UnitedHealth Group Gets Millions from Federal Subsidy, Spends Millions Against Public Option

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H/t to masaccio at firedoglake.com for this post UnitedHealth Group Gets Millions from Federal Subsidy, Spends Millions Against Public Option

UnitedHealth Group (symbol UNH) has paid its shareholders $1.5bn so far this year, through its stock repurchase program, and an additional $55mn from its paltry dividend of $.03 per share. That compares nicely with its reported earnings of over $1.8bn in the first six months. Shareholders’ equity is at $21.5bn, so there is a return on equity of 7.2% in the first half.

UNH has four business segments: healthcare services, Optum, Ingenix, and prescription services. Ingenix has the distinction of owning the Lewin Group, described by the Washington Post as “…a consulting firm whose research has been widely cited by opponents of a public insurance option….”

Ingenix supplied its parent company and other insurers with data that allegedly understated the "usual and customary" doctor fees that insurers use to determine how much they will reimburse consumers for out-of-network care.

Allegedly may be a euphemism: in settlements with the New York Attorney General and the American Medical Association, Ingenix paid a total of $400mn and agreed to exit the business.

Lewin Group Vice President John Sheils said his firm had nothing to do with the allegedly flawed Ingenix reimbursement data. Lewin has gone through "a terribly difficult adjustment" since it was bought by UnitedHealth in 2007, because the corporate ownership "does create the appearance of a conflict of interest."

"It hasn't affected. . . the work we do, and I think people who know me know that I am not a good liar," Sheils said.

I, of course, don’t know, but when people say they aren’t liars, I think of Richard Nixon, who wasn’t a crook.

The healthcare side of the UNH includes UnitedHealthcare, which accounted for over half of second quarter revenues.

Second quarter revenues of $10.3 billion decreased $223 million year-over-year. During the second quarter UnitedHealthcare experienced declines of 150,000 people served through fee-based programs and 260,000 people in risk-based health benefit plans. Membership attrition at continuing clients driven by economic pressures on their organizations was the most significant factor in the decreases, accounting for three-fourths of the total membership decline.

In the first quarter, “Compared to year end 2008, UnitedHealthcare served 445,000 fewer people through risk-based products and 460,000 fewer people through fee-based products at March 31, 2009.”

The other major component of revenues is Ovations, which deals with people over 50:

Ovations participates nationally in the Medicare program, offering a wide-ranging spectrum of Medicare products, including Medigap products that supplement traditional fee-for-service coverage, more traditional health-plan-type programs under Medicare Advantage, Medicare Part D prescription drug coverage, and special offerings for beneficiaries who are chronically ill and/or Medicare and Medicaid dual-eligible.

Its revenues were up 13% in the second quarter, thanks to substantial growth in Medicare Advantage, the federal subsidy for private insurance companies hoping to get into the Medicare business. Or maybe it was just their “strengthened market design.”

In other words, UNH is making money off taxpayers, while the private health insurance business is trending down with the economy. No wonder these guys are spending money like drunken sailors to get Congress to make people buy insurance from them, and subsidize the people who can’t pay for it themselves.

Center for Responsive Politics (opensecrets.org) has more about the Lewin Group and the politicians who cite its research Lawmakers Who Called Lewin Group's Data 'Nonpartisan' Collect Cash From Parent Company UnitedHealth

For years, congressional lawmakers on both sides of the aisle have regarded the Lewin Group, a Virginia-based research firm, as an unbiased, nonpartisan auditor of health care legislation. The company's website quotes Sens. Ron Wyden (D-Ore.) and Bob Bennett (R-Utah) calling the Lewin Group the "gold standard" for health care analysis.

Yet as the Washington Post reported Wednesday, few who have cited recent Lewin data, which suggests nearly 100 million Americans may quit their private insurance plans if offered a government-run alternative, mention that the company belongs to a UnitedHealth Group subsidiary.

UnitedHealth is represented in Washington by America's Health Insurance Plans, an industry trade group that consists of the nation's largest insurance providers and has emerged as one of the most outspoken opponents of President Barack Obama's plans to overhaul health care.

The Lewin Group itself does not have any history of lobbying the federal government, according to Center for Responsive Politics records. But UnitedHealth spent $1.6 million on lobbyists during the first quarter of 2009 after shelling out $4.7 million last year. AHIP has already spent $2 million on lobbyists this year, after lavishing $7.5 million on K Street in 2008.

Campaign contributions are also part of the insurers' government relations arsenal.

UnitedHealth's political action committee and employees have given current lawmakers $1.6 million since 2007. And although many Republican lawmakers have been singing Lewin Group's nonpartisan praises, 61 percent of its parent company's contributions have gone to Democrats since the beginning of the 2008 election cycle.

Based on contributions given since the start of 2007, UnitedHealth's top recipient (not including presidential candidates) is Senate Majority Leader Harry Reid, who has collected $35,000. Bennett has brought in $8,000 from the company since the start of the 2008 election cycle, at which time UnitedHealth's subsidiary Igenix acquired Lewin.

GOP lawmakers, who like the insurers have argued that a public option will harm private sector providers, tend to cite Lewin Group statistics more than their Democratic colleagues. The Post article noted Sen. Orrin Hatch (R-Utah) and House Minority Whip Eric Cantor (R-Va.) as having mentioned Lewin data.

Cantor (R-Va.) has brought in $12,500 from UnitedHealth since 2007 and Hatch has raised $7,000. Cantor ranks No. 13 among all lawmakers who have collected UnitedHealth cash since 2007.

AHIP's chief executive, Karen Ignagni, also tends to favor Republicans with her campaign contributions, Capital Eye reported earlier this month. About 55 percent of her lifetime donations have gone to Republicans.

Bobby Jindal, governor of Louisiana and a potential Republican presidential candidate, as well as Karl Rove, a strategist in the Bush White House, have both penned recent Wall Street Journal columns using Lewin figures to criticize a public health care plan. (Read Jindal here and Rove here.)

The Journal harnessed Lewin statistics in a July 20 editorial that calls Obama's preferred health care plan "one of the worst pieces of legislation ever introduced in Congress."

Not all Lewin findings bolster the Obama plan's critics, however.

Unlike AHIP, Lewin has declined to take a public stance on the legislation currently up for debate in both chambers. The firm's vice president, John Sheils, told the Post that if a public option is implemented, "People would indeed lose [the private plans] they have, but they might very well be better off."