Insurance Companies have already won the Health Reform battle beating out the Doctors and the Government. Will they take the money and run?
Written by Lewis D. Eigen
At the beginning of the Clinton presidency, when Health Care Reform was the number one priority, I was having lunch in Indianapolis, Indiana with my cousin Howard. At the time Howard was President of the Medical Faculty of the University of Indiana Medical School. As I am involved with things political, he asked for my take on the proposed reforms. The Indiana physicians and those of the rest of the country had to decide to get behind the Clinton plan or oppose it. I shared my view that the physicians of America had already lost control of American medicine. The business interests in the nation were getting killed by the of inflation of medical and healh benefit costs. The physicians had been in control for decades and had not been able to get a handle on this. Control was going in large part to the Federal Government or to the Insurance Companies. The right wing preferred the latter, and the left, the former. The middle was not sure, but nobody was willing to leave the power with the medical professionals. Howard observed that he and most Indiana physicians tended to want to avoid a large government role in medicine. Not because of economic ideology, but that although the medical professionals were not able to manage the business of health in America, they really wanted to maintain the independence of their professional diagnosis and treatment options, and the government could really impinge on that professional autonomy. My response to him was that if I were a physician I would much rather have the Government in charge than the insurance companies. Although the Government is often not very competent at complicated things professional and has a tendency to encroach, at least they really want high quality medicine, and make an effort at fairness. If they get out of hand, political pressure and Congress can curtail them somewhat. If the insurance companies get control of the health care system, they will and should, according to free market capitalistic principles, be driven by what maximizes their shareholders’ profits–not good medicine, not fairness, not the physicians’ independence, not the doctor-patient relationship, and not the health of America as a whole. I suggested that the physicians would be better off with the Government running the health care system even if they had to deal with the faceless, anonymous, bureaucrats.
At the time, the thought of Federal politicians and civil servants empowered to control medicine was just too much for them. They knew what they feared. On the other hand, they reasoned, why would the insurance companies interfere with doctors? The companies certainly would not come between the doctor and his/her patient? Insurance companies would certainly not tell them which procedures to do or not do or which medicines to prescribe. Most doctors at the recommendation of the American Medical Association, chose to side against the Clinton plan, and ended up with the insurance companies at the top of the heap. What happened was disaster for the physicians and for American medical consumers. In the world’s entire history of medicine–over 5,000 years, never have so few people (insurance company executives) controlled the medical practices of so many physicians. There is not a single physician in the nation who does not believe that the practice of medicine is now more interfered with than at any time in history, as it has been since Clinton health reform went down. And worse, it is insurance comoany faceless bureaucrats with whom physicians had to deal. There is nothing that they can do about it. There is no one to complain to. The insurance company bureaucrats had not “run amok” to be brought under control by the company executives. The bureaucrats were doing exactly what they had been trained to do–avoid paying whenever remotely possible and make physicians, hospitals and patients submit, resubmit forms, answer questions so even if they do get paid, it will be late enough for the company to earn more interest from the float, and everyone will pay a high emotional and administrative price for trying to colect money toi which they were entitled. That would have been bad enough, but on top of that, there is not a family physicians, primary health physician or internist who is not either making less money or having to work much longer hours or shortchange the patients from the time that they would prefer to give in order to try and maintain their income. Not a one who is not disgusted by the paperwork increase and the ignorant rules and regulations imposed on their practice by the insurance companies.
Ironically under the rule of the insurance companies, everyone else has lost except their fellow corporations–the drug companies and the medical device companies. The three groups of corporations have enough money, lobbyists, and smarts to combine with those who ideologically don’t want the government involved, and those narrow Republican politicians whose first priority is to bring down President O’Bama (think Senator Jim DeMint who had the lack of tact to publicly admit the strategy). The cost to the country was to them of lesser consideration.
The physicians have fared so poorly that their income, image, and professional autonomy have all eroded. The American Medical Association has been losing membership since their fateful siding with the insurance companies. The main reason is not that they guessed wrong. For that they would have been forgiven by most of their membership. It was that they could not PROTECT the profession from the very conservative corporations they aided and with whom they sided. Most physicians felt abused by the insurance companies and their vaunted professional association turned out to have no clout with that part of corporate America that now dominates health. The younger physicians are not joining in the same numbers as their counterparts of yesteryear. They see nothing that this venerable old organziation can or will do for them. The government is not their big enemy anymore.
The affect of this tragically parallels what has happened in Congress. As the Republican excesses of the George W, Bush administration and the Contract With America Congress caused many Republicans to lose their seats, the losers tended to be those Republicans who were more centrists. A shifting electorate moved to the Democrats. The Republicans who survived were those from the most right wing extremist districts, and the Republicans who were left standing after their party loss were more conservative than before when the conservatism so displeased the national electorate. And the Democrats, not to be outdone, all of a sudden had a big majority and the most extreme left wingers no longer accommodated their middle of the road brethren to block the Republicans from the worst of conservative excesses. Both parties became more extreme. In the case of the AMA, there was a hard core philosophically right wing group that saw government as unacceptable even if it would be better for the profession. They tended to be the older men who were in the positions of prestige and influence. They were not about to engage in a frontal attack on the insurance companies and ask the government to come to their aid. They paralyzed the AMA so that no help came for the average doctors. These let their memberships lapse in droves with the result that the remaining AMA members are older and more conservative than they were before. At this time, less than 20 percent of all the practicing American physicians are current members of the AMA.
After the O’Bama victory, the AMA was so desperate that the leadership changed tactics. They looked at what the Republicans had to offer and what the Democratic alternative was. Which would be better for American medicine and the ability of the physicians to practice independently? At the time, July of 2009. the Democratic alternative was the version passed by the House of Representatives, much to the left of what the Democratic Senate would nearly pass half a year later. But amazingly, the AMA put their traditional conservative ideology aside, looked at their members vested interests and that of the profession in general, and supported the House Democratic Bill and President Obama.
In all fairness to Cousin Howard, the physicians of the Indiana Medical Society, and those of the AMA, the scenario that I suggested in the Clinton era just did not seem probable at that time. Why would the insurance companies turn on the physicians, and if the companies were doing well, why would they alienate many of their customers by refusing to pay for services and dropping customers when they were ill. Letting insured people die of cancer while they haggeled over the details of the procedure. The policy of only serving the temporarily healthy only scared the them healthy to death as everyone knew that, sooner or later, almost all healthy people would change their status. In truth, the physicians could not believe that the insurance companies would kill the goose that laid the golden egg. But as every stock broker and financial services salesman knows, physicians don’t really understand business. They think of their practice as permanent, at least until they retire. A physician who makes a lot of money in the market or real estate will practice the same kind of medicine as he would if he made less or little in those investments. The physician who had large amounts of money tended to practice medicine the same as when he had little money.
But the business man–especially the financially oriented business man is not as professional. He knows that money is fungible. If the health insurance industry can make enough in ten years, by squeezing all the short term profits out of the system, and then use their political clout that the money buys to stave off reform for another decade, by the time reform is forced on them, they simply take the money and invest in oil wells, clean energy, the super Internet III or whatever. They come out ahead. Besides they knew better than anyone else that they could squeeze money out of the doctors and the hospitals and then raise the rates and get more for giving less–a great business money-making formula. Insurance company executives the country over who were then working for mutual companies and non profit insurance enterprises like Blue Cross and Blue Shield raised money from the other financiers who saw all this coming and turned these venerable organizations that had served the public so well for most of the century into profit making entities. Men who earned a healthy $250,000 a year running a mutual insurance company for the benefit of the insured public, could now make $25 Million and double that with the profits from the stock he owned. There was an orgy coming, and only a fool would miss out. It was a perfect storm so to speak. And these men knew that they only thing that could stop them were the insurance commissioners in the states–notoriously corrupt and ineffectual or the Congress who was well under the control of the insurance industry. Insurance and professional baseball were the only two industries in America which Congress had exempted from the Anti-Trust Laws. Even left wing liberal Senators like Lieberman and Dodd of Connecticut carried the insurance companies’ water as their state was the headquarters of many of the major insurance companies. The industry had the conservatives philosophically, enough stoppage with the liberals with the Connecticut Senators and even middle of the road states like Iowa and Nebraska had major insurance companies that were used to political protection.
What most physicians and reasonable people could not believe was that the insuracnce companies could be as venal as they were. I had an advantage, I had been the President of a small business of 300 odd employees. My wife and I owned the corpotation and providing full coverage life insurance was for us good business. However the exoerience of negotiating with the health insurers was enough to make anyone realize that these people were not to be trusted. The suggestions of the company to “help” us save money were unconscionable and we had to pinch ourselves to know that we were not dreaming: Here are a few examples out of many many more.
“Listen, we can save you significant money by placing a lifetime ceiling on the benefits to any employee–a large number like $1 million.” My wife asked the obvious question of what would happen if an employee got cancer, needed bone marroe tranplants, and was in repeated surgury?” The question was taken to mean “what about the company” when our context was what about the employee who would be cut off when he most needed the insuracne. So the answer was astounding. There are never any company reprocussions in these situations, The employee to reach the $1 million cap would have been out of work for a year or more and not in close contact with the other employees. Most of them will never know that the fellow hit his cap. And if anyone asks, the company says that we really don’t know as we respect the privacy of our ex employees. A few employees may know that he hit the limit and all your people have to do is say someone must have made some poor decisions as $1 million can by any medical procedure in the world.” The insurance man assumed that we had no interest in the health and welfare (as he didn’t) and our only interest was negative reaction of the current work force.
Some time later we went to a large health insurance conference guests of our insurance carrier at the time. A world famous expert was to tell us how company executives could reduce their medical insurance cost. We were skeptical, but sure enough, the fellow recomended a plan that would really work. Here it is:
“Take a look at our payment records for your employees. Note that 20% of the employees get 80% of the money. Now the trick is to get the employees who cost you the big health insuracne bucks off the payroll. Fire the employees who cost you big money when you can.” Another business owner jumped up and challanged him. “It’s illegal in most states to fire someone who is using his health insuracne because there is illness.”
“Yes, employees are often protected by contacts and court decisions. Our statistics have shown that the majority of the high cost medical cases are not the illness of the employees. It is their dependants–wives and children. Identify those employees whose famlies are heavy users and don’t promote them, give them the poorer assignments and if you do this right, they will get a job elsewhere and someone else will pay for the family that is using more than its share of resources. If he screws up, don’t give him another chance. You think that you are paying him $40,000 a year and you think he is worth it. But think again. He is costing you $80,000 or even more, Its a bad business decision to keep mhim around. It’s not fair to the company shareholders or to the other employees for that matter.
My wife and I developed a cynicism that has been with us ever since. I didn’t think anything could be worse–until that is when our warehouse manager came down with bone cancer. After the bills had passed $25,000 dollars, almost every bill was challanged by the insurance company, every physician’s judgment was being questioned. When my wife asked the company for an explanation, they were quite up front about their strategy. There are a lot of grey areas in these complciated cases, we have a special team that knows how some doctors and hospitals will take advantage in such a sitution. If the comopany makes it difficult to collect bills the docs and hospitals will rip off some other patient.” Of course my wife asked what if all the treatments and charges were legitimate. The man’s wife was under enoumous strain and she has to spend a couple of hours every day to keep up with the paperwork–all with three young children to care for and a terribly ill husband. The cash flow was so terrible that she often had to use her food money to pay the pharamacy bills while reimbursement was contestes. For 4 months my wife spent about 2 hours a day helping as the bills were now over $200,000. A bone marrow transpant at John’s Hopkins was the best shot and it took weeks to get the OK from the insuracne company. We cancelled the policy after we got another company to bid and we paid more money bet we were determined to avoid the hassle and pain for the family. Our insurance broker had tokl us that was exactly what the insurance company wanted. “They want to pay our only 70 cents for every dollar of premium. With this bone cancer case, they were paying out 9o cents. But they were losing money. Their overhead was 18 or 20 percent, so why keep the account?”
The fact that there had been a contract; the fact that the insurance comopany had made record proifts that year. Good health insurance management required getting rid of all costly cases–one way or another.
Two years later, we put our health insurance out for bids and sure enough the VP of the company that had wanted to get rid of us came to throw is hat in the ring. I observed that we had thought that his company wanted to be rid of us and not have us as a customer. The response: “Oh not at all, you were an excallent customer and we have a package that is perfect for yor. You were just unfortuante enough to have one of those very expensive cases. It can happen to anyone. But I understand that your warehouse manager died 6 months ago, so there is no reason that we should not do business now.”
I restrained my urge to commit asault, and decided to let the fool and his company spend the money to prepare a bid but there was no way that we would ever do business with that firm again. But it was my wife and I who were naive. All the companies did the same thing one way or another. So I had learned more than I ever wanted to know about health insurance companies and their ethics. So when I warned Cousin Howard about the danger to the doctors, I must confess that I did not ever suspect it would be so egregious. The more of an upper hand they companies got, the harder the swatted with it. And so they did. The insurance companies, now much stronger because they included the old non-profits and mutual firms converted to profit making companies, saw Obama win the Presidency and Congress with Health Reform, the central promise of the campaign. Then they showed why they were as highly paid as they were. They played Obabma and his people “like a fiddle.” By pretending that they might support the President’s plan, they got the assurance that they would INCREASE their volume by 15% (the formerly uninsured Americans who would have subsidized insurance) and the private firms would not be replaced by a single payer system which would save 20 to 30 percent of the nation’s entire health bill.. In return they would give up the right to screw the insured and those with previous conditions in the most egregious manner. That would cost them big time, but they would replace their lost profits and get even more from the greatly increased number of covered people, paid for with taxpayer money. Once the Obama health reform got into trouble, the insurance companies switched sides and opposed the whole thing. They realised that if Obama were to get reform, the worst they would have would be the deal they had made origianlly which put them ahead of the game. And if health reform goes down or goes Republican, the insurance companies get to continue their unconscionable but profitable practices and raise rates until in another 4 to 8 years the public rises up and there is real reform. The Republican “alternative plan” had some attractive features, but continued to allow the insurance companies to refuse to insure anyone who was sick with a “previous condiaiton.” They refused to prohibit the insurance companies from taking people’s insurance premiums and then canceling the policy if the patient or family would have the temerity to get sick or injured.
There would be a day when public anger would turn the tables, but the insurance executives were not afraid of the money being taken back. THey knew that the American Constitution protects the insurance companies. When there is the day of reckoning, the insurance people just cash out and take their fungible assets (money and investment positions) to some other ventures. Insurance is not like the auto industry where cash is tied up in factories, inventory, robots, patents and sunk research costs. They can take the money and run and there is no way an angry population can disgorge it or have “clawbacks.” The insurance companies have already won. The only things left to decide is how much the country will loose. When will they no longer be allowed to control the American health care system and then who will. My own suggestion is for the Physicians and other health professionals to control the practice of medicine with no control from the Federal government. And let the Federal government control the business and financing of medicine. Can the doctors be trusted? Can the Government be trusted? Possibly not, but if either is unworthy of the trust, American medicine will become second class for decades or more just when medical science is making its greatest breakthroughs. I would rather place my bet on a profession who at its worst has generally tried to help people and were inadaquate as business managers and a Government which at its worst, really tried to make things better for the nation, than to bet on a group of brilliant financiers who understand fungibility and know how to manipulate the rest of us to their advantage. But I have to check with Cousin Howard and see what he and his colleagues think these days.
Entry filed under: Health & Medicine, History, Politics. Tags: American Medical Association, Barak Obama, Bill Clinton, Congress, Demcrats, doctors, fungibility, health, health care reform, health insuracne companies, hospitals, Howard Eigen, insurance companies, physicians, Republicans.