Andrew Dreyfus: The last health care reform optimist
As CEO of Blue Cross Blue Shield of Massachusetts, Dreyfus is convinced medical costs can be reined in. And, yes, in a way that both political parties can agree on.
ANDREW DREYFUS stands at the front of a Washington, D.C., hotel ballroom. He’s spelling out how his state crafted the nation’s first universal health coverage law and is now tackling the even tougher challenge of rising medical costs. This is, to be clear, not a rapt throng of Apple fanatics hanging on every word from a stage-pacing CEO about the latest iPhone tweaks. This is a sober audience of buttoned-down insurance barons listening to a wonkish peer talk about Massachusetts policy. And he could not be more enthusiastic.
“We forged an enduring agreement on some of the thorniest and most challenging issues in health care,” he tells the gathering.
Is this guy serious?
While the US health care overhaul is under attack from critics who want it dismantled and his state is grappling with the highest health costs in the nation, Dreyfus is unfazed. He may just be the last health care reform optimist amid the partisan free-for-all. His message to colleagues in other states: We’re making it work. You can, too. “We have a health care system in Massachusetts where nearly everyone is covered, and we’re making significant progress on that Holy Grail of better care and lower cost,” he says in an earnest tone.
He is not exactly an unbiased voice. But he is a confident one. Dreyfus is the 55-year-old chief executive of Blue Cross Blue Shield of Massachusetts, the largest health insurer in the state that paved the path to Obamacare. Dreyfus has honed his “how we do it in the Bay State” talk through repetition. He’s given variations to congressional leaders on Capitol Hill, hospital and medical technology chiefs in Atlanta, directors of a renowned New York research foundation, and graduate students at Harvard, Princeton, and the University of Pennsylvania. At a time when President Obama’s new health care law is still playing out and November’s midterm elections may turn on its results, Dreyfus is out there like a brainy but fervent cheerleader for a team that’s struggling to find its identity.
His audience for this talk in the nation’s capital is a trade association of his fellow insurers, America’s Health Insurance Plans, and Dreyfus knows some in the room will be skeptical. So he ditches his standard opening line: “My name is Andrew Dreyfus, and I’m from the future,” a nod to the notion Massachusetts is leading the way. Instead, he goes for self-deprecating humor. “You may be thinking, ‘Why should I be listening to yet another talk about Massachusetts?’ ” he says, drawing knowing chuckles from some of his listeners.
Dreyfus concedes that Massachusetts is scrambling to fix its own glitch-riddled health insurance website. But his narrative soon turns upbeat. He talks about sharing responsibility for the greater good, citing the example set by Republican former governor Mitt Romney and the late Democratic senator Ted Kennedy, who worked together on the landmark 2006 Massachusetts law. Left unsaid is that such bipartisan cooperation can sound like a fantasy today.
Afterward, Dreyfus fields a few polite questions before catching a flight back to Boston. Audience reaction is cautious. “The politics and the market in our state are very different from Massachusetts,” deadpans Caroline Carlson Delgross, director of portfolio delivery at Blue Cross Blue Shield of North Carolina. But Scott Kelly, chief operating officer of Aspire Health Plan in Monterey, California, says, “Elements of what he talked about would certainly work in our market.”
On this day, that lukewarm assessment is the closest Dreyfus will get to an endorsement.
WITH HIS SLIGHT FRAME, wire-rimmed glasses, and closely cropped beard, Dreyfus could be mistaken for a professor who’s wandered off campus. But ask most anyone in Massachusetts health care, and they’ll tell you that he is the definition of a power broker. Few people have shaped health policy in the state more than Dreyfus. And now his influence extends from Beacon Hill to Capitol Hill.
Governor Deval Patrick traces his own education in the arcane realm of health care legislation and regulation to a series of forums Dreyfus hosted in 2005 at the John F. Kennedy Presidential Library. Patrick was weighing a gubernatorial bid at the time, and Dreyfus ran the newly formed Blue Cross Blue Shield of Massachusetts Foundation. Ever since those forums, Patrick says, Dreyfus has been “a person I turn to” for advice on health issues. “We probably amended health care reform a dozen times before we got to payment reform,” Patrick says, referring to the state’s more recent cost containment laws. “Andrew was always at the table as a source of objective fact. He understands you have to adjust as you go along.”
Dreyfus has proved adept at adapting, and it’s paid off. Over his career, he has remade himself multiple times: from community journalist to state regulator to policy guru and, after leaving the Blue Cross foundation to work for its parent insurance company, to captain of commerce. Running Blue Cross — which is at once a nonprofit public charity and the state’s largest health insurer, collecting more than $6 billion in annual premiums — earned him $1.3 million in total compensation last year.
But in some ways, Dreyfus seems an unlikely corporate bigwig. He gets far more animated talking about the mission of health policy than about the prosaic balance of claims and premiums. He feels a personal stake in the success of the Affordable Care Act, better known as Obamacare. For better or worse, he knows, the law is a Massachusetts experiment gone national. “There’s a social justice dimension” to the health overhaul, Dreyfus says. “People who have been left out of the health care system have faced great hardships, and that needs to be corrected.”
Dreyfus, who is unwaveringly mild-mannered, admits to getting upset when he hears or reads something that characterizes what took place in Massachusetts as a government health care takeover. But don’t expect an expletive-laced rant. “I’m not a kick-the-wall kind of guy,” he says. “I’ll sometimes throw a newspaper down in disgust.”
Not referenced in his national stump speeches — friends say it’s because he’s too modest — is the role Dreyfus personally played in the state’s push for universal health insurance. Through a set of in-depth reports at the Blue Cross foundation, he helped lay the intellectual groundwork for the first-in-the-nation expansion of access to care. “Of the people outside government, no one had more influence in setting the stage than Andrew,” says Massachusetts Port Authority chief executive Thomas Glynn, a former chief operating officer at Partners HealthCare. Glynn, who has known Dreyfus since they both worked for Governor Michael Dukakis in the 1980s, says, “Andrew created the library of data — how many people were insured, how many old, how many young — that policy makers used.”
For legislators and hospital and insurance leaders, the foundation’s Kennedy Library forums were the equivalent of a “University of Health Care with dean Andrew Dreyfus,” Glynn recalls. He says Dreyfus wanted the Blue Cross foundation to build a consensus for universal coverage but to stop short of recommending specific provisions of a bill, so it wouldn’t get mired in politics.
Critics suggest Dreyfus and other health care industry leaders are too cozy with politicians at the expense of financially strained patients struggling to keep up with mounting medical bills. The insider status of leaders like Dreyfus, the perception goes, reflects a process that favors the interests of insurers and hospitals over the people paying the premiums, making it tougher to rein in costs. “He’s a very political person, too close to the policy makers,” says Josh Archambault, a senior fellow at the Pioneer Institute, a free-market research group in Boston. “To control costs, you need robust, diverse, and ongoing discussions about solutions. Instead, we have people working behind closed doors to come up with complex bills that don’t engage consumers.”
Dreyfus presents himself — and his experience in Massachusetts — as a resource to be tapped on a national scale. He talks to members of Congress who won’t talk to each other. In recent weeks, he has huddled in Washington with lawmakers, ranging from Senator Tom Coburn, Republican of Oklahoma, and Senator Lamar Alexander, Republican of Tennessee, to Senator Jeanne Shaheen, Democrat of New Hampshire, and Senator Ron Wyden, the Oregon Democrat who oversees Medicare and Medicaid as chairman of the Finance Committee. The subject: controlling medical costs.
It’s not the easiest sell for an emissary from a state where residents — and employers — pay more for health care than anywhere else in the country.
MASSACHUSETTS HEALTH COSTS have outpaced the nation’s since long before the state’s universal health coverage law was enacted in 2006. There are many theories why, ranging from the quality and complexity of specialty care here to the high use of academic medical centers for routine procedures to the simple fact that everything else costs more here, too. While recent state laws have attempted to slow the rate of price increases, much of the real wrestling with costs has been done in the private sector — and in the closed-door contract talks between insurers and the hospitals and doctors they reimburse.
Dreyfus drew national attention in 2009 for helping to launch a Blue Cross payment plan, the “alternative quality contract,” that has become an industry template. It rewards doctors and hospitals that keep patients healthy and cut down on unnecessary medical procedures. The plan gives health care providers fixed budgets for treating patients rather than paying them for each office visit, test, or surgery. If the providers come in under budget, they make more money. “A lot of plans are borrowing from that playbook,” says Karen Ignagni, president of America’s Health Insurance Plans. Because of that, she says, Dreyfus has “become an important go-to person throughout the industry.”
Princeton professor Uwe Reinhardt, a top US health economist, says he was struck by the originality of the Blue Cross alternative payment concept when he heard Dreyfus break it down at a seminar. He later invited Dreyfus to speak to his class about creating incentives for constraining medical costs. “I’ve been to a thousand health care conferences,” Reinhardt says. “People talk about innovations when they’re recycling ideas that didn’t work before and they think they can make them work now. When I heard Andrew, I was electrified.”
In the years since Blue Cross and its competitors began negotiating fixed-budget payments with health care providers rather than traditional “fee-for-service” contracts, annual percentage increases on Bay State premiums have fallen from double digits to single digits. But it’s not clear whether the drop has been driven by the new contracts, the tough line Patrick’s insurance regulators have taken with health plans, or the sluggish economy, which has forced many workers fearing the loss of jobs to postpone elective medical procedures.
Many still balk at turning to Massachusetts for advice on health policy. “Massachusetts doesn’t look anything like the rest of the country,” says Douglas Holtz-Eakin, a former Congressional Budget Office director who now leads the American Action Forum, a center-right think tank. “They have the highest health care costs in the country. So the idea you can export what they’re doing to places like Texas or Arizona . . . it’s just not a natural fit.”
DREYFUS GREW UP IN BROOKLINE as the middle son of divorced parents, a birth order and status that he believes shaped his talent for building consensus as well as his diplomatic skills. His passion for social justice may have been fueled during the times he would accompany his father, owner of a property-casualty insurance firm, to Boston, where he was one of the few white agents to do business with African-American merchants in Roxbury and Dorchester.
At Brookline High School, one of Dreyfus’s best friends was John Dukakis, son of then-governor Michael Dukakis. Because there was sometimes security around the Dukakis home in those days, they hung out mostly at the Dreyfus home. “The Dreyfus household was the headquarters for after-school activity,” says John Dukakis, who remembers Dreyfus as a teenager who showed wisdom and curiosity beyond his years. “Even then, Andrew approached things as a policy wonk,” Dukakis says. “He was interested in learning how things work and how to make them better. Throughout my life, Andrew has been the close friend I can turn to for advice. I’m one of the few people outside his family who remembers him without a beard.”
After graduating from Connecticut College, Dreyfus had a two-year stint as an editor at Boston’s South End News. Then he went to work for his friend’s dad, Governor Dukakis, in a succession of jobs, eventually rising to undersecretary of consumer affairs and business regulation and director of operations in the Executive Office of Human Services. On the side, he wrote about dance, which he’d studied in college, for the Boston Herald and some weekly newspapers.
Dreyfus met his wife, Lynn Modell, a dancer, choreographer, and dance teacher, through a mutual friend. She accompanied him to some of the dance shows he reviewed in the 1980s. They married in 1989 and have a 23-year-old musician son and a 15-year-old high school daughter who engages in Fitbit competitions with her sometimes obsessive father to see who can walk more steps each day.
Upon leaving government, Dreyfus took a job at the Massachusetts Hospital Association, a trade group. From there he was recruited by then-Blue Cross chief executive William Van Faasen to run the insurer’s new foundation, envisioned as a launching pad for health policy. Dreyfus’s work rolling out the foundation’s plan for universal coverage led to a promotion. He became executive vice president of health care services. Under Van Faasen’s successor, Cleve Killingsworth, Dreyfus helped design the alternative quality contract as an antidote to the fee-for-service pacts blamed for driving up medical costs.
LIKE OTHER CORPORATE EXECUTIVES, insurance CEOs typically keep a laser-like focus on the bottom line. But when he took over as Blue Cross chief executive in the summer of 2010, Dreyfus identified affordable medical care — not higher profits — as his primary goal. “Slowing the unacceptable rate of [premium] increases will be the top priority,” he said in a Globe interview. If his pronouncement was surprising, it was also shrewd — and not entirely out of character for someone whose antenna is finely tuned to the sentiment of customers and the mood on Beacon Hill. Just four months earlier, the Patrick administration had denied Blue Cross and its rival health insurers hefty rate increases for small businesses and individuals at a time when everyone was complaining about years of double-digit hikes.
Dreyfus understands most people lump their dealings with health insurance into the same category as IRS audits or root canals. He also knows holding down premium increases will please his customers — Massachusetts businesses and other employers — and be crucial to the success of his enterprise. Cost pressures are putting an uncomfortable spotlight on health insurers. “With that is going to come a certain degree of skepticism, and I accept that,” Dreyfus says, employing some rhetorical jujitsu. “It helps to drive change. When I confront some anger or cynicism in the public, I try to turn it to our advantage.”
Early in 2011, four months after becoming chief executive, Dreyfus sent a letter to more than 400 leaders of hospitals and physicians’ practices, pressuring them to switch to risk-sharing insurance contracts with fixed budgets. Dubbed the “or else” letter by some health care providers, it implied Blue Cross would take a hard line in negotiations with those that didn’t get on board. “Fee-for-service payment rates can not continue to rise if we are to meet the community’s goal of affordable care,’’ Dreyfus wrote.
But only weeks after the “or else” letter, the insurer’s credibility was thrown into question when it disclosed in a regulatory filing that it had agreed to an $11 million payout for Killingsworth, who left the previous year. Blue Cross also was paying five-figure annual fees to 18 board members, most of whom were prominent business, labor, or education leaders, the filing showed, even as it demanded that health providers bring down spending.
“It’s hard to reconcile those two messages,” Dreyfus admitted at the time. Faced with the ensuing barrage of criticism, Dreyfus said Blue Cross would temporarily halt its board fees and open a “conversation’’ with community and state government leaders about whether it made sense for a big business such as Blue Cross to be organized as a nonprofit public charity. Despite the suggestion it might become a for-profit corporation, which would be subject to certain taxes and answer to shareholders, few believed that would happen — and it didn’t. Last year, the insurer reinstated payments for directors, though at lower levels and to fewer board members. Blue Cross officials said the fees were needed to recruit and retain qualified people to the board. Some state leaders, notably Attorney General Martha Coakley, disagreed and made their views known.
Critics say that while Blue Cross made the right opening moves to defuse the board pay crisis, it acted no differently in the end than any other company that cites competitors’ compensation to justify its own generous payouts. The Blue Cross position was “they’re paying their directors, so we should pay ours,” says consumer advocate Deirdre Cummings, legislative director for the Massachusetts Public Interest Research Group. “That kind of attitude is why salaries are going through the roof.”
In gauging success on the Dreyfus affordability goal, the results have been mixed. Blue Cross executives point to progress in reaching his stated target of limiting annual premium increases to 3 to 5 percent rather than the 8 to 10 percent of the last decade. Base rate increases for small businesses and individuals have fallen below 3 percent, though many pay more because of additional factors such as the age of their workforce. But the overall price increase trend for health insurance — based on the cost and volume of health services — remains above 6 percent.
For all the talk of lower costs, premiums continue to increase, though not as much as in the past. To Cummings, that amounts to “baby steps,” not the groundbreaking progress that she and others had hoped for. “Rates had been going up for so long that we should be seeing a decrease,” she says, reflecting the views of many employers and consumers. “What they’re actually doing is slowing the growth. The consumers are owed some savings.”
Nearly four years into his tenure, Dreyfus can point to other victories. Today, about 85 percent of Blue Cross health maintenance organization members are treated by doctors and hospitals that work under the alternative contract, up from 32 percent in 2010. That has helped restrain the kind of premium surges seen in the previous decade. On the financial front, Blue Cross has also become profitable under Dreyfus’s leadership after losing money under his predecessor. And last year it signed up more members than it lost for the first time in five years. But its profits, which climbed from $13 million when Dreyfus took over in 2010 to $164 million in 2012, fell to $69 million in 2013. The drop was attributed to new taxes and fees, technology outlays, and efforts to hold down premiums.
IT’S AN AFTERNOON SEMINAR at the Wharton School of the University of Pennsylvania, and Dreyfus is giving his familiar lecture — part history lesson, part pep talk, part Bay State boosterism — to business students and others. They know that in Washington, in state capitals, and at kitchen tables around the country, people continue to debate health insurance website fixes and enrollment numbers, whether Obamacare is working better, working at all, or can ever work. The students pepper Dreyfus with questions. Leaning on a lectern in front of a projection screen, he answers patiently. He is in his element.
“The Affordable Care Act anticipated a national solution to health care,” he says, but he admits that now it may take time — and experimentation — to reach any kind of nationwide consensus. “We might wind up with five variations, and that might not be a bad thing.”
His talk soon veers back to Massachusetts and the example it offers. The state’s “lessons are transferable,” he insists. But for the nation as a whole, he says, “it’s going to take a decade, and we should give it a decade.”
Percentage of Americans who have an unfavorable view of the Affordable Care Act (Obamacare)
Percentage who have a favorable view
Source: Kaiser Health Tracking Poll, June 2014
Percentage who say they haven’t been affected by Obamacare
Source: Kaiser Health Tracking Poll, May 2014
Percentage of Massachusetts adults who say they support the state’s universal health insurance law
Percentage who believe the law did not affect health care costs
Source: Boston Globe and Harvard School of Public Health, June 2014
Health care spending per capita in Massachusetts for 2009, making it the highest state in the nation
Per capita spending in Utah, the lowest
Source: Centers for Medicare & Medicaid Services