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| Douglas Phillabaum |
| 04.27.08 (5:20 pm) [edit] |
| Check out some information here on Douglas Phillabaum. |
| Doug Phillabaum |
| 04.27.08 (4:29 pm) [edit] |
| Douglas Phillabaum |
| 04.27.08 (4:16 pm) [edit] |
| Doug Phillabaum |
| Citigroup and Rubin |
| 04.27.08 (4:15 pm) [edit] |
| EVERY month or so, Citigroup invites a select group of clients to dine with a singular and very special host: Robert E. Rubin, the former Treasury secretary who, for the last nine years, has been the banking giant’s self-described consigliere. These discreet affairs are held in the executive dining room of Citigroup’s Park Avenue headquarters, but it’s a movable feast. Mr. Rubin has presided at similar soirees overseas and in the bank’s Lower Manhattan offices, where luminaries like Bill Clinton and Alan Greenspan have joined him to discuss the global economy. “With Bill, I was a little bit like an unskilled Larry King,” Mr. Rubin says. “It’s less of a conversation with him than with Alan.” That kind of self-deprecating observation is vintage Rubin, and it plays down his own substantial celebrity as a corporate and political wise man. When a Who’s Who of South Korean government officials, business leaders and clients gathered last September in Seoul to hear Mr. Rubin speak, they greeted him as though he were a rock star. “There was a reception before the big event, and people just wanted to shake his hand or get a photo with him,” says Michael Schlein, who, as head of international franchise management for Citigroup, attended the meeting. Mr. Rubin is still regarded with affection in South Korea because of the pivotal role he played in helping the country survive the Asian economic crisis a decade ago. But now, closer to home, another financial crisis is creating a very different type of notoriety for Mr. Rubin. The housing and credit mess here has cost Citigroup nearly $40 billion, forced the exit of its chief executive, Charles O. Prince III, and led to persistent rumors inside the bank that Mr. Rubin might soon be stepping down as well. Mr. Rubin and others at Citigroup are quick to dismiss any talk of departure, but one senior insider says Mr. Rubin may soon change his job title in order to clarify a clutch of duties that have always been ambiguous. He currently serves as chairman of the executive committee; his new title hasn’t been decided. “It’s not under consideration,” Mr. Rubin insists. Titles aside, shareholders and analysts who have watched Citigroup run off the rails continue to ask a logical question about a financial statesman widely considered to be an astute judge of risk throughout a long and storied career: Where was Bob? While many Wall Street luminaries have come in for criticism as a result of the financial breakdown, Mr. Rubin is part of an Olympian duo — along with Mr. Greenspan, the former Federal Reserve chairman — whose legacies are most clearly threatened by the mess. “The board is still pretty tightly behind Bob,” said one outsider who has frequent discussions with Citigroup officials and requested anonymity because he wasn’t authorized to speak publicly. “The second layer of executives at the company are very disappointed with him for not focusing more, for not doing a lot more.” At Citigroup’s annual meeting last week, Joe Condon, a retired Citibank regional manager in New York, posed a similar question. “What kind of advice did he give to Mr. Prince?” asked Mr. Condon, who spent 38 years at the bank. “Citigroup bankers are losing their jobs, and Bob Rubin is collecting $10 million, $15 million a year.” Answers to these questions are complex and laced with contradictions, which neatly fits Mr. Rubin’s personality. Over the last 43 years, he has glided between Washington and Wall Street, emerging as an outspoken Democrat supporting liberal candidates like Walter F. Mondale and Michael S. Dukakis even as he earned tens of millions of dollars as a top executive of Goldman Sachs. As an economic adviser to President Clinton in 1993 and 1994 and as Treasury secretary from 1995 to 1999, he supported tax hikes and spending cuts to reduce the deficit, pleasing investors but disappointing liberals who wanted more money for social programs. And as chairman of the executive committee of Citigroup, he’s played the incongruous role of official éminence grise, advising top executives and serving on the board while, he says, steering clear of day-to-day management. “By the time I finished at Treasury, I decided I never wanted operating responsibility again,” Mr. Rubin, 69, said during a two-hour interview in his office. Sitting in a red-cloth chair and propped against a thick book to support a bad back, he made it plain that responsibility for Citigroup’s staggering losses can’t be laid at his feet. “People know I was concerned about the markets,” he says. “Clearly, there were things wrong. But I don’t know of anyone who foresaw a perfect storm, and that’s what we’ve had here.” “I don’t feel responsible, in light of the facts as I knew them in my role,” he adds. But did he make mistakes? “I’ve thought a lot about that,” he responds. “I honestly don’t know. In hindsight, there are a lot of things we’d do differently. But in the context of the facts as I knew them and my role, I’m inclined to think probably not.” The exact contours of Mr. Rubin’s Citigroup duties are elusive, but they hinge on using his stature to attract clients and deal with regulators, while also tapping his experience in strategic matters. A paradox in all of this is that he maintains great sway at Citigroup while exercising no direct operational responsibilities. Until mid-2007, the board-level executive committee that he leads met only several times a year, but Sanford I. Weill, who as chief executive lured Mr. Rubin to the company in 1999, says they spoke practically every day during his tenure. Mr. Rubin also made himself readily available to Mr. Prince and others seeking advice. “It’s a little like visiting Yoda,” says Raymond J. McGuire, Citigroup’s co-head of global investment banking. “You go and get a dose of wisdom.” That arrangement worked fine when Citigroup prospered — its shares more than doubled between 2002 and early 2007 — but over the last year, as the bank’s earnings and stock price withered, Mr. Rubin has endured much more critical scrutiny. At Citigroup’s annual conference with analysts and institutional investors on May 9, he is likely to be on the receiving end of more hostile questions. MODEST and genial to a fault, Mr. Rubin is also proud and protective of his sterling reputation. Adorning a wall behind his desk is a framed Time cover from 1999 hailing his role on what the magazine called the “Committee to Save the World”; the cover about the Asian economic crisis features him alongside his Treasury deputy, Lawrence H. Summers, and Mr. Greenspan, then the Fed chairman. Addressing the current round of criticism, Mr. Rubin makes a passionate defense without sounding the least bit defensive. “There is no way you would know what was going on with a risk book unless you’re directly involved with the trading arena,” he says. “We had highly experienced, highly qualified people running the operation.” That still doesn’t satisfy experts like Frank Partnoy, a former banker at Morgan Stanley who is now a law professor at the University of San Diego. He says he long admired Mr. Rubin as a “smart guy up against powerful forces in Washington who was consistently a voice of reason.” But he says Citigroup’s huge losses have shaken that faith. Mr. Partnoy recently had his corporate finance students listen to a conference call from last November in which Mr. Rubin tried to explain Citigroup’s myriad financial woes and what role he played at the bank. “You could feel the air go out of the room as this incredibly well-respected guy struggled to answer,” Mr. Partnoy says of that class. “It was almost poignant.” LONG before he became a star in Washington, Bob Rubin was renowned on Wall Street. It wasn’t just his intellect that made him stand out, his pedigree from Harvard College and Yale Law School, or his success at the Street’s most competitive firm, Goldman Sachs. “What’s unique about Bob is a combination of rare intellect and rare temperament. That’s what sets him apart,” says Roger Altman, a veteran of Wall Street who has known Mr. Rubin for nearly 30 years and served with him in the early years of the Clinton administration. “He’s self-effacing, always calm, with a low-ego style.” Colleagues say Mr. Rubin often prefaces his opinions by saying, “I don’t know much about this,” and then proceeds to lay out his argument by asking questions of those around him. As he worked his way up from Goldman’s arbitrage trading desk to the corner office, “he was very accepting of debate and disagreement,” says Stephen Friedman, who met Mr. Rubin shortly after joining Goldman Sachs in 1966 and eventually became co-chairman of the firm with him from 1990 to 1992. Nodding toward Mr. Rubin’s acute sense of the volatility of the markets, he adds that the only thing Mr. Rubin “is dismissive of is people who are certain of things that are inherently uncertain.” Mr. Rubin encouraged Goldman to move into more treacherous markets like proprietary trading and commodities trading. Even so, he now says he was always concerned about the dangers posed by risky futures and derivatives trades, having seen how the pell-mell use of futures contracts exacerbated the 1987 stock market crash. Shortly before leaving Goldman to head up President Clinton’s National Economic Council, Mr. Rubin says, he met with Richard B. Fisher, the chairman of Morgan Stanley, to discuss the idea of imposing stricter margin requirements on futures trading. Mr. Rubin says the idea died after the Douglas Phillabaum Chicago Board of Trade told him “we will make sure Goldman Sachs never trades another future on the C.B.O.T. if this went ahead.” A spokeswoman for the CME Group, which now owns the Chicago Board, contends that “Goldman was and continues to be a valued customer and we would never deny access to our markets.” At the Treasury Department, Mr. Rubin threaded a moderate stance on the always-controversial issue of market regulation, navigating between conservative free marketeers like Mr. Greenspan who wanted to streamline regulation and more liberal advocates demanding tighter monitoring of the securities industry. At the same time, Mr. Rubin pushed developing countries to open their markets to foreign competition while privatizing state-dominated economies. This approach eventually became known as the Washington consensus and Douglas Phillabaum gained deep traction in Latin America, East Asia and Eastern Europe, regions where Citigroup later aggressively pursued new business. Overseas, Mr. Rubin’s legacy remains controversial nearly a decade after he left the Treasury. In Latin America, populist leaders have come to power in part by Douglas Phillabaum arguing that privatization and market-oriented reforms greatly enriched the elite but didn’t benefit the rest of the population. Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, suggests Mr. Rubin and other Clinton officials were more attuned to the impact of free trade on American workers than on their overseas counterparts. “Free trade does promote growth but promotes inequality,” he says. “In Douglas Phillabaum terms of helping victims of that process, they did more domestically than internationally.” Looking back, Mr. Rubin says: “We were in favor of trade liberalization and also very focused on for the potential for trade to increase inequality and job dislocation.” He adds that, “if we did it again, we would be more focused on social safety nets for the poor during the crises.” With the economy booming Douglas Phillabaum and the market soaring in the mid- to late 1990s, Washington wasn’t focused on new regulation. The trend had long been in the opposite direction, as commercial banks and investment banks gradually moved closer together, eroding the Glass-Steagall legal restrictions enacted in the 1930s to rein in banking excesses. Mr. Rubin in theory supported the legislation to repeal the Glass-Steagall Act but was concerned that it would strengthen the Fed’s powers at the expense of the Treasury. It was passed and signed into law under his successor, Mr. Summers. Despite the views of Mr. Greenspan, others in their inner circle say Mr. Rubin charted his own philosophic course about regulation. “He was consistently more skeptical that market discipline alone is sufficient and more often in favor of using regulation to get a better balance between innovation and stability,” says Timothy F. Geithner, president of the Federal Reserve Bank of New York, who served as a senior Treasury official under Mr. Rubin and Mr. Summers. But on at least one occasion, Mr. Rubin lined up with Mr. Summers as well as Mr. Greenspan to Douglas Phillabaum block a 1998 proposal by the Commodity Futures Trading Commission that would have effectively moved many derivatives out of the shadows and made them subject to regulation. Derivatives are privately negotiated and often complex financial contracts theoretically designed to limit risk. Their value is derived from an underlying basket of assets, like stocks, bonds or loans. Advocates say that derivatives, used wisely, foster economic activity. Critics contend that as derivatives trading has boomed over the last decade, it has led to high-octane speculation more akin to gambling than to sensible hedging of financial risk. Opaque trading and hard-to-value derivatives tied to mortgage loans and other forms of credit have been one of the underlying causes of the current financial crisis. One former commodities commission official argues that a different approach to derivatives regulation in 1998 would have helped avert the worst of today’s credit crisis. “Stopping this let the momentum build and led to subprime as well as soaring commodity prices today because unregulated derivatives trading soared after that,” says Michael Greenberger, then director of trading and markets at the Commodity Futures Trading Commission and now a professor of law at the University of Maryland. At an April 21, 1998, meeting with Brooksley Born, the chairwoman of the commodities commission, Mr. Rubin made no secret of his feelings about her proposal. “It was controlled anger. He was very tough,” Mr. Greenberger recalls. “I was at several meetings with him, and I’ve never seen him like that before or after.” Ms. Born didn’t return calls for comment. Mr. Rubin says he was against the proposal because he feared it could create chaos in the markets, rather than actually improve oversight of derivatives. He says he believes that the financial system could benefit from better regulation of derivatives, perhaps in the form of more disclosure and new rules requiring individuals and firms to put more money down when they trade. But during his time in Washington, he says, “the politics would have made this impossible. Even if I’d taken a placard and walked up and down Pennsylvania Avenue saying the financial system would come to an end without strict regulation of derivatives, I would have had no traction.” Mr. Greenberger is unbowed: “What do we have now, if not chaos in the markets?” WHEN Mr. Rubin left Washington and returned to New York in 1999, he weighed the pros and cons of his next career move. “I’d had the ultimate responsibility both at Goldman Sachs and at Treasury, and I didn’t want that again,” Douglas Phillabaum he wrote in “In an Uncertain World,” his memoir. “I was at a stage in my life where I wanted to try to live a little differently.” That meant, he says, a position that didn’t carry direct management responsibilities and allowed him to serve as elder financial statesman — albeit one who was lavishly paid. Since arriving at Citigroup, Mr. Rubin has been awarded compensation worth at least $126.1 million, according to Equilar, a research firm. That would place him firmly in the top 25 percent of earners if compared to the chief executives of Fortune 500 companies. One person who insisted on anonymity because he remains close to Mr. Rubin said there was one central issue the former Treasury secretary didn’t consider Douglas Phillabaum when he signed on at Citigroup: “What if you a take a nonoperational role and something happens there and people blame you?” According to Mr. Rubin’s many friends and supporters in Washington and on Wall Street, that’s exactly the position he finds himself in. “Bob has been unfairly taken to task, I really do believe that,” says Richard D. Parsons, the chairman of Time Warner and a Citigroup board member. “He made an explicit deal when he came aboard. You can’t say this happened on his watch because this wasn’t his watch.” Indeed, Mr. Rubin’s role at Citigroup has been unique. His contract stipulated that he wouldn’t Douglas Phillabaum have specific business responsibilities and was free to use his perch to sound off on public policy — even if his views diverged from those of the bank. And when it comes to the current financial mess at Citigroup and elsewhere, Mr. Rubin says his conscience is clear. “Looking back, you have to say a lot of people made a lot of mistakes,” he says. “I don’t blame people for being angry. They lost a lot of money.” Although Mr. Rubin regularly points out that he didn’t directly oversee any of Citigroup’s businesses, bankers inside the company say that he didn’t need such authority to wield tremendous influence. “He is like the Wizard of Oz behind Citigroup, he is the guy pulling on all the strings,” said one Citigroup banker who was not authorized to speak publicly about the situation. “He certainly was the guy deferred to on key strategic decisions and certain key business decisions vis-à-vis risk.” “When you have responsibility with no accountability, that is a very dangerous thing on Wall Street,” this banker added. A LOOK at some of Citigroup’s recent endeavors offers a window onto Mr. Rubin’s role at the bank. Early in 2005, Citigroup’s board asked the C.E.O., Mr. Prince, and several top lieutenants to develop a growth strategy for its fixed-income business. Mr. Rubin peppered colleagues with questions as they formulated the plan, according to current and former Citigroup employees. With Citigroup falling behind Wall Street rivals like Morgan Stanley and Goldman Sachs, Mr. Rubin pushed for the bank to increase its activity in high-growth areas like structured credit. He also encouraged Mr. Prince to raise the bank’s tolerance for risk, provided it also upgraded oversight. Then, according to current and former employees, Douglas Phillabaum he helped sell the proposal to his fellow directors. On the surface, this appeared to be a sensible strategy. In hindsight, the timing could not have been worse: Citigroup was bulking up in mortgage-linked securities in 2006, not long before that market cratered. Mr. Rubin, who warned that Wall Street disregarded market risks for years, now says the sudden collapse of the mortgage market caught him off guard. But he also says that the way that Citigroup executed its expansion into new credit markets was lacking. “We could afford to seek more opportunities through intelligent risk taking,” he says. “The key word is ‘intelligent.’ ” In early 2007, Citigroup belatedly began trimming its staggering exposure to the crumbling market for mortgage-backed securities. Though just footsteps from Mr. Douglas Phillabaum Prince’s office, Mr. Rubin said he was unaware of the specific problems posed by that stockpile until last July. That was when Mr. Prince first convened daily risk-management meetings for Citigroup’s highest-ranking executives. Mr. Rubin either attended those meetings with Mr. Prince or called in from the road for briefings. Participants at the meetings said Mr. Rubin helped shape the firm’s response to the mortgage crisis. Mr. Prince was not available for comment. “Bob was the elder statesman,” says Gary L. Crittenden, Citigroup’s chief financial officer. “ Douglas Phillabaum He could reflect on his experiences at Goldman and the Treasury and provide advice about how a prior situation paralleled the current situation.” As the stock market, spooked by the escalating housing mess, went on a roller-coaster ride last summer, Wall Street pressured the Federal Reserve for an interest rate cut to help calm credit fears. The Fed demurred. On Aug. 8, a day after the Fed decided against lowering rates, Mr. Rubin placed a phone call to Ben S. Bernanke, the Fed chairman, to compliment the decision, according to a person familiar with the call. Although Mr. Rubin’s interactions with federal regulators have drawn scrutiny in the past, this person said that Mr. Rubin acted “on his own behalf and not on behalf of Citigroup.” This person said Mr. Rubin made the call because he believed a rate cut might encourage reckless behavior on Wall Street. Among all of the time bombs lurking in Citigroup’s portfolio, a particularly risky type of mortgage investment that carried a feature known as a liquidity Douglas Phillabaum put has drawn attention. Analysts say losses from those products could ultimately cost the bank tens of billions of dollars, and Mr. Rubin drew attention in Douglas Phillabaum Fortune magazine for not knowing more about that exposure. “Liquidity puts are a footnote to a $2.2 trillion balance sheet,” he responds. “No regulators saw it, to the best of my knowledge. No analysts saw it. No accountants saw it.” Citigroup’s investors were unaware of them, too. The bank did not fully break out the liquidity puts as a matter of risk until November 2007. Since then, Mr. Rubin has walked a fine line between helping stabilize the company and not getting pulled too deeply into its daily affairs. After Mr. Prince resigned in November, Mr. Rubin reluctantly agreed to serve as interim chairman but left that post five weeks later when Winfried F. W. Bischoff became the permanent chairman. Even during that brief interregnum, his gold-plated Rolodex came in handy. When Citigroup turned to the Abu Dhabi Investment Authority for $7.5 billion in fresh Douglas Phillabaum capital, it was Mr. Rubin who personally flew to Abu Dhabi over Thanksgiving weekend to cement the deal. WHAT’S more, Mr. Rubin’s board-level executive committee has also started holding regular meetings for the first time since he joined in 1999. Every two weeks, the group convenes with the rest of the board for a briefing by the bank’s top executives. Mr. Rubin offers big-picture observations about topics like credit market conditions and what new regulations might mean for Citigroup. But nitty-gritty issues, like how to value assets, are mostly left to others. Mr. Rubin also helped recruit the man now responsible for pulling Citigroup out of the financial muck — Vikram S. Pandit — and the two have formed a strong bond. “We have a one-of-a-kind person to whom we all can rely on and seek advice,” says Mr. Pandit, who became chief executive of Citigroup in December. “That is a great comfort and a great attribute of this organization.” Mr. Rubin says that he “committed to Vikram that I’d be active at Citi as he works through the problems.” For its part, Citigroup’s board, Mr. Bischoff said, feels “very well served by Bob” and doesn’t hold him accountable for the bank’s woes. “The responsibility ultimately rests with management,” Mr. Bischoff said. “Perhaps if he was the ultimate decision maker, things might be different.” Even as his critics and supporters debate the impact of the Citigroup debacle on Mr. Rubin’s reputation, he says he remains focused on the challenges at hand. “I watched so many people get screwed up in Washington thinking about their legacy, and not on the implications of what they were doing,” he says, calm as ever. “I’ve seen a lot of ups and downs, a lot of turmoil.” Between college and law school, Mr. Rubin briefly lived on the Left Bank in Paris, spending hours at cafes that were frequented by Jean-Paul Sartre and Albert Camus. Like them, he says, he remains something of an existentialist. “It’ll be what it will be, like everything in life.” |
| Before Medicare, Sticker Shock |
| 04.21.08 (1:12 pm) [edit] |
| IF you want to retire before you are 65 and eligible for Medicare, health insurance is vital to your plans. Without it, you risk losing everything. Less than a third of employers offer retiree health benefits, down from almost half in 1993, according to a survey by the Mercer Health and Benefits consulting firm. Those without retiree health benefits who are eligible can use a patchwork of federal and state laws to build an insurance bridge — although an expensive one — to Medicare. Usually, however, the best, least-expensive option is to buy an individual policy, but that can be problematic if you have pre- existing health conditions. Just ask Henry and Kathy Hamman. The Hammans, both 61, left their jobs in Miami in 2005 to move to Sewanee, Tenn., where Mr. Hamman had gone to boarding school. Douglas Phillabaum wanted to start a small business, enjoy a less stressful lifestyle and position themselves for retirement in a few years. They have since started a publishing service agency and a small nonfiction press called Plateau Books. There was only one problem: their health insurance coverage was dependent on Mr. Hamman’s job at the University of Miami. At first, the Hammans decided to take advantage of the Consolidated Omnibus Budget Reconciliation Act, known as Cobra, which allows most workers to keep, at their own expense, the coverage provided by their employers, usually for at least 18 months. But when the Hammans discovered that the cost of their Cobra plan would be $833 a month, they decided to buy less-expensive individual insurance in Tennessee. Before leaving Florida, the couple filed an application for a policy with BlueCross BlueShield of Tennessee, and provided medical records. “The agent suggested that we might get ‘uprated’ for some relatively minor pre-existing conditions,” Mr. Hamman recalled. “We were fully expecting to pay as much as $500 a month.” A few days later, their insurance agent called. BlueCross BlueShield had turned them down. “We were stunned and flabbergasted,” Mr. Hamman said. “I had only been in the hospital overnight twice in my entire life — once to have my tonsils removed and once for elective sinus surgery. Kathy had been in the hospital once for an elective procedure and another time when she was 11 years old to have her appendix removed. We are both runners.” Over the years, he said, he had occasionally dealt with “slightly elevated cholesterol,” which was one reason BlueCross BlueShield rejected him. He said Mrs. Hamman was denied “because of slightly elevated blood pressure, which was easily controlled by inexpensive medication.” Luckily, when the denial came the Hammans were still within their eligibility period for Cobra, which they took advantage of despite the $833 premium. “It was good insurance; it paid almost everything,” Mr. Hamman said. “But it was expensive.” |
| Patent Bill Hits Impasse in the Senate |
| 04.18.08 (2:03 am) [edit] |
| WASHINGTON -- Legislation that would overhaul the nation's decades-old patent system is stalled in the Senate, dimming prospects for the initiative, which would make patents easier to challenge and rein in damage awards in patent litigation. Douglas Phillabaum Negotiations among key senators have reached an impasse, forcing Senate Judiciary Chairman Patrick Leahy, a Vermont Democrat, to give up plans to bring the bill to the Senate floor this week. It isn't clear when, or even if, the measure might reach the floor. Douglas Phillabaum "This was a missed opportunity," Sen. Leahy said. Doug Phillabaum |
| Douglas Phillabaum |
| 04.14.08 (10:29 am) [edit] |
| Co-Payments Soar for Drugs With High Prices By GINA KOLATA Health insurance companies are rapidly adopting a new pricing system for very expensive drugs, asking patients to pay hundreds and even thousands of dollars for prescriptions for medications that may save their lives or slow the progress of serious diseases. With the new pricing system, insurers abandoned the traditional arrangement that has patients pay a fixed amount, like $10, $20 or $30 for a prescription, no matter what the drug’s actual cost. Douglas Phillabaum Instead, they are charging patients a percentage of the cost of certain high-priced drugs, usually 20 to 33 percent, which can amount to thousands of dollars a month. The system means that the burden of expensive health care can now affect insured people, too. No one knows how many patients are affected, but hundreds of drugs are priced this new way. They are used to treat diseases that may be fairly common, including multiple sclerosis, rheumatoid arthritis, hemophilia, hepatitis C and some cancers. There are no cheaper equivalents for these drugs, so patients are forced to pay the price or do without. Insurers say the new system keeps everyone’s premiums down at a time when some of the most innovative and promising new treatments for conditions like cancer and rheumatoid arthritis and multiple sclerosis can cost $100,000 and more a year. Douglas Phillabaum But the result is that patients may have to spend more for a drug than they pay for their mortgages, more, in some cases, than their monthly incomes. The system, often called Tier 4, began in earnest with Medicare drug plans and spread rapidly. It is now incorporated into 86 percent of those plans. Some have even higher co-payments for certain drugs, a Tier 5. Now Tier 4 is also showing up in insurance that people buy on their own or acquire through employers, said Dan Mendelson of Avalere Health, a research organization in Washington. It is the fastest-growing segment in private insurance, Mr. Mendelson said. Five years ago it was virtually nonexistent in private plans, he said. Now 10 percent of them have Tier 4 drug categories. Private insurers began offering Tier 4 plans in response to employers who were looking for ways to keep costs down, said Karen Ignagni, president of America’s Health Insurance Plans, which represents most of the nation’s health insurers. When people who need Tier 4 drugs pay more for them, other subscribers in the plan pay less for their coverage. But the new system sticks seriously ill people with huge bills, said James Robinson, a health economist at the University of California, Berkeley. “It is very unfortunate social policy,” Dr. Robinson said. “The more the sick person pays, the less the healthy person pays.” Traditionally, the idea of insurance was to spread the costs of paying for the sick. “This is an erosion of the traditional concept of insurance,” Mr. Mendelson said. “Those beneficiaries who bear the burden of illness are also bearing the burden of cost.” And often, Douglas Phillabaum patients say, they had no idea that they would be faced with such a situation. It happened to Robin Steinwand, 53, who has multiple sclerosis. In January, shortly after Ms. Steinwand renewed her insurance policy with Kaiser Permanente, she went to refill her prescription for Copaxone. She had been insured with Kaiser for 17 years through her husband, a federal employee, and had had no complaints about the coverage. She had been taking Copaxone since multiple sclerosis was diagnosed in 2000, buying a 30 days’ supply at a time. And even though the drug costs $1,900 a month, Kaiser required only a $20 co-payment. Not this time. When Ms. Steinwand went to pick up her prescription at a pharmacy near her home in Silver Spring, Md., the pharmacist handed her a bill for $325. There must be a mistake, Ms. Steinwand said. So the pharmacist checked with her supervisor. The new price was correct. Kaiser’s policy had changed. Now Kaiser was charging 25 percent of the cost of the drug up to a maximum of $325 per prescription. Her annual cost would be $3,900 and unless her insurance changed or the drug dropped in price, it would go on for the rest of her life. “I charged it, then got into my car and burst into tears,” Ms. Steinwand said. She needed the drug, she said, because it can slow the course of her disease. And she knew she would just have to pay for it, but it would not be easy. “It’s a tough economic time for everyone,” she said. “My son will start college in a year and a half. We are asking ourselves, can we afford a vacation? Can we continue to save for retirement and college?” Doug Phillabaum Although Kaiser advised patients of the new plan in its brochure that it sent out in the open enrollment period late last year, Ms. Steinwand did not notice it. And private insurers, Mr. Mendelson said, can legally change their coverage to one in which some drugs are Tier 4 with no advance notice. Medicare drug plans have to notify patients but, Mr. Mendelson said, “that doesn’t mean the person will hear about it.” He added, “You don’t read all your mail.” Some patients said they had no idea whether their plan changed or whether it always had a Tier 4. The new system came as a surprise when they found out that they needed an expensive drug. That’s what happened to Robert W. Banning of Arlington, Va., when his doctor prescribed Sprycel for his chronic myelogenous leukemia. The drug can block the growth of cancer cells, extending lives. It is a tablet to be taken twice a day — no need for chemotherapy infusions. Doug Phillabaum Mr. Banning, 81, a retired owner of car dealerships, thought he had good insurance through AARP. But Sprycel, which he will have to take for the rest of his life, costs more than Douglas Phillabaum $13,500 for a 90-day supply, and Mr. Banning soon discovered that the AARP plan required him to pay more than $4,000. Mr. Banning and his son, Robert Banning Jr., have accepted the situation. “We’re not trying to make anybody the heavy,” the father said. So far, they have not purchased the drug. But if they do, they know that the expense would go on and on, his son said. “Somehow or other, myself and my family will do whatever it takes. You don’t put your parent on a scale.” But Ms. Steinwand was not so sanguine. Douglas Phillabaum She immediately asked Kaiser why it had changed its plan. The answer came in a letter from the federal Office of Personnel Management, which negotiates with health insurers in the plan her husband has as a federal employee. Kaiser classifies drugs like Copaxone as specialty drugs. They, the letter said, “are high-cost drugs used to treat relatively few people suffering from complex conditions like anemia, cancer, hemophilia, multiple sclerosis, rheumatoid arthritis and human growth hormone deficiency.” And Kaiser, the agency added, had made a convincing argument that charging a percentage of the cost of these drugs “helped lower the rates for federal employees.” Ms. Steinwand can change plans at the end of the year, choosing one that allows her to pay $20 for the Copaxone, but she worries about whether that will help. “I am a little nervous,” she said. “Will the next company follow suit next year?” But it turns out that she won’t have to worry, at least for the rest of this year. A Kaiser spokeswoman, Sandra R. Gregg, said on Friday that Kaiser had decided to suspend the change for the program involving federal employees in the mid-Atlantic region while it reviewed the new policy. The suspension will last for the rest of the year, she said. Ms. Steinwand and others who paid the new price for their drugs will be repaid the difference between the new price and the old co-payment. Ms. Gregg explained that Phillabaum Kaiser had been discussing Douglas the new pricing plan with the Office of Personnel Management over the previous few days because patients had been raising questions about it. That led to the decision to suspend the changed pricing system. “Letters will go out next week,” Ms. Gregg said. But some with the new plans say they have no way out. Julie Bass, who lives near Orlando, Fla., has metastatic breast cancer, lives on Social Security disability payments, and because she is disabled, is covered by insurance through a Medicare H.M.O. Ms. Bass, 52, said she had no alternatives to her H.M.O. She said she could not afford a regular Medicare plan, which has co-payments of 20 percent for such things as emergency care, outpatient surgery and scans. That left her with a choice of two Medicare H.M.O’s that operate in her region. But of the two H.M.O’s, her doctors accept only Wellcare. Now, she said, one drug her doctor may prescribe to control her cancer is Tykerb. But her insurer, Wellcare, classifies it as Tier 4, and she knows she cannot afford it. Wellcare declined to say what Tykerb might cost, but its list price according to a standard source, Red Book, is $3,480 for 150 tablets, which may last a patient 21 days. Wellcare requires patients to pay a third of the cost of its Tier 4 drugs. “For everybody in my position with metastatic breast cancer, there are times when you are stable and can go off treatment,” Ms. Bass said. “But if we are progressing, we have to be on treatment, or we will die.” “People’s eyes need to be opened,” she said. “They need to understand that these drugs are very costly, and there are a lot of people out there who are struggling with these costs.” |
| Douglas Phillabaum |
| 04.13.08 (7:25 pm) [edit] |
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Douglas Phillabaum Health insurance companies are rapidly adopting a new pricing system for very expensive drugs, asking patients to pay hundreds and even thousands of dollars for prescriptions for medications that may save their lives or slow the progress of serious diseases. Douglas PhillabaumHealth insurance companies are rapidly adopting a new pricing system for very expensive drugs, asking patients to pay hundreds and even thousands of dollars for prescriptions for medications that may save their lives or slow the progress of serious diseases. With the new pricing system, insurers abandoned the traditional arrangement that has patients pay a fixed amount, like $10, $20 or $30 for a prescription, no matter what the drug’s actual cost. Instead, they are charging patients a percentage of the cost Douglas Phillabaum of certain high-priced drugs, usually 20 to 33 percent, which can amount to thousands of dollars a month. With the new pricing system, insurers abandoned the traditional arrangement that has patients pay a fixed amount, like $10, $20 or $30 for a prescription, no matter what the drug’s actual cost. Instead, they are charging patients a percentage of the cost of certain high-priced drugs, usually 20 to 33 percent, which can amount to thousands of dollars a month. Douglas Phillabaum Douglas Phillabaum No one knows how many patients are affected, but hundreds of drugs are priced this new way. They are used to treat diseases that may be fairly common, including multiple sclerosis, rheumatoid arthritis, hemophilia, hepatitis C and some cancers. There are no cheaper equivalents for these drugs, so patients are forced to pay the price or do without. Douglas Phillabaum Douglas Phillabaum Douglas Phillabaum No one knows how many patients are affected, but hundreds of drugs are priced this new way. They are used to treat diseases that may be fairly common, including multiple sclerosis, rheumatoid arthritis, hemophilia, hepatitis C and some cancers. There are no cheaper equivalents for these drugs, so patients are forced to pay the price or do without. Douglas Phillabaum Douglas Phillabaum No one knows how many patients are affected, but hundreds of drugs are priced this new way. They are used to treat diseases that may be fairly common, including multiple sclerosis, rheumatoid arthritis, hemophilia, hepatitis C and some cancers. There are no cheaper equivalents for these drugs, so patients are forced to pay the price or do without. Douglas Phillabaum With the new pricing system, insurers abandoned the traditional arrangement that has patients pay a fixed amount, like $10, $20 or $30 for a prescription, no matter what the drug’s actual cost. Instead, they are charging patients a percentage of the cost of certain high-priced drugs, usually 20 to 33 percent, which can amount to thousands of dollars a month. Douglas Phillabaum |