Obamacare: Meet the Real Death Panel

Recently, President Obama assembled a brain trust of health care industry CEOs to discuss the (ahem) rocky beginning of the Affordable Care Act (aka ACA, aka Obamacare). These sages included Bruce Broussard (CEO, Humana), Mark Bertolini (CEO, Aetna), and Joseph Swedish (CEO, WellPoint). It is worth taking a closer look at these three fellows, because they provide an insight into realities of Obamacare that its supporters tend to gloss over.

 

The Real Death Panel: Broussard, Bertolini, and Swedish. Power ties!

Bruce Broussard (CEO, Humana)

Mr. Broussard received some unwanted attention when it was disclosed that he had used $323,000 of company money to commute to work by aircraft. His total compensation is $2.9 million (source). When backers of Obamacare talk about the fact that insurers will be required to keep their profit margin to a minimum, they are conveniently leaving out revenue. It is revenue that makes the stock prices go up, pads Mr. Broussard’s salary, and supports his luxurious commute via private jet.

Mr. Broussard is notable for repealing the Law of Supply and Demand:

"I want to say that we are very positive [about] the fact that health care reform is going to expand coverage [demand]... But it is going to raise the cost of care (source)."

Mr. Broussard’s investment in the success of Obamacare is questionable. In Kentucky, Humana sent its individual market policy holders a letter urging them to renew their policies before 2014, and thereby avoid participating in Obamacare:

"The amendment purported to allow policyholders to keep their current plan for the 2014 calendar year and thereby avoid rate increases due to the ACA’s requirements that policies remove exclusionary riders and provide coverage for 10 categories of so-called essential health benefits (source)." 

In 2011, Humana was fined $3.4 million for failing to report Medicaid fraud. On multiple occasions, Humana has been fined for improperly colluding to fix the reimbursement amount paid to physicians. The company has also violated labor laws by requiring staff members to work additional hours with no pay. In 2001, a Texas jury found Humana guilty of wrongful death resulting from improper care of a woman with kidney disease (source).

Mark Bertolini, Aetna

Clearly, passage of ACA did not alarm the board of directors at Aetna. In 2012, Mr. Bertolini’s pay package nearly quadrupled, totaling $36.23 million (source). 

Mr. Bertolini has announced that, in order to offset new Obamacare taxes, premiums will be raised across the board (source). What are these taxes? To raise money to provide “affordable” insurance, Obamacare taxes so-called Cadillac health plans that are offered by some of the more generous employer-sponsored health plans (source). Thus, when people pay Obamacare premiums, they are subsidizing Cadillac health plans for which they are ineligible.

Aetna policyholder Kevin Roberts faced a year long struggle to convince Aetna to pay for medical care for his autistic child, despite the fact that this care is explicitly covered under the Aetna policy he purchased (source).

Aetna has been fined more than $1 million for deceptive advertising. Also, despite being under a contractual obligation to do so, Aetna failed to cover mental health care, pap test screening, mammography, and preventive care for children up to age six (source).

Joseph Swedish, WellPoint

WellPoint ousted Angela Braly because she wasn't bringing in enough money to satisfy Wall Street (source) and the company looked to Joseph Swedish to take her place. To lure Mr. Swedish away from his previous job at Trinity Health Corporation, WellPoint paid Swedish a salary of $1.25 million, with a bonus of as much as $3.75 million more, according to a company filing. He will also get stock options worth as much as $8 million and a payout of $3.56 million to make it worth his while to change jobs (source). 

WellPoint made the news in 2010 for leading the way in the practice of rescission. This refers to a practice of cancelling the policies of customers who develop expensive health conditions such as breast cancer (source). Obamacare enrollees are, according to the law, protected against this sort of mischief but it is worth pointing out this practice as an indication of WellPoint's level of corporate citizenship.

In 2013, WellPoint was fined $1.7 million for violating federal HIPAA laws and exposing confidential patient health data, social security numbers, dates of birth, and other information on its website (source). In 2012, WellPoint paid four and a half billion to buy out Amerigroup, and in doing so became one of the largest Medicaid providers in the country (source). As the Wall Street Journal points out, this is part of a larger trend in which private business and government are becoming increasingly intertwined. And that last sentence ought to be terrifying to the reader, because it brings to mind a dystopian future in which the rapacity of big business and the power-without-accountability that is our federal government merge to become a supercharged money-sucking juggernaut. But I digress.

Honorable Mention: Other Attendees of the Obama Meeting

Karen Ignagni, America’s Health Insurance Plans (AHIP). 

AHIP is a lobbying group for health insurance companies. Before Obamacare became law, it seemed as though President Obama and AHIP were on opposite sides of the issue, and Ms. Sebelius even sent them a nastygram to complain about its tactics. In 2009, the president devoted one of his radio addresses to denying AHIP's allegation that Obamacare would increase the cost of policies in the individual insurance market (source). So it's surprising that AHIP received an invite from the White House. What's not surprising is that the cost of individual policies has gone up.

AHIP is currently led by Karen Ignagni. Mrs. Ignagni declared, prior to the passage of Obamacare, that America’s health insurers would be able, under Obamacare, to offer individual health insurance plans at a lower price. But she had to say stuff like that because at the time, there was still talk of a public option and she needed to stop that tout de suite (source). Once the public option was taken off the table, insurance company stocks went up 20%.

Mrs. Ignagni also claimed that AHIP members could get better prices than the federal government on pharmaceuticals for Medicaid recipients, but in reality, paying AHIP members to buy medications is (as one might expect) a more expensive approach (source). In other words, there are people out there who are willing to profiteer off Americans who are blind, physically disabled, or who are the poorest of the poor (i.e., Medicaid recipients).

Bernard Tyson, Kaiser Permanente.

Kaiser made the news recently for demoting a nurse working in Kaiser Hospital, because she has breast cancer, allegedly in the hope of convincing her to quit (source). Kaiser has also been found guilty of overcharging Medicare for reimbursements (source). Now, if I were given the task of picking companies to participate in providing affordable healthcare to Americans, I'd automatically disqualify a company that has a record of stealing taxpayer money. But that's just me.

Michael Neidorff, Centene Corporation.

Another invitee to President Obama’s council of sages was Michael Neidorff, CEO of Centene Corporation. He earned between $8.5 million and $10 million in 2012 (source), (source). It’s actually hard to tell how much folks like him make, because they benefit from various bonuses and payouts that vastly exceed their base salaries.

Centene is “a provider of managed Medicaid programs, [and] offers health plans in 18 states.” It “posted a 2011 profit of $111.2 million on revenue of $5.3 billion. The company reported first-quarter 2012 net earnings of $24 million on revenue of $1.7 billion (source).” You read correctly. You might have been under the impression that Medicaid is like Medicare or Social Security, with low administrative costs, but that is not the case. Companies can and do earn big money from Medicaid.

In Illinois, state records show that Centene gave $100,000 to the Democratic Governors Association on July 26, 2010 — two months before the firm received contracts to provide Medicaid services in three Illinois counties (source). 

Despite the alleged safeguards built into the Obamacare legislation, Peach State Health Plan, a Centene subsidiary, was recently fined $3.7 million for engaging in practices that put Medicaid patients at risk of death. If “risk of death” sounds like hyperbole, what I am discussing here is delays in prior authorization for medical services. Sometimes a delay means that a claim is denied and must be resubmitted. If you are living with cancer, delays in treatment can harm your chances of survival (source) (source). Psychiatrists spend 1 million hours a year on the phone trying to get prior authorizations, and emergency psychiatric patients who are at risk of suicide or who are at risk of harming other people are prevented from receiving care for hours (source). This makes health care more expensive to society and less efficient, but it does save health insurance companies some money. 

The hefty penalty centered on Peach State's inability to grant ‘prior authorization’ for medical services within two weeks -- the national standard for the time a health-care plan should take to grant or deny coverage to a patient. Peach State was failing to meet that target almost 20 percent of the time, potentially putting patients who needed coverage for medications, tests or other critical medical services and equipment at risk, according to sources close to the situation (source).

It has been alleged that “senior executives at Centene used their access to insider information” to sell “more than 374,000 shares of stock from Feb. 7 to June 8 [2012], resulting in total proceeds of nearly $18 million.” Shortly after that sell-off, the price of Centene stock fell $1.65 a share (source). Here is an example of a health care organization wheeling and dealing like a Wall Street bank, and possibly angling to be one of tomorrow’s “too big to fail” institutions. So it goes.

Fact Sheet: Your Email and Telephone Privacy

There are some popular misconceptions among Americans regarding the safety of their email communications. Many Americans believe that they are protected against secret, warrantless searches of the content of their emails. This fact sheet aims to set the record straight.

NSA's XKeyscore technology provides NSA personnel with the capability to search Americans' emails. All that is required is that the NSA agent fill in an on-screen form explaining why he or she is searching the email, without court authorization or review by other NSA personnel. A second NSA tool, DNI Presenter, is used to read the content of stored emails, Facebook chats, and private messages (1). Other programs exist that automatically scour up to 75% of all email communications in the United States for suspicious keywords.

Even though the capability exists, that does not mean that the NSA is using it to read Americans' emails. Indeed, as defenders of the NSA spying program point out, American citizens and residents are legally protected against warrantless email searches.

However, there are some seemingly minor loopholes with respect to Americans' protections against these email searches. Owing to these loopholes, nearly every American is susceptible to being secretly spied on by his or her government.

If a foreigner is under surveillance, and an American mentions the name of that foreigner in an email, his or her own email can be searched by NSA without warrant or justification (2).

If an email message is conveyed across a server located in another country, it is considered a "foreign communication" and is subject to a warrantless search (3).

The three hop rule

If a United States citizen or resident (person "A") has ever communicated with an individual (person "B") who has ever communicated with a person ("C") who has ever communicated with someone (Person "D") who has had contact with someone who is suspected of terrorism, that United States citizens is susceptible to warrantless searches of his or her email (4).

Every Internet user on earth is about 4.74 "hops" away from every other Internet user on earth (5). Every Facebook user is, on average, 3.74 hops away from every other Facebook user (6). If, in your lifetime, you have interacted online with 1000 people, you are only 2 hops away from everyone else in the United States (6).

The chance of being 3 hops away or less from a terrorist is a function of how many individuals are on the terrorist watch list. Approximately 875,000 people are on that watchlist, including people who have been cleared of any connection to terrorism, a two year old boy, and the Ford Motor Company (7).

Thus, it is very unlikely that a typical American benefits from legal protections against secret, warrantless searches. The same rules and loopholes apply to the content of phone calls. If you are unwise enough to discuss tax evasion or trade in illicit drugs using email or phone, the NSA will share the information with law enforcement officials at its discretion. However, law enforcement officials are advised to conceal the fact that they obtained evidence from the NSA (3).

Someone who remembers living under the Stasi in East Berlin offers some wise words: “It is the height of naivete to think that once collected this information won’t be used,” he said. “This is the nature of secret government organizations. The only way to protect the people’s privacy is not to allow the government to collect their information in the first place (8).”








(1) http://www.theguardian.com/world/2013/jul/31/nsa-top-secret-program-online-data

(2) http://www.nytimes.com/2013/08/08/us/broader-sifting-of-data-abroad-is-seen-by-nsa.html?hp&_r=1&pagewanted=all&

(3) http://www.forbes.com/sites/jennifergranick/2013/08/14/nsa-dea-irs-lie-about-fact-that-americans-are-routinely-spied-on-by-our-government-time-for-a-special-prosecutor-2/

(4) http://www.theatlanticwire.com/politics/2013/10/conservative-reporter-says-feds-took-her-files-while-searching-home-guns/70941/

(5) http://math.stackexchange.com/questions/446150/given-average-network-diameter-how-many-nodes-are-three-hops-away

(6) http://www.theguardian.com/commentisfree/2011/nov/23/facebook-degrees-of-separation

(7) http://www.washingtonsblog.com/2013/07/nsa-spokesman-accidentally-admits-that-the-government-is-spying-on-all-americans.html

(8) http://www.mcclatchydc.com/2013/06/26/195045/memories-of-stasi-color-germans.html#.UedhLJFx0xB

On Waldo Salt’s Un-American Activities

Introduction to the Occasional Series

Today, there are concerns raised in some quarters that federal government programs are infringing on Americans’ First Amendment, Fourth Amendment, and Fifth Amendment American liberties. These concerns relate to NSA secret surveillance of law-abiding American citizens.  

Many Americans do not understand that they can be harmed when they give up their claim to Constitutional liberties. Many Americans are wont to say, “If I have nothing to hide, I have nothing to fear.” Or they may say, “I am happy to accept the curtailment of these liberties, because I am afraid of terrorists, and I am confident that the NSA activities are motivated purely by the desire to protect Americans from terrorists.” What Americans do not say, but which may accurately describe their inner thought processes, is “I wasn’t using my First, Fourth, and Fifth Amendment liberties, so I don’t see the harm in giving them up.”

In this occasional series, I will profile Americans who have been harmed as a consequence of government usurpations of these liberties, in arguing that these liberties matter and that they deserve a vigorous defense. 

Waldo Salt 

During his long career as a Hollywood screenwriter, Waldo Salt wrote screenplays for notoriously bad movies such as Taras Bulba. For a period of time he wrote forgettable scripts for episodes of television shows and commercials. Later in life, however, Waldo Salt showed unmistakable genius. He won academy awards for Midnight Cowboy and Coming Home, and was nominated for an academy award for the 1973 film Serpico. 

Waldo Salt

The story of Serpico is the story of a New York City police detective who is determined to expose police department corruption, who doggedly pursues this cause even after it becomes obvious that his superiors within the department will oppose him at every step of the way. Thus, it is the story is of a man who values civic virtue more highly than the self-interested goal of professional advancement.

Mr. Salt discovered his own genius after his life had been nearly destroyed. In 1951, he was found guilty of being a communist sympathizer, and as a consequence, his name was added to a Hollywood blacklist of individuals who would no longer be given work. As recounted in a PBS documentary, 

Though the blacklist had been lifted, much of [Waldo Salt’s] life had fallen into ruin. Divorced, and sick with pneumonia and despair, Salt was living in a cheap New York hotel trying to write television scripts. “I ended up at fifty, over-the-hill, thinking I had no future,” Salt explained. “Finally, I realized that I had allowed myself to write less than I could.” According to fellow writer Ian Hunter, “From then on, Waldo approached screenwriting as an artist (source).”

During his years on the blacklist, Mr. Salt could only be paid if he agreed that his work would not be credited. Sometimes, he wrote under his wife’s name. 

The Truth of the Allegations

As it happens, Mr. Salt was a member of America’s Communist Party. Of course, the question of whether one supports or opposes communism is beside the point. It is fairly certain that Mr. Salt never plotted the violent overthrow of the United States. Persecuting Americans because of their political views goes against the values enshrined in the United States Constitution. That Constitution was written by men who had lived in fear of being punished by the British Government during colonial days, and when they shared their political views in newspapers, they used pseudonyms. 

Blacklisting as an Economic Sanction

The Hollywood blacklist was a form of economic sanction against individuals. It relied on the cooperation of private industry. Once an individual was brought before a hearing to discuss his or her alleged communist sympathies, and regardless of innocence or guilt, he or she would be fired and later discover it to be virtually impossible to find work elsewhere. About 80% of people who were summoned to these hearings lost their jobs, and the total number of who lost their jobs is about 10,000 (source). 

It is worth reflecting on the fact that Hollywood bosses were more than willing to give in to pressure from Joe McCarthy and his supporters. A typical Hollywood boss probably weighed the options thusly: (a) I could allow my reputation to be tarnished by people who accuse me of harboring communist sympathizers, and lose money or even my job in the process, or (b) I can fire an employee and find someone else to do the work, and avoid any trouble. A person who had both the moral clarity to see McCarthyism for what it was and the moral conviction to risk his or her career for the sake of principle might choose option “a.” A self-interested individual would certainly choose option “b.”

Al Pacino in Serpico

What did Joe McCarthy Want?

It is possible that the NSA is engaged in its secret surveillance of Americans solely for the purpose of protecting Americans from terrorists. It is possible that Joe McCarthy engaged in his campaign of anti-communism solely for the purpose of protecting Americans from the perceived threat of communist infiltration and subversion. He was, in fact, instrumental in uncovering Alger Hiss, who according to the CIA, was a bona fide Soviet spy working in the U.S. government (source). Julius Rosenberg, likewise, was probably a Soviet spy (source). Even if we give McCarthy credit for being well-intentioned and not a power-hungry demagogue it’s worth reflecting on whether the discovery of these two spies was worth the cost in thousands of ruined lives and reputations. 

Waldo Salt: An Epilogue

In one scene in the movie Serpico, the hero is warned that if he persists in trying to uncover corruption in the police department, he would be putting his life in danger. The danger wouldn’t come in the form of cold-blooded murder by another officer. Instead, the danger would flow naturally from his social exclusion from the bond of loyalty that officers otherwise share.   

Nobody has to take a shot at you.

I'm not saying anything’s going to happen. I'm saying it could happen.

I mean, there’s lots of ways.

They can just not be there when you need them.

Somebody comes at you with a gun, they look the other way.

Or they can send you in first enough times... until finally one day you’re gonna walk in the wrong door.

Six months before his death in 1987, Waldo Salt accepted the Laurel Award for Screen Achievement from the Writers’ Guild. During his acceptance speech, he said, “As writers true to ourselves … if we’re good, we’ll always be in trouble. Let’s be sure we deserve it.”

On Remembering Alexander Solzhenitsyn

Alexander Solzhenitsyn was born on December 11, 1918. He joined the Red Army during World War II to fight the Nazis and was decorated for bravery. One day, though, while camped on the German front, he made the mistake of criticizing Joseph Stalin in a letter to a friend. He was arrested and sent to a Soviet labor camp in Kazakhstan. This led to a series of novels that were banned in his home country. Nonetheless, his writings earned him the 1970 Nobel Prize for literature. This was followed by his writing a memoir, The Gulag Archipelago, that led to another arrest, this time for treason.

Alexander Solzhenitsyn's mugshot

When I was young and foolish, I regarded Mr. Solzhenitsyn dismissively for being a stalking horse for conservative anti-communism. In an intellectually lazy fashion, my opposition to conservative bullishness on nuclear brinksmanship and discontent with the excesses of capitalism were enough to close my mind to alternative points of view. Having grown older and wiser, I have rediscovered his works and I have found in Mr. Solzhenitsyn’s a compelling, modern voice that sounds the themes that America’s Founding Fathers had once sounded years before. 

It is also sobering, though, to reflect on the timeliness of his words. When we fall victim to the illusion that “what is, is normal” we fail to recognize the slow and steady encroachments of tyranny. We are, to use a trite cliché, those frogs that remain calmly in a pot of water as the temperature slowly rises. Below, I highlight some of the themes of Mr. Solzhenitsyn’s work.

I. Privacy.

Against the naïve canard that privacy matters not when one has “nothing to hide,” he wrote, “Everyone is guilty of something or has something to conceal. All one has to do is look hard enough to find what it is.” In reality, every one of us has something to hide, because the private details of our lives can be distorted and used as evidence by those who have an interest in creating fear and compliance. By zealously defending privacy, we take away one of the tools of tyranny. He lamented the fact that, “we are even unsure whether we have the right to talk about the events of our own lives.” He posed the question, “If you always look over your shoulder, how can you still remain human?”

II. Moral Complexity.

Against the foolish clinging to ideologies that set citizens against one another, Mr. Solzhenitsyn urged that we embrace a sentiment of solidarity. “Gradually,” he said, “it was disclosed to me that the line separating good and evil passes not through states, not between classes, nor between political parties, but through every human heart.” These ideologies that set conservatives against liberals and the supposedly right-headed against the supposedly wrong-headed, they are ideologies of self-interest disguised as higher principles. However, “the salvation of mankind lies only in making everything the concern of all.”

III. Courage in Defense of Freedom.

“Should one point out that from ancient times decline in courage has been considered the beginning of the end?” He was referring to a particular kind of courage: the courage to desire freedom even if one is made to feel afraid. The tyrant always creates imagined enemies to make the people want nothing more than to be protected. The desire to be protected is not far off from the desire to be tyrannized. “A state of war only serves as an excuse for domestic tyranny.” And in explaining how it was that the Russian people allowed themselves to become the victims of tyranny, he suggested, “we didn't love freedom enough.” 

IV. Opposing Oligarchs is Defending Freedom

“It's true that private enterprise is extremely flexible,” Solzhenitsyn  wrote. “But it is only good within very narrow limits. If private enterprise isn't held in an iron grip it gives birth to people who are no better than beasts, those stock-exchange people with greedy appetites beyond restraint.” In reflecting on his works an older Solzhenitsyn reflected, “In different places over the years I have had to prove that socialism, which to many western thinkers is a sort of kingdom of justice, was in fact full of coercion, of bureaucratic greed and corruption and avarice, and consistent within itself that socialism cannot be implemented without the aid of coercion.” 

It is important to think carefully about what he meant by socialism. The Soviet Union called itself a socialist state but it was notorious for being ruled by a clique of oligarchs. Anderson and Boettke's scholarly work in the journal Public Choice (1997) explains how Soviet leaders ostensibly created monopolies to ensure that the people received a steady supply of necessary goods. In fact, monopolies in the USSR were like monopolies anywhere else: they were means of preventing competition and allowing monopolists to make overgrown profits at the peoples' expense. I don’t believe Solzhenitsyn had in mind all forms of socialism –viable governments in the developed world are to varying degrees “socialist,” including even our partners France and the United Kingdom – but what he did have in mind was mercantilism (the exchange of privilege for revenue) and oligarchy (rule by the wealthy and influential) in the guise of socialism.

In the era of 'Obamacare' it is worth remembering Solzhenitsyn's observation of the Soviet Union: "Medical services were legally rationed according to need, but in reality were rationed by bribery." This is inevitable in an oligarchy.

V. Solzhenitsyn and Putin

As is often the case when lionizing a great man, one comes up against the fact that the great man is in fact fallible like the rest of us. Solzhenitsyn has been rightly criticized for supporting Vladimir Putin’s rise to political power. To understand how Solzhenitsyn may have erred, the issue of oligarchy remains pertinent. Solzhenitsyn was an outspoken opponent of Boris Yeltsin. Yeltsin had opposed Mikhail Gorbachev and led Russia to embrace a free-wheeling free-market economy. Yeltsin had the support of wealthy Russian businessmen and money flowing in from the United States. Speaking of the Yeltsin regime, Solzhenitsyn said,

“The most basic feature of the previous communist regime—the complete closedness (zakrytost) to the people and the lack of accountability for [its] actions—is no less fundamental to the current [Yeltsin] regime. ... Every kind of democratic screen is used to conceal a greedy oligarchy and for the deception of world public opinion.”

Putin, despite being a protégé of Yeltsin’s, stood for “hostility toward privatization and oligarchs” and made “speeches about the plunder of the people and the hand of the U.S.A. in the ‘democratization’ of former republics of the USSR (Horvath, 2011).”

In American politics, privatization is often viewed as a good thing, particularly by members of the political right. However, Solzhenitsyn saw privatization as a boon to oligarchs, and the logic is clear-cut. Large corporations with near-monopoly power are usually the beneficiaries when industries are privatized. Is this to say that privatization is always a bad thing, or that government ownership is always a good thing? I’d say certainly not. True to the genius of Solzhenitsyn, there are no simple answers to this question other than to say that, where corruption exists, it will find a way to profit from private or public ownership of industries.