It's not often that Medicare cost projections make entertaining political theater, but they did last week in Washington as hospital officials wondered how the feud might affect their future payments under the program.
In the first act earlier this month, reports surfaced that former CMS Administrator Tom Scully threatened to fire the agency's chief actuary during last year's Medicare negotiations if he disclosed to Congress his estimates of the cost of adding a prescription drug benefit to Medicare.
Last week the second act opened with HHS' inspector general's office launching an inquiry-at the request of HHS Secretary Tommy Thompson-into whether members of the Bush administration ordered the actuary, Richard Foster, to stay silent about his projections that the reform measure could cost as much as $600 billion over 10 years. As it deliberated and voted on the bill, Congress assumed a $395 billion price tag.
In the ensuing scenes, congressional Democrats called for more investigations as the Bush administration and Republican supporters of the law dismissed the drama as election-year politics that will have little effect on Medicare reform. Meanwhile, the national media began to chime in, as the Chicago Tribune called for a repeal of the Medicare reform law in a March 19 editorial.
Whenever lawmakers renew the debate over cost projections, industry officials said, hospitals should take note. "There is an emerging consensus that the deficit is a big problem, and whenever (Congress) goes to reduce the deficit, they look at entitlement programs and Medicare is one of the largest," said Ralph Muller, chief executive officer of four-hospital University of Pennsylvania Health System and a current member of the Medicare Payment Advisory Commission.
"Within Medicare, they look at providers before beneficiaries," he said. "The biggest providers are hospitals."
As questions continued to mount about the new law that sets aside some $25 billion for hospitals over 10 years, the American Hospital Association refused to comment on the political flap, or on whether the group sees the need to mobilize a lobbying effort to protect the dollars hospitals have been promised.
Many lobbyists and Capitol Hill aides said last week that lawmakers are in no mood to reopen the legislation, especially in an election year.
"None of this is important to the senior citizen out there without drug benefits making $14,000 a year," said Bill Pierce, an HHS spokesman. "This is simply charges by people who oppose the administration, oppose the law and don't want to see it be successful."
That defense did not prevent a series of legal questions from being raised last week. Adding to the drama, the General Accounting Office said it would take a second look at HHS' Medicare ad campaign, focusing on controversial "video news releases" that HHS distributed to local TV stations. In the videos, actors playing journalists explain the law.
Democrats cited the ads, as well as the cost projection dispute, as examples of an administration credibility gap as members of the hospital community watched from the sidelines. On the Republican side of the aisle, some health policy aides closely involved in last year's bruising Medicare reform battle wondered what all the fuss was about.
When Congress writes legislation it is required by law to use estimates provided by the Congressional Budget Office, and the CMS' estimates were not relevant during negotiations to craft a bill, Republican aides said.
"We were not searching for information from CMS," said John McManus, a former House Ways and Means Committee staff director.
At deadline, Foster had not responded to requests for comment, but he is scheduled to take center stage this week at a Medicare hearing by the House Ways and Means Committee.
Although the inspector general's inquiry is "absolutely appropriate," said a spokesman for Senate Majority Leader Bill Frist (R-Tenn.), "it's not surprising that the estimates coming out of the Bush administration were higher. Estimating is an inexact science. Small differences in assumptions can lead to wildly different conclusions." He said he didn't know whether Frist had seen the higher cost projections.
Democrats disagreed about the importance of the figures, arguing that they requested detailed cost projections from Foster on several occasions and were denied access to the information. Several Democratic senators, including presidential candidate John Kerry (Mass.), asked the GAO to write a legal opinion on whether Scully broke any laws, and what redress would be appropriate if he did.
"We believe that the activity in question at HHS squarely fits the description of prohibited conduct," the senators wrote in a March 18 letter to U.S. Comptroller General David Walker.
Even if he did threaten Foster with his job, Scully would be difficult to charge or prosecute, some healthcare lawyers said. Since Foster is still employed by the CMS, they said, there are no evident damages and criminal charges would be a stretch at best.
Scully did not return calls from Modern Healthcare last week but denied in an interview when the news first broke that he ever threatened Foster, calling the allegations "garbage."
"This is a firestorm that burns away quickly," said Stuart Gerson, a lawyer with Epstein, Becker & Green. "Scully doesn't make much of a poster boy for John Kerry," who said last week that Bush "knew all along" Medicare reform would be more expensive than Congress thought.
Also last week, the House Committee on Standards of Official Conduct said it would establish a subcommittee to investigate allegations that Rep. Nick Smith (R-Mich.) was offered a bribe by fellow lawmakers to vote for the reform law. Last November, the House passed the law 220-215 without Smith's vote.
"We believe that the activity in question at HHS squarely fits the description of prohibited conduct. In the instant case, Mr. Foster claims that he was prevented, by way of threats from his superiors, from communicating with Congress on a matter directly pertaining to his employment duties and the agency itself."
--An excerpt from a March 18 letter sent by a group of Democratic senators to David Walker, comptroller general of the U.S., who heads the General Accounting Office