Jun 10 2009
Wherein We Look at One Reason Health Care is so Expensive in the USA
America spends more than two and a half times MORE per person for health care in this country than any other advanced nation, according to the “Business Roundtable,” an organization which represents (and includes) CEOs of major companies. A recent report their organization put out goes on to say that “America’s health care system has become a liability in a global economy.”
That’s interesting, because it’s their CEO brethren in health insurance companies, which are certainly part of the reason why health insurance/health care costs are so high.
Remember, of course, that the way health insurance companies are made profitable is by paying as few claims as they can. The insureds are a COST CENTER–a liability–to health insurance companies. Is that really what you want to be, to the people who make decisions regarding your health care?
Take a look at the following (provided under open source/fair use rules…) which is a rundown of the compensation provided to only a few of the nation’s “health insurance CEOs.” Then see how serene you feel about it.
Per the Washington Post:
Karen Ignagni, CEO America’s Health Insurance Plans (AHIP)
Ignagni’s total compensation, according to AHIP’s most recent filing from 2007, was $1.58 million, which includes $700,000 in base salary, $370,000 in deferred compensation and a bonus. Ignagni won’t say how many hours a week she works. The number’s so high it’s embarrassing, she said.
http://www.washingtonpost.com/…
[All the following data for the 2008 salary survey is provided by Fiercehealthcare]
Ron Williams - Aetna
Total Compensation: $24,300,112
Details: Williams earned $24,300,112 in total compensation for 2008, with more than half of that ($13,537,365) coming from option awards. He also received an additional $6,456,630 in stock awards to go along with his base salary of $1,091,764.
Personal use of a corporate aircraft and vehicle, as well as financial planning and 401(k) company matches added up to $101,487 for Williams.
H. Edward Hanway - CIGNA
Total Compensation: $12,236,740
Details: Hanway took a significant pay cut from 2007 to 2008, due mainly to a drop off of more than $11 million in his non-equity incentive plan compensation. Still, his base salary of $1,142,885 surpasses that of Aetna’s Williams, and is supplemented by just over $3.6 million in option awards, and just over $820,000 in non-qualified deferred compensation earnings.
Also, nearly $21,800 in “other compensation” included the use of a company car with a driver, in-office meals, and emergency assistance services relating to medical exams.
Angela Braly - WellPoint
Total Compensation: $9,844,212
Details: Braly, like Williams, earned more money in 2008 ($9,844,212) than in 2007 (9,094,271), increasing her option rewards by nearly $1.5 million, and also receiving a $200,000-plus bump in base salary, from $922,269 to $1,135,538. Braly’s stock awards dropped from $2,160,159 to $1,750,015 because, according to the SEC, “performance-based restricted stock units awarded in 2008 were cancelled because our ROE target for 2008 was not met.”
Braly’s “other compensation” comprised use of a private jet for her and her family on business trips, just under $10,000 for legal services relating to her employment agreement and cash credits.
Dale Wolf - Coventry Health Care
Total Compensation: $9,047,469
Details: Wolf is the only CEO on this list who is no longer employed with his associated health plan; he retired from his position on Jan. 30 of this year after serving in that role since Jan. 1, 2005, and was replaced by former CEO Allen Wise.
Wolf, whose total compensation dipped quite a bit from 2007 ($14,869,823) to 2008 ($9,047,469), was pleased with the direction the company was headed in at the time of his departure.
“I am proud of what a talented group of people have accomplished over the past 13 years of my association with the company,” Wolf said, “and I am confident that the fundamentals which are in place today will carry the company forward to continued success.”
Wolf carried a base salary of $965,000 in 2008, and earned just over $1.9 million in stock awards. His “other compensation,” which amounted to $486,447, included transportation on the company’s airplane, a company match retirement savings plan and a company match 401(k) plan.
Michael Neidorff - Centene
Total Compensation: $8,774,483
Details: Neidorff, who’s base salary remained at $1 million, received increases in both his bonus ($1.25 million, up from $1 million) and his stock awards ($4.7 million, from $3.98 million) in 2008. According to the SEC, “Neidorff’s agreement was amended twice in the past twelve months; (1) to eliminate the non-compete and non-solicitation requirements if there was a ‘hostile change in control’ as defined in his agreement and (2) to add language to the agreement to make it compliant with Internal Revenue Section 409A.”
Neidorff’s “other compensation” of just over $418,000 comprised of use of the company airplane “for all travel,” life insurance benefits, security services, and tax preparation services, among other things.
James Carlson - AMERIGROUP
Total Compensation: $5,292,546
Details: Despite a lawsuit regarding Medicaid fraud that cost the Illinois plan $225 million, Carlson himself earned roughly $2 million more than he did in 2007. All aspects of his compensation increased in 2008, from his base salary (up from $608,000 to just over $761,000) to his non-equity incentive plan compensation (up to about $2.8 million from $1.98 million a year ago). Carlson’s bonus also grew quite a bit, going from $225,000 in 2007 to $520,312 in 2008; much of that amount was based on long term incentive program goals being met.
Carlson’s “other compensation,” which nearly tripled (going from about $7,000 to just over $20,000), included his employer 401(k) contribution, life insurance premiums, an executive health screening, flight services and a medical insurance stipend.
Michael McCallister - Humana
Total Compensation: $4,764,309
Details: Despite its pick ups of two smaller health plans (OSF Health Plans of Peoria, IL and Cos/Cariten Healthcare of Knoxville, TN), Humana’s McCallister earned roughly $5.5 million less in 2008 than in 2007. While his base salary ($1,017,308), option awards ($3,078,897) and “other compensation” ($668,104) all increased, his non-equity incentive plan compensation and his nonqualified deferred compensation earnings totaled zero dollars. The latter represents a discontinuation of the Officers’ Target Retirement Plan, according to the SEC.
McCallister’s “other compensation” included personal use of the company aircraft for him, and sometimes his family; company contributions to the Supplemental Executive Retirement & Savings Plan and the Humana Retirement & Savings Plan; a once-a-year physical, financial planning assistance, and more.
Jay Gellert - Health Net
Total Compensation: $4,425,355
Details: Gellert, whose company is considering selling off divisions in at least four states, earned nearly $740,000 in additional compensation for 2008. His overall base salary increased to a little more than $1.2 million from about $1.18 million in 2007, and his stock awards also rose (from about $1.4 million to more than $1.8 million).
Gellert’s “other compensation,” which totaled $131,526, included, but were not limited to, a $53,000 housing allowance, a corporate car and tax reimbursements of nearly $41,000.
Richard Barasch - Universal American
Total Compensation: $3,503,702
Details: After taking a pay cut from 2006 to 2007, Barasch more than doubled his total compensation for 2008, jumping up from $1,564,293 in 2007. Barasch’s base salary jumped up to $857,851 from $798,340 in 2007; his stock and option awards also increased, as did his “other compensation,” which reflected a car allowance, relocation benefits and a matching contribution to his 401(k).
Also of note for Barasch was the fact that his non-equity incentive plan compensation earnings totaled $1,195,147; in 2007, he did not receive any money in 2007 for such compensation, but took home $1.1 million in 2006.
Stephen Hemsley - UnitedHealth Group
Total Compensation: $3,241,042
Details: An $895 million class-action lawsuit over stock-option back dating aside, Hemsley still manages to make the cut for this list at No. 10. The UHG CEO’s base salary was $1.3 million in 2008, to go along with a non-equity incentive plan compensation worth just over $1.8 million and “other compensation” amounting to slightly more than $119,000.
Hemsley’s other compensation was a combination of the company matching his contributions under the 401(k) plan and the company matching contributions under his executive savings plan. According to the SEC, “in May 2006, the amount of Hemsley’s supplemental retirement benefit was frozen based on his current age and average base salary and converted into a lump sum of $10,703,229.” Because of this, “there was no increase in the benefit payable to Mr. Hemsley under his supplemental retirement benefit” in 2008.
As they’re talking about and working through possibilities of universal health care provision in this country, personally I’m completely annoyed with people bleating about “what about all the displaced health insurance people??” or “we can’t possibly pay for it…”
Well, there’s eleven people, right there, who have got to go. Eleven people. Their total compensation = $86.8 million
$7.9 million apiece, per year, on average. How much health care would THAT provide for people who need it? (Yes, I realize, in funding the overall program, that 86 million won’t go very far, but still….)
$7.9 million, each, on average. (Yes, I’ll repeat it.) Is that obscene enough for you?
Or are you going to tell me that as a society, we’re okay with paying those people, and those companies, obscene amounts of money to deny health care to members of the public?
Perhaps you’d tell me that these folks EARN their money, and are worth it. If so, you may not have any idea how the rest of the world recieves health care. Other “modern” countries are ALL wondering why we’re not marching in the streets daily about this. For that matter, I am too.
UPDATE: I need to add a hat tip to NYCEve, a health blogger who brought much of the above to my attention. If you want to learn more about the REAL DEAL when it comes to health care, google her, and read what she writes. Though I must warn you… her true stories will break your freakin’ heart.
I’m relatively sure that it was Reagan that set into works the ability for Insurance providers to be de-regulated. That meant that they could charge according to whim and every company providing health insurance up-ed their prices at the same rate. De-regulation has occurred within several companies with the same result.
The insurance companies claim that malpractice has caused the necessary cost increases, and they may not be too far off as to the recent cost, and it is a problem with frivolous lawsuits costing consumers more…However, we could negate some of the cost to medicaid by sending a several million people back to their home in Mexico…that’s common sense. But the idea that everyone should pay for benefits for people that do nothing to help themselves is a ludicrous idea and it has not worked out well in the countries that have socialized medicine.
By what measure would you assert that “it has not worked out in countries that have universal health care coverage?” Everyone there gets treatment, and guess what? Nobody goes bankrupt because of it!
I’d refer you to this scientific blog which looks at a comparison of several modern countries who have health care coverage for everyone:
http://scienceblogs.com/denialism/2009/05/are_patients_in_universal_heal.php
Americans have been fooled for years into believing that they have the best health system in the world. They don’t.
Almost every other modern country has a longer lifespan than Americans, and nowhere near as many people die in their hospitals.
As for the number of people who “do nothing to help themselves,” well that figure is not very high once you take out the unemployed which apparently you see as no longer qualifying as human beings. The costs of universal health care to the individual in countries that have it are lower than the costs to an individual American in this country.
Why not consider the fact that we might actually save money with a system of universal health care?
I agree that frivolous lawsuits have not helped matters. However i think that blaming the current mess on illegal aliens is ridiculous. We have far bigger problems than that.
Serene,
Damn fine work! You are spot on! I will be refrencing your posting.
respect
BTW I would be interested in putting you on my blog roll if you want to be there. You can give me a shout at dannydissent@yahoo.com if you dont object I will put you on.
Thanks, Danny!
I have added you to my blogroll (let me know if you want it removed..) I appreciate your work too… keep it up!
Remember the old quote–which goes something like this: “Never doubt that a group of concerned citizens can change the world, indeed, it’s the only thing that ever has.” ~ Margaret Mead.
Have a good one!
S
Serene,
How does railing against how much the ceo make in compensation, help this healthcare debate? CEO compensation has very little to do with why healthcare is expensive. Where is your data to back this up? Why isn’t President Obama talking about the compensation of CEO? You want to know why he isnt? Its because its a non issue!! If CEO pay was the problem don’t you think that problem would have been fixed by now? These people are CEO for a reason, they know how to run a business. Could you step in and do their job? I know I couldn’t.. In my opinion they deserve what they make. They get paid for a job they perform plain and simple. Why shouldn’t they get paid for their job? What do you think is the salary that these ceo should be making then, since you obviously have a problem with it.
“By what measure would you assert that “it has not worked out in countries that have universal health care coverage?” Everyone there gets treatment, and guess what? Nobody goes bankrupt because of it!” Nobody will go bankrupt this is true, but the government will!! I think I would rather have an individual go bankrupt than our government. If our system was so bad, why do people from countries that have “universal” healthcare come over here for treatment? If the universal system is so superior wouldn’t they get treatment in their home country? They come over here because they have rationed healtcare…
universal healthcare will hurt economic development and slow job growth. The very thing we need to get out of this recession!! Universal healthcare will not make things any better.
I wrote a blog on this topic and has generated alot of discussion. Dsent and other fellow today bloggers have commented on this imporatant issue. Very lively debate, feel free to join if you wish.
http://thedeepinsight.today.com/2009/05/19/how-obama-plans-to-fund-universal-healthcare/#comments
I didnt know that quote but its on the money. Of course Im happy to be on your roll. I have only had a taste of what you are putting out but it is delicious! Keep up the good work.
Peace
Sorry to interrupt the Mutual Admiration Society Meeting…
But I wanted to say that I enjoyed reading your posting.
Thanks.
AZ,
Uh no.. you said “If CEO pay was the problem don’t you think that problem would have been fixed by now? These people are CEO for a reason, they know how to run a business. Could you step in and do their job? I know I couldn’t.. In my opinion they deserve what they make.”
Didn’t you notice we bailed the industry out? You think people who run their companies into the ground deserve millions of dollars a year to do it then the taxpayers can bail them out so they can keep up the good work? If you think huge saleries don’t contribute to health care costs I don’t know who you think is paying them? You also ignore the inconvient fact that many americans go overseas to get health care because it can be done at a greatly reduced cost. You might want to consider reading the links Serene provided, even and especially the ones she posted to your site.
Peace