Obama's False Friends of Health Reform

I'm hoping President Obama realizes that some of the folks who've been currying favor with him are not, as they claim, bringing "solutions" to the health care reform table. Most Americans -- especially those who voted for him -- want nothing to do with the kind of "reforms" they are peddling.

If you watched the president's televised Q&A on ABC last Wednesday night, you probably noticed that one of the people in the audience was Ron Williams, the chairman and CEO of Aetna, Inc., the nation's third largest health insurer, and currently one of the most profitable. But there are a few things that you should know about Williams.

Back in the '90s, Aetna set out on an acquisition binge in its quest to become the biggest health insurer in the country. It got there by the end of the decade after spending billion of dollars for several competitors. By 1999 it had 21 million health plan members, the most any insurer had ever had at the time.

But, as often happens after buying sprees, Aetna soon came down with a bad case of buyers' remorse. As it turned out, some of the customers it had paid top price for were not as profitable as Wall Street analysts and the big institutional investors who owned most of Aetna's stock expected. When they took a closer look at what Aetna had bought, investors started deserting the company in droves. As a result, the company found its stock price in a free fall.

As the Wall Street Journal reported on August 13, 2004, Aetna's pretax profits as a percentage of revenues began falling dramatically after peaking at about 12 percent in 1998. By 2001 the company was a basket case as far as Wall Street was concerned. It had to do something, and fast.

Probably the most important thing it did to turn itself around was recruit Williams from rival WellPoint, the ambitious for-profit company that was gobbling up Blue Cross and Blue Shield plans from coast to coast.

As the Journal reported, Williams promptly ordered a $20 million revamp of Aetna's data systems. Health care analyst Joshua Raskin told the Journal that the new system that emerged from that investment, which Aetna dubbed the Executive Management Information System (EMIS for short), was "the single largest driver of the Aetna turnaround." Why? Because it helped Aetna "identify and dump unprofitable corporate accounts." How did it do the dumping? By jacking up premiums to unaffordable levels.

By the time the dumping -- or purging, as it is frequently called in the industry -- was done, Aetna had shed eight million of its 21 million members. It shrank so much that by the time it emerged from the Ron Williams-led turnaround, it had fewer members than when the company started out on its multi-billion dollar buying binge.

While Aetna was shedding those eight million men, women and children, by the way, it also reportedly shed 15,000 of its employees. Wall Street likes it when insurers dump employees, too, because the workers who don't get the ax have to assume the responsibilities of their laid-off colleagues. That theoretically boosts productivity, which Wall Street likes. And reducing the payroll leaves more money for profits.

The health insurance industry and its allies are working hard right now to convince you that the creation of a public insurance option would put a government bureaucrat between you and your doctor. As the 2004 Wall Street Journal article makes it clear, however, EMIS was at its heart a system that put corporate bureaucrats between people and their doctors. Here's what it saId:

Mr. Williams says EMIS helps him ferret out creeping costs so Aetna can react quickly. Sitting in his first-floor office in Hartford overlooking the Aetna parking lot, he taps on his keyboard to see whether some of the health insurer's members are visiting emergency rooms too much for nonemergency reasons, such as for the flu or a sprained ankle.

Did that send a chill up your spine like it did mine? And know this, if Aetna's CEO can keep an eye on your trips to the doctor, so can the CEOs of all the other big insurers.

The insurance industry claims that this time it really and truly supports legislation to reduce the number of people without insurance, that they've changed so much since 1994 -- when they said the same thing but did everything they could behind the scenes to kill reform -- that you can and should believe them now.

The next time you hear someone from the industry talking about how much they are committed to reform, remember that just a few years ago, the CEO of one of the biggest health insurers was the mastermind behind a business strategy that cost thousands of workers their jobs and millions of other people their insurance coverage. That's the real "solution" the industry is bringing to the table -- and the kind of reform Wall Street can really get behind.

Ron Williams has been richly rewarded by Aetna's board of directors for leading the company back to a level of profitability suitable to Wall Street. They tapped him to succeed Jack Rowe as CEO when Rowe retired in 2006. And they rewarded him with compensation totaling nearly $65 million over the past two years.

(Rowe, by the way, was paid $22.2 million in 2005, his last full year as CEO. He played a big role in hawking the high-deductible plans that Aetna and the other big insurers are now trying to push us all into. He claimed that Americans enrolled in managed care plans have been too sheltered from the real costs of health care and that we need to have more "skin in the game," by which he meant that we should have to pay a lot more out of our own pockets when we go to the doctor and pick up our prescriptions, even if we have health insurance. The median family income in the United States is just $50,000, which means that most of us already have a lot more skin in the game than Dr. Rowe and Ron Williams will ever need to.)

The insurance industry's two biggest lobbying groups -- America's Health Insurance Plans (AHIP) and the Blue Cross and Blue Shield Association of America -- warned members of Congress in a joint letter a few days ago that the creation of a public insurance option would unravel the country's employer-based system.

As they say where I come from, that dog won't hunt.

It is the insurance company executives -- in their never-ending quest to meet Wall Street's profit expectations -- who are doing the unraveling by purging employers whose workers have the audacity to file claims when they get sick or injured.

A final point about Ron Williams: Not only are he and his fellow CEOs trying to kill the idea of a public health insurance option -- a central part of candidate Obama's health care proposal -- but he is the leading advocate of an idea Obama rejected and which differentiated his proposal from Hillary Clinton's -- the imposition on all of us of an "individual mandate." Many insurance executives were wary of such a mandate because they don't like the government mandating anything, especially those pesky state mandates that force them to include certain benefits in the policies they sell. Advocates of an individual mandate eventually brought the skeptics, including many of AHIP's board members, around to their way thinking by persuading them that insurers could make billions more in profits if every American had to buy an insurance policy from them. Now you know the real reason behind AHIP's shift from neutrality on the issue to full-fledged support. It's all about the money.

Wendell Potter is the Senior Fellow on Health Care for the Center for Media and Democracy in Madison, Wisconsin.


Do you think socialized medicine runs itself? Sure there will be lots of people laid off in the private sector but some of them (or the equivalent) will have to be hired by the government. The difference is that there will be only one computer system for all of them to learn and no chance for fraud since all physicians will input their data into the same system (no doctor hopping getting multiple prescriptions). Also there will be no need to repeat tests that the last physician did because the results will be all in the same system. Socialized medicine works. All modern westernized countries use it and they are a lot healthier than we are at much less cost. Do a little traveling and find out. Better yet, take up residence in Canada, Germany or England like I did. Or pick another European country of your choice. Their health care systems are so far ahead of ours that the differences will shock you!

Medicare and HMO's are the worst systems possible. Americans have amuch greater recovery and life expectancy rate than any country in the world. I agree with you that the insurance companies should not be in the business of making profits and awarding CEO's outragious salaries and benefits etc. My husband had an experience with a HMO when he was paralized and could not walk. He needed a wheelchair and the operator at the HMO told him no they would not get him one and he asked what was he supposed to do and the answer was he could crawl on the floor if needed, but that they would not pay for a wheelchair. On the other hand Medicare did get him a wheelchair but then his father was diagnosed with alzheimers by his long time doctor; father in his 80's, did not test for any other reason his dad was having trouble with memory. He ended up dying of a brain tumor. Medicare doctors are paid bonuses for not doing tests on their elderly patients. So it will be interesting to see what gov't. coverage will do for the over 70 group who are getting larger every year. I believe that those who can afford to pay for their own medical care should do so and not receive Medicare coverage. They can afford multimillion dollar condos and homes but have the gov't. pay for their health care. Shame on them and on American senators and congressmen to allow this to happen. They don't care about anybody else in this country. We also should not be supporting those people who are in this country illigally, in any way. They do not pay taxes, social security etc. and neither do their employers. And I will hope and pray that God will continue to bless America.

(Linda Cosgrove Spence ) "<em>Americans have a much greater recovery and life expectancy rate than any country in the world.</em>" You really need to check out the facts instead of relying on hear-say you may have been given by someone else. In fact, Canadians live longer, on average, than Americans do... and have for some time. <a href="http://www.prb.org/Articles/2004/WhyDoCanadiansOutliveAmericans.aspx" title="Why do Canadians outlive Americans?">Why do Canadians outlive Americans?</a> Well... It may have something to do with the fact that the general health of the U.S. population<a href="http://vorg.ca/2283-Healthcare-battle-Canada-vs-USA" title="Health Care Battle: Canada vs U.S.A"> is lower than in most industrialized countries</a>.

Likely got coverage elsewhere? Have you tried applying for coverage with a pre-existing condition lately? And got a job somewhere else? With the unemployment rate the way it is, I doubt that many of them were able to find another job. And even if they were lucky enough to get hired, I'm sure their compensation isn't the same as their former job. You have some of the most terrible logic I've seen in years. You seem to think that capitalism is the only way to do anything. The nature of capitalism is to take as much as possible with giving as little as possible. Do you really think that model applies that well to something like healthcare? Conservatives bitch about the amount of drug addicts out on the streets and the country's demand for drugs, but do you think these ppl can afford <a href="http://www.edrugrehab.com?">drug rehab</a>? Locking addicts in jail won't do anything but drain the state's money and turn them into real criminals.

Perhaps Americans should organize and hold a nationwide boycott of the healthcare insurance industry. Quit buying insurance from them and lining the insurance companies, medical industry, and pharmaceutical industry's pockets. They act like own Americans, we're their property, and they can screw us. Meanwhile, they line their pockets with the billions in insurance premiums people pay.

Mr. Potter Thank you for coming forward and vocalizing the truth about what goes on in the health insurance industry. I hope they listen to you. Dr. Christine Eady

I am a RN. I have been employed in many different clinical settings over the last 35 years. I have also been employed as a case manager for very large health plans. I certainly could recount single cases where I felt extremely conflicted - walking a fine line between patient advocacy and corporate earnings. I feel very strongly health plans should not be publically traded. But I think it woud be foolish to throw away the baby with the bath water. There are many examples of efforts on the part of health plans to deliver quality health care. I believe the health care reform that is in play now in Congress should look to a private-public enterprise of which there are many examples around the country. It seems obvious any attempt to provide health care services to an additional the 40 million people is a enormous undertaking and it will take many years to be fully implemented. I would hate to see some of the health plans and their successful programs be disgarded and the wheel once more re-invented at great cost.

"There are many examples of efforts on the part of health plans to deliver quality health care." Insurance companies and other health plan administrators don't deliver any health care. They are financing funnels who charge money to either administer a plan for a corporation sponsoring a health plan, or to deny coverage to boost profits of an insurance company. Insurance companies aren't practicing doctors, don't perform operations or don't practice medicine. Insurance companies serve no purpose in health care except to add costs and deny needed care to make additional profits. They add nothing to health care except for providing a vastly overpriced financing method.

Don't hold back now... tell us what you really think. Great posting! The health insurance industry is comprised of bloodsuckers, parasites, and do nothing to elevate the health care people receive. They siphon off the profits that would otherwise be cost-savings and better care.

Even if the insurer was Mother Teresa and all of the staff saints, insuring medical care would be a disaster. It comes down to economics, which I will try to make as simple as possible. When medical care is treated like a market, as with insurance, it does not respond to price signals well. The prices can go up to a unbearable level without a drop in demand. Only when the price goes beyond that breaking point, and only if the doctor or an intermediary fails to adhere to the Hippocratic oath, only then does demand start to shrink. The introduction of insurance does not change the factors determining those threshold prices for the patient. So an increase in the fees which the doctor or hospital presents in a bill to an insurer will have no effect on demand until the out-of-pocket expense to the patient approaches those same thresholds. Thus 80% coverage (20% copay) insurance causes the market for a medical procedure to increase the medical costs fivefold (500%) so that there is no change in patient out-of-pocket expenditure. Thus, both the present circumstance (private insurance) and the Obama plan (public insurance) fail to address the reason why medical costs are so high: insurance. Note that both require that employment pay those inflated costs. The private insurers get their premiums through benefit packages which companies make available to their employees, now increasingly mandated. The public insurers get theirs through mandatory Medicare payroll deductions and, if that fails, through the income tax payroll deductions. Thus, both approaches will cause the collapse of our health care system as unemployment worsens. See my site for an alternative providing real health care reform. Thanks, CPK