How ironic that this news item pops up the week of the supposed deadline to buy insurance:
BOSTON, Mass. – November 16, 2007 – The former CEO of the state's largest health insurer walked away with $19.4 million last year.
When he left Blue Cross and Blue Shield of Massachusetts, William van Faasen received most of that money – $16.4 million – in a retirement package. He got the balance for his work as Chairman of the Blue Cross Board.
Just goes to show: Out-of-control health care costs for most of us = big windfall for someone else. Nowadays, the great sucking sound we hear is money going up the health care food chain. We pay ever-higher premiums, and property taxes to pay for muni employees' health care, and so forth; van Faasen hits paydirt. Yeah, it's that simple.
Do listen to the audio clip to hear BCBS's flack talking about a.) what a great job Van Faasen did controlling costs (hah!), and b.) how you've got to pay through the nose to attract “top CEO talent” or some such.
Well, first of all, it's not all that clear that you get that much better talent with that much more money. Costco's CEO disputes that, for instance. What's the marginal value of, say, the last $15 million of that payout? Was van Faasen that much better than someone who would have taken, say, $4 mill to go away?
Even more to the point, all the big health care plans in MA are not-for-profits, supposedly structured to provide a public service, not provide shareholder value. Blue Cross is paying for the wrong kind of person by throwing around that kind of megabucks. By flashing big bling, guess whom you're going to attract? The kind of person who really, really likes big bling. You're not necessarily going to attract people who are interested in providing a valuable public service — which is what being a non-profit is all about, right? I can understand a salary that provides for a quite comfortable life, but people are motivated by different things. And after all, we seem to have no shortage of people running for President, even at a measly $400,000 a year.
I'd just like to see if we could get away without our health plans buying into executive compensation insanity. I really wonder if things would fall apart.
I don’t know how much is too much or if $4, $5 or $20 million is too much, but his comp is about equal to 6 dollars per member of BC/BS. Just to put it in perspective to the total cost of health premiums.
too much. There is not justification. Numbers like that as a retirement package-especially for a nonprofit– are so obscene that they make a joke of the rationale that large CEO compensation is justified by the big picture. Great find in COSTCO’s CEO commentary.
Gary, I’m not one to easily pile onto the “CEO is overcompensated” meme. And you’re right that the level of comp is not a big driver of total health care cost.
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But doesn’t Charley raise a good question on whether a non-for-profit enterprise can reasonably make a gigantic executive payout?
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Shouldn’t an enterprise that wants to pay that kind of exec $$ be required to give up its non-for-profit status and the tax advantages that come from that?
While a public charity for state law purposes, BCBS of Mass pays taxes. Its not tax exempt.
And another thing:
think how much bling this guy carried home.
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Has anyone on BCBS insurance plans been denied care? Like that deaf girl who could get one cochlear implant but not two, at the beginning of Sicko?
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Because the idea of insurance is that everyone in the pool kicks in $6 so someone can afford major surgery, not so someone can take a jillion dollars home.
…they covered next to nothing. My mother in law in Germany has private coverage and is a breast cancer survivor, and she paid next to nothing out of pocket. I paid more for BC/BS coverage than she paid for her private coverage in Germany and I had next to no claims.
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And that’s why I continue to reference the health care financing fraud in the USofA.
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If you want to know how it is in other countries, rent Michael Moore’s Sicko. You’re getting screwed in the US, in more ways than one.
…it’s not even clear that the MA version is “not for profit” corporations. Some of them are not organized that way, but that’s irrelevant. In a “not for profit” corporation, the profits go to the CEOs and other high-level managers. Everyone knows that–or they should.
i didn’t say it was tax exempt. i said it got tax advantages. i may be wrong. that’s why i threw this one to gary, our resident financial/tax expert.
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Seems like it’s a matter of ‘fairness’, and, in the case of a not-for-profit who else to decide but the Board of Directors, who in the case of BC/BS believe that he contributed much toward the growth of the business.
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It’s not really outrageous when you consider that BC/BS is a multi-million dollar operations, not some soup kitchen run out of someone’s basement. Leading BC/BS requires that one individual understand the business, the market and the charity’s mission.
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But, assume I’m wrong. Let’s pass a law that a CEO’s salary cannot exceed say, $200K, or some arbitrary number that is allowed by statute. By passing said law, you’ve said that legislators know better than Board Members about a particular business. Weighing the choice between allowing the state to decide or Board of Directors, I’ll favor the Board everytime. But, that’s just me.
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Besides, if the Board is terribly wrong in its decision, then the Attorney General of Mass has authority to investigate, and the IRS has the ability to adjust, so it’s not like there isn’t any State oversight in this matter. Also besides, If the member of BC/BS thinks the Board is wrong, then the member can always switch to Tufts, Fallon, etc…
If a member wants to change health care companies, it’s often hard, right?
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Ie, many employers offer only a choice within a particular health care provider. Ie, I can choose Tufts HMO or PPO from my employer. If I were mad at Tufts, I couldn’t easily switch without buying it myself. Or changing jobs.
I can see that it’s difficult to change insurers, although I know the larger companies offer several choices of insurers. Having medical insurance so closely bundled with employments creates this barrier–but that’s another thread.
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Broadly speaking though, I don’t know how hard it is to change. In central mass for example, Fallon has a large market share, but Tufts and BC/BS are competing.
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But, back to the earlier notion, considering whether or not a not-for-profit should be ‘punished’ for paying a large bonus to the CEO (albeit, only $6 per member), consider this example:
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Let’s suppose a group of parents got together and figured out a killer ciriculum complete with hiring criteria that produced a small private school that outperformed all other public or private schools. The new private school–we’ll call it HATCH (you know as in who knows what will develope from a small egg). HATCH goes great guns, kids outperforming all others. HATCH ideas catch fire and the same group of parents seek to expand through the state. They form an eleemosynary corp in Massachusetts, elect not-for-profit status and hire a CEO with management skills: HATCH goes from 20 students to 3,000,000 thanks largely to his management. Board of Directors vote to award a $20 million dollar bonus. Globe runs big headline that says “CEO of private not-for-profit school receives $20 million bonus”.
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Why should the state have ANY say as to whether the $20 bonus is appropriate? It’s none of the collective citizenry’s business. The money was generated by the members, the decision to award a bonus was decided by the Board, the CEO pays tax on the salary.
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Is this example distinguishable from the BC/BS bonus?
First, of all, we’ve got an issue: the logical mascot for HATCH would be an egg, and that would lead to all kinds of demoralizing chants. “Scramble the eggs!” “Those eggs are rotten!” “HATCH teachers aren’t unionized and are therefore oppressed.” Etc.
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Second, like I said before, while I don’t like giant CEO payouts that seem out of whack, I don’t usually favor any sort of gov’t intervention.
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Clearly sometimes these giant payouts are warranted in the sense that the CEO can create shareholder value that exceeds his giant payout. We see that in the even BIGGER CEO payouts when a company goes from public to private, and private equity firms are paying that salary “out of their own pockets.” Just because there are spectacular busts, too, does not mean things will be better if gov’t sets limits on this. So we agree here.
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However, I do not understand why, in your example, the firm, whether HATCH or BC, should seek not-for-profit status. Ie, if you want to be private, go for it!
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But if you want (what I’m guessing but don’t know to be) not-for-profit tax advantages, whether for HATCH or BC, then in return shouldn’t we as taxpayers expect
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*some sort of additional public benefit (which wouldn’t exist if the organization were a company)
*possibly some additional public scrutiny of practices
*possibly some additional expectations of transparency (ie, whatever the compensation deal was, should be easy to find when it was struck, not announced later….doesn’t this particular payment smell “retroactive” to you)….?
I’m reminded of the 69th love song from the 69 Love Songs:
This year $20 million is a bonus, a reward, a generous stipend. In ten years, $200 million. In twenty, all of the pearls in the world.
Another example is Bill McGuire former CEO of United Health Care. Not only did he amass $1.8 billion in stock options, he retired on a king’s ransom ($91.3 million in retirement benefits) after earning $124 million per year.
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That he left the company with a 20% stock drop and a crippling stock options scandal, seems to be more of a problem with modern American business than anything else. It’s still troubling, especially when you realize that the 10 board members who approved Bill’s options are all UHC millionaires.
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http://www.startribu…
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It’s worth contrasting these numbers with the Bushian assertion that health care costs are a direct result of malpractice insurance and we could fix things by simply implementing medical liability reform.
The UHC shareholders have brought suit. It’s not clear to me why the BCBS folks haven’t.
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To address Gary’s points: I don’t think anyone is arguing for salary caps, just sanity.
seems to be weighing on the minds of some people, bordering on obsession.
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what one corporate healthcare executive in this state took home is equal to $500 worth of free care services to 38,800 men, women and children.
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so if it is found that 38,799 undocumented immigrants in massachusetts availed themselves to $500 of ‘our’ healthcare dollars, (which i’ll await the day that that is demonstrated) it would still be less than what one (and there’s a hell of a lot more than one in this state) member of the insurance cartel made off with.
In MA the mandatory purchase of private insurance law was foisted on us — surprise, surprise — by Blue Cross and Blue Shield as an end product of their 4 year “Roadmap to coverage” project (more aptly named “Roadmap to more corporate profits while MA citizens get screwed”).
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Where are the people who will stand up to defend their values? Private health insurance mandates suck. They waste money. They do not get us closer to affordable quality coverage for all. Poll after poll after poll shows a strong majority believe healthcare should be treated as a protected right and that it’s government’s role to enact policies toward that goal. Now we have essentially the opposite in this MA Chapter 58 law with its policy plan and legal mandate to purchase private insurance. Do people see this for what it is? Some do. Massachusetts Mandatory Health Insurance Purchase Law Is No Model for California
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A group I am active with, the Alliance to Defend Health Care is comprised mostly of frontline health professionals. We have been trying to stop the punitive and wasteful mandate law. We are acting on our deeply held values and our professional ethics that embrace healthcare as a fundamental right and reject it being treated as a market commodity.
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It’s been tough to fight the mandate law here in MA b/c almost all the “health advocacy” groups in the state have been bought off by BCBS MA’s “Foundation” and other HMO grants. Most noticeable and disappointing among this trend is Health Care For All MA that last year gave BCBS CEO Vanfaasen their “Person of the Year Award” at a fundraiser. Guess they figured lots of high rollers would buy tix to that event and would help keep the BCBS grant dollars flowing… We urgently need advocacy groups to advocate loudly and publicly for regular people’s interests and this kind of dynamic keeps that from happening.
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Evidence of this theory abounds, including that when NPR wbur reported 11/16/07 on-air about Vanfaasen’s pay out, it was stated that they called 5 health advocacy groups that receive funds from BCBS F for comments and NONE OF THEM would agree to be identified in their comments critical of the $19Mil pay out… pathetic.
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In one respect you could be impressed by BCBS’ strategy in setting all this up (their so called foundation and the so-called roadmap to coverage project). BCBS embarked on that strategy in 2001 after activists almost won a statewide ballot initiative in 2000 that would have heavily regulated ins. co and HMO spending.
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Well, here we are in 2007 with the insurance mandate law and related Connector contraption.
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Huge sums of public money — MILLIONS AND MILLIONS that is urgently needed for other uses – is being wasted with the layers and layers of NEW HEALTHCARE BUREAUCRACY that has been created to enforce the mandate to purchase a private insurance product, including the Dept of Revenue’s role in enforcing the mandate with a new state tax form “1099-HC”.
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Not so fast.
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Public outrage will soon escalate. Refusal to “comply” with the insurance mandate law, by both the insured, like me, who on principle will not fill out the new 1099-HC tax forms, and by those who will remain uninsured, will be an element of that outrage.
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To learn more about why we need to stop the MA mandate plan I recommend this excellent 10/12/07 report by a respected national consumer group based in California:
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Massachusetts Mandatory Health Insurance Purchase Law Is No Model for California
This completely unconstitutional piece of Satan inspired “legislation” will become the model for the nation. I’ll take the tax penalty plus forgo even over the counter medications unless I’m on my very death bed.
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Oh and by the way these new “plans”. They all suck. Even my $5000 HMO routinely denies benefits. You may easily Google United Health Care+RICO suit for complete details.
They need not sell real insurance merely the illusion of insurance. What happens is you have to bitch line item by line item. Takes a full half hour stuck in phone tree Hell and even after that you won’t get a resolution.
…the way you have to in the private sector – might it not outstrip that of the BD/BS exec, and then some – AND be entirely taxpayer funded?
That doesn’t make Van Fassen’s better for his stint better. Blue Cross also isnt really the private sector.
BC BS is not really in a free market, is it?
You wanted Universal Healthcare, you got it.
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We got a mandate, but if a state resident is unable or unwilling to pay the premium, where is the “universal healthcare”?
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Maybe hospitals who are burdened with patients who are unable to pay should be encouraged to dump them under the Central Crtery, similar to what Kaiser Permanente has long been accused of doing on Lost Angeles.
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Oh, sorry, the Central Artery doesn’t exist any more.
I don’t think Blue Mass Group will be able to cut the salary of van Fraasen’s successor. What needs to be done is read the Globe story about the Commonwealth Care funding gap. As of now 133,000 people are enrolled and the total enrollment as of 6/30/2008 was projected to be 136,000. All the same, Commonwealth Care is now projecting a maximum of 178,280 enrolled. That is the basis for the Globe estimate of a shortfall of $147 million. If the original estimate of 136,000 has been nearly reached 8 months ahead of time, how much faith can we have in the projected maximum?
after all they thought it was fine:
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George R. Alcott III
President, Local 1301, Communications Workers of America
Braintree, MA
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Brian M. Barefoot
President, Babson College
Babson Park, MA
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Peter W. Bertschmann
Sherborn, MA
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Samuel Cabot III
Chairman
Samuel Cabot Incorporated
Newburyport, MA
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Helen G. Drinan
Senior Vice President, Human Resources
Caritas Christi
Boston, MA
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Richard C. Garrison
Senior Vice President, Organizational Development
Vertex Pharmaceuticals, Inc.
Cambridge, MA
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Paul Guzzi
President and Chief Executive Officer
Greater Boston Chamber of Commerce
Boston, MA
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Robert J. Haynes
President
Massachusetts AFL-CIO
Malden, MA
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Marian L. Heard
President and Chief Executive Officer
Oxen Hill Partners
Boston, MA
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Philip W. Johnston
President
Philip W. Johnston Associates
Boston, MA
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Cleve L. Killingsworth
President and Chief Executive Officer
Blue Cross Blue Shield of Massachusetts
Boston, MA
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Gloria C. Larson
Co-Chair of the Government Practices Group
Foley Hoag LLP
Boston, MA
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William G. Lavelle, M.D.
Professor and Chairman
Department of Otolaryngology
University of Massachusetts Medical School
University of Massachusetts Memorial Medical Center
Worcester, MA
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James H. Lunt
President and Chief Executive Officer
Rogers, Lunt & Bowlen Company
Lunt Silversmiths
Greenfield, MA
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Ralph C. Martin II
Partner, Bingham McCutchen LLP
Consultant, Bingham Consulting Group
Boston, MA
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Robert F. Meenan, M.D.
Dean
Boston University School of Public Health
Boston, MA
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William C. Van Faasen
Chairman of the Board
Blue Cross and Blue Shield of Massachusetts
Boston, MA
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Benaree P. Wiley
Brookline, MA
Dave, just type this up into a post and I’ll front page. Bob Haynes? Phil Johnston? Reeeally.