Romney says corporations are people, so why aren't HMO hoodlums who steal from taxpayers in jail?

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If corporations are people, as Mitt Romney told a group today, then why aren't the companies caught defrauding Medicaid and Medicare in jail?

Romney's full statement, quoted in today's Huffington Post, is:

"Corporations are people, my friend... of course they are. Everything corporations earn ultimately goes to the people. Where do you think it goes? Whose pockets? Whose pockets? People's pockets. Human beings my friend."

"Everything ultimately goes to the people." That sure isn't the case with the big HMOs caught defrauding the taxpayers of billions of dollars intended to provide medical services to children.

I've asked before: if you were an employer and caught an employee stealing from you, would you hire that person again? And if you did and they did it again, would you hire them back a second time...a third time....?

Why is this any different from the Administration continuing to award federal subsidies to corporations already caught stealing from the government?

PR for the health insurance industry has done a great job fogging the mirror on Medicaid and Medicare. They have framed the entire debate in terms of the skyrocketing cost of medical care, the undeserving nature of recipients, and how the public budgets for these programs should be cut.

The problem is reality conflicts rather substantially with this PR "spin."

First, let's get the idea that Medicaid is for the poor or unemployed out of the way. Two-thirds of the national budget goes to keeping children and adults with disabilities, along with the elderly, out of institutions. Our country actually has a wonderful set of laws and regulations designed to keep families together, by providing medically necessary services in the individual's home. When the Medicaid budget starts getting cut, it's this two-thirds that is affected the most, and carries the highest human toll in misery and death.

Second, we need to remember that just because expenses are reported by insurance companies to federal authorities, doesn't mean those figures are accurate. The whistleblower case against Wellcare unsealed last summer reported expenses inflated by up to 299%. In Florida, investigators discovered Unitedhealth had billed the state for more than $2 million of speech therapy for children with disabilities that never took place.

Ironically, the insurance companies use these same inflated costs to justify premium increases in their state Medicaid contracts. In fact, the companies have to show they are losing money on the state contracts to get the rate increase. But if they were losing money in all the states that have awarded increases, how are they continuing to report record profits?

In its first quarter 2011 filing with the SEC, Wellcare said that "Hawaii program rate increases ... we believe have improved the stability of the program." With the company's operating profit jumping from 13.1% to 19.3% just in the past nine months, how much of the raise is being applied towards costs is in serious question.

Meanwhile, when PR flacks and industry reps talk about cutting provider rates, they forget to mention that doing so just increases the corporate HMO's profit margin. The HMO is not a "provider" in this lingo; it has replaced the state accounting and quality control bureaucracies with its own employees. The providers are the nursing agencies, pharmacies, hospitals, medical supply companies, day care centers for people with disabilities and other small businesses that provide direct services to the people needing them.

The biggest myth of all is that the issue that needs to be addressed is how to cut budgets. In essence, we are being asked to make decisions about cutting budgets without knowing how those budgets are spent. It might seem logical to equate Medicaid budgets with how much is spent on medical care, but that leaves out the twenty-to-fifty percent profit the HMO is scooping off the top of every payment they get from the government. Right now that totals somewhere between $2 billion and $5 billion a month, depending on how much fraud is going on.

As quietly as the government has been auctioning off Medicaid and Medicare to for-profit HMOs, the White House has taken steps to let these corporations know that federal regulators won't be watching too closely how these funds are actually spent.

On April 26, the Administration backed an agreement between Wellcare, nine states and the federal government, settling all the Medicaid fraud cases against them for $137 million. In return, the government agreed not to consider Wellcare a criminal and not to hold this non-criminal past against them in any future contract negotiations.

On May 6, the Administration published proposed new Medicaid access regulations that dropped jaws across Washington and the health reform movement. According to Sara Rosenbaum, Chair of the health policy department at George Washington University, "rather than being a forceful implementation of the law, the proposed rule is a model of inaction." She went on to call it "the first sign of the administration’s refusal to intervene" in state Medicaid practices, including those concerned with how government money is being spent. She calls the rule "a model of inaction," the sole remaining purpose of which is "to establish what might charitably be characterized as an information-gathering exercise."

Even this extremely watered down proposed law goes further by exempting everyone enrolled in Medicaid HMOs from inclusion in the five year information study.

Just from the year of statistics I took in college, I know any study that excludes seventy percent of the affected population has dubious accuracy.

Then on May 26, the White House took an action that could end up turning everyone receiving Medicaid into second class citizens. Defying HHS Secretary Sebellius as well as a number of health advocacy groups, Obama backed a "friend of the court" document submitted to the Supreme Court that advocates denying anyone on Medicaid the protection of federal law.

Simon Lazarus of the National Senior Center Law Center wrote:

The brief charts a path for the Supreme Court to permit federal courts to continue routinely to apply federal supremacy to strike down state laws protecting consumers, workers, retirees, bank depositors and others, alleged by business litigants to conflict with federal laws, while arbitrarily withholding identical protection from the vulnerable populations served by Medicaid and other safety net laws.

Rosenbaum warned in Politico that "there’s “no stopping point … in terms of its spillover effects” if the Supreme Court broadly restricts individuals’ access to the courts over state implementation of such a federal program."

If Romney thinks corporations are people, then Obama's actions tell us he values these corporations over the rights of the individual.

The country's most medically vulnerable population has been auctioned off to a bunch of criminal hoodlums with no regulatory strings attached.

Please sign our petition to stop this enslavement.

Wall Street HMOs use fraud, government handouts to pad profits, outgrowing S&P 500 by 25%

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After the S&P tumbled yesterday to a year-to-date loss of 10.3%, for-profit HMOs like Unitedhealth, Wellcare, Aetna and Humana remained showing a 13.7 -19.9% gain since January 1. The economy-immune growth of these companies is entirely fueled by government handouts currently running about $11 billion per month.

We have a tendency to talk about Medicaid and Medicare as if budgets and people are the same. We talk about the people who will be affected by Medicaid or Medicare cuts, under the apparent assumption that the budgets are actually paid out to the people. That is what happens in every other country that runs a government health system. It is not, however, what is happening here in the US where our government public health programs - Medicaid and Medicare - are increasingly owned by big business HMOs.

Ten for-profit HMOs control the private Medicaid/Medicare market. Revenues from commercial (employer) accounts over the past three years have been stagnant at best, but Medicaid and Medicare revenues are accounting for 85% of the $2.7 billion per month increase in total premiums received.

The problem is, as the private HMO industry has grown, so has, apparently, criminal Medicaid fraud.

Unitedhealth Group, Wellcare, Amerigroup, and a fourth HMO now merged into Centene (Vista) were all found to be stealing taxpayer money in Florida that was destined for children's health care. According to the Associated Press, the companies also participated in the state's pilot privatized Medicaid HMO plan which, in spite of numerous consumer complaints, has now been expanded statewide.

It was possible to catch this criminal fraud because this specific contract between Florida and the HMOs required 85% of the taxpayer funds received to be spent on healthcare. (Few state contracts require minimum spending amounts from Medicaid contracts).

New bills were signed into Florida law earlier this year by Governor Rick Scott requiring everyone in Medicaid to join a for-profit HMO. The bills do not stipulate any minimum spending requirement, although they do require the HMOs to refund the state anything they make in profit over 5%.

Our experiences in Hawaii with Unitedhealth and Wellcare indicate the likelihood of Florida receiving any rebated profits is laughable. This type of fraud seems to require some sort of collusion between state Medicaid bureaucrats and the corporations, for the former to turn a blind eye to the latter's illegal actions. The potential for fraud is enhanced because there are no viable sanctions for violating federal Medicaid law. (The only sanction is for the feds to withhold all Medicaid payments to a state; CMS tried that in Alaska a couple of years ago and it was considered a debacle).

Unitedhealth testified in Hawaii federal court last year they were losing money on their Medicaid contract with the state. Rumors on the street are that the company is still crying crocodile tears over its purported losses, presumably laughing all the way to bank with (pre-tax) net earnings reaching 8.1% of premium revenue.

Personally, I find it ironic that Florida has accused Unitedhealth of stealing more than $2 million from children by forging speech therapy records, when the company has steadfastly refused to provide my daughter with such therapy since September 2009.

United and Wellcare also seem to have found a way, at least in Hawaii, to ensure audits are nearly impossible. Most of their payments from the state of Hawaii were made outside of the state's auditable medical IT software system.

Recent moves by the White House are increasing the power these HMOs have over people's lives. A "friend of the court" brief submitted by the Department of Justice to the Supreme Court recommends exempting Medicaid recipients from the sovereignty of the "law of the land." A new Medicaid access rule published in the Federal Register essentially guarantees a federal "hands off" policy towards state Medicaid programs and the corporate HMOs with whom they contract.

The end result of all this? Our government is currently paying about $11 billion every month to for-profit HMOs to handle Medicaid and Medicare, with a promise not to let nasty federal regulations interfere with corporate performance. If the HMOs want to skim twenty-to-fifty percent off the top towards corporate profits, no problem. If children and adults with disabilities, who account for more than two-thirds of national Medicaid expenditures, get sicker, have to be institutionalized or even die, no problem.

It's hard to imagine the Navy paying for a battleship and being satisfied with only half of one.

The latest round of SEC filings indicate another 1.7 million people will be herded into for-profit Medicaid HMOs in the next few months. Hawaii is getting ready to put its entire Medicaid program (220,000) up for bid, with both Wellcare and United expected to be bidding. Hawaii Gov. Neil Abercrombie is continuing his abject pandering to both corporations, regardless of the number of federal regulatory and civil rights investigations brought upon the state by the two within the past eighteen months.

This is a federal subsidy that must be stopped. Please sign our petition to put an end to President Obama's pandering to big business HMOs.

HMO spends $627 million in public funds defending against Federal criminal fraud charges

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A company whose income derives entirely from taxpayer funds has spent $627.4 million of our money defending itself against federal criminal fraud charges. The figures are reported in Wellcare's SEC filings between January 1, 2009 and June 30, 2011.

Yet, while the S&P 500 is down 10.34% year to date, Wellcare's stock remains up 16.74% even after today's spectacular plummit.

Wellcare is not the only for-profit managed care company continuing to show significant year to date growth. Unitedhealth Group is up 16.44%, Humana up 19.93%, while Aetna, Coventry, Wellpoint, and Centene are all higher year to date.

Ironically, growth in all these companies has been fueled by federal and state tax-payer money. Total Medicare and Medicaid payouts to for-profit HMOs are running almost $11 billion per month. Life and death decisions for more than 33 million Americans, most of them medically vulnerable, have been sold off to these publicly funded HMOs, whose decision making is based more on shareholder profit than medical need.

The Affordable Care Act has tried to put in place minimum spending requirements of 80 to 85% for commercial and Medicare HMOs. Few states require any minimum spending on Medicaid contracts. Limited regulation and an absence of any effective enforcement of how taxpayer money is spent has led to fraudulent reporting of actual medical costs by up to 299%.

Somewhere between $2 billion and $6 billion a month is saved from government-paid premiums for Medicaid and Medicare by the HMOs simply refusing to authorize needed services.

Which brings us back to Wellcare's $627 million in taxpayer money spent defending itself against charges it has been stealing from us taxpayers.

Am I the only person who has a problem with this?

Obama's $1 trillion handout to big business insurers, Part 2

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Once you start following the money rather than the rhetoric, you can start seeing how the Medicaid/Medicare reality has little do to with big business insurers' PR campaign.

Myth 1:  We need to find a good way to reduce costs; rising costs of services is  the problem.

Reality:  When private insurers create HMOs for Medicaid and Medicare, the company is paid by the government a set amount per month per person. With little to no regulation let alone enforcement of minimum spending requirements, reducing costs just gives the company higher profits. 

I've been puzzling for over a month now over an article by Paul Krugman. He states, "Yes, Medicare has to get serious about cost control; it has to start saying no to expensive procedures with little or no medical benefits, it has to change the way it pays doctors and hospitals, and so on."  He compares US Medicare with Canadian health care, which is "less open-ended and more cost-conscious."

The Canadian public health system probably doesn't have a corporate middleman who slips twenty to fifty percent of premiums into his back pocket every month.

Myth 2: Health care companies are making money because people can't afford to spend their deductibles.

Reality:  Unitedhealth sold this line to the Wall Street Journal after last year's earnings figures came out.  It was apparently deemed successful enough that the PR department used it again in May with the New York Times.  This time they brought out some commercial policy holders to interview who substantiated their claim.

In the past three years, Unitedhealth's commercial premiums have increased by only $334 million a month.  Government revenues paid by Medicaid and Medicare are up almost $1.5 billion a month.  Corporate profits from not spending government-paid premiums are up 67%, while the premium revenues themselves are up only 51%.

Unitedhealth's soaring profits are more accurately represented by the family who has been denied hospitalization, or medications, or home care services for their child or grandparent with a disability.

We don't make as good a PR statement, however.

Obama's $1 trillion handout to big business insurers

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Federal hand-outs to the health insurance industry could top $1 trillion in the next five years. Between twenty and fifty percent of that will be saved off the top as net profit.

The handouts are not loans or grants or even tax breaks. They are the product of the Administration's policy supporting auctioning off state Medicaid and federal Medicare contracts to publicly traded, for profit health insurance corporations.

Based on SEC filings for the first three months of 2011, government payments to the top ten for-profit insurers were running around $10.9 billion a month, up ten percent just in the previous six months. Depending on how much fraud is going on, between $1.9 and $5.4 billion of that gets "saved" every month towards corporate profits by the company simply refusing to spend it.

Obama's willingness to concede to cuts in entitlements will probably have little influence on these payouts reaching $1 trillion in the next five years. The White House has given off too many signals in the past six months of its willingness to give private insurers a free hand in how they spend federal funds. The Administration has even gone so far as letting one company off the hook for criminal Medicaid fraud in nine states.

Just as slavery cloaked itself in the myth of the paternalistic landowner, the public war raging today over Medicaid and Medicare is using the myth of the undeserving poor to detract attention from the obscene private profits being generated with public funds.

In reality, the people whose lives are being affected the most are our country's fourteen million children and adults (including the elderly) with disabilities. Two-thirds of the nation's total Medicaid budget is allocated to paying for medical services to keep people with disabilities at home with their families, rather than shutting them up into institutions. More and more of that money is being paid out to companies more responsible to shareholders than policyholders.

What the President has auctioned off to big insurers is control over life and death of our society's most vulnerable citizens.

The new dandies of Wall Street

Ten health insurance companies control the private Medicaid/Medicare market. Four exist completely on public funding: Amerigroup, Centene, Molina and Wellcare. The other six (Aetna, Coventry, Health Net, Humana, Unitedhealth and Wellpoint) have been replacing lost corporate group business with new Medicaid and Medicare "managed care" policies.

Unitedhealth's quarterly net earnings (three-month profit before taxes) jumped from $505 million for April - June, 2008, to over $2.1 billion in the first three months of 2011. Quarterly commercial premiums were up by only $1 billion, but Medicaid/Medicare quarterly revenues were up by over $4 billion.

At Aetna, commercial revenue is down from 79% of total quarterly premiums to 74%. Its replacement with Medicaid/Medicare government funding, however, has accompanied a 22% increase in quarterly net earnings.

Among the ten, Medicaid membership is up 19%, and the mix of Medicaid and Medicare products is up 33%, from 27.7 million to 36 million policies. Both commercial membership and quarterly commercial revenues are down.

The relationship between the number of new Medicaid enrollees and the revenue they generate for the company is not a straight one to one ratio. Humana and Coventry both reported a loss in Medicaid membership at the same time as an increase in Medicaid revenue. Wellcare had a three percent increase in Medicaid membership generating a 14% increase in Medicaid revenues, and Unitedhealth and Amerigroup both showed almost a three-to-one ratio of Medicaid revenue growth to membership change.

In order to understand why Medicaid (and Medicare) contracts are so lucrative, it is best to start with what one writer has called the insurance industry's "dirty secret."


The "Patient Loss Ratio" and why it's important to Wall Street

When state Medicaid programs are carved up and auctioned off to the lowest bidder, they include a rate schedule used to determine a monthly payment per person. The insurer is paid a set amount per month per person, depending on how healthy the person is. For really healthy people, the insurer may get only $400 a month from the government; for a medically fragile child living in a rural area, the company may be getting paid $25,000 a month by the government.

For the publicly traded health insurers winning these contracts, profit derives from the simple difference between how much the government is paying to provide services for each covered individual, and how much the company spends on that person.

In the health industry, it's called the "Medical Loss Ratio": how much is actually spent per individual as a percentage of the total premium paid for that person. Since the term seems to imply that expenses are a corporate loss, the "Patient Loss Ratio" represents how much every policyholder under Medicaid and Medicare is losing of their budget to corporate profits.

For example, a medically fragile child in a rural area who is dependent on technology to breathe and eat might have a monthly budget of $25,000 to pay for equipment and care services at home. That's what the company is paid every month, and it is less than the state would pay if the child was institutionalized. When the company is reporting an MLR of 80%, it means the so-called "managed care plan" has cut twenty percent of the child's services. For instance, the child's life may now be endangered by the loss of 200 hours of home nursing services per month, and the community has lost 1.25 full-time jobs.

Minimum spending requirements for Medicaid contracts are virtually non-existent. In a single case in Florida where a contract required an 80% minimum, all eight insurers were found to have fraudulently padded medical expenses by fourteen to sixty percent (in other words, the patients were losing between 34% and 80% of their budgets to profits).

Non-profit health insurers and even for-profit corporations with US Military contracts report spending ninety-five cents out of every premium dollar on actual medical costs. Nevertheless, the Administration, in an extremely generous mood, tried to set minimum spending requirements of only 80-85% for commercial and Medicare policies through the Affordable Care Act. However, states were allowed to apply for (and are receiving) "waivers" as low as 70% on the basis the local insurance industry will be inconvenienced.


What Al Capone, the drug cartels and health insurers have in common

Money breeds crime. The more excessive the potential profits, the more pervasive is the crime.  And the analogy between health insurers and the heroine trade was made two years ago.

A whistleblower complaint against Wellcare, Amerigroup, Unitedhealth, Humana and others was unsealed last summer. Sean Hellein, an executive at Wellcare, wore a wire for 18 months as part of an FBI investigation into Medicaid fraud. This is a must-read for anyone who wants to understand how pervasive criminal Medicaid fraud is within the heath insurance industry. Some of the methods revealed included:

* inflating medical costs on 161,170 claims by 218% to 299%;
* bullying terminally ill patients and the mothers of medically fragile babies into disenrolling  ("cherrypicking");
* setting up a Cayman Islands reinsurance subsidiary to overpay themselves;
* cooperation between companies in false-billing practices, to reduce the chances of getting caught; and
* tricking federal regulatory computers into doublecounting expenses.

Hellein's testimony also reveals how incompetent state regulators are at catching Medicaid fraud. From mid-2005 to the date of the document, a Florida computer error awarded an estimated $16.8 million in overpayments for one program to Wellcare, Unitedhealth, Amerigroup, Humana and two other HMOs. Another error that was capitalized on was made by actuarial firm Milliman Consultants. The Milliman report mistakenly over-priced expenses for one program by $19.4 million over two years. Aware of the error, Wellcare fraudulently used the actuarial report to apply for (and receive) a rate increase.

In late April, 2011, Wellcare reached a settlement on criminal Medicaid fraud charges with nine states and the federal government. The White House apparently supported letting Wellcare off the hook by promising never to call them gangsters for what they had done, and not to hold their past gangster activities against them in future federal contract awards.

Would Fort Knox have hired Al Capone? As the mother of one of the millions of children victimized by this fraud, it feels tantamount to the President forcing me to hire a pedophile as a babysitter.


Federal and state funds diverted from medical care for  children and adults with disabilities can mean the difference between living at home with family, or being institutionalized; it can mean the difference between living surrounded by loved ones, and a slow, lonely and miserable death.

We need to look beyond the rhetoric on Medicaid and Medicare and pay attention to how our tax money is being spent. 

I've consolidated my document collection here.