Where Would Excess Health Insurance CEO Pay Go

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So, socialist Senator Bernie Sanders is on Twitter highlighting the pay of health insurance CEOs:

What insurance company CEOs made in 2017:
-Leonard Schleifer (Regeneron): $95.3 million
-Dave Wichmann (UnitedHealth): $83.2 million
-Mark Bertolini (Aetna): $58.7 million

We need a system that provides health care for all, not massive compensation for a few CEOs.

Putting aside Regeneron, which is not an insurance company and is therefore a different conversation, I agree with Sanders that these pay amounts are excessive, but the senator skates by an important point:  The reason insurance companies can do this sort of thing is that government insulates them from competition.  It also forces market-distorting policies on them, like requiring less-costly insurance customers to pay more to reduce the gap in prices.

For context, the pay for Wichmann that Sanders cites equates to around $2.25 from each of the company’s members, so as an isolated expense, it doesn’t mean much by way of price competition.  Still $83 million is a lot of money that could be put toward some other benefit or organizational improvement that would be salable.  Government has shaped the market landscape that allows that money to pool in executive compensation.  Naturally, the socialist’s solution to this problem is… more government!

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Let’s imagine, then, what would happen to this money if the government even more-fully ran our health insurance industry.  With no competition, the government would have little incentive to ensure that the CEO’s wages were redistributed in the way that would attract more customers.  Would it reduce prices by $2.25 for everybody?  That seems useless.  If you say it would hire more doctors, do the math, and you’ll find that the United CEO’s pay would maybe allow for another 400-500 for a nation of well over 300 million people.

Two areas in which some significant portion of the money would surely go are predictable based on other government activities:  More administrators and bureaucrats would be hired, and targeted special interest groups would receive enhanced benefits or cost savings, to be distributed based on the political value of their support.

This likelihood should lead anybody who thinks the CEOs make too much money and that it ought to fund, instead, an improved healthcare system to the conclusion that we need more market force in health care rather than less.  That would squeeze the pay of the top employees and distribute it where the market finds the most value.

Featured image from Bernie Sanders’s Twitter page as of 12/10/18.



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