A new report from the American Medical Association documented the increasing consolidation of the US health insurance market, if that is what it should be called. As reported by the Baltimore Sun, "in each of 43 states, a handful of top insurers have gained such a stronghold that their markets are considered 'highly concentrated' under US Department of Justice Guidelines, often far exceeding the thresholds that trigger antitrust concerns. The study also shows that in 166 of 294 metropolitan areas, or 56 percent, a single insurer controls more than half the business in health maintenance organization and preferred provider networks underwriting." Furthermore, "critics say that carriers are not only creating monopolies and oligopolies in many regions, they also control the other side of the equation in what is known as monopsony power. That means in addition to having the most enrollees, they're also the biggest purchasers of health care and can dictate prices and coverage terms." The results is "double-digit premium increases from 2001 and 2004 - peaking with a 13.9 percent jump in 2003 - soaring well above inflation and wages increases." But the federal government so far seems uninterested in addressing this concentration of economic power: "AMA officials say regulators seem uninterested, even though government officials are more than willing to target doctors' groups and hospitals on antitrust matters."
The rising rates insurers and managed care organizations can charge as they increasingly dominate individual markets have helped fuel an even faster rise in the compensation given to their top leaders. The Wall Street Journal reported (available here through the Pittsburgh Post-Gazette) on the stunning good fortune of the CEO of UnitedHealth Group, Dr William McGuire. "He draws $8 million in salary plus bonus, enjoying perks such as personal use of the company jet. He also has amassed one of the largest stock-option fortunes of all time. Unrealized gains on Dr. McGuire's options totaled $1.6 billion, according to UnitedHealth's proxy statement released this month. Even celebrated CEOs such as General Electric Co.'s Jack Welch or International Business Machines Corp.'s Louis Gerstner never were granted so much during their time at the top."
The article reported the company's board's willingness to furnish such largesse. "Dr. McGuire has pursued stock-options wealth tirelessly, as an iron-willed leader surrounded by an admiring board." "'We're so lucky to have Bill,' says Mary Mundinger, a UnitedHealth director who sits on the company's compensation committee. 'He's brilliant.' She says his income gives him extra credibility in health-policy debates because it shows his success. 'He needs to be compensated appropriately so that his business model has believability in the market,' says Ms. Mundinger, who is dean of the nursing school at Columbia University."
We have posted before (here, here, and most recently here) on Dr McGuire's amazingly remunerative career as a hired employee of UnitedHealth. Each post was based on new evidence that suggested his position was even more remunerative than had been heretofore believed. However, his spectacularly lavish compensation stands now in stark contrast to the stated mission of UnitedHealth Group:
UnitedHealth Group is a diversified health and well-being company dedicated to making the health care system work better. The company directs its resources into designing products, providing services and applying technologies that:I do not understand how the company can makes such claims when it has directed $1.6 billion of its resources into Dr McGuire's cache of stock options.
- Improve access to health and well-being services;
- Simplify the health care experience;
- Promote quality; and,
- Make health care more affordable.
Finally, we have written before about Dean Mary Mundinger of Columbia University's School of Nursing. Her academic writings advocated advanced practice nursing, advocacy that may fit the financial interests of UnitedHealth Group, since advance practice nurses are paid less than doctors. Yet she has not acknowledged her fiduciary duty to UnitedHealth Group as a member of its board of directors in her written academic work. It will be up to the stockholders of UnitedHealth Group to determine if her enthusiastic support of the CEO's huge compensation package is the best fulfillment of that fiduciary duty. One wonders whether she and other directors who also have allegiances to academic organizations and/or who write about health policy (including Donna Shalala, President of the University of Miami, [see post here,] and Gail Wilensky, Senior Fellow at Project HOPE, see list here) may be less inclined to rein in CEO compensation than those with less divided interests. Whose interests their academic and health policy work serves remains equally open to questions. But conflicts of interest inevitably raise such questions.