By DINAH WISENBERG BRIN and VANESSA FUHRMANS
Wall Street Journal
Originally published April 18, 2006

UnitedHealth Group Inc. Chairman and Chief Executive William W. McGuire said Tuesday he is recommending that the insurer, which is under scrutiny for the timing of past stock-options awards, forgo equity-based payments and grants for most senior executives.

The company also said it posted higher-than-expected first-quarter earnings but lowered its guidance for next year. Earnings at the country’s second-biggest health insurer climbed 21% to $899 million, or 63 cents a share, in the quarter, from $743 million, or 55 cents per share, a year earlier. UnitedHealth’s acquisition of PacifiCare Health Systems Inc., which it completed late last year, and its new Medicare drug-benefit plans helped fuel profits, as a well as a 58% jump in first-quarter revenues to $17.59 billion.

As a result, Dr. McGuire said the company now expects full-year earnings between $2.88 and $2.92 a share — a 22% to 24% increase from 2005 — compared with its earlier projection of between $2.85 to $2.90 a share.

Dr. McGuire prefaced his discussion of the company’s performance with his first comments on the controversy over his massive financial windfall from stock options, now totaling $1.6 billion in unrealized gains. In a move that could prove to be a significant pullback from what has been an enormously generous remuneration package, Dr. McGuire said he was recommending that the company eliminate change-in-control severance payments and “noncash perquisites,” for the most senior executives, as well as capping supplemental retirement plans and eliminating further equity-based grants “for the foreseeable future.” UnitedHealth’s board will consider that idea at its next meeting in May, he said.

Dr. McGuire’s suggestion does not restrict him or other executives from exercising options they’ve already received, and a company spokesman declined to specify what perks Dr. McGuire suggested be eliminated.

Earlier this month, UnitedHealth said a committee of its independent directors would review the company’s options-grant practices in light of Securities and Exchange Commission scrutiny of options grants at numerous companies, including UnitedHealth.

The Wall Street Journal reported last month that Dr. McGuire’s options grants were regularly dated just before substantial run-ups in share price and after a sharp fall.

Monday, Comverse Technology Inc. said that after a preliminary review of its stock-option practices, it expects to restate more than five years of financial results because the grant dates used in its accounting “differed” from the actual grant date.

Several UnitedHealth executives frequently received stock-options grants dated at or near quarterly low points in the company’s share price, raising questions about how the Minnetonka, Minn., health insurer timed options grants, the paper reported this week.

“I and all of us at UnitedHealth Group take these concerns seriously,” Dr. McGuire said. “It is extraordinarily difficult and frustrating not to respond to media reports” about company options practices, especially those that “impugn” management, Dr. McGuire said.

“To my knowledge, every member of management in this company believed at the time that we followed appropriate practices” for granting options executives and other employees, he said. The CEO, questioned by an analyst, wouldn’t specify whether he had received backdated stock options, saying the company didn’t want to bias the independent review committee. “We sleep with good conscience,” he added.

By the quarter’s end, UnitedHealth had signed up about 70 million consumers, an increase of 27% over the prior year. The company said it had 4.5 million seniors using its Medicare Part D prescription drug benefit, generating $1.2 billion in revenue for the quarter. The company’s Part D plans saw their margins squeezed due to the costs of assimilating new members, but it said it expects to see margins expand by year’s end.

Dr. McGuire was the subject of a Page One article in The Wall Street Journal today that looked at how an elite group of companies is getting rich from the nation’s fraying health-care system. Many of them are middlemen who process the paperwork, fill the pill bottles and otherwise connect the pieces of a $2 trillion industry.

UnitedHealth directors in the late 1990s allowed Dr. McGuire the rare freedom to time his stock-option grants. In several cases the grants carried dates when the company’s share price was particularly low, allowing him to profit when it recovered.

The Journal’s analysis of 12 options grants to Dr. McGuire from 1994 to mid-2002 found that if the options had been randomly dated, the odds of their occurring at such propitious times were about 1 in 200 million. It raised the possibility that the options grants were backdated. Backdating an options grant isn’t necessarily illegal, but civil or criminal actions could be brought if disclosure of the practice was inadequate, securities lawyers say.

Write to Dinah Wisenberg Brin at dinah.brin@dowjones.com10 and Vanessa Fuhrmans at vanessa.fuhrmans@wsj.com11

MORE ON MCGUIRE
• Option grants to Dr. McGuire in 1997, 1999 and 2000 carried dates on which UnitedHealth’s stock hit its low for the year. Read more about the grants and those made to other companies’ executives in The Perfect Payday (March 18, 2006) and see charts of the option grants.

THE DOCTOR’S OFFICE

By BENJAMIN BREWER, M.D.
THE WALL STREET JOUNRAL
April 18, 2006

A recently approved Massachusetts plan designed to force all residents to get health insurance was a step in the right direction, but it doesn’t go far enough.

Under the Massachusetts approach, there will still be a maze of plans provided by any number of insurers. That multiplicity is the problem. Multiple insurers and multiple plans create layers of unneeded expense and bureaucracy related to billing, collections and the entire assembly line of middlemen between the service rendered and the payment.

It took me a while to conclude that a single-payer health system was the best approach. My fear had been that government would screw up medicine to the detriment of my patients and my practice. If done poorly, the result might be worse than what I’m dealing with now.

But increasingly I’ve come to believe that if done right, health care in America could be dramatically better with true single-payer coverage; not just another layer — a part D on top of a part B on top of a part A, but a simplified, single payer that would cover all Americans, including those who could afford the best right now. Representatives and senators in Washington should have to use the same system my patients and I do were they to vote it in.

Doctors in private practice fear a loss of autonomy with a single-payer system. After being in the private practice of family medicine for 8 1/2 years, I see that autonomy is largely an illusion. Through Medicare and Medicaid, the government is already writing its own rules for 45% of the patients I see.

The rest are privately insured under 301 different insurance products (my staff and I counted). The companies set the fees and the contracts are largely non-negotiable by individual doctors.

The amount of time, staff costs and IT overhead associated with keeping track of all those plans eats up most of the money we make above Medicare rates. As it is now, I see patients and wait between 30 and 90 days to get paid. My practice requires two full-time staff members for billing. My two secretaries spend about half their time collecting insurance information. Plus, there’s $9,000 in computer expenses yearly to handle the insurance information and billing follow up. I suspect I could go from four people in the paper chase to one with a single-payer system.

It would be simpler and better for the patient, and for me, if the patient could choose a doctor, bring their ID card with them, swipe it in a card reader at the time of service and have the doctor get paid on the spot with electronic funds transfer.

Instead, patients have to negotiate a maze of deductibles, provider networks, out-of-network costs, exclusions, policy riders, ER surcharges, etc. Wouldn’t a card swipe be simpler? No preexisting conditions to worry about. No indecipherable hospital bills. One formulary to deal with and one set of administrative rules to learn instead of 300.

With a single-payer system, there are concerns about waiting times for procedures and not getting access to the “best doctors.” These are real issues, but not unsolvable ones. We have these disparities now. Fact is, they are mostly a matter of geography, insurance status and personal wealth.

A single-payer system would increase access to care for the uninsured and the underinsured, including the working poor. It would lower total health costs, in part by replacing 50 different state Medicaid programs and umpteen insurers with one system. This approach has the potential to improve quality and lower costs by improving care for chronic illnesses such as diabetes, high blood pressure and heart disease.

Such a system of care would rely on evidenced-based interventions, that is, providing the right care at the right time to the right patients, according to generally accepted best practices, and it would reduce the disparities in access to and quality of care among ethnic groups. Better tracking of chronic diseases, outbreaks and identification of bioterrorism would also be benefits.

There are powerful forces that oppose a single-payer system — the health insurance industry for one. The insurance industry got its share of the Medicare drug benefit pie, as did the pharma industry. It would have been better and simpler for the government to design one plan with a standard drug fee schedule that everyone could understand, as the government does with care that doctors provide to Medicare patients. But that’s not the way it happened.

Doctors have been supportive of the idea of universal access to care, but not necessarily a single-payer system. Some fear delays in obtaining necessary testing and surgeries. What I suspect they fear most is a loss of income and the fear of the unknown.

A single-payer system would admittedly lower fees for subspecialty care, such as radiology and cardiology. But if more doctors went into family medicine or obstetrics and fewer into subspecialties like plastic surgery, that shift might help correct the physician manpower imbalances that exist now. That wouldn’t necessarily break my heart.

I suspect doctors would be more likely to support a single-payer system if national malpractice reform was part of the package — which it should be.

I used to think a single-payer system would keep my income down and inject bureaucracy into my medical decision-making. But with the efficiency it could bring, it would at worst be an economic wash; more likely, the trimmed costs would more than make up for any foregone revenue. As for autonomy, I’m already struggling to maintain it amid the interference of insurers.

On the whole, the efficiency — and equality — that a single-payer system would provide would more than compensate for its shortcomings.

Write to Dr. Benjamin Brewer at thedoctorsoffice@wsj.com

By Howie Wolf
Originally published April 16, 2006
Boulder Camera

A brilliant and widely read book by Malcomb Gladwell called “The Tipping Point” calls our attention as to why there are so many changes in our society which seem to happen unexpectedly and suddenly. The sudden rise in popularity of “Hush Puppies” in the ’50s was an example.

Then Gladwell shows that not only fashion trends, but social movements and reform also may reach a “tipping point” wherein it is realized by the populace that something needs to give. The civil rights movement of the ’60s is an example of how a longstanding wrong reached the point when most of society could not tolerate racial inequality. Recently across our country people are marching in protest of impending anti-immigration legislation in Washington. Tipping points are being reached.

There is clearly a growing movement in our nation regarding health-care reform. We are spending far more for health care per capita and of our GDP than any industrialized nation. We have 46.8 million uninsured and many millions more underinsured. This means lack of access to care or delay in seeking care which translates into the grim reality that an estimated 18,000 Americans will die annually. Those who lack health insurance make around 50 percent of all bankruptcies, but 70 percent were “insured” when their medical condition began.

We do have outstanding health care being delivered in our country, and scientific advances abound. But these aren’t affordable for the uninsured.

Our co-pays and premiums are rising dramatically for those of us “lucky enough” to have insurance. Sadly for many Americans it is a choice of medication or food or a heating bill. Trying to understand most EOBs (Explanation of Benefits) reports from insurance companies is usually a complex task. Worse, there is no accountability, and insurance companies rake off 15 percent to 30 percent of our premiums to keep their companies rolling, which includes CEO salaries in the $20 million-per-year range. Most medical facilities must employ extra people to do the communicating with each insurance company with their varied rules and formularies. Payment to providers is made with predictable delays and dramatic cuts.

As a family physician who has practiced in this county for more than 43 years, I have seen the realities of what it is like for my patients who lack insurance and who face frightening medical doctor bills. An ethical and moral dilemma probably occurs with any provider who treats patients lacking insurance; we simply cannot offer the same services, treatment or medicine to the underinsured person.

Something needs to be done! Most national legislators seem uninterested in significant reform. The insurance and pharmaceutical lobbies have supported those in Congress who resist change. Indeed, the Medicare part D you’ve been hearing about is not only complex, but will be useful and money-saving for but a few Americans, while reaping nice profits for insurance and pharmaceutical companies.

Consider the savings that could have been achieved had prescription drug prices been a negotiable item, but that option was deliberately omitted. It was unconscionable how they swung this deal, leaving many seniors with costly choices. Why should a senior have to pay more than three to four times more for Lipitor than what Pfizer’s charges the VA Health care system?

Over 60 percent of all Americans favor a single-payer universal system, similar to the Canadian model. We would prefer a system that is affordable, accountable and accessible and includes preventive care and management of costly resources. Countries which have universal care can cover everybody – and have preventative care as well – at less cost than we are now paying. Their outcomes – longevity, maternal and infant mortality figures – are better than ours. Many of us who are activist in health care reform believe that – until the masses -including the uninsured and underinsured – create enough power to reach the “tipping point,” we’re stuck with the status quo.

Perhaps politicians will “listen better” when the streets swell with millions of people – as with the recent crowds demanding immigrants’ rights – but this time demanding health care for all. We are the only industrialized country without a universal system. Most systems are funded publicly but run privately. Canada’s operating cost is 2 percent to 3 percent compared to the 15 percent to 30 percent in our country.

I have learned that incremental reform will not do. A major fix is needed. Yes, the Health Savings Accounts are nice for those who have youth, money and good health. But for those who become very sick, the costs can be unaffordable, plus they do nothing to address the uninsured. Tying health insurance to employment seems absurd. People often get laid off, lose their insurance, and COBRA costs are out of sight. Employers get stuck because fewer of them can afford the rising rates. Why should employers carry the burden of health insurance anyway?

Are we close to reaching the “tipping point” with health care?

Howie Wolf, M.D., is a Boulder physician.

By Marcia Angell
Originally published April 17, 2006

IF GOVERNOR Romney thinks the state’s new plan for universal health coverage will carry him to the White House, he should think again. This Rube Goldberg contraption won’t even get him off the ground because it doesn’t touch the underlying problem — our reliance on multiple private insurance companies.

Private insurers compete not by offering better healthcare, but by avoiding high-risk individuals, limiting services for those they do cover, and, whenever possible, shifting costs to other payers or to individuals in the form of high deductibles and copayments. It’s a chaotic and fragmented system that requires a mountain of paperwork, which is one reason premiums are so high. Those employers who still offer health benefits react by capping their contributions, so that workers pay more out of pocket and bear the full brunt of premium increases. Massachusetts does better than most states, but healthcare in Massachusetts is also the most expensive in the nation.

If this system is left essentially intact, as it is under the new plan, expanding coverage will inevitably increase costs. That is common sense: Coverage and costs have to move in tandem if the system stays the same. Furthermore, the plan does nothing to keep costs from growing. For years, premiums have been rising much faster than the consumer price index. At current rates, even if the state were able to cover its proposed contributions to the plan at launch, it wouldn’t be able to keep up with soaring prices.

But already it’s clear that the governor and legislators don’t know how to pay for it even at launch. One legislator told Boston Globe columnist Joan Vennochi: ”We don’t yet know what it’s really going to cost us or where we’re going to get the money from. To some extent you might call it a Hail Mary pass.” The essence of this faith-based plan is to squeeze employers and individuals, with a relatively small state contribution. But employers who don’t offer health insurance can get away with paying a penalty of only $295 per employee per year — in a state where health insurance for individuals costs about $7,200 per year.

Individuals not covered by employers and whose income is at least 300 percent of the federal poverty level (now about $30,000) will have to buy their insurance or pay income tax penalties. Romney thinks premiums can be held to $2,400 a year with a cap of $2,100 on deductibles, but that is wildly implausible. If premiums are higher than that and continue to escalate faster than income, this will amount to fining people because they can’t afford health insurance, which, in effect, will punish them twice — an unsavory prospect.

Those individuals whose income is less than 300 percent of poverty level would receive state subsidies. That will require an enormous bureaucracy to determine what insurance is adequate and ”affordable” and who can really afford it, and there will be incessant legal and regulatory wrangling. The legislation calls for a new state agency, the Commonwealth Health Insurance Connector, to oversee insurance plans, and that is just the beginning.

Like the Medicare prescription drug benefit, the Massachusetts healthcare plan is a complicated morass that might limp along for a while, but will never cover all the people it is meant to cover, and will become increasingly unaffordable. Most likely, it will meet the same fate as the much celebrated 1988 legislation to provide universal coverage in Massachusetts, which shriveled and died with scarcely a whimper.

The only answer is to change the system entirely, so that we can expand coverage while controlling costs. Romney said, ”The old single-payer canard is gone.” No, it isn’t. Sooner or later, that is exactly what we’ll need if we’re really serious about universal healthcare. There’s no other way.

Dr. Marcia Angell is a senior lecturer in social medicine at Harvard Medical School and former editor-in-chief of the New England Journal of Medicine.

Copyright 2006 Globe Newspaper Company

http://www.boston.com/news/globe/editorial_opinion/oped/articles/2006/04/17/healthcare_plan_needs_dose_of_common_sense/

DID YOU KNOW THAT:

•Most uninsured people will now have to buy their own insurance without any or with very little financial support?

•The Bill will not help the underinsured or those with poor quality insurance, including those on Medicare paying high out-of-pocket costs?

•It will not attempt to reduce the costs of health insurance for individuals and businesses paying the highest prices in the world?

DID YOU KNOW THAT:

•40 percent of the uninsured in Massachusetts, the 292,000 who earn more than three times the poverty level income, will be forced to purchase their own health insurance without any help or subsidies from the state? Bad insurance for someone earning three times the poverty level will cost them 20 percent of their total income.

•The Bill raises only $170 million per year in new spending to help subsidize 748,000 uninsured people in Massachusetts? This is not enough to pay for 45,000 people. All other funds used by the Bill are a shell game, most taken out of Free Care – which provides medically necessary health services for the uninsured – and moved into more wasteful plans run by commercial insurance companies.

•This Bill, which will affect the lives of hundreds of thousands, was bought and paid for by healthcare industry lobbyists? Industry lobbyists spent over $7.5 million this year to make your health care Bill work for them. Forcing uninsured people into private insurance plans will create new business and new profits for insurers, without reforming the system of waste and discriminatory health care access for Massachusetts residents.

DID YOU KNOW THAT: every developed nation in the world offers comprehensive health care for all of its residents, except the United States? And they pay less for it? Let’s organize against these attempts to shift health care costs on to low-income people. Let’s fight for the universal, quality health care that we know is possible!