The Center for Public Integrity

While listening to the promises to repeal ObamaCare during the Republican National Convention, I was reminded of what those of us in the health insurance industry said when our friends in Congress were able to block passage of President Clinton’s health care reform legislation 18 years ago.

Like the politicians in Tampa, we insisted then that a big government program not only wasn’t needed, but would be harmful — that what the government really needed to do was get out of the way and let the free market work.

Insurance company spokesmen like me assured the public that our then-novel managed care plans, coupled with the invisible hand of the market, would do the trick. Leave it to us, we said, and we’ll get medical costs under control and enroll every American in a good HMO.

The proponents of a pure free-market health care system hope that Americans have amnesia and can be persuaded to blame President Obama for the problems that grew almost immeasurably worse between the demise of the Clinton plan and the passage of the Affordable Care Act. They want us to believe, despite overwhelming evidence to the contrary, that health insurers and the largely unfettered, loosely regulated marketplace can somehow turn things around. And that we should reward insurers for their failure by turning the Medicare program over to them.

As the Republican convention gets underway today in Tampa, we can expect to hear the politicians and delegates gathered there — including GOP nominee Mitt Romney — rail against “Obamacare”, insisting that what we need instead of a “government takeover of health care” is “patient-centered” care, although what that would look like hasn’t been disclosed.

If recent statements by Romney and his VP pick Paul Ryan are an indication of the rhetoric we’ll likely hear, get ready for speech after speech telling us that Obamacare will “cut” $716 billion from Medicare and cost small businesses a bundle.

In anticipation of these sorts of misrepresentations, doctors from all over the country — all members of a four-year-old organization called Doctors for America — have traveled to Florida to serve as a truth squad. And while they’re dispensing facts, they’ll also be providing more than a little free care. When the GOPers leave the Sunshine State, the doctors will hop on a bus and head to Charlotte to try to persuade the politicians and delegates who will gather there that they need to start aggressively defending the reform law.

Doctors for America is a bipartisan grassroots organization of 15,000 physicians and medical students from all 50 states. The organization’s executive director, Dr. Alice Chen, said the doctors decided on the road trip because “politics, not patients, has been driving the health care debate and is threatening to roll back the promise of a better health care system.”

Chen says the mission of the group is to build a health care system that works for everybody, not just the wealthy and fully insured. The group’s message: “Stop messing with health care reform because people’s lives are at stake.” Its “Patients Over Politics Bus Tour," which will make stops in Atlanta and Columbia, S.C. and several other cities between Tampa and Charlotte, will feature press events, town hall-type forums, and preventive health screenings.

When you look closely at GOP vice presidential candidate Paul Ryan’s proposals to restructure Medicare, it’s clear he agrees with many health insurance company CEOs that Americans — especially older Americans — don’t have enough “skin in the game” when it comes to medical costs. If his proposal to largely privatize Medicare becomes a reality, those not already 55 and older will be putting far more “skin in the game” than current Medicare beneficiaries do, and they’ll be required to peel off increasing amounts of skin every year for the rest of their lives.

I can’t tell you how many times I heard my former CEO and other industry executives say that, in addition to the ever-increasing cost of a stay in the hospital, new drugs and new medical technology, a big reason why premiums keep going up is because those of us who make a tiny fraction of what they make are not paying enough out of our own pockets (i.e., “skin”) for medical care.

They use that rather crude term when they talk to Wall Street financial analysts and policymakers to justify their strategy of moving more and more of us into what they euphemistically refer to as “consumer-directed” health plans that are in reality are high-deductible plans that require us to pay far more of our own money for medical care than we have had to pay in the past.

Ryan would change Medicare from what is known in industry jargon as a “defined benefit” plan to a “defined contribution” plan. Medicare beneficiaries would no longer have the assurance of knowing that the government would always pay the lion’s share of the cost of coverage (defined benefit). Instead, the government would give them a set amount of money in “premium-support” payments (defined contribution) every year to buy coverage from private insurers. (The 2011 version of Ryan’s proposal would replace the traditional Medicare program entirely by private insurance plans. In the 2012 version, traditional Medicare would remain an option.)

If Americans who are embracing Rep. Paul Ryan’s “Path to Prosperity” — and that now includes Mitt Romney — spent a few minutes reviewing a few recent research reports, they just might conclude that the Wisconsin Republican’s plan to reduce the deficit might better be renamed the “Path to the Poorhouse” because of what it would mean to the Medicare program and many senior citizens.

Ryan’s proposal, which will get new scrutiny now that Romney has made him his running mate, would end the current Medicare program for everyone born after 1956. It would replace Medicare with a system in which beneficiaries would receive a set amount of money from the government every year to buy coverage from private insurers. That money would go straight into insurance companies’ bank accounts, which would make them far richer and even more in control of our health care system than they already are.

While the amount of money beneficiaries would receive would depend on their health status, the average 65-year-old would get $8,000 under the Ryan plan in 2022, the year it would take effect. That’s the amount the current Medicare program is expected to spend on the average 65-year-old that year. After 2022, the annual increase in the “premium support” payments would be based on the consumer price index (CPI). And therein lies one of the biggest problems for anyone hoping to live long enough to enroll in Medicare and stay alive for a few years.

Aetna’s had a lot to say lately about how business is good. The company disclosed last week that it made $458 million in profits this spring, and said it expected to make more money this year than executives previously thought possible. The firm also signaled it set aside three quarters of a billion dollars from policyholders to buy back shares of its own stock instead of paying more claims. But a few days before that, Aetna’s CEO got a real-world understanding of just how inadequate some of the company’s policies are.

And thanks to Twitter, the rest of us got a better understanding of how U.S. health insurers are able to profit so handsomely from the inadequate policies they sell, especially to students.

A significant part of Aetna’s revenues come from its student health plan business. The company contracts with many colleges across the country to provide coverage to students. Trouble is, those policies typically have low annual and lifetime limits — as was discovered recently by Arijit Guha, a 31-year-old graduate student at Arizona State University who’s been diagnosed with colon cancer. Guha was paying $400 a month for a policy that had a $300,000 lifetime limit. It didn’t take long for his care, including surgery and chemotherapy, to exceed that.

Facing a growing mountain of bills and the very real possibility of having to file for bankruptcy, Guha and his friends decided to set up a provocatively named website — poopstrong.org — and to use Twitter and other social media to raise money to pay the claims Aetna was denying. 

Tweeting as Poop Strong, Guha soon drew the attention of a customer service representative at Aetna and, ultimately, the big guy himself, CEO Mark Bertolini.

Here’s an abridged version of how it went down:

Poop Strong: @Aetna’s 4th qtr profit up 73%: “it continued to benefit from low use of health care.” Helps they can ensure low use.

One of the reasons Americans seem so willing to tolerate the fact that 50 million of us are uninsured and almost 30 million more of us are underinsured is that most of us who have coverage assume we are OK. That nothing truly catastrophic will happen to us, and that, even if it did, our insurance policies will pay our bills and keep us whole.

Who would think that a decision to go see a movie on a Friday night could change our lives — and the lives of our families — forever? That we or a loved one, even with what we believed was decent coverage, might become a victim of violence that could leave us not only disabled for life but also potentially bankrupt and homeless?

That random act of violence in Aurora, Colo. earlier this month could have happened anywhere in America, of course — or in any other country, for that matter — but among the world’s developed nations, we live in the only one where the families of some of the injured would have to face begging for money to pay the doctors and hospitals and keep the sheriff and his foreclosure papers at bay. Talk about American exceptionalism. This is one area where, sadly, we truly are unique.

News reports informed us last week that three of the five hospitals where the victims were taken have said they will absorb most, if not all, of the cost of their care if they don’t have insurance. But who will pay for the care they’ll need after they’re discharged? And who will pay the medical bills of those who were unlucky enough to be taken to a hospital that decides not to be so generous? And what about those who have policies with such limited benefits or high deductibles they might actually wind up in worse shape than those who are uninsured? Having any type of insurance, even if it’s essentially worthless, can disqualify a patient from charity care.

I’ve often said the U.S. health care system is so complex that trying to understand it makes your hair hurt. Case in point: the Affordable Care Act runs more than 2,000 pages. I’ll grant you that it’s a massive piece of legislation — but lawmakers felt that’s what was needed to fix at least some of the problems that resulted from the helter-skelter way our health care system developed.  

This complexity also helps explain why it has been so difficult for the Obama administration to communicate how the numerous provisions of the law will likely benefit average Americans. And it also explains why so many journalists covering health care often do little more than “he said, she said” reporting. Going deeper requires a willingness to figure out how to make arcane but important parts of the system interesting and relevant.  

I’ll never forget being told by a reporter for a major financial publication while I was still at Cigna that her editor would not let her use the term “reinsurance” in a story she was writing about my firm — even though the company had just disclosed having to take a big charge against earnings because of problems within the company’s reinsurance operations. She said her editor believed readers simply couldn’t wrap their heads around the concept of reinsurance. As part of their risk management efforts, insurers buy "reinsurance" from other insurance firms to reduce their exposure to unexpected high claims from policyholders. The resinsurer assumes a portion of the risk.  

Similarly, many reporters refused or were not allowed to use the term “medical loss ratio” during the reform debate, even though changes in that mathematical equation can mean the difference between black ink and red ink on an insurance company’s balance sheet. That’s why shareholders and Wall Street financial analysts keep close tabs on it — and why it’s something we all ought to know a bit about.

The House of Representatives voted for the 33^rd time last week to repeal ObamaCare, and for the 33^rd time it was an exercise in futility. The Senate will ignore the House vote and allow the reform law to move forward, just as the Supreme Court did last month.

House members are well aware of all that, so the vote was all for show. And GOP leaders have no intention of repealing the Affordable Care Act because their friends in the health insurance industry are counting on major provisions of the law going forward, especially the expansion of Medicaid. Don’t be fooled by Republican governors like Florida’s Rick Scott and Texas’ Rick Perry, who are saying they’ll opt out of the Medicaid expansion now that the Supreme Court says that’s allowable. When the Feds start doling out billions in 2014 to bring an additional 16 million Americans into the Medicaid program, they’ll be on board. Trust me.

Want proof that Big Insurance has figured out how to make a lot of money off reform? Last Monday WellPoint announced it will pay nearly $5 billion to buy the country’s largest private Medicaid managed care company, AmeriGroup. Rest assured that lobbyists for WellPoint and other firms wanting to get their hands on that new Medicaid money will have a “here’s how it has to be” talk with their buddies on Capitol Hill.  

If you look at recent quarterly earnings reports from the big five for-profit insurance companies (UnitedHealth, WellPoint, Aetna, Cigna and Humana), you’ll see that the biggest growth in their membership has come not from the private sector but from public programs like Medicare and Medicaid.

Back during the debate on the Clinton health care reform proposal, insurance executives tried to convince lawmakers that they were on the same side of health care reform as consumers were, so they embraced the idea of “community rating” in which insurers charge everyone in a given community the same premium regardless of age, gender or health status. In testimony before a House committee in 1993, the president of Cigna’s health care business assured lawmakers that all the big insurers were on board with a return to community rating.

Fast forward nearly two decades and you’ll find that insurance executives have changed their tune, now that they’re actually being required to go back to the good old days when community rating was the norm. Today’s health insurers want nothing to do with it. There’s just not enough profit in it.

Community rating was the original way insurance companies set prices for their policies. The practice began in the late 1920s when the administrator of Baylor University Hospital in Dallas came up with a strategy to deal with his hospital’s mounting expenses. His idea was to have groups of local residents, beginning with the city’s teachers, pay fifty cents a month and receive up to 21 days of hospital care — if needed — during any year. If you were a 21-year-old man who was as healthy as a bear, you paid the same each month as a 42-year-old woman who was not nearly as healthy. It made everybody happy, subscribers and cash-strapped hospital officials alike. Pretty soon, other hospitals began offering similar plans. Eventually they were united under a common name — Blue Cross — and they were all operated on a nonprofit basis.

Health insurers avoided their worst case scenario last week — the prospect of the Supreme Court striking down the individual mandate but letting the rest of the health care law, especially profit-threatening consumer protections, go forward. Now the industry can focus on a goal it has had all along: getting rid of those pesky consumer protections.

That goal was clear to me from the reaction statement issued by America’s Health Insurance Plans. The statement was jam-packed with feel-good phrases like “secure and affordable,” “peace of mind,” and “choice and competition.” Allow me to provide an interpretation of what AHIP, the industry’s biggest PR and lobbying group, was really saying and really planning. After twenty years as an industry PR guy, I’m all too familiar with prose written to obscure intentions.

Sentence by sentence, here’s what AHIP’s communications people crafted as soon as they realized the industry would not have to go nuclear to wipe out ObamaCare — that instead, it could conduct a stealth ground war to get rid of everything in the law that might threaten profits.

“Individuals and families need secure, affordable coverage choices. Maintaining the link between market reforms and universal coverage is essential to avoiding significant cost increases and loss of choice for consumers and employers.”

Translation: “Whew! Thank you, Chief Justice Roberts. We can now shelve the campaign we were poised to launch to convince people why the consumer protections in the law won’t work without the mandate. We won’t have to squander resources on that effort. Now we can devote our war chest to helping elect candidates willing to use our talking points and vote the way we tell them to vote — and to persuading people to believe the consumer protections are not in their best interests after all. The mandate will work best for us when they’re all gone.”