Thursday, March 25, 2004

Medicare Chief Actuary Foster Says He Informed White House Officials in June That Medicare Legislation Would Cost More Than Lawmakers Expected
[Mar 25, 2004]

      During House Ways and Means Committee hearing Wednesday, CMS chief actuary Richard Foster said that as early as June, he shared with Doug Badger, President Bush's health policy adviser, and James Capretta, associate director of the Office of Management and Budget, his analysis that the Medicare legislation would exceed its target spending goal, the New York Times reports. According to the New York Times, Foster's analysis showed that the legislation "would cost 25% to 50% more than the Bush administration's public estimates" (Pear, New York Times, 3/25). According to OMB estimates released after Congress passed the legislation, the Medicare law will cost $534 billion over the next 10 years, $134 billion more than estimated by the Congressional Budget Office. Foster has said that the higher cost projection was known before the final House and Senate votes on the legislation in November but that former CMS Administrator Tom Scully told him, "We can't let that get out" (Kaiser Daily Health Policy Report, 3/23). He said that his office's official estimate for the enacted legislation was not complete until Dec. 23, but that "top administration officials had known for several months of his higher cost estimates," the Los Angeles Times reports (Kemper, Los Angeles Times, 3/25). Foster said, "The range of our estimates was $500 billion to $600 billion all the way through the process" (New York Times, 3/25). In an e-mail to colleagues at CMS, Foster indicated he believed he might lose his job if he revealed his cost estimates for the Medicare legislation. Scully has said that he did not threaten to fire Foster if the higher estimates were released. Scully also said that he "curbed Foster on only one specific request" made by Democrats at the time of the first House vote on the Medicare bill. Scully said, "[Democrats] were trying to be politically cute" and get Foster to give an estimate on the bill "and put something out publicly so they [could] walk out on the House floor and cause a political crisis, which is bogus." Last week, HHS Secretary Tommy Thompson and 18 Senate Democrats requested that the department's Office of Inspector General and the General Accounting Office look into the issue (Kaiser Daily Health Policy Report, 3/23).

Administration's Knowledge
Foster told the committee that Scully had said he was "acting under direct White House orders" when he instructed Foster to withhold some internal cost estimates. Foster said he believed that the order came from Badger (Schuler/Carey, CQ Today, 3/24). Foster said that he was not sure if Thompson was aware of the higher estimates and could not recall if Badger or another administration official directly ordered him not to answer questions concerning his analysis (Los Angeles Times, 3/25). White House spokesperson Trent Duffy said that Badger does not remember telling anyone to withhold information from Congress. Foster told the committee on Wednesday that he would not disclose his "evidence" of the White House's involvement until he provided the details to the HHS OIG, according to the New York Times (New York Times, 3/25).

Legality of Scully's Orders
Foster told the committee that he "failed to convince Scully that congressional requests for information should be granted in the best interests of the public," the Philadelphia Inquirer reports. He added that he considered Scully's order to withhold information "inappropriate and, in fact, unethical" (Pugh, Philadelphia Inquirer, 3/25). However, Foster said that after contacting an HHS lawyer, he "ended up convinced the administrator had the legal right" to withhold the estimates from Congress (Goldstein, Washington Post, 3/25). According to the New York Times, Foster identified the lawyer as Leslie Norwalk, acting deputy administrator at CMS (New York Times, 3/25). Foster said that the lawyer explained to him that because he is an employee of the executive branch, he did not have to give information to the legislative branch. He said that while he found the "new policy on communication with Congress ... unethical," he also did not believe that the administration had broken any laws, Roll Call reports (Pierce, Roll Call, 3/25). Foster said that he discussed with Scully a report accompanying a 1997 law that says it is "imperative for the actuary to provide Congress with impartial cost estimates for legislative proposals," according to the New York Times. However, he said that Scully told him that report "meant nothing" because it was not in the law itself (New York Times, 3/25). Foster said, "I could ignore the order. I knew I would be fired" (Rodgers, Wall Street Journal, 3/25). He said while he had considered resigning "in protest," his staff convinced him to keep his position "to fight to preserve his office's independence," the Post reports (Washington Post, 3/25). He added, "I thought it would be better to work within the system" (Zaneski, Baltimore Sun, 3/25).

Democratic, Republican Response
Democrats "tried to use the hearing to illustrate what they called a cover-up that raised questions about the Bush administration's credibility," the Los Angeles Times reports (Los Angeles Times, 3/25). Rep. Sander Levin (D-Mich.) said, "There was a cover-up of some basic information," adding, "We had the right to know. They had the right to tell us what they knew and what they did not" (CQ Today, 3/24). Rep. John Tanner (D-Tenn.) said, "Every Republican and Democrat on this committee ought to be outraged at the willful, deliberate, sinister withholding of information" (New York Times, 3/25). Rep. Charles Rangel (D-N.Y.) said that the issue "shows the intimidation and how far the majority party was prepared to go to keep Congress in the dark" (USA Today, 3/25). Rangel added, "[Republicans] would not have had the votes to pass this if the cost of the bill was known" (Heil, CongressDaily, 3/25). According to the Los Angeles Times, Republicans at the hearing attempted to "undercut the validity of Foster's claims," saying that Congress is "legally bound to use" CBO's estimates (Los Angeles Times, 3/25). Rep. Wally Herger (R-Calif.) said to Foster, "You mentioned earlier that you were following the law," to which Foster answered, "Yes" (Roll Call, 3/25). Rep. Nancy Johnson (R-Conn.) said, "The law allows Mr. Scully to control the flow of information. While you might not like it, that's the law" (USA Today, 3/25). According to the Los Angeles Times, House Ways and Means Committee Chair Bill Thomas (R-Calif.) "did not defend Scully's stifling of Foster," but he "encouraged Foster to confirm that [Thomas] had offered the actuary his moral support when the Scully-Foster dispute first erupted in June" (Los Angeles Times, 3/25). Thomas said, "I supported you then. I support you now" (New York Times, 3/25).

Estimate Discrepancies
During the hearing, CBO Director Douglas Holtz-Eakin addressed his agency's and OMB's estimates for the Medicare legislation, noting that the offices made different assumptions about the legislation. However, he said, "It is my judgment that $395 billion was and remains the single best estimate of the cost of this legislation" (USA Today, 3/25). Foster's estimates that were given to Congress last week show that $32 billion of the difference between the OMB and CBO estimates is related to increased payments to private plans participating in Medicare. Accounting for another $32 billion of the difference, CBO assumed that 87% of eligible seniors would participate in the prescription drug benefit, while OMB assumed that 94% of elderly would participate, according to the documents (Kaiser Daily Health Policy Report, 3/23). Foster said during the hearing, "The fact that we disagree somewhat ... is because the future is uncertain" (Baltimore Sun, 3/25).

Senators Request DOJ Probe
Sens. Hillary Rodham Clinton (D-N.Y.), Edward Kennedy (D-Mass.), Frank Lautenberg (D-N.J.) and Debbie Stabenow (D-Mich.) on Wednesday sent Attorney General John Ashcroft a letter requesting a Department of Justice investigation into whether Bush administration officials violated two federal criminal laws prohibiting the withholding from Congress certain information. The letter says that current laws can impose fines or five years of imprisonment for "whoever corruptly, or by threats of force, or by any threatening letter or communications influences, obstructs or impedes ... the due and proper inquiry under which any inquiry or investigation is being had by either House or any committee of either House or any joint committee of Congress" (Roll Call, 3/25). The senators also said that Foster's allegation possibly constitutes "obstruction of proceedings before departments, agencies and committees." DOJ officials on Wednesday night said that the request was being reviewed (Philadelphia Inquirer, 3/25). A Senate Democratic aide said it is likely that Ashcroft would open a criminal inquiry in the next few days, Roll Call reports (Roll Call, 3/25).

Broadcast Coverage
A HealthCast of the Ways and Means hearing is available online at kaisernetwork.org.

A HealthCast of an American Enterprise Institute discussion -- "Has the Drug Benefit Changes Medicare's Long-Term Outlook?" -- with Foster and others will be available online after 5 p.m. ET Thursday at kaisernetwork.org.

NBC's "Nightly News" Wednesday reported on Foster's testimony. The segment includes comments from Cybele Bjorklund, Democratic staff director for the House Ways and Means Subcommittee on Health; Foster; and Rep. Kenny Hulshof (R-Mo.) (Reid, "Nightly News," NBC, 3/24). The complete segment is available online in Windows Media.

NPR's "Morning Edition" Thursday included an interview with Marilyn Moon, health program director of the American Institutes for Research, about the Medicare estimates (Montagne, "Morning Edition," NPR, 3/25). The complete segment is available online in RealPlayer.

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