T R A N S C R I P T
VIDEO FROM DEMOCRACY NOW! AMY GOODMAN, PRODUCER
NOTE: See also our bonus feature
The Health Insurers Have Already Won
(at the bottom of this article), BusinessWeek’s article on the Obama sellout to the private insurance mafia and Big Pharma.
Dateline: August 14, 2009
“You Do Not Cut Deals with the System that Has to Be Replaced”: Ralph Nader on Secret White House Agreements with the Drug Industry
President Obama is headed to Belgrade, Montana today and Grand Junction, Colorado tomorrow for a pair of town hall meetings on his healthcare reform legislation. The meetings are part of a final public relations push by the president to answer critics of reforming the healthcare system before the Obamas go on vacation.
While much of the media coverage has focused on right-wing criticism of the bill, there is also growing concern by advocates of [true] reform that the Obama administration has secretly made concessions to the healthcare industry and pharmaceutical industry.
A recent article in Business Week was titled “The Health Insurers Have Already Won.” The piece details how UnitedHealth and rival carriers have maneuvered behind the scenes in Washington and shaped health-care reform for their own benefit.
Meanwhile the Huffington Post has obtained a memo that shows the White House and the pharmaceutical lobby have secretly agreed to precisely the sort of wide-ranging deal that both parties have been denying over the past week.
The memo says the White House agreed to oppose any congressional efforts to use the government’s leverage to bargain for lower drug prices or import drugs from Canada—and also agreed not to pursue Medicare rebates or shift some drugs from Medicare Part B to Medicare Part D, which would cost Big Pharma billions in reduced reimbursements.
In exchange, PhRMA, the Pharmaceutical Researchers and Manufacturers Association agreed to cut $80 billion in projected costs to taxpayers and senior citizens over ten years. On Thursday NBC reporter Chuck Todd questioned White House Press Secretary Robert Gibbs about the White House-PhRMA deal.
To talk more about the healthcare legislation we are joined by former presidential candidate and longtime consumer advocate Ralph Nader. Ralph Nader, longtime consumer advocate, corporate critic and former presidential candidate.
This transcript is available free of charge. However, donations help us provide closed captioning for the deaf and hard of hearing on our TV broadcast. Thank you for your generous contribution.
AMY GOODMAN: President Obama is headed to Belgrade, Montana today and Grand Junction, Colorado tomorrow, on Saturday, for a pair of town hall meetings on his healthcare reform legislation. The meetings are part of a final public relations push by the President to answer critics of reforming the healthcare system before the Obamas go on vacation.
While much of the media coverage has focused on right-wing criticism of the bill, there is also growing concern by advocates of reform that the Obama administration secretly made concessions to the healthcare industry and drug companies.
A recent article in Business Week was titled “The Health Insurers Have Already Won.” The piece details how UnitedHealth and rival carriers have maneuvered behind the scenes in Washington and shaped healthcare reform for their own benefit.
Meanwhile, the Huffington Post has obtained a memo that shows the White House and pharmaceutical industry have secretly agreed to precisely the sort of wide-ranging deal that both parties have been denying over the past week. The memo says the White House agreed to oppose any congressional efforts to use the government’s leverage to bargain for lower drug prices or import drugs from Canada and also agreed not to pursue Medicare rebates or shift some drugs from Medicare Part B to Medicare Part D, which would cost Big Pharma billions in reduced reimbursements. In exchange, PhRMA, the Pharmaceutical Researchers and Manufacturers Association, the lobbying association for the drug companies, agreed to cut $80 billion in projected costs to taxpayers and senior citizens over ten years.
On Thursday, NBC reporter Chuck Todd questioned White House Press Secretary Robert Gibbs about the White House-PhRMA deal.
- CHUCK TODD: Stepping back a minute on the PhRMA deal, are we to believe that PhRMA didn’t get anything for their agreement on the $80 billion, that they did not get anything in return from the White House, any pledges, promises, winks, nods, whatever? Are we to believe nothing was promised to them?ROBERT GIBBS: Well, again, I simply was responding to what the question was about a memo, that I think both sides have— CHUCK TODD: Read the memo a minute. ROBERT GIBBS: —have decided— CHUCK TODD: Can you answer that question? Can you answer that question? Would they—can you say for sure they were promised nothing in return? ROBERT GIBBS: I can assure you that we’ve come to an agreement to seek some savings from the pharmaceutical industry as part of comprehensive healthcare. CHUCK TODD: And at what point are you going to release then the facts of the deal with them and with the hospitals—
ROBERT GIBBS: Well—
CHUCK TODD: —and with a couple of these stakeholders that have come here—
ROBERT GIBBS: I think—
CHUCK TODD: —made these pledges?
ROBERT GIBBS: Yeah.
CHUCK TODD: And you guys have been—
ROBERT GIBBS: I think some of this is going to be written into legislation that we’ll hopefully see going through Congress relatively soon.
CHUCK TODD: Should we—you know, why not release it now? Why not say what it is now?
ROBERT GIBBS: Again, as I said yesterday, some of that agreement—some of those agreements are up on the Finance Committee website.
AMY GOODMAN: That’s the White House spokesperson Robert Gibbs being questioned by NBC, Todd, the White House correspondent.
Well, to talk more about the healthcare legislation, we’re joined by former presidential candidate, longtime consumer advocate, Ralph Nader.
Ralph, you have looked at what came out in the Huffington Post. Explain what it is now that we’re understanding is the deal that the White House has, well, denied over the last week.
RALPH NADER: What is emerging here is what was being planned by the Obama White House all along, which is they would only—they would only demand legislation that was accepted by the big drug companies and the big health insurance companies.
You can see this emerging over the last few months. President Obama has met with the heads of the drug companies and the health insurance companies. Some executives have met with President Obama four to five times in the White House in the last few months. He has never met with the longtime leaders of the “Full Medicare for Everybody” movement, including Dr. Quentin Young, who is a close friend of his in Chicago; Dr. Sidney Wolfe, the head of the Health Research Group of Public Citizen; Rose Ann DeMoro, the leader of the fast-growing California Nurses Association—not once in the White House.
That’s all you need to know to realize that the deal that’s being cut here is from Obama to Senator Baucus, the Blue Dog senator from Montana, who is cutting a deal, largely in private, with right-wing Republican senators and getting it through the Senate and presenting Henry Waxman and John Dingle and others in the House with a fait accompli. So whatever they pass in the House will be watered down in the Senate-House conference. And what we’ll end up with is another patchwork piece of legislation, allowing huge and expanded profits for the health insurance companies and the drug companies, and continuing this pay-or-die system that has plagued this country for decades, a system that takes 20,000 lives a year, according to the Institute of Medicine of the National Academy of Sciences. That’s about fifty to sixty people who die every day.
The big mistake that the Obama administration made was they did not have continual public congressional hearings documenting the greed, the fraud, the $250 billion in billing fraud and abuse alone that the GAO years ago has documented. They didn’t document the $350 billion of waste, the overhead of Aetna and UnitedHealthcare and other health insurance companies with their massive executive salaries and bureaucracies. They did not document the deaths, the injuries, the sickness that hundreds of thousands of Americans go through every year because they can’t afford healthcare. And by not doing that, by playing this behind-the-scenes game with these executives from the big health-industrial complex, they were vulnerable to the split in their own party in the House, with the Blue Dog Democrats emboldened by an apparently wavering and indecisive President Obama, and they made sure that they were placed on the defensive.
And, Amy, when you’re on the defensive in a battle like this, with all these right-wing websites and Swift-boat-type people filling town hall meetings around the country, it’s very hard to get back on the offense. And when you’re cutting deals, as Obama is, with these big corporations, you will never focus the public attention on the sources of the abuse and cruelty.
AMY GOODMAN: Ralph Nader, President Obama is going to be in Montana today. Democracy Now!, we traveled through Helena, Missoula, Bozeman, other parts of Montana in April. There was a very strong progressive healthcare movement, healthcare activists, throughout Montana. But the senator who really is in charge of this healthcare reform, Max Baucus from Montana, let’s just say wasn’t their hero. The Montana Standard reported he’s received more campaign money from health and insurance industry interests than any other member of Congress in the past six years. Nearly a fourth of every dime raised by Baucus and his political action committee has come from groups and individuals associated with drug companies, insurers, hospitals, medical supply companies, and other health professionals. The significance of this?
RALPH NADER: Well, the significance is that Obama is being undermined by his own party in Congress, because the Blue Dogs are getting far more money from these corporations and campaign contributions than the so-called liberals in the Democratic Party.
But, you see, I say “undermined”—I’m not quite sure that Obama is objecting to this. He has set the whole atmosphere of catering to these giant corporations. He has made every mistake that the Clintons made in 1993, ’94 with their health insurance plan, except that he’s leaving Michelle Obama out of it. He’s made every mistake.
You do not cut deals with the system that has to be replaced, which is the health insurance system and the monster costs imposed by the drug corporations, all of which are getting huge taxpayer subsidies, by the way.
So, what Obama failed to do, because he’s never done it when he was campaigning, he did not pay adequate and due regard to the folks that brought him to the White House. He has not mobilized the progressive base in this country. He has not done anything but, you know, humor the labor unions. And as a result, he doesn’t have a base out there.
You point quite clearly to, or you imply, that there a lot of people for a single payer, a full Medicare-for-All system. And that’s true. Every poll has shown a majority of the American people, majority of doctors, majority of nurses, are for the single-payer system.
So why isn’t the President of the United States, who was elected in large part by these same people, why isn’t he representing them in Congress and in the White House? Because he is not a transforming leader. He is a harmony ideology person. He’s a concessionary person. He wants any bill with the label “health insurance reform” on it, no matter what. He’s not even willing to draw the line and say there will be no bill, I will veto any bill that doesn’t have a vigorous public option, not a phony public option that will allow—that will allow people to be dumped into the public option when they’re the sickest and leave the healthiest people for the profiteering insurance companies.
AMY GOODMAN: Ralph Nader, last week we interviewed Democratic Congress member Henry Waxman, chair of the House Energy and Commerce Committee, you know, absolutely key in healthcare. And I asked him why he withdrew his support for HR 676, the bill to create a universal, single-payer healthcare system. Take a listen.
- REP. HENRY WAXMAN: A single-payer bill does not really have a chance to pass the Congress. It would be a radical transformation of our healthcare system. Some people could say, “That’s fine, we should do it.” But I don’t think the Congress would have any realistic chance of passing a bill like that. You’d have to take all the insurance coverage that’s provided on the private sector and switch it over to the government. There would have to be massive taxes, increases, to make up for the lost money that’s now being spent by employers for their employees. And by the time we would be through trying to accomplish something like that, the Republicans would demonize it. So what President Obama suggested was a practical compromise way to accomplish the goals that we wanted.There are other ways to get universal coverage, as well. Senator Wyden and Bennett had an approach that would end employer coverage by in effect giving people an opportunity to go buy private insurance. That would work. I have some misgivings about it, but it also is a radical transformation of healthcare. AMY GOODMAN: So, why did you support it for so long? REP. HENRY WAXMAN: Well, I wanted to argue that this was a way to cover people, and it’s the way many countries provide health insurance. And if we were starting from scratch in this country, we might well decide that that would be the way for us to go, but we have right now a system that’s been in place since World War II, where most people have their insurance through their jobs. And we thought it would be much too disruptive and people would be much too anxious, if we took things away from them with the promise that they’re going to get something else. And I didn’t think Congress could pass it.
AMY GOODMAN: That’s California Congress member Henry Waxman, chair of the Energy and Commerce Committee. Ralph Nader, your response?
RALPH NADER: Well, first of all, Henry Waxman is going to be shoved aside even on his modest proposal, because the deal is being cut between Obama, Baucus, Grassley, Enzi in the Senate. And he’s not going to have much left, given the rebellion in his own ranks by the right-wing Democrats, even to put forth what he is proposing, which is a huge step backward from HR 676, which was the single-payer bill that he was on for a long time before he dropped out, before Nancy Pelosi and Obama, in effect, persuaded him to drop out.
But, you know, this business of “it‘s impractical, they don’t have the vote,” well, these are self-fulfilling prophecies. How many times could that have been said to the civil rights movement, to the women’s rights movement in the past? Well, they didn’t have the votes in Congress. So did these advocates of civil rights and the women’s rights movement, did they back down? No, they worked. They fought. They were transforming leaders. These people are concessionary leaders.
Let’s give Henry Waxman some slack here. He says that Full Medicare for All is too disruptive and too fast. Alright, why don’t they set a system that’s described in an interview with the New York Times yesterday of Dr. Marcia Angell, who was formerly editor of the New England Journal of Medicine? She says the following: you could do Medicare, step by step. Right now Medicare kicks in at age sixty-five. In the first stage, you could take it down to fifty-five years or older, and then take it down to forty-five years or older. They don’t even want to do that.
That’s why the people who are building this movement called singlepayeraction.org, which confronts each senator as they’re going in and out of meetings and puts it on their website, that’s why they say there’s no piecemeal. They don’t want piecemeal. They want a continuation of the present system with more co-pays, more deductibles, enormous inflationary cost, and the fraud that’s enormously pervasive in the billing system, and the waste in the administrative bureaucracies of these health insurance companies.
AMY GOODMAN: Ralph Nader, I wanted to get your comment on the Whole Foods CEO, John Mackey, who wrote a piece in the Wall Street Journal, an editorial criticizing Obama’s plan to create a government-funded public healthcare option, dismissing the single-payer healthcare system of countries like Canada and Britain. He said he doesn’t believe in, quote, “an intrinsic right to health care, food or shelter,” and said those are best provided through, quote, “market exchanges.” Again, this is the CEO of Whole Foods, John Mackey. Single Payer Action, the group you just mentioned, is calling for a boycott now of Whole Foods.
RALPH NADER: Well, first of all, you know, he’s a libertarian, very right wing. And there is going to be announced a boycott of Whole Foods, because he is a clear menace to the fundamental system of community caring that should be a trademark of our country. We should care for one another. To leave it up to the market leaves it up to the funeral directors. Twenty thousand people a year, at least, are dying because they can’t afford health insurance. Nobody dies in Canada or Belgium or France or England or Germany because they can’t afford health insurance, because they’re insured from the day they are born.
And right now, people don’t have choice of—free choice of doctor and hospital when they’re under these HMOs. What’s happening here is a Goebbels-type propaganda attack on Full Medicare for All, accusing Full Medicare for All of everything that the present system is furthering: rationing of care by these HMOs, number one; bureaucracy, number two; huge cost increases, number three; and making the taxpayers subsidize their profiteering corporate greed.
AMY GOODMAN: Ralph Nader, we only have a few seconds, and I just want to ask, if you were President Obama today, what exactly would you do?
RALPH NADER: I would go for full Medicare for everyone, because people understand Medicare. Forty-five million people get it. They have free choice of doctor and hospital. It’s a three percent administrative burden, compared to 20 to 25 percent for the Aetnas and the private health insurance bureaucracies. It’s something that people understand. It’s something we should have had in 1964; instead of just for the elderly, it should have been across the board. That’s what I would go for. It’s supported by a majority of the people, majority of the doctors, majority of the nurses. It’s clear. It’s understandable. It doesn’t deal with unenforceable deals like the so-called drug industry—
AMY GOODMAN: And the polls that show that people who want to stay with their doctor are not going to support something like this?
RALPH NADER: No, because they get a free choice in doctor. See, all this is simply taking—
AMY GOODMAN: Five seconds.
RALPH NADER: —the health insurance industry, replacing it with a government insurance system, as in every Western country.
AMY GOODMAN: Ralph Nader, thank you very much for being with us, longtime consumer advocate.
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Business Week August 6, 2009
The Health Insurers Have Already Won
How UnitedHealth and rival carriers, maneuvering behind the scenes in Washington, shaped health-care reform for their own benefit
By Chad Terhune and Keith Epstein
As the health reform fight shifts this month from a vacationing Washington to congressional districts and local airwaves around the country, much more of the battle than most people realize is already over. The likely victors are insurance giants such as UnitedHealth Group ( UNH ), Aetna ( AET ), and WellPoint ( WLP ). The carriers have succeeded in redefining the terms of the reform debate to such a degree that no matter what specifics emerge in the voluminous bill Congress may send to President Obama this fall, the insurance industry will emerge more profitable. Health reform could come with a $1 trillion price tag over the next decade, and it may complicate matters for some large employers. But insurance CEOs ought to be smiling.
Executives from UnitedHealth certainly showed no signs of worry on the mid-July day that Senate Democrats proposed to help pay for reform with a new tax on the insurance industry. Instead, UnitedHealth parked a shiny 18-wheeler outfitted with high-tech medical gear near the Capitol and invited members of Congress aboard. Inside the mobile diagnostic center, which enables doctors to examine distant patients via satellite television, Representative Jim Matheson didn’t disguise his wonderment. “Fascinating, fascinating,” said the Democrat from Utah. “Amazing.”
Impressing fiscally conservative Democrats like Matheson, a leader of the House of Representatives’ Blue Dog Coalition, is at the heart of UnitedHealth’s strategy. It boils down to ensuring that whatever overhaul Congress passes this year will help rather than hurt huge insurance companies.
Some Republicans have threatened to make health reform Obama’s “Waterloo,” as Senator Jim DeMint of South Carolina has put it. The President has fired back at what he considers GOP obstructionism. Meanwhile, big insurance companies have quietly focused on what they see as their central challenge: shaping the views of moderate Democrats.
The industry has already accomplished its main goal of at least curbing, and maybe blocking altogether, any new publicly administered insurance program that could grab market share from the corporations that dominate the business. UnitedHealth has distinguished itself by more deftly and aggressively feeding sophisticated pricing and actuarial data to information-starved congressional staff members. With its rivals, the carrier has also achieved a secondary aim of constraining the new benefits that will become available to tens of millions of people who are currently uninsured. That will make the new customers more lucrative to the industry.
Matheson, whose Blue Dogs command 52 votes in the House, can’t offer enough praise for UnitedHealth, the largest company of its kind. “The tried and true message of their advocacy,” he says, “is making sure the information they provide is accurate and considered.”
Representative Mike Ross, an Arkansas Democrat who leads the Blue Dogs’ negotiations on health reform, also welcomes input from UnitedHealth. “If United has something to offer on cutting costs, we should consider it,” says Ross, a former small-town pharmacy owner. “We need more examples that work, and everything should be on the table.”
Fifteen years after the insurance industry helped kill then-President Bill Clinton’s health-reform initiative, Ross is frustrating the Obama White House by opposing proposals for a government-run insurance concern that would compete with private-sector companies. The President argues that without a public plan, premiums and medical bills will remain prohibitively high. Ross and Matheson have given strong voice to the industry’s contention that such a public insurer would actually reduce competition by undercutting private plans on price and driving them out of business. “We have concerns about a public option if it’s not done on a level playing field,” Ross says.
Obama launched his Administration vowing to extend coverage to all Americans and help pay for it by reining in insurance costs. Seven months later, insurers and pharmaceutical manufacturers that appeared vulnerable to a regulatory crackdown have been welcomed to the negotiating table by the President’s own party.
The several competing bills pending in Congress would guarantee all Americans access to health coverage, addressing the plight of the 47 million who are now uninsured. Congress plans to achieve that by expanding Medicaid, the government program for the poor and disabled; requiring insurers to accept all applicants regardless of their health; and mandating that everyone purchase coverage. Government subsidies would make the obligatory coverage more affordable. The legislation would do little, however, to slow spending by Medicare, the public program for senior citizens, or cut overall medical costs. Congress is considering taxes on the wealthy and on benefits now provided to many white-collar workers.
During the UnitedHealth road show in July, Democrat after Democrat clambered into the company’s promotional vehicle beneath a sign declaring: “Connecting You to a World of Care.” Judah C. Sommer, who heads the company’s Washington office, looked on with satisfaction. “This puts a halo on us,” he explained. “It humanizes us.”
And that Democratic proposal to tax insurance companies? It seems to be fading after the industry said it would raise rates for workers and their families.
UnitedHealth’s relationship with Democratic Senator Mark R. Warner of Virginia illustrates the industry’s subtle role. Elected last fall, Warner, a former governor of his state and a wealthy ex-businessman, received a choice assignment as the Senate Democrats’ liaison to business. The rookie senator landed in the center of a high-visibility political drama—and in a position to earn the gratitude of a health insurance industry that has donated more than $19 million to federal candidates since 2007, 56% of which has gone to Democrats.
UnitedHealth has periodically served as a valuable extension of Warner’s office, providing research and analysis to support his initiatives. Corporations and trade groups play this role in all kinds of contexts, but few do it with the effectiveness of the insurers. In June, Warner introduced legislation expanding government-backed Medicare and Medicaid coverage for hospice stays for the terminally ill and other treatment in life’s final stages. The issue isn’t a top UnitedHealth priority. But the corporation wanted to help Warner with his argument that in the long run, better hospice coverage would save money. UnitedHealth prepared a report for lawmakers finding that 27% of Medicare’s budget is now spent during the last year of older patients’ lives, often on questionable hospital tests and procedures. Expanded hospice coverage and other services could save $18 billion over 10 years, UnitedHealth asserted.
When Warner went to the Senate floor on June 15 to offer his bill, he cited those exact figures. He thanked the company for its support and put a letter from UnitedHealth applauding him in the Congressional Record .
Warner acknowledges in an interview that he worked on the hospice-care legislation with UnitedHealth executives. But he stresses that he has long experience with health issues and has formed his own views. The senator echoes UnitedHealth’s contention that a so-called public option could be a “Trojan horse for a single-payer system,” meaning government-run medical care. Warner has heard from some of UnitedHealth’s largest employer clients, such as Delta Air Lines ( SWY ). Delta CEO Richard H. Anderson, a former UnitedHealth executive, has told Warner and other lawmakers that big companies don’t want government to limit their flexibility in crafting employee health benefits.
Obama’s promise to boost competition and lower costs by having the government play a much broader role in health coverage has been steadily compromised because of the resistance of such Democrats as Warner. “There are different ways to skin this and get competition” in the insurance market, Warner says.
Warner and other opponents of a public plan have relied on an estimate by John Sheils, an actuary who says that 88 million people, or 56% of those with employer-provided coverage, would desert private insurance for a government-run program. That would destabilize the marketplace and potentially kill the private insurance industry, according to Sheils, who works for the Lewin Group, a corporate consulting firm in Falls Church, Va.
UnitedHealth lobbyists routinely cite Lewin’s work, as do Senator Orrin G. Hatch (R-Utah), the second-ranking Republican on the Senate Finance Committee, and Eric Cantor (R-Va.), the House Republican Whip. Left out of these testimonials or buried in the fine print is that a UnitedHealth unit owns the Lewin Group and thus is ultimately responsible for Sheils’ paycheck. In an interview, Sheils says UnitedHealth gives him and the Lewin firm complete independence: “We call it like we see it,” he adds.
Some Democrats differ. Says Representative Pete Stark, the liberal California Democrat who chairs the House Ways & Means health subcommittee: “The Lewin Group’s so-called analysis is suspect.” The nonpartisan Congressional Budget Office has stated that the Sheils-Lewin figure is far too high.
UnitedHealth brings a mixed record to its role helping to guide health reform. The company has repeatedly hit smaller employers and consumers with double-digit rate hikes in recent years, far greater than the overall rate of inflation. An investigation last year by New York’s Attorney General will force the company to stop running two huge databases used widely within the insurance industry. By allegedly setting medical reimbursements too low—that is, skewing statistics in favor of insurers by understating “usual and customary” physician fees—the databases had resulted in the overcharging of consumers by billions of dollars nationwide. In January, UnitedHealth agreed to resolve the situation by paying $400 million in a pair of agreements with the New York Attorney General and the American Medical Assn., although it didn’t admit any wrongdoing.
In a separate case last year, UnitedHealth was forced to stop selling “limited benefit” plans with capped payouts under the imprimatur of the senior citizen group AARP. It turned out that the policies provided very modest coverage, catching many customers off guard, according to Senator Charles E. Grassley (R-Iowa), who helped bring the practice to light. Grassley pointed out that UnitedHealth paid as little as $5,000 toward surgery costing several times as much.
Despite such episodes, UnitedHealth is generally well received in legislative circles in Washington. In late May its in-house point man on reform, Simon Stevens, hand-delivered a report to key senators detailing ways to save an estimated $540 billion in federal spending over 10 years. A week later, on June 4, Stevens accompanied UnitedHealth’s chief executive, Stephen J. Hemsley, to a meeting with Senator Kent Conrad (D-N.D.), an influential moderate member of the Senate Finance Committee. Conrad has since led an effort to create nonprofit medical cooperatives that would operate much like utility co-ops as a substitute for a federally run plan. With less heft than a proposed national plan, the state medical cooperatives would pose a far weaker competitive threat to private insurers.
Conrad says in an interview that the co-op idea evolved independently of any industry input. Skirmishing over the public plan could jeopardize efforts at reform, he warns. Co-ops, he argues, are “the only alternative that’s got much of a shot” to gain sufficient votes in the Senate.
UnitedHealth followed up on June 30 with another report for lawmakers pinpointing $332 billion in savings through better use of technology and administrative simplification. If enacted, those changes would potentially benefit UnitedHealth’s Ingenix data-crunching unit. Ingenix, with annual revenue of $1.6 billion, is poised to establish a national digital clearinghouse to ensure the accuracy of medical payments and provide a centralized service for checking the credentials of physicians.
Stevens, an Oxford-educated executive vice-president at UnitedHealth, once served as an adviser to former British Prime Minister Tony Blair. In that capacity, Stevens tried to fine-tune the U.K.’s nationally run health system. Today he tells lawmakers that the U.S. need not follow Britain’s example. Concessions already offered by the U.S. insurance industry—such as accepting all applicants, regardless of age or medical history—make a government-run competitor unnecessary, he argues. “We don’t think reform should come crashing down because of [resistance to] a public plan,” Stevens says. Many congressional Democrats have come to the same conclusion.
UnitedHealth has traveled an unlikely path to becoming a Washington powerhouse. Its last chairman and chief executive, William W. McGuire, cultivated a corporate profile as an industry insurgent little concerned with goings-on in the capital. From its Minnetonka (Minn.) headquarters, the company grew swiftly by acquisition. McGuire absorbed both rival carriers and companies that analyze data and write software. Diversification turned UnitedHealth into the largest U.S. health insurer in terms of revenue. In 2008 it reported operating profit of $5.3 billion on revenue of $81.2 billion. It employs more than 75,000 people.
In 2006, McGuire lost his job after getting caught up in the manipulation, or “backdating,” of company stock options. UnitedHealth was forced to restate earnings over a 12-year period to reflect the extra compensation it had granted McGuire and other executives. McGuire’s chief lieutenant, Stephen Hemsley, took over as CEO in December 2006. Two independent inquiries concluded that Hemsley wasn’t involved with the backdating. Nevertheless he forfeited $190 million in past stock compensation and unrealized gains to resolve the matter.
Hemsley, a former chief financial officer of the now-defunct Arthur Andersen accounting firm, generally shuns the spotlight. But when health reform became a central issue in the runup to the last Presidential election, company executives say they realized UnitedHealth needed to go on the offensive. Hemsley met with White House officials on May 15 and May 22 to promote his company’s prescription for cutting federal health spending.
In August 2007, the company hired Sommer, who previously headed global lobbying for Goldman Sachs ( GS ). He quickly built a new Washington team of former congressional aides and other K Street operatives. One key acquisition: Cory Alexander, former chief of staff for House Majority Leader Steny Hoyer (D-Md.), an influential moderate Democrat. Alexander had been lobbying for the huge mortgage financier Fannie Mae ( FNM ). Today, Sommer directs a team of nearly 50 people from UnitedHealth’s spacious Washington office on Pennsylvania Avenue, equidistant between the Capitol and White House. The company spent more than $3.4 million on in-house and outside lobbying in the first half of 2009.
Sommer has retained such influential outsiders as Tom Daschle, the former Democratic Senate Leader who now works for the large law and lobbying firm Alston & Bird. Daschle, a liberal from South Dakota, dropped out of the running to be Obama’s Secretary of Health & Human Services after disclosures that he failed to pay taxes on perks given to him by a private client. He advised UnitedHealth in 2007 and 2008 and resumed that role this year. Daschle personally advocates a government-run competitor to private insurers. But he sells his expertise to UnitedHealth, which opposes any such public insurance plan. Among the services Daschle offers are tips on the personalities and policy proclivities of members of Congress he has known for decades.
Conceding that he doesn’t always agree with his client, Daschle says: “They just want a description of the lay of the land, an assessment of circumstances as they appear to be as health reform unfolds.” He says he leaves direct contacts with members of Congress to others at his firm.
What people in Washington tend not to discuss, at least on the record, is the open secret that insurers are minimizing their forecasts of the eventual windfall they will enjoy from expanded coverage for Americans. UnitedHealth has given certain key members of Congress details about its finances and tax liability—both historical numbers and figures projected under various cost-sharing scenarios. But some on Capitol Hill are skeptical. “The bottom line,” says an aide to the Senate Finance Committee, “is that health reform would lead to increased revenues and profits [for the insurance industry]. … There will be [added] costs [to the companies], but we’re not sure the revenues and profits will be as low as they say.”
A fundamental question about the health overhaul is what minimum standards will apply to the coverage all Americans will be required to have. UnitedHealth has been exchanging a high volume of information on the topic with members of the Senate Finance Committee and their staff. Stevens, the former British health aide, regularly scans PowerPoint presentations generated by the committee staff that attempt to calculate the actuarial value of proposed benefit packages. Senators stung by the projected $1 trillion price tag are winnowing down the required coverage levels to cut costs.
This is good news for UnitedHealth, which benefits when patients pick up more of the tab. In late spring, the Finance Committee was assuming a 76% reimbursement rate on average, meaning consumers would be responsible for paying the remaining 24% of their medical bills, in addition to their insurance premiums. Stevens and his UnitedHealth colleagues urged a more industry-friendly ratio. Subsequently the committee reduced the reimbursement figure to 65%, suggesting a 35% contribution by consumers—more in line with what the big insurer wants. The final figures are still being debated.
Stevens says UnitedHealth and its corporate clients want to steer Congress toward benefit levels and cost sharing that can help control overall health spending: “We are providing another resource of actual modeling and advice on how proposals in the committees are structured and some potential unintended consequences of going down certain routes.”
Perhaps more than any other insurer, UnitedHealth is poised to profit from health reform. Its decade-long series of acquisitions has made the company a coast-to-coast Leviathan enmeshed in the lives of 70 million Americans.
United’s AmeriChoice unit is the largest government contractor administering state Medicaid programs for the poor and federally sponsored plans for children. AmeriChoice’s revenue rose 34% last year, to $6 billion, and it has 2.7 million people enrolled. Those numbers should continue rising under reform since congressional Democrats are proposing an expansion of Medicaid to help achieve universal coverage. More of the working poor would qualify for Medicaid, and AmeriChoice can sell itself to states as the leading service provider.
HEALTH COACH AT THE OFFICE
Another of the big beneficiaries among UnitedHealth’s stable of subsidiaries is OptumHealth. It’s the company’s one-stop shop for managing the chronically ill, offering wellness programs and guiding consumers on treatment options. Even before the reform debate, these services were growing in demand as big employers, state and local governments, and others tried to curb health-care spending by supervising patients more aggressively.
OptumHealth provides a broad range of services, from a 24-hour hotline where nurses can suggest the best hospital for a transplant to “health coaches” who dole out meal plans, to-do lists, and motivational messages. Some OptumHealth clients bring coaches into the office or onto the factory floor to teach about diet and exercise. Many of the cost-containment strategies Democrats are pushing call for more of the preventive care that OptumHealth sells.
“We are extremely well positioned for a much broader adoption,” says Dawn Owens, OptumHealth’s chief executive. Her division, based in Golden Valley, Minn., already boasts $5.2 billion in annual revenue.
Stevens argues that while UnitedHealth will likely benefit financially from health reform, the company will also aid the cause of reducing costs. He cites what he says is its record of “bending the cost curve” for major employers.
During a media presentation in May in Washington, Stevens said medical costs incurred by UnitedHealth’s corporate clients were rising only 4% annually, less than the industry average of 6% to 8%. But that claim seemed to conflict with statements company executives made just a month earlier during a conference call with investors. On that quarterly earnings call, UnitedHealth CEO Hemsley conceded that medical costs on commercial plans would increase 8% this year.
Asked about the discrepancy, Stevens says the lower figure he is using in Washington represents the experience of a subset of employer clients who fully deployed UnitedHealth’s cost-saving techniques, including oversight of the chronically ill. “These employers stuck at it for several years,” he says. “We are putting forward positive ideas based on our experience of what works.”
Terhune is a senior writer for BusinessWeek based in Florida. Epstein is a correspondent in BusinessWeek’s Washington bureau.