Deadly Spin

by Wendell Potter

  With the large, for-profit insurance companies now firmly in control, Hillary Clinton came to Washington to crusade for reform.

  And I wasn’t far behind, working against her.

  C H A P T E R V I

  Consumer-Driven Care

  THERE have been no Remote Area Medical expeditions to Pequot Lakes, in central Minnesota, but if Stan Brock leads one there before all the provisions of the current national health care reform kick in, Tom and Katie Brennan and their five children might be first in line.

  Like millions of Americans, the Brennans are finding out what it means to be underinsured—and how far the American system of financing health care has strayed from the original concept of insurance, which was to spread risk over a large pool of policyholders so that everyone, regardless of age or health, paid the same amount for coverage.

  The Brennans are a two-income family—Tom is self-employed; Katie is a schoolteacher—but they can barely afford the ever-increasing premiums and out-of-pocket expenses under their so-called consumer-driven health plans.

  Because the premium increases for family coverage by the local school district had been in the double digits for years—26 percent in one recent year alone—Katie dropped her family from that policy. “The cheapest family plan our school offers has an $858 monthly premium and an $11,000 deductible, which means nothing is covered until you exceed that amount,” Katie said when I talked to her. “That’s just too expensive for most schoolteachers. Only half of the eighty teachers are still on one of the district’s insurance plans.”

  Katie is now enrolled in a plan through the district that covers only her, with $150 monthly premiums (the school district pays an additional $300) and a deductible of $5,000. Tom pays $450 a month for a $5,900-deductible policy he obtained on the individual market for himself and their children.

  Even with that coverage, they had to fight their insurance company last year when their son Jack broke his arm. The fight was not to get the insurer to cover expenses related to the accident—the Brennans paid all the bills because the total expenses did not exceed $5,900—but merely to get credit for the money they paid toward the deductible.

  “[The insurer] said we needed to provide proof that it was not a preexisting condition,” Katie said. “This was a little ridiculous since he broke his arm in July and we had had coverage with this insurance company since February.”

  The Brennans are thinking now that they would be better off without insurance. They pay more than $7,000 a year in premiums and still have almost $11,000 in combined deductibles—and they have to pay the full cost of prescription drugs because medications are not covered under either of their policies.

  “Because of the high deductibles, we still wind up paying for everything out of pocket,” said Katie. “We now avoid going to the doctor. It is just too expensive. The cost of our premiums and out-of-pocket costs exceed our monthly mortgage payments. We do not take family vacations, and we drive older cars because our budget is so tight.”

  While most of the people who seek medical care at RAM’s expeditions have jobs but no health insurance, a fast-growing percentage are people like Tom and Katie Brennan, who have insurance that doesn’t come close to covering their medical expenses. According to a study by the Commonwealth Fund, the number of underinsured Americans reached twenty-five million in 2007—up 60 percent since 2003.1 At that rate of growth, the fund anticipates, at least forty million Americans might be underinsured—despite the reform bill just enacted—when it does a follow-up study in 2011. The reform legislation will help by limiting maximum out-of-pocket expenses that an insurer can require, but for many Americans these deductibles will still be more than they can afford.

  A consequence of underinsurance is that many people don’t get the care they need. In a separate study by the Center for Studying Health System Change, covering the same years as the Commonwealth Fund survey, one in five Americans reported delaying or forgoing needed care in 2007, up from one in seven in 2003, in many cases because they were underinsured.

  Middle-income families are especially hard-hit by this trend. American Medical News noted in a 2008 story about the two reports that middle-income insured Americans “are increasingly experiencing health care access difficulties that are more commonly associated with their lower-income counterparts and the uninsured.”2

  This rapid growth in the number of underinsured Americans is a consequence of the continuous shifting of health care costs—through high deductibles and coverage limitations—from insurance companies to their policyholders.

  As an insurance industry PR executive, I had the responsibility of helping create the perception that the high-deductible and so-called limited-benefit plans that insurers and employers were forcing Americans into were consumer-friendly and essential weapons in the industry’s battle against escalating health care costs. I was expected to hype these plans as part of a “consumerism” trend that was started by Americans who wanted more control over their health care and their health care dollars. To perpetuate the myth that Americans were clamoring for health insurance plans that required them to spend more of their own money for their medical care, my colleagues and I were expected to follow the lead of our CEO and industry marketing types and call these plans “consumer-driven.”

  “Consumerism is an inescapable trend,” declared Ed Hanway, CIGNA’s CEO, in November 2005 at the company’s Consumerism Forum for Investors, held at the überexpensive Mandarin Oriental, the swanky Manhattan hotel in Columbus Circle overlooking Central Park. “Like a tidal wave, it’s building in size and intensity … The crowd is chanting more: more choice, more control over health benefits, more quality and value, and consumers know that they have more at stake both financially and, most importantly, in terms of their own health.”

  MANAGED CARE:

  WHAT WAS THAT ALL ABOUT?

  “Consumer-driven” plans started appearing in the early 2000s when it became clear that the techniques of managed care—the insurance industry’s silver bullet of the 1990s—had not lived up to expectations. They might have, had the big for-profit insurers not done irreparable harm to this once-popular means of keeping people healthy at relatively little expense. By the time they were done with it, managed care companies (usually HMOs) were almost universally loathed.

  The forerunner of managed care plans—which require enrollees to seek care from a limited network of health care providers in exchange for relatively low premiums and out-of-pocket expenses—came into existence in the late 1920s and enjoyed wide support for decades, although mostly in Western states. A doctor and Lebanese immigrant named Michael Shadid is generally credited with developing the first one, in Elk City, Oklahoma, in 1928. Members of the cooperative, mostly farmers and their families, paid a fixed monthly fee in exchange for care at Shadid’s clinic. Soon, in California, Drs. Donald Ross and H. Clifford Loos established a prepaid plan for employees of the Los Angeles water department.

  The idea caught on. Industrialist Henry Kaiser was so impressed with what Drs. Ross and Loos had accomplished that he set up a similar arrangement for his workers who were building a large aqueduct in Southern California. That plan was the forerunner of the Kaiser Permanente health system, which now serves more than eight million enrollees in several states. The Ross-Loos Medical Group also experienced steady growth, eventually including a hospital and nineteen clinics in Southern California.

  It was not until the Nixon administration, however, that these prepaid plans started spreading eastward. As I mentioned earlier, Nixon put his support behind a bill that would encourage the creation of health maintenance organizations, the new name for the plans. The HMO bill attracted bipartisan support and became law in December 1973. The growth of HMOs was assured through a provision that required employers with twenty-five or more workers to offer an HMO plan if they also offered a traditional indemnity plan.

  When the big indemnity insurance companies started losing customers to HMOs, they did what they had
to do in order to survive: They began buying their new competitors. CIGNA was among the first of the big national multi-line insurers to get into the HMO business through a series of such acquisitions. One of the first was the Ross-Loos Medical Group, soon renamed the CIGNA Healthplan of California.

  CIGNA and the other big insurers set out to convince their corporate customers that they could keep their employee-benefit budgets under control if they moved their workers out of traditional indemnity plans, which allowed workers and their families to get care from any doctor or hospital, and into HMOs, which paid only for care provided by doctors and hospitals in defined and limited networks. HMOs could save money in a way that indemnity fee-for-service plans could not, by negotiating favorable rates with health care providers they wanted in their networks and by refusing to pay for care given to their members by providers who were “out of network.” Later permutations of managed care plans, like preferred provider organizations (PPOs), would provide some coverage for out-of-network care, although enrollees would be on the hook for higher coinsurance payments if they went to a non-network physician or hospital.

  My first experience as a promoter of HMOs came in 1985 when I was hired by the Baptist Health System of East Tennessee to run its advertising and PR operations. Baptist had just recently launched its own HMO with a network of its own three hospitals in the Knoxville area and the doctors who admitted patients to them. Many of the hundreds of HMOs that sprang up as a result of the HMO Act were local plans established by hospitals like Baptist, which saw HMOs as a means to attract patients.

  I had no trouble being an HMO promoter while at Baptist. My family and I liked our HMO’s emphasis on preventive care and the fact that we had a primary care physician who would coordinate care with specialists should we ever need them. Just as important, we liked knowing that visits to doctors would never cost more than a $10 copayment—and that we would never have to file another claim.

  Attitudes toward HMOs began to change for the worse, however, when the big for-profit insurers began to take over. These insurers knew that the more HMO members they had in a given market, the more leverage they would have over local doctors and hospitals. Not only could the insurers demand deep discounts from doctors once they acquired significant market share, but they could also influence—through their reimbursement policies and coverage guidelines—how the doctors practiced medicine.

  One of the reasons membership in HMOs grew so rapidly in the 1990s was because insurers were remarkably successful in getting their big-employer customers to move their employees out of indemnity plans and into HMOs. As recently as 1994, according to the Employee Benefit Research Institute, traditional indemnity plans were still the most commonly offered type of employer-based health plan. Just three years later, only 15 percent of workers were still enrolled in indemnity plans. The forced “migration” of workers to the managed care world was stunningly swift and successful.

  It didn’t take long, though, for doctors to start pushing back against the HMOs’ policies of providing lower payments for services and requiring doctors to follow strict care guidelines to even be paid, which they considered an inappropriate intrusion into their practice of medicine. In 2000, doctors joined a massive class action lawsuit against all of the big national and regional insurers, including CIGNA. The lawsuit contended, among other things, that HMOs used a software program designed specifically to cheat doctors out of millions of dollars. The suit was eventually settled out of court, although the managed care companies admitted no wrongdoing. As part of their settlements, CIGNA and the other insurers agreed to make significant changes in the way they paid physicians and to reimburse more than seven hundred thousand doctors for claims they had previously denied. CIGNA’s settlement alone was valued at four hundred million dollars.

  By then, HMO members had also begun their own rebellion. They didn’t like being told which doctors and hospitals they could choose and—even worse—being forced out of the hospital before their doctors thought they were ready. As described in chapter 1, the front-page stories in 1996 about HMOs insisting on one-day hospital stays for mastectomies and deliveries touched off a massive public outcry. Hardly a week went by when I didn’t get a call from a reporter with an HMO “horror story.”

  The reputation of HMOs would never recover. The public came to believe that instead of improving care, as insurers had promised, HMOs and other managed care plans had actually reduced the quality of care in the United States. They were finding that their doctors were spending less time with them during appointments because HMOs’ limited networks meant that network doctors had to take on more patients and, consequently, had to see more patients during a given day than they had in the past. And they were finding that HMOs were forcing doctors to adhere to what many of them referred to as “cookie-cutter” guidelines in delivering patient care. If they didn’t follow the guidelines—or take the time to prove to the HMOs why certain treatments were appropriate for certain patients—they wouldn’t get paid.

  In response to the backlash, big insurers launched a major effort in 1998 to put a positive spin on managed care. The companies banded together to finance a front group they named the Coalition for Affordable Quality Healthcare (CAQH). They then hired Goddard Claussen, the firm that created the “Harry and Louise” commercials to help sink the Clinton reform plan, and the Hawthorn Group, a PR firm, to develop a campaign to improve the image of managed care. Knowing that doctors were much better liked and respected than HMO executives, the consultants recruited physicians to appear in a series of ads and commercials to testify why they thought managed care was a good thing for their patients.

  The insurers funneled six million dollars into the campaign to counter what CAQH called “misperceptions” about managed care generated by media reports. In its first press release, CAQH said its ads would emphasize the message that managed care “keeps people healthier because it focuses on preventive medicine and provides the same high quality care at lower cost than traditional insurance.” The campaign, it said, “will remind people of why they like their HMOs … It provides the health care you want at a price you can afford.”

  Despite the millions spent on the campaign, it didn’t really “move the needle,” as the industry’s pollsters said a little more than a year after its launch.

  This was an especially difficult time to be a PR guy for an HMO. I learned to avoid telling people at Little League games and holiday parties what I did for a living. Just saying that I worked for CIGNA was often all it took to get an earful.

  I was conflicted. On the one hand, I felt that HMOs were getting a bum rap in the media. It seemed as if every reporter felt an obligation to bash managed care. On the other hand, I was beginning to have doubts that I was on the side of the angels. Defending my company and the industry was beginning to take a toll on me psychologically. For the first time, I started questioning whether for-profit insurers really did play a constructive role in our health care system, as I insisted publicly. But it was all self-talk. I never told anyone I was having doubts. I found that alcohol helped to keep those thoughts at bay, so I drank more than I ever had—although never at work—to keep from dealing with recurring thoughts that I had sold out.

  As part of my rationalization, I told myself that at least I was occasionally able to make a positive difference in a few people’s lives. One of my responsibilities, when a health-plan member complained to the media about a treatment or procedure that CIGNA had refused to cover, was to make sure the company’s executives understood what the PR consequences could be if the company didn’t pay. While medical directors always said they would never change a coverage decision based on what the media might or might not do, denials that attracted media attention were often reversed. Whenever that happened, I took some satisfaction in thinking that I might have helped save someone’s life.

  I came to realize that many of my fellow employees engaged in the same kind of self-talk to get through the day. They were good peop
le who had families and needed to keep their jobs just as much as I needed to keep mine. We told ourselves that for every horror story we heard, there were many more success stories, many more cases in which CIGNA paid hundreds of thousands of dollars for urgently needed care. And, we reminded ourselves, the media cover the few big wrecks on the freeway, not the thousands of people who make it home safely every day. To remind CIGNA’s customers of that, my staff and I began producing a newsletter called Proof That’s Positive. It consisted of anecdotes about people whose health had been improved and whose lives had been saved because their insurance company—CIGNA—had been there for them in their time of need.

  My newsletter didn’t seem to move the needle any more than the CAQH campaign. The backlash from members and the unrelenting negative publicity eventually forced insurers to loosen some of their coverage guidelines and restrictions and to broaden their networks of providers. Employers, fed up with complaints from their workers, pressured insurers to design “mixed model” benefit plans, like PPOs, that allowed enrollees to go out of network if they wanted to.

  There is no shortage of irony here. Insurance industry executives contended that if the government would just get out of the way and let the invisible hand of the market work, managed care plans would reduce the number of people without coverage, improve quality of care, and be a permanent solution to rising health care costs. The promise was that the techniques of managed care would make government intervention into the financing and delivery of care unnecessary.

  The invisible hand did work, but the results were the exact opposite of what the insurance industry executives had promised. When the marketplace responded, insurers had to sacrifice many of the very techniques that had briefly enabled them to control costs.