The relationship between high pay and the problems of the health care system

KEY SUMMARY: According to Axios “the CEOs of 70 of the largest U.S. health care companies cumulatively have earned $9.8 billion in the seven years since the Affordable Care Act was passed, and their earnings have grown faster than most Americans’ during that time, according to an Axios analysis of federal financial documents.

Can for profit healthcare really work in this country?  I’m no so sure given the statistic above. When a new drug fails in trials, nobody mentions the effect on patients it’s always the company’s stock that pays the price.

The ACA has not hurt the health care industry. [inlinetweet prefix=”” tweeter=”” suffix=””]Stock prices have boomed, and CEOs took home nearly 11% more money on average every year since 2010[/inlinetweet] — far outstripping the wage growth of nearly all Americans. [inlinetweet prefix=”” tweeter=”” suffix=””]Pay packages for the country’s influential health care executives don’t give them incentives to control health care spending [/inlinetweet]— something that economists, policymakers and even Warren Buffett have said is the most pressing problem in health care.

So if a new drug could reach more patients at a lower price but reduce profits there is no incentive to do do, after all insurance companies will just pick up the tab and even though few pay full list price they still pay a lot of money which in turn means that you and I are going to pay more money.

Want proof?  John Martin, former CEO of the pharmaceutical company Gilead Sciences, made $863 million in the ACA era  — the most of any health care CEO.  Can you guess how much of this was due to the price of their Hep-C treatment?

 CEOs often focus on what benefits the stock price:

  • Sell more prescription drugs
  • Perform more procedures and tests
  • Create new medical therapies that may not add value to someone’s life
  • Raise prices above inflation
  • Do anything to create higher earnings per share
  • Pharmaceutical and drug-related company CEOs made up 11 of the top 20 highest earners.

How much is enough?  Well, I guess if you’re a CEO the more zeros at the end of your total compensation the better.  How they can sleep at night when so many people are making decisions between paying the rent or renewing their Rx is beyond me but then I’m not greedy.

 

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