I found the afternoon to be very interesting. We have actually two debates going on at the same time and sometimes they don’t seem very related, but they are. One of the amendments that we’re debating is the one from the senator from Arkansas and it limits the deductible compensation for insurance executives to $400,000. And then we have the Ensign amendment which suggests that we should do the same for lawyers with junk lawsuits, but doesn’t go quite that unreasonable in that it only limits it as a portion of the lawsuit.
Of course, one of the reasons that it’s being given on the floor for supporting the Arkansas amendment is that Republicans are funded by insurance companies. I really have to object to that kind of wording. We could make a lot of insinuations about who is supporting junk lawsuits and where the money from those folks goes to. And they said, “Well, the evidence is that the insurance companies are putting so much money into defeating this piece of legislation.” Well, I found out that the pharmaceutical industry is now so firmly in the president’s camp that it’s developing plans to spend $150 million promoting the plan on TV. And that makes me kind of curious as to why the Arkansas senator did not include executives of pharmacy companies in the same piece of legislation.
I don’t begrudge anybody for anything that they make, but I found it interesting that the Abbott Laboratories make $28 million. The Allergan Executive CEO makes $14 million. Bristol-Myers Squibb makes $23 million. CEO of Johnson & Johnson makes $29 million. The CEO of Merck makes $25 million. The CEO of Pfizer makes $15 million. And Wyeth Pharmaceuticals, the CEO makes $25 million. Why would we want to leave these CEOs out of this same formula?
Are they taking the side of passing the bill as opposed to the side of informing the people? We ought to not be about that sort of thing. I’m sorry that the senator from Minnesota finished his presiding in the chair and I will still address the question to him. I did not expect him to give me an answer at the moment anyway. He said that there was a 428 percent increase in profits for the insurance companies and I didn’t quite get what the dates were. But he was talking percentages and as the accountant, I like to talk dollars. So I’d like to know what those dollars were from that first year to the final year. Because, for example, if a person makes $1 in the first year and in the last year side they make $5.28, that’s 428 percent increase. If you start with a really low number of zero, you can have an unlimited infinity increase in whatever year you pick after that if they even make a penny. So percentages can give some bad numbers and also the senator from New Jersey was talking about administrative costs and so was the senator from Minnesota. And I would like to get the figures from Minnesota to see how that’s working to have a limitation of 91 percent of all insurance money going to evidently to pay claims because I’m not aware of the administrative costs being quite that low in almost any business.
And I do know that with business, again, as the accountant, I find that most people, and I would include my colleagues here, think that most businesses are pretty simple. But when I visit one of those businesses, and I learn a little bit about it, I find that if you scratch the surface, there’s a lot going on out there that the average person couldn’t handle. And some of it shows in the legislation that we do. For instance, Cash for Clunkers. That was supposed to be a four month program. We ran out of money in four days. That’s how much we knew about the car business.
So when we’re talking about these different things, I got involved with some of these administrative costs when I was working on health plans. I did small business health plans. That was something rattling around here for 12 years, still is, and now it’s about 15 years. How that works is it allows small businesses though their association to group together to form a big enough pool that they can effectively lobby against insurance companies or negotiate with providers. And they can make these associations across stateliness. They can make them across nationwide if that will work better. Presently, you have to do it within your own state. That’s the law we have set up.
I found an example of one in Ohio that is very successful. It works really well. And that’s kind of how I modeled my small business health plans. I’ve got to tell you, when I did small business health plans, I was taking on insurance companies. They were pretty upset that I was doing anything in that area. They joined with some other people to keep me from getting cloture on the motion to proceed with the debate on that. So I know how tough health care is to move along. Ohio has that association within its state boundaries. It can work because they have a huge population. We have less than 500,000 people that live in Wyoming. And so if you break that down by associations, it would be really small pools and you don’t get the actuarial value out of it that you would if you can go to a bigger population. But in Ohio, they can do it within the state. In Ohio, they did do it within the state. And it brought down the cost of health insurance. It brought down the cost. Not only that, the biggest savings was in administrative costs.
It costs a lot more to keep track of all of the claims and everything from a small business than it does from a big business. The bigger the pool, again, the more capable you are of handling unusual situations. But administrative costs came down from 37 percent to 12 percent. 25 percent savings. Every business would like to have that. That’s how much it costs to administer. That’s why they wanted to group together through their association and form this bigger pool, which we haven’t been able to do.
I’d like to make some comments about junk lawsuits. We do have to do something about that. When I talk about junk lawsuits I’m talking about a bunch of them that are being filed these days that are $25,000, $45,000, $95,000. Whatever is less than what it would cost to defend that lawsuit. Because if it’s less than what it would cost to do the lawsuit, the insurance company is going to say, “Let’s just pay him and we’ll be saving money.” It’s a really bad precedent and it leads to more junk lawsuits being done.
I’m interested to note that both lawyers that are with the insurance companies and lawyers that are with the people that have been harmed don’t want to have tort reform. This kind of surprised me. Then I thought I learned a lot of this in law school. In law school, they probably taught how important that is to somebody’s retirement.
I remembered the Old West and the story about how one lawyer comes to town, he’s broke, but if they can get two, they can both make a good living. It does take lawyers on both sides working these lawsuits. But we do have to do something, particularly in the medical area because we could save $45 billion a year if we were to have something in junk lawsuits. Particularly with OB-GYNs. We are losing all of them in Wyoming. And it’s because there’s such a long tail on it. Somebody can sue for 18 years after they are born. And so the OB-GYNs have to pay a lot longer insurance tail on that. We had a dramatic case of a doctor attending a basketball game in Douglas. And the reason that he chose that to announce his retirement, because he couldn’t afford the insurance he had to pay, he had birthed almost every kid on both teams. And the mothers there don’t have OB-GYN help as a result of his retirement because of what it costs him for insurance.