The sky-high pay of health care CEOs - Axios
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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.
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Trump, the FBI and an exiled Chinese businessman

Trump and Chinese president Xi Jinping at Mar a Lago. Photo: Alex Brandon / AP

President Trump once raised the idea of turning a wealthy Chinese businessman living in exile in New York over to the Chinese government, the Wall Street Journal reports in a story the newspaper justifiably calls "worthy of a spy thriller."

  • The lead character: Guo Wengui, who made a fortune in real estate before fleeing China in 2014 and gaining a large following by making allegations of corruption against Chinese officials on Twitter.
  • The climactic scene: Chinese security agents reportedly visit Guo's apartment to pressure him to return to China, in violation of their visas and after being warned by the FBI. FBI agents plan to intercept and arrest them later that day at JFK airport but no decision comes from the State Dept. in time and they are allowed to board a plane back to China.
  • The twist: Trump, having received a letter from the Chinese government directly from the hand of casino magnate Steve Wynn, says in a meeting that includes Pence, Kushner and Bannon, "We need to get this criminal out of the country," referring to Guo (the Chinese government has raised various criminal allegations against Guo). The Journal notes that Wynn needs a license from the Chinese government to operate his casinos in Macau.
  • The resolution: Aides steered Trump away from the topic, while "noting Mr. Guo is a member of the president's Mar-a-Lago club."
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Trump's comments about Bergdahl loom over sentencing

Trump has been a vocal critic of Bergdahl. Photo: Lynne Sladky / AP

The sentencing of Army Sgt. Bowe Bergdahl may be held up because of comments President Trump has made. Bergdahl pleaded guilty to desertion and misbehavior before the enemy last week, 8 years after he abandoned his post in Afghanistan.

The military judge who will determine his sentence said Trump's remarks — he has called Bergdahl a "traitor" — could call into question whether he received a fair trial, the Washington Post reports.

The backdrop: Bergdahl faces up to life in prison, and at his sentencing hearing the judge debated whether Trump's remark to reporters last week — when he said, "[P]eople have heard my comments in the past" about Bergdahl — was a reaffirmation of the president's previous comment calling Bergdahl a "dirty, rotten traitor."

The judge will review whether Trump's words, as commander-in-chief, unfairly influenced Bergdahl's decision to plead guilty.

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The big picture on the Rohingya refugee crisis

Rohingya Muslim women stand in a line to register as refugees at a Bangladeshi camp. Photo: Dar Yasin / AP

Nearly 600,000 Rohingya Muslims have fled persecution in Myanmar and crossed via land or sea into Bangladesh during the most recent exodus, joining the 300,000 Rohingya people already living in Bangladeshi refugee camps.

The bottom line: Bangladesh is unable to handle the volume of refugees, and the living conditions at camps are worsening. But the humanitarian response to the crisis has been slow, and the flow of refugees into Bangladesh shows no signs of stopping.

The state of the crisis:

  • Over the past 7 weeks, 600,000 Rohingya muslims have crossed into Bangladesh and "thousands still enter on a daily basis," Shameem Ahsan, the country's UN envoy, said at a Geneva conference.
  • During the journey, many refugees — primarily children — die from exhaustion or drowning when poorly built rafts capsize in the Bay of Bengal.
  • The refugees live on a 100 kilometer strip of land in the most underdeveloped part of Bangladesh, near the coast, the Economist reports.
  • The UN has pledged $340 million in aid for the refugees and called Myanmar's actions "a textbook example of ethnic cleansing."
  • About 60% of the nearly 1 million Rohingya refugees living in Bangladeshi camps are children under the age of 17, CBS reports.
  • This is the third exodus of the Rohingya from Myanmar. They previously fled persecution in 1978 and 1991, per the Economist.
  • The refugees are stateless, with Myanmar refusing to accept them and Bangladesh referring to them as "undocumented Myanmar nationals," according to the Economist.
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Tech firms look for staff with security clearances

A Facebook employee in California. Photo: Jeff Chiu / AP

Bloomberg reports that major tech companies such as Facebook and Twitter are interested in hiring workers with top-secret security clearances as they deal with foreign meddling on their platforms and come under increased risk of hacks. Workers with clearances are already in high demand by government agencies and contractors who have access to classified information.

Why it matters: Former government employees, and those who work for government contractors, are becoming more valuable to tech companies that have typically preferred scrappy engineering graduates over those steeped in government bureaucracy. But they companies have realized having better access to government information could help them identify and deal with problematic accounts more effectively. And they need to show Washington policymakers that they're capable of fending off problematic activity on their platforms.

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Joint Chiefs Chairman describes deadly Niger ambush

Photo: Manuel Balce Ceneta / AP

General Joseph Dunford, Chairman of the Joint Chiefs, briefed reporters Monday on the operation in Niger, West Africa that resulted in the deaths of four US special forces troops.

Dunford acknowledged that there was "a perception that the Department of Defense has not been forthcoming," about the mission:

"We owe the families as much information as we can find out about what happened, and we owe the American people an explanation of... what the mission is and what they're trying to accomplish while they're there," he said.

Why they're there: 800 US service members, along with French troops, are training and assisting local forces fighting ISIS, al-Qaeda and Boko Haram-affiliated fighters. More broadly in Africa, about 6,000 forces are in 53 African countries.

The mission: 12 US special operations forces accompanied by 30 Nigerien troops departed Oct. 3 on a reconnaissance mission from the capital to an outlying village. Initial intelligence was that enemy contact was "unlikely." They left Oct. 4 to return to their operating base, and after leaving the village came under fire from about 50 local tribal fighters affiliated with ISIS and armed with rockets, machine guns and small arms.

The firefight: Dunford said his assumption is that the troops originally thought they could handle the resistance, and didn't call for support for an hour. An hour after that (two hours after the fighting began) French aircraft arrived on the scene.

The casualties: Staff Sgt. Bryan Black, Staff Sgt. Jeremiah Johnson and Staff Sgt. Dustin Wright were killed. Sgt. La David Johnson was reported missing, and troops stayed in the area until his body was recovered on Oct. 6.

The remaining questions: Dunford said the Pentagon is investigating several elements:

  • Did the mission change during the operation?
  • Did they have sufficient intelligence, equipment and training?
  • Was the pre-mission assessment of the threat accurate?
  • How did Sgt. Johnson become separated?
  • Why did it take so long to recover his body?
Featured

Trump awards Medal of Honor to Vietnam veteran

President Trump awarded Vietnam veteran Gary M. Rose with the Medal of Honor. Photo: White House live stream

President Trump awarded retired Army Capt. Gary Michael "Mike" Rose the Congressional Medal of Honor on Monday for his heroism in the Vietnam War.

"Today we have a room full of people and a nation who thank God that you lived," Trump said after recounting Rose's narrow escape after days tending to the wounded behind enemy lines. "Your devotion to your country inspires us all."

Watch the ceremony

Facts Matter Featured

The allegations against Harvey Weinstein and their fallout

The number of women coming forward with assault allegations against Weinstein is growing. Photo: Richard Shotwell / Invision via AP

The list of women accusing Harvey Weinstein of sexual assault and harassment continues to grow. The Los Angeles Police Department said it is looking into a 2013 sexual assault claim against Weinstein, and the AP reported that New York's attorney general has opened a civil rights investigation of the Weinstein Company.

Weinstein's response, from spokesperson Sallie Hofmeister: "Any allegations of non-consensual sex are unequivocally denied by Mr. Weinstein. Mr. Weinstein has further confirmed that there were never any acts of retaliation against any women for refusing his advances. Mr. Weinstein obviously can't speak to anonymous allegations, but with respect to any women who have made allegations on the record, Mr. Weinstein believes that all of these relationships were consensual..."

The timeline

  • Oct. 5: The New York Times publishes an investigation detailing numerous on-the-record claims of harassment against Weinstein and at least 8 settlements between Weinstein and his accusers.
  • Oct. 6: The Weinstein Company places Weinstein on indefinite leave. Several Democratic senators announce that they are giving the financial contributions they received from Weinstein to charity.
  • Oct. 7: Lisa Bloom, a civil rights attorney known for defending women in high profile harassment cases, resigns as Weinstein's advisor. She initially received criticism for choosing to defend him.
  • Oct. 8: The Weinstein Company fires Weinstein "in light of new information about misconduct ... that has emerged in the past few days."
  • Oct. 9: The Hollywood Reporter publishes the full text of an email Weinstein wrote to several media executives before he was fired, in which he pleads with them to write letters of support.
  • Oct. 10: The New Yorker publishes a 10-month-long investigation in which 3 women accuse Weinstein of rape. Hillary Clinton and former President Obama come out with statements against the producer. The University of Southern California announces it is rejecting a $5 million donation from Weinstein to its film school. The Wall Street Journal reports that the Weinstein Company is in the process of changing its name as a rebranding move.
  • Oct. 14: In an emergency session, the Academy of Motion Picture Arts and Sciences, the Oscars' governing body, votes overwhelmingly to expel Weinstein.
  • Oct. 15: Woody Allen, who has been accused of molesting his daughter Dylan Farrow and whose son Ronan Farrow wrote the New Yorker piece about Weinstein, says he feels "sad" for Weinstein. Allen draws criticism for saying. "You also don't want it to lead to a witch hunt atmosphere, a Salem atmosphere, where every guy in an office who winks at a woman is suddenly having to call a lawyer to defend himself." He later clarifies his comments and says he meant to call Weinstein a "sad, sick man."
  • Oct. 15: French President Emmanuel Macron withdraws the Legion of Honor, the nation's highest civilian and military award, from Weinstein.
  • Oct. 16: The Clinton Foundation says it will not return the donations — up to $250,000 — from Weinstein because the money has already been spent on projects, Fox News reports.
  • Oct. 16: The Weinstein Company, sinking from the scandal, says it will receive a rescue investment from Colony Capital, a private investment firm led by Trump confidant Tom Barrack.
  • Oct. 19: The Los Angeles Police Department tweeted that it has interviewed a potential sexual assault victim in a 2013 incident involving Weinstein.
  • Oct. 23: New York's attorney general opens a civil rights investigation into the Weinstein Company, asking for records of harassment complaints.

The allegations

The claims of rape, laid out in more detail in the New Yorker article:

  • Lucia Stoller, now Lucia Evans, was trying to make it as an actress in 2004, the summer before her senior year of college, when Weinstein approached her in a New York club. He began calling her late at night, but she wanted to meet in the daytime. She eventually met with him at his office where they discussed roles. Then, Evans said, Weinstein forced her to perform oral sex on him.
  • Asia Argento, a film actress and director, said Weinstein forcibly performed oral sex on her in 1997. Argento said she didn't speak out until now for fear Weinstein would "crush" her.
  • The New Yorker reports a third woman accused Weinstein of raping her, although her story was not detailed and she was not named.

The on-the-record claims of sexual assault and sexual harassment in the New Yorker:

  • In an NYPD audio recording of a 2015 sting operation, Weinstein admits to groping Ambra Battilana Gutierrez, a model. The day prior, Gutierrez told the NYPD Weinstein had lunged at her, touched her breasts, and tried putting a hand up her skirt. "A source close to the matter" said Gutierrez signed a nondisclosure agreement with Weinstein, including an affidavit stating the acts Weinstein admits to in the recording never happened.
  • Mira Sorvino, an actress who starred in several of Weinstein's films, said Weinstein massaged her shoulders and tried to get more physical in 1995. He later called and told her he was coming over to her apartment, although he eventually left.
  • Emily Nestor, who served as a temporary front-desk assistant at the Weinstein Company, said on her first day two employees told her she was Weinstein's "type" physically and said Weinstein sexually harassed her. She served out her temporary role and left.
  • Weinstein brought Emma DeCaunes, a French actress, to his hotel room, went into the bathroom, and returned naked with an erection and told her to lie down on the bed, DeCaunes said. She refused and left.
  • Rosanna Arquette, an actress, was to pick up a script from Weinstein's hotel room, but said when she arrived he was wearing a bathrobe and pulled her hand towards his visible and erect penis. He allegedly said he needed a massage. She said she wouldn't do that and left.
  • Jessica Barth, an actress, said Weinstein invited her to a meeting at a hotel and invited her to his room, where she said he alternated between talking about roles and demanding a naked massage. She refused and left.
The on-the-record claims of unwanted sexual advances in the NYT:
  • Gwyneth Paltrow told the NYT Weinstein placed his hands on her and asked her to come up to his hotel room for a massage after meeting with her when she was 22 before she began shooting "Emma." "I was expected to keep the secret," she said. Paltrow later told Brad Pitt, her boyfriend at the time, about the experience, and Pitt told Weinstein to never touch Paltrow again.
  • Angelina Jolie said Weinstein made unwanted advances on her in a hotel room before the release of "Playing by Heart" in the late 1990s. Jolie said as a result she "chose never to work with him again and warn others when they did."
  • Judith Godrèche, a French actress, recounted similar unwanted advances to the NYT.
  • Katherine Kendall, who appeared in the film "Swingers," said Weinstein once undressed and chased her around a living room.
  • Weinstein invited Tomi-Ann Roberts, hopeful to start an acting career in 1984, to his hotel to discuss a film. When she arrived he was naked in the bathtub and suggested she get naked in front of him. She wouldn't do it and left.
  • Dawn Dunning, who was doing some small acting gigs in 2003, met Weinstein at a nightclub where she was waitressing, and they set up a meeting together. Under the guise of a meeting running late, she was invited up to his suite. When she arrived Weinsten was allegedly in a bathrobe and said she could only work on his films if she had three-way sex with him. According to Dunning's account, he said, "This is how the business works."
Additional claims of sexual harassment and rape:
  • Cara Delevingne detailed an encounter with Weinstein, during which he allegedly asked her to kiss another woman in front of him and tried to kiss her himself, in an Instagram post Wednesday.
  • Zoe Brock, an actress and model, wrote a Medium post accusing Weinstein of asking for a naked massage in a hotel room and chasing her when she refused to comply.
  • Samantha Panagrosso, a model, told Variety that, when she met him at the Cannes Film Festival in 2003, Weinstein groped her in a pool and then followed her into her room, where he allegedly pushed her onto a bed and tried to grope her.
  • Lysette Anthony, a British actress, filed a police report in London alleging that Weinstein raped her in her home in 1992, per CNN. She is the latest woman to come forward with accusations.
  • Lupita Nyong'o wrote an NYT op-ed about an encounter she had with Harvey Weinstein as a student at the Yale Drama School during which he allegedly coerced her into giving him a massage.

Inside the company

16 current and former executives and assistants at Weinstein's company said they witnessed or knew about unwanted sexual advances in the workplace or at events associated with the company's films. Each of the 16 said his behavior was known widely throughout Miramax and the Weinstein Company.

Suspicions of retaliation: Four actresses, including Mira Sorvino and Rosanna Arquette, said they think that after rejecting Weinstein's advances or complained to the company, Weinstein removed them from projects or dissuaded people from working with them, per The New Yorker. They pointed out Gutierrez's experience, where after she went to the police, negative stories about her sexual history appeared in New York gossip pages. As noted above, Weinstein denies those claims.

Go deeper

NYT's Jodi Kantor and Megan Twohey: "Harvey Weinstein Paid Off Sexual Harassment Accusers for Decades"

New Yorker's Ronan Farrow: "From Aggressive Overtures to Sexual Assault: Harvey Weinstein's Accusers Tell Their Stories"

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​​California's wildfires, by the numbers

A neighborhood leveled by wildfires in Santa Rosa, California. Photo: Marcio Jose Sanchez / AP

California authorities have raised the total number of homes and buildings destroyed to 8,400 — up from 5,700 last week — as damage assessments from the deadly wildfires continue.

The big picture: Firefighters say the blazes will be fully contained by Wednesday, about two weeks after they started burning, the Santa Rosa Press Democrat reports. But the process of rebuilding entire neighborhoods in Sonoma County will extend long beyond that.

The numbers:

  • The total death count has risen to 42. A single Sonoma County fire — the Tubbs — killed 22 people, which makes it the third deadliest in state history, NBC reports.
  • The Tubbs fire alone destroyed 5,300 homes — more than any other California fire in history.
  • In total, 8,700 structures and 271,000 acres have burned.
  • At the peak of the fires, classes were canceled for 260,000 students at 600 schools, per KQED.
  • Insured damages from the fires will top $1 billion, and that figure is expected to rise.
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China’s pollution is getting in the way of its solar energy goals

Illustration: Egan Jimenez / Woodrow Wilson School of Public and International Affairs

Although China is increasing its solar energy supply, air pollution is blocking sunlight and reducing energy output in China, according to a study published today in the Proceedings of the National Academy of Sciences. The study is the first to calculate how much aerosols in the atmosphere are reducing China's solar energy generating efficiency.

Why it matters: China has set a goal of meeting 10% of the country's electricity needs with solar by 2030, and this shows a potentially intractable obstacle to meeting that milestone. On the flip side, it could encourage countries with emerging solar power to cut emissions or refocus solar panel efforts to more sparsely populated or remote areas, where pollution is less severe.

Magnitude of the problem:

  • The study shows that in the northern and eastern parts of the country, which are the most polluted, aerosol pollution is reducing solar electricity generation potential by as much as 35% per day. (Burning fossil fuels increases aerosol concentrations in the atmosphere.)
  • In the winter, when pollution is worst, air pollution in the area is blocking about 20% of sunlight from reaching solar panel arrays.

What's next: The researchers are looking to analyze other regions, including India also which suffers greatly from air pollution.

The study measured irradiance from the sun and analyzed aerosol components and clouds in the atmosphere using a solar photovoltaic performance model and NASA satellite data. They ran 9 separate analyses from 2003 to 2014 over all of China.

Featured

Dems aren't negotiating with the White House on health care

No one is currently engaging with the White House on its health care demands. Photo: Evan Vucci/AP

The Trump administration listed its demands for the Senate's health care bill over the weekend, but that doesn't appear to have reopened negotiations in the Senate — at least among the bill's existing supporters. As it stands, the bill has enough votes to pass the upper chamber.

Sound smart: This is a result of President Trump flip-flopping on the issue so often that members of his own party use it as the punchline of a joke.

"I'm not aware of any Dems negotiating with the White House. We have a bill that has the votes to pass the Senate. A bill that his administration was involved in negotiating. Time to get it done," a senior Senate Democratic aide told me.

Yes, but: The bill, negotiated by Sens. Lamar Alexander and Patty Murray, is most likely in a holding pattern until December, when it could get attached to a must-pass spending bill. In that case, negotiations would get more serious closer to the end of the year.

  • "At some point there will be a negotiation between" Minority Leader Chuck Schumer, Trump, Majority Leader Mitch McConnell, Minority Leader Nancy Pelosi and Speaker Paul Ryan, a senior GOP aide told me. "Just because it isn't happening now doesn't mean it won't be happening when it's needed."
  • Murray is still pushing for a quicker timeline. "I certainly hope the Majority Leader will listen to the members on both sides of the aisle who want to see this bill move forward and bring it up for a vote as quickly as possible," she said in a statement.