Why Did the "Dean of Health Care Economics" Urge Reforms that "Appeal to Some Special Interests?"

We have often discussed, some would say belabored, the importance of the "anechoic effect" in health care.  Particular issues which would make those who benefit the most from our current dysfunctional health care system uncomfortable are often considered not to appropriate for polite conversation. 

A prominent recent article in JAMA provided a great example of  how there are certain topics that health care, services, and policy experts avoid discussing.

Summary of the Article

The article was by Victor R Fuchs, who has been called the" dean of health care economics."  His topic was why US health care is so expensive compared to those in other countries, but provides little additional value for the extra expense.  [Fuchs VR. How and why US health care differs from that in other OECD countries.  JAMA 2013; 309: 33-34.  Link here.]

His explained the differences as follows:
-  "US individuals appear more distrustful of government...."  Thus presumably they shun government operation of health systems, which can lead to lowering administrative costs, and more effective negotiating "with drug companies and physicians and to control investment in hospitals and equipment."
-  "reluctance to achieve more equal outcomes for the population through redistributive public policy."  He attributed this to attitudes stressing personal responsibility for success, and the heterogeneity of the population leading to decreased sympathy to those who are unfortunate but "whose identity may differ greatly from one's own."
- "the opposition [to health care reform] of 'special interests,' such as pharmaceutical and device manufacturers, physicians (especially those in high-income specialties), and hospitals."  He noted that other countries have special interests, but attributed the power of US special interests to the country's system of government, especially "checks and balances," which provide "'choke points' for special interests to block or reshape legislation."

He ended with three policy prescriptions for more and better health care reform:


-  "government's role should be limited to what is necessary, not just desirable."
-  "provision of basic coverage for all should not require equality for obtaining additional coverage."
-  "reform should have features that would appeal to some special interests, or to some elements within each special interest group (for example, some physicians or some health plans."


I believe this essay, because it is in a prominent journal and by the supposed dean of US health care economists, provides a good example of some of the things that ail the discussion of health care policy. First, the author made rather cavalier use of evidence to support his points.  Second, he avoided even mentioning any of the unpleasant issues we discuss on Health Care Renewal.  Third, he not only failed to challenge any of those who benefit the most from the current system, but also suggested further appeasement at least of some of them.

Cavalier Use of Evidence

Prof Fuchs' justification for the role of distrust of government was based on a rather casual review of American history, and a single survey.  In fact, the proportion of people who appear to trust the government appears to depend on who asks the question and how it is asked.

For example, Gallup polling from 1998 to 2012 showed from 65% to 80% of people expressed “a great deal/ fair amount of trust in state and local government.”  Gallup polling from 1997 to 2012 showed from 51% to 83% of people had “a great deal” or “fair amount” of “trust in federal government to handle international problems.”  On the other hand, the Pew Research Center for the People and the Press showed public trust in government peaking at nearly 80% during the administration of President Johnson, then precipitously declining, rarely exceeding 50% over the ensuing years, and now around 20%. Furthermore, although Prof Fuchs argued that distrust of government is uniquely American, he provided no data comparing such poll results from the US with those from elsewhere.

Nor did he compare results of polls about trust of the government with those about trust of other organizations involved in health care.  However, while people in the US may be distrustful of government, polling shows even bigger distrust of health care special interests (like pharmaceutical companies and health insurance).    While Edelman marketing showed relatively constant trust in the pharmaceutical industry at around 50% from 2009-2012), a Harris Interactive 2010 poll showed that only about 10% of people thought the pharmaceutical industry was honest and trustworthy from 2003 to 2010, while health insurance companies and managed care companies were trusted by even fewer.

Avoiding Unpleasant Issues

While Prof Fuchs acknowledged the role of "special interests," he avoided mentioning how these special interests might negatively affect health care, and thus how their role could be altered or countered.

Some issues we discuss on Health Care Renewal, but which he ignored were:

Concentration of Power

We have frequently discussed how health care organizations have grown ever larger, increasing their market power, and hence their ability to command revenue.  Although we often hear arguments that larger organizations are more efficient, this historic excuse of monopolists has little evidence in support.  In fact, large organizations seem mainly efficient in extracting money for the benefit of their insiders.  For a recent discussion of the push toward monopolies that has some health care angles, see this post on Naked Capitalism.   


Commercialization of Health Care 

The US seems to be unique in that it allows a larger role for private, for-profit corporations in health insurance and the actual provision of health care.  In the US, many health insurance companies, some hospitals and hospital systems, and many other types of health care providers, like hospices and dialysis centers, are now for-profit.  Furthermore, the physicians who provide direct patient care are more frequently employed by corporations (rather than being in solo or small group practice), and these corporations are increasingly for-profit  (look here).

This increase in the provision of health insurance and direct health care by for-profit corporations is a historical change.  Through the 1970s, the American Medical Association declared "the practice of medicine should not be commercialized, nor treated as a commodity in trade." (Look here)   In most states, the corporate practice of medicine used to be banned.


Commercialization in an Age of Financialization -

This commercialization took place in an era in which economists were advocating that corporate leaders ignore all goals other than increasing "shareholder value" (look here).  This de facto meant increasing short-term stock price and/or revenue.  Clearly focusing only on short-term revenue increased the risk of management that ignored or was even hostile to the health care mission.  The focus on short-term revenue lead to strong incentives for employees to "make their numbers," that is, to achieve financial goals, no matter what it took (see examples here).  This likely lead to many examples of unethical behavior.  Furthermore, physicians were not immune to such requirements (look here).

 Abandonment of Government Regulation

As was noted in the comments on the post on Naked Capitalism,enforcement of anti-trust law that could prevent concentration of power has generally been abandoned by recent US administrations.  Furthermore, as we have discussed here, enforcement of laws against fraud, kickbacks, etc have lead to numerous legal settlements, but almost never any penalties against individuals who authorized, directed or implemented such actions within large health care organizations.  Thus, the leaders of health care organizations, particularly large health care corporations, have experienced impunity.  In some cases, there has been outright regulatory capture.  Conflicted regulators have proliferated, often through the mechanism of the "revolving door."

Executive Compensation 

Thus protected by such impunity, executives of large health care organizations often have become rich, and seem to be able to do so without any accountability for their organizations' actions.  As noted above, their incentives push them to put short-term financial goals ahead of the health care mission.  Furthermore, another currently fashionable business school doctrine is that health care managers may and perhaps should be generic, and thus need not know anything about health care, have experience caring for patients, or have sympathy for health care values.  All this has lead to health care management that ignores or even is hostile to the health care mission. 

Deception Undermining Clinical Research and Education 

Furthermore, this impunity and lack of accountability has been correlated with a rising tide of unethical behavior.  In particular, corporations that make drugs and devices have taken over clinical research meant to evaluate their own products.  They have often manipulated research to favor their products, and suppressed research that even when manipulated does not favor these products.  Thus they have corrupted the clinical research base on which physicians and patients rely to make the best possible health care decisions.  Marketers have launched stealth campaigns that have also included corruption of medical education.  In particular, they have paid influential health care professionals, called key opinion leaders, to support marketing under the guise of medical education.  Thus distorting health care and medical research and education decision making has distorted decision making, likely leading to increased costs and decreased quality.  

Other examples of poor, that is ill-informed, unaccountable, self-interested, conflicted and corrupt leadership are strewn around Health Care Renewal.  He have also shown how the governance of health care organizations often lacks accountability, integrity, transparency, and honesty.  All these problems can lead to increased costs, and decreased quality and access.  Yet almost never do any of these issues make it into polite discussion within health care research and policy circles.

Appeasement of Special Interests

Over eight years of  effort by a few dedicated academic researchers, health care professionals, investigative reporters, whistle-blowers, and watch dog organizations,  chronicled to some extent on this blog and by other bloggers and commentators, has shown bad leadership and governance of, and resulting unethical behavior by health care "special interests."  Yet, the example essay by Prof Fuchs failed to deal with any of these issues.  Instead of discussing how they might be approached, he suggested continuing appeasement of special interests, which would likely make our problems even worse.  Why he ignored all the privileges the leaders of special interest have, and felt the need to treat them even more nicely, remains unclear. 

Thus it appears that the anechoic effect is leading to failure to grapple with the real reasons for health care dysfunction, thus ensuring that health care costs will continue to rise while access and quality fall.

Real health care reform will first require honest, unflinching consideration of what has gone wrong.  As long as the conversation seeks to avoid offending those who benefit the most from the current system dysfunction, that dysfunction will only get worse. 

US President Theodore Roosevelt had the courage to challenge the "malefactors of great wealth" who engineered the first gilded age, at the expense of the public at large.  During this second gilded age, will we have the courage to take on the new malefactors of great wealth, including those who benefit from health care's dysfunction?

Where is the risk?

That’s the question Thomas Cox, an RN with insurance experience and expertise, says should be asked about any health care financing mechanism.

The whole idea of insurance is distributing risk widely so that it can be shared over a wide group of people and thus become manageable. That’s why people need insurance at all, and that’s also why schemes that put too much of the onus on individuals are a very bad idea – as has happened in recent years to a number of people,  the “insured” individual can incur costs that are more than he or she can bear.

In general, insurance is most solid when it’s over a larger group. Each major increase in group size distributes the risk further and makes the healthcare financing system stronger. Cox has an interesting paper on this which he presented at an American Statistical Association meeting.

In general, large insurers are an order-of-magnitude more sound than small ones, and nationwide insurance systems (such as Medicare) have a distinct actuarial edge over state-based insurance (think, for example, California earthquake). For this reason, it’s a shame that the Affordable Care Act (ACA) has state exchanges as its primary mechanism rather than one single federal exchange; risk dispersal is inferior.

Looking at the risk question, there’s a real problem with affordable care organizations (ACOs), which are one of the primary ways the ACA aims to keep down future costs. Essentially, ACOs are a form of capitation, and (Cox maintains and I think he’s right) capitation is essentially a mechanism to push risks down from the insurer or from Medicare to providers. Pushing risks to smaller groups is a terrible idea and will worsen the system. With ACOs having  smaller covered populations, they are far more subject to being the victim of events they can’t control, whether that’s having a large number of huge-cost, high-needs patients in a single year or having a large number of patients affected by an epidemic or natural disaster.

Providers are not trained or qualified to manage risk well, nor do they have the financial reserves to do so.  Cox calls this “professional caregiver insurance risk.”  Burdening providers with a task they are very ill-suited for is a truly bad idea. As Cox comments:

Pushing risks elsewhere removes the only real function we are paying insurance companies for.  If insurance companies are pushing down their risks elsewhere, we are paying them money for nothing of value. Insurance companies don’t provide healthcare – if they don’t manage risk either, what good are they? Of course, if they can sit there and siphon off profits without taking risks, it may not trouble profit-making insurers . . . but it should trouble the public [if they are] issuing policies, passing the insurance risks on to health care providers, and walking off with guaranteed profits year after year.

And (particularly for the ACO that has been “unlucky” and has incurred larger-than-expected costs), the financial risk can be a force for corruption, pushing organizations toward denying care and undertreatment.

Of course, with the enormous amount of unnecessary care and overtreatment in the US medical system today, some ACOs may indeed manage to give really good care for quite a while provided they are reasonably lucky. But this is a strategy with diminishing returns (as unneeded care dwindles in amount). At root, pushing down insurance risk to smaller entities is, Cox has persuaded me, a fundamentally flawed direction.

And I’ll never look at a health care financing proposal in future without asking myself: “Where is the risk?”

Fool Us Once, Shame on You, Fool Us Twice, Shame on Us - The Untrustworthy Pronouncements of Aetna's Former CEOs

A small tempest in the larger US health care reform teapot was produced a few weeks ago when Ron Williams, former CEO of Aetna, declared in a Wall Street Journal op-ed that he no longer supported the health insurance mandate.  The "mandate" for all US citizens to buy health insurance, actually a relatively small tax that would be imposed on people without health insurance, was the central point of contention in the lawsuit before the US Supreme Court challenging the Affordable Care Act (ACA). 

Immediate Past-CEO of Aetna Ron Williams' Abrupt Change of Mind on the Individual Mandate

Williams wrote,

Soon the U.S. Supreme Court will rule on the constitutionality of the Affordable Care Act. I am not a lawyer, or an expert on the Constitution. But as the chairman and CEO of a major health plan, I had a ringside seat to the entire health-care reform process. After much reflection, I have concluded that the federal individual mandate, which requires all Americans to purchase health insurance starting in 2014, will not be upheld.

On this, Williams was soon proven wrong. The Supreme Court upheld the law. However, the tempest was not due just to Williams' reversal of his former opinion, but the role he actually played in pushing his former opinion into the passage of the law, which was really far more than being a "ringside" spectator.

In an August 24, 2009 article, "Aetna's Ron Williams on Health Reform," Forbes' Dan Whelan noted,

Williams, 59, is taking a surprisingly visible role in arguing for change in the health care system. He has met with Obama a half-dozen times (he shrugs off the surname gaffe), has testified four times in front of Senate committees this year and participates in shindigs set up by the many trade groups for which he's a director.

Williams' position echoes that of the HMO industry generally: He's against a government-run plan but favors universal coverage and forcing insurers to take all comers.

As Wendell Potter, the former head of public relations for large health for-profit health insurance company Cigna, who is now a strong industry critic, put it on his blog,

Ron Williams who possibly more than anyone else had persuaded the President to reconsider his campaign pledge to enact reform without making people buy coverage from a private insurer. Candidate Obama’s reform platform differed from those of Hillary Clinton’s and John Edwards’ in only one significant way: both Clinton and Edwards embraced the mandate, which Williams was championing, first behind the scenes and then publicly, on behalf of the insurance industry. Candidate Obama said he didn’t believe it was right for people to be forced to buy something they couldn’t afford.

Williams was the industry’s most visible CEO on Capitol Hill during the debate on reform. He testified at numerous congressional hearings about how essential it was to move the millions of uninsured Americans into private health insurance plans and how an individual mandate was necessary to make that happen. He also never missed an opportunity to trash the idea of a 'public option' to compete with private insurance companies, which candidate Obama had said was essential 'to keep private insurers honest.'

Capitol Hill was not the only place Williams was frequenting during the reform debate. In an August 2009 article in Forbes, Williams was quoted as saying that he already had met with the President six times. When I called the White House to confirm that, a top aide told me it was true Williams had been there many times, adding, 'We’ve found him to be one of the more reasonable ones.'

Williams' recent seeming disavowal of the individual mandate raises the question of why anyone, much less President Obama, trusted him in the first place. After all, he was CEO of Aetna.

2001 Aetna CEO John Rowe Blamed Everyone Else for Health Care Problems

In fact, perusal of my memory, and a few file folders suggested several previous cases in which Aetna CEOs issued pronouncements that should not have been trusted.

First I recalled a meeting in 2001 at Brown during which the then Aetna CEO was honored by giving the Paul Levinger Lecture on "Good Health: Can We Afford It?" (See original Brown news release here.) My memory is that of Dr Rowe blaming just about everybody other than the for-profit health care insurance companies for health care's ills. A Brown Daily Herald article (not currently on line, Baskin B. Health care getting harder to afford, Aetna chief tells Brown U. Brown Daily Herald, November 30, 2001) recounted him blaming "cost inflation," (presumably due to doctors and hospitals), and employers, for whom "quality doesn't matter." He only allowed that insurers were to blame for not giving "better service," but not either rising costs or poor quality. I also recall Dr Rowe being treated with great respect by the audience. After all, this was a prestigious lecture.

However, his talk seemed just the least bit self-serving. If the audience had been aware of his record at the time, maybe we would have been more skeptical.

Mount Sinai CEO Dr John Rowe Extolled Merger with New York University, Jumped to Become Aetna CEO as Merger Began to Fail

By 1993, Dr Rowe was CEO of Mount Sinai Medical Center, and was seemingly at the vanguard of the movement for health care CEOs to be paid a lot. The New York Times reported that the 1993 Chronicle of Philanthropy survey showed him to be the country's best paid non-profit CEO, bringing in total compensation of over $800,000 in 1993 dollars. By 1998, Dr Rowe's big project was pushing concentration of power in health care in the form of a proposed merger between New York University Medical Center and Mount Sinai. According to the New York Times, the plan would be for Dr Rowe to become CEO of the combined entity. At the time, he said,

The advantages of merging hospitals are so great, they far outweigh any hypothetical potential negative impact.

The bond issue needed to finance the merger, however, ran into trouble by early 2000.  Soon after that, Dr Rowe seemingly demonstrated his lack of faith in it by jumping to the leadership of Aetna. It turned out, according to the Hartford Courant, Aetna's offer was just to rich to turn down.

Rowe got a $2 million sign-on bonus to leave Mount Sinai NYU Health and become chief executive of Aetna's health business, the document says. He will also get a $1.4 million retention bonus on July 3, 2001.

Both bonuses are designed to replace money that Rowe forfeited by leaving the giant New York hospital system, Aetna spokeswoman Joyce Oberdorf said.

In addition, Rowe will get an annual salary of at least $1 million and an annual bonus of $1 million to $3 million, depending on how well goals are met, under a three-year employment agreement with two possible one-year extensions.

Rowe, who already received 25,000 shares of restricted Aetna stock and options on 500,000 shares, will get another 100,000 options. The new options will be granted when Aetna spins off its health business to shareholders, or on Jan. 1, 2001 -- whichever comes first. The exercise price will be about $72.73, or whatever price Aetna stock is trading at the time if it's higher than that.

By 2001, the New York Times referred to the merger as existing "in name only." That year, the campuses resumed separate administration. The merger was officially terminated in 2008. Its failure was documented in an Academic Medicine article. (Kastor JA. Failure of the merger of the Mount Sinai and New York University hospitals and medical schools: part 2. Acad Med 2010; 85: 1828-32. Link here.)

If the Brown audience had known that the merger Dr Rowe extolled with such confidence was already failing, but that he was able to leverage his role in its development to go from the country's best paid non-profit CEO to a multi-million dollar a year insurance CEO, maybe we would have felt less guilt about our responsibility for health care's high cost, low access and poor quality.

Aetna CEO Richard Huber's Failure to "Walk the Walk"

In fact, searching through the files showed an even earlier example of an Aetna CEO talking out of two sides of his mouth.

By 1998, an American Medical News article documented the "rocky relations" between Aetna and physicians. By early 2000, Aetna CEO Richard Huber was known as "the managed care executive physicians love to hate," per the American Medical News. His departure was characterized by then American Medical News Street Smarts columnist Dr Scott Gottlieb, as partly due to how

Huber talked out of one side of his mouth about his company's obsessive quest for 'quality' health care -- while out of the other he was screaming at doctors, hospitals and drug firms about controlling costs. Yet Aetna's medical costs were still creeping up. As Richard Huber learned, you can't talk the talk if you don't walk the walk.

Summary

So the unreliability of recent Aetna CEO Ron Williams' advocacy of the "patient mandate," was presaged by similarly untrustworthy pronouncement by two former Aetna CEOs. In each case, the remarks of the particular CEO seemed more designed to promote his immediate self-interest than to provide trustworthy opinion or policy advice.

By the way, this summary should not be viewed as particularly an indictment of Aetna. I am sure I could find equally untrustworthy but self-serving pronouncements from the leaders of many other health care organizations. (Recall the visionary pronouncements of the failed and ultimately jailed CEO of the now vanished Allegheny Health Education and Research Foundation, see post here.)

The recent Ron Williams reversal should serve, however, as a stark reminder that we, meaning physicians, other health care professionals, those who study health care and health policy, policy makers, and the public at large, should be very, very skeptical about any pronouncements about health policy by top executives of health care organizations. They as a group have shown themselves to be remarkably good at doing whatever it takes to buttress their immediate self-interest, including making apparently oracular but ultimately foolish policy pronouncements.

The real question is why these pronouncements continue to be treated with reverence, if not as "visionaries,"  by health care professionals, health care and policy researchers, the news media, health care and medical journals, policy makers, politicians, and the public at large? Why has hardly anyone, besides yours truly, gone back to check the accuracy of their previous pontifications before swooning over their latest ones? Why has hardly anyone examined the accuracy of their predecessors' opinions, given that most executives these days seem to be subject to the same incentives to make things look good in the short term, and never mind the consequences?

Health Care (Insurance) Reform Upheld, but Concentration and Abuse of Power Remain Largely Unaddressed

This may seem like sour grapes, but...  Numerous media reports say that the US Supreme Court has upheld the massive US health care "reform" law (look here for Reuters coverage today, and here, for the Los Angeles Times, for example).  In my humble opinion, the law will likely increase acess to commercial health care insurance, although will likely not reduce the expense of such insurance, or address the misbehavior of many large insurance companies (for example, see our series of posts on Aetna, UnitedHealth, WellPoint, and the insurance industry in general, etc, etc).

The law, as we summarized here, does contain a few provisions relevant to the concerns we raise on Health Care Renewal.  These include measures to improve disclosure of certain kinds of conflicts of interest affecting individual physicians and health care academics, and improved funding for comparative effectiveness research.  We hoped that the law would lead to a more rational way to fix payments to physicians that might supplant the secretive, procedure-happy RUC, but so far that hope remains unfulfilled. 

However, as we wrote in 2010, the legislation will leave most of the other problems we discuss on Health Care Renewal untouched. We thus have one or two small steps for mankind in the US, but no reason for complacency.


The news is not bad.  We are probably on balance somewhat better off with some health care insurance reform than none.  However, we are still a long way from meaningfully addressing concentration and abuse of power in health care. There will be no rest for the weary bloggers of Health Care Renewal.

The Revolving Door's Bearings Overheat - Two Examples of the Health Care Insiders Who Keep it Spinning

Two recent stories illustrate a kind of conflict of interest affecting government health care policy. Note that neither story appeared in any one media outlet, but had to be pieced together from several sources, not all contemporaneous.

The Peripetatic Architect of Health Care Reform Implementation

Here is the story of Steve Larsen's latest career move, per the Wall Street Journal,

A top official in charge of implementing the federal health-care overhaul said Friday he would step down in mid-July, shortly after the Supreme Court is expected to rule on the fate of the law.

The official, Steve Larsen, heads the office at the Centers for Medicare and Medicaid Services that oversees most of the insurance provisions in the 2010 law. Those include setting up exchanges for consumers to shop for plans and obtain subsidies for premiums, establishing rules on how much money insurers must spend on medical benefits, and administering a federal program to provide insurance for consumers with pre-existing conditions.

Mr. Larsen said in an interview that his departure was '100% for personal and family reasons,' and that he hadn't considered the timing of the court decision. He cited his need to pay tuition for his college-bound children,...

The Wall Street Journal coverage made it sound like Mr Larsen was fleeing his post to avoid dealing with how the Supreme Court's decision on the Obama administration's health care reform law might complicate future functions of his office,

Mr. Larsen's departure highlights the challenges the administration will face once the Supreme Court rules. If the court upholds the law, the administration has a 2014 deadline to put it in place, including persuading states to set up the exchanges or establishing them on states' behalf.

If the court strikes down the law's key requirement, that most individuals purchase insurance or pay a fine, federal officials will have to establish whether they can make the remaining insurance elements of the law work, which would face stiff opposition from insurance companies and from Republican lawmakers who have pledged to overturn the law.

If the court voids the law entirely, officials will have to start undoing hundreds of its requirements that are set up to take effect or are, in many cases, already in place.

It only briefly mentioned where Mr Larsen was going, ostensibly in hopes that a better salary would aid in his tuition payments,

[he] said he would be working at a health-services business unit of UnitedHealth Group, an insurer

On the other hand, a report from Bloomberg suggested that UnitedHealth thought he would be well worth his salary,

Larsen will be executive vice president at Optum, a health services and information technology company that is part of UnitedHealth Group Inc., of Minnetonka, Minn., the company confirmed. UnitedHealth Group is the parent company of UnitedHealthcare, the largest health insurer in the United States in terms of policyholders and revenues.

'We are excited to welcome Steve Larsen to Optum,' company spokesman Matthew Stearns told BNA in an email. 'Steve's extensive, broad-based experience in health care will further enhance the support Optum provides to the health system and consumers in a rapidly evolving environment.'

It is funny how that experience seemed to be about crafting the regulations under which Optum, or at least its parent corporation would have to operate.

But wait, there is more. Bloomberg also mentioned that Mr Larsen had previously gone from a state government health policy position to the insurance industry before he wound up at the CCIIO.

Prior to joining the Obama administration to implement PPACA, Larsen served in a number of capacities at Amerigroup Corp., a public managed care company serving Medicaid and Medicare beneficiaries, according to his biography on the CCIIO website. Larsen also was Maryland insurance commissioner for six years, chairman of the Maryland Public Service Commission for Gov. Martin O'Malley (D),...

To clarify, Amerigroup is a publicly-held, Fortune 500 for-profit corporation (look here).
So in summary, and in chronological order, as best as I can establish it, Mr Larsen went from a Maryland state government policy position that affected health (and other insurance) companies, to a health insurance company (Amerigroup), to a US government policy position that affected health insurance, and now to another health insurance company (UnitedHealth).

The Peripatetic Legislative Policy Director

Brett Roper moved in the opposite direction, to government from industry, and to the Republican legislative majority, not the executive branch now controlled by the Democrats. Early in June, on the Republic Report,

In late 2010, as Congressman John Boehner (R-OH) prepared to take the gavel as Speaker, he hired a lobbyist named Brett Loper as his new policy chief. Loper left his job at the Advanced Medical Technology Association, a lobby group for medical device-makers, to join Boehner.

The Association did not seem to sad to see him go,

Republic Report reviewed ethics forms disclosed filed with the House clerk’s office, and noticed that Loper actually received a $100,147 bonus in 2011 for leaving his medical device lobbying group and becoming a public servant.

But wait, there is more. Loper also previously made more than one transition between government and industry. As Politico reported in 2010, before Loper worked for the Advanced Medical Technology Association,

Loper worked in senior positions for then House Majority Leader Tom DeLay and as the House Ways and Means Committee Republican staff director under then-ranking member Rep. Jim McCrery of Louisiana

But wait, there is still more. In 2011, the Atlantic reported,

In December, Boehner hired Brett Loper to be his policy director. At the time, articles focused on Loper's previous job as a lobbyist for the Advanced Medical Technology, where Loper vigorously resisted attempts to reduce the deficit by fighting cuts in fees to his clients proposed by the Obama administration.

That is part of the story.

But missing from the pieces about Loper have been his connection to the Abramoff scandal and knowledge of how to use government money to 'nfluence'legislators.

Sometimes a picture is worth a thousand words. Here is a photo of Loper (far right), basking in the tropical sun of the Marianas Islands, with Michael Scanlon (center), Jack Abramoff's partner in crime.

What is Loper doing in the Marianas?

As a staff member for Tom Delay, Loper was part of a mission to deliver money from the "favor factory," otherwise known as the Appropriations Committee of Congress, to two legislators in the Marianas, Norm Palacios and Alejo Mendiola (between Scanlon and Loper, above). In exchange for money for their two pet projects, Palacios and Mendiola agreed to switch their votes and support Abramoff's key ally in the Marianas, Benigno Fitial, in his bid to become Speaker of the House there.

The gambit worked. Fitial won. Abramoff -- whose lobbying contract to the Marianas had been canceled -- was re-hired by the Marianas. In that capacity, Abramoff resumed lobbying for the continuation of abusive labor practices in the islands. (For more on this, see my film, 'Casino Jack and the United States of Money.') Abramoff also continued to make sure that the grateful garment factory owners flowed campaign cash to key mainland Republican legislators, including Tom Delay.

Note that according to the Washington Post web-page on the Abramoff scandal,

Former Republican lobbyist Jack Abramoff was sentenced to five years and 10 months in prison on March 29, after pleading guilty to fraud, tax evasion and conspiracy to bribe public officials in a deal that requires him to cooperate in an investigation into his relationshps with members of Congress. Sources familiar with the federal probe have told The Post that half a dozen lawmakers are under scrutiny, along with Hill aides, former business associates and government officials.

The scandal prompted Rep. Tom DeLay (R-Tex.) and Rep. Robert Ney (R-Ohio) to give up their leadership posts,...

So Mr Larsen went from Republican senior legislative staff positions, during which time he associated with the now admittedly guilty Abramoff, to an industry trade association, and then back to a Republican senior legislative staff position.

Summary

So here are two recent good examples of a particular type of conflict of interest involving government and health care corporations. Both cases are of people who have made multiple transitions through the "revolving door" between the health care corporate world, and government agencies and organizations that are involved in policies that affect that world.

These transitions' multiplicity appears to represent a conflict of interest because these peoples' frequent revolutions through the door might diminish any sense that they ever have a primary interest on behalf of any immediate employer when another employer on the other side of the supposed arms' length government-industry relationship is always beckoning. Thus the people involved appear to have become members of a peculiar class always in transition, and hence more attuned to self-interest than to promoting the health of patients and the population (which ought to have been the primary concern for government leaders.) As Matt Kelley on the Compliance Week blog wrote in response to the Larsen story,

if you ever wonder why so many Americans feel like their country is slipping away from them, the revolving door—the sense that a private club of success exists in this country, and most Americans don't get to go through it, but merely live with the dictates of those who do—is a big reason why.

As we wrote before health policy in the US, in particular, has become an insiders' game. Unless it is redirected to reflect patients' and the public's health, facilitated by the knowledge of unbiased clinical and policy experts rather than corporate public relations, expect our efforts at health care reform to just increase health care dysfunction.

Physicians, public health advocates, whatever unbiased health policy experts remain must educate the public about how health policy has been turned into a corporate sandbox. We must try to somehow activate the public to call for health care policy of the people, by the people, and for the people.

Health Care Corporate Disinformation Campaigns: Wendell Potter's "Deadly Spin"

I wish I had gotten to this earlier....  In 2009, Wendell Potter, a mild-mannered former chief of public relations for for-profit health care insurance company Cigna, testified before Congress about how insurance companies manipulated public opinion to support corporate vested interests. 

insurance companies make promises that they have no intention of keeping, how they flout regulations designed to protect consumers . . . and how they ‘purge’ small businesses when their employees’ medical claims exceed what underwriters expected
[Kendall]

In November, 2010, he published a book entitled Deadly Spin on this topic.  Starting then, a series of op-ed pieces by Potter, reviews of his book, and interviews with him provided a chilling picture about how corporate health care uses disinformation to support its interests, regardless of the public's interests.  I am sure there is much more in the book, which I will endeavor to purchase and read forthwith.  Meanwhile, pieced together from these articles are examples of insurance industry disinformation campaigns, and some observations about how their disinformation machine works.

Stifling the Clinton Administration's Health Care Reform

He took part in the planning for the 'Harry and Louise advertising blitz that helped derail the Clinton health-care initiative and used to bandy about catchphrases that have resonated in more recent campaigns.
[Wilemon]

Discrediting Michael Moore's Movie Sicko

I described the meticulously planned and deception-based strategy the health insurance industry developed and carried out -- with help from one of Washington's biggest PR firms -- to discredit documentary maker Michael Moore and his 2007 movie, Sicko. Because the movie laid much of the blame for the seemingly intractable problems of the American health care system on insurers, the industry I used to work for spent a big chunk of policyholders' premiums on a behind-the-scenes campaign to demonize Moore and to misinform Americans about the health-care systems in Canada and Europe that -- as Moore explained in the movie -- provide coverage for all their citizens and provide high quality care for them at much lower costs than we do in the U.S.
[Potter, Huffington Post]

Quieting the Furor After a Denied Liver Transplant

In 2007, Cigna initially denied payment for a liver transplant for a 17-year old girl named Nataline Sarkisyan, creating a national uproar.

We learn that executives at Cigna worried that Nataline’s situation would only add fire to the growing public discontent with a health care system anchored by private insurance. As the case drew more national attention, the threat of a legislative overhaul that would ban for-profit insurers became real, and Mr. Potter found himself working on the biggest P.R. campaign of his career.[Chen]

As busy as they might have felt in the days leading up to Nataline’s death, he and his staff were inundated with calls from the news media immediately afterward. To bolster what was seen as a fight for its survival, Cigna hired a large international law firm and a P.R. firm already well known to them from previous work aimed at discrediting Michael Moore and his film 'Sicko.'
[Chen]

Twisting "Obamacare" to Benefit the Insurance Industry

Mr Potter himself wrote about how "Obamacare" was twisted into a win for the insurance industry in an op-ed entitled "Repeal and Replace?":

Despite all the attacks on 'Obamacare,' the new law props up the employer-based system that insurers and large corporations benefit from so greatly. It also guarantees that private insurers will get billions of dollars in new revenue. And the insurers won’t have to share a penny of that windfall with a government-run public option the president once said was necessary 'to keep insurers honest.'
[Potter, Newsweek]

On one hand, the goal of the insurance industry was the "individual mandate," the requirement that all Americans MUST purchase insurance, which for most means insurance provided by for-profit health insurance companies:

Although I was ashamed of many of the things I did during my career, I didn’t plan to speak out about the industry’s devious practices until I saw Karen Ignagni, president of America’s Health Insurance Plans, tell President Obama at the end of his March 2009 White House Forum on Health Reform, 'You have our commitment to play, to contribute, and to help pass health-care reform this year.' Then I knew the industry’s disingenuous charm offensive had begun. Soon after that I read that, Aetna chairman and CEO Ron Williams, the driving force behind the industry’s effort to get the individual mandate enacted, had met with the president half a dozen times. I knew Williams was trying to persuade the president to drop his insistence on the public option and to embrace the individual mandate. Sure enough, Williams got his wish.
[Potter, Newsweek]

In fact,

For months before I left my job, I worked closely with my counterparts at the other big insurers to develop the list of must-haves our well-connected army of lobbyists would take to Capitol Hill when lawmakers began drafting reform legislation. Despite their public statements to the contrary, insurance companies really liked much of what was in both House and Senate versions of the bill—big chunks of which they actually wrote behind the scenes—especially the requirement that all Americans buy insurance if they’re not eligible for an existing public program like Medic-aid or Medicare.
[Potter, Newsweek]

On the other hand, the industry wanted to make sure that the law did not regulate them too tightly, or otherwise inconvenience them or cost them too much money:

During the reform debate, the industry’s deception-based PR strategy had two active fronts. One was a highly visible charm offensive designed to create an image of the industry as an advocate for reform and a good-faith partner with the president and lawmakers in achieving it. The second was a secret fearmongering campaign using shadowy 'AstroTurf' groups and business and political allies as shills to disseminate misinformation and lies—like the one about the creation of 'death panels'—with the sole intent of killing any reform that might hurt the bottom line.
[Potter, Newsweek]

Tactic: Front Groups

This seems right out of the old KGB playbook, as described by Mr Potter in an interview about the campaign to discredit Michael Moore's Sicko:

one key component was to fund a front group, and that is something that I write about quite a bit in the book, about how special interests, and the insurance industry, in particular, will use premium dollars to funnel thousands and thousands, if not millions, of dollars to big PR firms to set up fake grassroots organizations—astroturf, as we call it—and front groups. And in this case, there was a front group that was set up called Health Care America, and the sole purpose for it to be set up was to attack Michael Moore and to attack the notion of a single-payer system in this country.
[Goodman]

Note that this particular tactic was never previously exposed:

I’ve done a search recently just to find out how they were covered, and they were never exposed.
[Goodman]

But it was quite influential:

They were quoted extensively. They sent out press releases. And they were given status as a legitimate organization, even by the New York Times.
[Goodman]

Tactic: Third Parties (Useful Idiots?)

An example from Potter's account of how insurers manipulated the Obama administration's health care reform:

He contends that the insurance industry used 'third parties,' such as sympathetic congressmen, 'to kill key elements of the president’s plan, if not all of it, by scaring and lying to the public.'
[Weiss]

Here is another version used in the campaign to quell the furor over the denial of the liver transplant:

the aggressive placement of articles with friendly 'third party' reporters, editors and producers who would 'disabuse the media, politicians and the public of the notion that Nataline would have gotten the transplant if she had lived in Canada or France or England or any other developed country.'
[Chen]

Tactic: Spies

This really is out of the espionage playbook:

A 'spy' was dispatched to Nataline’s funeral; and when the Sarkisyan family filed a lawsuit against the insurer, a team of lawyers was assigned to keep track of actions and comments by the family’s lawyer.
[Chen]

Tactic: Distractions to Make Important Issues Anechoic

We have often discussed how some of the issues we discuss on Health Care Renewal are anechoic, generating almost no discussion, polite or otherwise in the medical and health care research and policy literature, and sometimes even in the main-stream media. Part of the anechoic effect may be due to deliberate distraction, as Potter discussed in reference to the campaign to manipulate "Obamacare":

Potter shows then-Cigna chairman Edward Hanway's leading role in "a multi-milllion-dollar public relations and advertising campaign" in the run-up to the 2008 presidential election, designed to 'divert the public's and the media's attention' away from the central fact of millions of uninsured and underinsured sick people, toward other problems that were harder to blame on insurers: aging Americans, extravagant doctors, expensive technology, and consumers demanding costly operations they don't need.
[DiStefano]

Note that the usual dogma one sees in the medical and health care research/ policy literature about the causes of US health care's excess costs, declining access and poor quality are just as listed above: an aging population, high doctors' fees and excessive utilization, technology that appears to be ever costlier (unlike technology everywhere but health care), and patients' unreasonable demands.

Tactic: Message Discipline

As discussed by Potter in terms of the campaign to align "Obamacare" with the insurance industry's interests:

It's incredible message discipline, and it's based on an understanding of ideology. The health insurers know that they need to be allied with big, well-researched organizations like the Chamber of Commerce. They want to be associated with people who can convince us that the way to go for health care is market-based. You're going to be hearing in the weeks to come, as we revisit health care, from Republicans and big business and those in the industry that what we need are 'common-sense, market-based solutions.' Those are carefully crafted words, just as what we have now was a 'government takeover of the health care system.' They spend enormous amounts of money very carefully selecting words and putting them together in a way that will elicit an emotional response. The people who are saying this believe their own talking points because they don't have an understanding of how the system is working or not working. If they are conservative, they think, 'I'm supposed to believe this.' They're supposed to believe that the market should work well in health care. They just simply have their blinders on and won't take them down to see the reality.
[Whitaker]

Tactic: Entrapment (Double-Think?)

Finally, Potter discussed how public relations leaders keep their own people in line:

There's an entrapment that's part of the problem here. I was paid very well, but I wasn't independently wealthy, and I had to consider my own ability to make the house payments and the car payments and putting the kids through school. You also find that your ego and what you do for a living, you let it define you. How much money you make, what neighborhood you're able to live in, where you're able to send your kids to school, it all becomes part of your shell and your own self-identity. To do anything that will potentially destroy that is too frightening for people. It was certainly something I had to deal with, and I had to come to terms with the fact that I could lose all of that, whatever I had. I came to feel, well, I could lose it but what have I lost? A good friend of mine said, 'Well, you can at least push a broom, can't you?' I didn't think I was going to end up pushing a broom, but I didn't have to have all of that stuff. But people are afraid of losing all that stuff because they're afraid of losing part of their identity. So, financially and psychologically and from an ego point of view, it's hard to separate yourself from something you've been involved in.
[Whitaker]

Summary

In Mr Potter's own words, the for-profit health insurance industry's public relations machine, and by extension, the public relations machines of all the big health care corporate players

onslaught drastically weakened health-care reform and how it plays an insidious and often invisible role in our political process anywhere that corporate profits are at stake, from climate change to defense policy.
[Potter, Huffington Post]

So,

The onslaughts of spin will not stop, the distortions will not diminish, and the spin will not slow down. To the contrary, spin begets spin, as the successes of corporate PR functionaries increase the revenues of their employers, further funding their employers' efforts to create a more hospitable climate for their business interests. Americans are thus being faced with increasingly subtle but effective assaults on their beliefs and perceptions. Their best defense right now is to understand and to recognize the sophisticated tactics of the spinners trying to manipulate them.

Most important is a singular mandate: Be skeptical.
[Potter, Huffington Post]

I hope that summarizing some of Mr Potter's amazing points will help us all to be much more skeptical.

Note that Mr Potter has his own blog here, which will be added soon to our blog roll.

References


Chen P. When insurers put profits between doctor and patient. New York Times, January 6, 2011. Link here.
DiStefano JN. Potter vs Hanway: Cigna rebel tells all in book. Philadelphia Inquirer, January 20, 2011. Link here.
Goodman A. "Push Michael Moore off a cliff." Democracy Now, November 17, 2010. Link here.
Kendall J. An insider dissects the health insurance industry. Boston Globe, November 22, 2010. Link here.
Potter W. Repeal and replace? Newsweek, November 5, 2010.  Link here. 
Potter W. Why I will stay far away from cliffs from now on. Huffington Post, November 9, 2010. Link here.
Weiss G. Spin doctor reveals all. Portfolio.com, December 21, 2010. Link here.
Whitaker R. The insurance industry scam. Austin Chronicle, January 21, 2011. Link here.
Wilemon T. 3 events led 'Deadly Spin' author to turn on health insurance industry. Tennessean, January 13, 2011. Link here.

BLOGSCAN - Attention to Medtronic's Payments to Spine Surgeons in the Main Stream Media

On the HealthBeat blog, Maggie Mahar takes up the case of huge royalty and consulting payments to spine surgeons by medical device company Medtronic.  We had discussed the case recently here, followed by Howard Brody on the Hooked: Ethics, Medicine and Pharma blog (see link in this post).  Ms Mahar was notably optimistic because of the continued attention to this case by the main stream media.  She argued that the increased emphasis on aspects of health care dysfunction shown by the media means "health care reform is moving ahead on the ground."  I hope she is right, but I would feel more hopeful if ill-informed, mission-hostile, self-interested, conflicted, and corrupt health care leadership was less anechoic, if health care dysfunction actually got some attention in the medical/ health care/ health services research/ health care policy literature , and if I could identify at least one prominent politician or policy-maker who talks about these issues.

Corporate Proxies Suggest CEOs Rewarded for Influencing Health Care Reform

We have frequently discussed the often outsized, if not outrageous compensation awarded to top leaders of health care organizations.  Such compensation may seem disproportionate to the leaders' real-world achievements, and may contrast with organizational actions that seem inept, mission-hostile, or unethical.

In perusing this year's crop of proxy statements from some of the biggest US health care corporations, I noted that some provide some narrative, qualitative justification for their top leaders pay.  I was struck by three similar statements:

Johnson and Johnson

We recently discussed the contrast between Johnson and Johnson CEO William Weldon's gargantuan compensation and his detached response to the findings of an inspection of one of his company's factories that lead to its shutdown and the recall of its products.   According to the company's 2010 proxy statement, Mr Weldon's total compensation approved  in 2010 was $19,847,026.   The proxy statement included this overview of his performance:

The Board believes that Mr. Weldon generally exceeded expectations despite substantial economic, political, regulatory and competitive challenges as well as significant patent expirations. As referenced in the table above, the Company delivered solid financial results and positioned itself for future growth.

Under "strategic results" was this statement:

Mr. Weldon played an effective role in helping shape health care policy around the world and has been very involved with efforts on U.S. Health Care Reform. Mr. Weldon’s personal involvement with key leaders and organizations has ensured the interests of the Company are well represented.

Pfizer

We recently discussed the contrast between Pfizer Inc CEO Jeffrey Kindler's sizable compensation and the number and size of lawsuits alleging unethical conduct that the organization has settled, and its criminal conviction as a "racketeering influenced and corrupt organization" (RICO). According to the company's 2010 proxy statement, Mr Kindler's total compensation in 2009 was $14,898,038. The proxy statement included an Executive Compensation Discussion and Analysis. Its summary of Mr Kindler's performance was:

The committee believes that Mr Kindler's leadership was a significant factor in the continued progress made by Pfizer in 2009 in strengthening the foundation for future growth and long-term success.

It also specifically addressed Mr Kindler's "industry leadership":

During 2009, Mr Kindler was actively involved, through both Pfizer and external organizations, in developing and advancing US and global public policies that serve the overall interest of our Company and our shareholders, as well as doctors and patients. These efforts included constructive participation in the US legislative process to advance Pfizer's goals of achieving a more rational operating environment....

UnitedHealth Group

We recently discussed the contrast between UnitedHealth Group CEO Stephen J Helmsley's large total compensation and the profit he recently made from the sale of stock options and various questions raised about his company's ethical performance.  According to the company's 2010 proxy statement, his 2009 total compensation was $8,901,916. The company's 2010 proxy statement stated his compensation was based upon a variety of factors, including:

Positive participation and leadership of the Company in the health care reform and modernization debate

Summary

We have noted how health care organization may be gripped by "compensation madness," caused by "insiders hijacking established organizations for their personal benefit."  One could view the statements above as just one form of post-hoc justification for compensation madness.  It is possible that timid, if not crony boards are simply getting more inventive in their rationalizing CEOs' imperial pay scales.  On the other hand, those justifying the compensation of three extremely well-compensated health care corporate CEOs may really believe what they wrote about their CEOs roles in health care reform. 

We have posted little about the US health care reform effort because so much of it seemed irrelevant to the concerns mentioned on Health Care Renewal.  Health care reform legislation did little to address problems with health care leadership, governance and ethics, and how they challenge health care professionals' values and lead to higher costs, declining access, poor health care quality and disgruntled health care professionals (see this summary).  Maybe one reason this was so was that the top leaders of health care organizations did a good job pushing their personal and organizational priorities into the reform legislation, meanwhile discouraging any provisions that might threaten the way they were leading their organizations, and how much they were making while doing so. 

There a many reasons for the popular dissatisfaction with the recently enacted US health care reform legislation.  The influence of the leadership of top health care corporations in promoting their, rather than the populace's goals, ought to be a topic of further inquiry.  Meanwhile, it may be that the "superclass" has struck again. 

Pfizer Settles One Lawsuit, Loses Another, Pays its CEO $13.7 Million

It's deja vu all over again for Pfizer Inc, the world's largest pharmaceutical company.

Settlement of Suit Alleging Neurontin Risks Concealed

Pfizer has kept busy in court defending against charges that a company it acquired promoted Neurontin (gabapentin) for uses not approved by the US Food and Drug Administration (FDA), and not well supported by the evidence.  Most recently, it was convicted by a jury in California of being a racketeering influenced and corrupt organization (RICO) because of a long-term "racketeering conspiracy" involving Neurontin marketing (see post here). Now additionally, according to the Wall Street Journal,

Pfizer Inc. said it reached a settlement agreement in a wrongful-death lawsuit brought by a woman who claimed her husband's use of the antiseizure drug Neurontin caused him to commit suicide in 2002.

The suit was brought by Linda Shearer of Berkshire County, Mass., whose husband, Hartley Shearer, was prescribed Neurontin to control the effects of his paralysis. The suit alleged Pfizer promoted this use of the drug even though it wasn't approved by U.S. regulators. The suit alleged Pfizer knew the drug was associated with a risk of suicide, but failed to properly warn of the risk.

The new wrinkle here is that Pfizer did not defend a suit that alleged the company knew of a potentially fatal side-effect of the drug, but failed to disclose that risk.

Jury Awarded Damages for Treatment of Whistle-Blower

Meanwhile, the Hartford Courant reported:

A former Pfizer scientist who claims she has been paralyzed by a virus designed at the pharmaceutical company's laboratory in Groton was awarded $1.3 million by a federal jury in Hartford Thursday following a trial that raised questions about safety practices in the dynamic field of genetic engineering.

The amount of the settlement awarded to molecular biologist Becky McClain of Deep River will likely increase in coming days. After about day of deliberation, the jury also awarded McClain punitive damages, to be determined by U.S. District Judge Vanessa L. Bryant, and awarded fees to McClain's two Connecticut lawyers, Bruce E. Newman and Stephen J. Fitzgerald.

McClain claimed in her suit that she was inadvertently exposed through work by a former Pfizer colleague in 2002 or 2003, to an engineered form of the lentivirus, a virus similar to the one that can lead to acquired immune deficiency syndrome, or AIDS.


She further claimed that Pfizer wrongly fired her in 2005 for complaining about laboratory safety to the U.S. Occupational Safety and Health administration and to co-workers.

Ultimately, the jury was not permitted during the 12-day trial to hear argument supporting McClain's claim of a causal link between her disability and virus research done at her laboratory in Groton.

The jury based its verdict on evidence concerning McClain's two remaining claims: that her dismissal violated Connecticut's whistle blower law and McClain's free speech right. Her lawyers contended her complaint to federal safety regulators amounted to a whistle blower complaint and that her discussion of safety issues with fellow workers was free speech.

So, after being convicted by a jury of being a "racketeering influenced and corrupt organization," (RICO), and settling civil and criminal fraud charges for an unprecedented $2.3 billion (see post here), and after many other allegations, settlements, and convictions (look here),  Pfizer failed to defend one action, and lost another that argued Pfizer tried to hide information which put the company and/or its products in an unfavorable light.

In fact, Even Pfizer CEO Jeffrey Kindler could not put much of a spin on the company's recent record. As reported by Duff Wilson in the New York Times,

The world’s largest drug company, Pfizer, has handled mergers badly, invented too few drugs and left its reputation in disrepair after two criminal cases.

And that is the assessment of its own chief executive.

CEO's Multi-Million Dollar Compensation
But while all this was going on, the company did disclose (as mandated by the US Securities and Exchange Commission [SEC]) that CEO Kindler is continuing his acquisition of riches.  As reported by the AP (via USAToday).

The chief executive of drug giant Pfizer Inc., Jeffrey Kindler, received a 2009 compensation package valued by The Associated Press at $13.7 million, down 7.6% from 2008, as the board reduced the stock awards he received, citing economic pressures.

The world's biggest drugmaker paid Kindler, 54, a salary of $1.6 million, up just $25,000 from the year before. But his performance bonus was bumped up to $3.5 million from $3 million in 2008, according to a filing this week with the Securities and Exchange Commission.

Most of Kindler's compensation comes from long-term awards of stock options and restricted shares. The total fell 17% to $8.1 million in 2009, from $9.8 million, even though they were granted in late February, a month after Kindler announced plans to buy Wyeth for $68 billion, a sound strategy to counter Pfizer's looming revenue plunge.

Kindler's other compensation — a variety of perks — totaled $449,731. That included $190,725 for Kindler's use of corporate aircraft as required by Pfizer's board, $43,099 for use of a car, $7,690 for financial counseling and $1,217 for home security.

Even admitting that Kindler's compensation last year was slightly decreased from last year's not so small fortune, there still seems to be a huge disconnect between the company's ethical woes, legal settlements, and guilty pleas and its CEO's rewards. Once again, it seems that leaders of large health care organizations never face real accountability for their company's bad behavior. It almost goes without saying that in the two cases summarized above, no one who authorized, directed, or implemented the actions leading to the settlements or damages seems to have had any negative consequences.

So once more with feeling.... In the US, we have put much of our health care system in the hands of very large organizations, for-profit and not-for-profit, without holding these organizations and their leaders accountable for their actions. The results have been increasingly rich leaders who often behave like a new aristocracy, and repeated bad behavior by the organizations they lead.

Our latest effort at health care "reform" has continued to rely on large private organizations, while so far not adding to their or their leaders' accountability. In my humble opinion, if we really want to reform health care so as to improve quality, increase access, control costs, and support professionalism, we will have to make our new health care oligarchs accountable.

Postscript - Pay for Health Care Reform Lobbying?

By the way, a commentary in The [New London, CT] Day suggested an explanation for why Kindler was so richly paid last year:

It takes pages and pages of a company securities filing to explain and justify all the bells and whistles of Kindler's 'annual incentive award,' a complicated stew of stock options and deferred payments and plain old salary.

From all of this, Timothy P. Carney of the Washington Examiner found one juicy tidbit, which especially titillated industry bloggers.

It turns out Kindler's salary increase, from $1.57 million to $1.6 million, was based in part, the compensation committee suggested, on his success in making a deal with President Obama that protected the drug industry from some of the more onerous proposals of health care reform.

Praising Kindler as an effective lobbyist in, among other things, heading off legislation that would allow the importing of cheaper prescription drugs, the committee said: 'These efforts included constructive participation in the U.S. legislative process to advance Pfizer's goals of achieving a more rational operating environment.'

Or, he kept a finger in the dike against health care reform.

Indeed, a recent report by the Sunlight Foundation, a private nonprofit dedicated to more transparency in government, indicates Kindler's extensive role in negotiating a deal for the drug companies with the Obama administration and Senate Finance Committee Chairman Max Baucus.

It turns out Kindler's name turns up four times on last year's White House visitor logs.

The final deal Kindler helped craft promised $80 billion in cost cutting by the drug companies but blocked much more onerous reform measures for the industry, like lowering prescription drug prices through Medicare negotiations, re-importation of drugs from other countries with lower prices and quicker release of generics onto the market.

The cost-saving of such measures, if allowed to occur, could have been in the hundreds of billions of dollars, according to government analysis.

Kindler, as the pay committee says, did good.

Several of our fellow bloggers have suggested that an installment of the Public Broadcasting Service (PBS) program "Frontline" will show just how much of the recent US health care reform effort was the product of health care corporate CEOs (e.g., see this post on GoozNews, and this post on Managed Care Matters). We shall see once the program airs, but maybe Mr Kindler's salary was a good value for Pfizer, but a very bad one for the rest of the country.

The Health Care Reform Bill and Health Care Renewal

I have not written much about the seemingly endless health care reform debate in the US, because much of it has not been relevant to the issues we discuss on Health Care Renewal.  Now that the current phase of the debate is done, and legislation has been passed, let me offer my opinions on the few aspects that do seem relevant to this blog.

The Sunshine Act

For Health Care Renewal readers, the most important part of the legislation is that containing the provisions of the Sunshine Act, championed by Senators Grassley and Kohl.  (See this summary on Postscript, the Prescription Project blog.)  The act requires that all drug, device, biologic, and medical supply manufacturers report essentially all payments to physicians or teaching hospitals to the goverment, and on the internet.  It does not appear that the rules apply to other health care related non-profit organizations, e.g., medical schools, disease advocacy groups, health care related charities, medical societies, etc, or to payments made by for-profit health insurers, clinical research organizations, and some other corporations.  Unfortunately, the provisions only take effect in 2013.  However, despite these quibbles, this still may be one of the most important advances promoting disclosure of health care related conflicts of interest made in the 21st century.

Comparative Effectiveness Research

As best as I can tell at this point, the current legislation used the wording from the bill previously passed in the US Senate, which we discussed here and here, regarding comparative effectiveness research.  Although its goal of setting up a not-for-profit comparative effectiveness organization seems laudable, the devil will be in the details.  The Senate version gave considerable oversight of this organization to those with vested interests in selling particular products or services, threatening the impartiality of the organization and the research it would sponsor, and perhaps thus wholly defeating its ostensible purpose.  Furthermore, the Senate bill included curious wording that seems to threaten the ability of those getting funding from the organization to express views that might disturb the organization's leadership, again threatening the integrity of their dissemination of its work, and perhaps violating the First Amendment of the US Constitution.  Whether these provisions provide benefits that outweigh their harms is highly questionable.

Payments to Physicians

We have criticized how the process of setting payments to physicians by the US Medicare system has been captured by a secretive committee of the American Medical Association that is dominated by physicians who do procedures, the RBRVS Update Committee, or RUC.  The results have been payments for primary care and other cognitive services that have failed to keep up with inflation, a major cause of the continuing decline of generalist/ primary care medicine in the US.  (See most recent post here about this.)  According to the summary provided by the American College of Physicians (here), the new legislation would enable review of  payments made for specific services, and would reconsideration of the process used to set physician payments by an independent advisory group.  However, the bill would not mandate any changes in payments, or in the processes used to set them, including the pivotal role of the RUC.   So there is some chance that the legislation would lead to a more transparent, accountable, honest, and rational process for setting physician payments and hence eliminating perverse incentives, but no guarantee of such favorable changes.

Summary

The legislation seemingly will result in one major advance fostering disclosure of some conflicts of interest, and perhaps some progress in terms of reducing perverse incentives generated by Medicare's payments to physicians, and possibly reducing regulatory capture of this process.  It likely will result in more comparative effectiveness research, but how badly it will be biased in favor of vested interests is unclear.  As far as I can tell, the legislation will leave most of the other problems we discuss on Health Care Renewal untouched.  We thus have one or two small steps for mankind, but no reason for complacency.

the news is not bad, but we are still a long way from meaningfully addressing concentration and abuse of power in health care.  There will be no rest for the weary bloggers of Health Care Renewal.

Also, see comments here and here by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.

ADDENDUM (25 March, 2010) - Also see comments on the Sunshine Act by Alison Bass on the Alison Bass Blog.

The Health Care Bubble: Parallels with the Global Financial Meltdown

The global financial melt-down, or great recession, or whatever it will be called was a big surprise in September, 2008, to those of us not immersed in finance. A year later there is an opportunity to at least better understand the events leading up to it.  I have managed to read two focused books on aspects of the melt-down, (House of Cards, by William D Cohan, and Fool's Gold by Gillian Tett) and am in the midst of what may be the best general narrative of it published to date, The Sellout, by Charles Gasparino.

Reading the recent history of the meltdown makes me uncomfortably aware of parallels between these events and the current dysfunction of the health care system.  In his discussion of the run-up to the crash, Mr Gasparino emphasized a number of issues which I will catalog along with their health care parallels.

Prices Always Go Up

The prices in question were those of real-estate, and the notion that they would always go up helped to fuel would an explosion of mortgage loans made to people who had little chance of fully repaying them.  When housing prices reached an unsustainable level and started to fall, the melt-down began.

-  It is a cliche that overall health care costs in the US have been going up much faster than inflation for as long as most of us can remember (at least since the 1970s), creating the expectation that they always will go up.   

Products were Over-Rated by the Apparent Experts

Mortgages made to people who were unlikely to be able to pay them back were sold by irresponsible originators, and then packaged into financial derivatives by finance firms.  Many of these derivatives were rated "AAA" by trusted rating firms, even though they contained multiple individually risky mortages.  The rating firms boasted of expertise, and used complex mathematical models supposedly based on evidence to make their ratings. 

-  In health care, we have come to trust expert professionals' assessments of products (like drugs and devices) and services based on their expertise and clinical research evidence. 

Evidence Used to Rate Products was Suspect

The mathematical models used to predict risk were based on limited data and assumptions.  In particular, they did not account for the possibility that real-estate prices might go down, or that particular circumstances might cause multiple home-owners to default on their mortgages at the same time.  The increasing level of defaults, signaling that the derivatives based on the mortgages might be riskier and less valuable than previously thought, caused the melt-down to accelerate.

-  We have discussed how the clinical evidence may be manipulated by those with vested interests in selling products or services.  When manipulation  does not yield the result desired by the marketers, the results of the research may be entirely suppressed.  One particularly telling example was the suppression of research  unfavorable to new anti-depressant medications as documented in part by Erick Turner et al.  When all suppressed research was taken into account, the drugs appeared much less effective than was previously believed.

The Experts were Conflicted

The rating agencies were paid by the finance firms which sold the derivatives.  Ratings agencies that did not deliver sufficiently good ratings were likely to lose business.  "By 2005 triple-A ratings were being handed out like candy: underwriters could nearly demand they wanted on a deal and did."

-  We have discussed how physicians and medical academics frequently have conflicts of interest due to their financial ties to pharmaceutical/ biotechnology/ device and other health care companies.  August academic medical institutions have come to depend on money from industry to support research and education.  Distinguished academics are often paid key opinion leaders for drug and device marketers.

Deceptive Marketing

Per The Sellout, "On Wall Street, complexity isn't something to be avoided - it allows smooth-talking salesmen to obscure simple concepts like risk and losses."

- We have written again and again about deceptive marketing practices, how marketing is disguised as medical education, the use of stealth marketing, etc to promote often overpriced tests and treatments that are often less effective and/or more hazardous than they are advertised to be. 

Politicians Pushed Access without Regard to Consequences

US politicians from both parties pushed ever more accessible mortgages for the laudable goal of making better housing available to the less advantaged, but seemed unconcerned about how they would eventually pay back the loans.

-  The driving motivation for most current health care reforms efforts in the US seems to be to provide "access," now redefined as some sort of health insurance, without much attention to the reasons health care has become so inaccessible in the first place.

Major Organizations Lead by the Clueless

The Sellout provided some notable vignettes, including those about Jimmy Cayne, the CEO of Bear Stearns, who did not understand the complex derivatives his firm bought and sold, or the level of risk the firm was assuming; Stan O'Neal, the CEO of Merrill Lynch, whose tenure was "one of the strangest, most volatile, and ultimately most disastrous that Wall Street had ever seen;" and Charles Prince, the CEO of Citigroup, who apparently was a good lawyer, but had "little experience running a business," much less one as complex as Citigroup.

-  We have repeatedly discussed how large health care organizations are now often mismanaged, at times by people with little knowledge of or experience in the health care context.

Overpaid, Isolated, Arrogant, Imperial CEOs

The Sellout provided more notable vignettes.  Jimmy Cayne (see above), was at one point worth more than US $1 billion.  He spent more and more time playing bridge, and less managing his company.  Stan O'Neal (see above), would often vanish to play golf.  The leadership of Richard Fuld, the CEO of Lehman Brothers, "was more like that of a cult leader than even that of an imperial CEO."

-  We have repeatedly discussed how large health care organizations' leaders may be overpaid (some making nearly as much as the leaders of some financial firms before the collapse), arrogant imperial CEOs, some aspiring to be members of the superclass.  One striking example was the former CEO of UnitedHealth, Dr William McGuire, who was once worth more than US $1 billion before it became apparent that some of his fortune was based on back-dated stock options. 

Sycophantic Cronies as "Stewards"

The Sellout discussed how members of the boards of directors of financial firms were mostly chosen by the CEOs they were supposed to supervise.  For example, Jimmy Cayne, who had "a firm grip over his board of directors," noting "my board is my board."

-  We have often discussed poor governance of health care organizations, and specifically how boards of directors or trustees of health care organizations are similarly unlikely to challenge the CEOs they are supposed to supervise.  We also have noted how health care organizations' are often lead by the same Masters of the Universe who brought us the global financial collapse.  For example, Cornell's Weill Medical School was named after former trustee Sanford Weill, who constructed the giant conglomerate Citegroup, but did not figure out how to make its pieces fit together, and was forced "to step down as CEO as the research scandal [investigation] initiated by [former New York state Attorney General] Spitzer snared its highest-profile target, Weill himself." (from The Sellout, p. 187.)

Suppression of Dissent

The Sellout noted how increasingly arrogant leaders of financial firms ignored advice of more conservative or risk-adverse employees.  Dissenters were often afraid to speak out, and some were fired.  For example, at Bear Stearns, Jimmy Cayne increasingly marginalized "Ace" Greenberg, who was wary of excess risk.  At Lehman Brothers, the cult of personality that surrounded Fuld suppressed dissent and debate.

-  We have discussed the anechoic effect, the lack of discussion surrounding important health care issues, seemingly enabled by the sense that one simply does not talk about such issues.  Whistle-blowers are often ostracized, or worse, and academic freedom and free speech may be frankly threatened.

Ineffective, or Captured Regulators

From the 1980s onward, deregulation of the financial industry advanced.  The Sellout discussed how the Federal Reserve, lead by Allan Greenspan, enabled if not cheer-lead for the bubble.  The  Securities and Exchange Commission (SEC) was often ineffectual at best.

-  We have discussed how the FDA got conflicted advice and often seemed to feel that drug and device manufacturers, rather than the public were its clients.  We just noted that one version of health care reform would put control of a comparative effectiveness research institute in the hands of industry, and would empower its leaders to suppress research which offends them.

Summary

We have discussed the impetus to make physicians give up their professionalism ostensibly to increase competition (see post here), and to then hand over control of health care to managers ostensibly to reduce costs.  Since the 1980s, health care has increasingly been dominated by large organizations run as businesses by business managers.  It should therefore be no surprise that the ethos of health care management has come to resemble the ethos of business management in general.  Thus, maybe the parallels between some of the issues related to the global financial meltdown and the issues related to current health care dysfunction should not be surprising.

A few other bloggers and business writers have referred to a health care bubble in the last few years.  Notably, Dr Wes advanced the concept in 2008.  Dr Rich spoke out in early 2009, and Dr George Lundberg added to it later in 2009. 

So I make a fearless assertion and prediction.  Health care dysfunction has lead to a health care bubble, which is likely to burst soon with considerable adverse consequences.  Perhaps a controlled deflation of the bubble would be possible, but would require more courage and clear thinking than most of our political and health care leaders have exhibited so far.  We have repeatedly noted how current efforts to reform health care have ignored most of the issues discussed above and documented repeatedly on Health Care Renewal.  If one of the currently proposed versions of health care reform becomes law, it may postpone for a while the popping of the bubble.  However, the longer the bubble grows, the nastier the bursting of it.

Do not say we did not warn you.