Over the years we have frequently commented on the negative role the legal
profession and government regulations have had on the healthcare delivery
system and rising costs for the patient.
Today we comment on greedy and uncaring medical insurance companies and CEO
and executive greed that rivals that seen in other American industries the
last few decades.
This particular story is well documented in a recent January 1, 2008 release
from The Association of American Physicians and Surgeons.
A year ago, William McGuire, M.D., was ousted from his position as one of
the highest paid executives in the U.S. because of a backdating scandal.
More than 80 corporate officials lost their jobs in the scandal.
Dr. McGuire, former chief executive of UnitedHealth Group, agreed to one of
the largest executive-pay givebacks in history, forfeiting $620 million in
stock option gains and retirement pay, to settle civil and federal claims
against stock-option backdating. The final outcome, however, remains
uncertain as of Dec 28, 2007
McGuire still retains about 24 million stock options that currently could be
cashed in for a gain of about $800 million on top of the $500 million in pay
he received from UnitedHealth between 1991 and 2006. A freeze on these
assets was continued by U.S. District Judge James Rosenbaum in a Dec 26
ruling, pending a decision by the Minnesota Supreme Court on whether he has
the power to examine the settlement beyond just rubber-stamping it. State
courts give varying degrees of deference to special litigation committees.
The committee, appointed by UnitedHealth¹s board, had concluded that some of
the accusations against McGuire might have merit, but the cost and risk of
suing him might not be worth it. McGuire neither admitted nor denied
wrongdoing.
The two former Minnesota Supreme Court justices on the committee wrote that
their ability to evaluate McGuire¹s potential defenses were, "hampered by
his unavailability for an interview." They interviewed 50 other people over
the course of a year (Joshua Reed, Chicago Sun-Times 12/7/07).
Judge Rosenbaum also expressed some thoughts about the amount of money that
McGuire had claimed when he was forced out of UnitedHealth. "Words such as
Œhuge,¹ Œfantastic,¹ Œastounding,¹ Œstaggering,¹ or Œastronomical,¹ do not
describe $1 billion," he wrote. "Such a sum can only be thought of as
Œtranscendent,¹ or in terms of the gross national product of smaller members
of the United Nations" (Vanessa Fuhrmans and Peter Lattman, Wall St Journal
12/28/07).
McGuire is barred from serving as an officer or director of a public company
for 10 years. He also still faces a criminal inquiry.
UnitedHealth¹s current CEO, Stephen Hemsley, plans to voluntarily have his
remaining options repriced, effectively forfeiting $50 million, on top of
the $190 million in gains he agreed to give back last year on options with
questionable grant dates (Wall St J 12/7/07).
While growing into a colossus, UnitedHealth has repeatedly failed to perform
its basic job of paying medical bills. UnitedHealth, which covers 70 million
Americans, has been sanctioned in nine states for paying claims slowly;
shortchanging doctors, hospitals, or patients; or poorly handling complaints
and appeals.
One Nebraska woman complained to state regulators that UnitedHealth¹s
computers had incorrectly rejected claims related to her son¹s surgery‹six
times.
At one point, UnitedHealth owed Dr. George Schroedinger, an orthopedic
surgeon, $600,000. He and his clinic sued UnitedHealth of the Midwest in
2004.
Deciding for the clinic, U.S. District Judge Stephen Limbaugh of Missouri
declared that the company¹s claims processing systems were "flawed in many
ways, denying, reducing, and improperly processing claims on a regular
basis. And despite innumerable requests, United was unwilling to remedy the
underlying errors in its systems" (Star-Tribune 12/12/07).
Payment troubles continued after the verdict, and Dr. Schroedinger filed a
second lawsuit. "These people can never get it right, which says to me that
they just plain lie," he said in an interview.
Failure to pay isn¹t the only complaint. The insurer also gives incorrect
information on which physicians are in its network, creating enormous
problems for physicians¹ staff.
The AMA said that no other insurer has prompted as many complaints as
UnitedHealth about abusive and unfair payment practices. AMA officials have
met with UnitedHealth executives 16 times since 2000, with little to show
for it.
"They have always got a new plan to fix it," said Dr. William G. Plested
III, past president of the AMA. But "nothing ever happens."
It seems to us that this case is just the tip of the insurance iceberg. More
and more stories are appearing daily in the news media about how insurance
company are instructing employees their jobs are to deny claims and/or delay
payments.
With such a high percentage of medical premiums and other costs going to the
legal profession, to maintain compliance with endless government
rules/regulations and being hoarded by the insurance companies and
executives — is it any wonder medical costs are increasing so dramatically?
It's time to take a closer look at the medical insurance companies.
UnitedHealth Group is not the first medical insurance company to rob
patients, hospitals and clinics to pay obscene salaries to their executives.
Editor's Note: Michael Arnold Glueck, M.D., comments on medical-legal issues and is a
visiting fellow in Economics and Citizenship at the International Trade
Education Foundation of the Washington International Trade Council. Robert
J. Cihak, M.D., is a senior fellow and board member of the Discovery
Institute and a past president of the Association of American Physicians and
Surgeons.
