pricing and actuarial data to information-starved congressional staff members. With its rivals, the carrier has also achieved a secondary aim of constraining the new benefits that will become available to tens of millions of people who are currently uninsured. That will make the new customers more lucrative to the industry.
Matheson, whose Blue Dogs command 52 votes in the House, went for the glitter of UnitedHealth’s 18-wheeler presentation. He couldn’t offer enough praise for UnitedHealth, the largest company of its kind. “The tried and true message of their advocacy,” he says, “is making sure the information they provide is accurate and considered.”
Mike Ross (D-AR) was also impressed. He leads the ‘Blue Dogs’ negotiations on health reform, and also welcomed input from UnitedHealth. “If United has something to offer on cutting costs, we should consider it,” said Ross, a former small-town pharmacy owner. “We need more examples that work, and everything should be on the table.”
Fifteen years after the insurance industry helped kill then-President Bill Clinton’s health-reform initiative, Ross is frustrating the Obama White House by opposing proposals for a government-run insurance concern that would compete with private-sector companies. The President argues that without a public plan, premiums and medical bills will remain prohibitively high. Ross and Matheson have given strong voice to the industry’s contention that such a public insurer would actually reduce competition by undercutting private plans on price and driving them out of business. “We have concerns about a public option if it’s not done on a level playing field,” Ross says.
Spoken like a true insurance company advocate.
Obama launched his Administration vowing to extend coverage to all Americans and help pay for it by reining in insurance costs. Seven months later, insurers and pharmaceutical manufacturers that appeared vulnerable to a regulatory crackdown have been welcomed to the negotiating table by the Democrats.
The several competing bills pending in Congress would guarantee all Americans access to health coverage, addressing the plight of the 47 million who are now uninsured. Congress plans to achieve that by expanding Medicaid, the government program for the poor and disabled; requiring insurers to accept all applicants regardless of their health; and mandating that everyone purchase coverage. Government subsidies would make the obligatory coverage more affordable. The legislation would do little, however, to slow spending by Medicare, the public program for senior citizens, or cut overall medical costs. Congress is considering taxes on the wealthy and on benefits now provided to many white-collar workers.
However, during the UnitedHealth road show in July, Democrat after Democrat clambered into the company’s promotional vehicle beneath a sign declaring: “Connecting You to a World of Care.” Judah C. Sommer, who heads the company’s Washington office, looked on with satisfaction. “This puts a halo on us,” he explained. “It humanizes us.”
Remember the Democratic proposal to tax insurance companies? It faded after the industry said it would raise rates for workers and their families.
Now we come to UnitedHealth’s relationship with Democratic Senator Mark R. Warner (D-VA) of Virginia which illustrates the industry’s subtle role. “Elected last fall, Warner, former governor of his state and a wealthy ex-businessman, received a choice assignment as the Senate Democrats’ liaison to business. The rookie senator landed in the center of a high-visibility political drama—and in a position to earn the gratitude of a health insurance industry that has donated more than $19 million to federal candidates since 2007, 56% of which has gone to Democrats.” [Emphasis added]
UnitedHealth has periodically served as a valuable extension of Warner’s office, providing research and analysis to support his initiatives. Corporations and trade groups play this role in all kinds of contexts, but few do it with the effectiveness of the insurers. In June, Warner introduced legislation expanding government-backed Medicare and Medicaid coverage for hospice stays for the terminally ill and other treatment in life’s final stages. The issue isn’t a top UnitedHealth priority. But the corporation wanted to help Warner with his argument that in the long run, better hospice coverage would save money. UnitedHealth prepared a report for lawmakers finding that 27% of Medicare’s budget is now spent during the last year of older patients’ lives, often on questionable hospital tests and procedures. Expanded hospice coverage and other services could save $18 billion over 10 years, UnitedHealth asserted.
When Warner went to the Senate floor on June 15 to offer his bill, he cited those exact figures. He thanked the company for its support and put a letter from UnitedHealth applauding him in the Congressional Record. [Emphasis added]
Warner acknowledges in an interview that he worked on the hospice-care legislation with UnitedHealth executives. But he stresses that he has long experience with health issues and has formed his own views. The senator echoes UnitedHealth’s contention that a so-called public option could be a “Trojan horse for a single-payer system,” meaning government-run medical care. Warner has heard from some of UnitedHealth’s largest employer clients, such as Delta Air Lines (SWY). Delta CEO Richard H. Anderson, a former UnitedHealth executive, has told Warner and other lawmakers that big companies don’t want government to limit their flexibility in crafting employee health benefits. [Emphasis added]
“Obama’s promise to boost competition and lower costs by having the government play a much broader role in health coverage has been steadily compromised because of the resistance of such Democrats as Warner. ‘There are different ways to skin this and get competition’ in the insurance market, Warner says.”
Warner and other opponents of a public plan have relied on an estimate which says that 88 million people, or 56% of those with employer-provided coverage, would desert private insurance for a government-run program. That would destabilize the marketplace and potentially kill the private insurance industry, according to John Sheils, who works for the Lewin Group, a corporate consulting firm in Falls Church, Va.
“UnitedHealth lobbyists routinely cite Lewin’s work, as do Senator Orrin G. Hatch (R-Utah), the second-ranking Republican on the Senate Finance Committee, and Eric Cantor (R-Va.), the House Republican Whip. Left out of these testimonials or buried in the fine print is that a UnitedHealth unit owns the Lewin Group and thus is ultimately responsible for Sheils’ paycheck. In an interview, Sheils says UnitedHealth gives him and the Lewin firm complete independence: “We call it like we see it,” he adds.
Some Democrats differ. Says Representative Pete Stark (D-CA), the liberal California Democrat who chairs the House Ways & Means health subcommittee: “The Lewin Group’s so-called analysis is suspect.” The nonpartisan Congressional Budget Office has stated that the Sheils-Lewin figure is far too high.
An investigation into UnitedHealth last year by New York’s Attorney General will force the company to stop running two huge databases used widely within the insurance industry. By allegedly setting medical reimbursements too low—that is, skewing statistics in favor of insurers by understating “usual and customary” physician fees—the databases had resulted in the overcharging of consumers by billions of dollars nationwide. In January, UnitedHealth agreed to resolve the situation by paying $400 million in a pair of agreements with the New York Attorney General and the American Medical Assn., although it didn’t admit any wrongdoing.
In a separate case last year, UnitedHealth was forced to stop selling “limited benefit” plans with capped payouts under the imprimatur of the senior citizen group AARP. It turned out that the policies provided very modest coverage, catching many customers off guard, according to Senator Charles E. Grassley (R-Iowa), who helped bring the practice to light. Grassley pointed out that UnitedHealth paid as little as $5,000 toward surgery costing several times as much.
Comforting to know members of Congress can simply overlook such wrongdoing, admitted or not, of UnitedHealth.
In late May UnitedHealth’s point man on reform, Simon Stevens, hand-delivered a report to key senators detailing ways to save an estimated $540 billion in federal spending over 10 years. A week later, on June 4, Stevens accompanied UnitedHealth’s chief executive, Stephen J. Hemsley, to a meeting with Senator Kent Conrad (D-N.D.), an influential moderate member of the Senate Finance Committee. Conrad has since led an effort to create nonprofit medical cooperatives that would operate much like utility co-ops as a substitute for a federally run plan. With less heft than a proposed national plan, the state medical cooperatives would pose a far weaker competitive threat to private insurers. [Emphasis added]
Conrad says in an interview that the co-op idea evolved independently of any industry input. Skirmishing over the public plan could jeopardize efforts at reform, he warns. Co-ops, he argues, are “the only alternative that’s got much of a shot” to gain sufficient votes in the Senate. [Emphasis added]
Nonsense! That “the co-op idea evolved independently of any industry input” doesn’t pass the smell test. UnitedHealth, through that visit of Hemsley and Stevens with Conrad, sold Conrad that idea.
UnitedHealth followed up on June 30 with another report for lawmakers pinpointing $332 billion in savings through better use of technology and administrative simplification. If enacted, those changes would potentially benefit UnitedHealth’s Ingenix data-crunching unit. Ingenix, with annual revenue of $1.6 billion, is poised to establish a national digital clearinghouse to ensure the accuracy of medical payments and provide a centralized service for checking the credentials of physicians.
According to Wikipedia UnitedHealth Group asserts that Ingenix (a subsidiary of UnitedHealth Group) is the “industry leader” in quantifying “reasonable and customary rates” for medical services. Health insurance companies pay Ingenix to gain access to these rate determinations. As most health insurance plans contain an exclusion for coverage of services that exceed the reasonable and customary rate, this valuation is a way for insurance companies to deny coverage. [Emphasis added]
In February 2008, New York State Attorney General Andrew M. Cuomo announced that he was conducting an industry-wide investigation into a scheme by health insurers to defraud consumers by manipulating reasonable and customary rates. The announcement included a statement that Cuomo intended “to file suit against Ingenix, Inc., its parent UnitedHealth Group (NYSE: UNH), and three additional subsidiaries.” Cuomo’s investigation found that Ingenix databases used to quantify reasonable and customary rates were remarkably lower than the actual cost of typical medical expenses. This inappropriately provides health insurance companies with basis to deny a portion of provider claims, thereby pushing costs down to members. [Emphasis added]
On January 15, 2009, UnitedHealth Group announced a $350 million settlement of three class action lawsuits filed in Federal court by the American Medical Association, UnitedHealth Group members, healthcare providers, and state medical societies for not paying out-of-network benefits. This settlement came two days after a similar settlement with Cuomo.
In 2006, the Securities and Exchange Commission began investigating the conduct of UnitedHealth Group’s management and directors, including Dr. William W. McGuire, as did the Internal Revenue Service and prosecutors in the U.S. attorney’s office for the Southern District of New York, who have subpoenaed documents from the company.
The investigations came to light after a series of probing stories in the Wall Street Journal in May 2006, discussing the apparent backdating of hundreds of millions of dollars’ worth of stock options—in a process called options backdating—by UnitedHealth Group management. The backdating apparently occurred with the knowledge and approval of the directors, according to the Journal. Major shareholders have filed lawsuits accusing former New Jersey governor Thomas Kean and UnitedHealth Group’s other directors of failing in their fiduciary duty.
On October 15, 2006, it was announced that McGuire would step down immediately as chairman and director of UnitedHealth Group, and step down as CEO on December 1, 2006 due to his involvement in the employee stock options scandal. Simultaneously, it was announced that he would be replaced as CEO by Stephen Hemsley, who has served as President and COO and is a member of the board of directors. McGuire’s exit compensation from UnitedHealth, expected to be around $1.1 billion, would be the largest golden parachute in the history of corporate America.
McGuire’s compensation became controversial again on May 21, 2009, when Elizabeth Edwards, speaking on The Daily Show, used it to support her argument for a public alternative to commercial insurance. Edwards stressed the importance of restoring competition in health insurance markets noting that at one point, “the President of United Health made so much money, that one of every $700 that was spent in this country on health care went to pay him”:
Estimates of McGuire’s 2005 compensation range from $59,625,444 to $124.8 million, and the revenue of United Health Care was then $71 billion. It has therefore been suggested that Mrs Edwards may have meant to say that one of every $700 that was spent on United Health Care premiums went to pay McGuire.
On 6 December 2007, the SEC announced a settlement under which McGuire was to repay $468 million, including a $7 million civil penalty, as a partial settlement of the backdating prosecution. He was also barred from serving as an officer or director of a public company for ten years. This was the first time in which the little-used “clawback” provision under the Sarbanes-Oxley Act was used against an individual by the SEC. The SEC continued its investigations even after it in 2008 settled legal actions against both United Health Care itself and its former general counsel.
Doesn’t place UnitedHealth in a very good light. Yet Conrad and others crawled in bed with UnitedHealth.
In August 2007, the company hired Sommer, who previously headed global lobbying for Goldman Sachs (GS). He quickly built a new Washington team of former congressional aides and other K Street operatives. One key acquisition: Cory Alexander, former chief of staff for House Majority Leader Steny Hoyer (D-Md.), an influential moderate Democrat. Alexander had been lobbying for the huge mortgage financier Fannie Mae (FNM). Today, Sommer directs a team of nearly 50 people from UnitedHealth’s spacious Washington office on Pennsylvania Avenue, equidistant between the Capitol and White House. The company spent more than $3.4 million on in-house and outside lobbying in the first half of 2009.
Sommer has retained such influential outsiders as Tom Daschle, the former Democratic Senate Leader who now works for the large law and lobbying firm Alston & Bird. Daschle, a liberal from South Dakota, dropped out of the running to be Obama’s Secretary of Health & Human Services after disclosures that he failed to pay taxes on perks given to him by a private client. He advised UnitedHealth in 2007 and 2008 and resumed that role this year. Daschle personally advocates a government-run competitor to private insurers. But he sells his expertise to UnitedHealth, which opposes any such public insurance plan. Among the services Daschle offers are tips on the personalities and policy proclivities of members of Congress he has known for decades.
Conceding that he doesn’t always agree with his client, Daschle says: “They just want a description of the lay of the land, an assessment of circumstances as they appear to be as health reform unfolds.” He says he leaves direct contacts with members of Congress to others at his firm.
“Perhaps more than any other insurer, UnitedHealth is poised to profit from health reform. Its decade-long series of acquisitions has made the company a coast-to-coast Leviathan enmeshed in the lives of 70 million Americans.”
Sounds like a cesspool of deals doesn’t it? But wait! There’s more. Time published an article yesterday, about this same messy cesspool, which you should read as well. It begins with:
This is how Washington really works: Even a top liberal advocate for taking a strong stand against the insurance industry takes money behind the scenes from the insurance industry.
“On Sunday, former Senate Majority Leader Tom Daschle, who was once a nominee to be President Obama’s Secretary of Health And Human Services, appeared on NBC’s Meet The Press, playing the role of the liberal standard bearer, opposite Oklahoma conservative Sen. Tom Coburn. Daschle spoke out against insurers, praised the so-called “public option,” and at one point framed the debate over health reform to host David Gregory this way:”
Now it is one thing for Daschle to make this convoluted argument–that he can at once advocate the public option while taking money to help those leading the charge to defeat it. It is quite another for Daschle to be allowed on a show like Meet The Press to talk about the insurance industry without any disclosure of the fact that he now works as a strategist for the insurance industry.
It is all like a labyrinth of corporations intertwined with members of Congress, geared toward enhancing the financial coffers of corporations. As you read through all this mind-numbing information you come to the conclusion that Congress represents the corporations, has been bought and paid for by the corporations and their lobbyists. No real mention of the best interests of people, only the best interests of corporate America.
Government by the corporations, for the corporations. Stand up and waive the flag!
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