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The Myth of 'Free-Market Health Care'

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   Combining the worst of all possible worlds, this legislation, so costly to seniors, to states, and to the poor, and so profitable to drug companies and to health insurers (both of which types of businesses were big Bush contributors), was nonetheless set to boost the federal debt by at least another $724 billion, according to official estimates. Subsequent generations of Americans would therefore end up paying for this generation's drug and insurance companies' Republican boondoggle.

   Howard Gleckman of BusinessWeek (not yet a Bloomberg property), on 1 December 2003, boiled the problem down in his headline "This Medicare Bill Is No Remedy: It avoids the question of who pays and does little to keep costs from soaring -- Will seniors or taxpayers cover rising costs? Or will care be cut back?" Only Bush's financial backers had authentic cause to be pleased. In fact, within weeks after President Bush signed the new prescription-drug bill into law, one of its chief authors, Republican Congressman Billy Tauzin, began talks with the Pharmaceutical Manufacturers Association to become appointed their President, as The New York Times reported a year later, on December 16th, under the headline "House's Author of Drug Benefit Joins Lobbyists." Congressman Tauzin was now retiring from Congress to rise in the power structure, from having been a mere legal scribe, to becoming instead a paymaster to such scribes. (However, actually, lobbyists usually write the first draft of Republican bills; so, Tauzin would now become a scribe who really mattered.)

   Republicans were predicting that this new Medicare drug law would mean a big boost for the President's chances in the 2004 election: as usual, Republicans were treating the general public as mere suckers to be exploited by Republican financial backers, instead of as constituents to be served by genuinely progressive legislation. This is like the medieval manor system, with America's voters and patients filling in as the serfs. In fact, earlier in November of 2003, on the 6th, only weeks before passage of their Medicare act, the Bush Administration had slammed the door to the importation of inexpensive prescription drugs from Canada -- thereby making all the more cynical this sham prescription drug "benefit." That door-slamming was especially noteworthy because the new prescription drugs law, passing only weeks later, explicitly prohibited the U.S. Government from doing anything to lower the prices of prescription medications -- despite the fact that the U.S. price-inflation rate on these drugs (and on medical care generally) was the highest of all the eight components of the U.S. Consumer Price Index, and despite drug prices already being vastly higher in the U.S. than in any other country. Instead of lowering prices for drugs, the Bush bill simply subsidized from taxpayer funds the private insurers who purchased the drugs. This is what enabled some consumers to experience "discounts" -- not price reductions -- either by drug companies or by insurers: taxpayer-paid subsidies to those Republican-backing corporations.

   Bush's excuse for banning the importation of drugs from Canada, where drugs cost far less, was his claim that American-made drugs are safer than Canadian pharmaceuticals. Not only was no evidence ever presented to back up that allegation, but American drugs are routinely imported from abroad anyway, by drug manufacturers themselves -- only at artificially high prices which the American drug makers set, when they resell these pills to U.S. consumers. The only interest the U.S. President had was protecting the interests of U.S. pharmaceutical firms ripping off America's consumers and taxpayers.

   Bush's excuse for prohibiting the Federal Government from negotiating lower prices from the drug manufacturers was that to do so would be "socialism." Democrats had wanted the government to use its huge purchasing power under a prescription-drug bill so as to negotiate lower drug prices for consumers and for taxpayers. Consumer organizations also favored this. As Ron Pollack, of Families USA, put it, on 8 November 2006, explaining why the restoration of Democratic control of Congress would be good for both taxpayers and consumers, "Among all of the top-20 drugs prescribed for seniors, the V.A. [Veterans Administration, under legislation passed by Democrats in previous years] has achieved much lower prices than the lowest prices charged by all Medicare Part D plans. The median price difference is an astounding 46 percent." These are some of the reasons why the very same prescription drugs have vastly higher prices in the U.S. than in any other nation. Moreover, the give-aways to pharmaceutical companies survived even after Democrats (barely) retook control of Congress. As the New York Times columnist Paul Krugman explained on 20 April 2007 under the heading "The Plot Against Medicare," "The Senate failed to end debate on a bill -- in effect killing it -- that would have allowed Medicare to negotiate over drug prices. ... 42 senators, all Republicans, voted no on allowing the bill to go forward." Furthermore, "The NAACP and the League of United Latin American Citizens have become patsies for the insurance industry ... sending letters to Congressional leaders opposing plans to scale back the subsidy" to private insurers -- the subsidy which was part of the Republicans' scheme to drain Medicare and pour that taxpayer cash into private insurance and drug companies. As Krugman explained, removing these subsidies would have covered the "cost to provide all children in America with health insurance," but the NAACP and LULAC went with the Republican line on that matter. Those Tribal liberal groups went for bogus insurance industry arguments directed at their Tribalism, which claimed falsely that Blacks and minorities were benefiting from taxpayer subsidies to private insurance companies. This is why, even though Democrats now had a bare majority in the Senate, the Republican scams still survived, with the aid of "Democratic" interest-groups.

   President Bush and the Republican Party paid off their pharmaceutical and insurance company financial backers massively via their Medicare Part D Prescription Drug law. But actually, the corrupters (conservative industry) and the corruptees (conservative politicians) supported each other, while they jointly cheated the public: both taxpayers, and patients. On 2 March 2009, rawstory.com headlined "GOP Senator Orrin Hatch's Charity Tied to Massive Pharmaceutical Donations" and reported that, "The same year [Hatch's] Utah Families Foundation received massive gifts [$170,000], Sen. Hatch voted on a bill relating to Medicare Part D. Hatch voted against a bill requiring that the government negotiate discounted prices from drugmakers." This same day, the Washington Times bannered "EXCLUSIVE: Sen. Hatch's Secret Drug Firm Links," and reported that not only was his foundation financed by the drug industry, but one of Hatch's sons was the lobbyist for PhRMA, and "Pharmaceutical and health product companies already rank at the top of Mr. Hatch's political supporters, donating more than $1.25 million to his campaigns since 1998." Any Democrat who was that corrupt would have been hounded out of public office -- Democrats wouldn't tolerate national-level corruption -- but Utah was one of the three most-Republican states in the nation, and therefore accepted Hatch's corruption, since he broke no laws. However, his foundation broke at least one law: it "has been delinquent for nearly a decade in filing its required annual reports." Hatch remained popular in his state, even though he was virtually owned by corrupters.

   Bush's Part D drug plan was corrupt in other ways, too. For example, Wendell Potter at huffingtonpost headlined on 18 February 2013, "Obama's "Scheme' Will End the World as We know It, Says Big Pharma...Good!" and he reported that, "Before the Medicare Part D drug program was created in 2006, the pharmaceutical industry paid rebates to the government to help pay for those folks' medications. The rebate program ended when Part D went into effect. ... As a result, taxpayers are paying more now than before, even though drug companies are getting billions of dollars in revenue that they never had before. ... So the president [Obama] will be asking Congress to reinstate the rebates." (Of course, Congressional Republicans blocked that.)

   Furthermore, the Bush Medicare plan included also a $10 billion taxpayer subsidy for Health Maintenance Organizations, to assist HMO's, despite their vastly higher overhead costs, to "compete" against Medicare Part B, by offering Medicare Part D -- private insurance companies competing for the business, otherwise called "Medicare Advantage." This was the feature that was expected gradually to destroy Medicare Part B (the LBJ-Medicare supplement plan). Once Democrats took control of the Congress in 2007, they announced their intention to "Lower Part B Premiums For Seniors By Eliminating the HMO Slush Fund." In other words: congressional Democrats wanted to stop the raiding of Medicare Part B that was being done to subsidize Medicare Part D. On 7 May 2007, Robert Pear headlined in The New York Times, "Methods Used by Insurers Are Questioned," and he reported that, "Insurance companies have used improper hard-sell tactics to persuade Medicare recipients to sign up for private health plans that cost the government far more than the traditional Medicare program." The Insurance Commissioner in Mississippi reported that, "Abusive Medicare insurance sales practices are spreading rapidly." Complaints by seniors were simply flooding in.

   Perhaps the reason the rapacious new "drug benefit" and the "Medicare Advantage" plans were supposed to be a big political boost for the President was that they supercharged his political kickbacks from drug and medical insurance firms, and therefore raised yet higher his own advertising budget to fool voters during the 2004 election campaign. Consequently, for example, the AP headlined on 11 May 2004, "Medicare Contractor Firm Donates to GOP," and opened, "The first round of companies to get the go-ahead from the Bush Administration to offer Medicare prescription drug cards includes some big players in lobbying and campaign fund raising. An executive with one company, Medco, helped throw a $100,000 fund-raiser for President Bush." Still, the sailing turned out to be not entirely smooth for the AARP concerning this particular scam: on 16 January 2004, the AP headlined "45,000 People Quit AARP Over Medicare." Unfortunately, that constituted only 3 in 100,000 members, and therefore, this consumer boycott had negligible impact. Furthermore, the AARP subsequently won back some of those members by advertising on television saying that the AARP -- which had just helped to pass this prescription-drug bill that was going to maintain and even increase prescription-drug prices -- was fighting in Washington to lower prescription-drug prices. Like conservative politicos usually do, the AARP played the public for fools and won. (However, the AARP's protesters seem to have had some impact after all, because, in 2005, the biggest opponent of President Bush's plan to privatize Social Security was the AARP, which recognized that they weren't going to be getting any piece of that action, it was just a dead duck.)

   The biggest direct beneficiaries of this drug bill were the Republican Party and the AARP (which benefited only through the sales commissions it won via sales of UnitedHealth Group Incorporated's Medicare prescription drug plan, which AARP marketed). Both of them benefited only indirectly, and AARP's winnings from the plan were indicated in an article that appeared in the Wall Street Journal on 21 April 2006, under the headline "Large Insurers Are Big Winners." It said that, "New government enrollment data released yesterday show that, as of April 18, nearly 20 million people are enrolled. ... By far, the biggest winner in the race to sign up seniors is UnitedHealth Group Inc., which has used an alliance with AARP to help it grab more than 3.9 million new customers." Republicans saw such results as being a victory of the "invisible hand" of God, as against "socialistic" democratic governmental control of medicine. However, in 2000, UnitedHealth Group's PAC gave 85% of its $216,081 contribution total to Republicans, and the company gave $594,050 in soft money for the 2000 election cycle, of which 86% went to Republicans. Furthermore, UnitedHealth Group's CEO, the physician William McGuire, donated $23,000 personally, from 2002-2005, 100% of which went to Republicans. From 1992-2006, he contributed $117,467, of which $4,000 went to Democrats, less than 4%. That money, both corporate and personal, was coming back to him in spades now. Thus, perhaps some of this "invisible hand" wasn't quite so invisible after all, but more like a pickpocket's hand, if one watched it closely. In fact, on 18 April 2006, the Wall Street Journal headlined "As Patients, Doctors, Feel Pinch, Insurer's CEO Is Worth a Billion." Dr. McGuire "has amassed one of the largest stock options fortunes of all time," and a statistical analysis by the WSJ suggested that inside dealing was involved in this: "The Journal's analysis of 12 options grants to Dr. McGuire from 1994 to mid-2002 found that if the options had been randomly dated [which would have indicated that there was no insider dealing here], the odds of their occurring at such propitious times were about 1 in 200 million." An accompanying chart showed that each time McGuire received an options grant, the stock was at a low and immediately soared thereafter. If backdating of these options was the reason for this, that would be not only fraudulent, but also insider trading -- illegal. On 18 March 2006, the WSJ had headlined about this apparent backdating phenomenon, titled "The Perfect Payday: Some CEOs reap millions by landing stock options when they are most valuable. Luck -- or something else?" Wherever it's something else, it's a crime involving not only the CEO but also his board of directors, and the crime's victims are outside investors. (These crimes turned out to involve the Bush Administration's SEC as well, which had been looking the other way instead of looking out to protect investors.) Then, on 12 May 2006, the WSJ headlined "United Health Could Be Forced To Restate Profit: As SEC Steps Up Probes, Firm Says Options Problems May Mean $286 Million Hit." This news story closed: "Yesterday, Carl McDonald, an analyst with CIBC World Markets in New York, wrote in a report that the implication from the company's filing was that United Health had found "evidence that options were backdated.'" It was becoming apparent that the chief beneficiaries of Bush's Medicare prescription drug plan certainly weren't seniors, and probably weren't even necessarily the stockholders in the companies which had shaped it, but were instead the insider executives and board members at those firms. By no coincidence, those people were huge contributors to the Republican Party, not just from their personal funds, but also from the political slush funds (stockholder assets) they operated through the companies these executives controlled. The financial benefits to the people at the top of UnitedHealth were especially large. The WSJ calculated, on May 12th, that Mr. McGuire gained more than $2 billion. His COO gained nearly $1 billion. Two other of the company's executives gained approximately $100 million each. On 27 May 2006, the WSJ headlined an editorial "Backdate Backlash," and stated: "UnitedHealth has lost more than $17 billion of its market value since the backdating story broke." But that's not all: a few weeks later, on June 9th, The New York Times headlined "Health Insurer Is Told by State Not to Enroll New Customers," and reported: "New York State has banned United Healthcare's managed care plan ... from signing up most types of new customers. State regulators say they took the rare action because the company has persistently defied state rules. ... United Healthcare of New York is a subsidiary of UnitedHealth Group, based in Minnesota." Ten days after that, the June 19th issue of BusinessWeek headlined "The Customer: Satisfaction Not Guaranteed," and included a box, "Customer Disservice: These companies rate the worst in their industries in terms of customer satisfaction." All the listed firms were overwhelmingly Republican, including "Health Insurance: United Health Grp." So, the financiers of the Republican Party (such as Dr. McGuire) were cheating not only the public, and not only the outside investors in the companies they controlled, but also the consumers who purchased the goods and services of those companies. And, above all, U.S. taxpayers were cheated. Only those insiders and the Republican Party -- and their theocratic allies who preached Republican on Sunday mornings and brought the voters to the polls and won the resulting theocratic "invisible hand of God" laws  -- benefited. Then, on 20 October 2006, the Wall Street Journal bannered "How Did UnitedHealth's McGuire Get Same Options Twice?" and reported that outside lawyers had discovered a 1999 transaction in which "Dr. McGuire and other employees were able to effectively get the same options twice, ... while skirting disclosure requirements and potentially violating accounting rules. For Dr. McGuire alone, the extra options are now valued at $250 million." Moreover, "Dr. McGuire's role in implementing the transaction is amply documented."

   Nine days later, on October 29th, Reuters reported that the scope of the options-backdating scandal was far wider than was previously known: "The stock options timing scandal, which has already implicated at least 140 companies, could include hundreds more, according to a new analysis that found lax enforcement of corporate governance reforms that should have prevented the practice. ... A report released over the weekend from proxy advisory firm Glass Lewis & Co. showed that many firms may not have filed properly options timing paperwork as recently as 2005. ... Glass Lewis, in the report, said the SEC has not enforced the two-day filing rule, possibly leading to many more instances of backdating." By not enforcing this rule, numerous major contributors to the Republican Party had been enabled to rip off their stockholders. But yet there was more: Those contributors had also been enabled to rip off their fellow executives or board members, and they finally even ripped off taxpayers: On 7 December 2006, the Wall Street Journal bannered "How a Giant Insurer Decided To Oust Hugely Successful CEO," and asserted that UnitedHealth's board were dismayed to find that an internal investigation confirmed the report by the WSJ that Dr. McGuire had rigged the dates of his options. Then, five days later, the WSJ headlined "How Backdating Helped Executives Cut Their Taxes," and reported that, "New evidence suggests that corporate executives may have found another way to manipulate their stock options, this time to cheat on their income taxes." This is because "Those who hold their shares for at least a year pay a much lower capital-gains tax," and backdating enabled some executives to reduce their taxes by pretending to have held their shares for a year even when they had not. This cheating increased the federal deficit, and thrust their tax burdens onto others. However, since the SEC was, at last, being virtually compelled to investigate this, the WSJ headlined in another story the same day: "Another Consequence of Backdated Options: Stiff Tax Bills." Some executives would face huge fines, in addition to the back taxes which were due.

   But finally, on 7 December 2007, the Wall Street Journal bannered "UnitedHealth Ex-CEO Forfeits $620 Million in Options Grants." This would "settle civil and federal-government claims" against William McGuire. An expert observed, "He still walks away with a lot." Steal a couple of billion dollars, return $620 million of it; the Mafia would drool, and perhaps they would also complain that they had been discriminated against for not receiving favors like that. Mafiosi go to prison, while America's aristocrats just receive wrist-slapping fines. McGuire had paid much bigger dues to the Republican Party, which rewards loyalty at least as much as does the Mafia itself.

   Meanwhile, among the 250 "Commercial Health Plans" ranked by U.S. News & World Report, in their 5 November 2007 issue, none from UnitedHealth were named there as being among the "Best Health Plans 2007," and all were shown only on the magazine's supplemental website, such as "UnitedHealthcare of Mississippi" ranked #218 there, "UnitedHealthcare of Louisiana" ranked #215, and "UnitedHealthcare of Alabama" ranked #212. In terms of the three ranking-criteria of "Consumer assessment," "Prevention," and "Treatment," all of the UnitedHealth plans were ranked low. Dr. McGuire did fine, but his customers, quite evidently, did not.

   In fact, on 29 January 2008, the Los Angeles Times bannered "Health Plan Faces Fines of $1.3 Billion," and Lisa Girion reported that, "California regulators are expected to announce today that they are seeking as much as $1.33 billion in penalties from Cypress-based PacificCare as a result of widespread problems stemming from its takeover two years ago by healthcare giant UnitedHealth Group Inc. In an investigation prompted by widespread complaints, the state Department of Insurance uncovered 133,000 alleged violations of state laws and regulations. ... Separately, the state Department of Managed Health Care alleged that 30% of the medical claims it reviewed [from UnitedHealth] were improperly denied." A physicians' organization praised the state's clampdown against UnitedHealth, and said that though the company "may claim this is [only] and administrative issue, ... that doesn't help someone who needs their heart surgery approved in a hurry." Dr. McGuire, who had changed careers in 1986, from being a doctor to heading this profit-making insurer, had switched to the business of making life hell for patients and doctors, no longer the business of helping them. He was a great Republican, who walked off into the sunset a billionaire from two decades of ripping off the public. The money that his company didn't spend on health care for patients, went instead into his own pocket, and lots of it ended up there; and there were lots of people who suffered, and lots who died prematurely, as a result of where this money went, and where it didn't

   On 13 February 2008, Bloomberg News bannered "Cuomo to Sue UnitedHealth, Probe Reimbursement Policy," and reported that, "New York Attorney General Andrew Cuomo will sue UnitedHealth Group Inc. and subpoena 16 other insurers to investigate practices that allegedly cheated customers out of hundreds of millions of dollars." Cuomo, a Democrat, would sue UnitedHealth, "the largest U.S. health insurer, over practices that limit payments to customers by claiming their medical charges were unreasonably high. ... "This is an industrywide investigation because we believe there was an industrywide scheme to deceive and defraud customers,' Cuomo said."

As for the effects that Bush's prescription-drug plan had on drug company profits, this result turned out to be what had been anticipated -- and then some. On 6 November 2006, the eve of the 2006 mid-term congressional elections, The New York Times bannered "As Drug Prices Climb, Democrats Find Fault With Medicare Plan," and Alex Berenson reported that, "For big drug companies, the new Medicare prescription benefit is proving to be a financial windfall larger than even the most optimistic Wall Street analysts had predicted. ... Wall street analysts say they have little doubt that the benefit program ... has helped several big drug makers report record profits and exceed earnings forecasts made earlier in the year. Companies have raised prices on many top-selling medicines by 6 percent or more this year, double the overall inflation rate. In some cases, drug makers have received price increases of as much as 20 percent for medicines that the government was already buying for people covered under the Medicaid program." Typical: "Pfizer, the world's largest drug maker, said its sales soared 14 percent in the United States in the third quarter, while rising only 3 percent internationally." These huge financial contributors to the Republican Party, and enemies of the Democratic Party, were thriving by these extra tens of billions of dollars, after having spent only tens of millions of dollars on deceiving faithful Americans to vote Republican. And even Democratic voters had to buy drugs; this way the Republican Party extracted financial contributions indirectly even from the people who knew better, Democrats -- this was sheer coercion.

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Investigative historian Eric Zuesse is the author, most recently, of  They're Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010,  and of  CHRIST'S VENTRILOQUISTS: The Event that (more...)
 
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... by Eric Zuesse on Monday, Nov 25, 2013 at 9:33:52 AM
Four points:1) There's no such thing as "crime tha... by Joe Reeser on Monday, Nov 25, 2013 at 11:09:17 AM
Congressional Democrats never supported a privatiz... by Eric Zuesse on Monday, Nov 25, 2013 at 11:20:37 AM
Well, it appears just about everyone with whom you... by Joe Reeser on Tuesday, Nov 26, 2013 at 5:12:18 PM
"In November 2003, a Medicare prescription drug an... by Autumn Cote on Tuesday, Nov 26, 2013 at 3:44:21 AM
They voted overwhelmingly against it, but Republic... by Eric Zuesse on Tuesday, Nov 26, 2013 at 7:18:49 AM
It would appear we're both right.  Although g... by Autumn Cote on Tuesday, Nov 26, 2013 at 1:41:19 PM
Not true at all. I showed the numbers:  Democ... by Eric Zuesse on Tuesday, Nov 26, 2013 at 2:42:22 PM