It's anecdotes like these that make me seriously question if profit should be in the health care industry at all.
When William McGuire switched careers in 1986, he was so restless that a pay cut of more than 30% didn't faze him. Health maintenance organizations were booming, and Dr. McGuire wanted to help run one. So he jettisoned a six-figure income as a pulmonologist in favor of an HMO management job that paid about $70,000 a year.
Savvy move. Today, the 58-year-old Dr. McGuire is chief executive officer of UnitedHealth Group Inc., one of the nation's largest health-care companies. He draws $8 million a year in salary plus bonus, enjoying perks such as personal use of the company jet. He also has amassed one of the largest stock-options 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.
Dr. McGuire's story shows how an elite group of companies is getting rich from the nation's fraying health-care system. Many of them aren't discovering drugs or treating patients. They're middlemen who process the paperwork, fill the pill bottles and otherwise connect the pieces of a $2 trillion industry.
What's come of this $8 million a year, plus an estimated $1.6 billion in stock options? Think how many extra people could be covered a year with that $1.6 billion. Especially when the company also did this:
The Arizona Department of Insurance on Friday ordered United Healthcare to pay civil penalties totaling $364,750 — the largest fine in the department's history — for violations of state insurance laws. State regulators said United Healthcare illegally denied more than 63,000 claims by doctors without receiving all of the information needed to accept or deny a claim. The company also failed to follow state laws for promptly notifying doctors and patients about about decisions and appeals, the state said. United also violated a 2002 agreement to correct previous violations, the state said.
And the fact that they're doing this while the rest of us see our premiums rise 10%/year (if our employers don't drop coverage, that is):
The "risk" business has been a particular gold mine for UnitedHealth and its rivals in recent years. As health-care inflation eased, insurers still raised premiums at double-digit rates. UnitedHealth's stock price tripled between January 2003 and January 2006, helped by acquisitions, although it has fallen back somewhat since the beginning of this year. UnitedHealth's net income in 2005 totaled $3.3 billion, nearly four times the figure in 2001.
This is the kind of money I'd expect to see from an oil CEO (who are doing similarly well right now). But in health care, this kind of profit is disgusting. We have 45
Is this the kind of system that fits with our ideals? If health care is an expensive necessity, one that we join together to ensure for everyone, should health insurers be making these kinds of profits?