Jessica Mulligan Health Policy and Management Program Providence College (E-mail: [email protected])

Insurance Accounts: The Cultural Logics of Health Care Financing The financial exuberance that eventually culminated in the recent world economic crisis also ushered in dramatic shifts in how health care is financed, administered, and imagined. Drawing on research conducted in the mid-2000s at a health insurance company in Puerto Rico, this article shows how health care has been financialized in many ways that include: (1) privatizing public services; (2) engineering new insurance products like high deductible plans and health savings accounts; (3) applying financial techniques to premium payments to yield maximum profitability; (4) a managerial focus on shareholder value; and (5) prioritizing mergers and financial speculation. The article argues that financial techniques obfuscate how much health care costs, foster widespread gaming of reimbursement systems that drives up prices, and “unpool” risk by devolving financial and moral responsibility for health care onto individual consumers. [insurance, health reform, managed care, financialization, Medicare] Well before the recent financial crisis, social observers noted that finance had dramatically increased in economic importance as financial logics and instruments proliferated into many new domains. Complex calculative technologies like derivatives enabled new ways of pricing and profiting from risk (MacKenzie 2001). And, although critics warned that financialization was a key part of the redistributive politics of neoliberalism (Harvey 2005), by the late 1990s, everyday life had become “financialized” as “people from all walks of life [are asked] to accept risks into their homes that were hitherto the province of professionals” (Martin 2002). Finance was ubiquitous with retirement accounts, municipal infrastructure projects, higher education, and the housing market—all tethered to financial markets and new methods for predicting, dividing up, and profiting from risk. The global economy has been financialized, and this economic restructuring profoundly impacts government, inequality, and security. Medical anthropologists have produced many excellent critical accounts of inequality and marketization in health care (Horton et al. 2014; Lamphere 2005; Pfeiffer and Chapman 2010; Rylko-Bauer and Farmer 2002). And yet, there is almost no anthropological research that connects the process of financialization with health care restructuring and reform. This article aims to fill that gap. I draw on MEDICAL ANTHROPOLOGY QUARTERLY, Vol. 30, Issue 1, pp. 37–61, ISSN 0745C 2015 by the American Anthropological Association. All rights 5194, online ISSN 1548-1387.  reserved. DOI: 10.1111/maq.12157

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research that I conducted in the mid-2000s at a health insurance company in Puerto Rico to illuminate how financial logics remade the provision of health coverage and the structure of the health delivery system. In addition to ethnographic examples, I find evidence in the health policy literature and media reports to support the claim that financialization in health care produces new forms of inequality, valuations of deservingness, and forms of profiting from risk. Ultimately, I argue that financial techniques obfuscate how much health care costs, foster widespread gaming of reimbursement systems that drives up price, and “unpool” risk (Ericson et al. 2010) by devolving financial and moral responsibility for health care onto individual consumers.

Financialization Defined Since the 1970s, an interrelated set of political, cultural, and technological changes enabled credit and trading in financial assets to take a much more central role in the economy. As a result, “global financial assets (equity, public and private bonds and bank deposits) increased 9-fold in real-terms between 1980 and 2007” (Palma 2009:833). To say that the economy has become financialized refers in part to this growth in financial markets and financial activity as a proportion of total economic activity (Fine 2009), but it also describes a shift in how profits are generated. Krippner (2005) notes that since the 1970s, “accumulation [for U.S. businesses] is now occurring increasingly through financial channels” (p. 199) rather than “through trade and commodity production” (pp. 174–175). Other aspects of financialization include the managerial focus on financial assets and financial activities over real assets, “priority to shareholder value, or financial worth, over other economic and social values,” increasing volatility of the market as well as other domains of life as they become subject to market fluctuations and failures, and a political emphasis on deregulation as the market (not the government) is seen as the legitimate source of intervention and regulation of financial activity (Fine 2012:105). Financialization works in concert with the “market triumphalism” that is part of neoliberal political ideologies that have advocated privatizing state-run services and dismantling welfare states (Clarke 2004; Morgen and Maskovsky 2003), devolving service provision for the poor to the voluntary and nonprofit sector (Holland et al. 2007; Ilcan and Basok 2010), relaxing regulatory requirements, and making poor and sick bodies responsible for their own improvement (Metzl 2010; Rose 2007). The health care industry in the United States is a major source of jobs and economic growth; the sector employed 11.7 million people (58,000 in Puerto Rico) (KFF 2011), and national health expenditures totaled 2.7 trillion dollars or 17.9% of GDP in 2011 (Cuckler et al. 2013). Not surprisingly, financialization has impacted this complex industry in myriad ways. Take the hospital sector as an example. Hospitals have gone from being “cost and profit centers” in the 1980s and early 1990s to “investment centers” in the 1990s and beyond (Davis et al. 2013). As payers like Medicare and insurance companies put pressure on hospitals to become more efficient and control costs, hospital managers (who are increasingly MBAs rather than physicians) focused on “achieving a reasonable rate of return (profit) for the assets under their control” (Davis et al. 2013:132).1 These managers used techniques like

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mergers and acquisitions, intensified monitoring of lengths of stay and provider performance (Davis et al. 2013), inflated bills to the uninsured followed by the sale of unpaid debt to aggressive collection agencies (Kinney 2010:425–426), and relied on “nonoperating revenue” like investments to increase profitability (Singh and Song 2013).2 As the hospital example suggests, health care has been financialized in complex and still emerging ways that include: (1) expansion of markets through privatization, conversion of non-profit entities to for-profit corporations, and development of parallel private insurance markets that compete with public programs; (2) creation of novel financial instruments like health savings accounts3 to fund high deductible health plans that increase profitability and fan risk out to more participants; (3) widespread gaming of reimbursement systems to maximize revenues through manipulating electronic health records and risk-based premium payments; (4) managerial focus on shareholder value rather than health outcomes; and (5) speculative, risky expansions, mergers, and acquisitions aimed at profit maximization and consolidating market advantage. Despite these widespread structural transformations in the health system, as a field we have yet to examine health care finance anthropologically. This article offers some provisional observations about finance in the insurance industry, and especially in the Medicare program given my research site at a Medicare HMO in Puerto Rico. This site has relevance for broader conversations about health reform and the contradictions that emerge when government-sponsored programs combine their public commitment to provide high-quality health care services with their private commitment to maximize profit, foster competition, and create more consumer choice.

Methods This article emerges out of ethnographic work that I conducted in the mid-2000s at a Medicare Advantage health plan in Puerto Rico where I worked in the Compliance Department as a paid employee for 31 months. Medicare Advantage is the privatized way of receiving Medicare services through a managed care plan. My department monitored compliance with federal regulations, performed internal audits, processed appeals and grievances, and reviewed all company marketing materials. I use the pseudonym Acme for the company and do not reveal the exact time period that I worked there because I agreed to conceal the identity of the firm as part of my research agreement with the CEO. My primary methods were participant observation, document collection and analysis, and interviews with health plan employees and members. The research was approved by IRBs at Harvard University where I was a graduate student and Connecticut College where I held a postdoctoral fellowship. I discuss the research methods and ethical challenges of this work in detail elsewhere (Mulligan 2014). The Puerto Rico study was not aimed at studying financialization; I studied quality and how the privatization of the health care system on the island reconfigured the experience of illness and the provision of health care services.4 The concern with financialization and the role of finance in health care developed while I was in the field when the health plan was bought by mainland investors who applied their finance backgrounds to maximize profits in what for me, and many other

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employees, represented a stark change from the approach of the previous management. In retrospect, the purchase and leadership change put into relief practices that were already occurring at the firm. After this stint of fieldwork, I went on to work as a consultant in the United States for another company that was trying to expand its Medicare Advantage portfolio in the wake of the passage of the Medicare Modernization Act of 2003. The consulting was not formal research, but it does inform my understanding of how health care, particularly Medicare, was being financialized during this time period. Over the course of the year during which I consulted, I traveled to New Jersey, Massachusetts, Florida, Nevada, and California to work on health plan applications and prepare local leadership teams for federal audits. As an object of study, health care finance poses several challenges to ethnographers: Where do we look for finance? What evidence can we collect? How do we gain access to the largely privatized and elite domains where finance is discussed openly? So I approach finance somewhat obliquely by examining how it seeped into the health plan at which I worked in areas that were not explicitly considered financial like new member physical exams and quality improvement projects. In so doing, I convert past research and work experiences into a form of autoethnography, much as Michael Oldani (2004) did in his study of a similarly difficult to access and privatized domain—pharmaceutical sales. Beyond my own experiences, I also turn to the health policy literature and the media to provide evidence of how financialization is occurring in health care. Some of these media and health policy texts do double duty as primary sources insofar as they reveal the cultural logics of health care financing and showcase the assumptions used to naturalize the privatization of health coverage. This heterodox methodology has been termed “polymorphous engagement” (Gusterson 1997), which means “interacting with informants across a number of dispersed sites, not just in local communities, and sometimes in virtual form; and it means collecting data eclectically from a disparate array of sources in many different ways” (p. 116). This methodology is particularly well suited for studying corporations whose “cultural invisibility . . . is as much a part of their privilege as their wealth and power” (p. 115).

Medical Anthropologists Critique Market-based Care Medical anthropologists have produced a number of important critiques of the neoliberal turn to market-based care. This empirically grounded work has documented the unintended consequences of health policies by analyzing how marketbased health reforms reshape care-seeking and care-giving practices. In the United States, this approach has yielded crucial insights into how market-based health reforms like privatizing Medicaid have negatively impacted vulnerable populations, exacerbated health inequalities, and placed added burdens on safety-net providers (Boehm 2005; Horton et al. 2001; Horton et al. 2014; Lamphere 2005; Maskovsky 2000; Waitzkin et al. 2002). Globally, structural adjustment policies and health system restructuring along market lines have resulted in reduced capacity of health systems to provide primary care (Dao and Nichter N.d; Foley 2010; WHO 2008). In a recent survey of how structural adjustment programs have impacted health, the authors conclude: “The stories that anthropologists tell from the field overwhelmingly speak to a new intensity of immiseration produced by adjustment programs

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that have undermined public sector services for the poor” (Pfeiffer and Chapman 2010:149). Provider–patient relationships are a key site for exploring how financial concerns come to reshape the practice of care giving. Medical anthropologists have paid particular attention to utilization review under managed care and new payment policies that incentivize provider and patient compliance with standardized treatment plans. Utilization review is a tool of managed care that seeks to curb inappropriate usage of health services through activities like denying unneeded or unnecessary services, requiring preauthorization, and evaluating the level of intensity at which care is provided. Less commonly, utilization review may be targeted at increasing service use if underutilization is identified by, for example, increasing primary care visits or encouraging appropriate management of chronic conditions. Utilization review is supposed to target the reported 30% of care provided in the United States that is unnecessary or wasteful (IOM 2011, 2012). Though in theory the goals of utilization management may seem laudable, anthropologists have repeatedly documented through participation observation that introducing financial concerns and a third party (the managed care organization) into the care-giving relationship via utilization management can lead to negative impacts on patient care such as barriers to accessing care (Lopez 2005; Maskovsky 2000; Wagner ´ 2005), conflicts of interest for providers (Donald 2001), and blaming patients and providers who are high utilizers of services even when that use is appropriate and warranted (Abad´ıa N.d.; Willging 2005). Safety net providers and others have also had to step in to make up for the unmet health needs created by utilization review practices that deny services or downgrade service intensity (Lamphere 2005). Pay for performance (P4P) schemes are another example of how financial logics are directed at restructuring the provision of care. P4P assumes that incentives are misaligned in the health care system when a fee-for-service payment model is used (as in the United States). P4P advocates claim that fee-for-service reimbursement systems misalign incentives by paying for volume rather than quality of care. Since provider motivation is understood to be a key determinant of health outcomes, proponents of P4P advocate using financial rewards to incentivize better health care. As more and more health systems turn to P4P models, the unintended consequences include: “‘gaming’ the system; crowding out of ‘intrinsic motivation’; a drop in morale where schemes are viewed as unfair; and the undermining of social relations and teamwork through competition, envy or ill feeling” (Magrath and Nichter 2012:1778). Take, for example, Michael Oldani’s (2010) research on a P4P scheme used for primary care management of diabetic patients. He observed that new billing, payment, and bonus systems organized around the idea of patient and provider “compliance” led to gaming the reimbursement system with negative effects on patients whose diabetes is not easily controlled. This article builds on the field’s longstanding concern with the impacts of marketbased care and privatization. However, I shift the ethnographic and analytic focus from the context of care giving and the doctor/patient relationship onto the financial logics of insurance. I argue that we need to invest more attention to studying the balance sheets, market metaphors, and economic assumptions that constitute the financial side of health policy. The United States famously spends more per capita on health care than any other country, yet its basic health indicators measure far

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below its peers (IOM 2013). In their influential 2002 call to study market-based care, Rylko-Bauer and Farmer claimed: “The fundamental conflict between what is just and what is profitable has emerged as the heart of what is wrong with health care in the United States today” (p. 476). Heeding this call, I analyze the cultural logics and practices of health care financing. To do this, I turn to work that is emerging in economic anthropology and closely related fields on finance. This task is made more urgent by the passage of the Affordable Care Act (ACA) in 2010, which promises that private insurance exchanges will extend access, increase accountability, lower costs, create choice, and improve quality in the U.S. health system. The ACA represents an experiment in market making (Zaloom 2006) in which the social goal of expanding access to care is married to an economic ideology that asserts that competitive markets create efficiency, enable choice, and lower prices. Medical anthropologists should take an active role in analyzing and intervening in the culture work through which market-based health reforms such as these come to “make sense.” The remainder of this article explores the cultural logics of health care financing through an ethnography of private insurance markets and the everyday transactions through which health care is paid for and generates profit.

Borrowing from the Anthropology of Finance In recent years, anthropologists and other researchers have taken on financial actors and the finance system as objects of analysis (Maurer 2012).5 Inspired by the financialization of the economy and more recently by global economic crisis, anthropologists have studied traders (Fisher 2012; Ho 2009; Ortiz 2013; Zaloom 2006), debt (Graeber 2011; Peebles 2010), financial institutions (Holmes 2009; Roitman 2005), and economic protest movements (Juris and Razsa 2012). The work that I find most useful for understanding health care finance comes from two ethnographic examinations of financial traders. Caitlin Zaloom writes about the switch to digital trading at the Chicago Board of Trade in Out of the Pits (2006). She is primarily concerned with what she calls “practical experiments” in market building: “These experiments—in architecture and technological design, recruitment, self-discipline, and even the aesthetics of trading spaces—aim to bring economic ideals to life, and no ideal is more important than the competitive individual” (p. x). Health reform, likewise, extends and instills market logics into the provision and financing of health care through the use of insurance exchanges. Instead of the competitive individual, the responsibleized health care consumer is the market ideal that contemporary health programs seek to bring to life. Zaloom’s work also prompts us to ask: What are the technological interventions, organizational architectures, forms of communication, self-discipline, and policy choices that characterize these practical experiments in market making?6 A second example from the anthropology of finance comes from Karen Ho in Liquidated: An Ethnography of Wall Street (2009). Ho argues that a “culture of smartness” informs investment banking practices where Ivy League–educated analysts contribute to the hubris of investment firms and the perpetuation of a financial system that is concerned with short-term spikes in shareholder value over long-term stability and sustainability.

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To play the role of “master of the universe” requires not only especially strong doses of self-confidence and institutional legitimation, but also a particular set of beliefs regarding Wall Street’s role in the world and one’s own role on Wall Street. Investment bankers, trained to view financial markets and corporate America through particular, highly ideological lenses, are also imbued with a sense of their own personal exemplariness as agents of and models for socioeconomic change—a sense that must be embodied, believed in, and continually “pumped up.” (Ho 2009:41) A similar culture of smartness is at work in health insurance, as it is increasingly run by finance experts who oversee mergers and buyouts, devise complex financing schemes, invent new insurance products, and shift costs onto employers and patients (Potter 2010). At Acme, for example, several highly educated American male executives displayed this same bravado. One corporate executive from an acquiring firm was dubbed “Bob the Almighty” because of the way he strode confidently through the hallways, talked with unflinching authority, and implemented a series of sweeping managerial changes aimed at profit maximization such as the welcome physical described below. Ho also takes on a problem that will be familiar to anyone interested in the U.S. health system: the question of failure. She asks: How can investment bankers do what they do and engage in seemingly irrational practices, such as proclaiming shareholder value while engaging in actions that not only undermine it but produce corporate and financial market crisis? How does shareholder value maintain cultural legitimacy despite the inconsistencies and failures of its champions? (2009:25) Similarly, we could ask: How does a for-profit insurance system maintain cultural legitimacy despite its failure to improve health outcomes, stem health care inflation, and reduce health inequalities? Drawing on work in the anthropology of finance, I suggest that health care financing involves practical experiments in market making, cultures of smartness, and the importance of failure. The sections that follow illustrate some ways in which anthropological questioning of taken-for-granted financial categories and meanings combined with ethnographic insights can shed light on the contradictions of insurance and health reform. I focus on obfuscations of cost, gaming risk adjusted payment systems, and the devolution of responsibility on to individuals.

Obfuscating Cost: Representations of Value Finance experts employ considerable creativity when representing balance sheets, costs, and value in health care. This creative play, however, occurs within certain bounds; the numbers are massaged in patterned ways. Several common techniques used by insurance plans include excluding administrative costs and profit from their cost accounting, redefining administrative services as care, and shifting or externalizing costs onto other actors such as patients and providers.

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A recent article in The Atlantic puts these techniques on display. “The Quiet Health-care Revolution” was picked up by NPR and circulated widely on the Internet (Main and Slywotzky 2011). The article describes the success of a Medicare Advantage company that invested in preventive care such as clipping toe nails, wound care for diabetics, and the use of wireless scales by patients with congestive heart failure. Though the article title claims to be revolutionary, the emphasis is, in fact, about yielding more efficiency from current health care delivery and financing models rather than fundamentally changing the existing system. The authors claimed that this health plan was unique and innovative because its investments in preventative care resulted in lower total costs: “The company’s success to date suggests that such efforts to ‘bend the curve,’ achieving better outcomes at a lower cost, may be more plausible than they sound. The implications for the future of Medicare— and the nation’s fiscal health—may be substantial” (Main and Slywotzky 2011). The authors failed to disclose anywhere in the piece that they both work as consultants selling their expertise to health care firms interested in implementing this “revolutionary” care model. The nation’s fiscal health, keeping the frail elderly from experiencing falls, the future of Medicare, and higher quality are all linked in this article (much as they are in the ACA of 2010). This is the perennial promise held out by proponents of for-profit managed care: If health plans invest in prevention and care management, they can reduce medical costs and reap a profit. The reduced costs, in turn, are thought to benefit everyone from shareholders, to executives, patients, taxpayers, and the government. The actual track record of such initiatives is, however, quite spotty—the most effective care management programs in terms of improving health outcomes do not reliably save money. The evidence suggests that chronic care disease management programs are not successful at saving money and improving health outcomes simultaneously, although many in the health care industry remain optimistic that better-designed programs will be more effective (Bott et al. 2009; Motheral 2011; Russell 2009). The most effective programs for improving health outcomes are both labor and cost intensive (Fireman et al. 2004). One recent study found: The great hopes engendered by disease management—that more consistent intervention in chronic illnesses and better treatment using clinical guidelines from evidence-based medicine would lower costs—have yet to be realized. Health care, like many other institutions and agencies, has found that “better” and “cheaper” do not always partner well. (Fireman et al. 2004:63) Many claims that the authors made in the pages of The Atlantic were both unsubstantiated and misleading, which are common features of health care writing, where keywords like efficient, quality, and savings accomplish the cultural work of converting market-based health reforms into good financial common sense. One of the major ways that these claims are misleading is that the article suggests that private Medicare Advantage plans are an efficient way to deliver health care.7 However, administrative costs at insurance companies are much higher than in governmentrun programs like Medicare, which spends around 3–5% of its premiums on costs related to administration, while private Medicare Advantage plans spend around

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16% (AMA 2005; GAO 2008; Woolhandler et al. 2003).8 This means that managed care in Medicare costs 13% more to provide than traditional fee-for-service Medicare (Zarabozo and Harrison 2009:w55), with “no apparent quality gains” (Gold 2009). Nonetheless, efficiency is routinely tethered to privatized health care delivery forms, while public programs are presented as inefficient, bloated, and outdated. Second, despite widespread calls to make health care costs more transparent, what cost means in health care is incredibly complex and opaque. A common method used to make managed care appear more efficient is to focus on medical costs as if they were total costs (Sullivan 2001). Sullivan calls this an error on the part of health policy analysts. However, I think it is better understood as a representational technique that is enabled by the financialization of health care and is part of the creative play that informs everyday practices of market making. So, for example, the cost figures cited as part of the health care revolution in the pages of The Atlantic appear to include only medical costs and not the administrative costs that go into running an insurance company.9 Most analysts agree that managed care has been successful in cutting medical costs, largely by reducing services such as inpatient hospital stays and negotiating lower provider reimbursement rates (Sullivan 2001:56). However, managed care necessitates more administrative staff to review claims, process appeals, and engage in disease and care management activities. More staff need supervisors, supervisors need managers, and so on. When administrative costs are excluded, it looks like the plan has been extremely successful at lowering costs, but this only means that the plan is paying for less medical care. The upshot is that “administrative costs have soared as managed care methods have spread” (Sullivan 2001:59). This distinction between medical and administrative costs is also known as the medical loss ratio, which is the percentage of total costs used to pay medical bills. The language is interesting here—the primary function of health insurance companies that is to pay for medical care is presented as a loss. Investors used to be attracted to low medical loss ratios (in the neighborhood of 80% or 75%) because it signaled that the insurance company was not saddled with high medical spending and was therefore more likely to be profitable. The ACA directly addresses this issue by requiring large health plans to maintain a medical loss ratio of 85% or higher. Plans with medical loss ratios below this threshold will be required to pay a rebate to the employers or individuals who purchased the plan. The purpose of the law is to ensure that health insurance premiums go to paying for medical services and to limit the proportion spent on profits and other administrative expenses. Attempts to circumvent the medical loss ratio rule popped up almost immediately. Insurance companies began attempting to reclassify administrative services (like disease and care management programs) as medical services (Iglehart 2010). Here, what constituted “medical care” became newly fuzzy and negotiable. Insurance companies that had traditionally pushed many services out of the realm of being reimbursable were now arguing for a broader, more inclusive definition of care. In a burst of creative play, finance experts sought ways to work around the new restrictions that the ACA placed on insurance profits.

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Cost shifting is a second technique that is used to make insurance appear efficient. Managed care organizations are adept at shifting costs onto other payers and even onto unpaid individuals like family members, who assume an ever-larger role in care giving. According to Sullivan, some of the most common cost-shifting techniques include billing other payers such as worker’s compensation programs, or failing to reimburse the Veteran’s Administration for services delivered in VA facilities. Some insurance companies avoid paying their share of graduate medical education and research, which further externalizes the cost of private insurance (Sullivan 2001:58– 59). Typically, teaching hospitals pay for graduate medical education with federal Medicare funds, state subsidies, and higher reimbursement rates negotiated with private insurers (Health Affairs 2012). In Puerto Rico, medical residency programs were crippled by the shift to managed care and the privatization of public hospitals that took place in the late 1990s and early 2000s (Par´es Arroyo 2008; Sosa Pascual 2005). In an interview in Puerto Rico in 2005, Dr. Luis Izquierdo Mora—the former secretary of health, a practicing primary care physician, and a faculty member at the University of Puerto Rico School of Medicine—described how privatizing public hospitals and enrolling the population in private managed care insurance plans contributed to shrinking opportunities for medical education: They sold the hospital in Arecibo. They sold the hospital in Ponce. They sold it in Guayama. They almost, almost sold it in Mayaguez. They sold it in ¨ Aguadilla. . . . Obviously the Reform had a huge impact, because many of the privatizers, well, their priority was not, let’s piously say: their priority was not education, it was service delivery. Nor did they prioritize research. And medicine is made up of three things: service, education, and clinical and scientific research. . . . The Hospital in Carolina, right now, if they eliminate the question of teaching there, we would lose 11 residency programs. Eleven programs. And we’ve already lost so many. Emergency medicine, anesthesiology . . . a ton of things have already been lost. That is why we are against turning that hospital over to the privatizers, because the impact this has had on medical education has just been devastating. Cost shifting can also take the form of squeezing more from providers at lower rates. For example, at Acme the quality department implemented a project that scrutinized appointment lengths and required that longer appointments (those with CPT codes of 99214 or 99215) needed to be supported with documentation like progress notes. This payment rule discouraged billing for longer (hence more expensive) appointments by creating an additional administrative burden for providers. Though physicians initially complained about this practice and threatened to leave the network, they eventually relented and the plan was successful in changing the billing practices of its contracted providers. The plan’s work to shorten appointment lengths was considered a quality project, and federal regulators expressed approval for the project since it cut down on fraudulent billing, which was thought to save Medicare money (since the Medicare HMO was paid a capitated premium per member per month for each enrollee, the savings from this “quality” project

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just benefited the plan, not the Medicare program, which paid the same rate for managing patient care regardless).10 The current trend toward higher cost sharing by beneficiaries particularly in high deductible plans is another example of cost shifting. This trend is particularly concerning because higher cost sharing results in decreased care seeking, even for services that are fully covered (discussed below). Another kind of cost shifting involves asking patients to perform tasks that were formerly the domain of health care professionals. In the article in The Atlantic, for example, more care-giving tasks were shifted onto patients themselves in the form of weighing oneself daily, tracking one’s own biometrics, self-examinations, and so on. One manufacturer of health kiosks in use at Walmart dubbed this the “self-service healthcare revolution” (Appleby 2013). Anthropologists have referred to this practice as “labor-shifting,” because patients are essentially transformed into part-time employees for insurance companies (Lamphere 2005). By shifting or “externalizing” costs, managed care organizations mask the cost of their care model. Taken together, leaving out administrative costs from calculations of total costs, redefining administrative costs as medical care, and cost shifting are some of the representational techniques through which it is possible to manipulate and massage representations of value in health care.

Gaming Payments: Making Money from Money (Not Care) A central component of financialization is that profit is generated from activities that are not productive in a traditional sense—finance does not build cars, weave cloth, or design apps. Finance makes money from money by creating markets for the buying and selling of credit and debt. In the run-up to the most recent financial crisis, financial actors also created new and incredibly risky methods for selling debt through derivatives, credit swaps, and mortgage backed securities. In health care, financialization has unleashed new opportunities for practical experiments in market making. In the quest to yield more money from money, financial techniques are increasingly applied to premium payment and reimbursement systems to maximize revenues. “Cherry picking” and “cream skimming” are the terms long used by economists to describe the strategies that insurance companies employ to enroll the healthiest (and hence least costly) beneficiaries. These pastoral metaphors seem almost quaint in today’s financialized health care marketplace. Holding information sessions in the affluent parts of town, high co-pays for cancer drugs, and other fee structures that drive away those with chronic medical needs are all strategies that insurance companies have used to enroll the healthiest part of the population. With fewer medical bills to pay from healthier populations, insurance companies retain a greater share of the premiums that they receive from government programs, employers, or individuals. In an era of risk-adjusted payments, however, insurance companies have gotten more sophisticated, and more financial, in how they maximize their revenues and profit. Risk-adjusted payments take into consideration a beneficiary’s age, medical condition, gender, and economic status so that an insurance company is paid a higher premium for beneficiaries who are older, sicker, female, and poorer. Risk-adjusted

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payments are supposed to keep insurance companies from avoiding sicker and more costly beneficiaries by paying higher premiums for these individuals (Cunningham 2012). Some policy analysts see risk adjusted-payments as a regulatory solution to letting premiums be completely set by the market (in which case, the young and healthy would have radically lower premiums than the older and sicker) (van de Ven and van Vliet 1992). Risk adjustment is also known as risk mitigation; in other words, risk adjustment allows insurance companies to avoid assuming too much risk. In their recent study of life, fire, and car insurance in Canada and the United States, Ericson and colleagues make a counterintuitive argument; they claim that a key characteristic of insurance in the neoliberal era is “increasing risk segmentation or the unpooling of risk” (Ericson et al. 2010:533). Risk-adjusted payments in health care provide further evidence for this observation. Risk adjustment is a technique that enables market segmentation; where social insurance seeks to redistribute risk among everyone in society, risk adjustment enables segmentation (rather than pooling) by setting a more accurate risk-based payment for each individual based on his or her demographic and health characteristics. This ability to differentiate payment according to very specific individual characteristics has fed into the creation of new insurance products targeted at high risk groups.11 When I worked at Acme, the Medicare Modernization Act was being implemented. The law created new plan types under the Medicare Advantage program known as Special Needs Plans that specialized in serving low-income populations (beneficiaries who were dual eligible with Medicaid) and those diagnosed with specific chronic diseases such as chronic obstructive pulmonary disease or end stage renal disease. Although insurers had traditionally avoided the chronically ill since they incur more medical care, Acme jumped at the opportunity to offer special needs plans; executives were confident of the financial advantage of segmenting the market according to disease status, even before Medicare had issued the final rules that regulated the program.12 The experience of the Medicare Advantage program with risk-adjusted payment methodologies was used as the basis for including significant risk adjustment provisions in the ACA (Cunningham 2012).13 The ACA incorporates risk-adjusted payments in the individual and small group markets so that insurance companies would be more likely to participate and enroll newly insured populations, including those with preexisting conditions who formerly were denied coverage or could not afford exorbitant insurance premiums. Accountable care organizations and patientcentered medical homes—two pay-for-performance managed care models promoted by the ACA—also rely on risk-adjusted payment methods. While risk adjustment seems like a fairer way to set premium rates and is intended to reduce access barriers for those with greater medical needs, in practice, insurance companies have devised multiple techniques for gaming risk-adjusted payment systems. For example, under a risk-adjusted system or in a special needs plan, it is advantageous to enroll the healthiest of the chronically ill—diabetics whose condition is fairly well controlled or congestive heart failure (CHF) patients who are motivated and interested in treatment. With these patients, insurance companies receive a higher risk-adjusted premium but do not spend as much on medical care as they would with a diabetic whose condition is uncontrolled or a CHF patient who

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is not motivated or able to make behavior modifications or follow treatment plans. Adding a gym membership and health education classes to the benefit package is a good way to attract these more motivated individuals (Cooper and Trivedi 2012). A second example of gaming risk-adjusted payment systems involves massaging the data that payers use to calculate their risk-adjusted premiums. At the health plan where I worked in Puerto Rico, significant organizational energy was dedicated to mobilizing new members to attend a welcome physical. Health plan employees called new enrollees to invite them to attend their first medical appointment with the plan. Primary care physicians were awarded a bonus for every physical they conducted. Among high-volume providers, special days were set aside for conducting these physicals. Though a welcome physical sounds sensible and could identify health issues that require attention, as I understood it, the main objective of the physical was to document as many diagnoses as possible so that the risk-adjusted premium that the plan received would increase dramatically. This effort was highly successful: An ex-executive at the company informed me that the plan reported having the sickest beneficiaries in the country (and, by extension, the highest risk-adjusted premium rates). This practice was employed at plans across the country and is an example of how a culture of smartness contributes to rising health care costs. The practice is currently under federal investigation (Deaton et al. 2012). Mining electronic claims data for ways to exploit payment rules is common throughout the health care industry. Some firms even specialize in helping managed care organizations deny claims. Acme used a “payment policy management” company called iHealth Technologies that analyzed diagnostic and procedure codes on durable medical equipment, professional, and other outpatient claims, looking for reasons to deny claims. iHealth researched the constantly evolving standards of medical practice and furnished Acme with a denial rationale for each claim that included references to Medicare payment policy, clinical trials, and professional associations like the AMA to make its denials, in its words, “defensible.” For example, iHealth implemented payment rules (called iHealth “logics” at Acme) that generated denials for things like receiving too many therapies in a week (such as physical therapy or cardiac rehab). Companies like iHealth have their parallels in the provider world; the claims denial practices of HMOs have spurred the creation of companies that sell their coding services to providers so that they can avoid unnecessary and costly denials. Some e-health vendors specialize in products that allow providers to “upcode” by automatically populating claims forms with data from electronic medical records to ensure that providers maximize their compensation from payers. The “payment policy management” arms race is a product of the financialization of health care. Recent reports also suggest that it contributes to escalating overall costs (Abelson et al. 2012). The day-to-day work of the finance department at Acme focused on ensuring that the plan was making money off of the premium payments it received from the government while those premiums sat around waiting to pay medical claims. This is a hallmark of the financialization of the insurance industry, where profit is increasingly made from financial activity: “The ‘time value’ of money is precisely what the insurance industry thrives on. While they manage their ‘loss ratio’ . . . as best they can through policing of the claims process and through reinsurance,

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their profits are primarily derived from investment of premium dollars” (Ericson et al. 2010:544). When Acme was sold to a U.S. investment firm that I dub Health Holdings, Inc., the focus on finance intensified. Health Holdings, Inc. soon acquired a competitor and thus many more covered lives. Acme also reviewed its contracts with subcontractors and sought out more favorable terms. Physician payments were cut and beneficiary cost sharing increased. The profits largely left Puerto Rico as Health Holdings, Inc. was headquartered on the mainland.14 Financial techniques employed by insurance companies increase revenue, cut costs, and make money from money. Although all of this financial activity certainly makes insurance more profitable, it has done little to add value to the health system as a whole. Financial innovations in health care, similar to the process of financialization more broadly in the economy that led to the Great Recession, “can make private money but public harm” (Turner 2012:36).

Finance and the Devolution of Responsibility Neoliberal policy programs devolve responsibility for public service provision and economic security onto private actors such as corporations, non-profits, and individuals (Clarke 2004; Holland et al. 2007; Ilcan and Basok 2010; Morgen and Maskovsky 2003). Important work has recently emerged in medical anthropology that analyzes how physicians, insurance companies, school health officers, and nonprofits call on patients and their families to assume more responsibility for their own care. The “good” patient is one who exhibits the desire and discipline to maintain health (Borovoy and Hine 2008; Horton and Barker 2009; Metzl 2010; Rivkin-Fish 2011). But responsibility is not just for the body, it applies to the wallet as well.15 Here, I focus on financial responsibility for one’s medical care. What health care costs in the United States is famously (and disingenuously) mysterious. Across the political spectrum, observers critique a health care system in which insured individuals have no sense of what services actually cost. There is great variability in what a single provider might charge for a service depending on one’s insurance coverage or lack thereof. Provider reimbursement rates likewise exhibit widespread variation geographically, by specialty, and by place of service. For many health economists and conservative policy analysts, this lack of price transparency introduces an incentive to overutilize services for insured individuals who are buffered from the true costs of their medical care. Overuse and waste is blamed for the overspending that characterizes the U.S. health care system. This overconsumption problem among people with insurance has been termed “moral hazard.” The proposed solution is increased cost sharing as evoked in macabre terms like “having skin in the game” and “being on the hook.” Deborah Stone considers moral hazard “the most powerful narrative in American health policy” (2011:886). The empirical evidence, she argues, does not support the claim that insured individuals wastefully seek out medical care; they seek care when ill and make utilization decisions based on doctors’ recommendations, not their own propensity to overuse. Furthermore, greater patient cost sharing (the remedy for moral hazard) has been repeatedly shown to reduce use of medically necessary care. The end result is that “cost-sharing redistributes medical care back in the direction of ability to pay,” thus undermining the social purpose of insurance

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which is to distribute risk broadly across a population (Stone 2011:891). Despite the policy focus on insured individuals, much of the regional variation in cost and utilization can be attributed to the actions of physicians. Physician-owned facilities and imaging equipment on site coupled with a fee-for-service reimbursement system have repeatedly been associated with higher utilization rates and elevated medical costs (Gwande 2009; Stone 2011). Financialization and the widespread belief that something should be done about moral hazard have contributed to the creation of new plan types with novel finance methodologies such as Health Savings Accounts (HSAs) that fund high-deductible health plans. HSAs allow employees to put pre-tax wages into an account that can be used for medical expenses. Almost 11.5 million people in the United States had high deductible plans (also euphemistically called “consumer-directed plans”) in January 2011 (Kulkarni 2012). To be considered a high deductible plan, the deductible must be at least $1,200 for individuals and $2,400 for a family. High deductible plans have been shown to fulfill their central purpose; they reduce health spending. However, the reductions occur across the board and not just on services that policymakers deem “wasteful.” One study found a 21% reduction in spending in the first year, but beneficiaries cut back on the use of beneficial services “including preventive care, such as cancer screenings, even though such care was fully covered under consumer-directed plans” (Haviland et al. 2012). Many health economists champion high deductible plans for their perceived efficiency: “In the economic account moral hazard leads to inefficiency, which is clearly a ‘bad’ in economic analysis” (Baker 2000:573). But if patients forgo both necessary and unnecessary care when enrolled in high deductible plans, is that efficient? Is it good? The morally saturated language of health economics cries out for close scrutiny and analysis by anthropologists. Individualized ideas about personal responsibility—for one’s health and one’s finances—undergird the new care models that the ACA promotes. For example, many of the new plans available on the health insurance exchanges are high deductible plans. Moral hazard devolves responsibility onto individual actors who do not have the ability to direct or control spending in the health system. Individuals, however, are easy to blame. From the comparative health policy literature, we know that price controls, global budgets, and limiting physician salaries are more effective strategies for controlling health spending than blaming consumers for using health services (Oberlander 2011). Moral hazard also puts out of view the financial actors who creatively game payment and reimbursement systems. While financiers are able to massage their accounting balance sheets, patients must put their “skin in the game.” These are very different notions of accountability. Rather than see speculation and making money from money as a problem in the health system, moral hazard transforms care seeking itself into a bad risk and source of inefficiency. The upshot is that health coverage comes under attack because it leads to allegedly irresponsible behavior: “Moral hazard transforms health insurance from a social hero into a social villain. It transforms the social safety net from a mode of security against danger to the very danger itself” (Stone 2011:886).

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Conclusions I began this article considering how financialization creates new opportunities for creative play and practical experiments in market making. Finance experts manipulate risk-based premiums and expand, retract, and merge their firms with the ups and downs of the market. The purpose of the financial sector is to create liquidity and investment opportunities in the economy and to better allocate money in the system. However, critics of finance’s role in the recent recession argue that financial actors are often parasitical and siphon value from other sectors. Karen Ho writes that finance has “singularly privileged short-term shareholder value and large-scale gambling, [and] has actually diverted, transferred, and extracted wealth from productive enterprises, workers, houses, and communities, generating rampant socioeconomic inequality not seen since the Great Depression” (Ho 2012). Health care is not immune from these forces. To advance our understanding of how finance restructures health care, this article critically examines value, pricing, and financial accounting in the health insurance industry. Work remains to be done on how individuals understand and make decisions related to purchasing coverage, refusing or delaying care due to cost, and undergoing medical bankruptcy. Given the widespread practice of gaming the system and the everyday forms of market making discussed above, I am not optimistic about health reform’s ability to expand access, make care more affordable, and reduce overall costs through private, for-profit insurance companies. I worry that what looks like the pooling of risk through insurance exchanges will actually lead to further market segmentation and the unpooling of risk (Ericson et al. 2010), with individuals made responsible by the individual mandate for financing their own care, and no end in sight to the cultures of smartness that drive up and obfuscate health care costs. As medical anthropologists set about the task of documenting how health reform transforms the health care system in the United States and the experience of care seeking and care giving, we must also analyze the financial common sense and everyday experiments in market making that bring reform to life. Through ethnography, we can examine the insurance companies, regulatory agencies, doctors’ offices, and customer service call centers where these financial logics are applied and questioned. In so doing, we generate new forms of evidence that can inform public conversations about health reform and trouble the current terms of debate.

Notes Acknowledgments. This research was supported by the Department of Anthropology at Harvard University, the Andrew W. Mellon Foundation, and the Holleran Center for Community Action and Public Policy at Connecticut College. For feedback and inspiration, I thank C´esar Abadia, Amy Dao, Alexa Dietrich, Adriana Garriga-Lopez, Robert Hackey, Kyle Kusz, Sarah Horton, Andrea Mazzarino, Mark ´ Nichter, Jennifer Jo Thompson, and Victor Torres-V´elez. 1. Importantly, financialization entails more than commoditization and a shift to more for-profit providers of health services. Though for-profit health care firms certainly create hospitable conditions for financialization, nonprofits are still impacted

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by this process, especially non-profit hospitals, which make up three-quarters of hospitals in the United States (Kinney 2010). I thank participants in the EASA Medical Anthropology Network and AAA Society for Medical Anthropology joint meeting in Tarragona, Spain, on June 12, 2013, for raising these questions. 2. In the health insurance industry, the trend has been toward consolidation, with only a few firms dominating enrollment in each state and conversion of nonprofit plans to for-profit plans (Robinson 2000, 2004). 3. Personal communication, Amy Dao. 4. I worked and researched at Acme as managed care in Medicare first came to Puerto Rico. The Commonwealth of Puerto Rico (known as the Estado Libre Asociado in Spanish, literally, the Free Associated State) is a territory of the United States and, as such, is unevenly incorporated into the U.S. health care system. Since the 1950s, health care had been available to all in Puerto Rico, regardless of ability to pay (Arbona and Ram´ırez de Arellano 1978). In the 1990s, the health system in Puerto Rico underwent a series of market-based—neoliberal—reforms. First, the publicly funded regional health system was privatized by closing public health facilities and by enrolling eligible beneficiaries in private managed-care health plans. During the next decade, privatization intensified due to market-based reforms in the Medicare program. Elsewhere I discuss how reform was experienced on the island (Mulligan 2014); here I limit my observations to the financial practices that occurred at Acme. Puerto Rico has also been hit particularly hard by debt crisis as its bond rating has been downgraded to junk status and it is prohibited from declaring bankruptcy (Walsh 2013). The island has been saddled with austerity measures since the beginning of the recession, largely aimed at reducing government spending by cutting public jobs and reducing services. 5. A recent virtual issue of Cultural Anthropology features major contributors to this conversation on finance and highlights emerging debates in the field (Mauer 2012). One axis of debate concerns the political orientations of academics: Some claim that this scholarship overly identifies with the elite financial actors who they study, while others are weary of work that puts the “critical” before the “analysis” (Mauer 2012). Another critique is that anthropologists may be over-eager to recreate a distinction between the “real” and the financial economy, rather than interrogate this distinction as part of their analyses. 6. Zaloom’s inquiry into digitalization is also instructive. As health care increasingly looks to electronic medical records and other forms of digital communication to transform the practice of medicine, her work provides a useful analogy for making sense of this reliance on digitalization to create efficiency, transparency, eliminate human error, and erase individual and institutional (i.e., cultural) differences in record-keeping and documentation. 7. Medicare is a federal program for those over 65 and under 65 with certain disabilities. The program is financed through payroll deductions (for hospital and skilled nursing facility services) and premiums paid by beneficiaries (for outpatient and prescription drug services). There are two ways to receive Medicare benefits. The first is fee-for-service, or “Original Medicare,” in which a beneficiary can visit any provider who accepts Medicare. In Original Medicare, beneficiaries have few restrictions in provider selection, but they often face high out-of-pocket costs in the form of copayments and an annual deductible. The second way to receive

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Medicare is through a managed-care organization, currently known as the Medicare Advantage program. Payment to managed-care organizations under Medicare has existed in the mainland in one form or another since 1972 (Zarabozo 2000:62), but the first Medicare managed-care plan operating in Puerto Rico opened in 2000. Medicare managedcare organizations like Acme receive a capitation (payment) per member per month from the federal government to offer Medicare services through a network of contracted providers. By assuming the financial risk for a large enough group of beneficiaries, the premise is that managed-care organizations can provide benefits in addition to what is covered by Medicare, focus medical management efforts on prevention, control fraud by reviewing claims, and administer health care in a more efficient and businesslike manner, which will result in cost savings for the government and profits for the managed-care organization. The reality, however, has been that Medicare Advantage costs more, not less, than Original Medicare. Medicare Advantage plans on the island receive much higher payments relative to Original (fee-for-service) Medicare; in 2009, the Medicare Advantage rates were close to 180% of fee-for-service Medicare (MedPac 2009:179). Many Medicare Advantage plans have flocked to the island to profit from these high premiums. 8. These figures are disputed by conservative critics and the industry lobbying group, America’s Health Insurance Plans (AHIP), who claim that Original Medicare has an unfair advantage since its premiums are collected by the IRS and capital costs are not included. Some even argue that Medicare’s administrative costs are too low and that they do not effectively manage care or detect fraud, see AHIP (2005) for a summary of this position. 9. I emailed the authors of The Atlantic article requesting clarification on what they mean by total costs and asking for documentation or references but have received no response. 10. In his article on incentive payments to physicians at a primary care clinic in the United States, Michael Oldani (2010) describes an intervention that was also focused on monitoring billing codes. However, in this practice, the monitoring was around “relative value units,” which, together with CPT codes, were used to calculate provider reimbursements. At Acme, the difference between a 99213 and 99214 was understood in terms of the length of time that the provider spent with the patient and directly equated to a dollar pay out for the visit. In Oldani’s study, physicians had to classify patients into a RVU of 1, 2, 3, 4, or 5 according to levels of complexity involved in the medical decision making, the patient’s underlying health status, and time spent in the appointment (p. 218). Clinical features of care seemed more salient in the provider office compliance program than at the HMO. 11. Financial techniques also make it possible to slice and dice risk data in such a way that it is possible to single out individual usage patterns and identify some people as being irresponsible. Terms like “frequent flyers” and “hot spotters” describe these high utilizers of hospital services: often people who are homeless, struggling with addiction, or have multiple, complicated medical conditions and no insurance. 12. French and Kneale (2012) describe a similar instance where “bad” risks are preferred in their fascinating account of the creation of a market for “enhanced and impaired pension annuities,” which pay higher rates for smokers since they

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are projected to live shorter lives (p. 391). Likewise, Ericson et al. (2010) discuss lucrative markets for bad risks in auto insurance. Low-income applicants who need a policy to drive but cannot afford the entire premium at once are encouraged to finance their payments at high interest rates (pp. 535–536). 13. Medicare Advantage has a history of enrolling wealthier and healthier beneficiaries than Original Medicare (McGuire et al. 2011). The introduction of risk adjustment in 2003 was supposed to remedy this problem, also known as “favorable selection.” 14. Though not strictly financial in nature, health plans also employed rentseeking tactics to increase revenues. Rent seeking involves using the political process to garner privileges and increase market share. When Acme transitioned from being a start-up to a more established player, it contracted the services of lobbyists and took the political process far more seriously. A gain procured through lobbying by Medicare Advantage firms nationwide was a blunting of premium cuts by creating a quality bonus system in which plans with even mediocre quality scores received payouts. 15. Responsibilization has also been widely discussed in the literatures on reflexive modernization, governmentality, and neoliberalism (see Beck 1999; Holland et al. 2007; Rose 2007). It is a key technique within neoliberalism for devolving responsibility onto social actors for their own well-being: “The individual is responsible. She is to be her own political economy, and informed, self-sufficient consumer of insurance and other security products” (Ericson et al. 2010:553).

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Insurance Accounts: The Cultural Logics of Health Care Financing.

The financial exuberance that eventually culminated in the recent world economic crisis also ushered in dramatic shifts in how health care is financed...
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