Hiding the true cost of Medicare prescription drug legislation

Tuesday, October 18th, 2016 

This analysis by Charles Lewis is from his research for "935 Lies: The Future of Truth and the Decline of America’s Moral Integrity" (Public Affairs, 2014)

Small illustration of a closed book.

Lewis photo by Jeff Watts, AU


In 2003, Bush administration officials withheld important cost projection data from members of Congress before they voted on the biggest overhaul to the Medicare program since it began in 1965. Among other things, the Medicare Prescription Drug, Improvement and Modernization Act provided a prescription drug benefit for Medicare users and prevented the government from negotiating drug prices with pharmaceutical companies, a contested provision at the time. i

Lawmakers were told the bill would cost just under $400 billion — based on the Congressional Budget Office’s estimate — even though some Bush administration officials knew Medicare’s long-time Chief Actuary, Richard Foster, had estimated the cost to be closer to $534 billion months before the vote. The then-Administrator for the Centers for Medicare and Medicaid Services, Thomas Scully (who was also closely involved in writing the legislation) threatened to fire Foster if he disclosed his analysis to Congress members. ii

"It struck me there was a political basis for making that decision. I considered that inappropriate and, in fact, unethical,” Foster testified before the House Ways and Means Committee in early 2004 about Scully’s threats before the vote. iii

Weeks after the bill narrowly passed in the House in late November 2003 — during a highly unorthodox and controversial voting session held at 3 a.m. that reportedly included major arm-twisting by the bill’s main architects and last-minute vote changes — the White House announced the bill would indeed cost over $100 billion more than they had told Congress and the American people. Soon thereafter, Scully and at least 14 other staffers, officials and members of Congress closely involved with getting the bill passed resigned or left their positions for highly lucrative jobs in the pharmaceutical industry, which benefitted hugely from the new measure.

The muzzling of Foster and withholding of information from Congress wasn’t known or widely reported in the press until early the following year. If Foster had not been prevented from telling members of Congress about his considerably higher budget projections before it voted on the significant legislation, it is very possible the legislation would not have passed. A Government Accountability Office (GAO) investigation subsequently found that Scully had violated federal law but of course the culpable Bush administration and its Justice Department never prosecuted him.v

Foster said that while the 2003 incident was the most egregious and public, the Bush administration wasn’t the only one to bend the truth to further its political agenda. For example, he said that months after the Obama Patient Protection and Affordable Care Act had been signed into law, a White House blog article written by Obama health care czar Nancy Ann DeParle was a “mischaracterization” of his office’s analysis. He said that behavior like Scully’s and DeParle’s (in her particular case, the shading of the truth was less consequential as it occurred after Congress had already deliberated and voted on the legislation) that affects lawmakers’ and the public’s access to accurate and unbiased information is just “wholly inappropriate.”

"Now whether that was the former administrator withholding information from Congress or whether that’s other people mischaracterizing information, it sort of doesn’t matter," Foster said. "They’re both getting in the way of truth, getting in the way of policymakers being able to do their jobs well.” Not to mention getting in the way of the public’s right to know when it matters most, during the political decision-making process.viii

Kate Musslewhite Tobey contributed to this report.

iDepartment of Health and Human Services – Chief Actuary’s Communications with Congress,” U.S. Government Accountability Report, September 7, 2004, B-302911 (correspondence from GAO General Counsel Anthony Gamboa in response to a request for a legal opinion from 18 U.S. Senators), http://www.gao.gov/decisions/appro/302911.pdf, accessed September 16, 2012. M. Asif Ismail, “Drug Lobby Second to None: `How the pharmaceutical industry gets its way in Washington,” Center for Public Integrity, July 7, 2005.

iiBoard of Trustees 2004 Annual Reports, Hearing before the Committee on Ways and Means, U.S. House of Representatives, 108th Congress, 2nd Session, Mar. 24 and Apr. 1, 2004, Serial No. 108–69, page 47 (for Foster’s testimony about when his estimates were provided to his superiors), page 49-50 (Foster’s testimony about Scully’s threats). Foster testified he provided his estimates in June of 2003. (http://bit.ly/2e3Jfml); see also Richard Foster, “Actuary in the Hot Seat,” Contingencies Magazine, November/December 2004 edition; see also articles by Tony Pugh, Philadelphia Inquirer Washington Bureau: “Medicare expert says he was told to withhold cost,” Mar. 12, 2004 and “Medicare analyst confirms muzzling; He said his boss told him he'd be fired if he gave lawmakers higher cost estimates for the prescription-drug bill,” Mar. 13, 2004.

iiiBoard of Trustees 2004 Annual Reports, page 49.

iVFor details on the voting session start time, reports of arm-twisting, and government employees taking health industry jobs, see Steve Kroft, “Under the Influence,” CBS News 60 Minutes, originally broadcast on April 1, 2007. According to the 60 Minutes report, in addition to Scully, the following people also left their positions for jobs in the health industry: Congressman Billy Tauzin (R-La.) took chief lobbyist position at Pharmaceutical Research and Manufactures of America (PhRMA) at the end of his term; John McManus (staff director of the Ways and Means subcommittee on Health) left Congress and started his own lobbying firm representing clients from PhRMA, Pfizer, Eli Lilly and Merck; Linda Fishman (former health policy director for the Finance Committee) became a lobbyist with the drug manufacturer Amgen; Pat Morrisey (chief of staff of the Energy and Commerce Committee) became a lobbyist for drug companies Novartis and Hoffman-La Roche; Jeremy Allen went to Johnson and Johnson; Kathleen Weldon went to lobby for Bio-tech company Biogen; Jim Barnette went to lobby for Hoffman-La Roche. 

For more details on reported arm-twisting by legislators during Medicare vote, also see: “Congressman Denies Medicare Vote Bribe Charge,” Associated Press, Dec. 5, 2003; Carl Hulse, “Inquiry Sought In House Vote on Drug Plan for Medicare,” New York Times, Feb. 1, 2004. Robert Pear, “Inquiry Confirms Top Medicare Officials Threatened Actuary over Cost of Drug Benefits,” New York Times, July 7, 2004, http://www.nytimes.com/2004/07/07/us/inquiry-confirms-top-medicare-official-threatened-actuary-over-cost-drug.html?ref=richardsfoster, accessed September 8, 2012.

vSee Department of Health and Human Services--Chief Actuary's Communications with Congress,” B-302911, U.S. Government Accountability Office, Sep. 7, 2004 (http://www.gao.gov/products/A12277#mt=e-report); see Robert Pear, “Agency Sees Withholding of Medicare Data From Congress as Illegal,” New York Times, May 4, 2004, http://www.nytimes.com/2004/05/04/us/agency-sees-withholding-of-medicare-data-from-congress-as-illegal.html?ref=richardsfoster, accessed September 8, 2012. Robert Pear, “Inquiry Confirms Top Medicare Official Threatened Actuary Over Cost of Drug Benefits,” New York Times, July 7, 2004, http://www.nytimes.com/2004/07/07/us/inquiry-confirms-top-medicare-official-threatened-actuary-over-cost-drug.html?ref=richardsfoster, accessed September 8, 2012.  “The Foster Affair,” New York Times, July 13, 2004, http://www.nytimes.com/2004/07/13/opinion/the-foster-affair.html?ref=richardsfoster, accessed September 8, 2012. Robert Pear, “Inquiry Proposes Penalties for Hiding Medicare Data,” New York Times, Sept. 8, 2004. (http://www.nytimes.com/2004/09/08/politics/08medicare.html?_r=1&ref=richardsfoster), accessed September 8, 2012. Richard Foster told me that in the end, both 2003 estimates were too high, due in large part to an unexpected increase in generic drug prescriptions starting in 2004. As of 2012, Foster’s office estimated the net total Medicare cost to be $357 billion. But that was unknown to everyone, and became apparent ex post facto – and it does not obviate the fact that Congress was intentionally misled and  that Foster had been directly told NOT to tell the truth to Congress during its decision-making processes. (Comparison of the Office of the Actuary's original Title I MMA cost estimates to those underlying the CY 2012 Trustees Report, CMS Office of the Actuary; provided by Foster on June 5, 2012).

viInterview with Richard Foster, May 22, 2012, Baltimore, Maryland, referencing Nancy Ann DeParle, “New Report on National Health Expenditures,” The White House Blog, Sept. 9, 2010 (http://www.whitehouse.gov/blog/2010/09/09/new-report-national-health-expenditures). When asked for a response to Foster’s comments, a White House spokesperson said: “Nancy-Ann DeParle is a health policy expert and the former head of CMS and the blog post was based on our analysis of the report. This is hardly the first time different experts have reached different conclusions about health policy data.”

viiAndrea M. Sisko, Christopher J. Truffer, Sean P. Keehan, John A. Poisal, M. Kent Clemens and Andrew J. Madison, “National Health Spending Projections: The Estimated Impact Of Reform Through 2019,” Health Affairs, 29, no.10 (2010):1933-1941 (published online September 9, 2010; 10.1377/hlthaff.2010.0788: http://content.healthaffairs.org/content/29/10/1933.full.pdf+html?sid=f535639f-6adb-4105-91a1-f481125f6d0e). For Foster’s comments to the press in 2010, see: Alonso-Zaldivar, Ricardo, “White House health savings challenged,” Associated Press, Sept. 13, 2010. Separately, underscoring the strategic nature of information, what is released, what is not released or mentioned and its precise timing – and how easily the news media can be manipulated by those in power, when DeParle’s appointment as White House health czar was announced in early 2009, neither President Obama nor DeParle or others in the administration happened to mention her post-employment practices after leaving the Clinton administration in 2001 where she had overseen Medicare. Four-time Pulitzer Prize finalist Fred Schulte found from federal and other records that “she had earned more than $6.6 million since early 2001. And the public wasn't told that much of that corporate career was built at companies that have frequently had to defend themselves against federal investigations. After leaving government, DeParle accepted director positions at half a dozen companies suspected of violating the very laws and regulations she had enforced for Medicare. Those companies got into further trouble on her watch as a director.” Fred Schulte, “The DeParle Portfolio: DeParle profited from health care companies under scrutiny,” Investigative Reporting Workshop, July 2, 2009 (co-published with msnbc.com), http://investigativereportingworkshop.org/investigations/deparle-portfolio/story/deparle-profited-health-care-companies-under-scrut/

viiiInterview with Richard Foster, op. cit.