Reasonable? Who Decides?

Today's online Seattle Times has a link to "Million-Dollar Doctors," an article by John Ryan, posted on local NPR affiliate KUOW's site, revealing astonishing levels of compensation paid by "nonprofit" hospitals to their top executives and certain physicians. Interestingly, one of the newspaper's headline stories reports steep (double-digit) hikes in health insurance rates by the state's largest health insurers, utterly slamming "consumers" at a time when many people have lost their jobs or are taking mandatory cuts in pay (aka "furloughs"). The Times reports that Washington State's insurance regulators have ruled the rate hikes justified and left them "virtually untouched." I infer that the editors of the Times were loath to make a direct connection between the KUOW report it links to and their article on rate hikes: it would probably have pissed off corporate interests if they had. But I'm glad the link was there, lower down on the page. Presumably the regulators know all about these multimillion-dollar salaries. I guess they think people who routinely rake in 2 mill a year need $4 million dollar going-away presents.

Back in the late 1980s, I worked as a secretary for a couple of docs at one of these very hospitals. I would often come home acutely nauseated by what I had no choice to learn about the relations between drug companies and doctors, and technology companies and doctors, and asbestos manufacturers and doctors-- and by my being required to participate in it. I kept wondering: are these things legal? Ought I to be writing these letters and these bills and these reports on University time? I just couldn't tell, because the corruption was so thoroughly normalized. "I'm not a bad guy, Timmi," one of the docs told me. (Apparently my control over my eyebrows had slipped, betraying my dismay when he told me to charge the asbestos company he was testifying for in court $200 an hour for his travel time, plus, of course, expenses and the fee for deposing the patient who was going to get screwed by his testimony.) (That $200 an hour would probably be a lot more now.) "This is just how we do business, he said," eager to justify himself to me. (One day, telling me about his passion for Ferraris, he told me he'd already put away the money needed to send his five children to Princeton-- which was when, he said, he decided he deserved to spend his money on Ferraris and other treats, given his sober diligence as a breadwinner.) In short, I learned then, from the back end, the real reason health care is so expensive in the US. Which is why, of course, the routine denial of health care to millions of people and the industry's ability to stave off government-mandated universal health care is particularly enraging: it's so totally unnecessary and is the best illustration I know of for what is wrong with the current state of politics in the US.

After reading these two pieces, I found myself wondering how any reasonable person could conclude that the people running hospitals that can't be taxed-- because they're "nonprofit"-- can get away with paying themselves millions a year plus "golden handcuffs." The KUOW article noted that one of these hospitals has as its motto "We seek simplicity in our lives and in our work." (Its CEO was paid $2.1 million in 2007.) It notes, too, that another of these hospitals laid off 200 employees this year. And I also recall reading some time ago that many of these hospitals' employees don't receive health insurance with their wages. (Is that still the case? I'd be surprised if it wasn't.) According to Ryan,

The IRS can impose tax penalties or even revoke a charity's nonprofit status if it deems compensation to be unreasonable.

An IRS report this year on the nation's tax–exempt hospitals found almost no executive compensation violating the federal standard for reasonable pay. But the agency says it has a hard time enforcing the law because the notion of what is reasonable is so imprecise.

Reasonable? I suppose if you assume that bosses need to be paid 200 times as much (or more) as most of their employees, millions in salary a year for the so-called "employees" of a so-called "nonprofit" is "reasonable." But I wonder why someone holding such an attitude gets to decide what is reasonable in the first place. (What are such people doing, working for the IRS?) Why not put some ordinary people in charge of deciding what "reasonable" is. We could ask the surviving relatives of people who die from curable conditions because they can't afford or are denied health insurance and thus health care what reasonable is. Or perhaps we could ask some of the people just laid off by these hospitals: they might have a more informed notion of what reasonable is. "Reasonable," obviously, in this case doesn't mean reasonable to the ordinary person on the street, but something else entirely.