Former CIGNA executive-turned-whistleblower Wendell Potter has studied Romney's proposals and the deceptive rhetoric driving them, and found that the former Bain Capital CEO's plan is nothing more than a prescription for boosting health insurance companies' ever-soaring profits at the direct expense of the public's health and financial security. In a phone interview with AlterNet on the eve of the last presidential debate, Potter, a senior healthcare analyst at the Center for Public Integrity, lays bare six of the myths -- some of which he once helped to disseminate -- behind Romney's claims that his plan would increase competition, lower costs and improve quality of care for all Americans.
1. "I'll Cover Preexisting Conditions"
Wendell Potter: He has said that his plan would protect people with preexisting conditions. It clearly does not. If what he is proposing would be the law of the land, it would be essentially what the law is right now. That means people who are not fortunate enough to already have coverage through a large group plan are often pretty much out of luck. It's almost impossible to buy a policy on the individual market if you've got a preexisting condition. Even through a small employer it's very difficult to get affordable coverage if one of your employees has a preexisting condition, or you yourself if you're an employer.
So it would enable health insurance companies to avoid taking on the risk of insuring people who really need coverage the most. And frankly, it's one of the reasons why we have so many millions of Americans who don't have coverage. It's because they have preexisting conditions and can't buy coverage at any price. Some people have a health history that enables insurance companies to offer them coverage but charge them much more than they do other people. So it would enable them to continue to use underwriting techniques to exclude people from coverage who really need it. And that would enable them to continue to maximize their profits.
It would also allow insurance companies to continue to charge women more than men. Women have been discriminated against for many years just because they're women. The Affordable Care Act would end that discrimination. But obviously if the law is repealed, we go back to women being discriminated against and having to pay more, in many cases much more, than men. And when we're talking here about being charged more, we're talking about being charged more for their premiums rather than for what they would pay for a co-payment or out-of-pocket expense.
If you are a female and you're trying to get a policy on your own, more than likely you are going to be charged more than if you were a male. Particularly if you are of childbearing age because there is a very obvious chance -- or risk as they would put it -- of a woman of childbearing age having a child and requiring greater care just because of that. They don't like that. They would prefer not to have to cover those expenses. But if they have to, what they do is charge you more upfront for the policy just because you're female, because you're made different and you are capable of having children.
That's one main reason. The other is that women typically go to the doctor more often. This is just a fact, an actuarial fact -- women are more likely to seek medical care than men. That's known in the insurance industry and that's another reason why they're discriminated against. But primarily it's because they're able to have children, and also are at risk, many of them, of having breast cancer. So they are perceived to be at a higher risk than men. So that's what they do, they charge them more.
It would also let them continue to discriminate against older people, those in their late 40s and 50s, much more than younger people. And that's another reason why we have such a high percentage of the uninsured who are people getting close to retirement but not close enough to be able to qualify for Medicare. A lot of people who are in their 40s and 50s obviously have preexisting conditions because it is just what happens as you get older. So they are perceived to be more at risk of needing medical care. It becomes increasingly difficult for them to find a policy. And you can't find one that's affordable.
The Affordable Care Act would not allow insurance companies to charge older people more than three times much as young people. That's an important protection. During the healthcare reform debate, as insurers were trying to shape the law, they were trying to get that ratio to five-to-one. And of course if the law goes away, there's no upper limit at all.
In Massachusetts, where Romney was governor, the law that passed under him has a two-to-one ratio. In other words, insurers can't charge older people more than twice as much. Under the Affordable Care Act, it's three times as much. So even under Romneycare it's a better deal for senior citizens. But even with that, it's challenging for some people in their 50s to find affordable coverage.
2. Continue Healthcare Coverage for All Americans Via Emergency Rooms
Wendell Potter: Romney's comment about the emergency room essentially being the only safety net that we need is uttered by someone who doesn't have any idea what it's like to not have coverage and to use the emergency room because you have no other alternative.
The thing is, it's true that hospitals have to accept you, but all they're required to do is stabilize you. They don't have to admit you. They can essentially treat the symptom of what you might be presenting to the emergency room. But they are certainly not required to do anything more than that. And so a lot of people go to the emergency room and get some treatment and it's not really addressing what's wrong with them. And many people wait until it's too late and go to the emergency room. Many people die because they have postponed care that would've saved their lives just because they didn't have the money to do it.
It's a very heartless way to look at this because we've got so many people who cannot buy coverage because they either can't afford the premiums or they can't buy it at any price because of preexisting conditions. So there really is no safety net for many of those people. Emergency rooms are certainly not a good safety net.
It's also very inefficient. A lot of people who are seeking care in emergency rooms because they don't have insurance don't have the ability to pay. So a lot of hospitals have enormous amounts of "bad debt," as they call it, or have to write off care as charity care. But it's not written off. It may be on the books, but somebody has to pay for that. And the somebody who pays for it are people who have insurance. People who have coverage are paying a hidden tax to cover the cost of people who go to the emergency room but can't pay and who are admitted to the hospital but don't have the means to pay.
It perpetuates a system of inequitable access to care and of higher cost to all of us. But it's good for health insurance companies in that this is a segment of the population that they don't have to insure. And they don't want to insure anyone who doesn't have the money to pay for the premiums. They really could care less about the uninsured.
It's a factor in rising healthcare premiums because hospitals have to cover their costs or they go out of business. That's just the way it is. So as they negotiate with insurers they have to ensure that they're getting reimbursed enough to cover their operating costs. And if you have a high percentage of patients who are unable to pay, you've got to make sure that you are reimbursed by an insurance company a certain amount to cover that. So that's where it comes in. We all, if we have insurance, are paying for that. And most people are completely unaware of the fact that their insurance premiums are as high as they are partly because of this ridiculous situation.
Frankly, it's why the hospital industry and the American Medical Association came around to endorsing the Affordable Care Act. Because the more people you bring into coverage -- and the Affordable Care Act will bring 30 million people into coverage who are currently uninsured -- the amount of care that they have to write off will be reduced significantly. If that happens, then that will have a positive effect on health insurance premiums as well.
3. Allow Insurers to Sell Across State Lines to Increase Competition, Choice and Quality (aka "The Silver Bullet")
Wendell Potter: It's not a bullet. It's more of a blank. The fact is that insurance companies are not interested, as it turns out, in that concept. The insurance is regulated largely at the state level, so regulations vary from state to state. So insurance companies that are based in one state don't necessarily think it would be worth the investment to offer policies in a neighboring state. The economics don't work that well because healthcare is delivered locally. You can't buy healthcare from Amazon. You have to be seen by a doctor locally and be treated locally and the cost of care varies from one place to another, one market to another.
So insurance companies just aren't interested in making the investment that would be required to go into another state and try to build a network of providers, which is very difficult to do. The barriers to enter a new market are very, very high, and that's what most people don't really understand, especially those who espouse selling coverage across state lines. It's not that easy.
If it were that easy it would've been done a long time ago because there is no prohibition against insurance companies from doing it right now. They can do it right now. They just don't because the economics don't work for them.
If you're a big corporation and you can operate in multiple states, you've got economies of scale there and you're also insuring large corporations that self-insure, so your own money is not so much at risk. So you've got economies of scale, you've got the fact that you're insuring or providing administrative services to companies that self-insure. So for smaller insurers that operate primarily in one state, you don't have the economies of scale.
So in almost every market in this country, what we have is one or two insurance companies, at most three, that are very, very dominant. You don't have as many insurance choices as people think. You have a few insurance companies that have been in the market for quite a long time. They've grown to be of a certain size. They have clout at the negotiating table with hospitals and doctors and other healthcare providers, so they can demand lower reimbursement rates than some new out-of-state plan that comes in that wants to establish a presence.
It's kind of like the chicken and the egg. You have to have a pretty sizable membership base to be able to negotiate favorable rates with providers and you can't negotiate favorable rates with providers unless you have a sizable membership base. So if you're coming in from out of state, you don't have that network established, you don't have a membership base to start with. So that's why cost of entry is so high.
The only way you can establish a real presence in a new market is to buy another company. One of the reasons why the big corporations have become as big as they are over the years is because they have indeed done just that. They bought smaller companies to increase their market share and get into markets.
I'm sitting here in Philadelphia and Aetna is a big player here, but they are because they bought their way into this market several years ago. They bought an existing company called US Healthcare and US Healthcare had a big presence in Philadelphia. Aetna did not at the time, so they bought US healthcare and that gave them a favorable position in the market in Philadelphia.
4. Do Everything to "Save" Medicare and Medicaid
Wendell Potter: They would privatize the Medicare program. Even though they say that the newest version of the Romney idea would enable people to continue to opt for Medicare if they wanted to, essentially you would be going to a voucher system in which senior citizens or Medicare beneficiaries would be given X amount of dollars every year to go out and shop for coverage. You would be able to theoretically buy coverage from either the traditional Medicare program or a private insurance company.
But what inevitably would happen would be you'd have the insurance companies do as they have been doing for many years in the current market: targeting the people who are the healthiest to enroll. And they do that very successfully. They know how to do that. And they would also get more and more people into high-deductible plans as they do in the commercial market.
So the traditional Medicare program would soon be attracting only the sickest and oldest and that's not sustainable. You can't stay in business if you have a situation like that. What develops is a "death spiral," as they call it. It essentially would make the Medicare program unsustainable and overly expensive. Because if you have more and more sick people than your competitor, you have to charge premiums that are higher. So it would be a surefire way to eventually get rid of the Medicare program as we know it.
And why anyone in the world would think that private insurers can do a better job of providing affordable coverage is baffling to me because there's absolutely no evidence that that's the case. But some people buy into this notion that the private market is always better, that it can always be more efficient because of the competitive nature of free enterprise. The problem is that the free enterprise system simply does not work in healthcare as it does in other sectors of the economy.
So you would wind up with people being given a voucher and over time as the cost of healthcare would continue to increase, the value of that voucher would be less and less over the years. And people would find that they would have to pay more and more out-of-pocket for care than they do now.
Keep in mind this is a population where people are on fixed incomes. They don't have a job anymore. They're retired or most of them are. So their incomes are not as great as they were typically during their working years. They become less able to go to the doctor, less able to afford out-of-pocket expenses. It would essentially be creating death panels because people just simply could not go to the doctor.
You would have more and more senior citizens showing up at the emergency room because they waited too long to take care of something. And those visits to the emergency room might not have even been necessary had they been able to go to the doctor earlier and be treated for something before it got to the point of being a huge problem.
If Romney wins and does what he says he's going to do, there will be another [Medicare-related] windfall for the insurance companies. You've heard him criticize the president for supposedly cutting the Medicare program by $700 billion, which is absolutely erroneous and disingenuous. What Romney says is he would restore that amount of money for the Medicare program, leading people to think that benefits are being proposed to be cut and he would restore those benefits. But it is absolutely not the case and he is misleading people so badly here and apparently people are buying into what he is saying.
That $700 billion is not cutting benefits at all. What it's doing is reducing payments over the next 10 years to hospitals and insurance companies in particular. Part of the savings would come from reducing the overpayments that the government is paying private insurance companies to participate in the Medicare Advantage program. And the hospitals bought into it because they realized, again, if you expand coverage -- that money would be used to expand coverage to more people -- the more people in the system the less bad debt you have.
The government has paid private insurers over the years more in excess payments just to keep those insurance companies in the game. I saw a study just recently that found that since 1985 private insurance companies have cost the Medicare program more than $280 billion in excess payments. And that's because the government, again, has been paying insurance companies a bonus to participate in the Medicare Advantage program. Obama is proposing to eliminate those overpayments, to reduce them and then eventually to eliminate them.
But if Romney were to undo that, if he were to restore that $700 billion, he would be wasting that money. But it would go right to the insurance companies.
Medicaid beneficiaries would also be very aversely affected under the Romney-Ryan plan. They would convert the program into a block-grant program in which the federal government would just hand over X amount of dollars to the states and say, "Here, it's yours, do with it as you want." The federal guidelines would disappear as to how the money could be spent. So you would have some states that would do a better job of providing coverage to their low-income populations than we currently have now. But it would be a tragic thing for a lot of people who live in states that just would not provide the same level of access to care they do now because of the federal requirements that exist today.
So it would be different from state to state and it probably would change from administration to administration as well. It probably would become a very unstable kind of program over the years. And it would certainly facilitate the privatization of Medicaid.
5. Provide Americans the Freedom to Go Without Health Insurance
Wendell Potter: First, a high percentage of the uninsured are young people. And they're uninsured not necessarily because they want to be uninsured and not necessarily because they consider themselves invincible, but because they simply don't have the money to buy coverage. Most young people are just starting out in their careers and they're in entry-level positions that don't pay a whole lot. Many of them are in service jobs that don't offer coverage or are having to work part-time and are just not eligible for coverage. So many, many young people are working but they don't have enough money to buy coverage or they're not working for large companies that offer them coverage.
And because they comprise such a big part of the uninsured population, insurance companies have sort of said dismissively that young people consider themselves "young invincibles." That's the name that insurance companies call that category of people who are uninsured. But it's an arrogant term to get people to believe something that really is not true. Young people would like to have coverage, they just don't have the means to get it. But it is a term that enables insurers and their allies to try to get people to think that the problem with being uninsured is not much of a big deal after all because a lot of people who are uninsured are young people who are just being irresponsible, as young people often are. But it's not their being irresponsible, it's their being unable to afford to buy decent coverage.
Insurance companies do offer skimpy policies that are geared toward young people and they market these products in specific ways to try to appeal to young people. They price the premiums competitively low, but the benefits are also low. They're often completely inadequate. So some people who do buy coverage are buying coverage that would leave them very uninsured if they got sick or injured.
But it's all a big myth that anyone doesn't want to be insured. It's a scary thing to be uninsured. Most people realize that they can't control their destinies. They can't wake up every morning with a guarantee that they're not going to get bad news from the doctor after a medical test or that they're not going to be in an accident. There is no such thing as that kind of a guarantee. So we know that we really need to have some protection against illness and accidents.
But many people can't buy coverage for a variety of reasons, including those people who presumably have high incomes. The median household income in this country is not even $50,000. And it's quite true that there are some households with incomes of $75,000 and over in which the family members aren't insured. But it's often not because they are being irresponsible [i.e. they would prefer to just buy something else], it's because more than likely one or more people in that family has a preexisting condition. And if you're trying to insure your entire family, if one person has a preexisting condition, you're not going to be able to buy a policy for your family. It's just the way it is.
It's part of the propaganda of the insurance industry and its allies that we shouldn't worry about those people. Those people have money, they're just not using it to buy coverage. They don't deserve our sympathy. But what they're doing when they say that, or when politicians try to get us to believe that, is purposely obscuring what the reality is -- a lot of those people are that way not by choice but because they can't afford the high premiums or they can't buy it at any price.
6. Permit Heath Insurers to Spend Our Premium Dollars As They See Fit
Wendell Potter: If Romney follows through with getting rid of the Affordable Care Act, another way health insurers would profit under his presidency is that they would no longer have to abide by the requirement to spend at least 80 percent of what we pay in premiums on our medical care. This is the provisional law that pertains to the medical loss ratio of insurance companies.
Over the past several years, insurance companies have been spending less and less of their premium dollars on our medical care and a lot more on their overhead. That includes paying exorbitant CEO and other executive salaries and also rewarding shareholders if they're for-profit plans or for-profit insurers. And Wall Street has been very happy with this because the less the insurance companies pay out in claims as a percentage of revenue, the more is left over to reward shareholders.
This money also goes into sales and marketing activities to target people they want to have as customers. And they use it to pay underwriters, the very people who determine who to cover and who not to cover, and how much more, for example, to charge people who are older or who are women.
In 1993, the year the Clinton healthcare plan was proposed, insurance companies were spending about 95 percent, or 95 cents on every premium dollar on medical care. That was the overall industry average. That dropped over the years to where the average is down to 80 percent now.
One of the good provisions of the Affordable Care Act sets 80 percent as the floor. Insurance companies are prohibited from spending less than 80 percent and if they do they have to give their policyholders a rebate. And we've seen over the past year -- this is a provision that's already in effect -- they've had to send rebate checks to millions of policyholders because they did go below that threshold. It's an important protection for consumers that would go away if the law goes away.
