TPMDC
Accounting Firm Admits Cost Savings Left Out Of Report Prepared For AHIP Report
Christina Bellantoni | October 13, 2009, 10:12AM
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Accounting giant PricewaterhouseCoopers has issued a statement about the audit it performed for America's Health Insurance Plans (AHIP) that we have been following closely.
Most notable about the statement, issued late last night, is an acknowledgment the cost savings from the bill weren't included, though PWC points out that is noted on page one of the report.
The statement in full after the jump.
America's Health Insurance Plans engaged PricewaterhouseCoopers to prepare a report that focused on four components of the Senate Finance Committee proposal:*Insurance market reforms and consumer protections that would raise health insurance premiums for individuals and families if the reforms are not coupled with an effective coverage requirement.
*An excise tax on employer-sponsored high value health plans.
*Cuts in payment rates in public programs that could increase cost shifting to private sector businesses and consumers.
*New taxes on health sector entities.The analysis concluded that collectively the four provisions would raise premiums for private health insurance coverage. As the report itself acknowledges, other provisions that are part of health reform proposals were not included in the PwC analysis. The report stated on page 1:
"The reform packages under consideration have other provisions that we have not included in this analysis. We have not estimated the impact of the new subsidies on the net insurance cost to households. Also, if other provisions in health care reform are successful in lowering costs over the long term, those improvements would offset some of the impacts we have estimated."
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Gator_fan
October 13, 2009 10:25 AM
Wow.
After this, I can't see what leverage the insurance companies will have going into the floor fight.
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Walter Mitty
October 13, 2009 10:49 AM
Sounds like Snowe will vote for it. Crud.
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Walter Mitty
October 13, 2009 10:49 AM in reply to Walter Mitty
Wrong thread.
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Jerry 101
October 13, 2009 10:52 AM
PWC's partner/s who signed off on this engagement should be ashamed of themselves, as should the firm as a whole.
They should have known that their brand was going to be used to support a propaganda program here.
As someone in the biz, I would imagine this was structured as an agreed-upon procedures engagement, where the exact nature of the procedures to be performed are defined by the client, so PWC could only create a report following the AUP agreement. PWC's report is, I would imagine, as accurate as it could be and anyone else would probably come up with the same results, but the scope was limited by AHIP, so the results are misleading in the end.
No accounting firm should risk its professional reputation in helping generate propaganda. The reputation of an accounting firm is the most valuable asset a firm has. Look at Arthur Andersen. That's what happens to a firm who's reputation is compromised. Obviously, the AA example is an extreme example,, I doubt this will result in PWC collapsing any time soon. But it may cause some people to question PWC's independence and judgement.
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fsudirectory
October 13, 2009 11:03 AM in reply to Jerry 101
Agreed, I too work in the industry and from reading the above, it is clear that the agreed upon procedures were misleading at best.
The AHIP just used PWC, and the weak knees of the industry as a whole, to be able to push a report which was obviously flawed from the beginning. However, I do not see the engagement partner telling the AHIP, sorry we don't agree that these are fair metrics.
PWC will just say, we do not dictate to clients what we feel is an appropriate methodology for determining their end results, the same way the firms are not supposed to design controls and subsequently test them.
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needapithyuname
October 13, 2009 5:10 PM in reply to fsudirectory
This is the "good German" defense, and it seems to work well for accounting firms, except in the case of Enron. Is it true PWC did a report for the tobacco companies in the 90s? Are accountants as shamelessly hypocritical as Wall Street traders?
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onecrappyusername
October 13, 2009 11:54 AM in reply to Jerry 101
I can't get my head around how anyone at AHIP or PWC could have thought this was a good idea. On AHIP's part PWC's reservations were stated on page 1 of the report, making the biased genesis of the report obvious, and they should have foreseen that PWC wasn't going to obfuscate the fact that their scope and methodology were defined by AHIP. On PWC's part they should have known that their work was going to be misrepresented by their client. WTF? Did AHIP assume that nobody would notice (or make a story out of) the methodology of the report? Did someone at PWC greenlight a fucked up project because they've got a brother in law at AHIP or something? How desperate is AHIP that they pull this kind of stunt?
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The Commenter Formerly Known as NCSteve
October 13, 2009 11:58 AM in reply to onecrappyusername
If you listended to NPR this morning, you'd have no inkling that the problem was that simple. ("The White House says . . .," "factcheckers say . . ." "complicated but . . . " "well, they're kind of right about this one thing . . ." ". . . the politics of it . . .")
So, one could argue they succeeded in doing exactly what they wanted to do.
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PQuincy
October 13, 2009 12:12 PM in reply to The Commenter Formerly Known as NCSteve
Exactly right! For shaping public discourse, the details and corrections are almost always secondary. The message here is "This will cost YOU more money" -- almost certainly a lie -- and that's a message people are willing to hear because they are feeling cautious and uncertain about the whole health care finance thing.
Of course, NPR and especially PBS have also been obtuse on the whole health finance reform issue, as far as I can see. PBS in particular has been heavily funded for years by insurance companies, which may help explain their odd reluctance to push hard on the issue on McNeil-Lehrer, etc., though individual good programs have made it through.
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Ann Arbor
October 13, 2009 12:30 PM in reply to PQuincy
And last night Kelly O'Donnell had a credulous segment about the report on the NBC news, with a single sentence at the end that Democrats say it's misleading. Anyone who reported on this without skepticism and caveats is guilty of professional malpractice.
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onecrappyusername
October 13, 2009 12:43 PM in reply to PQuincy
Given PWC's statement only a few hours ago I still think it's inevitable that the narrative will change from "democrats/repubs say" to "report undermined by firm that produced it" or something similar. I base this on the need of networks to fill time, the current hotness of the report and anything related, and their love of putting a new "spin" on an existing hot story.
(fingers crossed, etc)
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chucktrotter
October 13, 2009 4:42 PM in reply to Jerry 101
I have been involved with two evaluations conducted by PwC. In both cases, the purchaser of PwC's services hired it to make the predetermined result of the finding "appear" to be the conclusion of a neutral third-party. In my experience the evaluators found the experts within the companies involved and asked questions. It was obvious, to me, that the interviewers didn't have a clue relative to the subjects they would write a final report (recommendation) on. It became very apparent that the purchaser of the service had hired PwC to make a case positive for the purchaser. In both of my experiences, IMHO, the results had been predetermined before the first PwC employee arrived on the properties being evaluated.
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fsudirectory
October 13, 2009 10:53 AM
So PWC was engaged to create a report with a flawed methodology, which any Parter should be able to understand.
P. Dubbs must really need some new engagements to pad the books, jeesh
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lousgirl84
October 13, 2009 10:57 AM
Just left out some details. You know, minor stuff. This firm should be disgraced by this report
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baltimore
October 13, 2009 10:58 AM
just shows you how crooked those accounting firms are! remember the twisted one that helped enron during the fraud.
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Jim H
October 13, 2009 11:16 AM
Why is this characterized as the accounting firm "admitting" something was left out of the report? Sounds more like they just "pointed out" something that was on the FIRST page.
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The Commenter Formerly Known as NCSteve
October 13, 2009 11:59 AM in reply to Jim H
The admission was on the first page. Today, they drew attention to the admission as if it were a defense of the methodolgy.
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bmull
October 13, 2009 11:27 AM
TPM is extremely biased against the PwC report. The limitations of PwC's analysis were stated very clearly. The impact of subsidies is disregarded because it is irrelevant to whether this bill lowers national health care spending. The report makes a good case that spending will go up faster under Obamacare than if we did nothing at all.
The CBO data doesn't even speak to this question. It just says that premiums won't go above 12% for people of below average income because, well--that's what the law says. There is no analysis of whether that is a realistic promise or not, nor or what will happen to premiums of people who don't qualify for the cap.
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The Commenter Formerly Known as NCSteve
October 13, 2009 12:06 PM in reply to bmull
"Limitations of their analysis were noted?" Oh. Right. That makes it okay then.
Just like it would be okay for them to do an audited financial statement of a client that said the company was broke because of all its liabilities but noted on page one "we do not consider assets to be within the scope of our audit."
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midnight rambler
October 13, 2009 2:40 PM in reply to bmull
TPM isn't "biased against" the report, they're stating what it actually says, unlike most of the media that is ignoring the disclaimers and reporting it as if the "conclusions" are gospel truth.
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Stroszek
October 13, 2009 11:31 AM
And, of course, the media ran with this report as if it gospel.
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bmull
October 13, 2009 11:35 AM
I wish I had a camera. The White House website is now linking to this TPM "story." I suggest TPM link back to the White House talking points and the propaganda circle will be complete.
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Stroszek
October 13, 2009 11:52 AM in reply to bmull
Heh, that's the best you guys can do to respond to this? You shouldn't have pressed "Submit." Just pathetic.
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henk
October 13, 2009 12:16 PM in reply to bmull
The bulk of this "story" is a statement from PWC, so are you saying that their statement is some type of propaganda? Or are you saying the original report is propaganda? Or is everything PWC, puts out propaganda? Or is everything you write propaganda?
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de TOQUEville
October 13, 2009 11:48 AM
Bmull: I can't find the link you're referring to on the whitehouse dot gov site ... link please?
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bmull
October 13, 2009 12:01 PM
http://www.whitehouse.gov/blog/Word-from-the-White-House-AHIP-Report-on-Senate-Finance-Committee-Bill/
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Stroszek
October 13, 2009 12:06 PM in reply to bmull
I like how this AHIP spammer is spouting the company line after previously fake-trolling as a concerned progressive. Fucking hilarious.
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de TOQUEville
October 13, 2009 12:19 PM in reply to Stroszek
Yeah, pretty transparent.
Also, that link he provides contains no reference to this site whatsoever.
Fail.
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midnight rambler
October 13, 2009 2:38 PM in reply to de TOQUEville
Um, it's right at the top.
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de TOQUEville
October 13, 2009 8:08 PM in reply to midnight rambler
Um, no.
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gharlane
October 14, 2009 1:47 AM in reply to de TOQUEville
Um, yes.
Not that it matters that much to the larger point, but the link to TPMDC is, in fact, there, in Paragraph Two.
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Hprof
October 13, 2009 12:02 PM
I'm glad, I suppose, that PWC feels guilty enough about this report to try to distance themselves from it.
But this excuse--"we put it on page one!"--is about as disingenuous as the report itself. The report has a 4-page executive summary that doesn't include this crucial qualification at all--it's on page 1 of the main report, 5 pages into the text of the document.
That's no excuse for the tradmed reporters not to read the whole thing and catch it--but if it was so damn important, why is in not in the executive summary?
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BillG
October 13, 2009 1:29 PM in reply to Hprof
Hprof: Financial reporting has its own set of conventions. The first page of any financial report (often called the opinion page) is the only place the reporting firm is allowed to interject its own viewpoint; in this, the opinion page serves as a sort of "pre" Executive Summary. (In the case of an audit, the opinion generally says something along the lines of "...in our opinion ...fairly represents the financial condition of xxx on mm/dd/yy.") It is up to the reader of any financial report to first read the opinion and then decide what merit, if any, the report itself deserves.
PwC may well have erred in accepting this as an agreed-upon-procedures engagement, but the firms' reservations are expressed as ably and amply as AICPA and FASB rules allow, and in the only place AICPA and FASB rules allow them.
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Hprof
October 13, 2009 6:08 PM in reply to BillG
I'm not an accountant, and so I'll take your word about the requirements for audits and financial statements.
But I don't see how any of that's relevant here: this document is not an audit or financial report, and so requirements for such documents wouldn't seem to apply; the statement in question doesn't appear on a " 'pre' Executive summary" "opinion page"--it appears after the Executive summary, in the introduction to the body of the report; finally, the statement (or certainly, the first 2 of its 3 sentences) is not an "opinion" in any common understanding of the term--it's a simple acknowledgement of what the report does and doesn't cover.
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dustbunny44
October 13, 2009 12:09 PM
bmull, the WH in your link is not referencing this TPM story. Read closely (I know, it's hard sometimes).
The title "Talking Points: AHIP Report on Senate Finance Committee Bill" refers to WH talking points, not this blog.
And the blog references are to the WH's own blog, not this one.
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de TOQUEville
October 13, 2009 12:16 PM in reply to dustbunny44
Bmull is a dumb ass.
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Schmed
October 13, 2009 12:35 PM in reply to dustbunny44
Actually, he's right. This link on the page: Supporting article: "Accounting Firm Admits Cost Savings Left Out Of Report Prepared For AHIP Report," TPMDC, 10/13/09
points back here
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de TOQUEville
October 13, 2009 8:09 PM in reply to Schmed
Actually, he's wrong.
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ejb3
October 13, 2009 12:37 PM
Our reputation is not for sale, but it can be rented.
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