The Bitter Pill

The Official Blog of UNITE – uniteforlife.org

$130 Billion Dollar Medicare Rip-Off

Evelyn Pringle September 2004

On July 6, 2004, the Department of Health and Human Services (HHS) Office of the Inspector General (IG) released a report stating that former Centers for Medicare and Medicaid Services (CMS) Administrator Thomas Scully pressured the agency’s chief actuary, Richard Foster, to withhold cost estimates of the Medicare Prescription Drug bill when it was being considered by Congress last year.

Foster had claimed that Scully ordered him to withhold estimates that showed the bill would cost between $500-$600 billion, well above the $395 billion estimate on which members of Congress were set to base their vote.

Specifically, Foster’s estimates were anywhere from 25 to 50% higher than those provided to members of Congress, and showed that rather than helping seniors lower prescription costs, the bill would be a windfall for drug companies, HMOs and insurance companies.

For instance, Foster’s estimates projected that the new plan would boost Medicare payments to private health plans by $46 billion (over 3 times the $14 billion Bush estimate), and that drugmakers would collect $100 billion more than the estimate provided to Congress.

Bush knew about Foster’s higher projections. On March 20, 2004, The Washington Post reported that, Trent Duffy, a Bush spokesman, acknowledged that the actuary’s cost estimates had been sent to White House officials, including Doug Badger, a special assistant to President Bush who negotiated with Congress on the Medicare bill.

The key to the success of Medicare scam was to hide Foster’s estimates from members of Congress until after they voted to pass the bill, and the strategy worked.

If revealed, Foster’s figures definitely would have threatened the passage of the bill because 13 Republicans had vowed to vote against it if the cost went over $400 billion. Even at the lower cost of $395 billion, the bill only passed by 5 votes. Had members of Congress known the truth, the bill may well have been doomed.

In January, 2004, upon submitting his budget, Bush was forced to admit that the bill would probably cost $534 billion, not $395 billion.

When Foster’s claims became public, Democrats were rightfully angry about being duped. They contend that Scully’s actions forced them to vote on a bill without full knowledge of its cost. Rep Charles Rangel, senior Democrat on the Ways and Means Committee, said: ” All I know is that the Congress did not have the best information available to make a judgment on vital legislation. … We asked for it. We were not given it.”

Many Republicans were also upset. Rep Trent Franks (R-Ariz) told the New York Times, “If anyone was truly pressured by a superior to withhold information from Congress, that is profoundly unethical and inappropriate.”

Rep Sue Myrick, one of the 13 Republicans who were set to vote against the bill, said she was “very upset” when she learned of the higher estimate. “I think a lot of people probably would have reconsidered (voting for the bill), because we said that $400 billion was our top of the line,” Myrick said.

Who Asked For The Estimates?

Members of Congress had been requesting Foster’s estimates for months. According to the New York Times, Cybele Bjorklund, an aide to California Rep Pete Stark, a member of the Ways and Means Committee, began to press Foster for his estimates in June, 2003. She said that after sending Foster an e-mail on June 17, and receiving no response, she called him on June 24. Bjorklund said that Foster told her, “I cannot give it to you; I’m afraid I could be fired.”

She then called Scully, who she says told her, “If Rick Foster gives that to you, I’ll fire him so fast that his head will spin.” Scully said that he recalls ” a heated conversation, but says he never threatened to fire Mr. Foster,” the New York Times reports.

Foster told colleagues that he would be fired if he revealed the estimates. “This whole episode which has now gone on for three weeks has been pretty nightmarish,” Foster wrote in an e-mail to colleagues on June 26. “I’m perhaps no longer in grave danger of being fired, but there remains a strong likelihood that I will have to resign in protest of the withholding of important technical information from key policy makers for political reasons.” Knight Ridder obtained a copy of the e-mail.

Bjorklund told the New York Times that in January 2004, she received a fax revealing Foster’s cost estimate for the Medicare legislation, the New York Times reports. The fax was dated June 11, 2003, and had “no hint of the sender” (New York Times, 3/18).

Scully Denial

In an interview with Knight Ridder, Scully denied Bjorklund’s assertion that he had threatened to fire Foster. He said he curbed Foster on one specific request, made by Democrats on the eve of the first House vote in June, because he thought they would use the cost estimates to disrupt the debate.

Otherwise, Scully said that Foster was available to lawmakers and their staffs.

“… I don’t think he ever felt – I don’t think anybody (in the actuary’s office) ever felt – that I restricted access. … I think it’s a very nice tradition that (the actuary) is perceived to be very nonpartisan and very accessible, and I continued that tradition.”

Scully said Liz Fowler, the chief health lawyer for the Democrats on the Senate Finance Committee, could confirm the actuary’s independence. Fowler did not. ” He’s a liar,” she said of Scully, according to Knight Ridder.

Results Of Investigation

After completing the investigation, the IG said that Scully may have violated ethical standards, but since he is no longer at CMS, recommended that no administrative action to be taken against him. She released a statement that said that Scully:

* Failed to produce premium estimates for drug coverage under the bill;
* Failed to provide congressional staff with total estimates and other information;
* Warned CMS’ chief actuary, Richard Foster, that ” disciplinary action” would be taken if Foster provided certain information in response to Congressional requests;
* Warned a Congressional staffer that Richard Foster would be fired for releasing information.

The report admitted that on 5 occasions between June and October 2003, which means before the bill was voted on, Scully blocked efforts by Foster to comply with requests from members of Congress for information about the cost of the Medicare drug bill.

And yet, the report concluded, “Our investigation failed to produce evidence that criminal statutes were violated in connection with the failure to respond to congressional requests.”

Supposedly the legal question weighed was whether Foster could speak independently of his boss or needed to obey his boss. Drews concluded that Foster’s job provides him “freedom from supervision in performing actuarial duties, not supervision of disclosure of Department records or information to the Congress.”

“Since the Chief Actuary is subject to CMS supervision, the Administrator has the right to direct the Chief Actuary, just as any other CMS employee, to provide the Administrator with information for review prior to the information being provided to the Congress, or even direct that the information not be provided,” Drews wrote.

Before Bush took office, the Medicare actuary’s estimates were customarily provided to lawmakers who were debating Medicare legislation. This finding begs the question of how is Congress supposed to legislate when experts in the executive branch fail to share information about the cost of government programs?

Results Of Other Investigations

The finding that Scully’s actions violated no laws is contrary to an April, 2004 report by the Congressional Research Service (CRS) that also investigated the matter. The CRS concluded that Scully’s threats to fire Foster probably violated a 1912 statute that says a federal employee’s right to communicate with and provide information to Congress “may not be interfered with or impeded.”

However, Justice Department lawyers claim that Scully was within his rights to order Foster to withhold information, as long as the directive was “not based upon an invalid or unlawful reason,” wrote Katherine Drews, a Justice Department associate general counsel.

Now what the hell does that mean? In plain language please.

Am I missing something here? Since when did it become lawful for the president to conspire with policy officials to provide members of Congress with phony cost estimates on pending legislation in order to funnel $139 billion to cronies in the health care industry?

Foster sure doesn’t agree with the findings. According to Knight Ridder, he stands by his position, ” My perception remains that Mr. Scully withheld that information for political purposes. And regardless of his legal right to withhold it, I continue to believe that it’s wrong and unethical to withhold technical information from Congress.”

Where Is Scully Now?

Unbeknownst to Congress, Scully was trolling for a job within the industry at the same time that he was working on the final Medicare bill. Knight Ridder reported that Scully “was exploring jobs in the private sector while he was pushing for passage of the prescription-drug bill, thanks to a waiver from Thompson that allowed him to conduct job interviews while he was still a federal employee.”

So that means that at the same time that he was browbeating Foster, Thompson told Scully that he didn’t have to abide by the federal law that bars presidential appointees from discussing employment with companies conducting business with their own department or agency. And neither Thompson or Scully felt a need to notify Congress of the waiver.

Where does Scully work these days? According to the July 7, 2004, Washington Post, Scully is registered as a lobbyist for major drug companies, including Abbott Laboratories and Aventis; for Caremark Rx, a pharmacy benefit manager; and for the American Chiropractic Association and the American College of Gastroenterology, among others.

All of these clients are affected by a bill that Scully helped write. But not to worry, according to Knight Ridder, the “White House announced in February that President Bush’s appointees no longer would be permitted to job-hunt while on the federal payroll.”

Who Else Was Involved In The Scam?

James Capretta, another top official on Medicare policy at the OMB, was also shown Foster’s cost estimates for the bill. So he knew that the cost of the bill was far more than Bush had advertised.

Another official in on the scam was Doug Badger, Bush’s top health policy adviser on Medicare. On March 20, 2004, The Washington Post reported that, Bush spokesman, Trent Duffy, acknowledged that “the actuary’s cost estimates had been sent to White House officials, including Doug Badger, a special assistant to President Bush who negotiated with Congress on the Medicare bill.”

On March 24, 2004, Foster told the House Ways And Means Committee that he had shared the estimates with Doug Badger and that Badger seemed to be directing Scully in imposing the gag.

One might say that Badger waltzed through the revolving door backward. He quit his lobbying job to become a Bush adviser. Before accepting the White House position, he helped bring in more than $1 million for the firm of Council Ernst & Young, from clients like Aventis, Baxter Healthcare, Biogen, Eli Lilly, Johnson & Johnson and Pfizer.

And this is not Badger’s first trip through the revolving door. He became a lobbyist after working as chief of staff to Sen Don Nickles (R-Okla) and staff director of the Senate Republican Policy Committee. He also has held positions at the DHHS and the Social Security Administration. I can’t wait to see where Badger ends up in January 2005.

Others Also Left For Private Employment

By now there must be a well-beaten path between the backdoor of the White House and companies in the Health Care Industry. Scully wasn’t the only guy trolling for private employment. Once the bill passed, members of the administration couldn’t get to their new high-paying jobs fast enough.

The bill was signed into law on December 8, 2003. Exactly 1 day later, Thomas Grissom, director of the CMS, left to become a lobbyist for medical device maker Boston Scientific. Grissom had been in charge of developing policies and regulations for the Medicare fee-for-service program and for overseeing Medicare’s $240 billion contractor budget.

I wonder how he was able to land a job the day after he quit his last one, especially in such a dire employment market? Maybe he could give some tips to the other people who are unemployed.

In January 2004, Dallas “Rob” Sweezy, the director of public and intergovernmental affairs at CMS, took a job with National Media Inc, which just happens to be the same firm that Bush paid $12 million to produce the phony TV ads touting the new bill, that the GOA determined were illegal and fraudulent.

National Media and its partner Alex Castellanos also served as consultants to both Bush campaigns and produced ads for the industry front group Citizens for Better Medicare.

However, Sweezy didn’t last long at National Media. In May 2004, he went to work for the lobbying firm Loeffler, Jonas and Tuggey, which represents Bristol-Myers Squibb, Purdue Pharma, First Health and PacifiCare.

James Capretta, Bush’s top official on Medicare policy at the OMB, left in June 2004 to join Wexler & Walker Public Policy Associates, where he will likely represent clients from firms like Amgen, Hoffman-LaRoche, PacifiCare and Wyeth.

Now where have I heard the names of those companies before?

Medicare Scam Will Cost Bush The Election

“The truth of the matter is that the only way this President and the Republican Congress could pass the fatally flawed Medicare bill was to deceive Congress,” said George Kourpias, president of the Alliance for Retired Americans. “Seniors know they’ve been dealt a raw deal with the Medicare law, and they will have their say at the ballot box.”

I look forward to seeing a record number of seniors at the polls.

Filed under: 2004, Bush, Drug Importation, Medicare Prescription Drug Bill, Scully

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