I often
tell people that, for purposes of the discussion I’ll agree to presume, whether
true or not, that regulators, academics, and non-profit people are generally more
ethical than businesspeople. (I am
inclined to believe that it is true that idealistic ethical young adults are
more likely to choose regulator, academic and non-profit careers than young
adults who are less idealistic and ethical.)
Nonetheless, regulators, academics, and
non-profit people often perform unethically in ways that businesspeople might
not do (examples below). Why is that?
Most businesspeople govern their behavior,
questioning themselves to assure that they are acting ethically. They do so because:
- They are aware of their potential conflicts
of interest.
- They are fundamentally ethical as are most
people.
- They want to avoid legal, regulatory, etc.
problems.
- They want to avoid customer backlash.
Unfortunately, it is less common for
regulators, academics, and non-profit people to apply such governors to their
behavior. They view themselves as “the good
guys” who are trying only to help people.
People with that mindset are less likely to question their actions, as
they “know” they’re acting ethically.
Furthermore, most people in our society are
quick to justify actions based on “the ends justify the means”. If my end is “to help people”, then how can
it matter what steps I take to achieve my goal?
Lord Acton is typically credited with the following quote, which I have
found to be predictive: “Power corrupts; absolute power corrupts
absolutely.” I believe that a benevolent
dictatorship can be the most effective government in the short-term. For example, in a crisis (e.g., on the
battlefield), someone must take charge and others must cooperate to avoid
disaster, if there is not enough time to discuss alternatives. The problem is that the longer a benevolent
dictatorship lasts, the more likely it is to get corrupted (due to his/her
corruption or to the corruption of her/his associates and certainly after the
benevolent dictator is gone).
It is important to stress that I am not
maligning regulators, academics and non-profit people. Au contraire, I’m crediting them with being
more ethical than the typical person. I’m
simply saying that even idealistic, well-meaning people are human.
When the government runs a program, we lose
oversight. Regulators in charge
of a program want the program to succeed.
That’s generally their job description and certainly is beneficial for their
career. Consider state long-term care
insurance programs. The impetus is to
help people plan effectively for LTC needs in their family. If they can do a better job with private
LTCi, that should be fine. However, if
people use private LTCi, the public program gets smaller. Focusing on the success of the public program,
rather than on how best to achieve the broad goal, can reduce success in
achieving the broad goal.
I believe “checks and balances” (separation of
powers) is the primary reason for the historic success of the USA. It is important for government to create
rules and to monitor performance, in order to maintain a fair market; that is, to
provide such a check and balance. When
the government runs the program, we lose the independent check and balance.
Examples
Note: In examples #2 and #4, I use
quotation marks to make it easier to read.
The commentary does not exactly quote the participants but conveys my
understanding of the conversation faithfully.
The Affordable Care Act (ACA) included
a long-term care insurance (LTCi) program: the CLASS Act.
Example #1: Secretary of Health and
Human Services Kathleen Sebelius declared repeatedly that the CLASS Act was
fundamentally sound despite her staff (as well as industry experts) telling her
that it was not feasible. I defended Sebelius
at the time, saying that it was her responsibility to state her belief, even if
it differs from her staff’s advice.
However, I was shocked when, about a week after the ACA passed, Sebelius
matter-of-factly stated that it wouldn’t work.
I concluded that she had been deceiving the public, legislators and
other regulators, in order to help get the ACA passed.
Example #2: At an industry
conference, I participated in a private meeting with about a dozen people in
the LTCi industry and two federal employees working on implementing the Class
Act. It is important to stress that I
admire both of these people who worked on implementing the Class Act. I’ve known them for decades and they are
bright people with integrity. However, they
kept defining the law in ways that were absolutely contrary to what the law
said. Getting annoyed, I asked an
admittedly rude question: “I’ve read the law multiple times and have been able
to understand every paragraph based on my assumption that it was written in
English. But you’re describing
provisions that are incompatible with English interpretation of the law. It seems to be the most amazing document ever
written! Its entire long text is intelligible
based on the assumption that it is written in English, but you seem to be
telling me it is actually written in a different language which results in
significantly different meaning. Is that
right? How can you do that?”
The actuary responded first. He said: “You’re right, but I’m comfortable
doing it because we’re making it better.”
(Those are common regulator attitudes: “We know best” and “the ends
justify the means”.)
The long-term public servant then
said “You’re right. We might not get
away with it.”
“Group think” is a problem in all
arenas, not just in government. That’s
another reason why we need broad involvement and checks and balances.
Other examples:
Example #3: I can provide a separate
document in which I’ve identified some of the myriad inaccurate communications by
proponents (mostly regulators and legislators) of the State of Washington’s “WA
Cares Fund”, which is a state-run LTCi program.
It is mind-boggling.
Example #4: The #2 person in the
California Partnership for Long-Term Care was trying to convince me to use
their marketing materials (I was running an insurer’s LTCi program at the time). Although that would have saved my company
significant time and expense, I explained I could not do so because California’s
materials did not satisfy my compliance standards.
He asked for an example, so I noted
that their materials said that the Partnership policy would cover your LTC need
for the rest of your life.
·
He: “What’s wrong with that?”
·
Me: “The longest benefit period is 5 years.”
·
He: “So what?
After that you can go on Medi-Cal.”
(Medi-Cal is California’s version of Medicaid.)
·
I was stunned that he would represent that going
on Medi-Cal would mean that the Partnership policy provided benefits for the
rest of your life. I’ve never heard
anybody in private industry make such a claim and we’d be rightfully called on
the carpet by the state if we did so.
However, I chose not to question that unethical explanation.
·
Me: “But what if you have countable assets and
the Partnership asset disregard does not cover all of them? You could have to spend down hundreds of
thousands of dollars after your 5-year benefit period expires and before you
could qualify for Medi-Cal.”
·
He: “That does not matter.” (This quote is exactly what he said. According to him, it did not matter that the
statement is blatantly false!)
Capable regulatory oversight blocks
misleading private industry materials, but nothing blocked the California
Partnership from distributing misleading materials.
Of course, some regulators are
quite careful with the materials they develop.
Later, Sandra Pierce Miller became the #1 person in the California
Partnership. Very shortly after she
assumed that position, we met at a conference.
She asked me what I thought of their marketing materials. When I said I do not use them because they
don’t meet my compliance standards, she was greatly concerned and
interested. Ms. Miller made appropriate
changes to the materials.
This happens with elected politicians
as well. Consider all the “mandates”
they conjure up that they’ve been given by voters in close elections.
I sometimes select Hillary Clinton
as an example. Most people seem to either
adore her or hate her. My position is different. I respect Hillary because she is smart, hard-working
and I believe means well. However, over
the years she seems, in my opinion, to have developed the viewpoint that she
and her close friends can solve all our problems and that if she is not in
control, we’ll all suffer. Therefore,
she believes that anything that helps her accomplish her goals is necessarily
good for the country. I think if Hillary
and I had known each other in college, we could have been close friends and in great
agreement. But over time, I’ve become
disenchanted with central control and Hillary has conflated her success and
what’s good for the country.
