Congressional Democrats demanded an independent investigation last week after an HHS inspector general's report cleared former CMS Administrator Tom Scully of criminal conduct related to cost estimates of last year's Medicare reform legislation.
The report concluded that the CMS withheld information from Congress about the actual cost of the Medicare bill and that Scully threatened to fire CMS Chief Actuary Richard Foster if he shared those figures with congressional Democrats. But the report from Acting Principal Deputy Inspector General Dara Corrigan determined that Scully did not violate federal criminal statutes. The General Accounting Office is undertaking a separate probe into whether HHS violated federal appropriations policies by Scully's alleged conduct. That report is expected later this summer.
Foster estimated that the Medicare Prescription Drug, Improvement and Modernization Act would cost $524 billion over 10 years, not the $395 billion the Bush administration was projecting in the weeks leading up to the bill's passage. The administration later conceded that Foster's higher estimate was correct. Disclosure of Foster's estimate, which congressional Democrats had repeatedly requested, could have thwarted passage of the bill, because more than a dozen Republicans had said they wouldn't approve legislation with a price tag exceeding $400 billion.
The report noted that the CMS actuary "had no authority to disclose information independently to Congress" and that "the administrator of CMS has the final authority to determine the flow of information to Congress."
Scully, who left the CMS earlier this year to join the Washington law firm of Alston & Bird, did not return calls last week for comment.
"The report shows that the administrator acted within his legal authority," HHS spokesman Bill Pierce said. In a news release, Corrigan said if Scully had not left government service, he might have faced administrative action. However, she said, no such recommendation would be made because he's no longer a federal employee.
Sen. Max Baucus (D-Mont.), the ranking Democrat on the Senate Finance Committee, said the inspector general had a narrow mandate to investigate whether Scully committed criminal violations in withholding information from Congress. "While the inspector general did not determine that criminal laws were violated, the report confirms that the administration failed to respond to congressional requests and suppressed information relating to several aspects of the Medicare prescription drug legislation," Baucus told Modern Healthcare.
But because the scope of the investigation was limited and did not look beyond HHS, any White House involvement in the decision remains unknown, he said.
Other Democrats, however, took issue with the report last week. Rep. John Dingell (D-Mich.) called for a congressional investigation and said it was regrettable that the inspector general did not examine whether the White House was involved. "Unfortunately, the chances of the public ever learning the whole story are dim," he said.
But a follow-up investigation appears unlikely. Senate Finance Committee Chairman Chuck Grassley (R-Iowa) called Scully's conduct with respect to Foster "inappropriate," but he did not join his Democratic colleagues in calling for a congressional inquiry.
Nancy Johnson (R-Conn.), chairwoman of the House Ways and Means Committee's health subcommittee, said the inspector general's report showed that the allegations against Scully were politically motivated. "This report makes very clear that CMS Administrator Scully acted fully within the law ... and ... took no steps to prevent a CMS estimate of the entire legislation from becoming public, as some have alleged," Johnson said in a statement.
Chip Kahn, president and chief executive officer of the Federation of American Hospitals, said the controversy would probably die down in the wake of the new report. "It's unfortunate that Tom (Scully) did what he did," he said. "I'm sure if he could have, he would have done things differently. But the fact remains that we now have a pretty clear message that the CMS actuary reports to the administrator."