Vanity Fair: The Sick Business of Health-Care Profiteering

[babylonsister]

The Sick Business of Health-Care Profiteering

Think Wall Street’s titans are the highest paid C.E.O.’s in the land? Think again. With median annual compensation of more than $12 million, medical moguls take the pay prize, even as the quality of care we receive falls to embarrassing lows. As the debate over health-care reform intensifies, the author catalogues the industry’s unbridled profiteering.


By Matt Kapp
WEB EXCLUSIVE September 24, 2009


It’s become a national pastime to bash Wall Street’s lavish pay packages, but as we enter the vortex of another health-care showdown, consider these overlooked facts: With median annual compensation of more than $12.4 million, C.E.O.’s at the big health-care companies make two-thirds more than their counterparts in finance and are the highest paid of any industry. The health-care industry’s total annual profit has grown to an estimated $200 billion, and it doled out nearly $170 million in campaign contributions in 2007 and 2008. It now spends more than any other industry lobbying the federal government—$3.5 billion over the past decade and a record $263 million in the first six months of this year. That’s six lobbyists and nearly half a million dollars for each member of Congress. It’s been a good year on K Street, too.

It should come as no surprise, then, that we spend 17 percent of our G.D.P. and more than $7,500 per American per year on health care. That’s 50% more than any other industrialized nation. Meanwhile, the quality of care we get in return has fallen to embarrassing lows. According to the World Health Organization, our health-care system ranks 37th in overall quality and fairness, placing us between Costa Rica and Slovenia. We rank 41st in infant-mortality rates, alongside Slovakia and Serbia, and dead last among 19 leading industrialized countries in preventable deaths. Nearly two-thirds of personal bankruptcies in the U.S. are caused by illness, yet more than three-quarters of those people actually had health insurance when they fell ill. In other words, we’re all getting ripped off.


Health-Insurance Companies

Gambling investors’ money on exotic securities in pursuit of outsize returns may be a dubious profit model, but what could be worse than the health-insurance industry’s core model: screwing sick people to boost margins. President Obama has taken aim at big health-insurance companies and their “record profits.” While it’s true they’ve managed to more than triple their profits over the last eight years, they’ve still only lifted their average margin to 3.4 percent, enough to place 87th out of 215 industries. But they shouldn’t be complaining about lackluster profits when they’re paying their C.E.O.’s and executives as extravagantly as they are. Dishing out this much scratch, it’s a wonder they’re making any profits at all: Aetna C.E.O. Ronald Williams has helped purge millions of members from the company’s rolls; his total annual compensation in 2008 was $24,300,112. Angela Braly, who has promised that WellPoint “will not sacrifice profitability,” also saw a raise, to $9,844,212. Cigna’s Edward Hanway saw his pay cut in half and still hauled in $12,236,740, but he was forced to manage a major P.R. crisis after the company initially refused to approve a liver transplant for a 17-year-old girl, which it said was “outside the scope of the plan’s coverage.” She died just hours after Cigna changed its mind and decided it would pay for a new liver after all. Despite a 75 percent pay drop in 2008, cutting him down to a humiliating $3,241,042, UnitedHealth Group’s Stephen Hemsley put on a brave face for Congress, assuring legislators: “Our mission at UnitedHealth Group is to help people live healthier lives.” UnitedHealth has been fined tens of millions of dollars for claims-processing violations (i.e., stiffing patients and doctors). Hemsley’s predecessor, William McGuire, resigned amid a stock-options backdating scandal in 2006. He still walked away with nearly half a billion dollars in stock options. Hemsley surrendered $190 million in options himself, but with $744,232,068 left over, he should be fine.

Even C.E.O.’s at “not-for-profit” insurance companies (like most state Blue Cross and Blue Shields) collect multi-million-dollar compensation packages, even as their companies pay little in the way of taxes. Blue Cross of Massachusetts’s C.E.O., Cleve Killingsworth, got a 26 percent raise in 2008, to $3.5 million, and Blue Cross of North Carolina’s C.E.O., Bob Greczyn, pulled down nearly $4 million after a 19 percent raise. Gail Boudreaux left Blue Cross of Illinois in December 2007 with $15.3 million. The not-for-profits can be just as freewheeling with expense accounts. In early September, a state audit found that Blue Cross of North Dakota used premiums to pay for a $238,000 sales managers’ retreat in the Cayman Islands and a $34,814 retirement party for an executive.

The bottom line for health-insurance companies is that things like new livers really eat into profits. But it’s not just the expensive life-and-death stuff they’re rejecting. While health-insurance premiums have more than doubled in the past decade, a recent study by the California Nurses Association found that the six biggest insurers in California denied an average of 21 percent of all claims in the first half of 2009, with PacifiCare denying an astonishing 39.6%. The nurses were able to conduct their study, the first of its kind, only because California requires insurance companies to provide detailed records of claims denials. (It’s the only state with such a mandate.)

more...

http://www.vanityfair.com/politics/features/2009/09/health-care200909?currentPage=1

[liberal N proud]

1. These CEO's make sure those in congress that oppose reform...

are the best paid law makers in the country. Paid off that is.