Thinking Vertically About Health Care Salaries

Have you ever noticed how easily people talk about someone else’s excesses, and how defensive they become when the subject is their own?

This is especially true when it comes to salaries. During a recent panel discussion before a hospital group, I was asked what I thought of the excessive salaries health plan CEOs make, and especially the severance package for William McGuire, UnitedHealthcare’s departing chief, which amounts to a lump sum payment of $6.4 million and $5.1 million annually for the rest of his life. And that doesn’t include his backdated stock options.

“Well, it seems excessive,” I opined, “but multi-million dollar salaries are what the market will bear for top flight business talent.”

Then, in a momentary lapse of better judgment, I gratuitously added, “But you could say the same thing about the salaries of certain hospital CEOs, or specialists who can make upwards of $1 million a year and then complain about reimbursement rates.”

Woops. A pall settled over the room. Someone suggested I might find the exit, or at least a closet I could hide in. Later, a physician chimed in, “When you’re criticizing salaries or high costs in health care, you’re thinking vertically. When you’re horizontal in the ER and struggling for your life, you don’t give a damn what anything costs.”

True. No one can affix a cost to a human life, though God knows enough economists have tried. But the fact remains that the high salaries in health care are the elephant in the room of soaring costs, decreasing access and cost shifting to consumers as employers and government payers feel the financial heat. A great number of people are doing very well in health care, thank you, and are not about to get on the bandwagon of reducing costs and making care more affordable to the average citizen if it means cutting into their spendable income.

Consider that in 2005, the average job in health care paid about $70,000, while the average of all U.S. jobs was around $44,000. Employers and government picked up the spread before, but now they say it’s the consumer’s turn. Suppose you’re in that “average” group. Where are you going to find the money? And when you hear what the health care high flyers are making, do you think you might feel a little resentful when you’re asked to pay more?

It’s all relative, of course. The hospital CEO questions the salary of the insurance executive, the primary care doc questions the salary of the procedural specialist, a teacher questions the salary of physicians, and so on up and down the line, depending on where you sit. What we think we are worth is one thing, what the market says is often another, and if we are lucky enough to find a fit between the two, we will go to inordinate lengths to justify our place on the economic ladder, especially if we’re on the upper rungs.

By way of comparison, health care salaries – and thus prices for services – are far higher in the U.S. than they are in other industrialized nations. Someone recently suggested that the reason there are long lines of patients in Canada waiting to see scarce orthopedic surgeons is that the orthopedists are coming to the U.S. in droves to make twice the money.

It’s about markets, after all. Up to this point, the U.S. market commands high prices for health care. Whether this will continue to be true in the future is anybody’s guess. Personally, I can see a future where it’s the middleman – the “trader” of knowledge, relationships and brokered deals – who will command the big bucks in health care, along with those who both design and employ new technologies to deliver services more effectively and efficiently. As for providers themselves, they will either continue to swim upstream in the flow of industrialized quality algorithms of care, or be relegated to the sidelines of labor.

Or not. No one has a crystal ball. One prediction I can safely make, however, is that I will keep my mouth shut the next time someone asks me whether I think someone else’s salary is excessive.

God forbid that they would start to question what foundation executives make.

Feedback? Send it my way: Roger.Hughes@slhi.org.
*The Drift reflects the views of the author, and does not represent the official view of SLHI’s Board of Trustees and staff.