Philadelphia Reflections

Money Bags

This little morality tale was told to me by two unrelated sources, one of whom was a staff aide to Wilbur Cohen, the author of the Medicare law. And the other was a high official of Pennsylvania Blue Shield, the appointed administrative agent for Medicare in Pennsylvania. Its relevance to the more recent SNAFU with Insurance Exchanges introducing the world to Obamacare should be fairly obvious.

After Lyndon Johnson rammed the Medicare amendment to the Social Security Act through Congress in 1965, he wasn't shy about drawing attention to it. The press was present in great numbers, with staff officials who had a role in crafting the document, members of Congress, and anyone else who was standing around. The legislation was laid before him and signed with twenty different pens to be presented as mementos to the in-group. Each pen was only used to inscribe about half of one letter of his name, so it was a slow but joyful process. As intended, it got lots and lots of publicity.

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H. Ross Perot

So, thousands of thankful old folks saw the ceremony on television, though they heard that the law was in effect immediately, and proceeded to dump their medical bills into a shoe box, sending them to Medicare to be paid. Unfortunately, Medicare didn't have an office, a staff, or even a telephone number. These things take time. As fast as they could, the Medicare staff constructed a system of carriers and intermediaries, carriers for part A, and intermediaries for part B. And almost without exception, appointed the local Blue Cross and Blue Shield organizations to be the carriers and intermediaries. Consequently, the organization of Medicare was patterned closely after the organization of the two administrative corporations. Meanwhile, the bills from old folks just kept pouring in through the postal service. It was about all the staff in Washington could do, just to direct the mail out to the local intermediaries and at least get it out of their hair.

Less than a year later, that's how the claims manage to Camp Hill, PA, a little suburban town near Harrisburg. In desperation, Blue Shield had rented a local vacant supermarket and piled the mailbags ten feet high. There were quite a few telephone calls of inquiry, and the old folks were politely told the matter was being looked into. It was beginning to look as though one supermarket wasn't big enough.

Computers were, of course, rented from IBM, who had a policy of renting, not selling, its valuable equipment. Keypunch operators, computer operators were hired, air conditioning was installed, and one team after another of computer programmers was hired -- and fired. Consultants were called, scratched their heads, sent big consultation bills, and turned sadly away. Sorry, but somehow it just doesn't work.

So that's how it happened that one Friday afternoon, a vice-president of Texas Blue Cross named H. Ross Perot came in, accompanied by a fellow with glasses so thick they looked like the bottom of Coca Cola bottles. So far as anyone can remember, the guy with coke-bottle glasses never said one word. The desperate, hopeless mess was explained to Perot, whose salary at that time was rumored to be twenty-five thousand dollars a year, about right for a Blue Cross executive. His background as a kindred Blue Cross person inspired confidence, and the conversation rambled on for an hour or so. Meanwhile, the guy with coke bottles went over to the Penn-Harris Hotel across the street and got to work. By the end of the weekend, he had come back a couple of times, but eventually, would you believe, it really, well it really worked. Contracts were quickly signed, the wheels began to turn, the mailbags in the supermarket began to march through the processing cycle. Blue Shield, the Medicare program, the finances of the nation's elderly, and Lyndon Johnson's reputation -- were all rescued.

As everyone now knows, the Medicare processing contracts made Ross Perot into a billionaire, living on Bermuda in the lap of luxury, eventually upsetting the re-election hopes of George Bush, senior by running for President himself on a third party ticket that had something or other to do with giant sucking sounds. A Congressional investigating committee looked into the outrageous profits Perot had extracted from his homeland's elderly, volleyed and thundered. Whether Perot actually thumbed his nose at them is doubtful, but he certainly was in a position to do so.

Meanwhile, whatever happened to that guy with the coke bottle glasses, no one seems to know.

Originally published: Wednesday, August 08, 2007; most-recently modified: Sunday, July 21, 2019