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Transcript:

July 31, 2009

BILL MOYERS: Welcome to the Journal. When one of our broadcasts strikes a nerve we like to bring it back, to give you a second chance to see it and to express your support of stations like this one whose independence depends on viewers like you.

Wendell Potter was here a few weeks ago to tell an insider's story of how the health insurance industry "puts profits before patients." Your response bowled us over. One blogger at the widely read website Talking Points Memo summed up what many had to say:

"I beg everyone who reads this and clicks onto the link to send it on to everyone you know. Send it to your congressmen, your governors, your legislatures, the White House. Get an email chain going--put the link up on yard signs or billboards. Put it on bumper stickers. Stencil it on tee-shirts or tattoo it onto (sic) your forehead. Whatever it takes. This is a television event too important to let die... Keep it going."

Well, it's alive and well, and thanks to this station, you're about to see it again. The message is even more timely. You heard Wendell Potter tell us how the industry would try to shape the health care debate as it played out in Washington over the summer. Sure enough, that's exactly what has happened. By pouring millions of dollars into lobbying -- including hiring more than 350 former members of congress and government staffers and by enriching incumbents with campaign contributions -- the health care industry is winning again.

Here, a congressional subcommittee investigated the twisted tactics used by health insurance companies to dump customers and stick them with their bills. It's a practice known as recission.

ROBIN BEATON: In May 2008, I went to a dermatologist for acne, pimples. A word was written down on my chart, which was considered to mean precancerous. In June 2008, I was diagnosed with invasive HER-2 genetic breast cancer, a very aggressive form of this cancer.

I needed a double mastectomy immediately. Blue Cross and Blue Shield pre-certified me for my surgery and for a hospital stay. The Friday before I was to have my double mastectomy, Blue Cross and Blue Shield called me by telephone and told me that my chart was red flagged.

BILL MOYERS: Red flagged. The insurer used inadvertent omissions on her original application — data that had nothing to do with her current condition — as an excuse to cancel her health policy. Without that insurance she couldn't have the cancer surgery that she needed.

ROBIN BEATON: I was frantic I did not know what to do. I didn't know how to pay for my surgery, the hospital wanted a $30,000 deposit. I was by myself I didn't have that kind of money.

BILL MOYERS: The committee found other insurers pulling the same tricks. Over the past five years the companies — Assurant, Golden Rule and WellPoint — had cancelled 20 thousand individual policies. Michigan Congressman Bart Stupak asked their executives if they would change their ways.

REP. BART STUPAK: Let me ask each of our CEOs this question, starting with you Mr. Hamm, would you commit today that your company will never rescind another policy unless there was intentional fraud-- fraudulent misrepresentation in the application?

DON HAMM: I would not commit to that.

REP. BART STUPAK: How about you Mr. Collins, would you commit to not to rescind any policy unless there is an intentional fraudulent misrepresentation?

RICHARD COLLINS: No, sir. We follow the state laws and regulations. And we would not stipulate to that. That's not consistent with each state's laws.

REP. BART STUPAK: How about you, Mr. Sassi, would you commit that your company will never rescind another policy unless there was an intentional fraud, misrepresentation?

BRIAN A. SASSI: No, I can't commit to that. The intentional standard is not the law of the land in the majority of states.

BILL MOYERS: But business as usual comes as no surprise to Wendell Potter, who knows all too well how they win and we lose.

SEN. JAY ROCKEFELLER: I'm pleased to welcome Mr. Wendell Potter to the committee today. He is a former insurance executive who is going to tell us about some of the tactics insurance companies use to keep insurance in the dark. I have a special respect for him, simply because he's doing something I think very courageous and very brave.

WENDELL POTTER: Mr. Chairman, thank you for the opportunity to be here this afternoon...

BILL MOYERS: Until last year, Wendell Potter was head of corporate communications for CIGNA — the country's fourth largest health insurance company.

Altogether Potter spent nearly 2 decades playing for the side that has opposed health care reform from the Clintons forward: he sat on policy committees, crafted executive messages, cajoled the press and witnessed firsthand the promises made — and broken. Take the case of Nataline Sarkisyan:

HILDA SARKISYAN: The insurance company is denying our case. She needs a liver transplant...

BILL MOYERS: At the end of 2007, Potter defended CIGNA when it refused to pay for the 17-year-old's transplant surgery, claiming the procedure was experimental. Protests at a regional headquarters created a public relations nightmare.

CROWD: Health care for all! Health care for all!

BILL MOYERS: CIGNA reversed its decision, but by then, it was too late. Nataline died just two hours after her surgery was approved. Early last year Potter left CIGNA. This summer, before the Senate Commerce Committee, he went public for the first time.

WENDELL POTTER: The industry and its backers are using fear tactics, as they did in 1994, to tar a transparent and accountable, publicly accountable health care option as, quote, "government-run health care." What we have today, Mr. Chairman, is Wall Street-run health care that has proven itself an untrustworthy partner to its customers, to the doctors and hospitals who deliver care and to the state and federal governments that attempt to regulate it.

BILL MOYERS: Wendell Potter joins us now. Welcome to the Journal.

WENDELL POTTER: Thank you very much for having me here.

BILL MOYERS: You worked for CIGNA 15 years and left last year.

WENDELL POTTER: I did.

BILL MOYERS: Were you pushed out?

WENDELL POTTER: I was not. I left-- it was my decision to leave, and my decision to leave when I did.

BILL MOYERS: Were you passed over for a promotion?

WENDELL POTTER: Absolutely not. No.

BILL MOYERS: Had you been well-paid and rewarded by the company?

WENDELL POTTER: Very well-paid. And I, over the years, had many job opportunities, many bonuses, salary increases. So no, I was not. And in fact, there was no further place for me to go in the company. I was head of corporate communications and that was the ultimate P.R. job.

BILL MOYERS: Did you like your boss and the people you work with?

WENDELL POTTER: I did, and still do. I still respect them.

BILL MOYERS: And they gave you a terrific party when you left?

WENDELL POTTER: They sure did, yeah.

BILL MOYERS: So then why are you speaking out now?

WENDELL POTTER: I didn't intend to, until it became really clear to me that the industry is resorting to the same tactics they've used over the years, and particularly back in the early '90s, when they were leading the effort to kill the Clinton plan.

BILL MOYERS: But during this 15 years you were there, did you go to them and say, "You know, I think we're on the wrong side. I think we're fighting the wrong people here."

WENDELL POTTER: You know, I didn't, because for most of the time I was there, I felt that what we were doing was the right thing. And that I was playing on a team that was honorable. I just didn't really get it all that much until toward the end of my tenure at CIGNA.

BILL MOYERS: What did you see?

WENDELL POTTER: Well, I was beginning to question what I was doing as the industry shifted from selling primarily managed care plans, to what they refer to as consumer-driven plans. And they're really plans that have very high deductibles, meaning that they're shifting a lot of the cost off health care from employers and insurers, insurance companies, to individuals. And a lot of people can't even afford to make their co-payments when they go get care, as a result of this. But it really took a trip back home to Tennessee for me to see exactly what is happening to so many Americans. I--

BILL MOYERS: When was this?

WENDELL POTTER: This was in July of 2007.

BILL MOYERS: You were still working for CIGNA?

WENDELL POTTER: I was. I went home, to visit relatives. And I picked up the local newspaper and I saw that a health care expedition was being held a few miles up the road, in Wise, Virginia. And I was intrigued.

BILL MOYERS: So you drove there?

WENDELL POTTER: I did. I borrowed my dad's car and drove up 50 miles up the road to Wise, Virginia. It was being held at a Wise County Fairground. I took my camera. I took some pictures. It was a very cloudy, misty day, it was raining that day, and I walked through the fairground gates. And I didn't know what to expect. I just assumed that it would be, you know, like a health-- booths set up and people just getting their blood pressure checked and things like that.

But what I saw were doctors who were set up to provide care in animal stalls. Or they'd erected tents, to care for people. I mean, there was no privacy. In some cases-- and I've got some pictures of people being treated on gurneys, on rain-soaked pavement.

And I saw people lined up, standing in line or sitting in these long, long lines, waiting to get care. People drove from South Carolina and Georgia and Kentucky, Tennessee-- all over the region, because they knew that this was being done. A lot of them heard about it from word of mouth.

There could have been people and probably were people that I had grown up with. They could have been people who grew up at the house down the road, in the house down the road from me. And that made it real to me.

BILL MOYERS: What did you think?

WENDELL POTTER: It was absolutely stunning. It was like being hit by lightning. It was almost-- what country am I in? I just it just didn't seem to be a possibility that I was in the United States. It was like a lightning bolt had hit me.

BILL MOYERS: People are going to say, "How can Wendell Potter sit here and say he was just finding out that there were a lot of Americans who didn't have adequate insurance and needed health care? He'd been in the industry for over 15 years."

WENDELL POTTER: And that was my problem. I had been in the industry and I'd risen up in the ranks. And I had a great job. And I had a terrific office in a high-rise building in Philadelphia. I was insulated. I didn't really see what was going on. I saw the data. I knew that 47 million people were uninsured, but I didn't put faces with that number.

Just a few weeks later though, I was back in Philadelphia and I would often fly on a corporate aircraft to go to meetings.

And I just thought that was a great way to travel. It is a great way to travel. You're sitting in a luxurious corporate jet, leather seats, very spacious. And I was served my lunch by a flight attendant who brought my lunch on a gold-rimmed plate. And she handed me gold-plated silverware to eat it with. And then I remembered the people that I had seen in Wise County. Undoubtedly, they had no idea that this went on, at the corporate levels of health insurance companies.

BILL MOYERS: But you had, all these years, seen premiums rising. People purged from the rolls, people who couldn't afford the health care that CIGNA and other companies were offering. This is the first time you came face to face with it?

WENDELL POTTER: Yeah, it was. You know, certainly, I knew people, and I talked to people who were uninsured. But when you're in the executive offices, when you're getting prepared for a call with an analyst, in the financial medium, what you think about are the numbers. You don't think about individual people. You think about the numbers, and whether or not you're going to meet Wall Street's expectations. That's what you think about, at that level. And it helps to think that way. That's why you-- that enables you to stay there, if you don't really think that you're talking about and dealing with real human beings.

BILL MOYERS: Did you go back to corporate headquarters and tell them what you had seen?

WENDELL POTTER: I went back to corporate headquarters. I was trying to process all this, and trying to figure out what I should do. I did tell many of them about the experience I had and the trip. I showed them some pictures I took while I was down there. But I didn't know exactly what I should do. You know, I had bills of my own. And it was hard to just figure out. How do I step away from this? What do I do? And this was one of those things that made me decide, "Okay, I can't do this. I can't keep-- I can't." One of the books I read as I was trying to make up my mind here was President Kennedy's "Profiles in Courage." And in the forward, Robert Kennedy said that one of the president's, one of his favorite quotes was a Dante quote that, "The hottest places in hell are reserved for those who, in times of moral crisis, maintain a neutrality." And when I read that, I said, "Oh, jeez, I-- you know. I'm headed for that hottest place in hell, unless I say something."

BILL MOYERS: Your own resume says, and I'm quoting. "With the chief medical officer and his staff, Potter developed rapid response mechanisms for handling media inquiries pertaining to complaints." Direct quote. "This was highly successful in keeping most such inquiries from becoming news stories, at a time when managed care horror stories abounded." I mean, you knew there were horror stories out there.

WENDELL POTTER: I did. I did.

BILL MOYERS: You put these techniques to work, representing CIGNA doing the Nataline Sarkisyan case, right?

WENDELL POTTER: That's right.

BILL MOYERS: And that was a public relations nightmare, you called it. Right?

WENDELL POTTER: It was. It was just the most difficult. We call them high profile cases, when you have a case like that — a family or a patient goes to the news media and complains about having some coverage denied that a doctor had recommended. In this case, Nataline Sarkisyan's doctors at UCLA had recommended that she have a liver transplant. But when the coverage request was reviewed at CIGNA, the decision was made to deny it.

It was around that time, also, that the family had gone to the media, had sought out help from the California Nurses Association and some others to really bring pressure to bear on CIGNA. And they were very successful in getting a lot of media attention, and nothing like I had ever seen before.

PROTESTERS: Shame on CIGNA! Shame on CIGNA!

WENDELL POTTER: It got everyone's attention. Everyone was focused on that in the corporate offices.

BILL MOYERS: You were also involved in the campaign by the industry to discredit Michael Moore and his film "Sicko" in 2007. In that film Moore went to several countries around the world, and reported that their health care system was better than our health care system, in particular, Canada and England. Take a look at this.

MICHAEL MOORE: I went across the city to a crowded hospital waiting room. How long did you have to wait here to get help?

CANADIAN WOMAN #1: 20 minutes

CANADIAN WOMAN #2: 45 minutes

CANADIAN MAN #2: I got helped right away.

CANADIAN WOMAN #3: You can see how crowded this is. They really do an amazing job.

MICHAEL MOORE: Did you have to get anyone's permission to come to this hospital?

CANADIAN MAN #2:: No.

CANADIAN MAN #3: No.

CANADIAN WOMAN #1: No.

CANADIAN WOMAN #3: We can go anywhere we want.

MICHAEL MOORE: You don't have to get pre-approved?

CANADIAN WOMAN #3: No, no. You just--

MICHAEL MOORE: By your own insurance company?

CANADIAN WOMAN #3: Oh no, oh heavens no.

MICHAEL MOORE: Can you choose your own doctor?

CANADIAN WOMAN #3: Oh sure. Oh yes.

MICHAEL MOORE: What's your deductible?

CANADIAN MAN #1: Nothing.

CANADIAN WOMAN #1: I don't think we have any.

CANADIAN MAN #2:: I don't know. I don't think there's any as far as I know.

CANADIAN WOMAN #3: It's really a fabulous system for making sure that the least of us and the best of us are taken care of.

BRITISH WOMAN #1: Oh, really it's not like that in the US? No. Not at all, no.

MICHAEL MOORE: So what do you pay to stay here?

BRITISH WOMAN #1: No one pays. They're asking, "How do people pay?" And I said, well there isn't, you don't, you just leave.

BRITISH MAN #1: It's just the insurance. There's no bill at the end of it, as it were.

MICHAEL MOORE: Even with insurance, there's bound to be a bill somewhere. So where's the billing department?

BRITISH WOMAN #1: There isn't really a billing department.

BRITISH WOMAN #2: There's no such thing as a billing department.

MICHAEL MOORE: What did they charge you for that baby?

BRITISH WOMAN #3: Sorry?

MICHAEL MOORE: You've got to pay before you can get out of here, right?

BRITISH WOMAN #3: No.

BRITISH MAN #1: No, no, no. Everything's on NHS.

BRITISH WOMAN #3: This is NHS.

BRITISH MAN #1: You know, it's not America.

BILL MOYERS: So what did you think when you saw that film?

WENDELL POTTER: I thought that he hit the nail on the head with his movie. But the industry, from the moment that the industry learned that Michael Moore was taking on the health care industry, it was really concerned.

BILL MOYERS: What were they afraid of?

WENDELL POTTER: They were afraid that people would believe Michael Moore.

BILL MOYERS: We obtained a copy of the game plan that was adopted by the industry's trade association, AHIP. And it spells out the industry strategies in gold letters. It says, "Highlight horror stories of government-run systems." What was that about?

WENDELL POTTER: The industry has always tried to make Americans think that government-run systems are the worst thing that could possibly happen to them, that if you even consider that, you're heading down on the slippery slope towards socialism. So they have used scare tactics for years and years and years, to keep that from happening. If there were a broader program like our Medicare program, it could potentially reduce the profits of these big companies. So that is their biggest concern.

BILL MOYERS: And there was a political strategy. "Position Sicko as a threat to Democrats' larger agenda." What does that mean?

WENDELL POTTER: That means that part of the effort to discredit this film was to use lobbyists and their own staff to go onto Capitol Hill and say, "Look, you don't want to believe this movie. You don't want to talk about it. You don't want to endorse it. And if you do, we can make things tough for you."

BILL MOYERS: How?

WENDELL POTTER: By running ads, commercials in your home district when you're running for reelection, not contributing to your campaigns again, or contributing to your competitor.

BILL MOYERS: This is fascinating. You know, "Build awareness among centrist Democratic policy organizations--"

WENDELL POTTER: Right.

BILL MOYERS: "--including the Democratic Leadership Council."

WENDELL POTTER: Absolutely.

BILL MOYERS: Then it says, "Message to Democratic insiders. Embracing Moore is one-way ticket back to minority party status."

WENDELL POTTER: Yeah.

BILL MOYERS: Now, that's exactly what they did, didn't they? They--

WENDELL POTTER: Absolutely.

BILL MOYERS: --radicalized Moore, so that his message was discredited because the messenger was seen to be radical.

WENDELL POTTER: Absolutely. In memos that would go back within the industry-- he was never, by the way, mentioned by name in any memos, because we didn't want to inadvertently write something that would wind up in his hands. So the memos would usually-- the subject line would be-- the emails would be, "Hollywood." And as we would do the media training, we would always have someone refer to him as Hollywood entertainer or Hollywood moviemaker Michael Moore.

BILL MOYERS: Why?

WENDELL POTTER: Well, just to-- Hollywood, I think people think that's entertainment, that's movie-making. That's not real documentary. They don't want you to think that it was a documentary that had some truth. They would want you to see this as just some fantasy that a Hollywood filmmaker had come up with. That's part of the strategy.

BILL MOYERS: So you would actually hear politicians mouth the talking points that had been circulated by the industry to discredit Michael Moore.

WENDELL POTTER: Absolutely.

BILL MOYERS: You'd hear ordinary people talking that. And politicians as well, right?

WENDELL POTTER: Absolutely.

BILL MOYERS: So your plan worked.

WENDELL POTTER: It worked beautifully.

BILL MOYERS: The film was blunted, right?

WENDELL POTTER: The film was blunted. It--

BILL MOYERS: Was it true? Did you think it contained a great truth?

WENDELL POTTER: Absolutely did.

BILL MOYERS: What was it?

WENDELL POTTER: That we shouldn't fear government involvement in our health care system. That there is an appropriate role for government, and it's been proven in the countries that were in that movie.

You know, we have more people who are uninsured in this country than the entire population of Canada. And that if you include the people who are underinsured, more people than in the United Kingdom. We have huge numbers of people who are also just a lay-off away from joining the ranks of the uninsured, or being purged by their insurance company, and winding up there.

And another thing is that the advocates of reform or the opponents of reform are those who are saying that we need to be careful about what we do here, because we don't want the government to take away your choice of a health plan. It's more likely that your employer and your insurer is going to switch you from a plan that you're in now to one that you don't want. You might be in the plan you like now.

But chances are, pretty soon, you're going to be enrolled in one of these high deductible plans in which you're going to find that much more of the cost is being shifted to you than you ever imagined.

BILL MOYERS: I have a memo, from Frank Luntz. I have a memo written by Frank Luntz. He's the Republican strategist who we discovered, in the spring, has written the script for opponents of health care reform. "First," he says, "you have to pretend to support it. Then use phrases like, "government takeover," "delayed care is denied care," "consequences of rationing," "bureaucrats, not doctors prescribing medicine." That was a memo, by Frank Luntz, to the opponents of health care reform in this debate. Now watch this clip.

REP. JOHN BOEHNER: The forthcoming plan from Democratic leaders will make health care more expensive, limit treatments, ration care, and put bureaucrats in charge of medical decisions rather than patients and doctors.

SEN. MITCH MCCONNELL: Americans need to realize that when someone says "government option," what could really occur is a government takeover that soon could lead to government bureaucrats denying and delaying care, and telling Americans what kind of care they can have.

SEN. JON KYL: Washington run healthcare would diminish Americans' access to quality care, leading to denials, shortages and long delays for treatment.

REP. JOE WILSON: How will a government run health plan not lead to the same rationing of care that we have seen in other countries?

REP. TOM PRICE: We don‘t want to put the government, we don't want to put bureaucrats between a doctor and a patient.

BILL MOYERS: Why do politicians puppet messages like that?

WENDELL POTTER: Well, they are ideologically aligned with the industry. They want to believe that the free market system can and should work in this country, like it does in other industries. So they don't understand from an insider's perspective like I have, what that actually means, and the consequences of that to Americans.

They parrot those comments, without really realizing what the real situation is.

I was watching MSNBC one afternoon. And I saw Congressman Zach Wamp from Tennessee. He's just down the road from where I grew up, in Chattanooga. And he was talking-- he was asked a question about health care reform. I think it was just a day or two after the president's first-- health care reform summit. And he was one of the ones Republicans put on the tube.

And he was saying that, you know, the health care problem is not necessarily as bad as we think. That of the uninsured people, half of them are that way because they want to "go naked."

REP. ZACH WAMP: Half the people that are uninsured today choose to remain uninsured. Half of them don't have any choice but half of them choose to, what's called, go naked, and just take the risk of getting sick. They end up in the emergency room costing you and me a whole lot more money.

WENDELL POTTER: He used the word naked. It's an industry term for those who, presumably, choose not to buy insurance, because they don't want to. They don't want to pay the premiums. So he was saying that half... Well, first of all, it's nothing like that. It was an absolutely ridiculous comment. But it's an example of a member of Congress buying what the insurance industry is peddling.

BILL MOYERS: Back in 1993, the Republican propagandist, William Kristol, urged his party to block any health care proposal, in order to prevent the Democrats from being seen as the quote, "generous protector of the middle class." But today, you've got some Democrats who are going along with the industry.

Max Baucus, the senator from Montana, for example, the most important figure right now in this health care legislation that's being written in the Senate. He's resisted including a public insurance option in the reform bill, right?

WENDELL POTTER: That's right.

BILL MOYERS: Why is the industry so powerful on both sides of the aisle?

WENDELL POTTER: Well, money and relationships, ideology. The relationships-- an insurance company can hire and does hire many different lobbying firms. And they hire firms that are predominantly Republican and predominantly Democrat. And they do this because they know they need to reach influential members of Congress like Max Baucus. So there are people who used to work for Max Baucus who are in lobbying firms or on the staff of companies like CIGNA or the association itself.

BILL MOYERS: Yeah, I just read the other day, in "The Washington Post," that Max Baucus's staff met with a group of lobbyists. Two of them had been Baucus's former chiefs of staff.

WENDELL POTTER: Right.

BILL MOYERS: I mean, they left the government. They go to work for the industry. Now they're back with an insider status. They get an access, right?

WENDELL POTTER: Oh, they do, they do. And these lobbyists' ability to raise money for these folks also is very important as well.

Lobbyists, many of the big lobbyists contributed a lot of money themselves. One of the lobbyists for one of the big health insurance company is Heather Podesta, the Podesta Group, and she's married to Tony Podesta, who's a brother of John Podesta.

BILL MOYERS: Who used to be the White House chief of staff.

WENDELL POTTER: Right. Right. And they're Democrats. And my executives wanted to meet with — and when I say my, the people I used to work for--

BILL MOYERS: At CIGNA.

WENDELL POTTER: Yeah, wanted to meet with Hillary Clinton, when she was still in the Senate and still a candidate for president. Well, that's hard to do. That's hard to pull off, but she did. That just shows you that you can, through the relationships that are formed and that the insurance industry pays for, by hiring these lobbyists, you can your foot in the door. You can get your messages across to these people, in ways that the average American couldn't possibly.

BILL MOYERS: So it's money that can buy access to have their arguments heard, right?

WENDELL POTTER: That's right.

BILL MOYERS: When ordinary citizens cannot be heard.

WENDELL POTTER: Absolutely right. It's the way the American system has evolved, the political system. But it does offend me, that the vested special interests, who are so profitable and so powerful, are able to influence public policy in the way that they have, and the way that they've done over the years. And the insurance industry has been one of the most successful, in beating back any kinds of legislation that would hinder or affect the profitability of the companies.

BILL MOYERS: Why is public insurance, a public option, so fiercely opposed by the industry?

WENDELL POTTER: The industry doesn't want to have any competitor. In fact, over the course of the last few years, has been shrinking the number of competitors through a lot of acquisitions and mergers. So first of all, they don't want any more competition period. They certainly don't want it from a government plan that might be operating more efficiently than they are, that they operate. The Medicare program that we have here is a government-run program that has administrative expenses that are like three percent or so.

BILL MOYERS: Compared to the industry's--

WENDELL POTTER: They spend about 20 cents of every premium dollar on overhead, which is administrative expense or profit. So they don't want to compete against a more efficient competitor.

BILL MOYERS: You told Congress that the industry has hijacked our health care system and turned it into a giant ATM for Wall Street. You said, "I saw how they confuse their customers and dump the sick, all so they can satisfy their Wall Street investors." How do they satisfy their Wall Street investors?

WENDELL POTTER: Well, there's a measure of profitability that investors look to, and it's called a medical loss ratio. And it's unique to the health insurance industry. And by medical loss ratio, I mean that it's a measure that tells investors or anyone else how much of a premium dollar is used by the insurance company to actually pay medical claims. And that has been shrinking, over the years, since the industry's been dominated by, or become dominated by for-profit insurance companies. Back in the early '90s, or back during the time that the Clinton plan was being debated, 95 cents out of every dollar was sent, you know, on average was used by the insurance companies to pay claims. Last year, it was down to just slightly above 80 percent.

So, investors want that to keep shrinking. And if they see that an insurance company has not done what they think meets their expectations with the medical loss ratio, they'll punish them. Investors will start leaving in droves.

I've seen a company stock price fall 20 percent in a single day, when it did not meet Wall Street's expectations with this medical loss ratio.

BILL MOYERS: And they do what to make sure that they keep diminishing the medical loss ratio?

WENDELL POTTER: Rescission is one thing. Denying claims is another. Being, you know, really careful as they review claims, particularly for things like liver transplants, to make sure, from their point of view, that it really is medically necessary and not experimental. That's one thing. And that was that issue in the Nataline Sarkisyan case.

But another way is to purge employer accounts, that-- if a small business has an employee, for example, who suddenly has have a lot of treatment, or is in an accident. And medical bills are piling up, and this employee is filing claims with the insurance company. That'll be noticed by the insurance company.

And when that business is up for renewal, and it typically is up, once a year, up for renewal, the underwriters will look at that. And they'll say, "We need to jack up the rates here, because the experience was," when I say experience, the claim experience, the number of claims filed was more than we anticipated. So we need to jack up the price. Jack up the premiums. Often they'll do this, knowing that the employer will have no alternative but to leave. And that happens all the time.

BILL MOYERS: So, the more of my premium that goes to my health claims, pays for my medical coverage, the less money the company makes.

WENDELL POTTER: That's right. Exactly right.

BILL MOYERS: So they want to reverse that. They don't want my premium to go for my health care, right?

WENDELL POTTER: Exactly right. They--

BILL MOYERS: Where does it go?

WENDELL POTTER: Well, a big chunk of it goes into shareholders' pockets. It's returned to them as part of the investment to them. It goes into the exorbitant salaries that a lot of the executives make. It goes into paying sales, marketing, and underwriting expenses. So a lot of it goes to pay those kinds of administrative functions. Overhead.

BILL MOYERS: When a member of Congress asked the three executives who appeared before the committee-- if they would end the practice of canceling policies for sick enrollees, they refused. Why did they refuse?

WENDELL POTTER: Well, they were talking to Wall Street at that moment. They were saying that because-- I guess they might have to spend some additional dollars to be more vigilant, to make sure that they were not rescinding a policy inappropriately. It makes no sense. The only reason they would have said that is to cover themselves and to send a signal to Wall Street that you know, we're going to continue business as usual here.

BILL MOYERS: You know, I've been around a long time. And I have to say, I just don't get this. I just don't understand how the corporations can oppose a plan that gives the unhealthy people a chance to be covered. And they don't want to do it themselves.

WENDELL POTTER: Well, keep in mind, what they want to do is enhance their profits. Enhance shareholder value. That's number one. And the way that the business that they're in is health care, certainly. But their primary motivation is to reward their shareholders.

Most of the shareholders are large, institutional investors and hedge funds. Hedge fund managers are the ones who look at the stock and investors for large organizations. It's not mom and pop investor.

BILL MOYERS: You wrote a column with the headline, "Obama's false friends of health reform." You use as a prime example a man named Ron Williams, who is at the top of the list of insurance executives in terms of their compensation. We actually saw Ron Williams at President Obama's Town Hall meeting.

RON WILLIAMS: I would commend the president for the commitment he's made to really try to get and keep everyone covered. And I think as a health insurance company we are committed to that.

BILL MOYERS: Who is Ron Williams, and why do you use him as the example of what Wall Street expects and wants from the insurance companies?

WENDELL POTTER: He was recruited by Aetna from WellPoint. Aetna had gone on a buying binge. There's been an enormous amount of consolidation in the health insurance industry over the last several years. Aetna bought a lot of competitors.

It reached 21 million members. But what it realized and what investors began to see is that a lot of the businesses that it had bought were not all that profitable. So they were-- Aetna was in a pickle. And they saw their stock price starting to plummet. So they brought-- among the things they did was bring Ron Williams in. And Williams, among the first thing he did was order a revamp of the IT system, so that--

BILL MOYERS: The information technology system--

WENDELL POTTER: Exactly, so that the company could determine more about which accounts were not profitable or margining profitable. So with that new system, he was able, and the other executives to identify the accounts that they wanted to get rid of. And over the course of a very few years, they shed 8 million members.

BILL MOYERS: 8 million policy holders?

WENDELL POTTER: 8 million people, men, women, and children, yes.

Some of them were shed by intention. Some, I'm sure, probably walked because the-- or left for whatever other reason, but they intentionally had this program to purge these accounts. Eight million fewer people were enrolled in Aetna's plans. Many of them undoubtedly joined the ranks of the uninsured, because their employers had been purged.

BILL MOYERS: So what happened to Aetna's stock?

WENDELL POTTER: Went up. And it has--

BILL MOYERS: And so did Ron's--

WENDELL POTTER: And--

BILL MOYERS: --compensation, right?

WENDELL POTTER: Ron's compensation and his stock on Wall Street. RON WILLIAMS: And so I think in the context of thinking about a government plan, what we say is, let's identify the problem we're trying to solve. Let's work collaboratively with physicians, hospitals, and other health care professionals, and make certain that we solve the problem, as opposed to introduce a new competitor who has the rulemaking ability that government would have.

BILL MOYERS: You know, there's an irony, because you hear the companies and their trade groups talking about how we don't want a public option that would put a bureaucrat between a patient and his doctor. But you've just described a situation in which a CEO is actually between a doctor and the patient,

WENDELL POTTER: It's true. And that same thing happened, in the Nataline Sarkisyan case. You had a corporate bureaucrat making a decision on coverage. So, they are trying to make you worry. And fear a government bureaucrat being between you and your doctor. What you have now is a corporate bureaucrat between you and your doctor.

BILL MOYERS: Whose motive is profit. Understandably, naturally is profit.

WENDELL POTTER: Right.

BILL MOYERS: But companies, any company is in business to make a profit, right?

WENDELL POTTER: Oh, absolutely.

BILL MOYERS: So how can you object? How can we object when an insurance company wants to increase its profits? That's a serious question. I mean, it sounds like a set-up but it's a serious question.

WENDELL POTTER: It's a very serious question. And I think that people who are strong advocates of our health care system remaining as it is, very much a free market health care system, fail to realize that we're really talking about human beings here. And it doesn't work as well as they would like it to. Yeah, there's nothing wrong. And I'm a capitalist as well. I think it's a wonderful thing that companies can make a profit. But when you do it in such a way that you are creating a situation in which these companies are adding to the number of people who are uninsured and creating a problem of the underinsured then that's when we have a problem with it, or at least I do.

BILL MOYERS: This is the key question for me. Can health reform that includes a public plan actually rid our system of the financial incentive on the part of the insurance industry to provide less for more?

WENDELL POTTER: It will help. It would help. Would it rid it? No, I don't think it would, because of the for-profit structure that is now dominant in this country. But the public plan would do a lot to keep them honest, because it would have to offer a standard benefit plan. It would have to operate more efficiently, as does the Medicare program. It would be structured, I'm certain on a level playing field, so that it wouldn't be unfair advantage to the private insurance companies. But because it could be administered more efficiently, then the private insurers, they would have to operate more efficiently. And that 20 cents in that medical loss ratio we talked about earlier might get narrower. And they don't want that.

BILL MOYERS: As this debate unfolds in the next month, into the fall, what should we be watching for? Tell us as an insider what to look for that is more than meets the eye?

WENDELL POTTER: When we see the actual legislation, when there's something before Congress, and it will happen, presumably, within the next few weeks, you'll start seeing a lot more criticism of it. And the special interests will be attacking this or that. The AMA will be upset about something. The pharmaceutical industry will be upset about something. The insurance industry will not like this or that. It's, you know, a lot of money is made in this country off of sick people. And then you'll start seeing a lot more of the behind-the-scenes attacks on this legislation, in an attempt to kill it. The status quo is what would work best for these industries.

BILL MOYERS: In other words, if the industry is able to kill reform, or the Democrats and the Republicans can't agree on a proposal, that's what the industry really wants.

WENDELL POTTER: Exactly. And it happened in '93 and '94. And just about every time there has been significant legislation before Congress, the industry has been able to kill it. Yeah, the status quo works for them. They don't like to have any regulation forced on them or laws forced on them. They don't want to have any competition from the federal government, or any additional regulation from the federal government. They say they will accept it. But the behavior is that they will not-- you know, they'll not do anything after say this plan fails. Say nothing happens. They're saying now what they did in '93, '94. "We think preexisting conditions is a bad thing," for example. Let's watch and see if they really take the initiative to do anything constructive. I bet you won't see it. They didn't then.

BILL MOYERS: Well, on the basis of the past performance, and on the basis of your own experience in the industry, can we believe them when they say they will do these things voluntarily?

WENDELL POTTER: I don't think you can. I think that they will implement things that make them more efficient. And that enhance shareholder value. And if what they do contributes to that, maybe so. But now, they do say, they are in favor of an individual mandate. They want us all to be insured.

BILL MOYERS: For the government to require every one of us to have some policy.

WENDELL POTTER: Exactly. And that sounds great. It is an important thing that everyone be enrolled in some kind of a benefit plan. They don't want a public plan. They want all the uninsured to have to be enrolled in a private insurance plan. They want-- they see those 50 million people as potentially 50 million new customers. So they're in favor of that. They see this as a way to essentially lock them into the system, and ensure their profitability in the future. The strategy is as it was in 1993 and '94, to conduct this charm offensive on the surface. But behind the scenes, to use front groups and third-party advocates and ideological allies. And those on Capitol Hill who are aligned with them, philosophically, to do the dirty work. To demean and scare people about a government-run plan, try to make people not even remember that Medicare, their Medicare program, is a government-run plan that has operated a lot more efficiently.

And also, the people who are enrolled in our Medicare plan like it better. The satisfaction ratings are higher in our Medicare program, a government-run program, than in private insurance. But they don't want you to remember that or to know that, and they want to scare you into thinking that through the anecdotes they tell you, that any government-run system, particularly those in Canada, and UK, and France that the people are very unhappy.

And that these people will have to wait in long lines to get care, or wait a long time to get care. I'd like to take them down to Wise County. I'd like the president to come down to Wise County, and see some real lines of Americans, standing in line to get their care.

BILL MOYERS: Wendell Potter thank you very much for being with me on the Journal

WENDELL POTTER: Thank you for inviting me.
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