The Luncheon Society/Healthcare Whistleblower Wendell Potter on his book “Deadly Spin”/San Francisco—Fior D’Italia/December 10, 2010

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There’s an old joke that says, “there are two sides to every story—but the bad side pays better.” If a conservative is a liberal who has been mugged, perhaps a liberal might just be a conservative who has been hung out to dry by the health insurance industry.

For nearly two decades, Wendell Potter served as the top Public Relations executive at CIGNA and an health insurance industry insider until he resigned in 2007.  Wendell Potter’s career as an insurance industry whistleblower began in June 2009 as an expert witness in front of a US Senate Committee on Commerce, Science and Transportation, while the healthcare debate was still in full bloom.

His testimony began:

“Mr. Chairman, thank you for the opportunity to be here this afternoon. My name is Wendell Potter and for 20 years, I worked as a senior executive at health insurance companies, and I saw how they confuse their customers and dump the sick — all so they can satisfy their Wall Street investors.

I know from personal experience that members of Congress and the public have good reason to question the honesty and trustworthiness of the insurance industry. Insurers make promises they have no intention of keeping, they flout regulations designed to protect consumers, and they make it nearly impossible to understand — or even to obtain — information we need. As you hold hearings and discuss legislative proposals over the coming weeks, I encourage you to look very closely at the role for-profit insurance companies play in making our health care system both the most expensive and one of the most dysfunctional in the world. I hope you get a real sense of what life would be like for most of us if the kind of so-called reform the insurers are lobbying for is enacted.

When I left my job as head of corporate communications for one of the country’s largest insurers, I did not intend to go public as a former insider. However, it recently became abundantly clear to me that the industry’s charm offensive — which is the most visible part of duplicitous and well-financed PR and lobbying campaigns — may well shape reform in a way that benefits Wall Street far more than average Americans.”

Joining CIGNA in 1993 when it was still known as a property and casualty insurer, Potter’s main job was to highlight its healthcare business.  Well paid and well armed with a powerful budget, it was people like Potter who put the final nails into a number of healthcare initiatives that impacted the insurance industry through the 1990’s and 2000’s.  When CIGNA came under fire for “Drive-through Mastectomies,” it fell to Potter and his PR team to tamp down the stories, place blame elsewhere and keep the bad news from the front pages of daily newspapers and weekly magazines.

By the end of 2007, Potter left his position disillusioned after the death of a young teenager caused, in part, by CIGNA’s foot dragging in a critical transplant case.

History of Healthcare Reform. Before Potter discussed his reasons for leaving the industry, he offered a tutorial on the relationship between healthcare reform and PR efforts over the past century. Unlike modern Europe, which crafted national healthcare programs, only 2% of Americans had any semblance of health insurance, with most of it skewed along the wealthier echelons of society. While Progressives took up the fight for universal coverage, conservatives successfully crafted a public relations theme that equated full healthcare in The United States with the rise of Bolshevism elsewhere.  The message communicated was that “Socialized Medicine” would upend the American way of life. 

While The New Deal revolutionized the relationship between government and the citizen, healthcare reform never found legislative success.  In fact, healthcare was originally part of the Social Security Act of 1935, but in the 11th hour, FDR removed that subsection of legislation. FDR knew he would run into opposition from important Southern Senators who were convinced the healthcare reform would open the door to full integration of Southern hospitals, which remained lily white. While New Deal reforms touched so many lives, healthcare would be left for another generation.

Truman and the growth of healthcare industry resistance. Unlike the patrician Roosevelt, Potter noted, Harry Truman understood how the lack of affordable healthcare impacted Americans. Realizing that repeated attempts at reform only needed one chance to reach the President’s desk for signature, a concerted effort from the American Medical Association, The US Chamber of Commerce and other groups partnered with a coalition of top-flight PR shops to craft consistent messaging designed to derail or defeat legislation. The chorus of “Socialized Medicine” against the backdrop of Communist expansion proved to be a compelling argument to forestall any reform.   In fact, the private plans that were offered trumpeted that “voluntary healthcare insurance” was more aligned with American thinking.

As legislation which would later be called Medicare worked its way through Congress, the contours of the debate formed decades earlier.  After Lyndon Johnson assumed the Presidency after the Kennedy assassination and piled up huge majorities in his victory over Barry Goldwater, he had the legislative skill to power through what became Medicare Parts A and B. In many respects, the modern conservative movement emerged from the ashes of the Goldwater campaign and the fight against Medicare.  Ronald Reagan’s star rose and within 24 months of Goldwater’s loss, he was elected Governor of California by a landslide.

How the Clinton failure emboldened Healthcare insurers. From the 1970’s through the early 1990’s, a variety of healthcare plans were proposed by many, including Richard Nixon, Jimmy Carter and Ted Kennedy.  For the most part, most of these ideas lacked the legislative leadership needed to for a Presidential signature. By 1973, the Nixon White House had been mortally wounded by Watergate and his plan would took up several boxes at the Nixon Library.  The plans offered by both Carter and Kennedy failed because they became fodder during the primary battle of 1980. Kennedy lost to Carter in the primaries but Reagan emerged as President by year’s end.

However, Bill Clinton ran on healthcare reform and promised to make it a central piece of his presidency. He chose the First Lady to spearhead the effort, as he had done for education while Governor of Arkansas. However, the secretive approach used by Ira Magaziner and the First Lady to build a health care reform plan behind closed doors played into the hands of their opponents.  Both gave the healthcare insurance PR machine the grist they needed to kill a bill once introduced with bipartisan support. The thrust had two main arguments.  First the American system of voluntary was the best in the world. Second, any changes result in decreased coverage at a higher cost.

In the end, Potter, noted, the Clinton faced far too many well-funded enemies to achieve success. While the Clintons tried to articulate how their plan would address the major gaps in coverage, they were cut down by a variety of PR campaigns, faux grassroots efforts, and well-produced and well-executed campaigns like “Harry and Louise,” that created fear and doubt in large sectors of America. The effort reached a crescendo with the 1994 midterms, where Democrats lost the House for the first time in a generation.

In basketball parlance, the Clinton failure “set a pick” for the healthcare industry and they were quick to exploit the opportunity. Within a few years, the non-profit landscape of Blue Cross/Blue Shield programs were transformed by for-profit acquisitions. For several generations, Potter said, “The Blues” leveraged their federal tax breaks into a near monopoly of the private healthcare field. Now as they moved into a for-profit model, executives argued they needed to raise capital to keep pace with a number of competitors and leverage the economies of scale.  14 Blue Cross plans that dominated their statewide markets were quickly transformed into for-profit subsidiaries of WellPoint which today is the largest private insurer.

It also allowed executive compensation to balloon to new heights. According to the Washington Post, “The Top 10 executives of the region’s largest health stand to collect $47.9 million in severance benefits if the state regulators allow the non-profit CareFirst Blue Cross Blue Shield to be acquired by for-profit WellPoint.”   

This quiet transformation of for-profit healthcare plans allowed the major players to rewrite the rules of the marketplace. The metric that Wall Street analysts focused on throughout was the Medical Loss Ratio  (MLR) which determined the amount of money that was paid for medical claims. As a result, profits were driven by three main factors:

  • Increased cost-shifting to patient through consumer driven healthcare (like HSAs) and higher co-pays
  • Increases in premium costs
  • Culling insurance rolls to remove those customer who might exceed the allowable MLR figurres

In most case, increases MLR figures weighed heavily in the minds of senor management because it resonated with the analyst community. At the end of the day, the ability of WellPoint to manage their MLR rate directly impacted the stock price, which also impacted an army of 401K accounts.

The Obama Effort. Political solutions often emerge from unique locales.  Clinton’s desire to tame the deficit resulted from Perot’s challenge in the 1992 election. Likewise Obama’s emphasis on healthcare resulted in response to the emerging campaign of John Edwards, who chose to make healthcare reform the bedrock of this 2008 campaign, something underlined by his wife’s diagnosis of terminal cancer. While John Edwards was finished off by his own personal failings, the campaign for healthcare reform remained in the political arena.

Potter noted that Obama was able to get to his legislation passed through Congress because he made early deals with Big Phrama and the AMA, thereby sidelining two major players. This left the insurance industry to fight the battle for themselves and without their traditional allies. Even after the victory of Scott Brown in Massachusetts in the seat vacated b the death of Edward Kennedy when reform appeared dead, Anthem Blue Cross’s decision to raise individual rates by 39% weeks after the special election energized the forces of reform. That decision provided the pivot and after a period of wrangling, the deal was completed and the legislation was signed.

Perhaps the greatest irony in the healthcare fight focused on the players involved. Many who campaigned against reform in 1993 and 2009 began their careers working for healthcare reform. The prime example was Karen Ignagni, who served as president of America’s Health Insurance Plans (AHIP), the face of the opposition. Ignagni started off on the staff of Rhode Island’s liberal Senator Claiborne Pell of Rhode Island for healthcare issues and later worked on pension and health benefits for the AFL-CIO. Like the punchline at the top of the piece, the bad side paid far better, nearly $2 million dollars per year. This story was replayed over and over again as those involved in creating healthcare solutions as staff members in their youth were now paid handsomely to forestall reform as hired guns.

The Case of Nataline Sarkisyan. In the fall of 2007, the case of Natalie Sarkiyan attracted national attention because CIGNA’s refused to allow a liver transplant. Natalie was a teenager from Glendale, California who contracted Leukemia as a child.  The disease went into remission but returned years later with a vengeance.  Doctors decided that she needed a bone marrow transplant and that procedure was approved so long as it took place at a Mattel Hospital at UCLA, a CIGNA affiliated location. While the bone marrow transplant was a success, complications ensued and it became clear that Nataline needed a new liver.  While a perfect match was found, CIGNA denied the procedure on the grounds it was experimental. The doctors and family fought back through a number of PR fronts of their own.

Working through the close knit Armenian community, the plight of the family soon became a national story. Potter soon found himself managing a PR nightmare that was resolved only when CIGNA caved and approved transplant. However, too much time had lapsed and Nataline Sarkisyan’s condition spiraled downward; hours after CIGNA’s relented to allow the transplant, she died.

At that point, Wendell Potter and the CIGNA spin machine went into overdrive to blemish of blame from their brand. Potter, drove the process as the tsunami of bad press hit the insurer. Talking points were created, detailed communication plans were constructed, and sympathetic stories were placed into the media.  Together they worked to disabuse the notion that young Nataline would have gotten better treatment in Canada, France, the UK or any other developed country with a national health system. Within time a narrative began to emerge that made the insurer appear as if they were the real victims in this tragedy.

At that point Wendell Potter decided he had enough. He left the CIGNA for good and now is a senior fellow at the Center for Media and Democracy.

However, The Spin Machine Continues.

The Luncheon Society is a series of private luncheons and dinners that take place in San Francisco, Los Angeles, and Manhattan.  We essentially split the costs of gathering and we meet in groups of 20-25 people. Discussions center on politics, art, science, film, culture, and whatever else is on our mind. Think of us as “Adult Drop in Daycare.” We’ve been around since 1997 and we’re purposely understated. These gatherings takes place around a large table, where you interact with the main guest and conversation becomes end result.  There are no rules, very little structure, and the gatherings happen when they happen. Join us when you can.

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