The Center for Public Integrity

What happened in Maine is a sobering reality check on the oft-repeated myth that getting rid of ObamaCare and other consumer protections is the answer to our health care problems. If the government will just get out of the way, the myth-makers would have us believe, the free market will magically transform our dysfunctional health care systems into one of the world’s very best.

The voters in Maine fell for magical thinking in 2010 when they turned over control of the legislature and governor’s office to candidates who promised to block ObamaCare and implement what they called “common sense” free-market solutions. Once they did, they assured voters, insurance premiums would fall and more people would have access to affordable care.

Sure enough, soon after being sworn in, lawmakers passed legislation that in many ways took Maine in the opposite direction of where President Obama wanted to go. When newly elected Republican Governor Paul LePage signed the bill into law —a bill enthusiastically endorsed by insurance companies — many consumer protections enacted over two decades disappeared. Especially hard hit: people living in rural areas and folks over 40.  

Among other things, the new law abolished protections for rural families that had required insurers to have at least one doctor in their provider networks within 30 miles of where those families lived and at least one hospital within 60 miles. The law also allows insurance companies to effectively double rates for older residents. That provision is affecting not only individuals and families, but also small businesses that employ older workers. Within months of the bill’s passage, insurers began jacking up the rates they charged businesses with older workers by 90 percent or more.

Even so, backers of the new law continued to insist that after it had been in effect for awhile, the measure would help a majority of Mainers.

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.

Mitt Romney's selection of Rep. Paul Ryan as his vice-presidential nominee has vaulted Medicare to the top tier of election issues, thanks to Ryan's proposal that the entitlement program be converted to a system of "premium support" that would provide subsidies for elderly beneficiaries to buy insurance on the private market. Judging by the fiery rhetoric from both campaigns, Medicare seems certain to remain a high-profile topic for the remainder of the contest. 

But Medicare is a complex topic, and the charges and counter-charges seem likely to yield more heat than light for a confused electorate. A recent story by FactCheck.org provides a helpful reality check on the finger-pointing, but there's been little of substance illuminating Medicare's increasingly precarious finances and its often-confusing spending choices. 

The Center's Manipulating Medicare series has attempted to fill that void. In the next month, we'll be adding to this reservoir of reporting with new investigative pieces on billing procedures by doctors and hospitals that have added tens of billions of dollars to our Medicare tab.

In the meantime, catch up with these examinations of the Medicare system:

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.