President Obama may have shunned lobbyists, but he gave them a big gift with his health care plan.
From the moment he proposed overhauling the health care system in February, the industry turned to K Street to help shape the plan.
It has been, without a doubt, the biggest lobbying campaign of 2009. This year, health care has translated into nearly $400 million spent on lobbying through September, according to the Center for Responsive Politics. Among the biggest winners: the Podesta Group reported $5.8 million in fees from clients lobbying on health issues in the first three quarters of 2009, Patton Boggs reported $6.9 million, Brownstein Hyatt Farber Schreck reported $1.32 million and Holland & Knight reported $2.76 million.
Although the big battles — a government-run insurance plan, abortion coverage — have taken up much of the public’s attention, they haven’t necessarily been the breadwinners for lobbyists. Some of the most lucrative and sensitive work has been on smaller issues that may have a big effect on a particular business.
“People are very concerned about very small things,” said Tony Podesta, head of the Podesta Group, which lobbies on health care on behalf of Amylin Pharmaceuticals, Children’s National Medical Center, Cubist Pharmaceuticals Inc., Genzyme, Novartis, Novo Nordisk Inc. and Wal-Mart, among others.
What follows are three prime examples of how lobbyists carved out those “small things” to influence the biggest issue of the year.
This summer, Automatic Data Process­ing Inc., or ADP, hired Sonnenschein Nath & Rosenthal. The company was concerned about the possible effects of the health care proposals on its business of offering payroll and benefits services to employers. One key issue: Flexible spending accounts were under siege.
The accounts, which allow workers to set aside pretax money that can be used to pay for medical expenses, were being looked at as a way to help pay for the expansion of health benefits. Some experts, including Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, have proposed doing away with them or limiting them.
ADP and other companies that administer the accounts are often paid based on the number of employees who enroll, which means that policies that make the accounts less attractive could cost them a lot of money, especially if employers decided it wasn’t worth it to keep offering the plans.
Ronald Platt, senior managing director at Sonnenschein’s public law and policy strategies practice and one of the lobbyists representing ADP, said an early draft of a bill from the House Ways and Means Committee limited the tax exemption to $2,000, a sign the argument against the accounts was gaining traction. Sonnenschein’s plan was to push for a $2,500 cap that would be indexed for inflation.
New Jersey-based ADP set out to approach friends on the Hill, including a very important one: Sen. Frank Lautenberg, D-N.J., a co-founder and former chairman of the company. Sonnenschein set up meetings on the Hill for ADP officials with Lautenberg and other members and staffers, focusing on states where the company operates. The member meetings included Rep. Kendrick Meek, D-Fla.; Sen. Robert Menendez D-N.J., a member of the key Senate Finance Committee; Rep. James Clyburn D-S.C.; and others, Platt said, adding that ADP Chief Executive Officer Gary Butler met with several of the members personally Sept. 15.
And Sonnenschein had help as other benefits companies sprung into action with their own efforts to defend flexible spending accounts.
Wage Works Inc. hired Patton Boggs, which was involved in developing a Web site featuring consumers’ stories of using the accounts and encouraging people to “tell Congress to protect flexible spending accounts.” The Employers Council on Flexible Compensation, which hired lobbying firm Mehlman Vogel Castagnetti, is behind a group called Save Flexible Spending Plans.
The push has produced results. The bill passed by the House includes the higher $2,500 cap and indexes it for inflation. The Senate bill also includes the $2,500 cap, and Sen. Chuck Schumer, D-N.Y., last week filed an amendment indexing that for inflation as well. Patton Boggs’ John Jonas said the firm had repeated meetings at Schumer’s office after he expressed interest in the issue, citing the large numbers of big employers who offer the benefit in his state.
Sonnenschein received $80,000 from ADP in the third quarter of 2009, lobbying disclosure reports show.
Holland & Knight lobbyists, meanwhile, found themselves taking on Obama, whose budget earlier this year called for the use of radiology-benefit managers by Medicare and Medicaid. Such managers are gatekeepers who review whether certain diagnostic imaging tests are necessary. The proposal was meant to contain growing imaging costs.
But Holland & Knight represents the E-Ordering Coalition, a group of software companies and the Center of Diagnostic Imaging and the American College of Radiology that want software, rather than human managers, to evaluate the use of medical imaging tests when doctors order them for patients. The coalition paid Holland & Knight $90,000 in the first three quarters of 2009, lobbying disclosure reports show. Of course, companies that provide radiology-benefit managers were lobbying, too. One, MedSolutions, has paid Health Policy Source Inc. $100,000 in lobbying fees this year, lobbying disclosure reports show. The lobbying team working for MedSolutions includes firm president Monica Tencate, a former health policy director for the Senate Finance Committee under Sen. Chuck Grassley, R-Iowa. She did not return a call for comment.
Michael Gaba, the federal policy leader of Holland & Knight’s national health law and life sciences team, said one key point that helped in the campaign was that, typically, Medicare doesn’t require prior authorization for medical services. But radiology-benefit managers authorize tests before they are given, he said, which would have meant that Congress would need to change the Medicare approval process. Part of the firm’s strategy, he said, was presenting “a reasonable alternative” that was simpler.
Gaba said the firm set up between 35 and 40 meetings between members of Congress and representatives of the coalition. Lobbyists also met with committee staff members for the Senate Finance Committee and the House Ways and Means Committee. So far, the campaign is working. Neither the House nor the Senate bill calls for radiology-benefit managers.
“What we succeeded in doing is not having [radiology-benefit managers] become the basis upon which to monitor or really ensure that radiology services that were being ordered were reasonable and appropriate,” Gaba said.
When company officials at Extend Health looked at the health care bill passed by the House of Representatives on Nov. 7, they realized they had a problem.
Rep. John Tierney, D-Mass., had included language in the House bill meant to stop employers from dropping medical benefits for retirees. But the language threatened Extend Health’s ability to market individual plans to replace the group insurance for retirees, the heart of its business model.
The company’s response? Hire a lobbyist. Company representatives met with Patton Boggs on Nov. 17 and hired the firm to help with the problem. Patton Boggs hasn’t yet had to file lobbying disclosure reports for Extend Health. Jonas said the company is paying an hourly rate.
The firm had two choices: fight to get the language dropped when members from both houses of Congress meet to conference the bill, or work with Tierney to see whether he’d agree to substitute language. And the campaign had to be conducted quickly, with Congress still hoping to wrap up the health care legislation by the end of the year.
“You’re much better off kind of going in and working with Tierney, saying, ‘We want to not do damage to the goal you’re trying to accomplish here, which is to preserve post-retirement medical,’” Jonas said.
Jonas and other lobbyists met with Tierney on Dec. 2, proposing different language that would say, “It’s OK if you give them … an equivalent benefit” to the group coverage, Jonas said, adding that Tierney had questions: Will the individual plan be as good as the group plan? Is the standard you’re proposing looser than the standard I have?
So far, Tierney hasn’t signed off on new language but has let his staff continue meeting with Jonas’ team regarding the issue. And even if Tierney agrees to a change, staff members must still review it, and congressional budget officials would likely assess it to make sure it doesn’t bring new costs into the bill.
Said Jonas: “You’re kind of racing the clock to get this done.”
Carrie Levine is a reporter for The National Law Journal , a Legal affiliate based in New York. •