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The Money Fighting Health Care Reform

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Sunlight Foundation
A chart showing some of the contributions from lobbyists and their health sector clients to the reelection committee of Max Baucus, chairman of the Senate Finance Committee, between January 2007 and July 2009

Some of the smaller spenders in favor of reform have relatively narrow concerns. For example, in 2009, the American Cancer Society’s Cancer Action Network spent more than $4 million to advance preventive measures against cancer, such as more money for early screening and antismoking programs. Labor unions, of course, supported reform, but their amounts spent on lobbying were piddling compared to those of the corporations. The AFL-CIO spent just $2.26 million, and the American Federation of State, County, and Municipal Employees, $2.87 million. Generally speaking, all but a tiny portion of lobbying money was spent either opposing the reform legislation outright or bending it to reflect corporate goals.

In addition, it’s worth remembering that, apart from lobbying legislators, these organizations spend vast sums for television and radio advertising. Last month, The National Journal ‘s Peter H. Stone reported that AHIP solicited between $10 million and $20 million from six large insurers—Cigna, Aetna, Humana, Wellpoint, Kaiser Foundation Health Plans, and UnitedHealth Group—that was funneled to the Chamber of Commerce to underwrite television ads opposing reform by two business coalitions set up by the Chamber.^7 PhRMA, as part of its deal with the White House, agreed to spend $100 million on television ads in support of reform—$100 million that, as everyone involved surely knew, could as readily have been spent on anti-reform ads if the outcome of the negotiations over the legislation had been less to PhRMA’s liking.

At one point last year, more than 3,300 people were registered as lobbyists on health care. That’s six for every member of Congress, House and Senate combined. Even the defense industry, according to Bloomberg News, had only two for every member.8 “We hear from lobbyists all the time,” said Representative Frank Pallone, a New Jersey Democrat who heads the House Energy and Commerce Committee’s Health Subcommittee. Just what they say is seldom made public, but some accounts suggest that lobbyists have mastered the art of explaining to lawmakers why their position serves the common good, and the best ones are invariably well versed in the arcana of their particular policy concerns; lawmakers sometimes turn to them for guidance on the possible impact of a certain provision in a bill; and lobbyists may suggest measures they want incorporated in a bill or eliminated from it. We gather that, with few exceptions, they make many of the same arguments against the reform legislation that we hear from members of the Republican caucus.

About one in ten of those 3,300 lobbyists was a former government staffer or member of Congress, according to The Washington Post.9 Nearly half of the 350 or so former governmental employees turned lobbyists once worked on Capitol Hill for key legislators or committees—something that surely didn’t hurt their chances of getting access to Congress. The Post reported, for example:

A June 10 meeting between aides to [Max] Baucus, chairman of the Senate Finance Committee, and health-care lobbyists included two former Baucus chiefs of staff: David Castagnetti, whose clients include PhRMA and America’s Health Insurance Plans, and Jeffrey A. Forbes, who represents PhRMA, Amgen, Genentech, Merck, and others. Castagnetti did not return a telephone call; Forbes declined to comment.

Also inside the closed committee hearing room that day was Richard Tarplin, a veteran of both the Department of Health and Human Services and the Senate, where he worked for Christopher J. Dodd (D-Conn.), one of the leaders in fashioning reform legislation this year. Tarplin now represents the American Medical Association as head of his own lobbying firm, Tarplin Strategies.

For people like me who are on the outside and used to be on the inside, this is great, because there is a level of trust in these relationships, and I know the policy rationale that is required,” Tarplin said in explaining the benefits of having government experience.

PhRMA, at one point, employed forty-eight lobbying firms, in addition to its in-house operation, and had a total of 165 people lobbying for its positions—137 of whom had previous government experience, mostly in Congress, according to Paul Blumenthal of the watchdog group the Sunlight Foundation, which has done excellent work on these connections.10

We don’t know just what goes on at these meetings and probably will never know. Baucus posted his public schedule last year, so it was possible to see, as Blumenthal calculated, that he had held twenty meetings with health industry representatives, mostly drug makers and insurers, as well as twelve with representatives of public interest associations.

Baucus’s record raises the question of the other major category of corporate expenditure, campaign contributions, which are distinct from the rest of the money spent on lobbying. According to the invaluable opensecrets .org, Baucus has raised about $2 million from the health sector during the last five years, including during his 2008 reelection campaign (which is when contributions from key industries to senators tend to spike). In his low-cost state of Montana—population 968,000—he won reelection that year with 73 percent of the vote. (The illustration on page 12 gives a sampling of health sector contributions to Baucus between 2007 and 2009.)

Other members of Baucus’s “Gang of Six”—the three Democrats and three Republicans who negotiated the Senate Finance Committee bill last year—have received substantial campaign contributions from the health sector during the same five-year period: Republican Chuck Grassley took in $813,000, Democrat Kent Conrad $689,000, with each of the others closer to $400,000. Only Grassley faces reelection this year, and his seat is considered safe.

In all, organizations and individuals in the health industry have given $27.6 million in campaign contributions during 2009–2010, with 54 percent of that going to Democrats. About $9.6 million of that total has come from pharmaceutical interests, and $7.5 million from hospitals and nursing homes. Taken together, their contributions amount to roughly between $100,000 and $300,000 for most incumbent senators and for representatives, who all face reelection fights this year.

In 2008 Obama himself received $19.5 million from health-related donors, compared to John McCain’s $7.4 million. This should be compared with the $750 million he raised overall, and with the larger contributions he received from lawyers and from members of the communications and finance industries, among others.

What are the various members of the health industry getting in return for all these dollars? Some caution is in order here. On the big question, the private insurers won: if a health care bill is passed, it would contain no public option, no federal alternative that might compete with them. But many factors influence a member of Congress’s vote or position. Democratic Senator Ben Nelson of Nebraska, for example, has received hefty contributions from the health sector during the past five years, $759,000. But he’s also a fairly conservative senator from a very conservative state that happens also to be home to large insurance interests, including Mutual of Omaha. Is he doing their bidding, or is he protecting legitimate constituent interests, or is he merely following his own cautious political instincts? Or may he see all three coinciding in the public interest?

The clearest case of a powerful lobby winning its arguments behind closed doors on health issues, documented by the Sunlight Foundation’s Blumenthal, involved PhRMA’s deal with the White House.11 PhRMA’s chief interests are three. First, the group opposes allowing Medicare to negotiate drug prices for seniors, which experts say would result in lower prices (and profits). The absence of such a provision in the 2003 Medicare bill caused many Democrats to oppose it. Second, it opposes drug “reimportation,” i.e., bringing in prescription drugs from other countries where prices are cheaper (opponents of reimportation cite concerns about safety and standards). Finally, PhRMA is concerned that Congress might hit it with the full cost, estimated at around $135 billion, of closing the so-called Medicare “donut hole.”

Obama campaigned in favor of closing the donut hole and allowing drug reimportation and Medicare drug price negotiation. Blumenthal documents how, step by step, PhRMA won on every point in negotiations both with White House officials and with Max Baucus. Several meetings during the spring and summer involved PhRMA CEO Billy Tauzin, a former member of Congress from Louisiana, Baucus or his staffers, and White House officials including Deputy Chief of Staff Jim Messina, who once worked for Baucus. Obama had dropped his campaign positions. The agreement was that nothing in the legislation would cost PhRMA more than $80 billion total (of which a reported $50 billion would go toward the donut hole problem).

As Baucus’s committee was preparing the final version of the health care bill last fall, Democrat Bill Nelson of Florida introduced a measure that would have closed the donut hole completely. The amendment failed 10–13, with Baucus and all Republicans opposing it, joined by Bob Menendez of New Jersey and Tom Carper of Delaware. Baucus and Carper both said at the time that they were standing by the White House’s deal with PhRMA. The White House was pressuring senators to keep to the deal. The three Democrats who voted with the Republicans also happened to be the top three Democratic recipients of PhRMA’s donations since 2003.

Then, as the full Senate debated amendments to the bill last December, North Dakota’s Byron Dorgan put forward a measure to allow drug reimportation. It received fifty-one votes, but it failed, because it was brought up under cloture rules requiring sixty votes. Dorgan’s amendment had been scheduled for a vote the previous week, but that vote was postponed. Then, several senators who had been on record as supporting reimportation switched their votes to “nay,” under pressure from Senate leaders and the White House, according to a report at the time in the Huffington Post, whose Ryan Grim followed the PhRMA deal closely. According to his report, when the roll was called and Connecticut’s Chris Dodd said “nay,” Vermont’s Bernie Sanders stage-whispered loudly enough to be heard in the press gallery: “Dodd?!”

Earlier last year, in the House, Energy and Commerce Committee Chairman Henry Waxman had fought for a provision that would make so-called “biologic” drugs, which derive from living cells and are typically expensive, available in generic form in as little as five years, something PhRMA also opposed. Democrat Anna Eshoo of California, pairing with the committee’s ranking Republican, Joe Barton of Texas, introduced a substitute measure slowing that process to twelve years (Eshoo denied at the time that her amendment did that, but Waxman said it did). It passed 47–11 in committee. Eshoo has received $112,000 in pharmaceutical donations so far in 2009–2010, making it the industry that is most generous to her.

With the plan it released on February 22, the Obama administration took some steps to challenge these lobbies. The insurance industry dislikes the administration’s proposal for a federal rate-review board, a seven-member body led by the secretary of health and human services that would review rate increases. (The administration suggested the review board in response to a plan by California’s largest private insurer, Anthem, to hike the rate paid by some of its customers by 39 percent.) In addition, the administration has now proposed closing the donut hole completely. This can’t sit well with PhRMA, although it should be noted that, of the association’s big three issues, closing the donut hole would cost less than drug reimportation or a requirement to negotiate Medicare prices. Assuming the House and Senate finally decide to pass a health reform bill, it will be interesting to see whether these provisions make the cut.

In fairness, the bill’s many positive features should be recognized. It ends discrimination based on preexisting conditions and development of catastrophic illnesses. It eliminates price discrimination based on health status and offers subsidies for up to 30 million currently uninsured people. It establishes a host of other precedents concerning cost control and new services that would, taken together, still be a major, even astonishing, step forward. As big a victory as that would be, it will remain the case that it could have been a considerably better bill, in both providing medical care and controlling costs.

Whether it passes or not, the institutional pressures of big money have effectively and quietly deformed central parts of the bill and continue to loom over any attempt by Congress to write and pass major domestic legislation. Stronger financial regulation is now being resisted daily by Wall Street lobbies. It’s not a coincidence that there have been fewer and fewer pieces of large-scale economic and social legislation since big money has increasingly dominated politics from the 1980s on. The question that remains open is whether there is any effective way of revealing what is being bought and sold in Congress.

—March 11, 2010

Letters

Elizabeth Drew Was First April 29, 2010

  1. 8

    See Jonathan D. Salant and Lizzie O’Leary, “Six Lobbyists Per Lawmaker Work on Health Overhaul,” www.bloomberg.com, August 14, 2009.

  2. 9

    See Dan Eggen and Kimberly Kindy, “Familiar Players in Health Bill Lobbying,” The Washington Post, July 6, 2009.

  3. 10

    See Paul Blumenthal, “Researching and Writing the White House–PhRMA Deal,” blog.sunlightfoundation.com, February 16, 2010.

  4. 11

    See Paul Blumenthal, “The Legacy of Billy Tauzin: The White House–PhRMA Deal,” blog.sunlightfoundation.com, February 12, 2010.

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