HMO executive compensation

natalie · Jun 22, 2001

http://www.boston.com/dailyglobe2/172/nation/HMO_rates_climb_again_for_2002+.shtml

HMO rates climb again for 2002

Increases tied to drug costs, fees for care

By Liz Kowalczyk, Globe Staff, 6/21/2001

ompanies and their employees can expect significant increases in their health insurance premiums for the fourth consecutive year in 2002, as prescription drug costs climb even higher, patients demand ultrafast imaging tests, and hospitals and doctors win bigger fees.

Even though new rates don't take effect until January, large employers are receiving 2002 premium estimates from health plans this month. Executives at Massachusetts' three largest insurers - Harvard Pilgrim Health Care, Tufts Health Plan, and Blue Cross and Blue Shield of Massachusetts - said they will raise premiums an average of 8 to 15 percent. Nationally the increases may be even higher, benefits consultants said.

Employers are just beginning to grapple with the bad news, but many companies plan to pass along the extra costs to their workers in the form of higher deductibles for hospital stays and copayments for office visits and medications, consultants said. But executives at other firms said they raised fees for employees last year and are worried that further increases this soon will annoy and anger their workers.

''We're struggling with this,'' said Kathy Reinhardt, director of benefits for Analog Devices in Norwood, which has 3,000 employees in Massachusetts. ''The company needs to make decisions about how much of the cost it can absorb. But we're also asking employees to take on a lot of extra work, and higher health insurance costs would be just one more thing they have to deal with. We're all asking: `Where do we go from here?'''

At the 25-person accounting firm of Rucci, Bardaro and Barrett in Malden, president Bill Rucci said that he may have to ask employees to pay for a greater portion of the premiums. The cost for an individual policy with Tufts is $191 for individuals, $523 for families. The firm pays 100 percent of the cost of individual policies and puts that same amount toward family coverage.

Tufts already warned Rucci that premiums for his company will jump 20 percent next year. Another option is to switch to a new insurer, but he already switched to Tufts this year when the company's former insurance company, Cigna, threatened to raise his premiums 65 percent.

''Employers are frustrated with the magnitude of the cost,'' acknowledged Kevin Counihan, Tufts senior vice president of sales and marketing. ''They remember the mid-1990s, when a 1 percent increase prompted immediate appeals. They remember the good old days. We were lulled into thinking we had a new model that would keep working.''

That model was managed health care, '90s-style. And during most of the 1990s it did what it promised. It stopped the double-digit health-care inflation of the late 1980s by limiting expensive and sometimes unnecessary procedures and tests for patients, reducing hospital stays, and holding down fees to hospitals and doctors.

But patients and providers rebelled. Patients want access to the latest technology and top hospitals. And providers said they can no longer accept fees that are below the cost of providing care. Partners HealthCare, the hospital and doctors network that includes Massachusetts General Hospital and Brigham & Women's Hospital, has won steep fee increases from the state's three largest insurers, including 25 percent to 30 percent over four years from Harvard Pilgrim.

At the same time, drug companies began marketing an array of expensive new drugs for conditions ranging from depression to high cholesterol, which patients are demanding.

As a result, Harvard Pilgrim said the premiums it charges employers will grow by 10 percent to 15 percent next year, a bit higher than this year. Tufts is estimating an 8 percent to 10 percent increase, and Blue Cross an 8 percent to 14 percent jump - both slightly less than this year.

Steve Booma, executive vice president of sales, marketing, and service for Blue Cross, said a three-tier pharmacy plan that goes into effect in July will slow the company's expenditures for prescription drugs. Under the plan, members pay $5 or $10 for generic drugs, $10 to $20 for preferred brand-name drugs, and $25 to $35 for nonpreferred brand names. The higher copayments are intended to encourage consumers to ask their doctors and pharmacists for the cheapest drugs.

Tufts and Harvard Pilgrim executives said their three-tiered pharmacy programs already are having an impact on costs. But executives at all of the plans said the higher fees demanded by doctors and hospitals have eaten up some of those savings. ''The overwhelming issue for everyone will be the Partners agreement,'' said Bruce Bullen, Harvard Pilgrim's chief operating officer. The agreement was announced yesterday.

Tufts executives said the plan's costs also are rising in the following areas: injectible drugs manufactured by biotechnology companies, including drugs for multiple sclerosis that cost $10,000 a month per patient; cancer drugs; radiology tests such as magnetic resonance imaging; hospital stays at the more expensive academic medical centers; and ear surgery for children and carpal tunnel surgery for adults.

In a preliminary survey of 2002 rates, benefits consultant Hewitt Associates said health plans are demanding 20 percent increases in the Midwest, 17 percent increases in the West and Southeast, and 15 percent increases in the Northeast. Companies will try to negotiate down these initial price quotes.

Robert Kennedy, Hewitt's practice leader for health and welfare in Boston, said increases in the Northeast are slightly lower because more people belong to managed-care plans. In Massachusetts, 52 percent of residents belong to managed-care plans, compared to 29 percent nationally, according to 1998 state figures.

''We're keeping a lid on costs a little bit longer,'' he said. ''We do have folks vested in managed care here. It's efficient, but it's started to erode.''

Health plan executives said they are developing new programs to control costs again, including a wider range of products that would offer employers more options between low-cost plans limiting the choice of doctors and hospitals, and higher-cost plans with wide choice.

Liz Kowalczyk can be reached by e-mail at [email protected].

Home Health Columnist / Guide · Jun 22, 2001

Here is USA Todays version of report:

http://www.usatoday.com/usatonline/20010621/3419879s.htm

Report flags health care's 'double standard' Executives get extensive benefits but deny patient protections, group says

By William M. Welch

USA TODAY

WASHINGTON -- A report being released today by a consumer interest group that is seeking passage of a broad ''patients' bill of rights'' charges that managed-care companies are offering ''profligate executive compensations'' to their own officials while ''continuing to claim that patient protections are too expensive.''

The report by Families USA says the 25 highest-paid executives in the 10 top health-insurance companies received a total of $201 million in annual compensation excluding unexercised stock options in 2000. That included salary, bonuses, life insurance, retirement plans, car and travel allowances and other compensation. Separately, the group calculated the 25 executives with the largest unexercised stock option packages in 2000 held options valued at $1.1 billion.

CEOs at 251 of the largest Standard & Poor's 500 companies pulled in compensation packages averaging $36.5 million in 2000, including stock options, according to database analyses by the non-profit Investor Responsibility Research Center. CEO pay has risen 500% since 1990.

Families USA calculated the compensation of managed-care executives based on Securities and Exchange Commission filings.

''The compensation is enormous, and the unexercised stock options are beyond enormous,'' said Ron Pollack, head of Families USA. ''It clearly shows they have a double standard: one standard when it comes to lining their own pockets and another when it comes to protecting the rights and interests of consumers.''

The study's release is timed to coincide with Senate consideration of the patients' rights bill, which has been stalled in Congress for five years and is the object of an intense lobbying battle by competing interest groups. The bill before the Senate and a rival one backed by President Bush both would require managed-care companies to guarantee certain protections.

Both would require the health plans to establish outside reviews for patients' disputes and permit lawsuits against health plans that federal law now shields from most suits. The bill before the Senate would go further by permitting suits in state courts, while the Bush-favored bill would permit them only in federal court and with tighter limitations.

The Families USA report says that William McGuire, chief executive officer of one of the biggest managed-care companies in the nation, UnitedHealth Group, received $54 million in salary and other compensation in 2000, not counting unexercised stock options. Those options were valued at $357.9 million.

Roger Crozen, a UnitedHealth spokesman, said the $54 million included a one-time exercise of stock options. He said the company, which is based in Minneapolis and provides coverage to 16 million Americans, has voluntarily granted its members many of the medical guarantees in the bill.

The Families USA report is ''a diversionary tactic,'' said Phil Blando, spokesman for the American Association of Health Plans. ''It's no accident that this is being released in the midst of an effort by the trial lawyers to take over the American health care system.''

The report by Families USA says the 25 highest-paid executives in the 10 top health-insurance companies received a total of $201 million in annual compensation excluding unexercised stock options in 2000.

I understand that other big companies have similar salaries, but they are not denying persons HEALTHCARE like this HMO executives are. Big bonuses need to be outlawed. Karen

Jenny P · Jun 26, 2001

This is the kind of stuff that makes me sick! How can anyone make that knid of money and DENY coverage to the people who make the payments to the insurance company?

My husband has M.S. and is on Avenox (one of those special A-B-C- injections); and it runs $1200/month for a weekly injection, according to our HMO (we pay an $8.00 co-pay). With this med, he is still able to work and function adequately. Without it, he probably would not be working anymore. He no longer drives unless there is no other way for him to get somewhere; he falls occasionally, and this med keeps his symptoms under control for the most part. It is a necessary drug; and members of his M.S. support group are also on various ones of these meds. In comparing the prices of these drugs, not one of them is in the $10,000/month range. I think someone slipped in an extra zero there. And yes, it still seems like an awful price to pay, but they are still contributing to society instead of being on welfare or in a nursing home.

H2OHead · Jun 26, 2001

The government will never get its hand out of the healthcare pie and your elected officials make money by smoothing the folks that got him/her into office. Wanna make some money in healthcare?...Take that BSN and add an MBA on top of it. I think that dollar faucett will openfor you. Your supervisors don't care about your technical skills, they expect them to be sharp, it's the ability to team play and lead folks down the hall that gets you monitarily compensated.

MollyJ · Jun 28, 2001

Great thread. Thought it was interesting that previous poster thought that "the government" was to blame for this one. No, I see this as corporate greed. Corporations are so glad to have their very own little cheerleader in the white house, too. :rolleyes:

I really see that the balance of power in health care does not lie (for the most part) with docs, hospital admins and of course not nurses but with insurors. Nurses really need to wake up to the impact that porificed reimbursements from very profitable insurors have had on hospitals. Insurors are strangulating a lot of profit to hospitals and whether a hospital calls itself non-profit or not, at the end of the day, there has to be left over money in the kitty to keep doing what they do. I also am frustrated with the greed represented by free standing surgi-centers, heart hospitals etc. These centers, often built by docs, scrape off high re-imbursement procedures from the dogged, "devoted" (and I know some of you will gag on that word) hospital. I call it devoted because it is the community institution that provides 24 hour a day care and doesn't get to SELECT the patients based on their insurance like those other free standing centers do.

Again, I have often called the problems of the current health care system the death throes of a dying system. Insurors and those greedy docs that are scraping high reimbursement procedures away from their community based institutions AND the consumer (who wants it ALL) are all contributing to hastening the inevitable death of the system.

When the house of cards collapses, what will it look like? How long can the house of cards continue to be built? Do we have 10 more years, more or less? Hard to say. I think over all economic health of the country will have a lot to say about this. But there is not a doubt for me that maintaining some kind of basic health structure in a country is central to the country's over all prosperity. As some of you know, I am reading Laurie Garrett's _Betrayal, the Collapse of Global Public Health_. This is thought provoking reading for all of us and I would urge all of you to check it out at the library.

PeggyOhio · Jun 28, 2001

Molly,

Enjoy your comments and perspective.

I attended the ANA RN Lobby day on June 26th. In the meeting we had with Senator Voinovich's staffer, I brought up the Family USA report. I asked what Senator Voinovich's position on the report was and how it impacted the nursing shortage (the viscious circle, hospitals saying reimbursement is the problem, insurors saying they're keep health care costs down, meanwhile nurses are caught in the middle, and these CEO's are laughing all the way to the bank!)

I got the same amazing answer that I got when I brought up the issue with Rep Kucinich's staffer. Basically that answer is, "that's capitalism, the federal government doesn't and can't go around putting caps on what industries profits are." Health Insurance is just another industry to them.

When I asked how come the government can put caps on what hospitals and doctors are allow to charge for their services,

the answer was "that's different". How, I wonder is that different?

Can anyone enlighten me on this? Because I find it very disturbing and I need to understand what the difference is on when it is and isn't capitalism at work.

If the federal government cannot/will not do something about this what can be done? Do we as the insured have to boycott these insurance companies that pay their CEO this obsene amount? Am I simply misunderstanding corporate compensation? Is this fair compensation? What is it?

I see a growing trend in this area to eliminate insurance companies altogether, with the hospital itself becoming the health care provider. When I started at my current position we had four different health care providers to choose from. Gradually the prices were raised on the others to make the hospital plan the only financially attractive one. Is this the future? Insurance companys eventually wiped out by big conglomerate health care systems? What will happen to market competition then?

:confused:

MollyJ · Jun 28, 2001

"Anyone" knows that health care is not just a "service", it is an essential service like electricity, airplanes, other forms of energy, etc, and we do not typically let free markets entirely reign in these areas. So the precedent for not letting a free market reign in this area is well stated.

While I am willing to see cosmetic surgery jobs (nose jobs) be the subject of free market economy, we know that health has too many impacts to say, "If you cannot afford it, you don't get it." An unhealthy populace is dangerous. They don't work well. Unvaccinated children/populations can hurt all of us. Again, Garrett's book illustrates this vividly. But of course, insurors and their back pocket buddies would buy this line.

Thanks for your post.

PeggyOhio · Jun 28, 2001

Molly,

Yes and I agree. Health care is different it is essential to the well-being of our citizens and therefore our society at large. I agree that it should be affordable and accessable to ALL CITIZENS, not just those fianancially well off enough to afford it.

What I don't get is the government sees no problem controlling the cost of the actual service (i.e how much they will pay for a chole, or cardiac cath, x-ray, a day in-patient, etc.). I actually had one staffer tell me that they have a big book that they look up what the profit margin of the hospitals is, and they have determined they (hospitals) are making money and that if they don't pay their workers enough to keep them (nursing shortage) that's their problem. And they apparently believe market forces will prevail to correct the problem.

Why then is there suddenly this attitude of 'hands off we can't tell insurance companies how much profit margin they can have. What their CEO's take out of the system isn't our (the governments) business.' No one in the government says, well if they can pay their executives that kind of money maybe they're charging to much for their service, let's put a cap on what they can charge for insurance. That for some reason is taboo.

Now that I think about it, isn't that exactly what happen with medicare HMO's? And isn't that exactly why the insurance companies started dumping Medicare patients, because Medicare wasn't giving them a big enough profit margin. And yet when the doctors and hospitals complain about the same thing they are labeled greedy and blamed as the reason why health care costs are rising.

No one seems to care that millions are raked out of the system by the CEO's of these insurance companies. Why? In the big picture is it really just seen as insignificant?

Mijourney · Jun 30, 2001

Hi. MollyJ, thanks for the info on the reference book. I feel that greed, abuse, waste, inefficiency, and mismanagement by government, corporate entities, and the public have led to much of the problems we face in health and medical care.

In light of your comments, do you feel that everyone should have Medicare and Medicaid? Health is crucial to a good quality of life, but our payment structure for quality health and medical services are set up to only give access to those that can afford it. Insurance is set up for those who have no health problems-no risk. I'm of the belief that health and medical care should be a ministry and not an industry. Unfortunately, like you, I see the dominoes falling our way. Brace yourself!

fiestynurse · Jun 30, 2001

I do not think we should go to a Medicare for all system, but a single payer system. The Congressional Budget office projects that single payer would reduce overall costs by $225 billion by 2004 despite the expansion of comprehensive care for all Americans. No other plan projects this kind of savings. There are states studying this system right now and determining how they can make it work.

The program would be federally financed and administered by a single public insurer at the state or regional level. Premiums, copayments, and deductibles would be eliminated. Employers would pay a 7.0% payroll tax and employees would pay 2.0%, essentially converting premium payments to health care payroll tax. 90-95% of people would pay less overall for health care. Financing includes a $2 per pack cigarette tax. The General Accounting Office projects an administrative savings of 10% through the elimination of private insurance bills and administrative waste, or $100 billion in 1994. This savings would pay for providing medical care to those currently underserved.

All Americans would receive comprehensive medical benefits under a single payer. Hospital billing would be eliminated. Instead, hospitals would receive an annual lump-sum payment from the government to cover operating expenses-a "global budget" A separate budget would cover such expenses as hospital expansion, the purchase of technology, marketing, etc.

Doctors would have three options for payment: fee-for-service, salaried postions in hospitals, and salaried positions within group practices or HMOs. Fees would be negotiated between a representative of the fee-for-service practitioners(such as the state medical society) and a state payment board. In most cases, government would serve as administrator, not employer.(this is not "socialized" medicine) Doctors would really have more freedom and say-so then they do now!

Single payer would be the simplest and most efficiant health care plan that Congress could implement. So, what is keeping our elected officials from going forward with this? First of all, we need campaign finance reform. Secondly, we need a President who will put this at the top of his list of priorities. Secondly, we need a grassroots effort from every healthcare worker and concerned citizen. There are already many organizations and people endorsing this effort and fighting for this very type of healthcare reform. It is the only thing that makes sense!!

Cdn_Psych · Jun 30, 2001

I'm in Canada and there is a big push on here among the business & political elite for more private care. The National Post even touts private health care as the solution to nurses feeling the need to strike (!!!).

Stories like this on below convince me Canadians would be making a big mistake to introduce even more private care into our system.

I can't help but wonder why everyone calls it "managed care". It seems to me "managed neglect" would be a more accurate term.

Originally posted by NRSKarenRN
Here is USA Todays version of report:
http://www.usatoday.com/usatonline/20010621/3419879s.htm

Report flags health care's 'double standard' Executives get extensive benefits but deny patient protections, group says
By William M. Welch
USA TODAY

WASHINGTON -- A report being released today by a consumer interest group that is seeking passage of a broad ''patients' bill of rights'' charges that managed-care companies are offering ''profligate executive compensations'' to their own officials while ''continuing to claim that patient protections are too expensive.''

The report by Families USA says the 25 highest-paid executives in the 10 top health-insurance companies received a total of $201 million in annual compensation excluding unexercised stock options in 2000. That included salary, bonuses, life insurance, retirement plans, car and travel allowances and other compensation. Separately, the group calculated the 25 executives with the largest unexercised stock option packages in 2000 held options valued at $1.1 billion.

CEOs at 251 of the largest Standard & Poor's 500 companies pulled in compensation packages averaging $36.5 million in 2000, including stock options, according to database analyses by the non-profit Investor Responsibility Research Center. CEO pay has risen 500% since 1990.

Families USA calculated the compensation of managed-care executives based on Securities and Exchange Commission filings.

''The compensation is enormous, and the unexercised stock options are beyond enormous,'' said Ron Pollack, head of Families USA. ''It clearly shows they have a double standard: one standard when it comes to lining their own pockets and another when it comes to protecting the rights and interests of consumers.''

The study's release is timed to coincide with Senate consideration of the patients' rights bill, which has been stalled in Congress for five years and is the object of an intense lobbying battle by competing interest groups. The bill before the Senate and a rival one backed by President Bush both would require managed-care companies to guarantee certain protections.

Both would require the health plans to establish outside reviews for patients' disputes and permit lawsuits against health plans that federal law now shields from most suits. The bill before the Senate would go further by permitting suits in state courts, while the Bush-favored bill would permit them only in federal court and with tighter limitations.

The Families USA report says that William McGuire, chief executive officer of one of the biggest managed-care companies in the nation, UnitedHealth Group, received $54 million in salary and other compensation in 2000, not counting unexercised stock options. Those options were valued at $357.9 million.

Roger Crozen, a UnitedHealth spokesman, said the $54 million included a one-time exercise of stock options. He said the company, which is based in Minneapolis and provides coverage to 16 million Americans, has voluntarily granted its members many of the medical guarantees in the bill.

The Families USA report is ''a diversionary tactic,'' said Phil Blando, spokesman for the American Association of Health Plans. ''It's no accident that this is being released in the midst of an effort by the trial lawyers to take over the American health care system.''

The report by Families USA says the 25 highest-paid executives in the 10 top health-insurance companies received a total of $201 million in annual compensation excluding unexercised stock options in 2000.
I understand that other big companies have similar salaries, but they are not denying persons HEALTHCARE like this HMO executives are. Big bonuses need to be outlawed. Karen