IL Attorney General Lisa Madigan: Don't Preempt State Regulatory Power

Two amendments were re-introduced in the U.S. House Rules Committee on Monday that will seriously undermine needed finance reform. Amendment #88, sponsored by Walter Minnick (ID) and others, would completely do away with the proposed Consumer Finance Protection Agency (CFPA); Amendment #141, sponsored by Melissa Bean (IL) and others, would hamstring regulatory efforts at the state level.

Background: You will find an update on the overall financial reform package, the Wall Street Reform and Consumer Protection Act (H.R. 4173), here: In the Public Interest: Rein in the Financial System That Failed. The toxic amendments are discussed here: Rep. Minnick Proposes Scrapping CFPA, Embraces Chamber’s Consumer Protection Model. Elizabeth Warren, head of the Congressional Oversight Panel, explains why American needs a Consumer Financial Protection Agency in the video at this page: Reining In Wall Street.

Yesterday, on a conference call hosted by Americans for Financial Reform, Illinois Attorney General Lisa Madigan explained why financial reform is so important and why the amendment re-introduced by Illinois Representative Melissa Bean should be withdrawn a second time. The main part of Attorney General Madigan's remarks appear below:

Let me give you the perspective of a state Attorney General. I have been Illinois State Attorney general for nearly seven years. Since taking office on January 1, 2003, I have had to focus on protecting people, borrowers and homeowners, from unfair, deceptive and discriminatory mortgage lending practices.

Since I have been the Attorney General, we have investigated some of the largest sub-prime lenders in the country: in 2003 Household Finance, in 2006 Ameriquest, in 2007 and 2008 it was Countrywide, and in 2009 Wells Fargo. After uncovering and documenting their predatory lending practices, we have either settled with or sued all those companies just mentioned, for putting people into loans that they didn't understand and they couldn't afford. In many ways we have had to out of my office do all that we possibly can to keep people in Illinois in their homes.

To give you just a quick perspective on that, I set up a homeowners'  help line about a year and a half ago and we have had approximately 19,000 Illinois homeowners call us about problems with their loans, trying to stay in their homes and trying to get modifications. We're looking at right now, and I think these numbers are only through October, 140,000 foreclosure filings in the state; like every other state, the highest number in years.

So I don't think that anyone at this point disputes that the practices of sub-prime lenders led to the foreclosure crisis, which ultimately was at the heart of our country's financial collapse. As an Attorney General I also am able to put in perspective that over the last 15 years, as we have seen state enforcement authority preempted, we have seen a rise of these predatory lending practices. I also don't think that anybody who knows the history would dispute that the only people bringing enforcement actions to hold lenders accountable and to try to save people's homes were state Attorneys General. We repeatedly tried to warn the feds about what was going on in our home states, in our communities, but regulators were blocking our efforts. And then, in addition to that, they did nothing to prevent the economic disaster that ensued.

We responded, and by "we" I mean not just the Illinois Attorney General's office but, we as state Attorneys General, and state banking regulators, and state legislatures across the country. We've responded not just with lawsuits but also with laws to protect and prevent the situation from happening again. Because the fed's didn't recognize or didn't want to respond, ultimately, as we all are painfully aware, American taxpayers, so the same people who are losing their jobs and are losing their homes, have had to bail out the financial services industry to the tune of 700 billion dollars last year.

I give that as background because it makes it very clear that the need for a CFPA has never been more apparent. The consumers need their interests considered and protected. It cannot just be a situation where banking regulators get to determine what is best for all of us because their priority is, what is best for a bank. And far too often we have seen that what is best for a bank may not be and has not been what is best for consumers and what is best for our economy.

Ed also mentioned as we all know many of those entities whose actions perpetrated this economic meltdown are fighting the creation of the CFPA and they are fighting the critical role that state Attorneys General and state banking regulators play in protecting their residents from abusive lending practices. Some of the amendments that are being proposed would limit state Attorney General authority and ability to bring lawsuits as well as to pass tougher laws in response to clearly abusive practices.

So, two points I want to leave you with:

1. Don't preempt state Attorneys General. There needs to be state level enforcement, particularly when the feds don't act. And it's a situation that the feds shouldn't be the ones intermediating what states decide to do vis-a-vis banks and lenders.

2. States need the ability to legislate to protect their residents when they see a clear problem. That goes the point about how the federal rules and the federal laws need to be a floor and not a ceiling, so we can legislate above if necessary as has been the case during this lending crisis.

What's going on now with some of these amendments is an attempt to prevent us from doing that. As others have said, there is no question that the current system of consumer protection failed. And in the end, financial reform is about restoring responsibility and accountability to our financial system. And it is about making sure that our financial system serves the interests of hard-working families and individuals and not just those of the big banks.

Support our Attorneys General and give some muscle to state regulators. Support H.R.4173. Call for defeat or withdrawal of Minnick and Bean amendments. Call your congressperson today and tomorrow and every day until the debate is over.

Non-Partisan CBO Estimates of Health Care Reform

Latest big-picture analysis of health care history and proposed reform from insurance/finance insider Andy Kurz (bio here).

SUMMARY: Few doubt how unsustainable current medical trends are. With medical inflation consistently outpacing the CPI, health costs will continue to take a greater share of the economy. Private insurers claim they can solve the problem with reform but without a Public Option. History suggests this is a dubious claim at best. Looked at from multiple angles, private insurers are not likely to succeed. Profits gains have far exceeded key indices, medical loss ratios have gone way down, while costs have gone way up, competition is diminished by concentration of major insurers, and tort reform complaints carry little water.

Full report here.

Illinois Needs Health Insurance Reform

A new report from Health Care for America Now (HCAN) summarizes the need for reform and expected benefits from pending reform in House and Senate. Sources are provided for  the stats, so you can fact-check the report.

Health insurance reform will reduce the deficit by $138 billion over the next 10 years, and Illinois families will see reductions in premium costs of up to $3,000 a year. Currently, 1.8 million Illinoisans do not have health insurance, and if nothing is done, this will increase to 2.3 million by 2019. Health insurance reform will allow the uninsured to get coverage and help the 612,000 Illinois residents who currently purchase individual insurance to buy an affordable health plan. Health insurance reform will help Illinois families, seniors, small businesses, and the state.

Full report here.

Public Option Has No Cost

(Revised 12/3/09) Retired insurance CFO Andy Kurz (short bio) is always looking for new ways to put health care numbers and proposed reforms in perspective. The chart below is his latest creation. Click the image to view the chart; there is also a pdf with a second page explaining calculations.

Executive Summary:

Americans can be divided into three health groups. About 3 in 10 people are on government run Medicare/Medicaid. Four in 10 work in big business and 3 in 10 work in small business or are uninsured. Much health insurance for big business is run just like Medicare where insurers administer claims but incur no claims risk. The middle group, small business and individuals incur the brunt of “at risk” insurance that is higher cost. Those higher costs put this group at a cost disadvantage to big business.

The Public Option has no effect on big business. But most new jobs come from small business, where higher health costs create a disincentive to hire. That in turn, hinders economic growth. A non profit Public Option eliminates high profit margins from insurance and puts small business on a more level playing field with big business. Since Public Option must play by the same rules, it is unlikely to put private insurers out of business. Only a strong Public Option with a broad enrollment base will compel insurers to compete.

Comments by the author:

This whole public option is not the boogeyman that some make it out to be. The diagram puts people of the U.S. into three main groups:Medicare and Medicaid recipients, insured by large employer, and eligible for proposed Insurance Exchange. For the largest, big business, it's business as usual, for several years at least.

I added a small table to show how health care costs are extremely skewed. If you are among the 90% of population, no worries, and why care at all about reform. You should care because if you become the 1 in 10, or 1 in 100, the consequences could be absolutely devastating health care costs. Kind of an eye opener, thanks to Kaiser Foundation for the stats.

Links for page 2:

Kaiser Foundation: Trends in Health Care Costs and Spending, March 2009

Centers for Medicare and Medicaid Services: Total Personal Health Care Expenditures by Type of Service, Region, and State of Residence: Calendar Year 2004

U.S. Census Bureau: Population, Population change and estimated components of population change: April 1, 2000 to July 1, 2008 (NST-EST2008-alldata)

U.S. Census Bureau: Statistics about Business Size (including Small Business)

Talk about Market Concentration

Remember the series of reports that came out in July on lack of competition in the health insurance market from Health Care for America Now (HCAN)? The report on Illinois stated,

Health Care Services Corp., doing business as Blue Cross and Blue Shield of Illinois, is the state’s leading health insurer with 47 percent of the commercial market. Together with WellPoint Inc., they control 69 percent of the state market.

That's about to change. According to an article today in the Chicago Tribune

Wellpoint Inc., which operates locally under the Unicare brand, said it will exit Illinois and Texas...Wellpoint said its Illinois Unicare customers, largely in the Chicago area, will be guaranteed coverage if they transition to Chicago-based Health Care Service Corp., parent of Blue Cross and Blue Shield of Illinois...

which moves us toward a situation more like this:

Medical Malpractice and Costs of Health Care

by Miles Zaremski

Miles Zaremski writes here individually and not on behalf of anyone but himself. He was the longest serving chair (5 years) of the American Bar Association's Standing Committee on Medical Professional Liability. He was also the first non MD-JD president of the American College of Legal Medicine (an association of professionals formally organized nearly 50 years ago by those principally possessing both the medical and law degrees). Mr. Zaremski is not a member of any trial lawyers association and does not represent injured persons, even though he has been in health care law and policy now for 36 years. Read more from Miles Zaremski at his blog on the Huffington Post.

The following was written in response to an op-ed published September 7, 2009 in the Chicago Tribune.

I am appalled to read in the story, "Doclors and Lawyers", that, "Medical malpractice reform has to be part of health-care reform". I have studied the effects of malpractice litigation on the health care system for nearly 40 years, and can say without hesitation that medical malpractice has a negligible impact on the costs of health care in our country. To be more precise, as reported by the Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group (1960-2007); U.S. Department of Commerce, Bureau of Economic Analysis; U.S. Bureau of the Census; and "Property/Casualty Insurance Industry Aggregates", Medical Malpractice Direct Premiums Written (Nat'l. Assoc. of Ins. Commissioners, 1992-2007), medical malpractice costs, as measured by medical malpractice premiums in 2006 - - - the most recent year for which all the necessary data to make comparisons is available - - - accounted for only .58 percent of overall health care costs. This is contained in a letter of record sent to Rep. Henry Waxman, Chr. of the U.S. House's Committee on Energy and Commerce, on July 29 by the American Bar Association.

Second, your article also talks about the costs of so-called defensive medicine - - - ordering up more tests and procedures than are necessary. In a 1992 Congressional Budget Office Report "The Economic Implications of Rising Health Care Costs" (October 1992, p.27), the CBO stated that such procedures would have been provided anyway, for reasons other than concerns about medical malpractice litigation. And, in 2004, the CBO also stated in, "Limiting Tort Liability for Medical Malpractice" (Economic and Budget Issue Brief (Jan. 8, 2004, at p.6), that the savings from reducing defensive medicine would be "very small".

Finally, as is mentioned in the article on attorneys and physicians, there is a continuing mantra of what limiting noneconomic damages does for physician malpractice premiums on an annual basis. Bunk. Truth be told, however, the costs of health care in states with, and without, such caps remains incredibly high and continues to soar. Moreover, doctors' malpractice premiums spike once or so every decade (at least since the time I started studying this topic going back to the 1960s). The timing of these spikes coincides with a downturn in what the financial markets provide as returns to the insurance industry on their investments. Thus, don't be surprised that the lower the return on investment, the higher the premiums for professional malpractice premiums will be for doctors.

As with other elements in the current health care debate, much has been shown to be false, misleading, overstatements, and, in the end, nothing but attempts to instill fear in the general population without fact. That which is suggested in the article about the need to reform medical malpractice laws as part of the health care reform debate is just more of the same.

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Note: The public option is essential to protecting the doctor-patient relationship. Three United States Supreme Court decisions in which I have been involved have had before them facts involving managed care companies making decisions for the attending doctor that harmed the patient. These cases are: Pegram v. Herdrich, Aetna v. Davila, and Cigna v. Calad. In the Herdrich case, Justice Souter (now retired) stated that "eligibility decisions and treatment decisions (are) inextricably mixed, as they are in countless medical administrative decisions every day". A public plan is designed not to allow what goes on every single day NOW - as shown by these three cases.

Medicare - cutting costs without cutting benefits

by Andy Kurz

Andy Kurz has over 12 years executive level experience in finance and risk management, including CFO for a Midwest Blue Cross and Blue Shield Insurer. Retired now, he had decades of involvement with financial applications and analytical software.

Many seniors have become fearful that cutting excess costs means cutting benefits. Medicare’s own data highlights differences between about 20% of states with the lowest costs and 20% of states with the highest costs. Cost of living explains some of the differences. But 71% higher physician and clinical service costs for essentially the same results suggests there are billions of dollars being spent with little or no added benefit.

Medicare Spending Discrepancies

States (all data from 2004 Center for Medicare and Medicaid Services)	Population	Medicare Spending	For Similar Results
26 states and the District of Columbia – combined Medicare population 17.9 million
Alaska, Arkansas, Idaho, Iowa, Kansas, Kentucky, Maine, Massachusetts, Minnesota, Montana, Nebraska, New Hampshire, New Mexico, North Dakota, Oregon, South Dakota, Utah, Vermont, Virginia, West Virginia, Wisconsin, Wyoming	20% of ALL Medicare Recipients in the U.S.	$12.5 billion in physician and clinical services	For every $100 spent on physician and clinical services in this group ...
California, District of Columbia, Florida, Nevada, New Jersey	21% of ALL Medicare Recipients in the U.S.	$22.6 billion in physician and clinical services	states in this group spent $171