Sunday, January 02, 2005

Malpractice Reform

The Maryland Legislature had an emergency session last week and passed a malpractice reform bill. The main provision was to hold the increase in malpractice insurance premiums for physicians to 5% (down from 35%). Medicaid reimbursements are also going to go up, but I'm not holding my breath. (This affects me more than just about any physician in Maryland since about 40% of my practice is Medicaid.)

Our local legislative representatives Haddaway and Eckardt, along with state senator Colburn all voted against the bill. The reason, which is the same reason that the governor is going to veto it, is because the mechanism of financing the cost of the two major provisions is to cancel the exemption HMO's (Health Maintenance Organizations) and MCO's (Managed Care Organizations) have of a 2% tax. The Republican governor and the Republican senator and representatives claim that this will increase the cost of health insurance on poor people.


First of all, let's disabuse ourselves of the fantasy that HMO's and MCO's can't afford a 2% tax. There are two large MCO's that cover probably 80% of the private insurance in Maryland. These are Blue Cross and Blue Shield, which is a publicly owned company, and United Health Group, traded on the NYSE (UNH). As you can see from the graph above, United Health Group's stock has gone from about $60 a share to $88 a share in one year. Not bad. In addition, the CEO is getting his hand on the goodies:

William W. McGuire
Chairman and CEO
United Health Group Inc.

In 2002, William W. McGuire raked in $37,888,157 in total compensation including stock option grants from United Health Group Inc..

And William W. McGuire has another $501,556,217 in unexercised stock options from previous years.

As for BCBS of Maryland, they tried to convert to a for profit entity and the CEO, a Mr. William Jews, would have obtained a massive bonus in the $20 million range. As it is:

Maryland's CareFirst CEO William Jews made a base salary of $1 million when the company filed its conversion application. He also received perks such as health, disability and life insurance, a leased car, and a country club membership.

[Actually, this whole article,Who Benefits? The Role of Executive Compensation in Health Care Conversions, is worth reading and I have reproduced one of the graphs above.]

This whole thing has been an exercise in politics as usual. The Governor knew going into it that the only source of funds was the tax if he didn't want to dip into the general revenues. As it is, he is threatening to shut down many services that benefit the poor in order to achieve his mandatory balanced budget. He was going to take the money from the general funds which pay for Medicaid. The old rob Peter to pay Paul trick.

What really comes out of this, though, is that our state Senator and Representatives are deep in the pocket of the rich. They think it is more important for United Health Care to make its billions than for the poor kids in Maryland to get decent health insurance. This is irony to the extreme since Colburn and Eckardt come from Dorchester County, one of the poorest counties in Maryland.

You know, if doctors disappeared tomorrow, we would not have medicine.
If politicians disappeared, we would have World Peace.
If insurance companies disappeared, we would think we had died and gone to heaven (complete with 77 virgins or their equal).

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