This Week:

Quote of the Week

The “Burst of Generosity” That “Left Observers Giddy”

“Shouldering the Burden” for “An Admiring Wall Street;” The Problem With Philanthropy

 

Greetings,

Well, it’s been three weeks since the last Nygaard Notes, and I can say that it was difficult to hold my tongue for that long!

The theme of this week’s issue is philanthropy. I have commented in these pages before on the “generosity” of the wealthy, but this week I go further to make a point about the phenomenon of philanthropy itself. More importantly, I talk about our response to it, and what it tells us about the corrupt ideology that increasingly has come to define our political culture.

Much has been said in the past couple of weeks by commentators of all stripes about the legacy of Ronald Reagan. Those outside the mainstream could read about his neglect of HIV/AIDS, his support of terror in Central America and elsewhere, his absurd pursuit of the “Star Wars” initiative, his tripling of the national debt, and on and on. Embedded in my thoughts on philanthropy this week, I have my own comment on the man and, although it is brief, I think it gets to the heart of the damage done to our nation – and the world – by this man’s presidency.

Glad to be back. I missed y’all.

Nygaard

"Quote" of the Week:

In the New York Times of June 4, 2004 ran a story headlined: “Store for Designer Clothes Tries to Sell a Political Viewpoint.” Apparently, “The entire window display” of the Marc by Marc Jacobs store on Bleecker Street in Manhattan “has been given over to partisan sentiment of an intensity that seems highly unusual for a major American fashion designer.”

There are images of “President” Bush and Colin Powell, and it implies that they have not always told the truth. “Retailing experts called the display a risky strategy,” the Times tells us. And why? The answer was supplied by one Candace Corlett, a partner in WSL Strategic Retail, a New York consulting company:

“A store is supposed to be a place where you escape reality, lose yourself in the fun of fashion, buy yourself a treat. Smacking customers in the face with a political issue – it's breaking the shopping karma.

The “Burst of Generosity” That “Left Observers Giddy”

“Philanthropy (noun): Love of humankind; the disposition or effort to promote the happiness and well-being of one’s fellow people; practical benevolence.” From the Shorter Oxford English Dictionary.

I am fascinated by the phenomenon of what is called “philanthropy.” Although anyone can be philanthropic, most of the time when we hear about philanthropy we hear about huge gifts from wealthy people and their foundations. Their benevolence (“good will; kindness; charitableness”) is often in the newspapers, since the sheer amount of money that the wealthy share often makes a big difference to the recipients of that money.

Witness the headline on the front page of my local paper, the Star Tribune, of February 20th: “Walker Is Given $10 Million for Performing Arts.” (The “Walker” in question is the contemporary art museum in Minneapolis called the Walker Art Center.) The source of this “burst of generosity” (as the Star Trib put it) is William and Nadine McGuire from Wayzata, Minnesota. The “burst of generosity” included lots of other gifts, so many that it “left observers giddy,” according to reporter Rohan Preston. In addition to the Walker, the McGuires have recently given $10 million to the University of Minnesota, $10 million to the Guthrie Theater and $1 million to the Children's Theatre Company. Added to “other recent Twin Cities giving by the McGuires and their family foundation, for which details were not revealed,” the total for the six months before the article was written comes to more than $40 million.

“Generosity” in Perspective

It’s a Nygaard Notes tradition to put reports of such “generosity” in perspective by looking at the giving in relation to the wealth of the giver. It’s a little tricky to determine the precise net worth of a guy like William McGuire, but we do know that Dr. William McGuire is the Chairman and Chief Executive of UnitedHealth Group Inc., the nation's largest health-services provider. They do a lot of things in the health field, like insurance, benefit management, services for HMOs, and on and on. But mostly what they do is make money. And then they take a lot of the money they make and pay it to their top executives.

Stephen Hemsley, for example, is the president and chief operating officer. He got paid $39.2 million last year. Robert Sheehy, chief executive of UnitedHealthcare, got $10.7 million. R. Channing Wheeler, chief executive of a United subsidiary, took home $9.3 million, and David Lubben, UnitedHealth’s general counsel was forced to scrape by on $7.5 million.

All of those guys are among the highest-paid executives in Minnesota, but they aren’t even close to McGuire. “McGuire has over the years consistently declined to comment on his compensation,” the Star Trib tells us, but we can get ballpark figures from a couple of recent articles in that paper. (Unlike the Walker gift article, which was on the front page, the following quotations appeared in the “Business” pages):

This one is from February 20, 2004: “McGuire has topped the Star Tribune's 100 list of highest-paid corporate executives several times in recent years, and he holds UnitedHealth stock and options valued at nearly $500 million.”

And here’s another, this from April 13, 2004: “The highest-paid corporate executive in Minnesota last year was UnitedHealth Group Inc. Chairman and Chief Executive Dr. William McGuire, who received $94.2 million in total compensation, or 10 times what he netted a year earlier, according to corporate documents released Monday...” [Ed. Note: The good doctor was not only the highest-paid chief executive in Minnesota last year, but the 2nd-highest-paid CEO in the United States.] “McGuire's compensation for operating the nation's largest health-services provider dwarfed that of other top-paid Minnesota executives... Not included in total compensation is the value of unexercised and newly issued stock options. McGuire is sitting on more than 17 million exercisable and unexercisable options, which the company values at more than $721.8 million.”

Using the handy-dandy Nygaard Notes calculator, I figure that Mr. McGuire has a “liquid” (easily converted to cash) wealth of at least $816 million ($721.8 million plus $94.2 million). So the donated $40 million that makes up his recent “burst of generosity” amounts to about 4.9 percent of his wealth. As always, I like to compare the magnitude of such “generosity,” in proportional terms. I’ll use myself as an example.

My wealth at the moment adds up to somewhat less than Mr. McGuire’s – let’s say I’m in the neighborhood of $4,000.00, although that may overstate my liquid assets by a bit. If I were to exhibit a “burst of generosity” over the next six months similar to Mr. McGuire’s, I would make donations to my community totaling roughly $196.00. Now, don’t get me wrong – shelling out a couple hundred bucks to charity is nothing to sneeze at. But it’s not likely to get on the front pages. (If you want to perform the exercise using yourself as an example, you can learn how to calculate your own net worth by going to the Nygaard Notes website and reading “Wealth in the United States” in Notes #138.)

Beyond the idea that a $10 million gift – while hugely important to the recipient – is not necessarily “generous,” there is another layer of meaning to this type of philanthropy that we can understand only if we look at the larger context. That’s what the next article will do.

“Shouldering the Burden” for “An Admiring Wall Street;” The Problem With Philanthropy

What is the source of William McGuire’s money? Profits extracted from the health care system. In the April 13 Star Tribune we were told that “News of McGuire's healthy 2003 payday followed a banner year for the Minnetonka-based UnitedHealth Group, which hit $28.8 billion in revenue and had record earnings of $2.9 billion.” [Ed. note: “Earnings” is the corporate term for “profits”] It went on to say that UnitedHealth’s “market value is about $42.3 billion. In 2003, UnitedHealth Group shares rose 39.4 percent.”

Three days later, on April 16, the Star Tribune reported (on page 2 of the “Business” section: “UnitedHealth Posts Big Profit Gain”) that the first quarter of 2004 was even more profitable for United than was 2003: “The Minnetonka-based provider of health care services reported a 17 percent increase in revenue to $8.1 billion for the first quarter and a 37 percent increase in profit to $554 million.”

Doing the Math

Start with three facts:

1. Health care spending in the United States now averages $5,440 per person per year.
2. Minnesota had 394,800 uninsured people in 2003.
3. UnitedHealth Group’s profits were $2.9 billion in 2003.

Do the math. That’s right, UnitedHealth’s profits for 2003 would cover the health care expenses for 533,088 people, or the equivalent of every uninsured person in Minnesota, plus another 138,000 from Wisconsin (Iowa, Delaware, Utah...)

All of this information was reported in the mainstream press. But the conclusion in the above paragraph was never stated.

There’s no point in picking on UnitedHealth. It’s a structural problem, cutting across the industry. Consider the following, also from recent press reports:

In an article from the April 2nd Star Tribune “Business” section headlined “State's HMOs Looking Healthier; New Programs, High Premiums Add up to Gains,” we read: “Most Minnesota nonprofit health plans recorded improved financial results in 2003, marking the third consecutive year of positive results, an industry trade group reported Thursday...” and “...the overall financial success is [in part] the result of several years of large premium increases, which began an upward spiral after medical costs began increasing in the late 1990s.” An “analyst” was quoted as saying, “In general, 2003 is a very strong year for HMO profitability.”

Two weeks later, same paper, “Business” Section: “HMOs Find They’re Flush With Cash.” Here’s the lead paragraph: “Blue Cross and Blue Shield of Minnesota had such a good performance in 2003 that it now has too much money. With financial reserves that are $30 million above a ceiling set by state law, the Eagan-based insurer is one of several Minnesota health plans that have turned results around... Although the comfortable financial cushion for Blue Cross and other health plans won’t mean a halt to premium increases, some increases might be slightly reduced because the plans won’t need to earn as much profit from customers.” [Ed. note: It is common for the press to report this way on the “profits” that “nonprofit” HMOs acquire. I don’t have time to explain that here, but it’s a strange reality.]

The Star Trib again: “And even though many health plans had a profitable year, in most cases they had low profit margins or even lost money on employer groups and individuals. As in years past, the most profitable lines of business in 2003 were programs serving people on Medicare or Medical Assistance.”

And again: “Several health plans said that medical cost increases moderated in 2003 because consumers are shouldering more of the burden themselves.”

“An Admiring Wall Street”

The Star Tribune reported that McGuire's big payday “followed a successful run-up in value by an admiring Wall Street and was defended as a reward for shareholders as well.” Meanwhile, in the world that most of us inhabit, we see news items like the following, from the New York Times of May 5. The headline was “Study Finds Widespread Problem of Inadequate Health Care,” and here are a few excerpts:

“Americans get substandard care for their ailments about half the time, even if they live near a major teaching hospital, the first comprehensive study of health care provided in metropolitan areas has found... The inadequate treatment leads to ‘thousands of needless deaths each year,’ said Dr. Elizabeth A. McGlynn, a researcher at the RAND Corporation and an author of the study... ‘Quality [of health care] in most areas of care was uniformly poor,’ said the authors of the study... And Dr. McGlynn added that for the $1.4 trillion a year the United States spends on health care, it was getting ‘fairly dismal results.’ Only a fundamental redesign of the health system will improve the situation, Dr. McGlynn said, adding, ‘It’s a tremendous cultural shift we’re asking for.’”

Tremendous, indeed. We now have a system in which premiums are raised to keep corporate profits “very strong.” Then Medicare and Medicaid – i.e. public tax monies – are used to further boost those corporate profits. And, finally, we are asked to “shoulder more of the burden” of rising health costs, to further boost those profits. At least, those do so who can afford to. Those who cannot “shoulder the burden” go without health care, contributing to the “fairly dismal results.”

Some of the profits thus generated are paid to people like Mr. Maguire. These wealthy people then donate a small part of “their” money to causes and institutions that are meaningful to them. In McGuire’s case this is major arts organizations – the Guthrie Theater, the Walker Art Center, and the Children’s Theatre – and the University of Minnesota medical school. All noble causes, no doubt. But are they as noble as providing basic health care to the thousands in my community that go without? I don’t think so. And here is where I think of Ronald Reagan.

Mr. Reagan, in a memorable press conference on June 28, 1983, was asked the following question by an intrepid reporter named “Gary:” “Mr. President...the polls continue to show that between 60 and 70 percent of the people still consider you to be a rich man's President with no idea of what the people who aren't wealthy are going through out there and really are unfair to the poor. How does that make you feel?”

After a somewhat lengthy and rambling answer, the President expressed, quite succinctly, the philosophy that still makes me recoil in horror when I think of it. He said:

“[W]hat I want to see above all is that this country remains a country where someone can always get rich. That's the thing that we have and that must be preserved.”

The preservation of this vision, this philosophy, is what makes the Bill McGuires of the world believe that they have the right to amass obscene wealth and, beyond that, to expect gratitude when they give away a small fraction of it. The institutionalization of this philosophy, in turn, is what prevents us from taxing this private wealth for the purpose of making a collective commitment to provide health care for all.

In 1997, at age 78, singer and activist Pete Seeger wrote the following song, entitled “And I’m Still Searching.” In it, Seeger expresses his own vision of a “tremendous cultural shift,” a Social and Cooperative one that is radically different from the Individualistic and Competitive vision of the late Ronald Reagan:

And I'm still searching
Yes I'm still searching
For a way we all can learn
To build a world where we all can share
The work, the fun, the food, the space,
the joy, the pain
And no one ever, ever need or seek to be
a millionaire.