HEALTHCARE AT HOME:
THE  ROWAN TECHNOLOGY REPORT

Serving the home health, home care and hospice industry since 1999.

analysis by Tim Rowan 

One of the most serious problems plaguing our representative form of government is the uncontrolled "revolving door" between elected and appointed offices and high-salary private industry lobbyist positions. Year after year, individuals do selfish things to make us wonder about the objectivity of all of our elected and appointed officials.

When Paul Ryan (R-WI) included the dissolution of Medicare in his 2012 budget proposal this week, and in doing so proposed an unimaginable windfall for health insurance companies, I wondered whether he is to be the next Washingtonian to enter the revolving door. While I insist on remaining optimistic about his personal integrity until proven otherwise, I remembered one precedent from only eight years ago that shakes my optimism. 

Remember Tom Scully? He is noted for being even more successful than his contemporary Tom DeLay in keeping himself out of prison when everyone was betting otherwise. In 2001, he left a lucrative career as a lobbyist, first with a DC law firm that focused on healthcare regulations, followed by six years as President and CEO of the Federation of American Hospitals, to accept an appointment as George W. Bush's CMS Administrator. 

In that role for just under three years, Scully is know for writing, and presided over passage of, the "Medicare Prescription Drug, Improvement, and Modernization Act" (The Act), which includes Medicare Part D, the prescription drug benefit. 

How Part D came to be 
The Act was called to a vote in the House by Speaker Dennis Hastert (R-IL) at 3:00 a.m. on November 22, 2003 and emerged successfully from a House/Senate conference committee three days later, following powerful pressure imposed on a handful of wavering representatives and senators by Representative Tom DeLay (R-TX) and Senator Trent Lott (R-MI). Though it passed handily in the Senate, it was sent to the President's desk on a 216-215 House vote and signed into law on December 8. 

Fiscal conservatives in Congress had made it clear their votes for The Act were contingent on the veracity of President Bush's promise that Part D would not cost more than $400 billion over 10 years. Scully later admitted that, as the House debate was beginning, he instructed Medicare's chief actuary, Richard Foster, to withhold from Congress Foster's estimates that the legislation would actually cost as much as $600 billion over 10 years.* The Congressional Research Service later concluded that Scully and the Bush administration broke federal law by telling Foster to withhold that information from Congress. No one was ever charged with that crime. 

A few days after The Act was signed into law, it was revealed that, while he was participating in crafting The Act's language, Scully had been interviewing for employment as a health industry lobbyist with law firms and private equity firms that might have been affected by the bill. It eventually came out that he had been given an "ethics waiver" from the Bush administration that provided him cover to do both at the same time.

Days after the bill became law, Scully resigned as CMS Administrator and accepted two positions, each of which is estimated to pay him in the high seven figure range. He is currently Senior Counsel at Alston & Bird LLP, a law and lobbying firm, where he focuses on health care regulatory and legislative matters. He is also a general partner at Welsh, Carson, Anderson & Stowe, a private equity investment firm, where he focuses on health care investments. 

Fast forward to April, 2011
Informed by this classic example of how Washington's revolving door works outside the boundaries of ethics and law, it seems that it may be wise to begin to keep a close eye on the career of Wisconsin Republican Paul Ryan, who is suddenly in a position to reap Scully-like rewards for his recent actions as a legislator. 

Whether he will seek those rewards depends on whether his personal integrity exceeds that of Mr. Scully. It should be possible to both watch him and remain hopeful. After all, aren't Wisconsinites known for their morals, politeness and integrity? 

Ryan chairs the House Committee on the Budget. In that powerful role, it is his responsibility to submit to Congress by April 15 a "Concurrent Resolution on the Budget" for Federal Fiscal Year 2012, which begins, of course, on October 1 of this year. He fulfilled that duty and submitted a resolution this week that includes a plan for rescuing the Medicare Trust Fund from bankruptcy. Bankruptcy is a clear danger whenever the ratio of Medicare beneficiaries to taxpaying workers increases, as it will do exponentially for the next 28 years as 76 million Baby Boomers enter the system.

Ryan's plan is to force Medicare beneficiaries to purchase insurance policies from private insurance companies, who would then pay for their healthcare instead of the Medicare Trust Fund. Seniors would receive vouchers for a portion of the cost of the premiums but would have to pay the difference out of their own resources. An objective CBO analysis, requested by Ryan, predicts "a sharp reduction in national debt over time through a shift of healthcare costs from the taxpayer to the poor (Medicaid) and elderly (Medicare)." 

The prospect of receiving premiums from millions of new customers will thrill insurance executives and their stockholders when they read Ryan's budget proposal (assuming they had not already read it, or written it, before it was released). Certainly, some of that windfall will become available to thank Mr. Ryan when he leaves Congress, whether that be twenty years from now, at the end of his current term, or the day after such a budget is approved. Of course, he does not have to accept the industry's gratitude. It depends on whether his ethics are as strong as his legendary P90X workout routine.

*After 2008 expenditures came in at just under $50 billion ($1,517 per beneficiary on average), CMS revised its forecast for the cost of Part D to $727.3 billion for the 10-year period 2009 through 2018.
http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2009.pdf