The Healthy Cost for Health Care

Can Obama Fix Health Care Too?

“holding premiums steady for as long as possible is our priority, and we’ve been able to do so for the past 12 months. Premiums are going up now due to rising prescription drug costs, increased use of health care services, and higher priced health technologies. Your new plan premium will be $1,342.50 per month, an increase of $552.00[!!!]”

I don’t understand why 2 people in their forties, who rarely go to the doctor, should pay over $16,000 per year for health insurance. In addition, I don’t buy their half-hearted explanation for one minute. The only thing they’re sincere about is raising my rates every single year around this time. What started out as a $237 per month payment has ballooned to over $1,300 per month in only 8 years! Either I’m in the wrong business, or there’s something critically wrong here (and my money’s on option B).

President Barack Obama discuss healthcare issues at a town hall meeting in Green Bay, Wisconsin. Picture Source

Fortunately, Obama is planning to do something about it: that’s at least what he says. According to the Journal Sentinel in Wisconsin, Obama addressed a crowd in Green Bay this month stating:

“If we do nothing, within a decade we will be spending one out of every five dollars we earn on health care…In thirty years, it will be one out of every three. That is untenable, that is unacceptable, and I will not allow it as president of the United States."

The President’s visit to Green Bay was in part to study and model their health care system. Green Bay, Wisconsin happens to have one of the nation’s best run health care systems, when measured by cost vs. health outcomes. What a remarkable idea, focus on the outcomes that matter then diligently work to optimize the system.

Our system is broken, because for decades we’ve been fueling the wrong outcomes. Emphasis right now is placed on reactive medicine, with very little attention paid to preventive medicine. We focus on expensive medical treatments and extended hospital stays even after numerous studies have shown that this path at best provides no additional benefit from an actual health outcome, and at worst actually has a negative effect on our health. Per capita, we’re spending far more than any other nation in the world on healthcare, and we’re not even realizing any benefit!

Even though Obama knows this is a huge issue, he hasn’t to date come out with any specifics on how he plans to fix the problem. At his website, he highlights three broad categories to target: reform the healthcare system, promote scientific and technological advancements, and improve preventative care. It’s a step in the right direction, but we need some tactical actions quickly before we’re all swept away by the healthcare undertow.

Hopefully, the Green Bay model will provide some insights. The model Green Bay has put in place is well in alignment with Obama’s broad-based strategic solution. They emphasize preventive care over reactive care, greatly reducing the incidents of invasive and expensive medical treatments. They also use digital records and enhanced physician collaboration, showcasing their prowess in embracing advanced technology. But in my opinion, the most important thing they’ve done is installed a system of transparency, whereby all players know what the other is doing.

I really hope President Obama succeeds with this. I understand he has a lot on his plate, but for me this is a big one. And of the three directions to go with a solution, I would urge that he focus on transparency first. If HealthNet were being honest, the letter would read:

“We’re very pleased that June is here again so we can raise your premiums. As you know the latter half of 2008 really took a beating on us financially, so we need to find any way possible to survive. We know how painful it is for you to switch your health insurance, which is why we are raising your premiums by $552.00 and we feel somewhat confident that you won’t switch. Of course you cannot cancel, because who in their right mind would go through life without health insurance. We look forward to raising your rates again next year, however in the meantime complain all you want, we don’t care.”

An Auspicious Time for Suspicious Crime

The Challenge with Anti-Money Laundering Controls

Citibank Japan has been sanctioned for having lax anti-money laundering controls. Picture Source

“fundamental problems with Citibank Japan's compliance and governance systems for detecting and monitoring suspicious transactions, including money laundering.”

As with most people, I’m not privy to the details of the investigation but I would have thought proper anti-money laundering controls would have been somewhat of an important issue for such a large financial services firm as Citigroup, Inc. and its foreign operation in Japan. There’s also indications that their control around organized crime activity (which I’m sure involves a good degree of money laundering) was inadequate.

Apparently, they were far enough out of control for financial regulators to sanction the financial services company, ordering them to suspend all promotional activity for an entire month. This is somewhat of a slap on the wrist for the financial services giant, but it’s enough to send a message.

Controls like these can get tricky sometimes. I don’t know the details of the investigation, but I wouldn’t arbitrarily assign all the blame to Citibank Japan’s inefficiencies. Sometimes it feels like staying in control is a moving target, because the regulators keep changing the rules. This could very well be the case as regulators are increasingly cracking down on AML and a whole host of other controls.

As I’ve said before, compliance has two halves: the “what” and the “how.” You need to know “what” it takes to be in compliance, and then you need to know “how” to comply. You cannot do the “how” without knowing the “what,” and the “how” only applies as long as the “what” is valid.

The moving target scenario that I’m talking about here happens when the “what” is unclear or hard to lock down. This can happen with AML controls because in large part the controls need to highlight “suspicious behavior.” In my framework of building controls, suspicious behavior is what I call a “trace.” People often make the mistake of classifying suspicious behavior as a leading indicator or actually causation; however, this is incorrect. When it comes to anti-money laundering, if suspicious behavior is involved it’s happening at the same time the risk is happening—not before.

That means by the time you uncover suspicious behavior, the money laundering event has already occurred, meaning contingent controls should be put in place (like freezing the funds). This is not true of all suspicious behavior however. Consider a bank robber looking nervously over their shoulder to see if any law enforcement is around. In this case, the behavior is considered a leading indicator, and a preventive control should be activated (like silently alerting the authorities).

The challenge with any control involving behavior is the human element. How exactly do you define “suspicious behavior” and how do you know your definition is accurate? You can’t exactly conduct a survey with known money launderers, asking them to respond to questions on their behavior when they’re laundering money. And even if you get it right, how long will it stay effective? As controls get tighter, the crooks get smarter and they will adapt their behavior once they know it’s traceable.

An awareness of this dynamic is important when you construct your AML controls program. Anticipate that your control requirements will continuously change over time. You should build agility into any compliance program, but controls involving human behavior like AML and privacy need special attention. Ensure that you have the capability of making adjustments when required, with minimal pain.

There’s another possible reason for Citibank Japan’s sanction. Maybe the controls are clear, but they just can’t seem to get their act together to pull together an effective control program. In that case, the first thing they should do is dial this toll free US number: 1-800-379-8064. Ask for John.

Practice Makes Perfect

How to Organize a Compliance Fire Drill

I was talking with my niece when she was training to be a fire-person, and she explained that a fire is not really an emergency for the fire department. It may be an emergency for you, but the fire department is prepared for it. In the same way, your compliance team should be prepared for anything, and the only way to do that is practice.

With other compliance concerns like safety and financial controls, external audits are routine. However assessing your real capability against a lawsuit can be tricky. That is unless your company gets sued on a regular basis.

To correct for this I suggest doing fire drills, in the same way your fire department conducts drills in preparation for a real fire. Every quarter or so, you should hold a mock lawsuit to see how your team will respond. Try to make it as real as possible, and instruct everybody to take it very seriously (as if it were really happening). You will probably need to get executive buy-in for this, but it is well worth it.

Just like a fire drill, your compliance team should be unaware that it’s coming (however make sure to coordinate with executive management, of course). Take some time to really think through the scenario, so the team can have something tangible to work with. For instance, test your government contact compliance team by creating a scenario where the Department of Justice (DOJ) is investigating the commercial practices of your training and education line of business. Go through all the motions, including the creation of a mock letter from the DOJ stating its intent.

Test your team by tracking speed and accuracy of response. Were they able to assemble and provide an initial response in a timely manner? How quickly were they able to come up with a plan of action? How effective is it? How quickly and efficiently can they get through the necessary information systems? If information technology group coordination was required, how smoothly did that go? What about backup records and evidence of claims?

Issue a mock litigation hold, and assess the capability of your information systems to alter their retention processes. A litigation hold should immediately override any retention policy in place. Are your systems capable of handling this?

All of these things are important to assess the effectiveness of your compliance team. Do not be surprised if you find major holes the first few times you go through this. It’s quite natural to have large inefficiencies in your organization and processes that are not uncovered until you actually go through the motions. That’s why you don’t want to wait until a real lawsuit to test them out!

In my experience, it takes anywhere from three to six times to get the majority of the kinks worked out. Of course you will never be in a position where all the kinks are worked out, but with some practice you can knock out the major ones.

One final thought, don’t ever get over-confident. You should continually test your system for effectiveness, as it will deteriorate over time if left alone. How would you feel if you found out your fire department stopped doing fire drills!

Organizing one of these is simple, so talk to your management today about a mock lawsuit. I’m sure your compliance team will be thrilled by the surprise party!

A Troubled Tango

Mark Sanford Apologizes for His Infidelity

Mark Sanford admits his Argentinean love affair. Picture Source

“we are in a hopelessly — or as you put it impossible — or how about combine and simply say hopelessly impossible situation of love. How in the world this lightening strike snuck up on us I am still not quite sure.”

Oh brother. Is this guy for real?

Spare me the Harlequin rhetoric. You’re an idiot and you got caught, so now you’re in the soup. What’s funny is that his wife paid about as much interest to his apology as an ADD patient in a slow moving opera.

Don’t cry for him Argentina. He doesn’t deserve it.

Don't Use Twitter

Always Provide Clear Instructions

The Twitter phenomenon has definitely taken hold, and it’s come in quite handy in circumstances we never thought possible. However, sometimes it’s just not the right thing to do:

When constructing policy, sometimes you have to spell out the obvious.