Real Danger of “Obamacare”: Insurance Company Takeover of Health Care
Saturday, November 10, 2012 at 7:36AM Election rhetoric shuns the big picture in favor of the bigger platitude. Now that The Show is over, we are left with the equivalent of a Sunday morning hangover following a binge of promises and lies. We leave the theatre of political spectacle on steroids for the real world of unstable economy, a globally and publicly subsidized financial sector, and increased costs of living on everything from food to education to health-care; outpacing declining median incomes. The average cost for health insurance for a family is $15,745 per year vs. a median income of $50,502, or about half post-tax take-home pay.
“Obamacare” is the name commonly used for the Patient Protection and Affordable Care Act (PPACA) of 2010. The very moniker is indicative of how name-and-image-centric our world has become; Medicare was never called “Johnsoncare” when President Johnson signed it into law in 1965 and Johnson was not exactly a man of small-personality. At any rate, Obamacare or the PPACA ranks as one of the most misrepresented issues from the campaign, by both sides of the ever-slimming aisle.
The Tea-Party Conservative types get it embarrassingly wrong when they call it a “government takeover of health care.” Likewise, Progressive Obama-supporters are deluded in accepting it as the most sweeping healthcare reform since Medicare. (Side note: I wish the word ‘sweeping’ could be retired from politics until it actually means -sweeping.)
Here’s why. The PPACA does nothing to restructure the health insurance industry, anymore than the Dodd-Frank Act restructures the banking industry. This means everything else it attempts to do, positive or negative, will be vastly overshadowed by an industry accelerating to morph itself into a acquisition machine in order to circumvent anything that even smells like a restriction, including laws that exist and ones to come.
How? By doing the same thing energy and telecom companies did after they were deregulated in 1996, and that banks did after they were summarily deregulated (after moving that way for decades) in 1999. They are merging, consolidating, eliminating competitors, and controlling their domain. They are manufacturing power.
Investment bankers are roaming the world to exploit this hot new opportunity. That’s one reason insurance companies don’t even call themselves that anymore. Now, they are ‘managed health care’ companies. Call yourself a managed health care company, and you can buy everything from other insurance companies to hospitals to clinics to doctors. The more consolidation, the more fees bankers rake in, and the more premiums and medical reimbursements and health care procedures, each company can control.
The result of 1996 energy deregulation was a glut of crime-spawned bankruptcies like Enron. Likewise WorldCom led a pack of telecom degenerates in the production of tens of billions of dollars worth of accounting fraud. The final repeal of Glass-Steagall ignited a merge-fest of investment and commercial banks, their linkages ensuring that taxpayers, whose deposits have been protected since the New Deal, provide a safety-net upon which they can mint toxic assets loosely based on over-leveraged home mortgages, and engage in risky, speculative activity; big banks don’t go bankrupt when they fabricate values or lose big on stupid bets, they get federally subsidized in all sorts of ways.
You know who else is similarly too big to fail? The insurance industry. UnitedHealth Group, the nation’s largest health insurer covers 50% of the insurable population in over 30 states. Blue Cross-Blue Shield, covers 100 million people through a constellation of 38 sub-companies. They, and other insurance companies are growing in breadth. When companies consolidate, the result is less transparency, less competition, and more possibility for fraud and shady behavior. Every. Single. Time.
Obamacare and Accounting Fraud
By January 2014, the PPACA will require insurance companies to list their prices on competitive exchanges. In Obama-theory, this is supposed to reduce premiums via competition. But what if, say, only three companies control nearly all of the premiums? Consider the fact that it costs the same $3 to extract your money from a Chase, Bank of America or Citigroup ATM (if you don’t get it directly from the firm you bank at.) They constitute a monopoly that defies anti-trust inspection (thank you, Department of Justice.) What incentive would any of them have to charge less? None. That’s why they don’t.
Managed Health Care companies don’t just administer private, but government health insurance policies as well. The http://www.healthcare.gov website says that under the PPACA, the life of the Medicare Trust Fund will be extended to 2024 as a result of reducing waste, fraud, abuse, and slowing cost growth. President Obama promised to reduce Medicare fraud 50% by 2012 according to the site – but if he did, he forgot to mention it during the campaign period.
To supposedly combat price hikes, the PPACA calls for a new Rate Review program, wherein insurance companies must justify premium hikes of more than 10% to a state or federal review program. Given that banks aren’t supposed to hold more than 10% of the nation’s deposits in any one institution, and three do, this isn’t a comforting constraint.
While it is positive that the PPACA requires coverage of people with pre-existing conditions and prohibits lifetime caps, it can’t control what people pay for insurance, because it doesn’t limit actual premiums, which have risen 13% on average since the Act was passed.
The medical cost ratio limitation the PPACA instills; that 80% of premiums must be used for medical care in the case of individuals and small groups, and 85% in the case of large groups) to supposedly ensure companies operate on a more efficient premium in vs. premium out basis, is a joke. Its punch line is accounting manipulation. Call everything a medical cost; even buying another company, and the ratio is meaningless.
WellPoint got the Joke
WellPoint got that joke immediately. The largest for-profit “managed health care” company in the Blue Cross and Blue Shield Association, it began trading publicly on December 1, 2004. Depending on the state, it operates under Blue Cross and Blue Shield, Blue Cross or Anthem.
After the PPACA was passed, in March 2010, WellPoint allegedly reclassified certain administrative costs as medical care costs in order to meet the law’s new medical loss ratio requirements (which requires insurers spend at least 80% or 85% of premiums on health care services, depending on the type of plan, individual or group respectively.)
A month earlier, WellPoint announced its Anthem Blue Cross unit would raise insurance rates for some individual policies in California up to 39%. Federal and California regulators are still investigating this, but the premium hikes remained.
WellPoint is also one of Wall Street’s favorite “managed health care” companies; cause it keeps getting bigger through acquisitions that pay hefty fees to the bankers involved. On October 23rd, WellPoint got approval from Amerigroup’s shareholders to acquire Amerigroup, a Medicaid-focused health insurer, in a $4.9 billion cash deal. The deal makes WellPoint the nation’s largest Medicaid insurer, and provides it greater access to Medicaid patients who also qualify for Medicare.
It was the largest cash deal ever, and the largest premium paid for a company in the managed health care realm. As a result, Goldman Sachs (who advised Amerigroup) and Credit Suisse (who advised WellPoint) retained their top positions in the global healthcare deal advisory league table.
The value of Amerigroup, as a company, dropped 34% within two weeks of that agreement, in stark shades of what happened when Bank of America took over Merrill Lynch in the fall of 2008.
This summer, Amerigroup and Goldman Sachs faced a shareholder lawsuit filed by the city of Monroe Employees Retirement System and Louisiana Municipal Police Employees Retirement System. It alleged that Goldman advised Amerigroup to accept WellPoint’s offer quickly, rather than seek other bids, because the bank had structured a complex, and fee-heavy derivatives transaction on the back of the deal. The insurers resolved the suit by tweaking the deal parameters. All parties denied ‘any wrongdoing.’ But where there’s smoke in complex derivatives land, there is fire.
Other Mergers
After the Supreme Court upheld the PPACA, a spate of mergers rippled through the managed health care realm, to ostensibly cope with smaller profit margins and ‘compliance costs.’ But really, it’s because each firm wants to corner as much as possible of the market, in as many states as it can, to garner more premiums and control more disbursements and prices at the upcoming insurance ‘exchanges.’
In late August, the third largest insurance company in the US, Aetna announced it was buying Coventry Health Care for $5.7 billion. Coventry provides Medicare and Medicaid services, thus the takeover expands Aetna’s Medicare and Medicaid business. Being part of Aetna enables Coventry to grab more consumers on more state-run health insurance exchanges, reducing competition in the process. The Department of Justice is examining anti-trust issues surrounding the deal, but it’s still expected to close in mid-2013.
On October 17th, UnitedHealth Group issued $2.5 billion of bonds as part of its $4.9 billion acquisition of Brazil’s Amil Participacoes. Bank of America Merrill Lynch, Goldman Sachs, J.P. Morgan Chase & Co., Morgan Stanley, UBS and Wells Fargo Securities were lead underwriters on the deal.
They are not buying international companies in order to increase accounting transparency. Like other multinationals, they are doing so to move profits around and circumvent restrictions and tax laws. They are using cash, or raising extra debt, to do so, rather than to reduce premiums or increase disbursements to medical professionals.
And if you’re keeping score – billion of dollars are flowing from insurance companies – NOT to reduce premiums to patients and NOT to reimburse doctors and NOT to enhance the quality of care, but to simply expand nationally and globally. Meanwhile, their CEOs are doing quite well from all that non-health care related movement.
Total compensation for the bulk of health care company CEOs rose by 14.7% in 2011 by 14.7%, or $11.1 million, to $87 million. Cigna’s CEO David Cordani made $19.1 million. UnitedHealth Group's CEO, Stephen J. Hemsley bagged $49 million in salary, stock options, and other compensation last year. The highest-paid CEO made 94 times the average compensation level of primary care physicians. And none of them had to pick up a single scalpel in the process.
Doctors as profit centers
Not just patients, but physicians have been bled steadily from the current state of insurance company controlled health care through diminishing insurance reimbursements, electronic medical records mandates whereby they spend as much time complying with Kafkaesque controls over their decisions on performing surgeries and providing care, and debt. New doctors are graduating with an average of $250,000 in debt, which, combined with diminishing disbursement and soaring costs, will keep many, underwater. Forever.
According to Dr. Michael H. Heggeness, President of the North American Spine Society, a group of 6500 global spinal and orthopedic surgeons (at which I delivered a speech last month), “The last people, that most of the population feels sorry for are doctors, yet they are in an economic crisis of their own. In 2002, 80% were in private practice, now 70% are in hospitals because they can’t afford to make a private practice work.”
Meanwhile the more hospitals are viewed as profit centers, the more their Chairmen will cut costs to maximize returns, and not care quality. They will seeks ways to sell underperforming assets, programs or services and reduce the number of nonessential employees, burdening those that remain. No doubt the private equity community will be getting more into this game, as insurance companies buy more hospitals, doctors, clinics, and perhaps drug companies, or vice versa, and ‘restructuring’ accelerates.
And if insurance companies can manage doctors directly, they can control not just costs, but treatment – our treatment. It’s not an imaginary government takeover anyone should fear; but a very real, here-and-now insurance company takeover, to which no one in Washington is paying attention.
Reader Comments (27)
Before anyone self-flagellates over the health care industry horrors deftly exposed by Ms. Prins, consider the following 10 reasons to buck up:
1. Anxiety will only make things worse, landing you in the very system you probably can’t afford anyway. Although, anti-anxiety drugs are really good, until you become addicted to them. Then not so much.
2. The Internet is always there to help. I’ll save you the trouble of Googling your symptoms. For a chronic condition, the treatment is almost always worse than the disease, and largely ineffective to boot. For an acute condition, go to the Emergency Room, ’cause that’s where the morphine is, silly.
3. I actually have nothing against flagellation, because, you know, no judgments here. But if a friend is involved, don’t forget to pick a safe word before you start.
4. Hey CEO’s of UnitedHealth Group, Cigna, Aetna, et al – the joke’s on you. I printed my insurance card at Kinko’s, and my name really isn’t John Boehner. If you wanted my money, you should have gotten it up front.
5. Colorado and Washington voted to legalize marijuana for recreational use. Can you believe those people remembered to vote? That’s a democracy win.
6. Some doctors are choosing to work outside of the health insurance industry, and if doctors get squeezed hard enough by Big Healthcare, perhaps more will join. Now, most of these folks won’t be general practitioners or offer anything you really need, but we’ll all have enormous breasts and be wrinkle-free for low, low prices.
7. Pretty soon, we’ll have universal health care. You get laid off, commit a petty crime, go to prison, and you’re covered. I suggest you go to a supermax prison, because you get your own cell, and they look really clean.
8. This thing you’re in now? You’re not getting out of it alive, anyway. Neither is Lloyd Blankfein. But you look like you. And Lloyd Blankfein looks like Lloyd Blankfein.
9. I have it on good authority that Ms. Prins’ next book is actually a children’s story about a fluffy bunny that meets a big, bad wolf in the forest. And the fluffy bunny, she pulls out a rocket-propelled grenade launcher, aims it at the wolf, and convinces the wolf to take an early retirement. Because, she’s not a Barbarian, for God’s sake. And the wolf’s name is Ben Bernanke (just a coincidence).
10. You can’t kill yourself now; Ms. Prins’ articles are too entertaining. “Nobody follows the money like Nomi.” That’s a free tagline, Ms. Prins. Use it in good health.
WE'RE Waiting ... http://www.youtube.com/watch?v=fpAyan1fXCE
Dear Shrugging Atlas,
Thanks for the ten points to live by :) ... to your health as well, Nomi
Single payer is still alive and well. One thing the for profit obamacare did was give states the right to have a single payer health care system. Vermont is leading the way. Delaware has a single payer bill in front of their legislatures as do many other states. Fact: we can save 45% more with single payer just by getting the pencil pushers out of health care. There are still no one standard for doctors, hospitals and providers to abide by. They still have to hire these pencil pushers to do the medical coding which is eliminated under single payer. We can save our states billions every year, by going to a single payer system. The corporate owned media NEVER informed our citizens of why they should be pushing for a singlepayer system, because the corporate media continues to push for corporate owned health care. Obama did nothing to allieve us of the big pharma companies charging us 4 times more than other industrialized civilized nations for our drugs. If you want to change the system then go to deinformedvoters.org and get the bill...just change the name of the state...everything else is done for you.
Over the past 20+ years in the medical business I have seen the birth of HMOs, the rise of for profit hopitals and the race to the LCD in care for patients. Make no mistake, those folks providing direct care to patients are doing the very best they possibly can despite a stunningly rapid decline in working conditions. My advice as a medical professional? All those things your momma told you about eating vegetables and playing outside and taking time to laugh were and are all true. Your best option though - DON'T GET SICK.
Nomi -
I remain astounded at the cost of health insurance that people accept. $15K for a family health insurance plan? I know that IS accurate but it leaves me shaking my head that people accept this like there are no alternatives. I am self-employed in Wyoming (rancher and metal fabricator) and responsible for myself and my actions. Tho' now divorced, I did have a family HDHP that qualified me for a health savings account. I paid just over $1000/qtr for a total family deductible of $10K/year. If nothing happened to us, I saved a lot of money. If something major DID happen, I would still have been out less than $15,745.
I benefited from tax savings when contributing annually to my HSA, and saved GOBS on insurance costs, yet the average Joe is clueless about this. When presented with the facts, they're regularly rejected because my plan involved ACTUALLY take charge of my own life, saving money, AND making my own health care decisions.
Now that I'm single again, I still have my HSA and my new $5K deductible plan is about $700/qtr. (It is, FWIW, an "any doctor/any hospital" plan and I'm pleased as punch with it. Of course, you might guess that if I have a sniffle, I eat chicken soup. When I broke my hand in a shop accident, I just sucked it up - with a bag of ice and glass of Scotch. I admit this might not be for everybody.
People expect life to be free of risk and expense, and it is NOT, yet our government has set the precedent that we should all expect a free, risk-free existence. There's nothing worse, to me, than being effectively punished or demonized for making good decisions.
Thanks, Ms. Prins, for confirming what I already suspected: in spite of Obama's good intentions, Obamacare as it stands is a gift to the insurance companies. I had hopes for the original bill, but as soon as the "public option" was eliminated, we were left at the mercy of the insurance companies. I can only hope that at some point, the public will see through the "government takeover" ruse and demand a public option. I know it's a long shot, but it's our only hope.
Oh, and "Shrugging Atlas," thanks for the laughs. I hope they lower my healthcare costs.
My FAVORITE SING ALONG
FIRE THE INSURANCE-MAN. They always get it
http://m.youtube.com/#/watch?v=3WqOsb1LM-c&desktop_uri=%2Fwatch%3Fv%3D3WqOsb1LM-c
Fachism is defined as "government by corporate economic monopoly. Mousillini caled it corporatism. The carrier the comit crimes to escape care for me becomepart of another company which merged with a third,, changed names,, them merged with another big one... all of them owned hospitals and clinics, and involved with hmos.. no one was punished for the felonies that crippled me.... I see the horror stories getting worse as the law gives a wink and a nod to corporate crime.. living on social security, I can inagine my premiuns being greater than my income for pre existing conditions..... so I live in mexico. educate the ignorant masses as to the nature of fachism. I ris
Nomi,
This is a great article. As always you do not mince words. It seems like these creeps are dead set on stealing anything we have or better said anything we have left.
The big banks own the stock of the federal reserve so Ben works for them. The big banks own the insurance companies. The richest ten percent of people in the world have most of their assets invested in the big banks one way or another. They fund and control both political parties. Therefore they will always get bailed out and we get stuck with the bill.
We as a majority of citizens need to change this. I think we need a Gandhi type leader to lead a march of 50 million of us or so down to that old swamp they call D.C. When we get there we should not leave until these good old boys and girls net the derivatives out to zero for starters. Then we need to implement a plan to end the Fed and the IRS and restore our Constitutional Republic .
Nomi, You are a super smart person who cares about other people. You earned my respect and admiration the first time I read your writings . Like they say " You Got Soul Girl "
Thank you for being there and having the courage to communicate !
Sincerely Dean
Interesting that she speaks at a spinal society conference. Spine surgery is known to be expensive, over utilized and exhibits poor outcomes. Interesting to note that Meaningful Use and outcomes measurement are never mentioned. Ms. Prins should spend more time helping the healthcare aspects of reform and less time protesting consolidation. Ultimately single payer is ultimate form of consolidation.
Liz - thank you for sharing that information. Yes, the media has shown a lack of analysis on single payer (at the state level, like Vermont) insurance, or even a credible critique of a nationalized system.
Rudy, it sounds like you found a good plan for your needs. I didn't go into it, in this piece, but the issue of premiums vs. deductibles would make it difficult to compare policies, but moreso, IN the event, of required treatment that extends past a deductible, the more insurance companies control the health care environment, the less control an individual has, and that's a growing concern...
LL, I've been writing about the perils of consolidation in many industries for years, and unfortunately, excessive private corporate mergers have produced crises in all of them, for foreseeable reasons. As a licensed rescue diver and community first responder, I only have a limited knowledge of how to provide care, but I take your point - there must be a balance between meaningful and necessary treatments vs outcomes - for patients. In fact, at the spine conference, Dr. McGirt presented a compelling paper on the ratios of meaningful (for the patient) provision of care vs. what the insurance companies support, and insurance companies tend to support spending more money on less effective care over a longer time interval (better for earnings, less payout upfront, instead of more expenditure upfront and less over time, which would be more effective for patients, in an array of circumstances). Unfortunately, insurance companies don't care about the meaningful use or value / cost quotient from a patient's perspective, they care about maximizing shareholder value (more so as they consolidate more) which is a profit / cost quotient or minimum payouts per maximum premiums, which is why their earnings statements per quarter do not mention patient value at all.
When a 3 day stay in a hospital costs $18,000 for a Medicare patient who hid not have surgery something is wrong. When Big Pharma gouges prices for medications something is wrong. So what is bring done about this? They want to cut our entitlements!
Instead of building factories, or making products, the new "entrepreneurs" are looting our nation. They are stealing the commons and gutting the government for loot. Crooks that should be in prison but instead they live in mansions and spend their time cooking up more schemes to rob us.
Romney was one of these crooks, where Obama is just carries water for these people. And does it well.
Fantastically enlightening blog post, as usual. Much thanks!
Taken with the article below, we begin to get a picture of just how completely fraud-based is the society we presently live in.
http://www.ips-dc.org/reports/ceo-campaign-to-fix-the-debt
We appear to be living in the time of "The Final Extraction" --- their endgame of privatizing everything, and extracting the final shrinking amounts of wealth any way they can.
In one of Leonardo da Vinci's notebooks is a passage where he remonstrates..."never get sick, given the horrible state of medicine during our time.." --- truly, not much has changed.
Just business as usual, mega-corporations gobbling up more and more of the American landscape. In my opinion, the fix here will not come from government oversight, that's just more of the fox guarding the hen house, or I should say the hens opening the door for the fox.
The only solution is to roll back corporate law to where it was when this country was founded. The founders had a deep distrust of corporations, and for good reason. We need to revoke corporate personhood, revoke the corporate shield, revoke the ability of one corporation to own another. Until we rein in the monsters, they will continue to steal from us and abuse us.
Reg,. " Just business as usual, mega- corporations gobbling up more & more." -
The GLOBAL FINANCIAL WORLD is operating in CYBER TIME & MONIES, with ASSETS that either, do not exist & or, have no actual VALUE to back up their worth as/in transactions / trading.
You can't buy anything with cash or credit that has no value.
What are you selling, if the product you are selling has no value or does not exist.
It's just a COMPUTER GAME.
While a lot of what you say is true, it's dishonest to combine average cost of healthcare and median income of American family. Either make both numbers median or make both numbers average. Doing it the way you did it presents a dishonest skewing of the numbers.
Dear E,
The Census Bureau reports incomes as median to specifically adjust for the skewing that the unequal distribution of income and wealth would indicate, http://www.census.gov/prod/2012pubs/p60-243.pdf, in their comparisons to average health care costs. The reason for that , and for how I view figures is specifically to unskew them. In other words, for average income, the smaller number of people making WAY more money would skew the average figure, whereas a median figure takes into account this disproportion. If someone makes a billion dollars a year, $15K of health care premiums for a family is nothing, but MOST people don't make that, hence the median income figure. In terms of average premiums, there is less diversity in what insurance companies charge for premiums than in American incomes, so average and median would be nearly equal, but average figures are more prevalently accessible and issued, but if you took into account deductibles, and such, yes, the median number might be a bit lower. That said, if you took into account what doesn't get covered even past the deductible, it might be a bit higher. You've hit upon, in that respect, a real problem with accounting for what goes into - and out of - and insurance company each day. They don't make it easy for a fully 100% accurate paper-trail.
Thieving, looting, scorch the earth - from some of the "best" families, corporate indwellers learned it at the best universities money could buy: UPenn Wharton, Harvard, Yale, Princeton. Is there a specific gene for high crime? Is it curable ? btorode
What does Nomi Prins recommend as a solution? Reading the article, I couldn't figure out the upshot of where you were going with this analysis. Is there a policy solution? New laws and regulations for private insurance markets who sell health and medical insurance to "rationalize" them? If so, what would they look like?
And the appropriate follow-up recent article:
http://www.zerohedge.com/news/2012-12-07/meet-liz-fowler-architect-obamacare-jumps-ship-johnson-johnson
Of course the health insurance industry is a blight on humanity and we should continue to focus on getting rid of it. Howver, premiums in the new health insurance exchanges set up by Obanacare in 2014 will be heavily suvsidized and liminted by income. In the commercial market, the 85% loss ratio restriction is providing some rebates. Activists can be poised to take on and challenge the accomplishments and failures of the ACA as they unfold - e.g. demand that states use their power to regulate rates - while pushing for more sweeping reforns in 2017. Or rely on chanting disillusionment, and see if that generates a movement, in addition to speaking fees.
And where jobs are concerned, it appears pretty certain that Obamacare will simply be another chapter in the continuing and exponentially increasing jobs offshoring:
http://www.computerworld.com/s/article/9240448/D.C._awards_Obamacare_IT_work_to_offshore_outsourcer
As far as the sorry ass ex employees throwing stones I’m more than certain that you all were compensated well beyond what any other employer would of ever done for you. Also I’m certain you were treated like family an invited to every function instead of how you should have been treated, like an employee. You all will have to answer for your accusations wither in sound body and mind or to your maker.
Thanks for a great article. We need tons more like it. In reply to one comment above, Obamacare's "new rules" actually make it ILLEGAL for any state to even BEGIN to try any sort of a single payer solution until after 2017. ACA also specifically refused (despite attempts) to amend federal ERISA law that is very "problematic" regarding allowing any true single payer plan to be legally implemented. Vermont is doing the best it can under the circumstances (thank heavens), but so far my understanding is that even though what Vermont is talking about is as close as it can get, it is not truly single payer (because federal laws need to be amended or waived first before that can become possible). That means creating healthcare freedom, justice and equality for ALL Americans is actually ILLEGAL (against the law) here. It is also against the law for most of us under age 65 to be able to join Medicare (a right that many innocent Americans will have to die for being denied). We should not be left to the mercy of private health unsurance corporations that have no mercy and have more than proven themselves to be totally defective, unreliable, amoral and insatiably greedy. ACA takes the most horribly broken part, enriches and expands on that. It is no more a "step towards single payer" than it is a "government takeover of healthcare". We are being duped like we've never been duped before.
As if having corporate insurance lobbyists write the bill would lead to any other conclusion: Obama is just repaying the WALL STREET Chosenites that elected him.