Corporate Greed is the Real Threat to Medicare

Now that fiscal hatchet man Paul Ryan is on the Republican ticket, the presidential race has turned into a free-for-all over the future of Medicare.

Recognizing the unpopularity of their goal of slashing entitlement spending, Ryan and Romney are instead straining credulity by painting themselves as defenders of Medicare against $700 billion in cuts scheduled under the Affordable Care Act.

This, of course, is a reprise of the tactic long used by opponents of healthcare reform of deliberately conflating Obamacare’s negotiated cuts in payments to healthcare providers with cuts in actual services to seniors.

Such obfuscation can have some success because most people continue to view Medicare solely as a government social program, when it is also a massive system of contracts that transfer more than $500 billion in taxpayer funds each year to the private sector. Medicare took the profit out of providing health insurance to seniors but it left untouched the profit motive in the delivery of their medical services. In fact, Medicare’s billions have played a central role in building the commercial healthcare industry into the leviathan it is today.

Not content with making a reasonable amount of money from serving this huge market legitimately, providers regularly try to bilk the system for more than what they are entitled to. This is not just a matter of the proverbial Medicare mills in which individual physicians or small operations charge for services provided to imaginary patients or else overbill when treating real ones.

Some of the biggest instances of Medicare fraud have been perpetuated by Fortune 500 companies such as for-profit hospital operators, medical device manufacturers and pharmaceutical producers.

Let’s start with the drugmakers, since they have been at the center of several recent cases involving the illegal marketing of their pills for unapproved purposes, which among other things results in more high-priced medications getting prescribed for Medicare patients, thus inflating system costs. A few weeks ago, Glaxo SmithKline agreed to pay $3 billion to resolve federal criminal and civil charges relating to the improper marketing of its best-selling anti-depressants.

In May, Abbott Laboratories agreed to pay $1.5 billion to settle similar charges relating to the off-label marketing of its drug Depakote. Although Depakote was approved only for treating seizures, Abbott created a special sales force to pressure physicians to use it for controlling agitation and aggression in elderly dementia patients. This was both a safety risk and an added financial burden for Medicare and Medicaid. Illegal marketing charges had previously been settled with companies such as Novartis, AstraZeneca, Pfizer and Eli Lilly—in other words, pretty much the whole industry.

Medical device makers also contribute to escalating Medicare costs by pressing doctors to use their expensive products in place of cheaper alternatives or perhaps when they are not really medically necessary. Last December, Medtronic paid $23.5 million to resolve federal charges that it paid illegal kickbacks to physicians to induce them to implant the company’s pacemakers and defibrillators. Several months earlier, Guidant paid $9 million to settle federal charges of having inflated the cost of replacement pacemakers and defibrillators for Medicare and Medicaid patients.

And then we have the for-profit hospitals. A decade ago, HCA, one of the pioneers of the industry and still its biggest player, paid a total of $1.7 billion in fines in connection with charges that it defrauded Medicare and other federal health programs through a variety of overbilling schemes. Chief executive Rick Scott—now the Republican governor of Florida—was ousted but managed to avoid prosecution.

It now looks HCA is at it again. The New York Times just published a front-page exposé of how the company—now controlled by a group of private equity firms including Bain Capital—is making fat profits through “aggressive” billing of Medicare as well as private insurers. The Times reported that HCA’s tactics are now “under scrutiny” by the Justice Department.

The debate over Medicare’s supposedly out-of-control costs is surprisingly devoid of discussion of how much of the problem is the result of aggressive billing or outright fraud by the likes of HCA, the device makers and the pharmaceutical producers. Seniors cannot be expected to suffer cuts in their benefits as long as the giant corporate healthcare providers continue to gouge the system.

The Unlikley Regulator

Since the Citizens United ruling in January 2010, it has appeared that the U.S. Supreme Court was doing everything possible to increase the dominion of corporations. Yet in its astonishing ruling on the Affordable Care Act (ACA), the Court, among other things, affirms the right of the government to put far-reaching restrictions on one of the country’s most powerful industries.

Even more remarkable is that the majority decision was written by Chief Justice John Roberts, a former corporate lawyer thought to be firmly in the anti-regulatory camp.

What made the healthcare case so unusual is that, strictly speaking, none of the parties were overtly opposing the provisions of the ACA regulating the heinous practices of the private insurance industry, such as discriminatory pricing, denial of coverage to those with “pre-existing conditions” and cancellation of coverage after a subscriber gets seriously ill. Both the oral arguments and the written opinions were filled with pro-regulation comments by normally laissez-faire-minded Justices.

Opponents of the law chose instead to focus their attack on the constitutionality of the individual mandate, which was at the heart of the deal the Obama Administration and Congressional Democrats made with the insurance industry under which the companies agreed not to fight the regulations in exchange for which they were guaranteed millions of new compulsory customers paying subsidized premiums.

Thanks to the defection of the Chief Justice based on a narrow interpretation of the mandate, the stratagem of the anti-healthcare reform camp turned out to be a colossal miscalculation. It also looks like the insurance companies have been snookered about the extent to which they will benefit from the law.

It will be of some consolation to conservatives that the Roberts opinion contains a strident rejection of the idea that Congress was justified in imposing the individual mandate through its constitutional power to regulate interstate commerce. The Chief Justice devotes many pages of his decision to a recitation of the argument that the mandate was in this sense an overreach, in the course of which he even reprises the broccoli analogy used by Justice Scalia during the hearings on the case.

Yet he then pivots and embraces, along with the Court’s four liberal justices, the secondary argument that the mandate was justified as an exercise of the taxing power of Congress, the tax being the financial penalties contained in the ACA for those without coverage who refuse to purchase individual policies.

What’s interesting is that in order to depict the penalties as a legitimate tax, Roberts has to argue that they are not overly punitive. In doing so, he writes that “for most Americans the amount due will be far less than the price of insur­ance, and, by statute, it can never be more. It may often be a reasonable financial decision to make the payment rather than purchase insurance.”

Roberts is thus highlighting one of the rarely discussed features of the ACA’s individual mandate: the penalties for disobeying it are far from draconian. Overheated rhetoric by the Right notwithstanding, no one will ever be thrown in jail for not having health coverage, nor will the penalties drive anyone into penury. In fact, it is not clear that the requirement will ever be enforced to any significant extent.

Moreover, any penalties that are collected will go to the Treasury, not to the private insurers missing out on premium payments from scofflaws. If enough of the defiantly uninsured realize the relatively low risks of non-compliance, the individual mandate may not create as many new customers as the insurance industry had hoped.

Of course, the ACA will create new customers from among the ranks of the uninsured who want coverage but have not been able to afford it without the subsidies the law will create. But many of these will be families who will make significant use of the coverage, as opposed to the young invincibles who never go to the doctor. In other words, the industry will end up with more of the less profitable end of the market.

Reading the Roberts opinion, one gets the impression that he was grasping for a way to uphold the ACA and rise above the unalloyed conservative partisanship that has tainted the recent history of the Court. While history may look kindly on his decision, in the shorter term he is bound to become a whipping boy for disappointed opponents of healthcare reform. Back in the 1960s rightwing fringe groups campaigned to have then-Chief Justice Earl Warren impeached for his supposedly pro-Communist rulings. Calls to “Impeach John Roberts” are already emerging from Red State America.

Whatever the Roberts legacy turns out to be, the bigger question is what will become of the U.S. healthcare system. It is encouraging that the most egregious insurance company behavior will be outlawed, but who knows what other tricks the industry will devise to torment its customers. The uproar over the ACA does not change the fact that the only real solution is to take the profit out of health coverage.

Will Big Pharma Remain Above the Law?

The recent announcement that a corporation agreed to pay $1.6 billion to settle regulatory violations would normally be considered significant news, but because the company involved was a drugmaker there was not much of a stir. That’s because Abbott Laboratories is only the latest in a series of pharmaceutical producers to pay nine- and ten-figure amounts to settle charges that they engaged in illegal marketing practices.

Abbott’s deal with federal and state prosecutors involves Depakote, which was approved by the Food and Drug Administration to treat seizures but which Abbott was charged with promoting for unauthorized uses such as schizophrenia and for controlling agitation in elderly dementia patients. The company admitted that for eight years it maintained a specialized sales force to market Depakote to nursing homes for the latter unauthorized use. In other words, it systematically violated FDA rules and encouraged doctors and nursing homes to use the drug in potentially unsafe ways.

Abbott follows in the footsteps of other industry violators:

  • In November 2011 GlaxoSmithKline agreed to pay $3 billion to settle various federal investigations, including one involving the illegal marketing of its diabetes drug Avandia.
  • In September 2010 Novartis agreed to pay $422 million to settle charges that it had illegally marketed its anti-seizure medication Trileptal and five other drugs.
  • In April 2010 AstraZeneca agreed to pay $520 million to settle charges relating to the marketing of its schizophrenia drug Seroquel.
  • In September 2009 Pfizer agreed to pay $2.3 billion to settle charges stemming from the illegal promotion of its anti-inflammatory drug Bextra prior to its being taken off the market entirely because of concerns that it was unsafe for any use.
  • In January 2009 Eli Lilly agreed the pay $1.4 billion—then the largest individual corporate criminal fine in the history of the U.S. Justice Department—for illegal marketing of its anti-psychotic drug Zyprexa.

The wave of off-label marketing settlements began in 2004, when Pfizer agreed to pay $430 million to resolve criminal and civil charges brought against Warner-Lambert (which Pfizer had acquired four years earlier) for providing financial inducements and otherwise encouraging doctors to prescribe its epilepsy drug Neurontin for other unapproved uses.

Soon just about every drugmaker of significance ended up reaching one of these agreements with prosecutors and shelled out what appeared to be hefty penalties. In fact, the amounts were modest in comparison to the potential revenue the companies could rake in by selling the drugs for uses far beyond what the FDA review process had deemed safe. A 2009 investigation by David Evans of Bloomberg noted that the $2.3 billion penalty Pfizer paid in connection with Bextra was only 14 percent of the $16.8 billion in revenue it had enjoyed from that drug over the previous seven years.

The company’s 2004 settlement should have been a deterrent against further off-label marketing, but, according to Bloomberg, Pfizer went right on doing it. Seeking maximum sales, regardless of restrictions set by the FDA, was an ingrained part of the company’s modus operandi. When the 2009 settlement was announced, John Kopchinski, a former Pfizer sales rep turned whistleblower, was quoted as saying: “The whole culture of Pfizer is driven by sales, and if you didn’t sell drugs illegally, you were not seen as a team player.”

Compared to other forms of corporate misconduct, such as securities violations, the drug companies are much more likely to have to admit to criminal violations in the off-label marketing cases. And the penalties are far larger than those imposed for most environmental and labor violations.

Yet these seemingly harsher enforcement practices appear not to have been very effective in putting an end to the illegal activity. In fact, the willingness of the drug industry to flout the drug safety laws raises serious questions about the effectiveness of FDA regulations and the federal criminal justice system in general. If a group of companies know that they can repeatedly break the rules and face consequences that fall far short of the potential gains from the illegal behavior, enforcement has little meaning.

What makes the situation even more outrageous is that off-label market is just one of numerous ways that the drug industry regularly violates the law—whether by defrauding federal programs such as Medicare or by covering up safety risks related to the approved uses of certain drugs.

The one thing that makes drug industry executives a bit nervous is that federal prosecutors have begun to show interest in reviving what is known as the responsible corporate officer doctrine, a provision of U.S. food and drug laws that could be used to hold executives personally and criminally responsible for violations. So far, the doctrine has been applied to only a few small fish. But if Big Pharma CEOs start appearing in perp walks, the industry may finally realize it is not above the law.

Are Free Market Ideologues and Big Business Heading for a Divorce?

Conservatives are feeling smug. The recently completed Supreme Court oral arguments on the healthcare law were replete with skepticism about the powers of the federal government and glorification of personal liberty, though what was being celebrated was the dubious right of a person to be uninsured against the risk of a catastrophic medical event.

We’ve come to assume that modern conservatism is a stalking horse for an expansion of corporate power. Yet were the interests of big business really being served by the evisceration of the Patient Protection and Affordable Care Act?

First, in their desire to invalidate the individual mandate to purchase coverage, lawyers opposing the law and conservative justices went out of their way to distinguish it from what they had to admit were the valid powers of Congress to impose taxes and regulate commerce. Nary a negative word was said about the provisions of the act that impose dramatic new restrictions on the health insurance industry relating to pricing and the denial of coverage to those with pre-existing conditions. Although the justices seemed more inclined to throw out the entire law than to simply carve out the individual mandate, they suggested they would have no problem if Congress subsequently passed new legislation that reinstated the regulations without the hated mandate.

What the justices downplayed is that the Affordable Care Act was a grand bargain with the health insurance industry in which it acceded to the new regulations in exchange for being guaranteed a vast new pool of customers whose premium payments would be heavily subsidized by the federal government. The Right has gotten so carried away with its denunciations of the Act as a government takeover that it has forgotten it is really an enormous boon to private insurers.

One member of the court who chose not to ignore this was Justice Ginsburg, who during the second day of the hearings said she found it “very odd” that the opponents of the law were conceding that the government had every right to take over entire portions of the healthcare insurance market, as with Medicare, but rejected an arrangement designed to “preserve private insurers.”

The point also came up in an exchange the same day between Justice Kennedy and Solicitor General Donald Verrilli in which Kennedy seemed to acknowledge that Congress would have the right to create a single payer system, and Verrilli responded that it was “a little ironic” that the Act was being criticized because Congress had instead decided to “to rely on market mechanisms and efficiency and a method that has more choice than would the traditional Medicare or Medicaid-type model.”

Of course, there is no guarantee that if the Affordable Care Act is struck down in its entirety, Congress will reinstate the most significant regulations on the insurance industry, much less that it will embrace single payer. But one has to wonder what the industry thinks about the position in which it will be put.

Once they made their deal with the Obama Administration, the big insurers largely stayed on the sidelines as the Right assailed the Act, purportedly in the name of free enterprise. Now those companies seemed to be confused about the law.

In its most recent 10-K filing, giant UnitedHealth Group acknowledges that the new law “may create new or expanding opportunities for business growth” but also warns that it “could materially and adversely affect the manner in which we conduct business and our results of operations, financial position and cash flows.” Its rival Wellpoint expresses the same ambivalence in its 10-K, saying: “As a result of the complexity of the law…we cannot currently estimate the ultimate impact…on our business, cash flows, financial condition and results of operations.”

Yet they seem even more worried about the possibility that the law may be overturned. UnitedHealth writes: “Any partial or complete repeal…could materially and adversely impact our ability to capitalize on the opportunities presented by the Health Reform Legislation or may cause us to incur additional costs of compliance.”

Apart from the insurance companies, there are other major corporate players that have been intending to “capitalize on the opportunities” created by the Affordable Care Act’s infusion of lots more federal money into the medical sector. For example, for-profit hospital operator HCA writes in its 10-K that the Act “may result in a material increase in the number of patients using our facilities who have either private or public program coverage,” though it also worried about intended reductions in payments to Medicare providers. On the issue of partial or complete repeal, it also admits that the impact would be “unclear.”

Healthcare is not the only arena in which corporate interests may be having second thoughts about their direct (as with the Kochs) or indirect encouragement of junkyard dog-style conservatism. Tea party types in Congress recently decided to challenge the continued existence of the Export-Import Bank, an institution that has long been relied on by major companies such as Boeing and General Electric to sell their big-ticket items to foreign customers.

That move features prominently a New York Times front-page story reporting that some business interests are wondering if they made a mistake in heavily supporting the far-right Republicans who seem to call the shots on Capitol Hill these days. The article quotes a spokesman for the Club for Growth, which promotes “economic freedom” as admitting that “free market is not always the same as pro-business.”

Hopefully, those are not the country’s only choices. If we’re lucky, the clash between these two tendencies will open up more space for changes that promote economic and social justice while putting restraints on both the market and the corporations.

Back to the Barricades?

The news that Byron Dorgan and Christopher Dodd will not run for reelection has Democrats fretting that they will lose their 60-vote supermajority in the Senate and will no longer be able to get anything accomplished.

But what have we got to show, with regard to checking corporate abuses, for the past 12 months of Democratic control over the legislative branch as well as the White House? Last year this time, excitement over Obama’s election and the Democratic gains in Congress persuaded many activists that great things could once again happen in Washington. The big business agenda would supposedly no longer reign supreme, and progressives anticipated major legislative gains regarding healthcare coverage, financial regulation, the climate crisis and union organizing.

Now those expectations seem hopelessly naïve. Rather than radical changes, we’ve ended up with a disappointing series of half-measures, quarter-measures, and stalemates.

The biggest frustration is in the healthcare arena. We seem to be on the verge of getting a new system that will expand coverage and curb some of the most egregious insurance industry abuses, but these improvements come at a high cost. The final bill will likely have a strict individual mandate compelling those without coverage to become customers of a bunch of blood-suckers yet a weak employer mandate allowing many companies to avoid providing decent coverage to their workers. It will not seriously regulate insurance rates yet may end up penalizing union workers who gave up wage increases to get more generous benefits. The bill that squeaked through the Senate and is expected to form the basis of the final legislation is so compromised that veteran reformers such as Physicians for a National Health Program have called for its defeat.

After crippling the economy through reckless investments and forcing millions of homeowners into foreclosure, the big banks have largely been treated with deference by Congressional Democrats and the Obama Administration. Nothing has been done to break up institutions deemed too big to fail and thus able to extort massive taxpayer-funded bailouts. Despite loud complaints from bankers used to sumptuous pay packages, the federal government’s restrictions on executive compensation have been pretty indulgent. The bill that passed the House in December creates a new consumer protection agency for financial services, but it is unclear how much power it will have. And the bill lacks aggressive regulation of the exotic financial instruments that helped bring about the crisis. Separate legislation on credit cards that was enacted curbs some of the industry’s most outrageous practices but does nothing about usurious interest rates.

The climate bill passed by the House in June not only shunned strict emission limits in favor of the dubious cap-and-trade system, but it would allow many major polluters to avoid paying for their emission allowances for up to 20 years. And the overall emission reductions the bill envisions are far below the level needed to make a substantial dent in global warming.

And then there’s the Employee Free Choice Act, the key priority of the labor movement, which did so much to get Obama and many Democrats elected. The legislation has been in suspended animation for many months as Senate leaders apparently cannot muster enough votes to overcome intransigent opposition not only from Republicans but also from some Dems. EFCA remained stalled even after the AFL-CIO signaled it was open to compromise on the key issue of card-check organizing.

Overall, corporate interests have been remarkably successful over the past year in avoiding serious restraints on their freedom of action. Much of what the Democrats are accomplishing amounts to the appearance of reform. It gives the impression that corporate misbehavior is being addressed but is actually inoculating business against more stringent regulation. In the case of healthcare, the situation is even worse: by turning millions into captive customers, Congress is granting unprecedented power and legitimacy to a discredited industry.

There are plenty of obvious explanations for this dismal performance. It is easy to point to the corrupting effect of corporate campaign contributions and lobbying by former Congressional staffers as well as the pernicious role of conservative Democrats and egomaniacs like Joe Lieberman.

But the progressive movement also deserves some of the blame. The euphoria following the 2008 election gave rise to another bout of the delusion that serious change requires nothing more putting in office a certain number of people with the preferred party designation.

During the 1930s FDR is supposed to have told activists in a private meeting: “I agree with you, I want to do it, now make me do it.” Although that quote has showed up in several blogs over the past year, the underlying message seems to have been lost on many of today’s activists. With the absence of substantial popular pressure, it has been easier for Congressional Democrats to succumb to the siren song of the corporate interests.

Ironically, it has been the woefully ignorant and confused tea party movement—serving as a witting or unwitting stalking horse for the corporate elite—that has lately shown the power of grassroots mobilization. Their positions make no sense, but the tea baggers have made sure that Congressional Republicans maintain a hard-right stance on everything.

Perhaps we will accomplish more if we return to our own barricades.

A Truly Captive Market

parasitesThe House of Representatives, in a rare embrace of de-privatization, has just passed legislation that would put an industry out of business. If approved by the Senate, the Student Aid and Fiscal Responsibility Act will eliminate the heavily subsidized business of bank origination of federal student loans. Students would get their loans directly from the federal government and would see a huge increase in the Pell Grant program, thanks to the tens of billions of dollars saved by eliminating the subsidies.

Unfortunately, the impulse to abolish a parasitic form of private enterprise has been missing from the official debate on healthcare reform ever since Democratic leaders and the Obama Administration shunned the idea of expanding Medicare eligibility to non-seniors. Now, given the uncertain prospects for a public insurance option (a weak substitute for single payer), we are faced with the possibility that the parasites of the private health insurance industry will not only survive but will be empowered as never before.

While support for the public option has waned, the powers that be in both major parties have never wavered from their endorsement of the individual mandate—the bizarre idea that the solution to the problem of the uninsured is to force them purchase insurance. This implies that being without insurance is a personal shortcoming rather than a social problem. It makes as much sense as saying that the way to help the homeless is to compel them to buy a house.

It is true that the proposals for an individual mandate come with provisions for subsidies, yet as the plan just issued by Senate Finance Committee Chairman Max Baucus illustrates, those subsidies would not extend to many middle-income families, who might find themselves in the absurd position of having to pay penalties to the federal government for failing to buy coverage they cannot afford.

What’s wrong with the imposition of an individual mandate without a public option is more than that of inadequate subsidies. It would amount to an unprecedented move by government to compel residents to become customers of a particular set of corporations. States currently require drivers to obtain insurance for their vehicles from private carriers, but automobile ownership is not compulsory. Adoption of an individual mandate sans public option would make it a condition of being alive for the uninsured to start paying premiums to a private insurance company.

What next? Will the federal government allow the likes of WellPoint and Cigna to put private bill collectors to work harassing “deadbeats” who don’t make their mandatory payments? Since the carriers could not drop these non-paying customers, would the companies be allowed to lock them up in healthcare debtor prisons until a relative takes care of the bill?

Maybe not. But there’s a strong possibility that the furor over unaffordable mandatory coverage would prompt Congress to bring down rates by allowing insurers to offer lower-quality plans. If the public option is jettisoned along with single payer, “reform” may turn out to be nothing more than a way of making millions of Americans pay for the dubious privilege of shifting from the ranks of the uninsured into a captive market of the woefully underinsured.

Fighting Dirty on Healthcare Reform

gangsYou’ve got to hand it to the health insurance corporations and their front groups for knowing how to play hardball. To protect the interests of the industry, they have been willing to spread outlandish allegations about euthanasia, gambling that the ensuing uproar will force nervous Dems to dilute their plan.

It remains to be seen whether the streetfighters ultimately prevail, but for now they have succeeded in reframing the debate. The country has been talking about pulling the plug on grandma when we should be discussing pulling the plug on the likes of Aetna, Cigna and Humana.

Unfortunately, the Obama Administration and the Democratic leadership in Congress have ruled out euthanizing the for-profit health insurance, leaving us with the alternative of a public plan that would compete with the commercial carriers and supposedly “keep them honest,” as Obama likes to put it.

Since the industry doesn’t seem interested in becoming virtuous, it has instead encouraged opposition to the public option. Apart from whatever behind-the-scenes role it has played in the town hall disruptions carried out by the rightwing lunatic fringe, the major insurers are cultivating the fifth column that is undermining the public option from within the Democratic Party. It’s widely known that members of the Blue Dog Coalition have been showered with campaign contributions from the industry. A recent Business Week cover story entitled “The Health Insurers Have Already Won” details other ways the big insurers have cozied up to and co-opted conservative Dems.

I’ve already written about the suspicious role the Lewin Group, owned by UnitedHealth Group but purportedly editorially independent, has played in the reform debate. Business Week describes how UnitedHealth itself feeds self-serving data to “information-starved congressional staff members.” The magazine depicts an especially close relationship between the company and Sen. Mark Warner of Virginia, who “echoes UnitedHealth’s contention that a so-called public option could be a ‘Trojan horse for a single-payer system.'”

The infatuation of Warner and some other Dems with UnitedHealth is all the more baffling in light of the controversy over the company’s Golden Rule Insurance subsidiary, which has repeatedly been fined by state regulators for deceptive practices. Golden Rule was one of the companies singled-out in a recent House Energy & Commerce Committee hearing on abuses in the individual health insurance market.

Business Week reports that the health insurers consider the battle against the public option already won and are now focusing on shaping the terms under which they will be providing new subsidized coverage. They are, the magazine says, pursuing the “aim of constraining the new benefits that will become available to tens of millions of people who are currently uninsured.”

How long will it be before Obama, having abandoned the public option, finds himself pressured by the health insurers and their surrogates to give ground on other aspects of the reform plan, such as the elimination of lifetime benefit caps? Or the prohibition on denying coverage based on pre-existing conditions?

The insurance reform effort will continue its slide toward irrelevance until Obama recognizes that he is engaged not in a boxing match with Marquis of Queensberry rules but rather a knife fight in which anything goes.

Corporate Lobbying Goes from Fake to Fraud

bonnerAs the Yes Men have shown with their impersonations, misrepresentation is sometimes the best way to convey a larger truth. That same lesson has been demonstrated, albeit unintentionally, by the lobbying firm Bonner & Associates, which was just exposed as having forged letters from non-profit organizations to members of Congress expressing opposition to the climate bill. In this case, the larger truth is that much of the support that corporate interests claim for their policy positions is bogus.

The story came to light thanks to the Charlottesville (Virginia) Daily Progress, which revealed that the office of Rep. Tom Perriello had received letters urging him to vote against the climate bill from two local civil rights organizations–Creciendo Juntos and the Albemarle-Charlottesville branch of the NAACP–that were discovered to be forgeries. Additional faked letters were later reported by two other members of Congress.

Soon it was revealed that the letters had been sent out by Bonner, which had been hired by Hawthorn Group to help in its work on behalf of the American Coalition for Clean Coal Electricity (ACCCE), a major coal industry front group. Bonner, which specializes in fabricating what it calls “strategic grassroots/grasstops” campaigns for large corporations, apologized for the phony letters but insisted they were the work of a rogue employee who has been terminated. This has not prevented a firestorm of criticism and calls from the likes of and the Sierra Club for a Justice Department investigation of the matter.

Environmental groups are entitled to their righteous indignation, but some of this is akin to expressing shock that gambling is taking place in Casablanca.  The entire point of the Astroturf work done by the likes of Bonner is to be deceptive–to give the misleading impression that there is a groundswell of support for the policy positions of big business.

The Bonner firm, founded in 1984 by former Congressional aide Jack Bonner (photo), made its name creating bogus campaigns on behalf of clients such as the banking industry (to fight proposals to lower permissible interest rates on credit cards) and the auto industry (to fight stricter fuel efficiency standards). In 1997 Ken Silverstein wrote a piece in Mother Jones describing Bonner as “a leader in the growing field of fake grassroots” lobbying.

In other words, Bonner is in the business of generating communications to members of Congress that are “real” messages from fake organizations. The current case involves fake messages from real organizations. It’s too soon to tell whether this represents a new tactic by the firm or an employee simply got confused about which aspects of the messages are supposed to be bogus. But either way, firms such as Bonner are helping large corporations co-opt political discourse.

Even more ominous are the supposedly spontaneous disruptions of town hall meetings being held by members of Congress. These confrontations are being carried out by rightwing opponents of healthcare reform–such as the group FreedomWorks–serving the interests of the for-profit medical establishment. It is bad enough when agents of business try to manipulate “civilized” communication with members of Congress; it is much worse when they begin to act like storm troopers trying to intimidate elected officials  from diverging from the corporate line.

An Independent Corporate Front Group?

sheilsWould a consulting company owned by Exxon be considered an impartial source of analysis on global warming, or would such a firm owned by Xe (formerly Blackwater) be regarded as a good judge of federal policy on the use of mercenaries? Probably not; in fact, they would, in all likelihood, be seen as front groups for the interests of their corporate parents.

Then how is it that one of the most influential consulting firms on healthcare policy is the Lewin Group, which is owned by a subsidiary of UnitedHealth Group, the largest of the for-profit medical insurance corporations and thus a very interested party when it comes to the current deliberations in Congress on major healthcare reform?

Lewin claims to be “objective” and “impartial,” but some of its analysis is repeatedly being used in very partisan ways by Republican members of Congress (such as John Boehner and Orin Hatch) and conservative commentators (the Heritage Foundation and Rich Lowry of National Review) to attack the idea of a public option in legislation that would seek to provide coverage to the uninsured. They typically do not mention Lewin’s relationship to UnitedHealth, which will benefit greatly if the public option is eliminated.

Those seeking to shield for-profit insurers from a competing federal plan are trumpeting Lewin research purporting to show that the existence of at least some versions of a public option would result in a mass exodus from employer-provided plans with higher premiums. Lewin claims that some 119 million of the 171 million people covered by employer plans could migrate to Uncle Sam’s offering. Given the assumption that taxpayers will be subsidizing participants in the public plan, such a shift is seen as creating a fiscal disaster for the federal government and the collapse of private plans. The rabidly pro-corporate group Conservatives for Patients’ Rights uses the Lewin research in a TV ad that depicts a public plan as a bulldozer that could “crush all your other choices, driving them out of existence.”

Lewin insists that it has “editorial independence,” but it is difficult to believe that its judgments are not influenced by the identity of its corporate parents. Its immediate parent, by the way, is Ingenix, a major player in healthcare information technology, especially billing systems. Ingenix, of course, also has a vested interest in protecting the for-profit medical bureaucracy.  Ingenix and its parent UnitedHealth have paid out hundreds of millions of dollars to settle class-action lawsuits stemming from investigations spearheaded by New York Attorney General Andrew Cuomo charging that Ingenix promoted a database product that allowed insurers to underpay their members when reimbursing for out-of-network expenses.

Lewin was in existence for three decades when Ingenix and UnitedHealth acquired it in 2007. It’s interesting that before that deal Lewin was often in the news in connection with reports it produced for states such as California, Hawaii and Vermont showing the potential benefits of state single-payer systems. The firm released one such report (for Colorado) after being acquired by Ingenix, but these days Lewin seems to focus more on the hazards of expanded government involvement in healthcare. Lewin Senior Vice President John Sheils (photo) told the Associated Press that “the private insurance industry might just fizzle out altogether” if a public option were enacted.

Sheils insists he is impartial, but he has been aggressive in spreading the word about the potential drawbacks of the public option. He confronted President Obama directly on the issue last week as one of the questioners in an ABC News special whose host, Charles Gibson, seemed determined to bash government involvement in health insurance.

The Lewin Group acquisition added an insignificant amount to UnitedHealth’s annual revenues but it turned out to be a valuable investment for the $80 billion insurance giant. While playing the role of a neutral analyst, the consulting firm is in reality defending the interests of its corporate parents and the rest of the for-profit health insurance business. The most effective business front group is one that believes it is independent.

Rick Scott’s Crusade to Preserve Fast-Food Healthcare

rickscottIs Rick Scott following the T. Boone Pickens playbook? Pickens is the notorious corporate raider who moved into the public policy arena with his advocacy of wind energy. Scott (photo) is the former chief executive of disgraced for-profit hospital company Columbia/HCA (now just HCA) who has inserted himself in the middle of the debate over healthcare reform.

Both men play down their controversial histories and claim they are driven by principle rather than personal gain. In the case of Pickens, the principle is laudable: he has been pushing the country to adopt renewable energy in a major way. Scott is playing a much less constructive role. He is on a mission to sabotage efforts by the Obama Administration and Congress to make affordable coverage available to all.

Scott is the public face of a new organization called Conservatives for Patients’ Rights, which has been spending heavily on TV ads to argue that the reform proposals being considered by Democrats would take away the ability of patients to make their own healthcare decisions, leaving them at the mercy of the “nanny state.” The group’s website is filled with testimonials from “victims of government-run healthcare” in Canada and Britain.

It’s tempting to laugh all this off. The problem with the reform ideas being considered by the Democratic leadership is that there is not enough government control. The most efficient alternative, single-payer or Medicare for all, has been taken off the table, and some leading Dems are even leaning toward the abandonment of a public option as one of the new coverage options that would be available to the uninsured.

Moreover, does a campaign that puts the now unpopular term “conservatives” in its name, focuses much of its media buys on Fox News and uses a tainted figurehead such as Scott really expect to win widespread appeal? Perhaps this is just another facet of the Right’s current tendency to rally only hardcore reactionaries.

Yet there is more to Scott’s crusade than ideology. He represents a portion of the commercial healthcare industry that is threatened not only by government involvement but even by measures that bring medical costs under control.

Since 2001 Scott has been involved in a privately held company called Solantic, which is a leading operator of “urgent care facilities” throughout Florida. These are standalone clinics located in shopping centers, strip malls and the Orlando airport. Some are in Wal-Mart Supercenters.

The existence of the company – whose president Karen Bowling used to be a Columbia/HCA marketing executive and before that a TV news anchor in Jacksonville – is predicated on the fact that traditional medical care is out of reach for a substantial portion of the population – both the uninsured and the underinsured. Its walk-in clinics treat care as an isolated and seemingly affordable purchase rather than an ongoing relationship between patient and doctor. Critics also charge that the clinics often serve mainly as a way to attract customers to the drugstores and retail outlets in which many of them are located, creating an incentive for them to prescribe medications that will be filled under the same roof.

While the clinics may be a convenient alternative for simple procedures, the industry will succeed only if its services are used also by people with a wider range of conditions, including ones that should involve ongoing monitoring. For those patients, the clinics are as distant from good medical care as fast-food joints are from healthy eating and payday lenders are from responsible banking.

The prospects for Solantic were appealing enough that private equity firm Welsh, Carson, Anderson & Stowe, which focuses on the healthcare and infotech sectors, agreed to invest $100 million in the company in 2007. Last year, Welsh partner Thomas Scully joined Solantic’s board. Scully previously served as head of the Centers for Medicare & Medicaid Services during the Bush Administration. He was at the center of a scandal for threatening to fire the chief actuary of the Medicare program if he told Congress that the industry-friendly drug benefit promoted by Bush would be much more expensive than the White House had acknowledged. After leaving the Administration in 2003, Scully first went to work as a lobbyist for the healthcare industry.

Scully, Scott and Solantic all have a strong vested interest in preserving the current system that deprives so many people of decent coverage and forces them to depend on walk-in clinics. It remains to be seen whether the Democrats are truly willing to create an alternative that frees everyone from fast-food healthcare.