Progress Report: President Shills For Insurance Industry

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Thu, 06 Jan 2005 08:29:47 -0800

Progress Report: President Shills For Insurance Industry

 

 

" American Progress Action Fund "

<progress

 

 

The Progress Report

 

 

by Christy Harvey, Judd Legum and Jonathan Baskin

with Nico Pitney and Mipe Okunseinde

..January 6, 2005

 

PATIENTS' RIGHTS President Shills For Insurance Industry

CORPORATE POWER The War Against Reform

UNDER THE RADAR Go Beyond The Headlines

 

PATIENTS' RIGHTS

President Shills For Insurance Industry

 

President Bush traveled to Collinsville, IL, yesterday on behalf of

the insurance industry to push his plan to restrict justice for

injured plaintiffs. The president claimed " the prospect of big jury

awards in medical malpractice cases was causing insurance rates to

soar and doctors to abandon their practices. " If you scrape away the

overheated rhetoric and look at the reality, however, a very different

picture emerges. His proposal would have no real effect on the cost of

health care. The caps would " disproportionately affect " children and

seniors who live on fixed incomes. According to the Congressional

Budget Office, it also would " undermine incentives for safety " while

at the same time making it " harder for some patients with legitimate

but difficult claims to find legal representation. "

 

THE INEFFECTIVE ILLINOIS ILLUSTRATION: President Bush chose Madison

County, IL, to stump for this proposal because, he said, " the county

illustrated the problems " of junk lawsuits. Nearly 700

malpractice/wrongful death suits were filed there between 1996 and

2003. But here's what Bush doesn't tell you: Since the system usually

does work, most frivolous lawsuits are thrown out of court early in

the process. Of those 700 lawsuits, for example, only 14 resulted in

verdicts and only six of those favored the plaintiffs. And of those

six, only one was actually large enough to be affected by the

president's proposed $250,000 cap.

 

THE MYTH OF THE CAPPING EFFECT: Capping malpractice awards would have

little to no effect on skyrocketing malpractice insurance costs. The

CBO found malpractice costs account for less than 2% of health care

spending. In fact, an analysis by the CBO shows capping medical

malpractice would affect private health insurance premiums by a measly

one half of one percent.

 

NO LINK BETWEEN PAYOUTS AND PREMIUMS: Today's high premiums are a

result of insurance industry pricing practices which gouge doctors.

Consider: While malpractice payouts actually went down by 8.2 percent

between 2001 and 2002, there was no corresponding decrease in doctors'

premiums; the insurance industry simply pocketed the difference. The

Des Moines Register points out, " There's simply no correlation between

lawsuits and insurance rates. Rather, insurance rates are tied to the

climate of the stock and bond market, where insurance companies invest

much of their money. "

 

NO LINK BETWEEN CAPS AND PREMIUMS: A study by Weiss Ratings, Inc.,

showed that in 19 states with malpractice caps, physicians suffered a

48.2 percent jump in their premiums. Meanwhile, in 32 states without

caps, premiums rose by only 35.9 percent. In other words, there is no

connection between caps and premium rates. That finding was echoed by

the Congressional Budget Office, which found there is " no

statistically significant difference in per capita health care

spending between states with and without limits on malpractice torts. "

 

THE CALIFORNIA TEST: President Bush has said he wants to institute a

$250,000 cap on damages, similar to the cap in effect in the state of

California. That cap, instituted in 1975, had no effect on malpractice

insurance costs. According to the Foundation for Taxpayer and Consumer

Rights, insurance rates continued to skyrocket for 13 years after that

cap was enacted. It wasn't until the state went after the insurance

companies themselves, with a " 1988 ballot proposition mandating a rate

rollback and making it easier to challenge future rate hikes that the

problem began to subside. " A 1993 study of medical malpractice

insurance found caps in California had " done little more than enrich

California malpractice insurers with excessive profits, at the expense

of malpractice victims. "

 

SELLING INSURANCE: Common sense dictates that if the skyrocketing cost

of malpractice insurance is fueling the high cost of health care,

President Bush should address the issue of insurance reform. Why is he

so reluctant? Just follow the money. According to the Center for

Responsive Politics, since 2000, the insurance industry has donated

almost $74 million to President Bush and his allies in Congress.

 

CORPORATE POWER

The War Against Reform

 

After the massive financial meltdowns at Enron, WorldCom, and a host

of other companies, Congress passed legislation to clean up corporate

America. The law, called Sarbanes-Oxley, requires corporations to

adopt more responsible accounting practices, publicly disclose more

details about their finances and improve corporate governance. Three

years later, unscrupulous members of the business community have

launched an under-the-radar campaign to roll the reforms back. The

battle pits Treasury Secretary John Snow, who appears willing to

capitulate to the demands of big business (saying we need " a more

balanced environment " ), against SEC Chairman William Donaldson, who

strongly defends the law. The outcome will have a profound impact on

our ability to reduce future corporate scandals and, ultimately, the

health of the American economy.

 

CORPORATE CRONIES SEEK OUSTER OF EFFECTIVE SEC CHAIRMAN: William

Donaldson, a long-time Bush family friend who was installed as

chairman of the SEC, has done an admirable job in using the new powers

granted to the agency under Sarbanes-Oxley to reign in corporate

abuse. Under Donaldson's leadership the SEC " has instituted a program

to get ahead of problems by finding risks. " Now Bush's corporate

allies want him ousted. Several major industry groups – including the

Business Roundtable, the U.S. Chamber of Commerce and the National

Association of Wholesaler-Distributor – are " part of a quiet effort to

convince the president that it's time for a new Securities and

Exchange Commission chair. " Thomas Donohue, president of the Chamber

of Commerce, hasn't been so quiet. He described the implementation of

Sarbanes-Oxley as a " runaway system of corporate destruction being run

by [New York Attorney General] Eliot Spitzer and the people who work a

the SEC. " Donaldson says he is become the subject of criticism because

some groups are " dedicated in deed and rhetoric to perpetuating a

myopic focus on the status quo. "

 

SARBANES-OXLEY GOOD FOR BUSINESS: Chicken Littles - like Donohue -

claim that because of Sarbanes-Oxley, the sky is falling on corporate

America. Business Week disagrees. A new analysis of the impact of the

law by the magazine concludes that the law is " worth the trouble " for

business. One benefit: " the intense scrutiny of accounting methods and

internal controls has unearthed lingering problems in the way

companies operate. " Also " fixing weak financial controls has nipped a

lot of the problems in the bud. " Executives from GE and United

Technologies credit the law for spurring improvements in their

business practices. Philip Strand, a top executive at SAS (a large

software company) argues " many public companies should be looking at

the new Sarbanes-Oxley financial disclosure the same way most of us

should view spinach – it's just plain good for you. " There is extra

work involved " but it is work that can provide long-term benefits for

the enterprises that take the right approach. "

 

SARBANES OXLEY GOOD FOR INVESTORS: One huge advantage of tighter

controls on financial accounting: " greater confidence investors have

in financial results. " Ultimately, renewed investor confidence means a

stock market that is more stable and produces better returns.

 

DIRTY TRICKS HAVE ALREADY BEGUN: Whatever the benefits, some companies

are reflexively opposed to it and remain determined to do whatever is

necessary to undermine Sarbanes-Oxley. In November, lobbyists for

Fidelity Investments persuaded Sen. Judd Gregg (R-NH) to secretly slip

in an amendment to a fast-moving spending bill " directing the

Securities and Exchange Commission to justify a new [sarbanes-Oxley

related] rule that forces fund companies to appoint directors without

ties to management. " Reps. Michael Oxley (R-OH) and Barney Frank

(D-MA) sent a letter to Gregg's committee saying that slipping the

provision into the bill at the last minute, without debate, was

" imprudent. " The U.S. Chamber of Commerce – which argues vehemently

against the right of individual consumers to protect their rights –

has taken the SEC to court over the same rule.

 

 

Under the Radar

 

MILITARY – TOP ARMY RESERVE GENERAL WARNS OF 'BROKEN' FORCE: Hoping to

" send a clear, distinctive signal of deepening concern, " the Army

Reserve's top general has warned in a memo that " 'current demands' in

Iraq and Afghanistan put his command in 'grave danger' of being unable

to meet other potential Pentagon missions or help with domestic

emergencies, and that the Army Reserve 'is rapidly degenerating into a

'broken " force.' " Lt. Gen. James R. " Ron " Helmly, who has " earned a

reputation as a no-nonsense leader during 2 1/2 years as chief of the

Army Reserve, " also charged the " Army Reserve recruiting was in

'precipitous decline' and that if it did not turn around could spur

national debate over the reinstitution of the draft. " For progressive

solutions to the Army's dire recruitment and retention problems, check

out the recent American Progress report, " For Soldier and Country:

Saving the All-Volunteer Army. "

 

EDUCATION – ARNOLD TERMINATES FUNDING: California students had better

work on their bodybuilding physiques, because they're about to have

the state's busted budget hoisted onto their shoulders. Gov. Arnold

Schwarzenegger has announced plans to gut spending on K-12 education

and community colleges by $2.2 billion when he presents his budget

Monday, the Los Angeles Times reports. Schwarzenegger also will weaken

a proposition which guaranteed funds for education even when the state

faces serious fiscal woes, meaning " chools, like all other

programs, would endure large, unanticipated reductions if the state

budget falls out of balance. " California's Superintendent of Public

Instruction Jack O'Connell " called the spending proposals

'devastating' and education groups immediately began mobilizing to

fight the governor. "

ETHICS – SHOOTING THE MESSENGER: In what has become a high stakes game

of follow the leader or face the repercussions, it seems that Rep.

Joel Hefley (R – CO) will be replaced as Chair of the House Ethics

Committee. Over the past year Hefley has drawn the fury of House

Republicans who are malcontent with the Ethics committee's

admonishment of House Majority Leader Tom DeLay (R – TX) for several

of his political and financial improprieties. Also, his public

questioning of the Republicans' recent change in House ethics rules

demonstrated again that he was not willing to compromise the integrity

of the House just to close ranks around DeLay, with whom he is barely

on speaking terms. With ominous foreboding, a leadership aide close

to Republican leaders has clearly stated that Hefley's " time is up. "

SOCIAL SECURITY – WHITE HOUSE MEMO DETAILS RESOLVE TO CUT BENEFITS: A

private White House memo sent Monday to top conservative allies seeks

" to avert a split in Republican ranks " by taking sides in a growing

conservative fissure over whether Social Security privatization plans

should include drastic cuts in benefits for future retirees. The memo

says President Bush will push ahead with his plan to cut benefits, and

claims the plan's success would be " one of the most significant

conservative governing achievements ever. " Still, after Senate

Republicans reported being " scared to death " of the political fallout

of privatization plans during a private retreat yesterday, the White

House responded by " emphasizing the importance of unifying behind

whatever plan has the best chance of being signed into law. " In other

words, " American Prospect fellow Matthew Yglesias writes, the White

House doesn't mind what passes " as long as they can replace Social

Security with something else. Anything else. "

GONZALES – NEW INVESTIGATION RAISES NEW QUESTIONS: With the recently

ordered U.S. armed forces' investigation " into allegations that

terrorism suspects were abused at the military detention facility [in

Guantanamo Bay] " , it becomes even more imperative that Alberto

Gonzales, current White House counsel and Bush's nominee for Attorney

General, address his role in the prisoner abuse scandal and other

issues regarding the handling of detainees. While the recent

investigation has been prompted by an FBI memo " [detailing] reports

from 26 agents saying they had witnessed interrogation excesses at the

prison, " 17 of those were allowed under Pentagon policy, according to

the Bureau's general counsel. While the Pentagon and the White House

continue to maintain that there never was an executive order to that

effect, memos authored by Gonzales dismissed laws prohibiting torture

and were incorporated into the Pentagon's interrogation policy.