Monday, March 7, 2011

Compensation by Nonprofit Blues Draws Scrutiny

A recent editorial in the Boston Globe, No wonder health costs are so high, is critical of the compensation paid by Blue Cross Blue Shield Nonprofits around the country.  Notable excerpts of the piece include the following:

IF MASSACHUSETTS is the model, then national health care reform is ultimately doomed. That can be the only conclusion after this week’s news that Blue Cross Blue Shield of Massachusetts is in the homestretch of paying out nearly $28 million in retirement and severance pay in the last five years to its last two CEOs. Adding more insult to consumers, the curtain was pulled back on the incestuous way Massachusetts’ top health care providers pay board members tens of thousands of dollars.

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But Massachusetts is not alone. Blue Cross Blue Shield of Michigan doled out $1.54 million to 34 board members, even as the company was losing $145 million, the Detroit Free Press reported in 2008. In 2009, Blue Cross Blue Shield of North Dakota, nationally touted as a well-run alternative to the vilified “public option,’’ was exposed for paying out millions in bonuses, charter flights, Caribbean junkets, and severance for a CEO who had been busted for drunk driving.

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But nowhere in the nation does it seem that Blue Cross is willing to moderate itself. WellPoint, which runs Blue Cross plans in 14 states, including California, raised compensation 51 percent in 2009 for CEO Angela Braly, to $13.1 million. Other top WellPoint executives received similar percentage hikes, taking home between $4.5 million and $7.2 million, according to the Los Angeles Times. Horizon Blue Cross Blue Shield of New Jersey gave recently retired CEO William Marino a 59 percent pay boost in 2009, to $8.7 million, and its top 10 executives received an average 61 percent raise, totaling $24.3 million.


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Corporate CEO’s are not alone in this behavior. We find similar evidence in the health care industry. According to the Daily Planet (2007), several organizations demonstrated outside the annual shareholders meeting of United Health Group the largest HMO in the U.S. to "decry the gap between need and greed.” United Health Group CEO William McGuire, and his replacement Stephen Helmsley, as well as other Minnesota HMO executives, took billions in stock options. McGuire was the highest-paid CEO in Minnesota history, with stock options totaling $2 billion. Helmsley, who replaced McGuire, has stock options in excess of $750 million. In 2009 Helmsley’s compensation came to $57,000 an hour. McGuire and other executives who were ousted in October, 2006, are under criminal investigation due to stock option backdating fraud. According to Herbert Sacks past President of the American Psychiatric Association, when asked where does this money come from, he replied “from the denial and interruption of…patient care.”
Not only are CEO salaries excessive but so are their Senior VPs', VPs', and board members. For example, in 2007, the top 6 health plan boards paid themselves a whopping $277,998,793 (Jodell, 2009).
Estimates of the compensation cost for health care CEO’s and their executives total about $7 to 10 billion a year. If their pay was reduced by 80 percent it would cover health insurance for 500,000 families enrolled in a government insurance program at $10,000 per year per family.

Posted by: czander | Mar 8, 2011 10:07:19 AM

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