Health Industry Bidding to Hire Medicare Chief

By Robert Pear for the New York Times, 12/03/03

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:

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."