Derrick Z. Jackson

No wonder health costs are so high

By Derrick Z. Jackson
Globe Columnist / March 5, 2011

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Your article has been sent.

Text size +

IF MASSACHUSETTS is the model, then national health care reform is ultimately doomed. That can be the only conclusion after this week’s news that Blue Cross Blue Shield of Massachusetts is in the homestretch of paying out nearly $28 million in retirement and severance pay in the last five years to its last two CEOs. Adding more insult to consumers, the curtain was pulled back on the incestuous way Massachusetts’ top health care providers pay board members tens of thousands of dollars. National nonprofit consultant BoardSource says just 3 percent of nonprofits pay board members an honorarium.

Blue Cross board members are movers and shakers of commerce, labor, law enforcement, public health, medicine, diversity, charities, and the Democratic Party. Meanwhile, consumers are drowning in rising copays, premiums, and prescription costs.

But Massachusetts is not alone. Blue Cross Blue Shield of Michigan doled out $1.54 million to 34 board members, even as the company was losing $145 million, the Detroit Free Press reported in 2008. In 2009, Blue Cross Blue Shield of North Dakota, nationally touted as a well-run alternative to the vilified “public option,’’ was exposed for paying out millions in bonuses, charter flights, Caribbean junkets, and severance for a CEO who had been busted for drunk driving.

You would think that with the hoopla around the health care law that President Obama signed a year ago, we would see less of this outrageous behavior, especially when a third of Americans with private health insurance are covered by a nonprofit Blue Cross Blue Shield plan, according to the Washington Post. In a town-hall meeting on the economy last fall, Obama said he pushed reform to “stop a health care system that was broken from bankrupting families and businesses and . . . start getting a better bang for our health care dollar.’’

Instead, CEO pay is excessive even as premiums rise. Blue Shield of California is seeking the last of a series of rate hikes that would add up to 59 percent. Blue Cross Blue Shield of New Mexico wants a 21.3 percent rate hike. Blue Cross Blue Shield of Illinois last month sought a 14 percent rise in out-of-network visits. Blue Cross Blue Shield of Michigan wanted to jack up rates 56 percent on individual policies, but backed down in the face of outrage to hikes ranging between 7 percent and 9 percent.

In Massachusetts, when Governor Patrick last month announced improvements to health care, he said, “We’ve had 25, 30 percent premium increases year after year, especially for small businesses and working families; that’s over.’’ Andrew Dreyfus, the CEO of Blue Cross Blue Shield Massachusetts, responded by saying, “We have a big stick on us’’ that would in turn pressure Blue Cross to “force hospitals and physicians to moderate the increases that they ask for from us.’’

But nowhere in the nation does it seem that Blue Cross is willing to moderate itself. WellPoint, which runs Blue Cross plans in 14 states, including California, raised compensation 51 percent in 2009 for CEO Angela Braly, to $13.1 million. Other top WellPoint executives received similar percentage hikes, taking home between $4.5 million and $7.2 million, according to the Los Angeles Times. Horizon Blue Cross Blue Shield of New Jersey gave recently retired CEO William Marino a 59 percent pay boost in 2009, to $8.7 million, and its top 10 executives received an average 61 percent raise, totaling $24.3 million.

In Massachusetts, Attorney General Martha Coakley said she will review Blue Cross’ $11.3 million platinum parachute for former CEO Cleve Killingsworth to see if there were “appropriate deliberations in terms of their duty as a nonprofit.’’ But Blue Cross had already given out $16.4 million to predecessor Willam Van Faasen, and business went on as usual. If nonprofits can behave like this, there is no hope that costs will ever be reined in by a for-profit health care system.

Derrick Z. Jackson can be reached at