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Insurance Industry Flack Screws Up, Points Us to Report We Really Should Read

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I turned 43 a couple of weeks after I joined CIGNA in 1993. One of the birthday gifts from my new colleagues was a framed three-word quote by E. B. White: "Be obscure clearly."

We laughed and laughed. It was an inside joke -- and a perfect present for an HMO PR guy who more than a few times had to be obscure when responding to media inquiries. Reporters always wanted more information than I dared give them, but I had to give them something. Hence the need to follow White's sage advice.

That quote, by the way, was in Elements of Style, the classic 1959 book on writing that White coauthored with William Strunk Jr. White was not actually recommending obscure writing. He was just saying that if for some reason you felt you could not tell the whole truth, if there was no choice but to be obscure, at least use the active voice and proper grammar while doing it.

Successful flacks know how to use a variety of public relations tricks to obscure the truth -- being selective in the disclosure of information, for instance, or using statistics in misleading ways. Or pointing the finger of blame at someone else or "reframing" the issue about which reporters are asking.

I have kept that framed quote all these years. Now, though, I'm thinking it would have a better home in the office of the chief flack for the health insurance industry.

Yesterday, Robert Zirkelbach, spokesman for America's Health Insurance Plans (AHIP) took aim at the health care advocacy group Health Care for America Now (HCAN). HCAN took issue with AHIP's assertion that the average profit margin for health insurance firms is just 4.4 percent. Zirkelbach did not explain how he came up with that figure, but considering the fact that the big for-profit insurers had significantly higher margins than 4.4 percent last year (according to Yahoo! Finance), AHIP's calculations must have included the insurers that, at least in theory, don't make profits at all, like the so-called nonprofit Blue Cross and Blue Shield plans.

In a memo to editors and reporters Thursday afternoon, HCAN took issue with the 4.4 percent figure and accused AHIP of trying to pull the wool over journalists' eyes.

"AHIP's focus on profit margins is misleading and designed to protect their massive income by shifting attention away from their return on equity -- a key measure of profits as a percentage of the amount invested," HCAN's executive director, Ethan Rome, wrote.

"That return is a phenomenal 16.1 percent as of today. By that measure, health insurers are ranked fourth highest of the 16 industries in the health care sector. The health insurance industry has a higher return for investors than cell phone companies, beer companies, mortgage companies, life insurance companies, TV broadcasters, drug store companies, or grocery stores."

Zirkelbach, the health insurers' flack, responded in a Reaganesque, "there you go again," fashion. "Shocking," he wrote. He said Health Care for America Now had "released yet another deceptive, ideologically based attack on health plan profits. The data continue to show that this is an efficient, low-margin industry. It's time for them to get over the fact that the American people rejected the government-run plan and to start focusing on what's really driving health care cost growth."

So what are the "real drivers" of health care costs? Zirkelbach sent reporters a link to a chart on AHIP's blog called "Putting Health Plan Profits in Perspective." The chart shows, surprise, surprise, that health plan profits of $13.1 billion pale in comparison to those real drivers. The biggest such driver by far, according to AHIP's chart, is "defensive medicine" as practiced by doctors worried about getting sued, followed closely by "fraud and abuse in the entire system."

The source of that chart, according to AHIP, is an October 2009 white paper by Thomson Reuters entitled, " Where Can $700 Billion be Cut Annually from the U.S. Health Care System?" The title of the report is hyperlinked, but when you click on it, you get a page of gobbledygook.

I actually searched for the report and read it closely. Guess what? There is no such chart in the Thomson Reuters white paper and no breakdown of cost drivers as depicted by AHIP. In fact, had AHIP executives actually read the paper, they surely would not have brought it to the attention of the media. The insurance industry does not fare well at all.

A major point of the Thomson Reuters paper is that up to $700 billion that we spend on health care in the U.S. is wasted and that a big reason for that waste is our multi-payer system of private health insurance companies.

"Health care providers must deal with dozens of health benefit plans to bill successfully for services rendered," the report said. "Health plans must support systems for underwriting, claims administration, provider network contracting, and broker network management... Simplifying our health care system's administration could reduce annual health care costs by almost $300 billion."

Then there were these bullet points that surely will never appear in a health insurance industry presentation:

• The average U.S. hospital spends one quarter of its budget on billing and administration, nearly twice the average in Canada. American physicians spend nearly eight hours per week on paperwork and employ 1.66 clerical workers per doctor, far more than Canada.

• In 1999, health administration costs totaled at least $294.3 billion in the United States, or $1,059 per capita, as compared with $307 per capita in Canada. After exclusions, administration accounted for 31 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada.

I guess we actually should thank Zirkelbach for drawing our attention to the Thompson Reuters report. You won't find the chart AHIP says is in it, but you will find a lot of other useful information that, to AHIP's horror, might make you wonder what value private insurers actually add to the American health care system.