Wendell Potter:

We led Americans, employers in particular but also policymakers, to think that all of us needed to move into high deductible health plans. We had a way of referring to them back then that was euphemistic. We call them consumer driven health plans, and we call this movement consumerism.

So that was a way that we misled everybody into thinking that Americans were just chomping at the bit to be moved into health plans that require them to pay more money out of their own pockets before their coverage kicks in. It was amazing that we were able to pull that off, but we did to the point that today most Americans have to pay a lot of money out of their own pockets before their coverage will kick in even as they're paying more and more for the premiums.

So that's just one example of how we purposefully misled so many Americans to further our agenda and our agenda. Frankly, the bottom line is to enhance shareholder value because for most of these big companies that dominate the health insurance market, our for-profit companies and their stock is traded in the New York Stock Exchange.

Katie Gatti Tassin:

The regularly scheduled programming for this week was a thought provoking conversation with the author of You Don't Need a Budget, Dana Miranda, about how conventional personal finance advice can lead us to unhealthy outcomes.

But last Friday, my interest in the national conversation that was happening around our healthcare system reached a boiling point and we decided on Friday afternoon to shift gears for today's show. So you'll hear that conversation with Dana in two weeks for our next full length episode on New Year's Day. It is a great one, but in the meantime, the discussion that recent events have spurred about the state of our healthcare system has left me wanting. I know I'm very needy, but I did hear from a lot of you that you were feeling the same way. Of all the personal finance conversations that I have with people, the number one black box in their financial lives is their health and their access to healthcare.

It's a big reason why people feel uncertain about whether their financial independence number will be high enough or if they can safely leave paid work that thing that you want to do when you reach FI. Since that paid work is often how they access their health insurance, even that sentence would probably raise eyebrows outside the US like, wait, what does your access to healthcare have to do with your financial life? But in this country, as we know, a lot.

While we've done several episodes about dealing with medical debt and how to fight back against denied claims in the past, I have to admit I've had pretty poor success rates with negotiating with health insurance companies and healthcare providers myself. The rules often feel completely arbitrary, and so I acknowledge that these strategies while useful, can also feel limited in their impact and in that sense, kind of frustrating.

That's why today I don't want to talk about new scripts to try on the phone with a billing department or the ins and outs of an appeal again. Today I want to talk about what we get wrong about our healthcare system and specifically some of the biggest misconceptions about the way we finance our medical care.

We're extraordinarily lucky that despite the short notice, we are joined today by Wendell Potter, the ex-vice president of corporate communications at none other than Cigna Healthcare, a man who is now a healthcare reform advocate and a health insurance whistleblower.

Welcome back to The Money with Katie Show. I'm Katie Gatti Tassin and let's do this.

Okay, so to start, shocking events are often inflection points in culture that spur discussion. I think that's fair to say that's what we're seeing now. So before we speak with Wendell, there are a few prominent narrative points that have emerged in the last week or two that feel really important to scrutinize.

To begin, the killing of UnitedHealthcare. CEO Brian Thompson prompted a focus on interpersonal violence for political ends and how we should think about and relate to these types of events, these rogue actors who commit violent crimes to send a political message. But as shocking as it was, it's not really a new or unprecedented way to express discontent in America or elsewhere. I was curious, what is a historical comp for something like this? Has something like this happened before and what happened in the aftermath?

So I've been thinking about another act of political violence that occurred just a few miles from where Brian Thompson was killed outside the Midtown Hilton. But about a hundred years ago: the Wall Street Bombing of 1920. A man driving a horse drawn carriage pulled up across from the JP Morgan building in the heart of Wall Street, then got down, disappeared into the crowd, and shortly thereafter an explosion occurred. It left 30 people dead, hundreds more injured, and according to a PBS special about the bombing, tensions were high at the end of the 19th century and the beginning of the 20th:

YouTube clip:

Striking at the heart of the nation's financial center, many wondered if this was the spectacular blow against capitalism that radical agitators had so long discussed.

The corner of wall and Broad Streets represented the fusion of American capitalism with American government. You could target them both at once. The targeted

Is to say, we are taking on the citadel of American capitalism, we loathe it, we want to overthrow it.

Financial centers around the country went on high alert. The head of the Morgan Bank sent guards to its family's Madison Avenue residence…

Katie Gatti Tassin:

According to the FBI's website, to this day, they still don't know for sure who did it, but they believe the attack was carried out by a group of Italian anarchists led by a man named, are you ready for this… Luigi Galeoni? It's just weird, right?

This attack is mostly lost and forgotten to American history. But the idea at the time, just a couple of decades out from the first gilded age was that many Americans felt angry at the corruption and greed that they perceived from Wall Street and the burgeoning financial system.

We'll get right back to it after a quick break.

And then of course more recently, you might recall a little event now known as January 6th. The events of January 6th were inspired by the belief that the 2020 election was stolen. And I think this is a useful modern comparison because again, it demonstrates something very important that when a person or a group of people come to believe that the institutions designed to protect them or listen to them are not doing that you will eventually see violence or this tendency toward operating outside of the system of some kind. That's not to say that the violence is justified, just that it isn't surprising in those moments.

And in this case, the act fits into an umbrella of anarchic tactics called propaganda of the deed or an action, usually violent intended to influence public opinion. So if you're like, why does this matter? Why does the anarchic history of this or violence as a political message, what role is this playing here and why is this relevant context?

Public opinion is a very powerful tool. For example, a November announcement from Anthem Blue Cross Blue Shield declared it was rolling out limits on anesthesia coverage reimbursement in a few states, and this announcement had gone more or less unnoticed. The American Society of Anesthesiologists responded and they were angry in their own press release, but the public was not really aware that this was happening, and the move was supposedly intended to keep the lid on costs for anesthesia providers and allegedly planned to use time limits offered by Medicare to determine the appropriate reimbursement amounts stating that the company would deny claims above those amounts. But that doctors were welcome to appeal the decision.

But when it resurfaced as a particularly egregious example of insurance companies interfering with the delivery of medical care, the blowback was so strong and so outsized that Anthem reversed course in at least one state.

[To Wendell:] So you were the vice president of corporate communications at the health insurance company, Cigna, I know you worked there for 15 years. Your name was on their earnings reports. But before you worked for Cigna, you were a journalist, which tells me that you understand the role that access to accurate information plays in forming public opinion and how that information can be manipulated.

Wendell Potter:

You're right. Had I not been a journalist in my first career, I probably would not have left. I wouldn't have had what I've often referred to as a crisis of conscience, because I finally ultimately came to realize that what I was doing for a living as a pretty high paid executive at Cigna and Humana before that… I always tried to make sure that the stories that I wrote were accurate, never purposely wanted to mislead people, never obscured or left out important details. And I came to realize that's exactly what I was being paid to do. All of that.

And it was largely to misinform to a certain extent, mislead people to make them think that we have the best healthcare system in the world, but nobody else could possibly do it better, that we need to have health insurance companies in the mix as they are, because they are the appropriate gatekeepers, if you will, for us to get the care that we need and presumably to get coverage for that care.

So we've been sold a story for a long period of time that these companies play an essential role in our healthcare system that the value proposition, and that's a term that we used in the industry, kind of a wonky buzzy marketing kind of corporate word, but that people need to understand what our value proposition was. And my role was to support my companies and their business strategy and in particular, for example, how we led Americans, our employers in particular, but also policymakers to think that all of us needed to move into high deductible health plans. We had a way of referring to them back then that was euphemistic. We call them consumer driven health plans, and we call this movement consumerism.

So that was a way that we misled everybody thinking that Americans were just chomping at the bit to be moved into health plans that require them to pay more money out of their own pockets before their coverage kicks in. It was amazing that we were able to pull that off, but we did to the point that today most Americans had to pay a lot of money out of their own pockets before their coverage will kick in even as they're paying more and more for their premium. So that's just one example of how we purposefully misled so many Americans to further our agenda and our agenda. Frankly, the bottom line is to enhance shareholder value because most of these big companies that dominate the health insurance market are for-profit companies and their stock is traded in the New York Stock Exchange.

Katie Gatti Tassin:

Still, this event was notable because it wasn't just a targeted murder, but a performance between the shell casing with the words “Deny, Defend, Depose” the backpack full of monopoly money. As soon as these details began emerging, it became clear that this was intended to grab attention, send a message, start a conversation.

And this is why, from where I'm sitting, the statements from politicians or traditional media increasingly feigning confusion about why people would discuss and interpret it as a political act feels challenging to me. After all, it's sort of flatly a historical for American politicians to claim that in America we don't kill people to resolve our differences.

And as Tracy McMillan Cottom pointed out, “The moralizing about the public response to the killing conflates a personal dimension of this story, a murder and the fallout for the victim's family with the public dimension about industries that affect and control our lives, our futures are pain. A family lost their kin and a community lost a member. That is a personal tragedy. At the same time, a public actor was presumably targeted because he had a tremendous amount of power over people's wellbeing. The system has to make a profit, and in doing so, the system victimizes a lot of people.”

Now, I know I just said history can provide insight into these types of boiling over moments that produce events like these, but make no mistake, we are certainly in a very unusual moment right now, and this clicked not when I saw the initial conversation online, which almost always tends toward this nihilism and irony. But when I saw that Ben Shapiro and Matt Walsh did shows about how the left was celebrating a man's death and their comet sections were overrun with their own fans saying, “It's not just the left,” and “I just realized your business model relies on normal people hating one another.”

So I think online you're getting this sense, or at least I'm getting this sense, that this has proven to be a bit of a turning point around class consciousness and perhaps this recognition that the left versus right dichotomy is maybe not the primary dichotomy that's operating here. Which brings me to my next point: The editorial gaslighting that is falling into this camp of American healthcare isn't really that bad.

So social media platforms were overrun in the aftermath with people across the political spectrum, sharing horror stories about having coverage denied in critical moments or watching loved ones die unnecessary deaths. Many remarked it was surreal to see Americans in so much agreement for once.  But there's a conspicuous gap between the professional coverage of what's unfolding and the undeniably loud and surprisingly uniform response from the public.

One feature of the coverage has been emphasizing the difference in the victim and the killer's background, so not really the position that they're in society now, but where they started, and it feels to me or the way that I've interpreted it, is sort of this attempt to obfuscate or muddle the dynamics of class and power at play here. Much attention has been paid to Mangione's wealthy upbringing contrasted with Thompson's upbringing in a working class family, and this is exemplified perhaps no better than in one New York Times op-ed by Bret Stephens. Bret Stephens sort of a famously contrarian opinion columnist for the Times, I guess by contrarian, I mean he once argued earnestly for race science, so I'll leave that with you.

But he basically wrote a piece calling Brian Thompson a working class hero, and I think first of all, we're kind of making the same mistake here that Tressie pointed out, which is trying to derive public and political meaning from the personal backgrounds of the real humans involved.

But that wasn't actually the part that jumped out at me in this piece, Stephens argues that the public's dissatisfaction with the healthcare system is not real. He calls it the supposed rage, and in order to do this, he cites a 2023 Kaiser Family Foundation study as evidence that most Americans actually like their health insurance.

So this idea that American healthcare is uniquely bad or disliked isn't even true. He says 81% of insured adults rated their health insurance plans as excellent or good. Now he offers this as proof that the supposed rage at private health insurance is neither real nor widely felt. This is one of the more prevalent and platform examples I found of someone insisting that Americans don't actually dislike the healthcare system and the public response is an overreaction that it's wrong in some way.

At face value, I found that to be pretty obviously silly if for no other reason than the response itself is pretty obvious proof that people do not feel favorably. But I was curious, right? I wanted to dig into this study more because this is sort of a classic move that I've seen a lot in the last two weeks, which is to claim that yeah, everyone says they hate it, but when you actually survey them, they're like, yeah, it's fine.

So the study, the study surveyed 3,605 insured adults. So off the bat, we are not including people who do not have health insurance. 978 of them had healthcare via their employer or their spouse's employer. 1,700 of them had Medicare or Medicaid, and 880 got a marketplace plan. So of your 3,600 insured adults, roughly half of them or 46% of them are actually on government health insurance, not private healthcare. And when you segment by those populations, those on Medicare rated their health insurance the highest with a 91% approval rate.

But what's more interesting is when you segment by people who claim they are in good health and those who do not, then the results shift dramatically. 67% of adults who are in fair or poor health said they have experienced problems within the last 12 months trying to use their health insurance. So two in three people who actually have to use their insurance to access healthcare report experiencing problems with it. Half of people with private insurance rated it negatively when it came to costs compared to only 10% of Medicaid users and 27% of Medicare patients. Four in 10 or 40% of insured adults told Kaiser that they had skipped or delayed healthcare at least one time in the previous year alone because of the cost. That's 40%.

Wendell Potter:

Most of us are healthy throughout a year. We don't test the limits of our private health insurance plan, but sadly, when we do get sick, when we do get injured, we find out and at this point it's too late that our health plan is not anywhere close to as valuable or protected as we thought it was. And that's a sad reality, and that is one the other reasons why the industry has been so successful at holding these reforms at bay is because most notice us, we think it's going to be there when we need it and then get a rude awakening when we get sick and find out, oh, oh, I'm going to have to pay a lot of money out of my own pocket. I might not get the procedure or even the test or the medication my doctor says I need because there's someone at this insurance company who is going to deny that and they do it every single day in this country.

Katie Gatti Tassin:

So in summary, I don't read this study and go, yeah, this is a picture of a healthcare system that's working well. You don't even have to go out and find a different study to disprove the conclusion that he came to. You can just use the same one.

Now, I want to be clear, there's nothing wrong with this methodology from the standpoint of what KFF was originally trying to look into and to study, but it's not a good gauge of what Bret Stephens claimed it proves, which is again, Americans quote, supposed rage at private health insurers and that the vast majority of Americans actually think the system is excellent or good. So I don't know really what's happening here.

I think there's a temptation often to project your comfort onto others. If you have money, you have a good healthcare plan and you're healthy, you rarely need to use it. I can see why it might be easy to say that people are overreacting or to take refuge in the rationality of like, well, it's just business. They're not that profitable, which brings me to my next section, contending honestly with the role of profit in the financing of our medical care.

Because a big question that I've seen circulating among the business circles online right now is, well, how greedy is too greedy? How much profit is too much profit, right? Oh, it's not greed, it's just business. And a lot of numbers about UnitedHealth Group, the parent company of the subsidiary for which the CEO was killed are being reported right now with respect to things like their net revenue and claim denial rates.

YouTube clip:

With that, let's turn to our third quarter results. Revenues of $101 billion grew more than 9% over the prior year with strong growth. Again at both Optum and UnitedHealthcare. Optum health revenues grew by over $2 billion and are approaching $26 billion. This was driven by an increase in both the number and type of care services we offer and the patients we serve, especially in the home, and among those with complex needs.

Katie Gatti Tassin:

That was a snippet from their recent Q3 2024 earnings call. I don't really know what I was expecting when I tuned into listen to it, like a bunch of people twisting their little villain mustaches with Wall Street, but they often talked about getting costs down and saving money for taxpayers. Yet when it actually came to the numbers portion of the earnings call, it was all growth, growth growth.

YouTube clip:

So far this year, we have returned $9.6 billion to shareholders via dividends and share repurchase. Additionally, we have invested more than $11 billion in a wide range of strategic opportunities, including updating and extending our longstanding and productive relationship with AARP to better serve older Americans.

Katie Gatti Tassin:

In other words, they make roughly half a billion dollars in profit each week.

It is a humongous company, the fourth largest in the United States with $372 billion in 2023 revenue, which was an increase according to their fourth quarter reporting of 15% from the previous year.

And just last month, the Justice Department sued to block UnitedHealth Group from acquiring a home health and hospice provider, something the DOJ considered an anti-competitive move saying “it would allow UnitedHealth Group to further extend its grip to home health and hospice care threatening seniors, their families and nurses.” The word “threat” with regard to United UnitedHealth Group was used five times in this DOJ press release.

UnitedHealth is the most profitable health insurance company in the United States, so it should probably come as no surprise that it also denies the most claims: one in every three.

Zooming out a level, more broadly speaking, according to KFF, family premiums for employer health coverage rose 7% in 2024. On average, an employer now pays $19,276 in premiums for family and the worker pays on average $6,296 per year. In other words, the average cost to ensure a family in the US with employer provided health insurance is around $25,000 per year.

So back to the idea that the health insurance industry is merely doing what it needs to do that claim denials are not heartless restrictions, but mere cost containment. So I'm referencing really a lot of the talking points that I'm seeing in some of these op-eds as well as in business community and those types of circles online.

The neutral to positive opposing viewpoints here on the health insurance industry that I want to challenge are those that argue for profit insurance is merely a necessary evil because healthcare must be rationed in some capacity.

One popular smart guy response I've seen in the last week a lot actually is, “Other countries ration healthcare with long wait times. We just ration it with money. No system is perfect. There is not an endless supply of quality healthcare out there. Y'all are being naive if you think that this is a human right.”

And I think it's worth examining some of those assumptions a sister claim to that one is “America just has higher health costs because of America is so rich and rich countries just use more healthcare. So nothing to see here.”

I don't think anyone believes that there is an endless supply of free quality healthcare out there. I also don't think that people generally believe other country systems don't have flaws, but what I want to challenge is this idea that the financing that pays for medical care should also be making a profit and that a for-profit model is the best way to promote access and deliver quality healthcare. It bears repeating. We're not talking about for-profit care. We are talking about for-profit financing of care.

Because think about it, the profits are what's left over after the executives get paid tens of millions of dollars. The profits are not for the people who are doing the work, they're not for the doctors, they're not even for the claims adjusters, they're for shareholders. And I think it's that concept of a rent seeking middleman who stands between you and the care that you need with their palm extended that people object to.

I keep seeing this sort of commentary in both Twitter threads and big newspaper op-eds alike that are effectively what you guys don't understand is that a 6% profit margin isn't even that much. That's econ 101. 6% is nothing. They barely have any room for error. You guys are getting confused, but 6% is nothing.

But if you're asking how profitable is too profitable with regard to again, the financing of care, I think you are already asking the wrong question. It's futile to debate whether this is egregiously profitable or only modestly profitable because it bypasses the core problem, which is that any profit on the financing of medical care is too much because every dollar of profit represents a dollar that was not spent on improving the quality or access of the care itself. By definition.

And it's only in America that we seem married to this idea that it's not only justified that shareholders would make money on this industry, but unavoidable. I listened to one interview with a healthcare expert, an economics professor who said, “Listen, insurance companies are not the bad guy. They're just the middleman taking a slice of the pie along the way,” and he was completely serious. This idea that it's not about greed, it's just business. It also sort of distracts from what's happening here. The word greedy, I don't know. I don't think it gets us closer to the issue.

I think the issue is that we're talking about a system that has grown and morphed to optimize for the wrong outcomes, and that's a feature of a healthcare system that's in bed with Wall Street, right? That's by design. That's not a bug.

And so this rationing argument that health insurance companies function to ration healthcare because without their denials, too many people would be able to overwhelm the system sort of falls apart once you start trying to square the existence of those profits. But it also ignores the that oftentimes health insurers create rules that lead to more unnecessary care, not less. So more on that in a moment.

But first, how does the existence of an anti-competitive landscape of private for-profit health insurers drive up costs? Well, if you're a provider, a healthcare provider, you negotiate reimbursement rates with the insurance providers, they're going to want a discount from that sticker price. That's what they're effectively selling to their customers, right? So, you go, oh we'll get you these discounts in addition to the other benefits of carrying health insurance, in order to make sure you get paid as much as you can for providing the care, you are now incentivized to raise that sticker price or chargemaster rate such that whatever you get after the discount is what you want.

Now, this is the part where insurance companies will point the finger at hospitals and say they're the reason that things cost too much because these chargemaster rates are so high, and that's not totally untrue, but as you'll see, it's a disingenuous representation of the situation.

But regardless, this creates a distorted price signal in which someone with insurance might see the sticker price and the discount and think that their insurance company got them a deal. When in reality, the existence of that for-profit insurance company is part of the reason that the sticker price is so high in the first place.

You see how this becomes kind of circular. So for example, I recently saw a GI specialist at UC Davis. The chargemaster rate, according to my bill was $646 for a 45 minute appointment after my insurance discount. I paid $564 out of pocket for the appointment toward my $2,500 per year deductible.

I called to negotiate and I asked what it would've cost had I been cash pay had I not carried this insurance, and they told me that the cash pay rate was $380. It's like, that's weird. That's really interesting. So that is to say, because I had insurance, I actually paid roughly 48% more than a cash pay customer would've paid because the contract between my insurer and my provider said that my provider agreed to charge me the rate that the insurance company had negotiated with them, even if it was as was true here, a lot higher than what they would charge someone without my insurance. They said, and I quote, “Well, our contract is with them, not you.”

This only ends up being a good deal for me, the insured, if I end up paying my entire $2,500 deductible such that my covered healthcare beyond that point is free to me. So let's pause there for a second. What incentive does that now create for me as the insured? Well, once you get close to a deductible, you are now incentivized to try to get as much medical care as you possibly can to get your money's worth. In that year, you spent your $2,500 on four office visits and some labs as I did, and now you're like, all right, let's go. I am going to try to load up now to get my money's worth. I'm not going to wait until February to get this other thing that I think I need. I'm going to get it now because now it's quote unquote free. I ended up getting a colonoscopy that was soft recommended this year because I had hit my deductible.

And so my economically rational response was, “Okay, this is healthcare. My doctor says I might need to rule out anything serious with these GI issues. I could wait until next year and see what happens and how my symptoms progress, or I could get it before the end of the year because I'm about to hit this deductible.”

So I think on the patient level, the behavioral level, there is this inclination to behave in that way. Again, rationally so because they're like, well, I've already spent thousands of dollars. I might as well try to take care of anything else right now. In short, the assumption is that a profit motive always functions to drive costs down, but I think it's really important to consider all of the ways in which in this system profit motives are actually driving the costs up.

So for example, we know that between 15 and 30% of our healthcare spending goes to administrative costs alone. So not the medical care but the administration of the system. More complicated systems like the ones that we have mean more complicated administrative costs. When your claim gets denied and you have to go back and forth with four different people via phone call and email, that costs money. It costs money to employ those people. It costs money to deny these claims.

This is part of what single payer offers and can achieve is that it radically simplifies the complexity. It eliminates both the profit motive and the administrative burden, much of the administrative burden, and we know that these denials are on the rise. Most people don't even realize that denials are often erroneous, and so appeal rates are actually very low, which is sad. I guess it does cut back on the administrative burden, but it is quite sad. Something like only one in 500 denials gets appealed according to PBS reporting, which I find almost hard to believe, but we did confirm it with I think one other source, KFF.

This was one of the major takeaways I had from trying to learn everything I could about this subject beginning a couple of years ago, which is that you always, always appeal. I appeal everything, even approvals. I'm like, hey, are you sure that's all you can cover? Can we double check that? Because half the time it just feels so arbitrary whether something gets accepted or denied or if something gets covered only a little bit or still

The point is even when the system is working, it can still feel like a shell game. Okay, so we will continue after a quick break.

But that's not the only way that the presence of these companies in the market drives up prices and waste because there are a lot of ways that these barriers inhibit care, but one of the more popular ways doesn't just deny a claim once it's been filed, it tells the doctor you can't do that, or importantly, you can't do that until you do all of these other things. First, take the practice of prior authorization. For example:

YouTube clip:

We have four full-time employees who their sole focus is on obtaining prior authorization for medications to treat Crohn's disease and ulcerative colitis, and that's just for one disease state.

Katie Gatti Tassin:

Prior authorizations were, I imagine, originally put in place to limit surprises and hold providers accountable for being good stewards of healthcare. But in practice, they have three major adverse effects. The first is administrative bloat, which is expensive. The second is creating unnecessary testing and procedures to justify the procedure that a doctor actually wants to do, which is expensive, and of course, blocking or delaying access to necessary care, which is deadly.

The American Medical Association ran a survey in 2023 in which it asked doctors how often prior authorizations inhibit care or create bad outcomes. One in three doctors of the 1,001 doctors surveyed reported that prior authorization has led to a serious adverse event for a patient in their care one in three, more specifically for those one in three doctors, they said 25% of the time they were reporting a patient being hospitalized when they otherwise would not have been. 19% of the time, they reported it resulting in a life-threatening event and 9% of the time, in disability permanent damage or death. Here's the real kicker.

86% of physicians, nearly nine in 10 reported that prior authorization requirements led to a greater not lesser use of healthcare resources resulting in unnecessary waste instead of cost savings. More specifically, about two thirds of physicians reported resources were diverted to ineffective initial treatments or additional office visits due to prior authorization policies while almost half reported prior authorization policies led to urgent or emergency care for patients.

I think this is a familiar story. I think a lot of people have experienced this, that in order to get the care your doctor believes you need, you must first go off and get this other thing that the insurance company says. You have to get first in order to prove that you actually need the thing that your doctor says you need, and it just becomes kind of a mess.

So if our genuine concern with sticking to the system we have now is that there are too few doctors and too little healthcare to go around and that that's why you need a middleman to gatekeeper access for everybody's benefit, consider that the average physician's practice spends almost two business days per week submitting prior authorizations. 35% of doctors reported employing staff solely to deal with insurance paperwork, and that also drives up the cost of care.

Another example of an area where complexity drives inefficiency and inefficiency drives higher prices is something called pharmacy benefits managers or PBMs. A PBM is another type of middleman, also, weirdly enough, often owned by the insurance company, that negotiates with pharmaceutical companies on behalf of employers, the government and bewilderingly, yes, insurance companies. I know it's a little bit circular about the cost of drugs and certain rebates, so much like the cost of care is driven higher because of this discounting system.

The way this system is set up incentivizes higher list prices for drugs as well. And so if you're a purchaser of a drug who does not have insurance or you have a high deductible and you need a very specific drug, you end up paying a very inflated list price. Different people and different insurance companies can end up paying wildly different prices for the exact same thing. According to writer Matt Stoller, the revenue of American PBMs is larger than what France spends on its entire healthcare system. Here's a CEO of Merck, a pharmaceutical company at a hearing on drug prices, talking about why the presence of PBMs incentivizes higher drug prices, not lower ones:

Merck CEO:

If you bring a product to the market with a low list price in this system, you get punished financially and you get no uptake because everyone in the supply chain makes money as a result of a higher list price.

Katie Gatti Tassin:

And okay, a moment of, I don't know, introspection. Here's the thing, it doesn't feel good to me to believe that there is a subset of society that's greedy and malicious and just loves to profit off of death and suffering. That is a lot of psychic weight to carry and believing these systems are full of evil people makes me feel hopeless and I don't want to feel hopeless. I want us to ask better questions.

For example, what if all that money were spent on disease prevention, training more doctors and nurses, making medical school free or deeply subsidized and removing the types of barriers and restrictions that might put downward pressure on the number of doctors? What about building out more health infrastructure?

The idea that healthcare needs to be rationed relies on a belief in a fixed supply and limited resources, neither of which would necessarily be true as evidenced by the $23 billion and rising profits of companies like UnitedHealth Group every year.

And I think a big question right now is to what extent can we blame private health insurance for the inefficiency and high costs in our system? A lot of what I've heard in the week since the shooting is that the insurance companies are a bit of a scapegoat for high hospital costs or greedy healthcare workers or who knows what else. And okay, it's true that they do not bear the blame for our current circumstances alone, but I also do not think that the public scrutiny is misguided, at least not as misguided as some of this stuff would make you think.

And if you spend two weeks reading countless articles and comment sections about this problem as I have, I think what you'll find is that there is this temptation to do this thing where you say, well, the insurance companies are really just a small piece of the puzzle, right? You go, yeah, they're not great, but they're not that profitable. They're this necessary evil. The real problem is that doctors are just paid too much and the procedures are too expensive, so on and so forth.

And so for a day or two, I was entertaining that direction and thinking about it really deeply, and then I was like, wait a second. I think for-profit health insurance companies are a small piece of this puzzle in the same way that the pin is a small piece of a grenade. Sure, it might not be the largest component, but it is a very critical piece and it's the piece that serves as the linchpin of why we get so much distortion in pricing experience and outcomes.

It also happens to be the area where I think you're seeing the most disproportionately poor money for value exchange. We can argue over whether an anesthesiologist deserves to earn $500,000 a year, but I don't think anyone questions whether the anesthesiologist is an important part of the surgical process. I'm not sure we can say the same about the health insurance executive who makes literally 20 times that amount. There are some things that just shock the conscience, and I believe that sense of injustice is justified.

The for-profit health insurance company exists not to keep a lid on costs or to make the process more efficient or to deliver better health outcomes. It actually does none of those things. It's not really designed to, its business model is systematically restricting access and taking more than they are giving. That's how you get profits. Of course, the point of insurance in general is to pool and distribute risk. So that's not to say it would have to work this way, but that because of the factors we've talked about, like perverse incentives, opacity of pricing, high and rising, administrative costs, prior authorizations, all this complexity, and of course, we cannot forget shareholders. That's how it works in practice.

So whenever these conversations come up, inevitably so too does the Affordable Care Act and questions like, why didn't the Affordable Care Act solve this problem and maybe why have things gotten worse since the Affordable Care Act passed? The primary function of the Affordable Care Act was to increase healthcare coverage, but it did so by subsidizing the insurance industry, says Senator Bernie Sanders, friend of the show Senator Bernie Sanders.

For a little analogy here, imagine there's a two-lane bridge and to manage traffic on this two lane bridge, there's a private for-profit toll company. And this toll company charges each driver who goes over the bridge a toll and then return their toll profits to their toll shareholders. Now imagine on the other side of that bridge is something that everyone needs, and if they do not get it when they need it, they will get sick or they will die. So the government in recognizing how important this bridge is and how important it is that people can cross this bridge, they decide, hey, we're going to actually mandate payment of these tolls and we're going to subsidize some of that toll payment too.

Now, the toll company is like, hell yeah, they're thrilled right now. Everyone has to pay this toll. The toll company's revenue jumps, and it is true that more people now get to cross that bridge and get to access what they need. But we didn't ask the better question, what if instead of subsidizing the tolls and subsidizing the toll company, we just took all of that money and built a bigger bridge with it?

When we argue about whether or not the toll company is too profitable or if the people who run the toll company are evil, or if the toll company is just preventing too much traffic from going on the bridge at once for everyone's safety, and actually it's a good thing the toll company's there because we can't let too many people on the bridge at once. We lose sight of the reality that we might not even need the toll company if we just had a bigger bridge, if we just invested all that money in the bridge directly or that may be more accurately, we would need a very downsized version of the toll company. The toll company would not be able to raise their tolls by 10% per year.

Since the ACA passed. it is true that America's largest health insurers have made more than $371 billion in profits, more than 40% of that net income going to wait for it…UnitedHealth Group.

[To Wendell:] There are regulations, I believe they were introduced by the Affordable Care Act, that sort of set limits around how much of an insurance company's revenue or how much of the premiums had to go to medical care as opposed to things like profit. And as I was sitting with that, I was like, if that's true, I could see why then that would actually incentivize driving nominal costs higher because if your percentage that you can make is capped, then it's like, okay, well if I can only make 6%, I want to make 6% on $300 billion, not on $100 billion. Are you familiar with this?

Wendell Potter:

I certainly am because I spent a lot of time meeting with members of Congress during the time that they were debating what became the Affordable Care Act and that what you're referring to is a provision of the law that was well intended because insurance companies were under pressure to spend less and less of our premium dollars every year on our healthcare. In 1993, the average amount of money or a percentage that insurers were paying out of premiums was 93% on healthcare. By the time Congress was debating the ACA, it had dropped about 80%. So the law tried to set that as a floor, but the unintended consequence is exactly as you've described. These companies have found that they had even less incentive than they had before to control the cost of a stay in the hospital or a prescription drug or a visit to a clinic or a physician office.

These companies have never done a very good job of controlling the unit cost of healthcare goods and services, but this gave them even less of a reason to try to do that. What they have focused instead on is making it more and more difficult for us to get the care that we need, in other words, to influence the utilization of healthcare goods and services to repress it. And that is exactly what they've done. But you're right, the provision of the Affordable Care Act that addressed that, big companies have worked around that.

Another thing that they've done that's been kind of incentivized by that they have grown bigger by not only buying other and smaller health insurance companies to get bigger in part of was referred to as vertical integration. They have bought physician practices and clinics. They've gotten deeper and deeper into healthcare delivery. The three of the biggest ones have gigantic pharmacy benefit managers that sl a lot of money out of a pharmacy supply chain. So the ACA for a lot of good, it did had some provisions that again, were well intended but have contributed, I think, to these companies getting bigger and caring less about the rising cost of healthcare.

Katie Gatti Tassin:

I think what we find is all of these areas where the second and third order effects are not what you would expect. And I think that part of the reason that happens is because rather than a sort of holistic or comprehensive wholesale reform, what you're seeing is the government sort of trying to work with this industry without meaningfully challenging it. And so it's like, well, how can we make sure you guys can still make money and your shareholders are still happy, but people can still have healthcare and what's the compromise? And so I know you are an advocate for Medicare for all and a single payer system and sort of the simplicity that that will bring. I would love to hear you talk about what you think we stand to gain from switching to a single payer system.

Wendell Potter:

What you said is something that you would think that policymakers at this point would recognize. We've been trying this for decades and decades now, allowing these big companies to be the gatekeepers and to be the mechanism that makes healthcare somewhat affordable for us, but it's failed miserably. The average price of a family premium that people get through the workplace now is over $25,000 and the Affordable Care Act, it does set a limit on how much we have to pay out of our own pockets, but that linen goes up every year.

And then this was to accommodate big insurance companies. They insisted if there had to be a cap for it.  To be a huge cap today, a family could have to pay $18,900 out of the family's bank account before their coverage will kick in, and that's on top of the premiums.

But big insurance companies have spent enormous sums of money getting politicians to buy into the notion that we have to have them that we can't do without 'em. And politicians sadly don't pay a lot of attention to how other systems around the world really operate. We spend twice as much per capita on healthcare in this country as the average of other developed countries, and our outcomes are much worse and our access to care is much worse, and we still have about 30 million people who don't have health insurance.

So what we have got is a system that is not working, and I don't think that politicians really think that next year it's going to get appreciably better because these guys are in the business to make money, and the status quo is extraordinarily profitable for them, so simplifying it.

Another fun fact about our healthcare system is that we spend about $4 trillion every year on healthcare currently, and about a third of that goes to administrative costs that are made necessary because of our multi-payer as opposed to a single payer system. The Medicare program, which is a government run single payer system, the original version of it, the administrative costs are very low compared to private insurance and the private version of Medicare.

Katie Gatti Tassin:

Another such area where the public private partnership left the existing incentive structure intact, but just injected public funds into it is the Medicare Advantage program. This interestingly ties back to Brian Thompson's work at UHC. According to the New York Times, Thompson oversaw significant growth in one of the company's key businesses: the sale of private insurance plans under Medicare Advantage, a program mainly for those 65 and older that receives federal funds and now covers roughly half of the 61 million people signing up. In July of this year, Wall Street Journal reporting uncovered that between 2018 and 2021, so this is before Thompson's tenure as CEO, private insurers in the government's Medicare Advantage program made hundreds of thousands of questionable diagnoses that triggered extra payments from taxpayer coffers, including outright fabricated ones.

Now, the Medicare Advantage program cost the US government around $450 billion per year, and it grew out of this idea that the private sector and these for-profit companies could provide healthcare more economically than the public sector could. But instead of saving taxpayers money, researchers and government officials have said the cost of the program has gone up by tens of billions of dollars.

Wendell Potter:

These companies have sold politicians on the notion that the private sector and private insurance companies can do a better job than the government. A lot of people just have this notion that the government's extraordinarily inefficient and private sector can do no wrong, can do anything better, but we've got decades of evidence that just doesn't. That's not true.

What we have is evidence that these companies in their quest for profits have really destroyed a healthcare system, or at least made it so dysfunctional and so unfair and so expensive that millions of us, even with insurance are not getting the care that we need. The federal government has estimated that we spend about more than $80 billion a year, more just in the Medicare Advantage program alone, to keep those companies in the game offering these Medicare advantage plans than if the same people stayed in traditional Medicare. That's just one example of how inefficient and how this public private partnership has benefited the big insurance companies to our detriment and we taxpayers are paying that money.

And you are absolutely right too. The industry, and I was a part of this, I have to admit, during the years and I spent there of confusing people to make people think that if you have a single pair system, your taxes are going to go up. Well, this is a very good possibility that you would pay more in taxes. But what they again obscure and make sure you don't take it into the equation is that you and your employer will not be paying those premiums. So you would be paying less, you might call it a tax that you would be paying as opposed to premiums, but you would actually be paying less. Everybody would have access to care, would have healthcare coverage, and there's plenty of evidence around the world that by taking this approach, people actually live healthier lives and live longer. We've actually been losing ground compared to other countries in terms of life expectancy and outcome. But these companies have been masters as we talked at the beginning of miscommunication, misdirection, and misleading people.

Katie Gatti Tassin:

A unique feature of the program is that it actually allows the insurance companies to add diagnoses to the charts that the doctors themselves have not indicated sometimes using AI to draw conclusions about what a patient might have and need treatment for. Again, not diagnosed by a doctor and often never receiving said treatment, but then still collect a payout for it. For example, one such complication of diabetes that the government will reimburse the insurance company for is diabetic cataracts. UnitedHealth members were found to be 15 times as likely as the average Medicare patient to have a chart that indicated they had this disease. And as of 2021, it was estimated the government had paid the Medicare Advantage insurers $700 million for diagnoses related to diabetic cataracts.

The crazy thing is this wasn't even the first time this happened. A former UnitedHealth Group employee filed a fraud case against the company in 2011, which the DOJ took over in 2017, according to CBS. The DOJ alleged, there were instances of more than 2 million invalid codes, which resulted in erroneous payments to the insurance companies in access of $2 billion.

About 20 years ago, the Center for Medicare Services drafted a rule that would've required these plans to identify these overpayments by CMS and refund the government once they were discovered. But the rule was dropped after pushback from the industry.

The gap in life expectancy between the richest 1% of Americans and the poorest 1% is almost 15 years for men and 10 years for women. Surprisingly, there's no published evidence that this difference is attributable to a lack of access to direct medical care, but there is a correlation with access to higher education and what one paper called “healthful hehaviors” aka not smoking, doing your part to exercise, managing and avoiding stress, eating healthy foods, et cetera. In other words, these general health markers were more strongly correlated with these differences.

The paper which published these stark life expectancy findings emphasized the role that your environment plays in your personal outcomes, talking about regional differences in the way individual lives were lengthened or shortened by the environment that this life existed in, and the life's context, if you will, and environments that condone and normalize fraud, waste, and exploitation will generate more fraud, waste, and exploitation. The same goes for cultures that promote and celebrate violence. Neither outcome is good, but both represent the product of a specific set of systemic choices of individuals and their individual choices being shaped by their environments. Whether that environment is leading you to deny claims for lifesaving care or to smoke and not exercise, and to not have access to healthy food and to live a life that is a decade shorter.

So a quote from Friedrich Engels comes to mind: “When society places hundreds of proletarians…” I love this language, the proletariat. “When society places hundreds of proletarians in such a position that they inevitably meet a too early and an unnatural death, one which is quite as much a death by violence as that by the sword or bullet, when it deprives thousands of the necessaries of life, places them under conditions in which they cannot live, forces them through the strong arm of the law to remain in such conditions until that death ensues, which is the inevitable consequence, know that these thousands of victims must perish and yet permits these conditions. To remain its deed is murder just as surely as the deed of the single individual.”

Wendell Potter:

Even in this country, until about the mid-1990s, most people got their coverage through nonprofit health insurance plan. Blue Cross Plans were all nonprofit for most of their history, but that began to change in the mid-nineties when Blue Cross of California petitioned to convert to for-profit status. It did, and that just kind of set off some dominoes. Now, several Blue Cross plans operate on a for-profit basis and are part of one of the giant for-profit corporations. It's called Elevance, and they market their plans as Anthem plans in a lot of states.

Companies like UnitedHealth and Cigna and Aetna saw that they could make a lot of money in health insurance. They previously were in property casualty and life insurance and other kinds of things, and then they started buying up health plans. That's how we got to where we are now. But it hasn't been that many years ago that we had almost everybody was at a nonprofit health insurance plan. It's only in the last 30 years that we've seen this shift, and now almost all of us are now enrolled in a for-profit health insurance plan.

Katie Gatti Tassin:

It is nice to be reminded this problem while it feels intractable it hasn't been this way since they signed the constitution. The UnitedHealth Group was not sitting in the room being like, and by the way, all health insurance should be for profit.

I'm just curious about the path forward and what it would really take if there were the political will and public opinion and momentum for real change. What would have to happen in order for us to really deviate meaningfully from the status quo? I don't know if that necessarily means we would see a single payer system in my lifetime, but I feel so estranged from the policy side of things that you are so familiar with that I'm like, what would have to be the game plan if you could be like, okay, magic wand, this is how things would have to shift.

Wendell Potter:

First of all, you have to recognize this has to be for the long term because it's just not likely to happen that we're going to have a Congress or administration for the next two to four years that'll be supportive of this. Even Joe Biden said that he would veto a Medicare for all bail if it came across his desk. So there's a lot of work you've got to do, even with a lot of Democrats and also understanding my old industry strategy, but you have to do this for the long haul.

Employers will have to play a key role and a more visible role as we go forward because they are being taken to the cleaners. They increasingly are realizing that. We're seeing also some agents and brokers, and I do a lot of public speaking who have had similar crises of conscious and have done the same thing. I have, although not become a whistleblower, but are advising their employer customers. There's a different way you could do this. You don't have to work with Cigna anymore. There are some smaller, more transparent health plans that you should consider.

So it's going to take, the private sector does have a significant role to play, whether we get to single payer or just one that makes more sense and doesn't cost us as much, but we've had over in recent weeks, such an outpouring of rage as a consequence of a corporate assassination in New York of a health plan executive. How do you channel that? That has kind of ripped the Band-Aid off, if you will. To a certain extent. People are seeing that, wow, the industry has been able to tap down this and make us think that we're just happy as clams with the way things are. People are not happy as clams. So I think the more that we can figure out how to harness that and help that rage be channeled in a constructive way, that'll help us get to where we need to ultimately wind up.

Katie Gatti Tassin:

Yeah. It's fascinating that you mentioned the corporate side of it because you're right. I think that this is one of those rare opportunities where the public interest and the corporate interest of every corporation, except for the health insurers, are actually kind of in lockstep where it's like, Hey, they don't want to spend $20,000 rising by 8% per year on every employee. That's not sustainable for them either.

To your point, man, I hope we can leverage that discontent from corporations who do have quite a bit of sway in Congress as we know, and what's in the public interest to come together and find some way to build a system that's just more reasonable, and that puts health outcomes first, not shareholders.

Wendell Potter:

Yes. I think we'll get there, maybe there sooner than later to get these corporations. We need to drive a wedge between them and these big private insurance corporations, and I'm seeing that happen and I'm seeing healthcare providers get in the mix a bit more too. They are finding out they being hospital administrators and physicians and physician practices, and even pharmaceutical companies, insurance companies are not good partners to work with, and they're realizing that as well too.

Katie Gatti Tassin:

Wendell, thank you so, so much for joining us, especially on short notice. It was such a pleasure.

Wendell Potter:

My pleasure. Thank you for having me on.

Katie Gatti Tassin:

That's all for this week for our next full length episode. We will see you in two weeks in 2025 for our conversation with Dana Miranda.

Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our Chief Content Officer, and additional fact checking comes from Scott Wilson.