Just How Did Medicare Bill Get Passed?

March 27, 2004 -- It cannot be overstated how much President George W. Bush has always been one to learn from the mistakes of his father. The first President Bush was pilloried for ignoring needs on the domestic front. His son is determined to not allow that perception to cost him re-election. And last year's Medicare Reform Bill is his exhibit A.

"When we came to office, people had gotten used to what they called gridlock; old problems were used to score points," the president said on March 11. "But we came to Washington for a different reason. We came to solve problems. … That's why we passed reforms of Medicare, to give patients prescription drugs and give seniors choices. No, we came to lead, and we have delivered results for the American people."

The "Medicare Prescription Drug, Improvement and Modernization Act of 2003" is, according to Norm Ornstein of the American Enterprise Institute, "the domestic issue for the White House going into the election season." Before it passed last fall, "the White House and the Republicans in Congress were desperate to get a huge trophy," he said.

Republicans in Congress agree. "The fact is there was an awful lot riding on this bill politically — for the president and for the Republican Party," Sen. Chuck Hagel, R-Neb., told ABCNEWS.

The bill passed the House and Senate and was signed into law on Dec. 8. "Our government is finally bringing prescription drug coverage to the seniors of America," Bush said at the bill signing.

Bush and Republican leaders said the new law would cost $400 billion, providing drug benefits to seniors beginning in 2006, as well as subsidies to insurance companies and HMOs. It would also allow the first steps to allow private plans to compete with Medicare.

Certainly at the time the president never anticipated headlines like these, from recent newspapers in swing states Florida, Michigan and Pennsylvania: "The Medicare fiasco; President's political dream scheme is becoming a nightmare," wrote the Sarasota Herald-Tribune; "Bush's Medicare dream turning into a nightmare," wrote the Detroit Free Press; "Medicare law has become stumbling block for Bush," wrote the Philadelphia Inquirer.

So what happened?

The Price of Victory

To get the bill passed, the attitude across the board, from the White House to the Department of Health and Human Services — which oversees Medicare — to the GOP leaders in Congress was "win at any cost," Ornstein said. "And now we're beginning to see how big that cost was."

According to Robert E. Moffit, director of the Center for Health Policy Studies at the Heritage Foundation, the GOP leadership of the House and Senate said, " 'Look, we're going to have a financially responsible drug benefit. That's what we're going to have, and it's not going to be any more than $400 billion over 10 years.' And the conservatives in the Congress were saying, 'Wow. OK. All right. You know, we budgeted that, but it can't be any more than that.' So they were in a position where they had to hold to that line."

Democrats had proposed a more expensive version. But conservatives like Rep. Pat Toomey, R-Pa., thought even the Republican leadership's $400 billion price tag was too high.

"There is no mechanism to contain the cost of this bill," Toomey told ABCNEWS. "And you know in the history of every entitlement program in American history, they end up costing far more than the initial projections." Without any cost containment mechanism, Toomey says, he's concerned the Medicare bill will do that as well.

But according to Sen. Bill Frist, R-Tenn., a physician in addition to being Senate majority leader, "Health care security and better health care for those seniors and those individuals with disabilities is the goal. And therefore the cost is well worth it."

The Real Numbers

But there was an even bigger question raised about the program's looming cost; one raised by Medicare actuary Richard Foster.

Foster is a 30-year veteran of the Medicare process, relied upon by both Democrats and Republicans for his unbiased accounting. He calculated the cost of the bill and the number he came up with it was much higher than the $395 billion touted by the Bush administration and the Republican leadersip. Foster "had projections that were between $500 and $600 billion over 10 years for the drug benefit," Moffit said.

Cybele Bjorklund, a top health-care staffer for House Democrats, had relied on Foster's numbers for years. At least until last June.

"I had asked [Foster] for information on the effect and cost of particular proposals," Bjorklund told ABCNEWS, "and he said that he had at least part of the information ready, but that he was not allowed to give it to me. I asked him why, because under the law we are entitled to access this information and he had prepared it, and he was clearly unhappy with telling me that he couldn't give it to me. And he said that he'd been threatened."

Bjorklund said Foster told her that Medicare Adminstrator Thomas Scully — a Bush political appointee — had called him into his office and told him he couldn't give cost estimates to Congress anymore without Scully's prior appoval.

"I was not happy about that," Foster told a congressional committee Wednesday. "I could ignore orders, but I knew I would be fired."

That night, Bjorklund said, she caught up to Scully and confirmed Foster's story. "I said, 'How can you do that? You need cause, he's protected'. And he said, 'If he gives that to you, I will fire him so fast his head will spin.' "

"It struck me as a political basis for making that decision," Foster said Wednesday. "I considered that inappropriate and, in fact, unethical."

Scully, who has left government to work for a law firm and investment bank with major health-care industry clients, has denied this story. But even his fellow Republicans aren't so sure as to what happened.

"If in the administrative or the executive side there was some sort of withholding of data to a member of Congress, I think it needs to be looked into," said Frist.

"It's a very serious charge leveled by a 30-year professional," added Hagel. "I don't know how far it goes. I don't know who all was involved but we need to find out."

Why Foster's calculations may have been witheld soon seemed clear. A few weeks after the Medicare bill was signed into law, the bill's estimated cost began to rise. The Bush administration began publicly it would cost $534 billion for the next 10 years — about $140 billion more than it had told Congress it would cost.

"Within the Republican caucus there were a number of senators who were very uneasy about this, just from the dollar figure alone," said Hagel. "The $400 billion number was critical because that fit within the budget which most of us voted for." With costs exceeding that figure, the bill's outcome was far from assured passage.

But the Republican leadership dismiss this point. "These estimates are just that," Frist said. "They're guesstimates, to my mind. Nobody knows, and nobody will know, what this bill is going to ultimately cost." Besides, Frist added, Congress is ultimately supposed to rely upon the figures provided by the Congressional Budget Office. And as recently as Wednesday, the Republican head of the CBO insisted that the $395 billion figure remains accurate.

When did the administration know about the higher cost?

But clearly the Bush administration thought it would be much more than that. So members of Congress on both the left and right began to ask: When did the Bush administration know that the bill would probably cost more than $100 billion more than it had said?

On Jan. 30 of this year, Bjorklund got a hint. "One Friday afternoon, working in my office, I heard a fax come in, I checked the machine, and it was a table that was unattributed, it came anonymously, and it showed an estimate performed by Foster's office on June 11," Bjorklund said. "It was an estimate of a package that was similar to what passed the Senate and it showed a score of $551 billion."

According to this fax, therefore, around the time Foster was allegedly being silenced, the Bush administration already possessed evidence that the numbers it was touting to Congress were far too low.

On Wednesday congressional Democrats asked the Justice Department to investigate the matter "It may well have been a crime to have withheld this information from the congress," said Rep. Henry Waxman, D-Calif. "There is statutory authority that says you can't keep the Congress from getting the information we need."

Health and Human Services Secretary Tommy Thompson declined an interview with ABCNEWS, but last week he said he would have his department's inspector general look into the charges against Scully. Though he didn't seem overly concerned. "I don't believe the White House interfered at all with Rick Foster," Thompson said. "I don't think there has been any evidence whatsoever of that, and i think the IG is going to find that out."

Hagel says that it's an open debate as to whether that larger number would have prevented the bill from passing. "I have never seen a bill with so much intensity, so much political pressure than this bill," he said. "So even with a $550 billion number, whether it would a passed the Senate or not, I don't know, because the politics of this were of such intensity that it was difficult, especially on the Republican side, to walk away from this."

A Very Long 15 Minutes

Which is not to say that the bills sailed through the House and Senate with ease.

You could tell things were far from normal from the moment the Medicare bill was called for a vote in the House of Representatives — at 3:01 a.m. on Saturday, Nov. 22, 2003.

"It was an unusual evening," recalled Toomey. "Well, it wasn't an evening. It was an unusual early morning, to be more precise."

"The yeas and nays are ordered," the House chair intoned that morning. "This will be a 15-minute vote."

Almost immediately, 17 House Republicans voted "no." By 3:48 in the morning — almost an hour after the 15-minute vote had been called — 218 members of Congress, a clear majority, had voted against the bill, with 215 in favor.

Sometimes exceptions are made to that 15 minutes. On rare occasions, when the margin of victory is close, a vote might be held open as long as an hour.

But there was clearly something different about this bill.

"After the vote was open about a half an hour, I drove home," said Rep. Pete Stark, D-Calif. "It takes me an hour to get home, and I was listening on C-SPAN Radio. And I say, 'We're winning.' And I got home, and I got in bed, and I looked at the television on C-SPAN again, and we were winning.

"And then I said, 'Wait a minute.' "

The lobbying on the floor of the House was furious and the vote was being held open longer than has ever happened in modern congressional history.

"I turned on the TV at 2, and 3, and 4 in the morning," Frist chuckled. "It made for good drama from the Senate side, and I don't try to explain what goes on specifically in the House side."

"Traditionally, the speaker doesn't vote on issues unless it's an issue of enormous moment or extremely close, and the speaker doesn't lobby on votes on the House floor," Ornstein said. "That's the reason you have a majority leader."

On this issue, however, he said, House Speaker Dennis Hastert, R-Ill., "openly strong-armed members. It's a gross violation of the normal role on the speaker."

Moreover, Hastert was joined on th floor of the House by Secretary Thompson. That Thompson was there "is just an enormous breach of the standards of the House," Ornstein said.

At 4 in the morning, one of the rebellious 26 — Rep. Ernest Istook, R-Okla. — changed his vote from "no" to "yes," and the tide began to turn.

In the speaker's crosshairs were several of the 12 Republicans who had signed a letter organized by Toomey complaining about the bill's flaws and pledging their opposition. But by the end of the night, nine of those principled 13 — Republican Reps. Sue Myrick of North Carolina, Marsha Blackburn of Tennessee, Joseph R. Pitts of Pennsylvania, Roscoe Bartlett of Maryland, Trent Franks of Arizona, David Vitter of Louisiana, and Joe Barton, Jeb Hensarling, and John R. Carter of Texas — voted for the bill.

Only Toomey, Tom Feeney of Florida, Gresham Barrett of South Carolina, and Scott Garrett stuck to their guns.

Finally, at 6 a.m. — nearly three hours after the 15-minute vote began — the gavel came down and the triumphant Republican chair announced that the Medicare bill had passed.

Democrats were furious. "This vote has now been held open longer than any vote I can remember," Rep. Steny Hoyer, D-Maryland, fumed. "Democracy is about voting. But just as you cannot say on the Tuesday of Election Day, 'We'll keep the polls open for 15 more hours until we get the results we want,' we ought not be able to do it here."

"The three-hour vote will enter the realm of dark legend," Moffit said. "This was not good government's finest hour, shall we say."

Added Ornstein: "There is simply no question here that what Speaker Hastert did in the name of winning at all costs stained his speakership and stained the House of Representatives in a way that will last for a very long time."

That is not, of course, how the Republicans running the country see it. "We got it done," Frist said, "and it took leadership. It took leadership by the president of the United States, by Speaker Hastert doing everything that he possibly could, by the leadership in the United States Senate, and to me that's what good government is all about."

The Saga of Nick Smith

Strong-arming is one thing, but the extreme measures employed on the floor that night have triggered an investigation by the House Ethics Committee. Investigators are focusing on the tactics used against Rep. Nick Smith, R-Mich., who refused to buckle and voted no on the bill.

In December, Smith — who has largely kept away from the media since then — described the scene to a local Michigan radio station, WKZO-AM in Kalamazoo. "The arm-twisting was probably as strong as I've ever seen it," Smith said. "They threatened — here's what they did. They started out by offering the carrot." Smith is retiring this year, with his son Bradley running to replace him, "so the first offer was to give him $100,000-plus for his campaign and endorsement by national leadership. And I said no, I'm gonna stick to my guns on what I think is right for the constituents in my district."

The carrot having failed to work, Smith said, out came the stick. "They said, well, if you don't change your vote — this was about 4 a.m. Saturday morning — then some of us are going to work to make sure your son doesn't get to Congress." Smith says he "told them to get the heck out of there and I mighta used a different word besides heck."

Ornstein said "that, by any reasonable standard, is a bribe, and we're now in the middle of investigating it."

In December, after the Justice Department said it would review the bribery allegations, Smith issued a statement that contradicted some of his earlier claims, insisting no specific money amount had been cited. Regardless, the House Ethics Committee has indicated there is enough evidence to merit its own investigation, which it launched this week.

Still More Issues

And as if these three fairly major controversies weren't enough, still others have appeared.

Medicare Administrator Scully received an ethics waiver so while he was negotiating the Medicare bill he was able to simultaneously negotiate with various companies for his next job — companies representing health-care interests that stand to make millions from the actual bill.

The Department of Health and Human Services has also been pilloried for using taxpayer dollars to fund a $9.5 million TV advertising campaign about the new law that the General Accounting Office ruled to had "notable omissions and other weaknesses" though they were "not so partisan as to be unlawful."

GAO is currently investigating some video news releases — essentially a fake news broadcast — that HHS distributed to local television stations. Some stations ran the VNRs as if they were actual news, though critics say they were little more than a commercial for the new law. HHS under the Clinton administration distributed VNRs as well.

"What you have is credibility issue piled on credibility issue piled on credibility issue over this bill," Ornstein said.

Perhaps not surprisingly in this election year, Democrats are now trying to tie this to other issues, like Iraq. "There is a pattern here," said Senate Minority Leader Tom Daschle, D-S.D. "First of all, with the Congress not being given the right information, we're led to the wrong decisions. This has happened now on several occasions."

"They said that there were nuclear weapons in Iraq and that Iraq was involved in 9/11, and that was false," argued Sen. Edward Kennedy, D-Mass. "They had indicated that this bill was going to cost $400 billion, and that was wrong. And they not only deceived the Congress, they misrepresented the figures, they basically lied."

Republicans respond that this is all just election year nonsense. "Democrats are playing out of a partisan, poll-driven playbook," said Frist. "We're seeing these attacks on procedure, going around the periphery, without going right at the heart of the bill. What is actually in the bill, the preventive care, the chronic disease management, the prescription drugs, things which help people."

What once seemed like the centerpiece of the president's domestic achievements now has been sullied by investigations, ethics complaints and multiple controversies. Whether any of these allegations and accusations will ultimately mean more to seniors than the huge new entitlement program they've been granted is certainly questionable. But right now, the aggressive steps used to pass this bill seem to have snatched a political defeat from the jaws of victory.