Managed Care Companies Contend "Costs and Losses" Are Forcing Them To Abandon America's Seniors

At the Same Time, Their Top Executives Take Home Millions

Managed care companies that are pulling out of Medicare because they can't make enough money, continue to provide multi-million dollar compensation packages to their top executives, according to Families USA, the national consumer health watchdog organization.

Sixty-one of the 90 HMOs that are pulling out of the Medicare market this year are owned by nine for-profit, publicly traded insurance companies. These companies are required by law to report compensation for their top executives to the Securities and Exchange Commission. Families USA found that the top executives in these companies received an average of $2.4 million per year in compensation, exclusive of unexercised stock options, in 1997. In addition,

• Top executives at United HealthCare, which is pulling out of the Medicare market in parts of 13 states, received, on average, over $2.8 million in compensation in 1997.
• Top executives at Aetna, which is pulling out of the Medicare market in parts of 11 states and the District of Columbia, received, on average, $1.7 million in compensation in 1997.
• Top executives at Oxford Health Plans, which is pulling out of the Medicare market in parts of Connecticut, New Jersey, New York, and Pennsylvania, received over $6.4 million in compensation in 1997. Oxford's former CEO, Stephen Wiggins, took home over $30 million in compensation exclusive of un-excersized stock options in 1997, making him the highest paid for-profit HMO executive that year.

"These companies' priorities are definitely out of whack. At the same time they abandon our elderly because there isn't enough profit in Medicare, they pay their top executives millions of dollars in compensation," said Ron Pollack, executive director of Families USA. "Clearly, lining the pockets of their top executives is more important than living up to their promise to provide care for this country's senior citizens and disabled."

The average compensation in 1997, exclusive of unexercised stock options, for for-profit, publicly traded companies who own HMOs pulling out of the Medicare market is as follows:

A spokesperson for United HealthCare has been quoted as saying that United HealthCare "cannot continue to serve markets which cannot be economically viable for us in the foreseeable future." This poses new problems for seniors who will face a bevy of Medicare choices in the coming months with the Medicare+Choice program. Congress created Medicare+Choice in an effort to offer beneficiaries more choices under Medicare, including the option of joining Medicare HMOs.

"The pullout of these HMOs leaves many Medicare beneficiaries in a precarious position," added Pollack. "If they return to traditional Medicare, they could loose some of the benefits that they received from their HMO. If they choose another HMO, they have no guarantees that the company won't pull out of the market next year."

Beneficiaries who are dropped from HMO coverage can join another HMO or return to traditional Medicare. If they return to traditional Medicare, they will need a Medigap policy to cover co-pays, deductibles and other health care costs. Unfortunately, many seniors may have difficulty finding a Medigap policy that will take them, that they can afford or that covers benefits such as prescription drugs. On the other hand, if beneficiaries choose to enter another Medicare HMO, there are no guarantees that their new HMO will serve Medicare patients the following year or that benefits offered will remain the same from year to year.

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Families USA is the national organization for health care consumers. It is nonprofit and nonpartisan and advocates for high-quality, affordable health care for all Americans.

1201 New York Avenue NW, Suite 1100 · Washington, DC 20005
202-628-3030 · Email: info@familiesusa.org · www.familiesusa.org