Whatever problems the ACA might have, health care company CEOs shouldn’t be the ones complaining (and they really aren’t very much).
Why? Because they’ve been handsomely compensated since the ACA was signed into law in 2010, as a nice bit of reporting by Bob Herman at Axios showed yesterday morning.
Herman used SEC filings for 70 publicly traded companies based in the United States to tabulate health care company CEO compensation during the “ACA era” from 2010, when the law was signed through 2016.
The average annual CEO compensation package was a nifty $20 million, most of it paid in vested stock. John Martin, former CEO of Gilead Sciences, was the top earner at $863 million. That makes sense: Herman’s list show that 11 of the top 20 highest earners were pharmaceutical and drug-related company CEOs.
The CEOs on Herman’s list are in charge of huge companies; collectively, their annual revenues are $2 trillion. Of course they’re going to command top dollar.
But, as Herman notes, the rich compensation packages highlight a basic problem.
On this side, we have all the worry about health care costs, encomiums to value-based care, and aspirations for care coordination and getting ride of needless utilization.
On the other, we have companies paying CEOs huge sums largely in the form of stock that goes up if those companies sell more prescription drugs, market more devices, get a higher price, perform more tests, do more procedures.
That’s not even close to being a fair fight.
“Health care inflation continues to blow away general economic inflation, and a big reason why is because health care executives are not paid to slow spending” is Herman’s big takeaway.
Ostensibly, health insurers should be on the “losing,” cost-minding side of the health care struggle. But health insurers have also done well during the ACA era—despite the well-chronicled problems with the exchanges and the individual market—with more customers in the individual market buying their products, the growth in Medicare Advantage, and the expansion of Medicaid and outsourcing of the management of the Medicaid programs.
We used Bob Herman’s numbers to create a separate tally of the compensation paid to health insurance CEOs. They might not be in John Martin’s approaching-a-billion league, but they are paid extremely well.
Here is a list of their total compensation, using Herman’s numbers, during the ACA era (2010–2016):