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2003-12-03 -- Health Industry Bidding to Hire Medicare Chief

Scully told The Washington Post, "I'm checking out of Dodge."

It's hard to do this news story justice.  Thomas Scully, the
mild-mannered head of Center for Medicare/Medicaid Services (CMS) who
played such a large role in the recent privatization of Medicare, is
stepping into the phone booth, and in two weeks will emerge as the
blue-caped Superman of for-profit healthcare, ready to serve and
protect the highest-bidding law firm for private health insurance.



Long known as a quick-change artist, Scully served in senior positions
at the Office of Management and Budget during the first Bush
administration. Later, he served as president of the Federation of
American Hospitals, the trade group representing the for-profit
hospital industry.



The fact that *legal* firms are so eager to get Scully's insider
knowledge of Medicare restructuring is yet another indication that
for-profit insurance companies are planning radically stripped-down
Medicare benefit packages they can profit off, but which will need
standardization and government approval.  These "basic healthcare"
insurance packages would also be used for the uninsured in the
for-profit implementation of "universal healthcare" and later,
employer provided health benefits.



We are in the habit of thinking of privatization in terms of
contracting out, taking jobs and functions out of government and into
private indust ry, a money-saving way of eliminating unions,
contracts, job descriptions and similar inconveniences.



But another interpretation is also useful: that government and
corporations *merging* to protect each other during time of crisis,
along the lines of Italian "corporate-fascism" of the 1920s and 1930s.
An additional 20 million seniors over the next decade, with both
chronic diseases and longer lifetimes, at a time of open-ended war and
more intense international competition would definitely qualify as a
crisis.







New York Times, December 3, 2003



Health Industry Bidding to Hire Medicare Chief



By ROBERT PEAR



WASHINGTON, Dec. 2 - The federal official who runs Medicare and was
intimately involved in drafting legislation to overhaul the program is
the object of a bidding war among five firms hoping to hire him to
advise clients affected by the measure.



Though the official, Thomas A. Scully, is not widely known outside
Washington, his exhaustive knowledge of the Medicare program and the
intricacies of the legislation, approved by Congress last week, would
make him a prize catch for any law firm or private equity firm.



In an interview on Tuesday, Mr. Scully said that his discussions with
potential employers complied with federal ethics regulations and that
he had seen no reason to recuse himself from work on the legislation.
He said he had consulted with the top ethics officer for the
Department of Health and Human Services and received a waiver allowing
him to continue work on the bill. The department confirmed his
account.



Mr. Scully has made no secret of the fact that he has been looking for
jobs outside the government for more than six months - even as he
spent hundreds of hours in closed sessions with House and Senate
negotiators working out countless details of the legislation, which
makes the biggest changes in Medicare since creation of the program in
1965.



Experts on the federal ethics law said they could not judge the
propriety of Mr. Scully's actions without knowing the terms of the
waiver, which have not been made public.



Mr. Scully said Tuesday evening, after several earlier interviews
about his job negotiations, that he was submitting a letter of
resignation and would step down on Dec. 16. He said he had not decided
which of the five jobs to take.



Gail E. Shearer, a health policy analyst at Consumers Union, said Mr.
Scully's discussions with prospective employers were troubling. "At a
time when there are questions about whether the Medicare legislation
serves special interests or consumers, we want to know that our public
officials have their minds totally focused on doing what's best for
consumers," she said.



For his part, Mr. Scully said, "I'm not the most popular guy in the
world, but nobody has ever accused me of being other than honest."



After federal employees resign, they are subject to a permanent ban on
"switching sides." They cannot try to influence the government on a
"particular matter" in which they were personally and substantially
involved. In addition, federal law establishes a one-year "cooling-off
period," during which former senior officials are not supposed to
lobby at all before the agencies where they worked. But they often
give clients informal advice about navigating the federal bureaucracy.



President Bush plans to sign the Medicare bill, a centerpiece of his
domestic agenda, on Monday. The bill not only offers drug coverage to
all 40 million beneficiaries, but also changes Medicare payments to
most health care providers.



Mr. Scully, who served as a White House budget official in the first
Bush administration, has run Medicare and Medicaid since May 2001.



In the interview on Tuesday, Mr. Scully said that he tentatively
decided last May to leave the government but that he stayed on, at the
request of the Bush administration, to work on the Medicare bill.



"I have been talking to a number of law firms and private equity
firms," he said. "My hope is to combine work at a Washington law firm
and a Wall Street investment firm."



Mr. Scully said that after consulting with the ethics officer he saw
no reason to disqualify himself from work on the legislation or on
regulations that affected clients of the five firms.



"My job negotiations were not serious enough," he said.



A summary of ethics rules issued by the Department of Health and Human
Services says employees who have begun seeking jobs in the private
sector must immediately recuse themselves from "any official matter"
that involves the prospective employer. This covers legislative
initiatives and proposed rules, the document says.



A spokesman for the department said that Mr. Scully's waiver allowed
him to work on "matters of general applicability like the Medicare
reform bill" while he talked to potential employers.



As administrator of the Centers for Medicare and Medicaid Services,
Mr. Scully receives a salary of $134,000 a year. Lawyers and lobbyists
said he could easily earn five times that in the private sector
because he has extensive knowledge of the Medicare program and can
offer clients access to senior administration officials.



In his last job, as president of the Federation of American Hospitals,
a trade group for investor-owned hospitals, Mr. Scully made $675,000 a
year.



No one has suggested that Mr. Scully took any position in return for a
job offer. In some cases, he took positions contrary to those of the
lobbyists with whom he was discussing employment. But sometimes their
positions coincided.



Mr. Scully said he had been talking with three law firms and two
private investment firms. He identified them as follows:



¶Alston & Bird. The firm, based in Atlanta, represents the National
Association for Home Care and Johnson & Johnson, among other clients.
The Washington office is headed by a college friend of Mr. Scully's
and includes Bob Dole, the former Senate Republican leader.



¶Baker, Donelson, Bearman, Caldwell & Berkowitz. The firm represents
the Disease Management Association of America, which scored a major
victory in the Medicare bill, authorizing payment for services
provided by its members to people with chronic illnesses. The firm,
which includes Linda H. Daschle, wife of the Senate Democratic leader,
has also represented the American Association for Homecare, Amgen and
the Federation of American Hospitals.



¶Ropes & Gray. The firm, based in Boston, represents the
Pharmaceutical Research and Manufacturers of America, the main lobby
for the brand-name drug industry. It focused on changes in drug patent
laws, one of the hottest issues in the Medicare bill. It also
represents many drug companies including Abbott Laboratories,
AstraZeneca, Bristol-Myers Squibb, Eli Lilly, Novartis and Pfizer.



¶Welsh, Carson, Anderson & Stowe. A private equity investment firm
based in New York, it has invested in many health care businesses. It
has a major stake in U.S. Oncology, which manages cancer treatment
centers and lobbied for more adequate payments under the Medicare
bill.



¶Texas Pacific Group. A private investment partnership, it manages
assets worth more than $13 billion. It helped rescue Oxford Health
Plans, which suffered severe financial problems while Mr. Scully was a
member of Oxford's board.



James C. Duff, managing partner in the Washington office of Baker,
Donelson, said: "Our firm would be a perfect fit for Tom because we
have built one of the top health care practices in the country. We do
both legal and lobbying work. Tom's recent experience at the highest
levels of the government makes him very attractive to our firm."