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COMPARISON OF BLUE CROSS EXECUTIVE SALARIES AND MEMBERS-CALENDAR YEAR 1973

Blue Cross plan location (members) and executive titles

Salary

Associated Hospital Service of New York City (8,843,732):

President.
Senior vice president.
Vice president..

Do.
Do.
Do.
Do.

Do.
Vice president and secretary.

Vice president.
Michigan (5,339,769):

President.
Executive vice president.
Vice president...

Do..
Vice president and treasurer.
Vice president..
Vice president and controller
Vice president.
Assistant vice president.

Director
New Jersey (4,146,582):

President.
Vice president, finance.
Vice president, public relations..
Vice president, marketing -
Vice president, provider relations.
Vice president, secretary-treasurer.
Assistant vice president, personnel..
Assistant vice president, systems.
Assistant vice president, marketing-

Vice president, operations..
Massachusetts (3,316,628):

President.
Executive vice president.
Vice president, treasurer.
Vice president, actuary :
Vice president, administrative services..
Vice president, data processing..
Vice president, benefits administration.
Vice president, marketing --
Manager, systems development division..

Assistant vice president, data processing-• Chicago (3,278,398):

President..
Executive vice president.
Senior vice president.

Do.
Vice president.
Senior vice president.
Vice president.

Do..
Do..

Do
Dallas (3,110,026):

President.
Vice president.

$87, 187.50 63, 958.27 32, 580. 17 42, 291, 71 32, 416.63 46, 375.00 45, 291.71 45, 375.00 51, 374.92 42, 291.71 65, 833. 32 47, 600.00 43, 840.00 44, 100.00 39, 169.71 37, 960.00 36, 223.68 18,000.00 32, 100.00 31, 359.82 192,058.00 48, 463. 62 44,619.63 43, 682.68 42, 756.21 40, 826.99 33, 230.74 32, 671.36 32, 432, 69 32, 323. 11 69,553. 73 50, 314.94 44,207.26 40, 271.82 39, 664.82 36, 509.18 36,092. 47 32,684.46 30, 890.00 30, 405. 20 67,999.94 56, 333. 34 53,000.08 47,500.08 43, 645.85 39, 250.04 36, 499.92 36,000.00 34,999.95 34, 300.08 62,893.00 34,999.00 29, 714.00 37,810.00 20, 283.00 30, 174.00 32,611.00 31,934.00 29, 212.00 29, 756.00 69, 750.00 47, 766.00 38, 577.00 33, 250.00 32,649.00 29,060.00 28,047.00 26, 662.00 26, 151.00 25, 184.00

Do..

Do..
Do.
Do..
Do.
Do.
Do.

Do.
Philadelphia (2,427,007):

President.
Executive vice president.
Vice president-Provider relations.
Vice president-Marketing ---
Vice president-Administration..
Vice president-Finance and treasurer..
Vice president-Personnel.
Vice president-Legal and corporate secretary-
Assistant vice president-Provider relations
Director-Rating service..
See footnotes at end of table.

COMPARISON OF BLUE CROSS EXECUTIVE SALARIES AND MEMBERS—CALENDAR YEAR 1973

Blue Cross plan location (members) and executive titles

Salary

65, 669.00 49, 158.00 40, 425.00 37, 568.00 36, 250.00 35, 450.00 34, 907.00 29, 645.00 29, 125.00 29, 050.00 53,500.00 31, 650.00 31, 550.00 30, 800.00 27, 948.00 25, 920.00 24, 650.00 23, 700.00 22, 221.00 21, 600.00 75, 865.87 40, 495.33 39, 250, 72 37, 605.08 35, 944,62 34, 546.04 32, 572. 19 30, 583.98 29, 196.98 28, 990.71

Pittsburgh (western Pennsylvania) (2,308,917):

President.
Vice president-Medical affairs.
Executive vice president.
Senior vice president-Administration.
Vice president-Operations..
Vice president-Treasurer.
Vice president-Actuarial research and accounting -
Vice president--Marketing -
Vice president-Public relations.

Vice president-Personnel and planning..
Cleveland (1,810,549):

President..
Vice president-Enrollment..
Vice president-Operations...
Vice president-Corporate planning and personnel.
Vice president Hospitalization and provider affairs.
Director-Personnel.
Vice president-Research and development..
Director-Government and professionals.
Director-Hospitalization and provider, audit.

Director-Claims administration.
Cincinnati (1,553,660):

President.
Executive vice president.
Vice president and staff corporate secretary..
Vice president.

Do..
Do..

Do.
Assistant vice president.
Vice president..

Director
Blue Cross of Western New York (Buffalo, N.Y.) (1,046,396):

President.
Executive vice president.
Vice president-E.D.P. & S.S.
Vice president-Finance..
Vice president-Administrative service.
Vice president-Marketing --
Vice president-Provider affairs...
Vice president-Provider reimbursement.

Director-Cost accounting and interest control..
Rochester, N.Y. (852,456):

Managing director..
Executive director.
Controller..
Director-Data procurement.
Director-Field service..
Advance system technical manager.
Assistant consultant statistics
Assistant director-Field service.
Manager-System and program.

Manager-Hospital audit..
Columbus, Ohio (769,967):

President.
Vice president-Administration.
Vice president-Finance and treasurer.
Vice president-Hospitalization provider service.
Director-sales..
Vice president-Actuarial service.
Vice president-Communications and secretary.
Director-EDP and planning-
Director- Personnel and administrative service.

Director-EDP and Operations..
Rhode Island (746,586):

President.
Executive vice president.
Vice president-Finance.
Medical director.
Vice president-Hospital relations and physicians relations..
Vice president-Administrative.
Vice president-Data processing.

42, 291.67 41, 375.00 33, 233. 37 30, 979. 18 26, 479. 18 24, 583.31 24, 583. 31 23, 583. 33 23, 200.00 47,000.72 41, 124. 72 29, 661. 60 27, 244. 20 24, 784.16 20, 956.00 20, 113.92 19, 860.96 18, 443.00 18, 368. 12

43,759,91 26, 104.83 24, 404.87 21,980. 11 20,864.79 20,369. 48 19,910. 19 18,626. 85 18, 396. 84 17,239.17 31,499.00 22,554.00 15,404.00 13, 590.00 13, 380.00 13,088.00 13,077.00

1 Effective May 1, 1974, the president's salary was raised to $103,000.

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$95, 000

$8,000

8.4

$103, 000

$47, 884.64 $50, 019.31 $55, 325.04 $62, 461.55 $70, 988.62 $77, 384.99 $84, 038.74 $92, 058.00
30, 427.75 32, 346.25 34, 330. 96 35,000. 16 29,858.41
25, 346.18 26, 500.01 022, 807.56 30, 292, 22

7 32, 323. 11
26, 009.7927, 509.64 29, 330.63 31, 984.72 36, 342.44 39, 355. 93 41, 913.85 44, 619.63
23, 346.26 25, 346.18 28, 661. 43 31, 984.72 35, 362.92 38, 592. 12 41, 346, 23 43, 682.68
22, 980.81 25,000.04 :22, 275.08 28, 484.52 33, 961.5937, 019.31 39, 580.64 42, 756.21

*35, 323.08 39, 702.07 44, 057.96 48, 463.62

24, 580.73 30,907.69 33, 855.89 37, 019.31 40, 826.99
_10 22, 598. 18 25, 607.60

24,769.16 29, 269. 10 30, 935. 39
_13 24, 959.77

33, 400
45, 600
44,500
43, 900
50,000
42, 200

4,000
3, 200
2,500
3, 600
8,000
3, 200

12.0
7.0
5.6
8.2
16.0
7.6

President.
Vice presidents:

Staff.
Operations.
Public relations.
Marketing -
Provider relations.
Finance
Secretary-treasurer.
Personnel

Planning development..
Medical director.
Adviser
Assistant Vice presidents:

Personnel
Systems
Marketing -
Provider relations.
Controller.
Operations.
Planning development.

37, 400
48, 800
47,000
47, 500
58,000
45, 400

11 32,500

3, 300

10.2

35, 800

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165 people listed, all males.
3 87 people listed, 7 (8 percent) are women--all of whom make under $11,500.
3 142 people listed, 22 (15.5 percent) women, all make under $15,500.
* From 1969 through 1974, all people listed are male.
5 During this time unionized employees of Blue Cross were granted a 5.5 percent raise.
o Formerly assistant vice president, comptroller.

7 Formerly assistant vice president, operations.
8 Formerly assistant vice president, provider relations.
• Formerly vice president, operations.
10 Formerly assistant vice president, personnel.
11 Formerly assistant vice president, planning development,
13 Formerly vice president, provider relations.

Professor Law. The second area which I would like to discuss is Blue Cross building programs. I wish I had better data on this. I do not know of any study, Federal or private, that has taken an overall look at this question. But as you travel around the country you do notice that Blue Cross/Blue Shield is housed in these very grand steel and glass buildings, which have been constructed since 1966. Particularly in smaller cities which do not have a large number of such buildings, Blue Cross dominates the urban horizon.

We all know that these major construction projects, besides involving monstrous legitimate costs, afford a rich opportunity for cost which are less than legitimate. In 1971 the Subcommittee on Antitrust and Monopoly of the Senate Committee on the Judiciary looked into a variety of abuses in the administration of the Virginia plan. I am not sure why that was suggested, but maybe because it is just across the river and you can see the building standing there.

They found that the building had cost $8 million. They moved in 2 years after the beginning of medicare. That investigation showed that $i million was spent to decorate and furnish the building, and most of the purchases were made, without competitive bidding, from a firm whose sales manager was chairman of the building committee of the Blue Cross board.

Over half of the business of the Richmond plan is financed by medicare and medicaid. Senator Phillip Hart expressed amazement that there was no outside authority, in either State or Federal Government or the National Blue Cross Association, that could control or question this situation. He asked, "There isn't any outside discipline that could do other than sort of wonder? Nobody could correct, is that right, absent the internal discipline (within the local plan)?

The Richmond plan executive responded, "Mr. Chairman, I would say you are absolutely right, but that responsibility rests purely on the shoulders of the (local) board of directors . . . The moment they found the level of spending which they couldn't quite stand, they acted immediately ..."

That was the situation in 1971. Since that time Blue Cross building programs have proliferated. The oversight situation has not improved in any significant respect.

The third item which I would like to discuss is public relations and advertising costs. The most recent data which I have on advertising is for 1974. According to the national consumer affairs office of Blue Cross, the local plans spent $12 million for advertising during the year. This is in addition to the national advertising campaign conducted by the BCA.

I am sure that many of you will recall during that period the national BCA, as well as the American Hospital Association, were running ads on the TV evening news. This was a time when many believed that Congress was about to act on National Health Insurance. The BCA spent $750,000 on television advertising in this single campaign. These ads were, in the overwhelming number of cases, simply puff pieces extolling the virtues of your friends at Blue Cross. The slogan for that campaign was "Blue Cross: We're here. We're

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now."

I asked many people what they thought the slogan meant, and most found it incomprehensible. I believe it has meaning only as a statement on National Health Insurance. As it became apparent that congressional action on National Health Insurance was not imminent, these ads disappeared.

The advertising campaigns of the local plans are financed directly from payments made by individual Blue Cross subscribers, and by Federal funds provided under medicare and medicaid. The national ad campaigns are financed from assessments made from the local plans, which in turn come from subscribers and from Federal funds, and from direct charges to the Federal programs for administrative expenditures.

Use of public funds for these advertising campaigns raises serious legal questions. I believe that Blue Cross, in relationship to its contracts with the Federal Government, is bound by the Federal Procurement Regulations. These regulations strictly limit the advertising costs which a government contract or may recover to expenses incurred in soliciting employees or supplies to perform the contract.

In addition, I believe that the Federal funded Blue Cross advertising campaigns designed to influence the judgment of Congress on National Health Insurance raise serious legal questions under the Fairness Doctrine. Particularly in light of the many recent polls showing that most Americans believe that the private insurers should have no role in National Health Insurance, it seems grossly unjust that these subscribers and taxpayers should be forced to finance an ad campaign puffing a view which they overwhelmingly reject.

Even though it seems that the law prohibits this activity and even though the ads are there for everyone to see, no one in a position of authority is asking these legal questions or challenging the Blue Cross practices. At least no one in authority is asking the questions in any public forum or taking any legally effective action to prevent these abuses.

The problem of Blue Cross advertising costs is essentially one of enforcement of existing laws. The problems of excessive executive compensation and wasteful building programs involve, I believe, inadequacies in the law as written. There is not to my knowledge any restraint whatsoever on the amount that Blue Cross, locally and nationally, pays its executives, or the amount that it sinks into lavish building programs. Blue Cross can spend whatever it wants and charge a proportionage share of that expense to the Federal account.

The Federal statute vaguely requires the payment of reasonable administrative costs. Either statutory change or stronger regulations implementing the vague statutory mandate are needed. One possible approach to the question of executive compensation might be to mandate that Federal reimbursement for executive compensationwhether in the form of salary or limousines-should be limited to increases which are equal to or less than the increases in compensation paid to nonexecutive Blue Cross workers.

Of course this does not deal with existing or past abuses. The difficulty of the executive compensation problem is compounded by the fact that at least sometimes high-powered executives actually implement programs that serve people's needs. Therefore, a very low administrative budget may reflect conscientious restraint, or it may

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