Shorter Explanation of "Consumer-Driven Healthcare": Hello, Sucker!

This week, it's a populist health care wonkfest! My proposed title for the column was "The Solution For Health Care Costs Is For You -- Not Me -- To Be More Responsible," but the editor was briefer. It is interesting, however, that these titans of industry, who are paid these gigantic sums because of the economic value they supposedly add, can't be responsible for figuring out their own "consumer-driven" health care. It's a wonder that those who should be most capable of navigating the morass of different prices, coverages, and plans are instead asking their employers to pick up all of the costs, for all of their life. In other words, "consumer-driven" for thee but most certainly not for me. Anything strike you as wrong about that picture?

EXECS: 'DO AS I SAY, NOT AS I DO' ON HEALTH CARE
East Valley Tribune, Apr. 16, 2006

Ah, the private sector, where the market’s ruthless realities root out excessive executive compensation, punishing those who abuse their shareholders. Except in most cases, not so much -- so think twice before swallowing the ‘winger rhetoric about how to fix health care costs. If it’s good enough for you, why isn’t it good enough for them?

While companies cut retiree benefits and making employees pay more of their health care expenses, those moves don’t apply to top executives. Ellen Schultz and Theo Francis of The Wall Street Journal (subscription required) reported that many companies, even in the hard-pressed airline industry, have promised “lifetime” free health care to retired CEOs and other senior officials.

POSITION PERKS

Continental Airlines provides free health care to retired board chair Gordon Bethune and his dependents. (That’s on top of his other perks, like free flights, 10 years of free office space, and a $22 million lump-sum pension payout.)

Northwest Airlines has two sets of rules, one for top executives and another for everybody else. For everybody else, employees need 23 years to qualify for retiree coverage at age 55, which terminates with Medicare eligibility at age 65. Top execs, however, get lifetime health care for both themselves and their dependents after only three years -- and Northwest pays all out-of-pocket medical and dental expenses.

Northwest justifies these lavish health benefits as necessary to retain top executives and that the total cost is “fairly low” when compared with the total compensation for executives in other industries. Thus, a bankrupt airline compares itself to other (non-bankrupt) businesses solely for awarding executive benefits, something Northwest doesn’t do in any other evaluation of its performance.

Citigroup pays not only all health care costs for Chairman Sanford Weill and his wife, but also all taxes on the imputed income; naturally, he’s the only Citigroup employee with that benefit. AT&T Inc. pays up to $100,000 per family for top execs’ out-of-pocket health care costs. Northrop Grumman Corp. requires regular retirees to pay more of their own health costs as inflation increases, but top executives can get a special plan that absorbs all increases in medical costs.

Cooper Tire & Rubber has agreed to fund a special trust to pay for top executives’ lifetime health benefits in the event of an acquisition or bankruptcy filing; meanwhile, they’ve increased the amounts all other retirees must pay for health coverage, and don’t provide any coverage at all for employees hired after January, 2003. Qwest Communications pays all costs for coverage on the company’s health plan for 18 months after departure for top executives, but not for regular employees, who have to foot the entire bill.

TOO MUCH COVERAGE?

Part of what’s going on is the compensation consulting racket, where Gretchen Morgenson of The New York Times reported that the supposedly independent consultant which approved nearly $20 million in compensation for Verizon’s CEO -- for a year when Verizon’s credit rating fell, net income declined by 5 percent, and the company froze pensions for its managers -- is also Verizon’s benefits manager, reaping over $500 million from its Verizon work in the past 10 years. It’s enough that in this year’s proxy statement, Verizon no longer described its consultant as “independent,” merely “outside.”

But the other part of what’s going on is, as noted by Jonathan Cohn of The New Republic, is that the Bush administration and conservative ideologues think that the U.S. health care system costs too much because people have too much insurance. They think insurance “insulates” people from the actual costs, so we use more medical services than we “should.” The only way to control costs, say these hard-nosed free marketeers, is to make everybody pay more medical costs directly.

That’s the theory, except that these same folks aren’t willing to have it apply to them. Business leaders are working hard to insulate themselves from all health care costs, permanently. And if cutting retiree benefits, eliminating health insurance for workers, and making everybody pay more of their costs is such a recipe for success, why won’t top executives eat their own cooking?