Healthcare and Banking: What do they have in common?

The Banking system collapse due to the excesses of greed and deregulation is well known. But I believe there is a root cause, not readily discussed. The same is true for the abysmal failure of our healthcare system to control the costs of healthcare. I have worked in both systems and will share some insights and thought I have had about these issues.

The For-Profit model of business isn't right for any business and many have been ruined by moving from a Not-for-Profit system, to a For-Profit system of governance. I have consulted over the past 20 years to 7 prominent healthcare company CEO's and their executive teams, as well as to Freddie Mac and Banks. While Healthcare companies don't seem to have anything in common with Freddie Mac and this story, they do. You see, most senior executives were allured, and are still allured, by the idea of making more money than just a good salary for themselves. They wanted their companies to become For-Profit entities and wanted a share in the company's profit through the use of bonuses and, when possible, stock options/grants. What has happened is that many healthcare companies have merged and become Publicly traded companies, such as Anthem Insurance company and then, Wellpoint.

I remembered the time back in 1988 when I was facilItating an Executive retreat with the CEO, the President and senior team. It was just before the Savings and Loan crisis had raised its ugly head to give you a reference point. Initially the team had a low level of energy and I asked what would make them more excited as a team. I was reminded that they were a quasi government appointed and instituted organization. I asked them what that meant to them. They answered that their compensation was set with little room to truly make the kind of money other Executive teams would make in smaller sized financial institutions, and, for the level of responsibility they had versus the compensation they received, they just weren't that excited about things. I asked the group, "What would make you excited and really engaged?" They replied almost to the person, "If we were a Publicly traded company and had a chance at owning stock and truly merit based performance aligned with the level of responsibility and accountability they had." That comment was an eye opener for me. I then asked, "Why don't you become a Publicly traded company?" The reply was, "You don't understand, we are a quasi government organization and therefore they couldn't." I said to them, "That's not the reason you aren't a Publicly traded company. It's because YOU DON'T BELIEVE YOU CAN become a Publicly traded company! I then suggested consideration that they could in fact become a Publicly traded company and asked what would have to be done to start the process. This began the process where Freddie Mac began a Publicly traded company in 1989. The rest is now history.

During that same approximate timeframe, I had Blue Cross and Blue Shield (BCBS) of Kentucky as a client beginning in 1988. It was a Non Profit organization at that time. It went through a major successful turnaround from 1988-1993 with a new CEO (my client) leading the charge. In 1993, it became the first BCBS plan to merge with Anthem Insurance Co. This was the first cross-state merger of two strong Blue plans. In 2001, Anthem became a Publicly traded company. In 2004, Anthem and Wellpoint merge becoming Wellpoint, Inc. and in 2005 Wellpoint, Inc. acquires Lumenos (formerly, another client of mine). To see the other acquisitions of Wellpoint during those years, click on this Wikipedia link.
What these all have in common is the pursuit of profits in the healthcare industry.

I don't know what contribution For-Profit motivation contributed to the increase in healthcare costs. But I am sure it has been substantial. For example, the Anthem/Wellpoint merger reaped the Executive team a total of hundreds of millions of dollars in deferred compensation, salary and bonuses. The exact figure is difficult to determine. But it is enough to say that many people could have been insured for years, had the companies not had these compensation packages. In the words of a former CEO from the Healthcare system, "The biggest mistake I made was going form a Non-profit to a For-Profit company, as everything changed after that. If I could do it over again, I would not have done it!

A new and unique reaction to the Financial crisis of 2008: Class Warfare.

Past election issues, say from 1980-2004, have often been based upon ideological differences. The election of 2004 was based upon Security and who was going to make the Country safer, Bush or Kerry. In 2000, it was about proposed reforms of Social Security and Medicare and whether there was going to be a "lock box" for Social Security as Gore proposed or whether it was better to allow individuals invest their own retirement in the stock market, as Bush supported. (It's a good thing that idea never made it!) The other issue was, who was going to restore integrity and honor to the Presidency, after the Lewinsky matter and the impeachment of the President Clinton for lying turned the Country upside down and divided us into Red and Blue States. Another issue was weather we were going to use the U.S. Military fro "Nation Building". The Clinton Administration did send troops to the Balkans and this was supported by Gore. Bush wanted no Nation Building (in contrast to his desires the last 6 years in Iraq!). Gays in the Military were an issue and the Clinton Don't ask, Don't Tell policy was the policy of the Clinton Administration. Again, ideological issues around morality.

In the 1992 election between George Bush Sr. and a newcomer, Bill Clinton, Bush 1 had a very high approval rating of 89% after the first Gulf War. But that approval rating started dropping, as a mild recession encouraged Democrats there was a chance to win the election and take it away from Bush. Bush emphasized Clinton's lack of Military experience and ensured rumors of Clinton's infidelity took hold in the media. This campaign was as much about Clinton's character as anything else.

The 1988 election between Bush Sr and Dukakis had Bush casting Dukakis as a "proud liberal" that didn't have any Military experience, hence the famous photo of Dukakis in a tank with a helmut on and looking foolish according to the Bush attacks. There were a number of ideological differences between the 2 candidates. Dukakis tried to tie Bush to the scandals of the Reagan Administration, such as Iran Contra. During one of the Presidential debates Dukakis was asked by the Moderator if he supported the Death Penalty and gave Dukakis the situation for him to have as a context, which was that he was to pretend his wife was raped and murdered. Dukakis's answer discussed the statistical ineffectiveness of capital punishment. Rumors were spread that Dukakis's wife burned a Flag in protest of the Vietnam war.

In all of these examples the push for ideological differences is evident. For the first time in my memory, the fundamental difference in this election, is that it is about Class Warfare. There are no more Red States versus Blue States, Liberal versus Conservative. As a result of this unprecedented financial crisis, it's all about the Wealthy versus the Middle Class. Europe's elections have had this debate many times, but this is the first time in this country. Unions in France now have the power as they do in other European countries and in countries in South America as well. It is about empowering the Middle and Lower Class at the expense of the Wealthiest who have enjoyed an unprecedented run of about 30-50 years. Those who are wealthy are are split about this issue. Some believe the wealthiest are reaping the excesses of their failures to ensure all boats should have risen. They are willing to pay more in taxes and think it is fair and often wondered why the Republican Party under Bush 2 was pushing for so many tax breaks they really didn't need. It is a fact, that the gap between CEO's pay and average workers has increased many times fold over the past 20 years. This excess is giving rise to the highest voter participation rate in history. It has mobilized the youth of the country. With an election victory comes a more empowered electorate, just as the Founding Fathers had hoped would happen.

It has been a consequence of the actions and decisions of Presidents like Reagan, Bush 1, Bush 2 and all their supporters, including Corporate leaders who took abusive Salaries, Bonuses and company Stock Options. Those leaders got their Boards stacked with supporters who would approve these excesses and there was a quid pro quo for those serving on multiple Boards. You scratch my back and I'll scratch yours. It is only those Corporations that truly have independent Board members that have a chance to limit excesses.

Even Healthcare companies, who have gone from Non Profit to For Profit Corporations are guilty of these excesses and are responsible for contributing to the high cost of healthcare. Greed drove these leaders to excesses. It might be a way to help reduce healthcare costs if we can get a handle on these excesses, and possibly return them from For Profit to Non Profit once again.

Lou Dobbs made his fame over the issues about jobs being outsourced abroad, illegal immigration ruining Middle Class jobs. War and Peace are still issues in this election as they have been since Vietnam. But because Iraq wants us to leave with in an agreed upon timetable, it is less of an issue than it could have been this time.

The focus the next 4-8 years will be about restoring a Middle Class in America, reigning in excessive CEO compensation, a better safety net for the less fortunate, a focus on real improvement in the education of our youth, and a world that works together because it has to in order to survive. Collaboration and cooperation will be the tools used. Everyone will be asked to sacrifice something for the betterment of all. After this election, the times they are a changing!!! It's now up to you to vote and start this chain reaction for the better! Turn away from the failed policies of the past. Vote for real change this time. Vote your interests not your favorite personality. Vote with courage of the unknown, not the fear that binds us to the past.