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Joe Conason: Playing Monopoly with America’s Health
Popular disgust over the fat premiums that financial executives bestow upon themselves is burgeoning, and rightly so. Those Wall Street piggy banks are filling up with billions upon billions of government-subsidized dollars.
But anyone infuriated by the grossly inflated compensation of the masters of finance should check out the incredible earnings of the top executives in the health-insurance business. They’re among the most highly paid suits in the country — not owing to any skill in providing health care, which they don’t do, but because they have succeeded in denying care, quashing competition, driving up costs and winning federal subsidies for their companies.
Last year, WellPoint, the country’s largest health insurer, paid chief executive Angela Braly just less than $10 million in salary, options and bonuses, along with the use of a private jet for herself and her family. That included a raise of about $750,000 over her 2007 salary.
UnitedHealth Group, the second-largest, paid CEO Stephen Hemsley only $3.2 million last year, but in 2007 he took home $13.2 million. His biggest bonanza got away when he was forced by the Securities and Exchange Commission to surrender $190 million in falsely backdated stock options, but that was nothing compared with the nearly $1 billion in options that his predecessor was required to disgorge. The SEC declined to prosecute anyone for those frauds.
Meanwhile, the CEO of Aetna, Ronald Williams, earned $23 million in 2008, and the CEO of CIGNA, Edward Hanway, brought home a total of $120 million in the past five years, plus nearly $29 million in stock options.
Why are these insurance executives paid such obscene amounts? They might explain that they have improved the processing of claims and managing of risk — happy euphemisms for the notorious corporate practices of denying care wherever possible — or they might insist that their huge salaries reflect their challenging roles in a highly competitive marketplace.
But these companies actually exercise near monopolistic control of local insurance markets, which allows them to drive up costs and reduce access. That is the assessment of the American Medical Association, which has sponsored a series of large-scale studies of insurance markets across the country to determine whether excessive market power affects doctors and hospitals. The very notion of a competitive market and consumer choice is a sick joke in most U.S. cities and towns, where a single health insurer predominates.
Those AMA findings amplified earlier studies dating back to 1995, which even then showed a clear trend toward concentration that has only grown worse. In the past five years, the largest insurers have followed an imperial strategy of growth through merger and acquisition.
The buying binge has led to bloat, with those two companies now covering more than 67 million individuals, or 36 percent of the total U.S. insurance market. That is more than double the market share controlled by the two largest insurers, Aetna and United, in 2000.
If the insurance executives get their way, this damaging consolidation will continue unchecked. When Braly isn’t complaining about potential competition from a public option provided by government, she tells shareholders that acquisition of smaller firms will continue to serve as “one of the key drivers of WellPoint’s future growth.”
The other significant “driver” of profitable growth for the insurance monopolies is the federally subsidized Medicare Advantage program, which overpays them by billions of dollars annually to compete with the traditional, government-run Medicare system. Originally billed as a way to reduce the cost of Medicare, that program has accomplished little except to improve the bottom line for the private insurers — and underwrite the excessive compensation of the Bralys and Hemsleys of the industry.
They blatantly curtail competition, lobby for federal subsidies, boost premiums, ration care and cut access, while insisting that a public option would cause all those terrible consequences. Obviously, they believe that the rest of us are chumps. And they may well be right.
— Joe Conason writes for the New York Observer. Click here for more information, or click here to contact him.
» wrote on 10.23.09 @ 10:40 AM
Sorry Joe, you got it wrong. If we could have true competition by letting us buy insurance across state lines instead of state mandates that guarantee monpolistic behavior we would see prices drop like a stone and that could influence the pay packages you talk about. But then if we took away the politics of envy that the left loves you wouldn’t have anything to write about.
Anyway, as some one once said “if you think health care is expensive now, just wait until it is free”.
» wrote on 10.23.09 @ 11:57 AM
Really good article Mr. Conason, your analysis is well done. As a UCSB employee I got to know the people who try to get the best health care for their employees. I discovered that they are appalled at what the insurance industry is doing to health care and how adversely the health care policies affect the employees and all others in our community who try to find decent insurance. The information is available for all of us to be well informed. Forget about TV news, the media own them and control content. But the information is available and the internet is the easiest place to find it.
» wrote on 10.23.09 @ 01:20 PM
-Remove the anti-trust exemption
-Remove the life time payment cap
-Do not allow denial due to a preexisting condition
-Streamline the healthcare system with electronic records
-Introduce competition through a public OPINON
-Let the Bush tax cuts expire
-Introduce Tort Reform
-Investigate Mal-Practice Insurance Premiums
-Remove co-pays on preventive medicine
-Allow Medicare to negotiate drug prices
Just a few ideas to move forward on this issue. One thing is true. We cannot count on the blood sucking insurance companies to do anything positive
» wrote on 10.23.09 @ 01:25 PM
Conason actually got most of it right.
Palin was right too, when she yelled about “Death Committees”.
What she left out is that they’re there right now - health insurance companies, who decide in secret which patients are eligible for which treatments, when patients lives and/or life-savings are on the line.
America has had almost limitless “competitive, private sector health insurance” for over 50 years. Costs did NOT come down. People are NOT covered. Longevity does NOT lead the world. Neither does improvement in infant mortality. Why?
In Europe, many countries have mandatory health insurance through private insurers. And that can work well.
The trick is that most of them either are non-profit corporations, or highly regulated insurers, with mandatory profit caps on fee increases, and on executive compensation.
These are simple reforms Senate Republican won’t even consider.
If Mr. Danker’s Senate Republicans agreed to those improvements for existing private health insurers, much of what Mr. Conason wants would happen on its own, within a few years. What do you say, Mr. Danker? Can Pepperdiners live with that?
» wrote on 10.23.09 @ 02:33 PM
Two of the main retorts the GOP has had to the notion of single-payer provided or public option health insurance, that is when you can ellicit a positive contribution rather than a snarky and/or paranoid smear, are TORT reform and purchasing insurance across state lines, as rtezt suggests.
As far as tort reform goes, the math just isn’t there. The amount of $ it would save, even if you include generous estimates for how much is spent on “defensive medicine”, is not very much. Furthermore you risk putting people’s health in danger by doing so: between 5 and 7 times as many people die from medical mistakes as the number who recieve some monetary compensation for a medical mistake. Tort reform could and probably should happen to some degree, but it’s tinkering around the edges of our problem, and in no way central to it.
As far as interstate purchase of health insurance goes, it might be interesting to try it, but again it’s small potatoes, really really small, compared to the problem, and it would only be reasonable to try it if we completely standardize all 50 states first. Otherwise, the “race to the bottom” argument aginst this idea seems a very real danger. In NO way would prices “drop like a stone”, as rtezt suggests. Insurance companies aren’t going to voluntarily kill their own golden goose! Anyone who makes the claim that allowing interstate health insurance purchases or tort reforms will solve our health care problems is either misled and not applying logic to the problem, or simply an obstructionist masqerading as a person with an idea.
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