Administration hides true cost analysis until after passage of Medicare Prescription Drug Act

NOTE: The following is one of a series of case studies produced by the Union of Concerned Scientists' Scientific Integrity Program between 2004 and 2010 to document the abuses highlighted in our 2004 report, Scientific Integrity in Policy Making.


The administrator of Medicare threatened to fire his chief actuary if he communicated to Congress his cost estimates for the Medicare Prescription Drug Mobilization Act of 2003. As a result, members of Congress only saw a lower estimate of the cost of the bill before narrowly voting to approve it. The censored Medicare estimate was in line with the subsequent White House budget request for the program, although the estimate was not released until after the bill's passage.

On December 8, 2003 President Bush signed the Medicare bill into law following a contentious debate in Congress and an unusually long roll call vote.1 Weeks after the signing, the White House's 2004 budget request estimated the price of the Act at over $540 billion. This request was 35% higher than the $395 billion Congressional Budget Office (CBO) estimate that was used to pitch the bill to lawmakers. It is not unusual for the CBO's program cost estimates to differ from the White House's, but allegations of censorship by Medicare's chief actuary raised the possibility that higher estimates were suppressed for political reasons therefore skewing the information available to policy makers.

In March 2004, Richard Foster, the chief actuary for the Centers for Medicare and Medicaid Services, went public with claims that his boss, Medicare administrator Thomas Scully, had actively prevented him from releasing higher cost estimates—$551 billion over 10 years—in response to Congressional inquiries during the debate over the bill. In an interview, Foster said "In June 2003, the Medicare administrator, Tom Scully, decided to restrict the practice of our responding directly to Congressional requests and ordered us to provide responses to him so he could decide what to do with them. There was a pattern of withholding information for what I perceived to be political purposes, which I thought was inappropriate."2

Foster also said that Scully threatened to fire him if he told lawmakers about the higher numbers, an accusation that Scully initially denied. Cybele Bjorklund, a health policy staffer working for Democratic members of the House Ways and Means Committee also claimed that Scully told her that if Foster gave her the cost estimates, "I'll fire him so fast his head will spin."3

The Medicare law expanded the role of the federal government in the health care sector, providing Medicare recipients for the first time with prescription drug coverage. The cost of the program was an issue in the Congressional debate leading up to the bill's passage. Congressman Richard Neal (D-MA) was quoted in the Boston Globe as saying, "I think there was an effort to camouflage the true costs because the Republican conservatives, who already were in protest, would have been in revolt."4 The bill passed by a slim margin of five votes in the House of Representatives.

In response to calls from Democratic legislators, the Inspector General of the Department of Health and Human Services (HHS) initiated an internal investigation in the spring of 2004. The investigation confirmed that Mr. Scully did threaten to discipline Mr. Foster if he responded to various Congressional inquires about the costs of the Medicare bill, but that Mr. Scully's threat, and the withholding of information from Congress, were not illegal.5 The IG found that Mr. Scully had "the final authority to determine the flow of information to Congress" and that Mr. Foster "had no authority to disclose information independently to Congress."6

The research arms of Congress reached different conclusions about the legality of Scully's actions. The Congressional Research Service (CRS) concluded that several laws dating back to 1912 may have been broken, including the Lloyd-LaFollette Act and the Whistleblower Protection Act. The CRS memo noted that "Congress' right to receive truthful information to assist in its legislative functions is clear and unassailable" and executive branch agencies "do not have the right to prevent or prohibit their officers or employees … from presenting information to the United States Congress." The CRS report also noted that Congress intended for the Medicare actuary to have a "degree of independence to make professional and reliable cost estimates."7

The Government Accountability Office (GAO) also concluded Scully had broken the law by preventing the release of information to Congress and that furthermore, federal money could not be used to pay Scully's salary after he began making such threats. The GAO recommended that HHS attempt to recover those funds.8

Thomas Scully resigned from Medicare in December 2003, shortly after the law was passed. By the next summer he was registered as a lobbyist for several large drug companies.9 The organization Public Citizen reported that the pharmaceutical industry and HMOs spent an unprecedented $141 million and hired 952 individual lobbyists—half of whom were "revolving-door" lobbyists who were former employees of the U.S. government—to push for the legislation's passage.10

 


1. CNN. 2003. Bush signs landmark Medicare bill into law. December 8.

2. Pear, R. 2004. Democrats Demand Inquiry Into Charge By Medicare Officer. New York Times, March 14.

3. Stolberg, S.G. and Pear, R. 2004. Mysterious Fax Adds to Intrigue Over Drug Bill. New York Times, March 18.

4. Milligan, S. 2004. Cost estimates rise to $540 billion for Medicare Plan. Boston Globe, January 30.

5. Corrigan, D. 2004. Statement of Dara Corrigan, Acting Principal Deputy Inspector General, Department of Health and Human Services on Thomas Scully and Richard Foster Investigation. July 6.

6. Pear, R. 2004. Inquiry Confirms Top Medicare Official Threatened Actuary Over Cost of Drug Benefits. New York Times, July 7.

7. Maskell, J. 2004. Congressional Research Service (CRS) Memorandum to Charles Rangel, House Committee on Ways and Means, Subject: Agency Prohibiting a Federal Officer from Providing Accurate Cost Information to the United States Congress. April 26.

8. Government Accountability Office (GAO). 2004. Report to Sen. Frank R. Lautenberg et al. Subject: Department of Health & Human Services—Chief Actuary's Communications with Congress. September 7.

9. Pear, R. July 7, 2004. 

10. Public Citizen. 2004. The Medicare Drug War. June. 

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