In May, 2009, President Obama held a high-profile event in the White House, convening leaders from the health care industry to a meeting to discuss reform of the U. S. health care system. Participants included representatives from the insurance, drug, medical device, and hospital industries as well as business, labor and organized medicine. This "alliance" for health care reform produced a voluntary, unenforceable "commitment" to reduce the costs of health care by 1.5 percent, which would amount to some $2 trillion over the next 10 years. Promises were vague, such as promising to "cut both overuse and underuse of health care by aligning quality and efficiency initiatives". The White House was quick to call the meeting "an historic day, a watershed event, because these savings will help to achieve comprehensive health care reform."
Subsequent weeks and months, however, soon showed the "charm offensive" by major stakeholders in our medical industrial complex to be a sham alliance as their real agendas and differences among each other became more obvious. In this and the following posts, we will revisit each major group's pledges, agendas, tactics and likely rewards as the national debate over health care reform intensified in Congress and across the country.
The pledge by the insurance industry was simple -- if all Americans are required to buy health insurance, the industry would be willing to charge sick people more for coverage than for healthy people. The industry would abandon pre-existing conditions as an underwriting principle, accept all applicants for insurance, and stop charging women higher premiums than men. As the CEO of the industry's trade group, America's Health Insurance Plans (AHIP), Karen Ignagni said that insurance companies "accept the premise that the system is not working today and needs to be reformed."
As the second largest private insurer, UnitedHealth Group even offered up 15 recommendations that could save $540 billion in federal health care costs over 10 years, including such steps as "providing patients with incentives for going to high-quality, efficient physicians, granting physicians incentives for providing comprehensive and preventive care, and reducing unnecessary care". UnitedHealth's Center for Health Reform and Modernization also attached speculative cost savings in these areas: "providing nurse practitioners at nursing homes to manage illness and reduce avoidable hospitalizations ($166 billion), using evidence-based care management with preventive care to reduce avoidable hospitalizations ($102 billion), and analyzing claims before they are paid to prevent duplicate billing and other administrative errors ($57 billion).
The industry's agenda -- gain enormous markets for new enrollees in both private and public plans, many enabled by government subsidies extended to those unable to pay the premiums; as many as 50 million new enrollees were in play.
That its agenda was more self-serving than supportive of real reform came clear as the industry took to the battlefield on these fronts:
• Vigorously oppose any public option as an effort to bring competition to the market, claiming that it could not be a level playing field and would put them out of business.
• Oppose any controls or caps on premium rates.
• Fight against any cuts in overpayments to Medicare Advantage plans or attempts to set medical-loss ratios too high (the lower they are, the more income insurers profit).
• Lobby in favor of setting the lowest possible minimal standards for insurance coverage.
• Launch ad campaigns to tell the public how the industry is doing its part to support health care reform.
• Increase its campaign contributions as shown in Table 1. (Terhune, C, Epstein, K. Why health insurers are winning. BusinessWeek. August 17, 2009: 036.)
Campaign Contributions by Major Insurers
Insurer 2005-2006 2007-2008
Blue Cross/Blue Shield $2,451,716 $3,125,921
AFLAK $1,924,335 $2,211,030
UnitedHealth Group $1,045,877 $1,568,634
Aetna $674,950 $721,957
AHIP $510,561 $591,750
Source: Center for Responsive Politics
The insurance industry has continued to realize high profits despite the recession. Profits for the major insurers in 2007 are shown in Table 2:
Profits of Five Major Insurers in 2007
UnitedHealth Group $4.65 billion
WellPoint $3.34 billion
Aetna Inc. $1.83 billion
Cigna Corp. $1..11 billion
Humana Inc. $834 million
Even as many people lose their jobs and health insurance, some insurers continue to post large profits. Despite a continued fall in commercial enrollees, UnitedHealth Group, for example, reported a 155 percent increase in second-quarter earnings for 2009 compared to 2008, largely as a result of strong growth in its Medicare and Medicaid business.
During the August 2009 recess of Congress, lucrative future rewards were being projected for the insurance industry. An in-depth article in BusinessWeek (Ibid) had this to say:
"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, Aetna, and WellPoint. 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."
Wall Street, of course, has followed the health care debate with intense interest, since the health care industry accounts for one-sixth of our economy. Within hours after the Obama Administration signaled its willingness to consider alternatives to a public plan, trading in UnitedHealth and WellPoint jumped about three-fold as investors placed new calls and puts. Health insurance stocks were pushed higher despite a triple-digit loss in the broader markets. Tracy, T. UnitedHealth, Aetna, WellPoint get bullish signal.
Even as partisan and internecine battles among stakeholders reached new levels as members of Congress went home to hear impassioned protest from many constituents, President Obama was still seemingly pleased with the level of stakeholder support for health care reform. In a Rose Garden press briefing: "And the fact that we have made so much progress where we've got doctors, nurses, hospitals, even the pharmaceutical industry, AARP, saying that this makes sense to do, I think means that the stars are aligned and we need to take advantage of that."
Noting the political gulf between House and Senate bills over health care reform, especially the Senate Finance Committee's strong opposition to a public option, AHIP naturally continued to campaign for a bipartisan health reform bill, trusting that the Senate would defend its interests
John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008. With permission of the publisher, Common Courage Press
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