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Tilting at Windmills

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June 8, 2009

IT'S A FEATURE, NOT A BUG.... The New York Times had an item over the weekend on the inclusion of a public option in a health care reform. The piece was primarily about the existence of state-based plans in which employees are given a choice "between government-backed insurance options and a menu of commercial policies." Though the comparisons are imprecise, as the New America Foundation's Len Nichols noted, the state plans are "proof of concept" that governments can maintain fair competition.

But the article also noted the principal criticism of a public option.

[C]ritics argue that with low administrative costs and no need to produce profits, a public plan will start with an unfair pricing advantage. They say that if a public plan is allowed to pay doctors and hospitals at levels comparable to Medicare's, which are substantially below commercial insurance rates, it could set premiums so low it would quickly consume the market.

Yeah, don't throw us in that brairpatch.

Josh Marshall added, "As [Jon] Taplin suggests, these 'problems' sound remarkably like 'the point' of the whole exercise. Most of the argument here is that a big government plan would just provide the insurance 'service' much more efficiently and cheaply than private carriers. And that the private carriers wouldn't be able to make any money off selling the service any more. But this is the argument that single payer advocates routinely make -- namely, that a lot of the money that goes into private health insurance goes to paperwork, much of which is tied to finding ways to deny people coverage. That, and the need to earn profits on providing the service."

For a while, it seemed the right tried to argue that a public option would be awful because no one would want to sign up for it. Such a system, they said, would force Americans to accept rationing, long wait times, a labyrinthine government bureaucracy, etc. Except, that never made any sense -- Americans who are already in such a system tend to like it (the VA system, for example), and for that matter, there's no reason to think consumers would voluntarily sign up for an awful system.

So, now the right is arguing that a public option would be too popular. Insurance companies want consumers to think that private coverage is already so inadequate, Americans will flee, if given half a chance, to a public system that's more efficient and costs less. If there's a competition, conservatives and the industry expect the public option to win.

In turn, they want government to, above all else, protect the insurance industry's flawed business model. It's not exactly a persuasive pitch.

Steve Benen 8:00 AM Permalink | Trackbacks | Comments (31)

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Where the money goes: Insurance CEO pay.

Insurance: Health & Disability

William W. McGuire
Chief Executive Officer
UnitedHealth Group

In 2005, William W. McGuire raked in $37,665,645 in total compensation including stock option grants from UnitedHealth Group.

And William W. McGuire has another $1,776,547,635 in unexercised stock options from previous years....

John W. Rowe
Chief Executive Officer
Aetna

In 2005, John W. Rowe raked in $17,709,543 in total compensation including stock option grants from Aetna.

From previous years' stock option grants, the Aetna executive cashed out $27,367,351 in stock option exercises.

And John W. Rowe has another $265,503,766 in unexercised stock options from previous years....

H. Edward Hanway
Chief Executive Officer
CIGNA Corporation

In 2005, H. Edward Hanway raked in $16,998,300 in total compensation including stock option grants from CIGNA.

From previous years' stock option grants, the CIGNA executive cashed out $16,447,500 in stock option exercises.

And H. Edward Hanway has another $28,881,000 in unexercised stock options from previous years....

Larry C. Glasscock
Chief Executive Officer
WellPoint

In 2005, Larry C. Glasscock raked in $16,277,139 in total compensation including stock option grants from WellPoint.

And Larry C. Glasscock has another $55,936,000 in unexercised stock options from previous years....

Daniel P. Amos
Chief Executive Officer
AFLAC

In 2005, Daniel P. Amos raked in $12,806,251 in total compensation including stock option grants from AFLAC.

From previous years' stock option grants, the AFLAC executive cashed out $24,011,800 in stock option exercises.

And Daniel P. Amos has another $110,915,022 in unexercised stock options from previous years....

J. Barry Griswell
Chief Executive Officer
Principal Financial Group

In 2005, J. Barry Griswell raked in $11,095,699 in total compensation including stock option grants from Principal Financial Group.

From previous years' stock option grants, the Principal Financial Group executive cashed out $3,529,225 in stock option exercises.

And J. Barry Griswell has another $13,577,390 in unexercised stock options from previous years....

Dale B. Wolf
Chief Executive Officer
Coventry Health Care

In 2005, Dale B. Wolf raked in $9,725,931 in total compensation including stock option grants from Coventry Health Care.

From previous years' stock option grants, the Coventry Health Care executive cashed out $13,103,944 in stock option exercises.

And Dale B. Wolf has another $69,514,075 in unexercised stock options from previous years....

Mark S. McAndrew
Chief Executive Officer
Torchmark Corporation

In 2005, Mark S. McAndrew raked in $8,805,171 in total compensation including stock option grants from Torchmark.

From previous years' stock option grants, the Torchmark executive cashed out $9,212,776 in stock option exercises.

And Mark S. McAndrew has another $2,709,795 in unexercised stock options from previous years....

Michael B. McCallister
Chief Executive Officer
Humana

In 2005, Michael B. McCallister raked in $5,383,515 in total compensation including stock option grants from Humana.

From previous years' stock option grants, the Humana. executive cashed out $778,903 in stock option exercises.

And Michael B. McCallister has another $60,865,194 in unexercised stock options from previous years....

Anthony M. Marlon
Chief Executive Officer
Sierra Health Services

In 2005, Anthony M. Marlon raked in $5,142,630 in total compensation including stock option grants from Sierra Health Services.

From previous years' stock option grants, the Sierra Health Services executive cashed out $14,213,325 in stock option exercises.

And Anthony M. Marlon has another $8,497,674 in unexercised stock options from previous years....

Michael F. Neidorff
Chief Executive Officer
Centene Corporation

In 2005, Michael F. Neidorff raked in $4,665,233 in total compensation including stock option grants from Centene.

From previous years' stock option grants, the Centene executive cashed out $8,334,974 in stock option exercises.

And Michael F. Neidorff has another $9,646,123 in unexercised stock options from previous years....

Jay M. Gellert
Chief Executive Officer
Health Net

In 2005, Jay M. Gellert raked in $1,787,682 in total compensation including stock option grants from Health Net.

From previous years' stock option grants, the Health Net executive cashed out $9,852,152 in stock option exercises.

Posted by: bakho on June 8, 2009 at 8:06 AM | PERMALINK

http://www.aflcio.org/corporatewatch/paywatch/db_console_r.cfm?f=0&ind=Insurance%20Health%20%26%20Disability

HT to Anne

No discussion of health care or government money to pay private insurance should start without a discussion of CEO compensation.

Posted by: bakho on June 8, 2009 at 8:10 AM | PERMALINK

So, these freemarketeers are afraid of the competition they'd get from a potentially streamlined org that doesn't price gouge? Seriously? I thought that kind of "healthy competition" was what Republicans are all about. You know, best practices, keeping costs low, that kind of stuff. Isn't that what they've always said?

Posted by: chrenson on June 8, 2009 at 8:14 AM | PERMALINK

I blame the Canadians for this perception that a less costly, more efficient health care system is more desirable.

Posted by: pj in jesusland on June 8, 2009 at 8:22 AM | PERMALINK

"Americans will flee, if given half a chance, to a public system that's more efficient and costs less."

I already subscribe to several of these 'public systems': Fire- if my house catches on fire, a bunch of guys in shiny red trucks show up. And I don't get billed before or after I use the service.

Police. Ditto. Call 911 and a bunch of guys with guns show up and save me.

National defense: Russian troops land on the Jersey beaches, and a bunch of guys with guns show up and tell the Ruskies to take a hike.

Since I am not one of the priviledged 2%, I don't pay Federal Income taxes, which makes all of the above "free".

It would be nice if healthcare had a similar program. . .

Posted by: DAY on June 8, 2009 at 8:22 AM | PERMALINK

Steve is right that we've all been saying this for-blankety-blank- ever. But why is anyone surprised? The nakedness of this "competition is good" shtick was exposed when the phone companies, the airlines and other utilities were deregulated. Why is it so hard for the press and the politicians to honestly admit that insurance companies have zero incentive to actually provide health care services to their clients. Their fiduciary duty is entirely to their own shareholders and owners and CEOs.

Just as newspapers are actually in the business of "selling eyeballs to advertisers" and not, you know, in the news business so insurance companies are in the business of taking premiums from employers and their employees for bundled services, and then disagregating those services on a one to one basis and denying payment. The entire health care insurance industry is a kind of elaborate bait and switch in which you are offered health insurance but what you get is a minimal form of subsidy for whatever health care you try to access.

aimai

Posted by: aimai on June 8, 2009 at 8:24 AM | PERMALINK

Waah! The great and powerful free market is too weak to compete with the government.

And the funny thing is, a lot of private insurers also have their fingers in Medicare and Medicare Advantage.

Too bad none of AHIP's members ever sat down and seriously considered how consumers would react if enough of the insurers kept cranking up the price of coverage while also creating more and more barriers to treatment. Too busy building vaults for all the cash I guess.

Posted by: The Answer WAS Orange on June 8, 2009 at 8:32 AM | PERMALINK

Great point. That's the irony I like to throw at conservatives: if you really like competition so much, then extend the idea of "competition" even to one system of doing things versus another, such as public v. private. They tend not to like that idea.

That "complaint" also shows the hand of conservative critics, clearly caring only about their clients' profits and not which is better for the public.

Posted by: Neil B ♪ on June 8, 2009 at 8:38 AM | PERMALINK

Conservatives can't seem to get their message straight. First they want to tell us that government can't do anything right, and is certain to screw up healthcare.

Now they want us to believe that a gov-run program will be so efficient, that private plans can't compete. So which is it?

Posted by: Stetson Kennedy on June 8, 2009 at 8:47 AM | PERMALINK

Stetson: First they want to tell us that government can't do anything right, and is certain to screw up healthcare. Now they want us to believe that a gov-run program will be so efficient, that private plans can't compete.

Great point! Now if only there was some network or agency solely tasked with information gathering and dissemination that could somehow reach a large number of the country's population and report on this blatant, self-serving hypocrisy. If only...

Posted by: chrenson on June 8, 2009 at 8:57 AM | PERMALINK

Larry C. Glasscock
Chief Executive Officer
WellPoint

In 2005, Larry C. Glasscock raked in $16,277,139 in total compensation including stock option grants from WellPoint.

Let me add to Bakho's listing of compensation: Susan Bayh (wife of Evan Bayh) received $350,000 in compensation from Wellpoint in 2007 for being on the board of directors.

In this morning's Washington Post, Fred Hyiatt has an opinion piece which does not include a public option as part of the discussion of health care reform.

The corporate world and their toadies in the rethug & dumb parties and their echo chamber in the corporate media will do their best to assure the continuation of their enormous profits. Single payer and/or a public option are antithetical to that profitability and will be vigorously fought.

Posted by: AngryOldVet on June 8, 2009 at 8:58 AM | PERMALINK

In other words, if the peasants have affordable health care, they will like it and we won't be able to steal from them any longer.

Posted by: JS on June 8, 2009 at 9:07 AM | PERMALINK

But why is anyone surprised? The nakedness of this "competition is good" shtick was exposed when the phone companies, the airlines and other utilities were deregulated.

Of course corporations don't like competition when it's on their turf and they're on the defensive. So the bigger the corporation and the bigger the turf, the more they would like to eliminate competition so they can rake it in. So if they're big enough, they can whine to legislators to protect them, like this. It is pretty funny when they have to write it out, boo-hooing that somebody who prices their product lower could, you know, get a lot of business.

In addition, they can put together real or (in a lot of cases) bullshit product differentiation to at least make comparison shopping difficult or impossible. Look at Medicare Part D, where you need a roomful of risk analysts and a closetful of servers to figure out the complications on lists of similar but not identical plans. Scott "Dilbert" Adams called this a confusopoly.

Posted by: ericblair on June 8, 2009 at 9:14 AM | PERMALINK

Newt Gingrich issued the usual dire warning yesterday on Face the Nation that bureaucrats would be making health care decisions, bad ones, of course, under a public plan. As proof, he pointed to the UK's poor cure rate for breast cancer vs. the US. Oddly, he didn't say how many of our cures result from treatments allowed and paid for under Medicare and Medicaid, which I imagine are substantial. And by the way, just who does he think is calling the health care shots/denying treatments at private health insurance companies?

Posted by: Norwood Woman on June 8, 2009 at 9:22 AM | PERMALINK

Yesterday, in the Oregonian, a shill for New America Foundation wrote that change must be slow as any sudden change will affect the budget adversely. The problem for the right is that when those 46 million, finally, receive coverage, well, the horror of horrors, they all might avail themselves to treatment. Better to leave them out in the cold in order to keep costs low. By all means bring on change is their mantra, as long as you bring it on ever soooooooooo slowly. Yes, put the "Slowskis" in charge of change.

Posted by: berttheclock on June 8, 2009 at 9:34 AM | PERMALINK

What a fantastic post AND follow up comments! Now if only Obama, who has decided to get out front and publicly champion health care reform, will make the points made here to expose the hypocrisy and stupidity of the counter-arguments.

Posted by: Chopin on June 8, 2009 at 9:35 AM | PERMALINK

As I've written before.

From 1999 Canadian Gov Study comparing both systems (at a time when certain political leaders wanted to privatize HC)

Canada's HC admin costs = 7% of total spending.
US's HC admin costs = 24% of total spending.

Posted by: Former Dan on June 8, 2009 at 9:38 AM | PERMALINK

Norwood: Newt Gingrich issued the usual dire warning yesterday on Face the Nation that bureaucrats would be making health care decisions, bad ones, of course, under a public plan.

Newt f*@#ing Gingrich has obviously never sat on the f*@#ing phone for an entire f*@#ing weekend with f*@#ing Anthem. Bureaucrats indeed!

Posted by: chrenson on June 8, 2009 at 9:39 AM | PERMALINK

Sure, anyone would rather tangle with an insurance company bureaucrat than a government bureaucrat.

Posted by: jrosen on June 8, 2009 at 9:44 AM | PERMALINK

They're talking out of both sides of their mouths--on the one side, they say that "government run" healthcare is awful and no one wants the Canadian nightmare in the U.S., on the other, they say that it would be too popular and put them out of business.
Now, if "government run" healthcare is so bad, I don't think people would flock to it just because it's cheaper, since it would be rationed and inferior care. They've completely exposed themselves, now the reformers need to get ahead of this debate and go all out to inform the public what the insurance industry is really all about--profits, not people.

Posted by: Allan Snyder on June 8, 2009 at 9:51 AM | PERMALINK

I think the main problem is that most people don't know the purpose of insurance, which is to balance the unpredictable individual costs of a particular activity across time and a known population.

The obvious business model is to play hot potato with individuals expected to actually produce claims but set rates as if these individuals were still part of the covered population. You never know who might actually make a claim.

Individuals cheat by not getting insurance while they are "healthy", which raise premiums for everyone.

But the problem with forcing people to buy insurance without providing a public option is that the new model will be to market to the young and healthy only, and hope that the hot potatoes go somewhere else. We can expected to be harassed with paperwork so that we will go somewhere else for insurance. In other words, the difficulty of filing claims will increase in order to drive users of health care away.

Posted by: tomj on June 8, 2009 at 9:58 AM | PERMALINK

These are TOUGH times to be a health care executive:

Chief executive officers at the seven largest publicly traded health plans experienced an average 12% drop in total compensation in 2008, compared with 2007, according to documents filed with the Securities and Exchange Commission.

That decrease is steeper than the average among the CEOs of companies in the S&P 500 Index, who saw an average drop of 6.8%, according to an analysis by executive compensation research firm Equilar.

For the top brass at the big health plans, there also was a wide range in pay changes between 2007 and 2008. Three executives -- Jay Gellert, president and CEO of Health Net; Angela Braly, president and CEO of WellPoint; and Aetna Chair and CEO Ronald Williams -- saw boosts in total compensation. Williams' went up by 5%, from $23 million to $24.3 million; Braly's by 8%, from $9 million to $9.8 million; and Gellert's by 20%, from $3.6 million to $4.4 million.

On the other end of the spectrum, the pay package for UnitedHealth Group President and CEO Stephen Hemsley dropped 75%, from $13.1 million in 2007 to $3.2 million in 2008.

CEOs at the 7 largest publicly-traded health plans saw a 12% drop in total compensation in 2008.

Total compensation also dropped for three of his counterparts at the largest health plans: Cigna Chair and CEO H. Edward Hanway's total pay dropped 53% from $25.8 million in 2007 to $12.2 in 2008. Coventry Health Care's President and CEO Dale Wolf, who was replaced in January 2009, made $9 million in 2008 compared with $14.8 million in 2007 (-39%). Humana's President and CEO Mike McCallister made $10.3 million in 2007 and $4.7 million in 2008 (-54%).

The pain....I can feel it from here......Poor babies.....what can we do to make it better? Scrap single payer? Sure, why not?

Posted by: dweb on June 8, 2009 at 10:04 AM | PERMALINK

In turn, they want government to, above all else, protect the insurance industry's flawed business model. It's not exactly a persuasive pitch.

This may not be persuasive to the consumer, but it seems makes sense to our elected representatives in Congress, which is all that matters.

Posted by: qwerty on June 8, 2009 at 10:13 AM | PERMALINK

It seems to me that the one place where private insurance might have a leg up on a the public option is this: typically, the big insurance companies pay doctors more money for similar procedures than Medicare does. If that's so, then doctors would have incentives to prefer patients with private insurance over those with the public option.

Thoughts?

Posted by: Sean on June 8, 2009 at 11:36 AM | PERMALINK

Wait a minute: I thought one foundational GOP argument is that private enterprise is always more efficient than government.

Here's an opportunity to clearly prove their point.

But they consider it a bad test because a government program would be inherently more efficient?

The question arises: efficient at what?

One must suspect that the stated goal (providing health care, education, etc.) is in fact always secondary to the unstated goal of creating profit for investors. At that, private enterprise is always, clearly, more efficient. For health care -- well, the GOP is admitting that private enterprise is no competition to a public option in that respect. So their line of thinking must be: health care is nice, but ROE is essential.

The GOP seeks to expand the *opportunity* to make a profit into the *right* to make a profit.

Posted by: Jon on June 8, 2009 at 12:11 PM | PERMALINK

Sean, you're definitely right that, in some places, Medicare pays far less than insurance. However, in California, insurance companies pay less. There needs to be some guarantee that physicians will still get out of school with all those loans and be able to afford to pay them off! My husband is paid about 34% of what he bills by Medicare and about 60% of what he bills by insurance, although both are dropping each year.

Posted by: Margaret on June 8, 2009 at 2:23 PM | PERMALINK

maybe we should save some serious Fed dollars and force our "representatives" into the market by eliminating their nationalized/socialized health care benefits.

First thing, stop all lifetime benefits for former government employees.

Can we get a petition going for this?

Posted by: Michael on June 8, 2009 at 2:40 PM | PERMALINK

"They say that if a public plan is allowed to pay doctors and hospitals at levels comparable to Medicare's, which are substantially below commercial insurance rates, it could set premiums so low it would quickly consume the market."

As an advocate for many labor unions it has been my esteem honor to represent their concerns before many types of businesses. Since the mid 80's health care cost for their employees have been a major portion of allocated funds boards have positioned for negotiations. While at the table I have yet to encounter opposition to the idea of a national health care plan, privately. Publicly is another issue.

As to the above quotation, "which are substantially below commercial insurance rates", what private insurance business and their fee schedule would these critics be referencing? Every private carrier I have had experience with USE the Medicare rates of payment, as the guideline, by which they reimburse healthcare providers for services rendered.

That is not to say there are no differences between Medicare health insurance and private carriers plans. Where private insurers depart from Medicare practices mostly, are in denial of services, dramatic reduction of time for hospital stays, establishment of a protracted review committee for certain types of tests are two of the major differences. Of course there are many other differences, but none that benefit the healthcare provider or the consumer.

If for some reason you believe private health care insurers compensate health care providers at a higher rate than does Medicare, ask your personal physician.

Healthcare private insurers certainly do not wish this Medicare reality to become part of the public debate.

I am never without wonder when it comes to mankind's placing a monetary value on the care of fellow men and women. Profit it seems trumps our call to be caring, compassionate and serving.

Posted by: Bill M on June 8, 2009 at 3:17 PM | PERMALINK

[...] the big insurance companies pay doctors more money for similar procedures than Medicare does. -- Sean, @11:36

NYTimes has been having a series of articles on different aspects of healthcare. Over the weekend, they had one about "if doctors had more time to talk to patients" (or something like that). It concentrated on doctors who do not accept any private insurance plans, for various reasons. One of the side bits of info that emerged is that all of that "extra" that the private insurance pays to doctors is then dribbled away for administrative costs. The doctors need to hire two-three people who do nothing but try to unscramble the paperwork, force the insurance to disgorge the money, etc, etc. If you take that hassle away, you need only one receptionist (or none; one of the doctors does it all himself, via "intertubes") and you end up with the same money for yourself or, even, slightly more.

So that "private insurance pays doctors more" meme is, let's say... somewhat deceptive. Your brutto may be more; your netto isn't. Your check may be large (if you get it), but your take home pay is not.

With public option, the biggest problem will be to convince the young an the healthy to buy into it, so as to dilute the pool of the old and the chronically sick, since the public option won't be allowed to turn anyone away.

Posted by: exlibra on June 8, 2009 at 3:44 PM | PERMALINK

Fiscal conservatives generally fall into two categories, with overlap between them.

1. The very rich such as the CEOs of the insurance companies mentioned in the first post, and/or those who've inherited piles of $$$ like Richard Mellon Scaife;

2. The true believers, who may or may not be rich themselves, but who are Randians or libertarians or both. These folks really do believe that private industry or "The Market" (or however they refer to it) is automatically superior to and more efficient than any government entity. And there's the corollary belief that city government is better than county is better than state is WAY better than the Feds. Or, that all issues are best dealt with at the local level. And in SOME cases, all of the above beliefs apply. Trouble is, they don't in ALL cases, health care being a prime example.

The church choir in which I sing is overwhelmingly liberal. But we have one beleaguered (sort of) fiscal conservative. He and I started to get into a discussion one day ca. a year ago. He opened by saying, "Well, we all know that whatever government does, they screw up."

I replied, "Wait a minute. I don't think this is in evidence at all." To my surprise, he immediately got up and walked out of the room! And no, his cell phone wasn't ringing or anything. He just was completely unwilling to proceed with the discussion if I wouldn't accept his flawed initial premise.

I just hope that we can overcome the Wurlitzer and get people to realize that we need serious health care reform.

Posted by: wolfdaughter on June 8, 2009 at 4:15 PM | PERMALINK

.
NEWS FLASH:
We're not getting health care until we get rid of all the DINO's.

Now back to our regularly scheduled programming, "The Unnatural News."
.

Posted by: cosanostradamus on June 9, 2009 at 4:54 AM | PERMALINK




 

 

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