Tuesday, July 19, 2011

Health Care for the Very Rich is Different from That for You and Me - the Case of the CEO's Six-Figure Hip Replacement

Another glimpse of health care for the very rich comes by way of a BNet post by Jim Edwards about the beleaguered CEO of Forest Laboratories.

The background is that:
The CEO is fighting to retain his place atop the company against both investor Carl Icahn, who wants his own directors on Forest’s board, and the Department of Health & Human Services, which wants to exclude Solomon from the drug business as a punishment for the company settling a $313 million investigation by the Department of Justice over its illegal marketing of Levothroid and other drugs.

We had posted about the government threat to disbar him from government business after his company here.

Edwards noted that despite these setbacks, Solomon's total compensation actually increased:
Forest Labs (FRX) reported that CEO Howard Solomon earned $8.9 million in fiscal 2011, 7 percent more than last year,...

This is par for the course for executive compensation in health care. We have discussed numerous instances in which such pay defies gravity, rising even when serious questions have been raised about the performance of the executives and the organizations they lead. We most recently belabored this issue here.

However, Edwards also wrote
The company also spent $316,638 on medical expenses for the 83-year-old CEO, up from $56,571 in 2010. The company’s proxy disclosure did not say what was wrong with Solomon. UPDATE: A spokesperson for the company said:

Mr. Solomon is in excellent health and has no ongoing medical conditions that would impair his ability to continue functioning as the Company’s CEO. A good portion of last year’s expense was related to hip replacement following a fall when he was playing tennis – which he has now reluctantly discontinued.

Later, he summarized the amounts the company paid for Mr Solomon's medical care in previous years:
Here’s how Solomon’s medical bills have increased over the last few years.

2011: $316,638
2010: $56,571
2009: $28,000
2008: $25,000

Mr Solomon is 83 years old, and therefore qualified years ago for Medicare, the US single payer health insurance system for the elderly and disabled. Medicare serves as the primary health insurance for many elderly people, and it covers hip replacements for quite a few of them. A publication by Zimmer, one of the larger manufacturers of prosthetic hips, noted that Medicare payment rates in 2009 for hip replacement were up to about $25,000 for hospitals, and up to about $1500 for surgical fees.

Yet Forest Laboratories increased its payments to Mr Solomon for health care by about $250,000 due to his hip replacement. This amount is obviously an order of magnitude bigger than the usual Medicare payments for hip replacements, and presumably was paid in addition to the amounts Medicare paid for this surgery.

Nothing in Mr Edwards' post, or in the proxy statement from which the numbers came explains the use to which the $250,000 was put. The size of the amount does suggest that Mr Solomon received some sort of health care much more expensive than that available to the general public.

We have previously noted a few instances (e.g. here)  suggesting that the amounts large corporations pay for their top executives' health care are far larger than even the high prices charged by commercial health insurers.  Information from litigation suggested that one retired corporate CEO was entitled to payments for all sorts of amenities, such as first-class transportation, services of personal aides and trainers, cosmetic procedures, etc in conjunction with his health care (see post here).  The case of the Forest Laboratories CEO provides more evidence that top corporate leaders receive health care in what amounts to a system separate from and in a tier above what even supposedly well-insured "regular people" can access. 

The existence of this separate health care system for very rich corporate executives may provide yet another explanation of why real health care reform is so difficult.  We have frequently suggested that those who have become rich from the current health care system are likely to strongly resist any changes to that system that might threaten their continued accumulation of wealth.  These peoples' riches provide them with the resources to fight such changes, e.g., through stealth policy advocacy (see posts here and here).  Furthermore, these peoples' access to a separate health care system for the very rich makes it extremely unlikely that they or their families will ever experience the problems that drive many common folk to despair about our current health care dysfunction.

Perhaps some intrepid investigative reporter will write a Pulitzer prize-worthy story about the parallel health care system for the very rich.  Perhaps some honest health services researcher will study how the existence of such a system affects policy-makers.

At the least, we deserve health care policy informed by how the health care affects real people, and not made solely by those who are sheltered from he vicissitudes of the real, and currently dysfunctional health care system.

1 comment:

Afraid said...

Perhaps the money was needed to pay for security. Who knows what the CEO might reveal when under pain medications.