The sky-high pay of health care CEOs - Axios
Top Stories
Featured

The sky-high pay of health care CEOs

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.

Why it matters: The ACA has not hurt the health care industry. Stock prices have boomed, and CEOs took home nearly 11% more money on average every year since 2010 — far outstripping the wage growth of nearly all Americans. But the analysis also reveals that the pay packages for the country's influential health care executives don't give them incentives to control health care spending — something that economists, policymakers and even Warren Buffett have said is the most pressing problem in health care.

Data: Analysis of company filings; Chart: Lazaro Gamio, Naema Ahmed / Axios

What we found: Total earnings amount to an average of $20 million (median of $11 million) per CEO per year. A vast majority of pay came in the form of vested stock.

The largest haul: John Martin, former CEO of the pharmaceutical company Gilead Sciences, made $863 million in the ACA era — the most of any health care CEO.

The big takeaway: 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.

What the analysis covers: The total CEO compensation (salary, bonuses, stock, perks and retirement/severance when relevant) each year since 2010, when the ACA went into effect, based on company filings with the Securities and Exchange Commission.

These 70 corporations were chosen because they are based in the United States and are among the largest publicly traded health care companies, together encompassing more than $2 trillion of annual revenue. It did not include the generous pay packages of not-for-profit hospital CEOs.

Our unique tabulation: We calculated the actual realized gains of CEOs' stock options and awards (money that they had to pay taxes on), not the estimated fair value of their stock shown in the federal filings' summary compensation tables.

  • The estimated value of stock is misleading and does not accurately depict how much a person made in a given year.
  • Actual realized gains show that CEOs are making a lot more than headlines suggest.

William Lazonick, an economist at the University of Massachusetts Lowell, and Matthew Hopkins, a senior researcher at the nonprofit Academic-Industry Research Network, reviewed the analysis for accuracy. They have written extensively about corporate executive compensation and why actual realized stock gains matter.

"What is the relationship between their high pay and the role of stock prices in their high pay and the problems of the health care system?" Lazonick said. "There is a very close relationship, but it's not apparent to most people."

The stock story: A gigantic portion of what CEOs make comes in the form of vested stock, and those incentives drive their decision-making. The analysis shows that since the ACA was passed, health care executives routinely took measures to inflate stock prices — such as repurchasing shares or issuing dividends to shareholders — that led to higher take-home pay.

Stock-heavy pay also drives CEOs to do the exact opposite of their buzzword-laden goals of creating a "patient-centered" health system that focuses on "value."

Actions that would benefit the broader health care system:

  • Lower prices
  • Eliminate unnecessary procedures, tests or devices
  • Coordinate care

Instead, 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

Here are the other main takeaways from the analysis:

  • Of the 113 health care CEOs in the analysis, only four were women. Two women (Heather Bresch of Mylan and Debra Cafaro of Ventas) still lead their companies.
  • Executives made slightly less as a group in 2016 than they did in 2015 because the presidential election dangled like an ax over the stock market.
  • The richest year was 2015, when 70 health care CEOs collectively made $2 billion. That was an average of about $28.5 million per CEO and a median of about $17.3 million per CEO. The median household income in 2015 was $56,515, which the average health care CEO made in less than a day.
  • Pharmaceutical and drug-related company CEOs made up 11 of the top 20 highest earners.
  • Gilead's Martin made the most since the ACA became law. Several other executives — including John Hammergren of McKesson ($587 million), Leonard Schleifer of Regeneron Pharmaceuticals ($338 million) and Stephen Hemsley of UnitedHealth Group ($279 million) — each took home more than a quarter-billion dollars on their own.
  • A handful of lesser-known health care CEOs were among the highest earners. For example, Michael Mussallem of the medical device company Edwards Lifesciences collected $246 million since the ACA went into effect. Last year, for every dollar Mussallem's company brought in as revenue, two cents went toward his pay.
  • The analysis still underestimates how much wealth health care CEOs have. It did not include vested stock after CEOs retired, nor did it include the value of stock CEOs still hold. For example, Walgreens CEO Stefano Pessina owns more than 13% of Walgreens, which equaled about $12 billion as of June 2017.
Featured

Moore, Bannon go after establishment, media, accusers on election eve

Photo: Brynn Anderson / AP

Roy Moore told Alabama voters "if you don't believe in my character, don't vote for me" in an election eve rally that featured Steve Bannon, and in which the participants repeatedly challenged the credibility and motives of the women who have accused Moore of sexually harassing or assaulting them when they were teens.

Why it matters: Moore emerged Monday night after hardly appearing publicly in recent weeks with a group of anti-establishment surrogates and a closing argument — the woman accusing me are lying, the media is conspiring against me and I'll represent your voice and Trump's agenda in the "swamp" of Washington.

  • Both Moore and Bannon took swipes at the "establishment," including Richard Shelby, Alabama's senior senator who has publicly opposed Moore. Bannon even indirectly mocked Ivanka Trump — alluding to her quote that "there's a special place in hell for people who prey on children" — while heaping praise upon her father.
  • Bannon said the GOP establishment was only using Trump to get a corporate tax cut, and would quickly abandon him afterward. He told voters that the message they should take from recent events is that if you try to challenge the status quo like Trump and Moore, "they're going to try and destroy you and your family."
  • Moore was introduced by his wife, who portrayed her husband as the victim of a coordinated character assassination attempt by the media and said, "our sails are torn, but our anchor holds."
  • Moore criticized his opponent Doug Jones for supporting "transgender rights," gay marriage and legal abortion.

Controversial moments:

  • Seeking to discount claims of prejudice, Moore's wife Kayla said "one of our attorneys is a Jew," along with some friends.
  • As Jonathan Allen of NBC News points out, Bannon mocked MSNBC's Joe Scarborough for not getting into as prestigious a college as he did — but Scarborough went to the University of Alabama.
  • In an apparent reference to the allegations of child sexual abuse against him, Moore said his wife "has closer contacts to kids than I do."
  • A man who served with Moore in Vietnam spoke, testifying to Moore's character. He mentioned a time another officer led them to a "private club" that turned out to be a brothel, in which some of the prostitutes were "very young," and Moore immediately said they should leave.
Featured

Weighing the benefits and risks of birth control pills

A birth control pill dispenser. Photo: Mike Derer / AP

A recent Danish study linked hormonal birth control to an increased risk of breast cancer, but the same contraceptives have also been shown to protect against certain less common cancers, such as endometrial and ovarian, the New York Times reports.

Why it matters: The study published last week raised alarm with its conclusion that users of hormonal birth control see about a 20% increased risk of developing breast cancer. But "it’s really problematic to look at one outcome in isolation. Hormonal contraception has a complex matrix of benefits and risks, and you need to look at the overall pattern," JoAnn E. Manson, a professor of women’s health at Harvard Medical School, told the Times.

The results: A British study that followed 46,000 women from 1968 to 2012 found birth control pill users had increased risks of breast and cervical cancers, but the overall cancer rates among users and non-users was equalized by the fact that users were less likely to develop other cancers.

“There is good data to show that five or more years of oral contraceptive use substantially reduces ovarian cancer and endometrial cancer risk, and may reduce colorectal cancer. And the protection persists for 10 or 20 years after cessation" of use, David J. Hunter, a professor of epidemiology and medicine at the University of Oxford told the Times.

Featured

Macron lures climate scientists to France for Trump's term with millions in grants

Under a program called 'Make Our Planet Great Again', France has offered 18 climate scientists — 13 of them U.S. based — millions of euros in grants to work in France for the rest of President Trump's term, according to the Guardian.

French president Emmanuel Macron announced the contest right after Trump pulled out of the Paris climate accord, and more than 5,000 people pursued the grants.

Why it matters: The program, with the branding driving home the point, makes clear that France views the U.S. under Trump as hostile ground for climate science.

Featured

Report: Trump furious Haley said his accusers "should be heard"

Photo: Evan Vucci / AP

President Trump was "infuriated" by U.N. Ambassador Nikki Haley's remark Sunday that the women accusing him of sexual assault and harassment "should be heard," the AP reports.

Per the report, Trump has "grown increasingly angry in recent days that the accusations against him have resurfaced, telling associates that the charges are false and drawing parallels to the accusations facing Republican Alabama Senate candidate Roy Moore." White House advisers were "stunned" by Haley's statement, made on CBS' "Face the Nation," according to the AP.

Featured

House tax bill adds $1 trillion to deficit over 10 years, official analysis finds

The U.S. Capitol dome reflected in water. Photo: Jacquelyn Martin / AP

An analysis released Monday by the non-partisan Joint Committee on Taxation projects that the House tax bill would generate enough growth to produce $428 billion in revenue over ten years, per WSJ. That's less than one-third of the $1.4 trillion in tax revenue that would be lost over that time due to the cuts.

  • The bottom line: Estimates find that the bill would come nowhere near paying for itself, despite claims to the contrary from GOP leadership and Treasury Secretary Mnuchin.
  • What's next: The House and Senate are reconciling their two versions of the bill.
Featured

Barkley vs. Bannon: Election eve in Alabama

Charles Barkley, Jones' headliner, and Steve Bannon, Moore's headliner. Photos: AP

It's Election eve in Alabama and Senate candidates Roy Moore and Doug Jones have brought in big-name guests to headline their final rallies. Former NBA player and current sports analyst, Charles Barkley, an Alabamian, is appearing with Jones. And Steve Bannon is returning to rally for Moore.

Where things stand: Polls out of Alabama are showing wildly different projections for Election Day, with one from Fox News showing Jones leading by 10 points and another from Emerson College showing Moore up by 9.

Featured

New Yorker cuts ties with Ryan Lizza over alleged sexual misconduct

Lizza. Screengrab via PBS on YouTube.

The New Yorker has cut ties with Ryan Lizza — a prominent political reporter at the magazine who is also a CNN analyst — over "improper sexual conduct," per Politico's Michael Calderone.

The statement: "The New Yorker recently learned that Ryan Lizza engaged in what we believe was improper sexual conduct. We have reviewed the matter and, as a result, have severed ties with Lizza. Due to a request for privacy, we are not commenting further."

Lizza responded, saying the New Yorker's decision was "a terrible mistake."

The law firm representing Lizza's accuser, Wigdor, LLP, put out the following statement, per the Daily Beast: "In no way did Mr. Lizza's misconduct constitute a 'respectful relationship' as he has now tried to characterize it. Our client reported Mr. Lizza's actions to ensure that he would be held accountable and in the hope that by coming forward she would help other potential victims."

Lizza's controversial interview with then-White House Communications Director Anthony Scaramucci led to Scaramucci's resignation.

Georgetown University, where Lizza is adjunct lecturer, said: "Georgetown recently learned of the New Yorker's actions. Classes have concluded for the fall semester at the University. Mr. Lizza will not be teaching any classes next semester."

CNN says Lizza will not appear on air while it looks into the allegations.

Featured

Alabama polls show wildly different results on election eve

Brynn Anderson/AP

One day before Alabama's closely watched Senate special election between Republican Roy Moore and Democrat Doug Jones, two new polls were published — one from Fox News showing Jones leading by 10 points and another from Emerson showing Moore up by 9 .

Background: Since the Washington Post first reported about alleged sexual misconduct by Moore, polls in Alabama have been going back and fourth between both candidates. So who's really leading? The old addage applies: it all comes down to turnout.

What to keep in mind: As the Washington Post's Philip Bump points out, pollsters use various indicators such as historic results and enthusiasm shown by voters in prior polls, to figure out who will turn out on Election Day. There are also other factors that make it tough to determine who's going to turn out, he added:

  1. This is a highly contested statewide contest with few precedents on which to base estimates.
  2. It's happening under the most polarizing president in modern history.
  3. Moore was already an unusual and controversial candidate prior to the allegations.

Worth noting: There's also speculation that there's a pool of voters who won't admit to pollsters they're voting for a man who's facing allegations of sexual misconduct.

Featured

NYC terror suspect in custody after subway blast

The scene following an explosion near Times Square on Monday. Photo: Andres Kudacki / AP

27-year-old Akayed Ullah is in custody after he intentionally detonated a low-tech pipe bomb in a subway station near Times Square on Monday. New York City Mayor Bill de Blasio said the explosion was "an attempted terrorist attack."

The Department of Homeland Security said Ullah came to the U.S. in 2011 after presenting a passport displaying an F43 family immigrant visa. Ullah "is a Lawful Permanent Resident from Bangladesh who benefited from extended family chain migration," said DHS spokesman Tyler Houlton.

Details of attack:

  • The New York Police Department said the explosion occurred in an underground walkway that runs through the Port Authority bus terminal and Times Square along 42nd Street.
  • NYC Police Commissioner James P. O'Neill said during a press conference that Ullah had attached the "low-tech" pipe bomb to himself with a “combination of Velcro and zip ties." It's unclear whether Ullah was attempting a suicide bombing.
  • O'Neill also said Ullah acted alone and no other devices had been found.
  • Following the blast, Ullah was taken into custody and transported to Bellevue Hospital where he was treated for severe burns to his hands and abdomen. NYPD said three others suffered minor injuries.
  • No formal announcement has been made on what's next, but both federal and local law enforcement officials have indicated that Ullah will be prosecuted in federal court in Manhattan, reports the New York Times. The attack is also being investigated by the Joint Terrorism Task Force.

What they're saying:

  • New York Gov. Andrew Cuomo: "This is New York. The reality is that we are a target for people who would like to make a statement against democracy, against freedom. We are not going to allow them to disrupt us."
  • Secretary of Homeland Security Kirstjen Nielsen: The Trump administration is taking “appropriate action to protect our people and our country ... The administration continues to adopt significant security measures to keep terrorists from entering our country and from recruiting within our borders."
  • White House Press Secretary Sarah Sanders: : "We know that the president's policy calls for end to chain migration .. had [Trump's] policy been in place, then the attacker would not have been allowed to come into the country."
Featured

White House says Trump accusers' "false claims" are politically motivated

Rachel Crooks, left, Jessica Leeds, center, and Samantha Holvey have all accused President Trump of sexual misconduct. Photo: Mark Lennihan / AP

Three women who have accused President Trump of sexual misconduct spoke out again today in an NBC interview with Megyn Kelly and in a press conference hosted by Brave New Films, saying they hoped their allegations would be treated differently given the momentum of the #MeToo movement. The White House, which has disputed the claims before, issued this statement Monday in response:

"These false claims, totally disputed in most cases by eyewitness accounts, were addressed at length during last year’s campaign, and the American people voiced their judgment by delivering a decisive victory. The timing and absurdity of these false claims speaks volumes, and the publicity tour that has begun only further confirms the political motives behind them."