Marketing Bad Health Care Decisions as a New Form of Stealth Health Policy Advocacy

A remarkable set of video advertisements appeared a few weeks ago that seem designed to frighten people into making bad health care decisions.

The "Bad Uncle Sam" Advertisements

As described by Businessweek,

In the first ad, dubbed 'The Exam,' a young woman who has signed up for Obamacare arrives at a medical facility and changes out of her clothes and into a flimsy hospital gown. Following the instructions of a doctor, she reclines on a hospital bed and spreads her legs into a pair of stirrups. The doctor leaves the room. Then, suddenly a mascot wearing a plastic Uncle Sam mask and sporting an unwavering grin—Creepy Uncle Sam!—pops up between her legs. As she screams, the ad pans out. 'Don’t let government play doctor,' reads the kicker.

The final message, for some reason not described by Businessweek, was

Opt out of ObamaCare

Similarly,

A second spot, entitled 'The Glove,' follows a similar narrative arc. A young man sits in an examination room and tells a doctor that he’s signed up for Obamacare. 'I saw the ads and figured, why not?' he says. 'Okay,' says the doctor. 'Take your pants off.' The man drops his trousers, reclines on the hospital bed, and brings his knees to his chest. The doctor leaves the room. Behind the young man, Creepy Uncle Sam pops up, raises his hand into the air, snaps on a latex medical glove, and wiggles his fingers menacingly.

Once again, the final message is

Opt out of ObamaCare

The Ostensible Message of the Advertisements

Again per Businessweek, the ads were sponsored by " Generation Opportunity, a Virginia-based conservative organization funded in part by Charles and David Koch,..."  According to an article on the Atlantic website, Generation Opportunity means to be

urging Millennials not to sign up for insurance on the health care exchanges created by the Affordable Care Act. It claims that paying the individual mandate's tax penalty and buying insurance that doesn't meet government coverage rules is a 'better deal' for young people.

As many have noticed, that is not the implication of the visuals.  As an opinion piece in the National Journal put it,

 the message is that the government is trying to forcibly rape women with a blunt metal instrument.

Furthermore, the final written message of both advertisements is not a nuanced one about where one should seek to go to buy health insurance.  It is simply "opt out of ObamaCare."

A Nonsensical Premise

Also, the premise of the advertisements is nonsense, to put it politely.

ObamaCare does require health insurance to pay for various kinds of preventive care without requiring patients to pay deductibles.  It does not make physicians and nurses provide these services.  Whether a patient gets, for example, a pelvic exam, is up to that patient and her doctor or nurse practitioner, not the government.  Of course, the legislation does not remotely suggest creepy government agents should perform pelvic or rectal exams. 

Thus, the entire point of these advertisements seems to be to generate irrational fears that will drive young people away from health insurance now available through ObamaCare.

Stealth Health Policy Advocacy by Means of Marketing Bad Personal Health Care Decisions

In the US, the Affordable Care Act, aka ObamaCare, still arouses a lot of controversy.  There are many people who have been critical of various aspects of the law.  (In fact, we criticized it for not addressing most of the issues about which we write on this blog.)  Furthermore, there is at least a large minority who want to repeal the law.  So there has been an ongoing barrage of persuasive messages meant to support or criticize various aspects of the law, and to support or discredit the entire law.

However, the "Bad Uncle Sam" advertisements are different.  They do not urge people to vote for any particular person or initiative.  They do not urge people to express their own policy views.  They do not ask for contributions to political or advocacy organizations.

Instead, they urge people to make particular health care decisions.  Despite the more nuanced messages espoused by Generation Opportunity when interviewed, their advertisements try to irrationally scare people away from purchasing health insurance made available by ObamaCare.

They are aimed at young adults, who are less likely to have spare funds to pay for expensive health insurance, less likely to get sick or injured, and more likely to feel relatively invincible.  However, were an uninsured person, even a young one, to suffer a significant illness or injury, the resulting costs in our dysfunctional and extremely expensive health care system could drive them bankrupt.  This is all the more likely since the uninsured are likely to be charged "rack rates" for health care, while insurance companies negotiate discounts for their subscribers.  Furthermore, uninsured people may put off needed tests and treatments due to financial concerns, yet doing so may lead to worse health care results, or even death.

An article in the St Louis Post succinctly listed the costs associated with some unlucky outcomes for uninsured young people, for example, 

Suppose you twist your knee playing soccer. Without coverage, fixing it will be at least $20,000 to repair the ACL ligament, according to an estimate from Costhelper.com.

Can’t pay it? Buy some crutches. They run about $30. You’ll also take on the risk of tissue damage and early arthritis.

Personal finance columnist Jim Gallagher concluded,

 although the vast majority of young adults stay healthy, serious trouble is not rare. Those without insurance are playing the odds. If they win, they’ve saved the insurance premiums. If they lose, they’re ruined.

Generation Opportunity may claim to be

 a free-thinking, liberty-loving, national organization of young people promoting the best of Being American: opportunity, creativity and freedom. 

However, what it appears to be doing is urging bad health care choices  based on a false premise to serve an ideological agenda.

Thus, its advertisements are a unique and uniquely bad mixture of marketing (of bad decisions) and stealth health policy advocacy.  If they want to publicly oppose ObamaCare, that is their right.  Fooling people into making bad decisions in the hopes that this will financially burden ObamaCare is completely unethical and amounts to disinformation, in my humble opinion.  The leadership and funders of Generation Opportunity ought to be ashamed of themselves.

The US has many major health care problems.  They deserve discussion and debate.  Disinformation that tries to confuse people into making bad personal health care decisions is likely to make our health care dysfunction even worse.  

The Market Made Us Do It: Increasing Low Level Employees' Health Plan Deductible While Paying Executives Millions

A small news item from the Seattle public radio station, KUOW, provides our latest example of the contrasts between how hired executives and "regular" employees are treated even at non-profit health care organizations, and between these organizations' actions and their stated missions. 


Hospital Employees Strike Against Reductions in their Health Insurance


The report was about a small job action going on at a single hospital.  Ironically, the strike is over the employees' own health insurance. 

Along with housekeepers, nursing assistants and other staff, surgical technologist Bob Wilson is a member of the Service Employees International Union local 1199NW.

'You see all the guys on TV that hand the doctor the scalpel? That’s me,' he said from the picket line on Friday. 'We’re out here because we think we deserve affordable health care.'

The union and Providence St. Peter have been in contract negotiations since last summer. SEIU represents about one fourth of the hospital's employees.

In January, employees' health insurance changed. The union says the higher deductibles and out of pocket expenses hurt for a union whose median member makes $31,000 a year.

I’m forgoing care,' Wilson said. 'I’m not going and seeing a doctor unless I absolutely have to. A lot of people here at Providence are doing the same thing: They’re trying to save their money.'

An piece on the Huffington Post further described the strikers' concerns about the new health plans' deductible amounts:

The employees' new $3,000 annual deductible for families is 10 percent of the average worker's pay and a sharp boost from the $750 yearly deductible in their previous health plan.

Millions for Hired Managers 


The first contrast is between the strikers' relatively low pay and modest insurance coverage with the compensation given to the hospital system's top managers.  Per KUOW,

Providence St. Peter is part of Providence Health & Services. The Catholic organization runs hospitals in five western states. Its headquarters is in Renton.

Furthermore,

The union says Providence can afford to do better given what it pays its CEO, John Koster.

The union just learned of Koster’s 2011 pay on Thursday after reading Providence’s latest filing with the IRS. Providence reported Koster’s compensation as $6.4 million, up from $3.1 million in 2010.

Also,

Providence’s IRS filing reveals that 19 employees of the Catholic ministry earned at least $1 million in 2011. Eight of those employees earned at least $2 million. The top five executives earned more than $3 million each.

Note further that the organization's filing acknowledged that some of its most highly compensated employees received "first-class or charter travel," "tax indemnification and gross-up payment[s]," discretionary spending account[s]," "housing allowance[s] or residence[s] for personal use," and "payments for business use of personal residence." 


Serving the "Poor and Vulnerable?"

The second contrast is between the hospital system's stated mission and how it treats different kinds of employees.  The Providence Health & Services web-site states:

Providence Health & Services is a not-for-profit Catholic health care ministry committed to providing for the needs of the communities it serves – especially for those who are poor and vulnerable. Providence Health & Services continues a tradition of caring that the Sisters of Providence began more than 155 years ago.

It does not seem unreasonable to claim that low level employees making about $31,000 a year given a health plan with a $3,000 deductible are likely to become poor and vulnerable were they to be unlucky enough to sustain any major illness or injury.

The Market Made Us Do It

However, instead of considering its mission, Providence Health & Services spokespeople invoked the market as justification for its less than generous health plan versus its exceedingly generous pay of top managers.  

In an email to KUOW, "Providence officials" described its contract offer and health plan as "competitive with other health care providers."

Regarding its compensation practices,

 In an email, Providence spokeswoman Colleen Wadden said Providence sets its compensation the same way, whether it’s for housekeepers or executives: Base salaries are set at the middle of the market.

Note that we have discussed the "market made me do it" justification for huge executive compensation from health care organizations as a talking point that is used again and again by public relations operatives and board members (e.g., look here).  Its use in this case, though, is particularly unfortunate. 

Summary

In this example, we have a huge health system (with over $3.6 billion in revenue in 2011) whose mission is to be a "Catholic health care ministry" that serves the "poor and vulnerable" also claiming that the almighty market means it must pay its executives more than one hundred times what it pays its lowliest employees, compensate them with first class travel, tax gross-ups, and so forth.  Moreover, presumably this dictatorial market also makes sure this ministry cannot provide its lowliest employees with health insurance that seems sufficient to prevent them from becoming poor and vulnerable should a severe illness strike.  

Maybe Providence Health & Services executives and public relations people should read what one prominent Catholic theologian wrote (here, and see this post) about the market in health care:

Hospitals and other facilities 'must rethink their particular role in order to avoid having health become a simple 'commodity,' subordinate to the laws of the market, and, therefore, a good reserved to a few, rather than a universal good to be guaranteed and defended,' 

That theologian was the current Pope Emeritus, Benedict XVI. 

So this is a new, vivid example of how leaders of big health care organizations may preach about the mission while acting to put their own self-interest way ahead of that mission.

 As we have said until blue in the face,...

Health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

Another Revolving Door Variant: From Academia with Millions in Medtronic Royalties, to the White House, to the Health Care Service Corp

The revolving door spins, and where it will stop, nobody knows...

In October, 2010, we noted questions about how Dr Stephen Ondra got to be a Senior Policy Adviser for the US Department of Veterans Affairs. A veteran who was a neurosurgery professor at Northwestern University, Dr Ondra had received millions of dollars in royalties from device manufacturer Medtronic, whose CEO supported his appointment to the government position  (see this post).  As soon as he was appointed, he publicly opposed a nominee for US Surgeon General who had been critical of the medical device industry, and its financial ties to doctors.

After going to Washington, Dr Ondra apparently also served in the Executive Office of the President, in the White House, but returned to Northwestern University in 2012.  However, he did not stay there for long.

This month, a post on Forbes indicated he is moving on again, and back to the corporate side of health care.

the nation’s fourth-largest health insurance company is naming a key former health advisor to President Obama as its top doctor.

Dr. Stephen Ondra, will become senior vice president and chief medical officer at Health Care Service Corp., the Chicago-based parent company of Blue Cross plans in Illinois, Texas, Oklahoma and New Mexico. The plan has more than 13 million health plan members and is looking to grow even more, announcing last year a proposed partnership with the Blue Cross plan in Montana.

Health Care Service Corp is a mutual insurance company, that is, a company owned by its policy-holders rather than stock holders.  However, that does apparently not make it any more ascetic than a typical for-profit insurance company, at least in terms of generosity towards its top hired executives.  As Crain's Chicago Business reported in 2012,

New federal regulations intended to force health insurers to spend less on administration didn't keep the parent of Blue Cross & Blue Shield of Illinois from paying CEO Patricia Hemingway Hall more than $12.9 million in 2011, a 61 percent raise.

The Health Care Service Corp. chief executive's total compensation last year dwarfed the $8 million she received in 2010, according to a filing with the Illinois Department of Insurance. The 2011 increase was fueled by an $11.8 million bonus, which was 69 percent above her 2010 bonus of $7 million.

Ms. Hall wasn't alone in getting a big raise at Health Care Service, whose insurance business booked net income of more than $1 billion in 2011, for the second straight year.

The 10 highest-paid executives at the Chicago-based mutual company — which operates Blue Cross plans in Illinois and three other states — earned a collective $41.7 million, 65 percent more than the $25.3 million they were paid in 2010.

 If Dr Ondra's new position puts him among the latter group of executives, he too stands to make millions a year. 

So to recap Dr Ondra's career so far, in 2010 he was a medical school professor who had earned millions in royalties from Medtronic.  He then went to top leadership positions in the US Veterans Department and Executive Office of the President.  He returned briefly to Northwestern University, only to leave again for a top executive position in for-profit insurance company Health Care Service Corp, where he is likely to make millions more.

Thus Dr Ondra is our latest interesting example of the "revolving door" phenomenon in health care.  He started as an erstwhile academic physician but with a very major financial relationship with a medical device company.  He then went through the door the first time into the US government, and then a second time from the government to a for-profit insurance company, with just a brief stop-over in academia.

By the way, it appears that all of this is quite legal.  It does again raise questions about whether health care leaders in government with previous relationships with industry might still feel undue sympathy to the interests of industry, as might government leaders who can expect future jobs in industry.

Moreover, this case, like previous cases we have discussed,  indicates how leadership in academic health care, corporate health care, and the government tend to blend together.  Leaders of one type of organization have more and more in common with leaders of the other types of organizations than they do with their lesser ranked colleagues, and certainly than with other health care constituencies.  So the more the revolving door revolves, the more we wonder about the corporatism of health care, about how health care seems to be increasingly run by an amorphous group of academic/ corporate/ government leaders whose loyalties may be more to each other than to academic and professional values, patients' and the public's health, and government of, by and for the people.

Where is the risk?

That’s the question Thomas Cox, an RN with insurance experience and expertise, says should be asked about any health care financing mechanism.

The whole idea of insurance is distributing risk widely so that it can be shared over a wide group of people and thus become manageable. That’s why people need insurance at all, and that’s also why schemes that put too much of the onus on individuals are a very bad idea – as has happened in recent years to a number of people,  the “insured” individual can incur costs that are more than he or she can bear.

In general, insurance is most solid when it’s over a larger group. Each major increase in group size distributes the risk further and makes the healthcare financing system stronger. Cox has an interesting paper on this which he presented at an American Statistical Association meeting.

In general, large insurers are an order-of-magnitude more sound than small ones, and nationwide insurance systems (such as Medicare) have a distinct actuarial edge over state-based insurance (think, for example, California earthquake). For this reason, it’s a shame that the Affordable Care Act (ACA) has state exchanges as its primary mechanism rather than one single federal exchange; risk dispersal is inferior.

Looking at the risk question, there’s a real problem with affordable care organizations (ACOs), which are one of the primary ways the ACA aims to keep down future costs. Essentially, ACOs are a form of capitation, and (Cox maintains and I think he’s right) capitation is essentially a mechanism to push risks down from the insurer or from Medicare to providers. Pushing risks to smaller groups is a terrible idea and will worsen the system. With ACOs having  smaller covered populations, they are far more subject to being the victim of events they can’t control, whether that’s having a large number of huge-cost, high-needs patients in a single year or having a large number of patients affected by an epidemic or natural disaster.

Providers are not trained or qualified to manage risk well, nor do they have the financial reserves to do so.  Cox calls this “professional caregiver insurance risk.”  Burdening providers with a task they are very ill-suited for is a truly bad idea. As Cox comments:

Pushing risks elsewhere removes the only real function we are paying insurance companies for.  If insurance companies are pushing down their risks elsewhere, we are paying them money for nothing of value. Insurance companies don’t provide healthcare – if they don’t manage risk either, what good are they? Of course, if they can sit there and siphon off profits without taking risks, it may not trouble profit-making insurers . . . but it should trouble the public [if they are] issuing policies, passing the insurance risks on to health care providers, and walking off with guaranteed profits year after year.

And (particularly for the ACO that has been “unlucky” and has incurred larger-than-expected costs), the financial risk can be a force for corruption, pushing organizations toward denying care and undertreatment.

Of course, with the enormous amount of unnecessary care and overtreatment in the US medical system today, some ACOs may indeed manage to give really good care for quite a while provided they are reasonably lucky. But this is a strategy with diminishing returns (as unneeded care dwindles in amount). At root, pushing down insurance risk to smaller entities is, Cox has persuaded me, a fundamentally flawed direction.

And I’ll never look at a health care financing proposal in future without asking myself: “Where is the risk?”

Fool Us Once, Shame on You, Fool Us Twice, Shame on Us - The Untrustworthy Pronouncements of Aetna's Former CEOs

A small tempest in the larger US health care reform teapot was produced a few weeks ago when Ron Williams, former CEO of Aetna, declared in a Wall Street Journal op-ed that he no longer supported the health insurance mandate.  The "mandate" for all US citizens to buy health insurance, actually a relatively small tax that would be imposed on people without health insurance, was the central point of contention in the lawsuit before the US Supreme Court challenging the Affordable Care Act (ACA). 

Immediate Past-CEO of Aetna Ron Williams' Abrupt Change of Mind on the Individual Mandate

Williams wrote,

Soon the U.S. Supreme Court will rule on the constitutionality of the Affordable Care Act. I am not a lawyer, or an expert on the Constitution. But as the chairman and CEO of a major health plan, I had a ringside seat to the entire health-care reform process. After much reflection, I have concluded that the federal individual mandate, which requires all Americans to purchase health insurance starting in 2014, will not be upheld.

On this, Williams was soon proven wrong. The Supreme Court upheld the law. However, the tempest was not due just to Williams' reversal of his former opinion, but the role he actually played in pushing his former opinion into the passage of the law, which was really far more than being a "ringside" spectator.

In an August 24, 2009 article, "Aetna's Ron Williams on Health Reform," Forbes' Dan Whelan noted,

Williams, 59, is taking a surprisingly visible role in arguing for change in the health care system. He has met with Obama a half-dozen times (he shrugs off the surname gaffe), has testified four times in front of Senate committees this year and participates in shindigs set up by the many trade groups for which he's a director.

Williams' position echoes that of the HMO industry generally: He's against a government-run plan but favors universal coverage and forcing insurers to take all comers.

As Wendell Potter, the former head of public relations for large health for-profit health insurance company Cigna, who is now a strong industry critic, put it on his blog,

Ron Williams who possibly more than anyone else had persuaded the President to reconsider his campaign pledge to enact reform without making people buy coverage from a private insurer. Candidate Obama’s reform platform differed from those of Hillary Clinton’s and John Edwards’ in only one significant way: both Clinton and Edwards embraced the mandate, which Williams was championing, first behind the scenes and then publicly, on behalf of the insurance industry. Candidate Obama said he didn’t believe it was right for people to be forced to buy something they couldn’t afford.

Williams was the industry’s most visible CEO on Capitol Hill during the debate on reform. He testified at numerous congressional hearings about how essential it was to move the millions of uninsured Americans into private health insurance plans and how an individual mandate was necessary to make that happen. He also never missed an opportunity to trash the idea of a 'public option' to compete with private insurance companies, which candidate Obama had said was essential 'to keep private insurers honest.'

Capitol Hill was not the only place Williams was frequenting during the reform debate. In an August 2009 article in Forbes, Williams was quoted as saying that he already had met with the President six times. When I called the White House to confirm that, a top aide told me it was true Williams had been there many times, adding, 'We’ve found him to be one of the more reasonable ones.'

Williams' recent seeming disavowal of the individual mandate raises the question of why anyone, much less President Obama, trusted him in the first place. After all, he was CEO of Aetna.

2001 Aetna CEO John Rowe Blamed Everyone Else for Health Care Problems

In fact, perusal of my memory, and a few file folders suggested several previous cases in which Aetna CEOs issued pronouncements that should not have been trusted.

First I recalled a meeting in 2001 at Brown during which the then Aetna CEO was honored by giving the Paul Levinger Lecture on "Good Health: Can We Afford It?" (See original Brown news release here.) My memory is that of Dr Rowe blaming just about everybody other than the for-profit health care insurance companies for health care's ills. A Brown Daily Herald article (not currently on line, Baskin B. Health care getting harder to afford, Aetna chief tells Brown U. Brown Daily Herald, November 30, 2001) recounted him blaming "cost inflation," (presumably due to doctors and hospitals), and employers, for whom "quality doesn't matter." He only allowed that insurers were to blame for not giving "better service," but not either rising costs or poor quality. I also recall Dr Rowe being treated with great respect by the audience. After all, this was a prestigious lecture.

However, his talk seemed just the least bit self-serving. If the audience had been aware of his record at the time, maybe we would have been more skeptical.

Mount Sinai CEO Dr John Rowe Extolled Merger with New York University, Jumped to Become Aetna CEO as Merger Began to Fail

By 1993, Dr Rowe was CEO of Mount Sinai Medical Center, and was seemingly at the vanguard of the movement for health care CEOs to be paid a lot. The New York Times reported that the 1993 Chronicle of Philanthropy survey showed him to be the country's best paid non-profit CEO, bringing in total compensation of over $800,000 in 1993 dollars. By 1998, Dr Rowe's big project was pushing concentration of power in health care in the form of a proposed merger between New York University Medical Center and Mount Sinai. According to the New York Times, the plan would be for Dr Rowe to become CEO of the combined entity. At the time, he said,

The advantages of merging hospitals are so great, they far outweigh any hypothetical potential negative impact.

The bond issue needed to finance the merger, however, ran into trouble by early 2000.  Soon after that, Dr Rowe seemingly demonstrated his lack of faith in it by jumping to the leadership of Aetna. It turned out, according to the Hartford Courant, Aetna's offer was just to rich to turn down.

Rowe got a $2 million sign-on bonus to leave Mount Sinai NYU Health and become chief executive of Aetna's health business, the document says. He will also get a $1.4 million retention bonus on July 3, 2001.

Both bonuses are designed to replace money that Rowe forfeited by leaving the giant New York hospital system, Aetna spokeswoman Joyce Oberdorf said.

In addition, Rowe will get an annual salary of at least $1 million and an annual bonus of $1 million to $3 million, depending on how well goals are met, under a three-year employment agreement with two possible one-year extensions.

Rowe, who already received 25,000 shares of restricted Aetna stock and options on 500,000 shares, will get another 100,000 options. The new options will be granted when Aetna spins off its health business to shareholders, or on Jan. 1, 2001 -- whichever comes first. The exercise price will be about $72.73, or whatever price Aetna stock is trading at the time if it's higher than that.

By 2001, the New York Times referred to the merger as existing "in name only." That year, the campuses resumed separate administration. The merger was officially terminated in 2008. Its failure was documented in an Academic Medicine article. (Kastor JA. Failure of the merger of the Mount Sinai and New York University hospitals and medical schools: part 2. Acad Med 2010; 85: 1828-32. Link here.)

If the Brown audience had known that the merger Dr Rowe extolled with such confidence was already failing, but that he was able to leverage his role in its development to go from the country's best paid non-profit CEO to a multi-million dollar a year insurance CEO, maybe we would have felt less guilt about our responsibility for health care's high cost, low access and poor quality.

Aetna CEO Richard Huber's Failure to "Walk the Walk"

In fact, searching through the files showed an even earlier example of an Aetna CEO talking out of two sides of his mouth.

By 1998, an American Medical News article documented the "rocky relations" between Aetna and physicians. By early 2000, Aetna CEO Richard Huber was known as "the managed care executive physicians love to hate," per the American Medical News. His departure was characterized by then American Medical News Street Smarts columnist Dr Scott Gottlieb, as partly due to how

Huber talked out of one side of his mouth about his company's obsessive quest for 'quality' health care -- while out of the other he was screaming at doctors, hospitals and drug firms about controlling costs. Yet Aetna's medical costs were still creeping up. As Richard Huber learned, you can't talk the talk if you don't walk the walk.

Summary

So the unreliability of recent Aetna CEO Ron Williams' advocacy of the "patient mandate," was presaged by similarly untrustworthy pronouncement by two former Aetna CEOs. In each case, the remarks of the particular CEO seemed more designed to promote his immediate self-interest than to provide trustworthy opinion or policy advice.

By the way, this summary should not be viewed as particularly an indictment of Aetna. I am sure I could find equally untrustworthy but self-serving pronouncements from the leaders of many other health care organizations. (Recall the visionary pronouncements of the failed and ultimately jailed CEO of the now vanished Allegheny Health Education and Research Foundation, see post here.)

The recent Ron Williams reversal should serve, however, as a stark reminder that we, meaning physicians, other health care professionals, those who study health care and health policy, policy makers, and the public at large, should be very, very skeptical about any pronouncements about health policy by top executives of health care organizations. They as a group have shown themselves to be remarkably good at doing whatever it takes to buttress their immediate self-interest, including making apparently oracular but ultimately foolish policy pronouncements.

The real question is why these pronouncements continue to be treated with reverence, if not as "visionaries,"  by health care professionals, health care and policy researchers, the news media, health care and medical journals, policy makers, politicians, and the public at large? Why has hardly anyone, besides yours truly, gone back to check the accuracy of their previous pontifications before swooning over their latest ones? Why has hardly anyone examined the accuracy of their predecessors' opinions, given that most executives these days seem to be subject to the same incentives to make things look good in the short term, and never mind the consequences?

Health Care (Insurance) Reform Upheld, but Concentration and Abuse of Power Remain Largely Unaddressed

This may seem like sour grapes, but...  Numerous media reports say that the US Supreme Court has upheld the massive US health care "reform" law (look here for Reuters coverage today, and here, for the Los Angeles Times, for example).  In my humble opinion, the law will likely increase acess to commercial health care insurance, although will likely not reduce the expense of such insurance, or address the misbehavior of many large insurance companies (for example, see our series of posts on Aetna, UnitedHealth, WellPoint, and the insurance industry in general, etc, etc).

The law, as we summarized here, does contain a few provisions relevant to the concerns we raise on Health Care Renewal.  These include measures to improve disclosure of certain kinds of conflicts of interest affecting individual physicians and health care academics, and improved funding for comparative effectiveness research.  We hoped that the law would lead to a more rational way to fix payments to physicians that might supplant the secretive, procedure-happy RUC, but so far that hope remains unfulfilled. 

However, as we wrote in 2010, the legislation will leave most of the other problems we discuss on Health Care Renewal untouched. We thus have one or two small steps for mankind in the US, but no reason for complacency.


The news is not bad.  We are probably on balance somewhat better off with some health care insurance reform than none.  However, we are still a long way from meaningfully addressing concentration and abuse of power in health care. There will be no rest for the weary bloggers of Health Care Renewal.

Huge Insurance Company WellPoint Settles Once Again, Providing a Window On the Ethical Questions Its Birth Presented

Another month, another question about the ethical conduct of for-profit insurance giant WellPoint. 

WellPoint Settles Allegations its Predecessor Anthem Cheated its Former Policy-Holders

This time the issue was how the company treated people insured by its now Anthem subsidiary a long time ago.  Here is the Reuters version:

Health insurer WellPoint Inc has agreed to pay $90 million to settle a class-action lawsuit against its Anthem unit over accusations the company did not fairly compensate former members when Anthem was converted from a mutual company into a stock company.

The Indianapolis Star noted:

WellPoint had fought the lawsuit for seven years in court.

The lawsuit alleged that WellPoint's Anthem subsidiary underpaid policyholders who opted to receive cash instead of stock when the Blue Cross-Blue Shield franchisee converted in 2001 into a stock company.

Of course, a WellPoint spokesman denied the company had done anything wrong, per Reuters,

Anthem spokeswoman Kristin Binns said in an e-mailed statement.

'We continue to believe that in all ways the company acted appropriately and in the best interests of its former members,...'

The Historic Context: the Conversion of Non-Profit Health Insurers into For-Profit Corporations

This may seem very dry and only of historical interest, but consider the historical context. Per Wendell Potter's Deadly Spin, after the Clinton administration's failed attempt at health reform, leaders of previously non-profit Blue Cross and Blue Shield insurance plans saw a new opportunity. In the mid-1990s,

the Blue Cross and Blue Shield Association took a little-noticed but monumental step. The trade group, a bastion of non-profit health insurers that included the founders of the modern health insurance system, modified its bylaws to permit members to convert into public-stock companies.

Potter opined about the executives' main motivation for conversion to for-profit status, and then consolidation of the resulting companies,

They would earn bigger pay packages for managing larger businesses, and if they could convert them to for-profit companies, they would earn even more.

So,

Fourteen Blue Cross plans, most of which dominated their state-wide markets, converted from nonprofits to for-profits, and by 2004 all fourteen wound up as wholly owned subsidiaries of WellPoint....

The Anthem Demutualization as a Step to WellPoint Executives' Enrichment

Anthem began as a non-profit insurance company, Blue Cross/Blue Shield of Indiana. Its hired managers first converted it into a mutual insurance company, a company that was owned by its policy-holders, and hence somewhat a non-profit in spirit. Then the executives started to acquire other formerly non-profit Blue Cross and Blue Shield plans. Then they converted the mutual insurance company into a pure for-profit. The for-profit Anthem eventually acquired WellPoint, taking that company's name. The resulting company then had become the biggest for-profit US health care insurer. In 2003, as the acquisition of WellPoint was pending, the Indianapolis Star reported:

The top executive at Anthem Inc. will receive a $42.5 million stock-and-cash award for guiding the company as it became the state's largest firm and now stands to become the nation's largest health benefits company.

Larry C. Glasscock will receive the merit-based performance award over the next three years on top of his salary, bonus and other compensation of $3.73 million last year. It's the most compensation Glasscock has received since he became the company's chief executive in 1999 and helped convert it to a publicly traded concern in 2001

Furthermore,

Award amounts of $16 million each went to Glasscock's two highest-ranking associates: executive vice presidents David R. Frick, an attorney and former Indianapolis deputy mayor, and Michael L. Smith, a former chief executive of moving company Mayflower Group.

In addition, the president of Anthem Midwest, Keith R. Faller, will get a stock-and-cash award of $11.9 million, while Anthem Southeast President Thomas G. Snead Jr. got $4.36 million.

The allegation that the company's hired managers failed to adequately reimburse policy-holders for the policy-owners' ownership interests in the mutual version of Anthem was the basis of the law-suit that was just settled. The Anthem demutualization was a key step in the formation of the WellPoint behemoth. Its creation was the rationale to make the executives listed above rich. The allegations made in the lawsuit just settled suggest that they earned these huge windfalls on the backs of the policy-holders who at one point thought it was their company, and formerly thought that their insurer was a benign non-profit organization.

A Continuing Record of Ethical Misadventures

Thus, the lawsuit just settled suggests that WellPoint was born in ethically questionable circumstances, and that its creation served more to enrich its hired executives, who may have started as hired leaders of mission-oriented non-profit organizations. So in retrospect maybe it is not so surprising that WellPoint's leadership has continued to generate a series of ethical questions.

Since we began Health Care Renewal, we have noted that the company:

• settled a RICO (racketeer influenced corrupt organization) law-suit in California over its alleged systematic attempts to withhold payments from physicians (see 2005 post here).
• subsidiary New York Empire Blue Cross and Blue Shield misplaced a computer disc containing confidential information on 75,000 policy-holders (see 2007 story here).
• California Anthem Blue Cross subsidiary cancelled individual insurance policies after their owners made large claims (a practices sometimes called rescission).  The company was ordered to pay a million dollar fine in early 2007 for this (see post here).  A state agency charged that some of these cancellations by another WellPoint subsidiary were improper (see post here).  WellPoint was alleged to have pushed physicians to look for patients' medical problems that would allow rescission (see post here).  It turned out that California never collected the 2007 fine noted above, allegedly because the state agency feared that WellPoint had become too powerful to take on (see post here). But in 2008, WellPoint agreed to pay more fines for its rescission practices (see post here).  In 2009, WellPoint executives were defiant about their continued intention to make rescission in hearings before the US congress (see post here).
• California Blue Cross subsidiary allegedly attempted to get physicians to sign contracts whose confidentiality provisions would have prevented them from consulting lawyers about the contracts (see 2007 post here).
• formerly acclaimed CFO was fired for unclear reasons, and then allegations from numerous women of what now might be called Tiger Woods-like activities surfaced (see post here).
• announced that its investment portfolio was hardly immune from the losses prevalent in late 2008 (see post here).
• was sanctioned by the US government in early 2009 for erroneously denying coverage to senior patients who subscribed to its Medicare drug plans (see 2009 post here).
• settled charges that it had used a questionable data-base (built by Ingenix, a subsidiary of ostensible WellPoint competitor UnitedHealth) to determine fees paid to physicians for out-of-network care (see 2009 post here). 
• violated state law more than 700 times over a three-year period by failing to pay medical claims on time and misrepresenting policy provisions to customers, according to the California health insurance commissioner (see 2010 post here).
• exposed confidential data from about 470,000 patients (see 2010 post here) and settled the resulting lawsuit in 2011 (see post here).
• fired a top executive who publicly apologized for the company's excessively high charges (see 2010 post here).
• California Anthem subsidiary was fined for systematically failing to make fair and timely payments to doctors and hospitals (see 2010 post here).
• management was accused of hiding the company's political contributions from the company's own stock-holders (see 2012 posts here and here).

Meanwhile, top hired managers have continued to draw bloated compensation from the company.  For example, as we noted here, current WellPoint CEO Angela Braly got $13.2 million compensation, and received an additional $6.9 million from newly vested restricted stock units in 2011, despite falling company earnings.

Summary: A Company Too Big to Manage Except to Enrich Its Executives

Thus, we have seen an amazing string of incidents suggesting that company leadership has consistently put short-term revenues, and the resulting exaggerated management compensation, before stock-holders' interests, and before patients' interests.  Yet this pattern, so plain above, has largely not been assembled from its component pieces in public other than on Health Care Renewal.  Lack of perception of this pattern may explain why this incredible compilation of ethical missteps has failed to generate any calls for massive revisions in how this company is lead and governed, or perhaps calls to dismantle such a large for-profit company as unmanageable except as a source of nearly unlimited dollars for the enrichment of its top insiders.

True health care reform would require the leaders of health care organizations to uphold the health care mission ahead of their own self-interest, and to be accountable to the organizations' owners, when they exist, and to patients and the public at large.

A Camel Through the Eye of a Needle - at Non-Profit Health Insurers

It is time to drag out that well-worn phrase,...  sometimes you just cannot make this stuff up. 

Recently, the New York Post reported about executive compensation at some non-profit health maintenance organizations/ health insurance companies in New York.  To wit,

FidelisCare

At one Catholic-run health insurer for the needy, charity starts in the executive suite.

Mark Lane, the CEO of the Fidelis Care/New York State Catholic Health Plan, receives a $1.1 million salary plus another $864,000 in retirement pension and other benefits, The Post has learned.


His total compensation comes to nearly $2 million.

Fidelis is a tax-exempt, not-for-profit HMO serving 750,000 patients throughout the city and state who mostly qualify for Medicaid, the public insurance program for the needy. That means nearly all of Fidelis’ revenues come from taxpayers.

Meanwhile Fidelis’ executive vice president and chief operating officer, the Rev. Patrick Frawley, an ordained Catholic priest, is paid $587,249.


Frawley received more than $900,000 in other retirement and deferred benefits — raising his total compensation to $1.54 million, according to IRS filings.

That’s a lot of pennies from heaven.

'It’s shocking to me,' said a source familiar with Catholic health charities.

Amazingly, the justification that was trotted out in this case was just of the "our CEO is brilliant" variety, but in this case, provided by a Bishop:

Fidelis defended the salaries of its top officers, who oversee a $3 billion operation.

Bishop Joseph Sullivan, a member of Fidelis’ board of trustees who formerly served as chairman, called the compensation 'generous but fair.'


He said the goal is for salaries to be at the '75th percentile' of rivals.


“Our ability to continue to grow is based on the quality of leadership. You get what you pay for. Lane and Father Frawley are worth every penny,” Sullivan said.

Fidelis also issued a statement explaining that Frawley, after serving in pastoral roles for 25 years, was granted release from his priestly assignment to pursue a career in health care.

So much for a vow of poverty, even at a non-profit providing health care mainly to the poor.

EmblemHealth

On the other hand, executives of secular, but still non-profit health insurers do even better,

Anthony Watson, CEO of EmblemHealth, gets a compensation package of $8.5 million — about half in salary and bonuses and the rest in retirement and deferred benefits, according to IRS filings.

Two other EmblemHealth executives also snagged multimillion-dollar compensation packages.

Summary

We have noted before how the "peer benchmarking process," setting executive (but not necessarily other) compensation based on a comparison with compensation at other, often highly selected organizations, coupled with the "Lake Wobegone Effect," the belief that one's own executives are always above average, will lead to inexorable rises in executive pay, regardless of performance, or whatever else is going on in the world. The Bishop's assertion that Fidelis' executive compensation should be at the seventy-fifth percentile, because of the "quality of leadership," not further described, is a perfect example of these phenomena.

It is striking to see these phenomena at a non-profit organization whose mission is:

to ensure that every resident, regardless of income, age, religion, gender, or ethnic background, has access to quality health care, provided with dignity and respect.

So, ad infinitum, I repeat.... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.