Shay Totten of Seven Days reported that William R. Milnes Jr. retired last year from his position as CEO at Blue Cross Blue Shield of Vermont with a total compensation package of some $7.25 million. Kevin Goddard, the publicist for BCBS, suggested that this news must be understood “in context.” I can offer some context from my medical practice.
Medical insurance companies and the administrative entities called pharmacy benefit managers work assiduously to alter the clinical decision making of physicians and other clinicians, generally steering prescribers toward less expensive drugs. Chief among the tactics used to influence physicians is “utilization review.” Ostensibly, the prescriber submits a report with a rationale for a non-preferred drug, but the real game is to hassle physicians into compliance by chewing up their time with paperwork and phone calls. Bupropion, an antidepressant that I often prescribe, provides a fine case in point.
Generic, slow-release bupropion is less expensive than the brand-name Wellbutrin XL version (for customers paying out of pocket, $143 versus $173 for 30 pills at Vincent’s Pharmacy in Waterbury, $130 versus $254 at Rite Aid in Burlington), but it turns out that the generic version is known to sometimes release its contents unreliably and too quickly. This happened to one of my patients, who experienced nausea, restlessness, anxiety and headaches daily with the generic drug; symptoms resolved completely and immediately when he restarted brand-name Wellbutrin XL. Thanks to Kafka-esque administrative hurdles, the aforementioned patient endured approximately five weeks on generic bupropion after the prescription for Wellbutrin XL was written; in another case in my practice, a Byzantine authorization process caused two months to elapse between writing the brand-name prescription and getting insurance reimbursement authorized.
In a recent conversation with the medical director at BCBSVT about the second case above (the first case wasn’t his), he proudly informed me that his employer had saved “in the ballpark” of $1.8 million over a year by getting doctors to prescribe generic drugs rather than brand name. His financial guys assured him that the savings were passed on to consumers in the form of reduced premium prices. According to my simple-minded calculation, with 160,000 subscribers, all these efforts to reduce the cost of prescription drugs saved Blue Cross subscribers a preposterously paltry 98 cents per month per member.
As illustrated above, the cost-cutting practices of insurance plans cause illness — morbidity — in some patients, in the same way that ordinary prescribing practices sometimes result in unwanted side effects. But doctors and insurance plans are different in important ways. Doctors disclose to their patients the potential harms of the medications they are asked to take; insurance plans pretend that cost cutting can be accomplished without causing any real harm — in fact, they claim, risibly, that quality is improved. Doctors systematically track the morbidity caused by their clinical practices, and change treatment plans accordingly; insurance plans do not track or disclose publicly the real damage their cost-cutting practices inflict upon patients, so subscribers have no assurance that harmful administrative practices are ever changed.
I calculate that the CEO compensation package added $3.78 per month to the premium cost for each BCBS subscriber in 2008. To look at it another way, the savings achieved at the cost of potentially considerable morbidity and clinical disruption was not that different in magnitude than the $770,000 paid out in bonuses to the nine top executives at Blue Cross last year, as reported by Totten. As a medical insurance subscriber, I can live with 98 cents more a month in medical premiums, and a few “unnecessary” brand-name prescriptions, in exchange for unfettered access to the clinical judgment of my physicians. Apparently, a certain amount of morbidity for anonymous subscribers is something that Blue Cross executives can live with, but they can’t live without their bonuses.
We live in a time when CEOs and various affiliated hustlers have fantastically inflated notions of their value, and sycophantic boards feed this infantile grandiosity with outsized compensation packages. These are not just skim scams in which a few dollars are siphoned off at a time, invisibly and harmlessly, from each of a large number of customers. Executives and other corporate employees are rewarded for the precise practices that cause real harm to their customers and shareholders. The sums of money are smaller, but the rackets at Blue Cross Blue Shield of Vermont and AIG are precisely the same. The difference is that the bubble hasn’t burst yet, for BCBSVT in particular, and the medical industry in general.
Robert S. Emmons, MD, is a board-certified psychiatrist with a solo private practice in Burlington. He is part-time clinical associate professor of psychiatry at the University of Vermont, where he teaches in the areas of psychoanalytic psychotherapy and ethics.