Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, July 5, 1995 TAG: 9507050107
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: The Washington Post
DATELINE: WASHINGTON LENGTH: Medium
Among other recommendations, the Senate's permanent subcommittee on investigations says Congress should pass laws that include criminal prosecution of and civil penalties against insurance executives who violate the public trust.
The report also calls for tougher financial standards and authority to put the management of Medicare up for competitive bidding, to which it never has been subject. Blue Cross and Blue Shield, on which more than 65 million Americans depend for their medical coverage, handles more Medicare claims than any other insurer.
The Senate panel also said in its report that Congress is wasting money by refusing to pay for extra federal auditors to examine health-care providers, notably the Blues, that do business with the federal government. It contends that millions in taxpayer dollars could be saved if there were enough auditors to monitor the companies.
``It's kind of like opening the doors of the bank and saying to the tellers, `You're too expensive. Let's just let everybody help themselves to the money,''' said Sen. Sam Nunn, D-Ga. ``It's an example of very short-sighted thinking.''
Nunn, once chairman and now the ranking minority member of the Senate subcommittee, led an investigation of Blue Cross and Blue Shield that took several years and focused on its nationwide federal contracts, as well as on the plans in Maryland, the District of Columbia, New York and West Virginia.
The probe began when the plan in West Virginia collapsed in 1990, leaving many families without health coverage. That was the first time in the nation's history that a Blue plan had failed.
The Nunn hearings found overspending, poor management practices and other problems at the Blue plans in the district, Maryland and New York, as well as problems in the big contracts the federal government holds with the Blues to cover federal workers and Medicare recipients.
The hearings led to two indictments against former Blue Cross executives in Maryland, who were acquitted, and one perjury indictment against a former executive in New York, who is awaiting trial. Only last week, two men were indicted in Richmond, Va., on charges that they defrauded the Maryland Blue Cross plan.
Nunn sparked the investigation of Blue Cross overcharges in Virginia that resulted in $23 million in refunds to 132,634 policyholders, and his staff uncovered a scheme to defraud Blue Cross in New York of $27 million. The hearings prompted new laws in several states and soul-searching in Blue Cross boardrooms across the country.
The report summarizes what the panel considers to be broken and describes in detail how to fix it.
``The recommendations have a lot of common sense to them,'' said Robert Eicher, a partner with A. Foster Higgins & Co., an insurance consulting firm in New York. ``They would go a long way toward correcting some of the problems.''
The report, completed this month, says former managers at the Maryland and district Blue Cross plans stumbled into disastrous investments. The report concludes that the Blue Cross and Blue Shield National Association, a trade group that knits together the 67 independent plans, wasn't scrutinizing the state plans closely enough.
The national Blue Cross association has strengthened its financial standards since the Nunn committee started work. Executive Vice President Harry Cain said it now requires a higher level of reserves in each plan to protect against potential losses.
As of this year, Cain said, the national association has a detailed blueprint of how to strip troubled plans of the Blue Cross and Blue Shield trademarks. The theory is that the mere threat would spur action to correct problems.
And by year's end, every Blue Cross and Blue Shield in the country must set up safeguards to keep families from being unprotected if a Blue plan ever failed again.
``I'd give the association credit for making efforts and improvements,'' Nunn said.
He added, however, ``I think they've got a long way to go.''
by CNB