“Today the American people are questioning whether or not we receive fair value for the $2.6 trillion we, as a society, are expecting to spend this year on our health care system. The vast majority, including those of us at UnitedHealth Group, believe the answer is, ‘No.’”
— Stephen Hemsley, CEO, UnitedHealth Group
America has a very expensive health care system. Perhaps you’ve noticed.
There are many reasons. We want the newest, most expensive and heavily promoted technology and drugs — even when they’re only marginally better than less expensive models they replaced.
The system is filled with perverse incentives that encourage doctors and hospitals to provide more care, not better care.
Our supersized couch-potato culture is producing a bumper crop of illnesses such as heart disease and diabetes.
Compared to all of that, compensation for health care executives is a drop in the bucket. But it is a very high-profile drop, and it’s about to get even more attention.
Modern Healthcare, a leading health industry trade journal, published its annual executive compensation survey this week. Topping the list is Stephen Hemsley, quoted above, who gave a speech to the Detroit Economic Club last year questioning the value Americans receive for all that health spending.
His take for 2009: $106 million — $7.5 million in salary and benefits and $98.5 million in stock options.
Mr. Hemsley is not alone. The CEOs at insurance giants Cigna, Humana, Aetna, Coventry Health Systems and WellPoint all took home between $10 million and about $18 million. Many of those companies already have announced double-digit premium increases for next year.
In all, the CEOs of America’s 10 largest health insurance companies made $228.1 million in salary and stock options during 2009, accor ding to the liberal advocacy group Health Care For America Now. (That's enough to buy health insurance for at least 47,284 people, based on figured cited in this Kaiser Family Foundation survey on average premiums.)
Since 2000, those CEOs have received slightly less than $1 billion in compensation, the group said.
Think it doesn’t matter? Overall health spending increased by about 72 percent between 2000 and 2009. In that same period, insurance company overhead increased by 95 percent.
Of course, that’s just the insurance companies. Generous compensation is the rule throughout the health care industry.
Researchers analyzed pay and benefits for 342 CEOs of corporations in the Standard & Poor’s 500 index.
They found that health care CEOs received an average compensation of $10.5 million last year. That’s 40 percent more than the average for all S&P 500 companies — 77 percent higher than chief executives at financial services companies.
Most hospitals rely on government programs, including Medicare and Medicaid, for a substantial share of their income. That probably will increase with health care reform.
About 85 percent of U.S. hospitals are nonprofit corporations, exempt from paying sales, income and property taxes. That gives the public an even larger stake in their efficient operation.
Executives deserve to be fairly compensated. Health care is a challenging field. But every dollar spent on executives and administrators is a dollar that doesn’t go to actual health care.
Last year, the average compensation for hospital system CEOs was $1 million. That’s enough to hire five new primary care doctors.
Are Americans getting good value for the $2.6 trillion we’ll spend on health care this year? Is the $160 billion we paid for insurance company overhead a smart investment?
We’ll have to agree with Mr. Hemsley and UnitedHealth Group on this one.