McKinsey's track record in promoting dishonest insurance practices is well-known. So it may not be surprising that its current "study," on health care reform looks, sounds and smells bogus.
Would McKinsey produce a sham study designed to impugn healthcare reform? The consulting firm refuses to answer questions about its "study," and inside sources suggest that the work product cannot withstand scrutiny. The firm's reputation for integrity is, to put it charitably, tarnished, which is why Barry Ritholtz asked "Is McKinsey & Co. the Root of All Evil?" Ritholtz highlighted the McKinsey's involvement in some of the most notorious business disasters in modern times. Then there's the issue of top McKinsey executives who were, in fact, major white collar crooks, (i.e. Enron's Jeffrey Skilling, and the executives tied toGalleon's insider trading ring.)
Here's my rule of thumb. If a firm is so disreputable that it advises insurance clients to cheat policyholders, then it would have few qualms about publishing a sham study designed to impugn legislative reform that limits insurance company profits. A blockbuster article published by Bloomberg Markets in 2007, revealed how McKinsey advised Allstate to systemically deny rightful payouts to policyholders:
One slide McKinsey prepared for Allstate was entitled "Good Hands or Boxing Gloves," the tape of the Kentucky court hearing shows. For 57 years, Allstate has advertised its employees as the "Good Hands People," telling customers they will be well cared for in times of need. The McKinsey slides had a new twist on that slogan. When a policyholder files a claim, first make a low offer, McKinsey advised Allstate. If a client accepts the low amount, Allstate should treat the person with good hands, McKinsey said. If the customer protests or hires a lawyer, Allstate should fight back.
"If you don't take the pittance they offer, they're going to put on the boxing gloves and they're going to batter injured victims," plaintiffs attorney J. Dale Golden told Judge Thomas Clark at the May 12, 2005, hearing in which the lawyer introduced the McKinsey slides.
Bloomberg's reporting echoed that in Dave Berardinelli's book, From Good Hands to Boxing Gloves, As BusinessWeek noted:
[Bernadelli's] tale illuminates the largely hidden role McKinsey has played as a key architect of claims practices in use across the insurance industry today. In addition to advising Allstate, McKinsey has also done work for Farmers Insurance Group, USAA, State Farm, and Fireman's Fund (AZ ). While many of the cost-reduction strategies McKinsey recommended at Allstate remain in place, some have been reined in following legal and regulatory challenges in several states.
Of course, none of that may be pertinent to the current study, written by Shubham Singhal, Jeris Stueland, and Drew Ungerman of McKinsey. Maybe someone should try contacting them.