Holding Patients Hostage:

               The Unhealthy Alliance Between
                     HMOs & Senate Leaders

 

                    Public Citizen's Congress Watch

                               Loren Berger
                             Steve Weissman
                            Michael Surrusco
 
 

          Acknowledgments
          The principal authors of "Holding Patients Hostage: The Unhealthy
          Alliance Between HMOs & Senate Republican Leaders" were
          investigative reporter Loren Berger and Steve Weissman, Legislative
          Representative at Public Citizen's Congress Watch. Michael Surrusco,
          Senior Researcher at Congress Watch, provided extensive analysis of
          campaign contributions. Frank Clemente, Congress Watch Director,
          provided significant conceptual and editorial advice. Researcher Eric
          Baker and Legislative Assistant Roxanne Gillespie also provided
          important assistance to this report.

          Financial Support
          Public Citizen wishes to acknowledge the generous financial support of
          the Schumann Foundation, which enabled us to hire the investigative
          reporter to undertake this project, and the Joyce Foundation, which
          supported the numerous Public Citizen staff who contributed to this report
          and coordinated media activities upon release of the report.
 
 
 

                           Executive Summary
 

          This timely new Public Citizen investigative report documents how
          campaign cash -- particularly unlimited soft money contributions -- has
          cemented an alliance between pro-managed care interests and Senate
          leaders that has thwarted strong new patients' rights protections
          supported by the majority of Americans. Drawing upon interviews with
          key lobbyists, Capitol Hill staff and written sources, the report details the
          intimate working relationships between two top pro-managed care trade
          associations that are major campaign contributors to the Republican Party
          -- the Blue Cross and Blue Shield Association and the National
          Federation of Independent Business.

          The report reveals the extraordinary range of pressures Senate Majority
          Leader Trent Lott (R-Miss.) and Assistant Majority Leader Don Nickles
          (R-Ok.) have deployed to keep reluctant Republican senators in line. And
          based on a new Public Citizen analysis of political contributions data, the
          report lays bare the financial ties that bind the "iron triangle" of
          pro-managed care contributors, their lobbyists and Senate Republican
          leaders that has worked in concert against strong patients' rights
          legislation.

          Senators Lott and Nickles represent the last bastion of HMO resistance
          to public regulation of the managed care industry, which most Americans
          blame for decreasing the quality of health care. In 1998, Lott and Nickles
          prevented the Senate from even considering the patients' bill of rights. In
          1999 they steered a relatively weak patients' rights bill through the Senate
          by a narrow margin. Only two months later, the House of Representatives
          -- including a third of the Republicans who defied their leaders --
          decisively passed strong legislation. Today, Senator Nickles chairs the
          climactic House-Senate Conference on the patients' rights bills. He often
          makes pessimistic statements on the outlook (he recently told
          Congressional Quarterly magazine, "It's not a high probability to even
          have a successful conference."(1)) while his pro-managed care allies fight
          to kill any legislation.

          Among the report's highlights:

               Members of the pro-managed care Health Benefits Coalition
               (HBC) has given more than $14 million in campaign contributions
               to the Republican Party and its candidates since 1995 (79% of the
               total), according to new data analyzed by Public Citizen. Nearly
               40% consisted of soft money donations to the Republican Party.
               Senate Republican leaders Lott and Nickles have established
               intimate "iron triangle" working relationships with two leading HBC
               donors/lobbyists: the Blue Cross and Blue Shield Association and
               the National Federation of Independent Business (NFIB).

               The "Blues," which comprise the nation's largest provider of
               managed care services, have dispatched Brenda Becker, their
               national PAC coordinator and a key lobbyist, to serve as one of a
               small number of co-chairs for major Republican Party fundraising
               events. She has responsibility for soliciting millions of dollars from
               the health care industry and other businesses. Becker has
               co-chaired the annual GOP House-Senate fundraising dinner for
               the last several years. She co-chaired the Republican National
               Committee's Majority Fund in 1997 and again this year. And she
               has personally orchestrated "Leadership PAC" fundraisers for Lott
               and Nickles as well as golf tourney fundraisers, including an
               upcoming Nickles-sponsored event at the Republican National
               Convention in July. (See Appendix A for a complete list of
               Becker's fundraising activities.)

               NFIB, which chairs the HBC, has emerged in recent years as a
               pro-Republican electoral force and top strategic partner of the
               Republican congressional leadership. NFIB-related lobbyists have
               worked on an almost daily basis with Nickles and his staff in
               developing a legislative strategy to blunt a strong patients' rights bill.

               According to interviews with congressional staff and lobbyists,
               Senators Nickles and Lott have employed a variety of strong
               pressures, including social ostracism, on Republican senators to
               create near-unanimous Republican support for a weak patients'
               rights bill. Nickles and Lott also pressured four
               independent-minded senators into abandoning efforts at bipartisan
               compromise.

               According to various sources, including a leaked Health Insurance
               Association of America document (see Appendix B), the
               Republican leaders came down hard on Senator Jim Jeffords
               (R-Vt.), Chairman of the Senate Health, Labor and Pensions
               Committee, for working with ranking Democratic Senator Ted
               Kennedy (D-Mass.) to produce a bipartisan bill.

               Senator John Chafee's (R-R.I.) efforts to carve out an independent
               position with Sen. Bob Graham (D-Fla.) were met, according to
               his former aides and others, with exclusion from various Senate
               Policy committee briefings on patients' rights issues and severe
               ostracism by senior GOP Senators.

               Senators John McCain (R-Ariz.) and Peter Fitzgerald (R-Ill.) did
               not appear at a press conference to deliver their scheduled
               endorsement of a last minute Chafee-Graham compromise bill
               because the leadership warned them off, as a former Republican
               aide revealed and Sen. Nickles did not deny.

               The HBC and other managed care interests have given nearly $21
               million in campaign contributions since 1995. As the patients' bill of
               rights debate took off in 1997-98, contributions from the HBC
               jumped 18% over 1995-96 -- despite the general decrease in
               campaign contributions from the presidential to the congressional
               election cycle. Republicans have reaped the overwhelming share of
               HBC contributions in recent years. From 1997 through 1999,
               Republicans harvested $8.9 million -- 81% of total pro-managed
               care contributions.

               Unlimited soft money donations to Republican Party committees,
               especially congressional ones, have become increasingly important.
               HBC soft money to Republicans jumped from $1.8 million in
               1995-96 (a presidential and congressional election cycle) to $2.6
               million in 1997-98 (a congressional election cycle) -- an increase of
               50%. The share of soft money going to Republican congressional
               committees rose from 45% to 61% as debate over patients' rights
               heated up. (See Appendix C for a chronology of legislative
               activities and large soft money contributions.)

          The report concludes that the strong body of evidence linking
          pro-managed care industry campaign contributions with Senators Lott
          and Nickles' strenuous efforts to defeat popular patients' rights legislation
          highlights the need for campaign finance reform. The McCain-Feingold bill
          would ban unlimited corporate, union and individual "soft money"
          contributions to political parties, such as the $5.3 million given by HBC
          members to Republican Party committees since 1995. Senators Lott and
          Nickles are major impediments to such reform, just as they are the chief
          impediments to a pro-consumer patients' bill of rights.

          A series of Tables and Appendices presents data on managed care
          interests' political contributions and fundraising activities, and key
          congressional developments on patients' rights legislation.
 
 

 

                  Introduction: Patients and Politicians
 

           "We have a political problem because we have an image problem. In
                polls we're right down there with tobacco companies."

          Ben Singer, Vice-President of Public Relations,
          Pacificare Health Systems, the nation's 5th largest HMO(2)
 

          One of the major political issues in the 2000 election is that of assuring
          patients' rights to adequate medical care from their Health Maintenance
          Organizations (HMOs) and other managed care companies. This report
          documents how escalating campaign contributions -- particularly soft
          money -- have cemented a political alliance between Senate Republican
          leaders and the managed care industry and its business allies that has
          stalled popular patients' bill of rights legislation for more than two years. It
          details the critical roles played by Senate Majority Leader Lott and
          Assistant Majority Leader Nickles in blocking strong patients' rights
          legislation.

          In October 1998, the Republican leaders succeeded in preventing a full
          Senate vote on a pro-consumer patients' bill of rights. In July 1999, Lott
          and Nickles withstood public pressure for a strong bill, mobilizing all but
          two Republican senators to pass a weaker measure by a narrow 53-47
          margin. Less than two months later, the House of Representatives,
          including 68 Republicans, defied its Republican leadership and passed a
          strong patients' rights bill 275-191. As Chairman of the ongoing
          House-Senate Conference on patients' rights legislation, Nickles will have
          a major influence over the outcome of the Conference.

          Over the last decade "managed care" (health insurance and service
          delivery mechanisms that limit consumer choice to keep costs down,
          including HMOs, point of service plans and preferred provider
          organizations) has transformed the private insurance market. By 1996
          about 73% of Americans who had employer-sponsored health insurance
          were enrolled in managed care plans as opposed to previously dominant
          fee-for-service plans, which maximized consumer choice.(3) But the
          consequences of managed care have triggered broad public resentment.

          "Americans continue to express generally negative views about managed
          care," Kaiser Family Foundation analysts observed in February 2000,
          reviewing surveys it had conducted with the Harvard School of Public
          Health since September 1997. Over this period, majorities consistently
          complained that HMOs and other managed care plans decreased the
          quality of health care for the sick, made it harder for them to see
          specialists, and decreased the time doctors spent with patients. The public
          (Republicans, Democrats and Independents alike) overwhelmingly
          supported comprehensive consumer protection legislation, including the
          right to sue health plans for malpractice. Even though support for specific
          protections dropped by about 20 percentage points when estimated
          annual costs of $200 per family were mentioned, "a plurality or majority
          still favor[ed] each of the protections."(4)

          And the cost of protection became less of a caveat over time. In
          December 1999, 53% of respondents said that even with the additional
          premiums, they favored a strong patients' bill of rights, including the right
          to sue health plans. Only 31% disagreed. Despite a major public relations
          campaign by the managed care industry in 1998-99, 48% of those
          questioned thought legislation was needed more urgently than when the
          debate first began and another 40% thought it was about as urgent
          now.(5)

          Reacting to increased public dissatisfaction with managed care, the issue
          of patient protection legislation began to pick up steam in 1996 when
          Congress passed a law requiring minimum hospital stays for new mothers
          and their babies. That same year, bipartisan bills were introduced to ban
          "gag clauses" in managed care contracts that limited what physicians could
          discuss with patients.(6)

          In February 1997, Sen. Ted Kennedy (D-Mass.) and Rep. John Dingell
          (D-Mich.) introduced the "Patient's Bill of Rights Act." Two months later,
          Rep. Charles Norwood (R-Ga.) and Sen. Alphonse D'Amato (R-N.Y.)
          introduced the Patient Access to Quality Care Act (PARCA), which
          notably included the right to sue employer-sponsored managed care plans
          in state courts for denial of necessary care. Under the reigning
          interpretation of the Employee Retirement Income Security Act (ERISA)
          governing such employer plans, state tort sanctions for injuries, including
          compensatory and punitive damages, were pre-empted by federal law,
          which lacks such strong remedies.

          During the last two years, Congress has intensely debated two different
          approaches to regulating managed care. One, represented by the
          House-passed Norwood-Dingell bill (H.R. 2723, the "Bipartisan
          Consensus Managed Care Improvement Act of 1999"), would extend a
          broad range of substantive protections to approximately 161 million
          people covered by ERISA private employer, state and local government,
          and individual managed care and fee-for-service plans. Included are such
          rights as access to the nearest emergency room, clinical trials,
          out-of-network providers and off-list prescription drugs. In addition,
          women and children would be guaranteed access to obstetricians,
          gynecologists and pediatricians directly rather than through gatekeepers.
          "Gag rules" preventing providers from discussing expensive treatments
          with patients would be prohibited. The bill would also provide for
          independent, external review of claims of denial of medically necessary
          benefits. Finally, Norwood-Dingell would change the law to allow the 123
          million people under ERISA to sue for damages in state courts for denial
          of care. Major organized groups supporting the Norwood-Dingell bill
          include the American Medical Association (AMA) and many other health
          professions' groups, disease groups, the AFL-CIO, consumer groups,
          and the Association of Trial Lawyers of America.

          The Senate-passed Republican alternative (S. 1344, the "Patients' Bill of
          Rights Plus Act") would extend many similar, though sometimes narrower,
          benefit protections -- but only to 48 million people. This is the minority of
          ERISA-covered workers who are in employer "self-insured" plans, which
          are exempted even from the irregular patchwork of state laws mandating
          benefits on health plans. Exceptionally, one provision of the bill would
          allow overnight stays after breast cancer surgery and another would
          prohibit genetic discrimination in enrollment and premiums; both would
          apply to the broad insured population of 161 million. The Republican bill
          also contains an external review procedure for the 123 million people
          under ERISA, but the health plan selects its own reviewer and the
          reviewer could only decide whether the plan followed its own definition of
          medically necessary care. Most important, there would continue to be no
          right under ERISA to sue for full damages in state courts. Key groups
          behind the GOP's legislation include managed care and health insurance
          companies and business trade associations.

          Several factors help explain why, after three years of debate, Congress in
          general and the Senate in particular have still not responded to popular
          demands for patient protections. The dislike of government regulation runs
          strong among Republicans and especially among their legislative leaders.
          Sen. Nickles, for example, acknowledges that consumers are
          experiencing problems with managed care, but has argued that the
          marketplace should solve them. "I'm not sure you need a legislative
          solution," he observed.(7) "I'm a strong proponent and a believer in the
          free-enterprise system. I've been in it all my life and I love it."(8) Nor can
          one neglect the enormous sums that the main pro-managed care coalition
          has spent on lobbying -- $148 million in 1997-98 alone -- in the period
          when it opposed strong patients' rights legislation.(9) In addition, the
          coalition and its members have spent tens of millions of dollars on issue
          and image-burnishing ads, much of it in an effort to provide "political
          cover" for sympathetic Republican legislators.(10)

          Still, as this report makes clear, there is a strong body of evidence that
          large, pro-managed care campaign contributions to the Republican Party,
          amplified by unusually close collaboration between key donors and the
          Senate Republican leadership, have played a critical role in the stalling of
          managed care reform.
 
 
 
 

                          Special Relationships:

              The Blue Cross and Blue Shield Association,
           National Federation of Independent Business, and
                        Senators Lott and Nickles

 

          As congressional debate intensified in early 1997 over proposed federal
          patient protection legislation, leading representatives of the managed care
          industry and business began meeting regularly to coordinate their
          efforts.(11) In January 1998, 31 managed care and business groups
          formed the Health Benefits Coalition. The HBC announced "a campaign
          against excessive and costly government mandates on employers and
          health plans," warning that "prescriptive federal legislation in this area will
          backfire -- increasing health care costs and driving up the number of
          uninsured Americans."(12) Among its members were such high-powered
          corporations and trade associations as: Aetna-U.S. Healthcare, American
          Association of Health Plans, Blue Cross and Blue Shield Association, The
          Business Roundtable, CIGNA, Health Insurance Association of America,
          Humana, National Association of Manufacturers, National Federation of
          Independent Business, Prudential and the U.S. Chamber of Commerce.

          Table 1 shows HBC contributions to Republican candidates and
          committees. Two of the top three HBC contributors during the patients'
          rights fight, which broke out in 1997-99 were the Blue Cross and Blue
          Shield Association and the NFIB, which chairs the HBC. Together, as
          Table 1 shows, they provided about a third of total HBC contributions to
          Republicans -- $2.9 million out of $8.9 million.

          Both associations have extremely close relationships with Senators Lott
          and Nickles, which enabled them to further enhance their influence and
          that of other HBC donors in the patients' rights fight. In the case of the
          NFIB, the relationships were founded on the broad political role it played
          in the Republican Party; regarding the Blue Cross and Blue Shield
          Association, the relationship was based on its general role in fundraising
          for the Republican Party, and more specifically for Lott and Nickles. The
          NFIB used its political influence to enter into a strategic alliance with Lott
          and Nickles on managed care; the Blue Cross and Blue Shield
          Association used its fundraising power to get Lott and Nickles energized
          on behalf of its economic interests.

           Table 1: HBC Member Contributions to Republicans (1997-1999)
                    Affiliate
                                    1997-1998
                                                1999
                                                        1997-1999
                                                           Total
           Aetna Inc
                                     $206,760
                                                $77,700
                                                           $284,460
           American Assn of Health Plans
                                      $99,891
                                                $32,750
                                                           $132,641
           American Automobile
           Manufacturers Assn
                                      $69,300
                                                  $250
                                                            $69,550
           American Insurance Assn
                                     $375,509
                                               $139,965
                                                           $515,474
           Associated Builders &
           Contractors
                                    $1,057,984
                                               $278,250
                                                         $1,336,234
           Blue Cross/Blue Shield
                                    $1,070,714
                                               $472,667
                                                         $1,543,381
           Chamber of Commerce of the
           US
                                      $56, 250
                                                $92,697
                                                           $148,947
           CIGNA Corp
                                     $583,985
                                               $194,725
                                                           $778,710
           Food Distributors International
                                     $204,450
                                                $55,450
                                                           $259,900
           Food Marketing Institute
                                     $532,727
                                               $208,557
                                                           $741,284
           Health Insurance Assn of
           America
                                     $157,524
                                                $54,911
                                                           $212,435
           Healthcare Leadership Council
                                      $69,427
                                                 $3,600
                                                            $73,027
           Humana Inc
                                     $110,850
                                                $10,000
                                                           $120,850
           International Mass Retail Assn
                                      $18,460
                                                 $2,500
                                                            $20,960
           National Assn of Health
           Underwriters
                                      $20,164
                                                 $3,500
                                                            $23,664
           National Assn of
           Manufacturers
                                      $23,500
                                                 $7,000
                                                            $30,500
           National Fedn of Independent
           Business
                                    $1,146,336
                                               $163,292
                                                         $1,309,628
           New York Life Insurance
                                     $369,899
                                               $131,350
                                                           $501,249
           Premier
                                       $2,250
                                                    $0
                                                             $2,250
           Prudential Insurance
                                     $290,625
                                               $120,300
                                                           $410,925
           Society for Human Resource
           Management
                                       $6,265
                                                 $5,330
                                                            $11,595
           United HealthCare Corp
                                     $305,300
                                                $49,050
                                                           $354,350
           Totals
                                    $6,778,170
                                             $2,103,844
                                                         $8,882,014
 

          Source: Center for Responsive Politics data (www.opensecrets.org)
          analyzed by Public Citizen. The data in Table 1 and successive tables
          reflects all data available electronically from the Center for
          Responsive Politics as of February 1, 2000. Since some 1999 reports
          were not yet available, data for 1999 is incomplete.
 
 

          Blue Cross and Blue Shield Association

          The Blue Cross and Blue Shield Association is the trade group for
          independent Blue Cross and Blue Shield member plans with combined
          annual revenues of at least $80 billion. The plans comprise the nation's
          largest provider of managed care services. Overall, the Blues service 75
          million health care customers. More than 52 million people -- roughly one
          in six Americans -- are enrolled in a Blue Cross and Blue Shield managed
          care plan.(13)

          Less of a soul mate to the Senate Republican leaders than the NFIB, the
          Blues are still extremely close to them due to their special role as a general
          fundraising powerhouse for party committees as well as for Lott and
          Nickles themselves. And they clearly perceived this role as benefitting
          their anti-regulatory interests.

          To begin with, since 1995 the Blues have provided $2.5 million of the
          $14.2 million Republicans have received from HBC members (see Table
          2 and Table 4 on p. 15). In addition, a particularly high percentage of the
          Blues' total campaign contributions -- about 50% -- came in the form of
          soft money to Republican Party committees (see Table 3). (Soft money is
          the unlimited contributions to political parties from corporations, unions
          and individuals.) Moreover, the Association's soft money donations rose
          20% from the 1996 cycle to the 1998 one at a time when total soft
          money donations from all sources to the political parties declined 16%.(14)
          Senators Lott and Nickles are heavily involved in raising and benefitting
          from party soft money (see pp. 19-20 below).
 
 

               Table 2: Blue Cross & Blue Shield Contributions (1995-1999)
              Year
                          Republicans
                                             Democrats
                                                              Total
            1995-1996
                           $939,158 (65%)
                                             $505,089 (35%)
                                                             $1,444,447
            1997-1998
                          $1,070,714 (67%)
                                             $528,626 (33%)
                                                             $1,599,590
              1999
                           $472,667 (70%)
                                             $197,721 (29%)
                                                               $670,888
              Total
                         $2,482,539 (67%)
                                           $1,231,436 (33%)
                                                             $3,714,925
 

          Source: Center for Responsive Politics data (www.opensecrets.org)
          analyzed by Public Citizen.
 
 

               Table 3: Blue Cross & Blue Shield Soft Money Contributions
                                    (1995-1999)
              Year
                          Republicans
                                             Democrats
                                                              Total
            1995-1996
                           $438,908 (76%)
                                             $139,635 (24%)
                                                               $578,543
            1997-1998
                           $524,625 (76%)
                                             $163,375 (24%)
                                                               $688,000
              1999
                           $248,445 (74%)
                                              $87,750 (26%)
                                                               $336,195
              Total
                         $1,211,978 (76%)
                                             $390,760 (24%)
                                                             $1,602,738
 

          Source: Center for Responsive Politics data (www.opensecrets.org)
          analyzed by Public Citizen.

          Soft money donations were often made at strategic times. For example,
          on February 27, 1998 -- a month after the formation of the HBC, two
          weeks after Senator Nickles had composed his health care task force,
          and four months after Senator Lott's appeal to managed care interests to
          "Get off your wallets" -- the Association gave $100,000 in soft money to
          the Republican Senate/House Dinner Trust, while three affiliates gave an
          additional $20,000 to the RNC.(15) Brenda Becker, vice president of
          congressional communications and PAC coordinator for the Blues, was
          forthright in explaining a few months later what the Association expected
          from its Republican recipients, "We are giving more to Republicans
          because they've been carrying our water on a lot of issues and they are
          also in the majority."(16)

          Very importantly, as part of her work for the Blue Cross and Blue Shield
          Association, Becker has raised substantial sums for the Republican Party
          for years from the health care sector, as well as from other industries in
          which she has connections. She is one of a small select group of
          Washington insiders who routinely serve as co-chairs for major
          Republican fundraising events.(17) "I pick up the phone and call people
          and make them aware of a fundraising event, and hopefully, they will
          attend," Becker said. "Do I call health care companies? Absolutely. But,
          we also have a broad group of people who we know and who we have
          relationships with."(18)

          Again, Becker is candid about how her fundraising redounds to the
          political benefit of her Association. "Basically it helps us stand out as a
          player and demonstrates our support of friends and people who
          believe in the mechanisms of the market place," she said (emphasis
          added).(19)

          Becker further noted that she has co-chaired the annual GOP
          House-Senate dinner, the party's largest annual fundraising event "for the
          past four to six years." As Washington co-chair of the June 1998 dinner
          with Richard Creighton of the American Portland Cement Alliance,
          Becker's job was to corral money from health care groups, insurers and
          health care providers. She helped to collect over $10 million in a single
          evening.(20) She was also Washington co-chair, with Creighton, of the
          June 1999 dinner, which raised $9 million.(21)

          In 1997, she served as co-chair of the Republican National Committee's
          Majority Fund. The fund boasts almost 100 PACs, many of which
          contribute $15,000 a year in hard and soft money. She took on the
          assignment again for the year 2000 with co-chairs Richard Creighton and
          former Indiana senator Dan Coats.(22)

          At this year's Republican National Convention, to be held in Philadelphia
          on July 31 to August 3, Blue Cross and Blue Shield is expected to be on
          hand to assist Nickles, an avid golfer, in holding a golf tourney for GOP
          party contributors. "The conventions are like the Super Bowl of
          fundraising," said Robert A. Rusbuldt, the chief Republican lobbyist with
          the Independent Insurance Agents of America. "It's an opportunity for
          members and party committees to engage in fundraising on a massive
          scale."(23)

          Furthermore, Becker has also provided direct fundraising assistance to
          Senators Lott and Nickles during this critical period for the managed care
          forces. In the winter of 1998, she helped organize a large golf fundraiser
          for Nickles' Leadership PAC at the Doral Hotel in Miami.(24) On April
          21, 1998, she orchestrated a fundraiser for Lott's PAC at the Washington
          Hyatt Regency. The event, which was to celebrate Lott's 25th year in
          Congress, raised more than $1 million. While the dinner was organized by
          several dozen lobbyists, Becker and Dirk Van Dongen, president of the
          National Association of Wholesalers-Distributors, led that team.(25) In
          addition, on October 6, 1999, Becker co-hosted, along with Dirk Van
          Dongen and Michael Boland, a former Lott aide now with Boland and
          Madigan, a dinner party for Lott that brought in roughly $800,000 to be
          divided between the senator's campaign coffers and his Leadership
          PAC.(26)

          Blue Cross and Blue Shield also forayed into fundraising for House GOP
          leaders, who were attempting to beat back managed care bills among
          their own members. In September 1998, Becker was among a select
          group of Washington lobbyists tapped by the National Republican
          Congressional Committee to help raise $37 million for various
          issue-advertising campaigns to aid House members and GOP challengers.
          On Sept. 15, 1998, NRCC Chairman John Linder (R-Ga.) and House
          Majority Leader Richard K. Armey (R-Texas) met with ten or so
          lobbyists and asked them to persuade their clients to attend a series of
          nationwide fundraisers. In addition to Becker, Gary J. Andres of the
          Dutko Group; Nicholas E. Calio of O'Brien Calio; Bruce A. Gates of
          Washington Counsel; Edward W. Gillespie of Policy Impact
          Communications; Timothy P. McKone of Davis, Manafort & Friedman;
          and Daniel P. Meyer of the Duberstein Group were among those who
          met with Armey and Linder.(27)

          On February 23, 1999, Becker was the scheduled co-host of a
          $2,000-a-plate dinner for House Speaker J. Dennis Hastert (R-Ill.).(28)
          On October 5, 1999 -- two days before the House's scheduled debate
          on the leading pro-consumer managed care bill sponsored by Rep.
          Charles Norwood and Rep. John Dingell -- Becker feted another
          exclusive $1,000-a-plate fundraising breakfast for House Speaker
          Hastert. Other hosts of the affair were CIGNA Corp. lobbyist Art Lifson,
          Aetna lobbyist Jonathan Topodas, Thomas Scully, president of the
          Federation of American Health Systems and health care superlobbyist
          Deborah Steelman, whose client list includes Aetna, drug companies and
          managed care providers.(29)

          For a timeline of significant fundraising activities by Becker and the Blue
          Cross and Blue Shield Association see the chronology in Appendix A.
 

          National Federation of Independent Business

          Over the last several years, the NFIB has developed an extremely close
          working relationship with the congressional Republican leadership. A
          critical event was its ability to mobilize many of its more than 600,000
          small business owner/members against the Clinton health care plan in
          1993-94 and to help GOP leaders articulate an effective political
          message. "The success of the NFIB in the Clinton Health Care battle
          translated into clear access to the Republican leadership in both houses of
          Congress as well as significant input into the policy agenda of the
          Republican Party," concludes one scholar.(30) Thus the NFIB is a key
          participant in the Thursday Group, a regular meeting of pro-GOP interest
          groups convened by the heads of the Senate Republican Policy
          Committee and House Republican Conference. Not only does the NFIB
          put its financial muscle into Republican candidates (only 5% of funds went
          to Democrats in the 1996 election), it extensively mobilizes its members to
          support its selections and has contributed to pro-Republican election time
          TV and radio "issue ads."(31)

          "The number one interest that rings the bell of the GOP leadership is the
          NFIB. The Republican Party looks at small business as being its core
          constituency," commented Thomas Scully, president of the Federation of
          American Health Systems and a former White House aide to President
          Bush. "If the NFIB had said, 'We don't care about this issue [of patients'
          rights],' the GOP leadership would have been far less aggressive in their
          positions."(32)

          In the fall of 1997, the NFIB's connection with GOP Senate leaders
          began to pay off for the managed care interests that it led as chair of the
          Health Benefits Coalition. As previously mentioned, the principal managed
          care and business groups had been meeting regularly since about the
          beginning of the year. Significantly, they had dubbed themselves "the
          NFIB coalition" according to a October 22, 1997 memo from a Health
          Insurance Association of America (HIAA) lobbyist to her supervisor that
          was leaked to the press (see memo in Appendix B).(33)

          According to the memo, Lott's aide, Keith Hennessey, had told the
          coalition that Lott was "very concerned" about "the issue of mandates,
          incremental reform, etc.;" thus Hennessey would be "working with House
          and Senate leadership to coordinate the advocacy effort." To the
          coalition, Lott conveyed an appeal for financial support, "Senator Lott
          also said that Senate Republicans need a lot of help from their friends on
          the outside. 'Get off your butts, get off your wallets.'" Hennessey
          specifically mentioned the need for "employer/insurer grassroots"
          lobbying. Extensive advertising campaigns ensued.(34)

          Increased contributions were also forthcoming. As we shall see in more
          detail later (p. 15), HBC contributions to Republicans jumped from $5.3
          million in the 1996 election cycle (a presidential and congressional election
          year when contributions run higher) to $6.8 million in the 1998 cycle (a
          congressional election when contributions typically decrease).

          According to the HIAA memo, NFIB lobbyist Mark Isakowitz
          subsequently informed the group that he had been summoned to the Hill
          by staffers for Lott, Nickles, House Speaker Newt Gingrich (R-Ga.) and
          House Majority Leader Armey. Isakowitz was directed to get the NFIB
          coalition to brief Republican health legislative assistants, implement a
          "heavy" grassroots lobbying effort against the bill during Congress' winter
          recess, meet with groups of senators to report on what each organization
          was doing to fight these bills, and write "the definite piece of paper
          trashing all these [patient protection] bills." Isakowitz's "overall
          impression" was that "the Leadership was looking to signs of serious
          commitment on our part before they go out on a limb."(35)

          This was just the beginning of the NFIB-Lott-Nickles relationship on
          managed care. In January 1998, the NFIB formalized its role in the
          coalition against managed care regulation. Its Senior Vice-President of
          Federal Public Policy, Dan Danner, moved into the position of chairman
          of the newly-created Health Benefits Coalition.

          The next month, Senator Lott selected Senator Nickles to head a Senate
          Republican health care task force. Its mission was to study the impact of a
          variety of regulatory proposals involving managed care. As a former
          small-businessman with deep roots in Oklahoma's oil patch, Nickles'
          philosophy particularly resonated with that of the NFIB. At various crucial
          junctures during the managed care reform debate, press releases on his
          Senate web site show, Nickles conducted press conferences with the
          NFIB at his side to argue against new managed care standards.

          Directing the HBC lobby, the NFIB became intimately involved with
          Nickles on behalf of managed care interests. Veteran NFIB heavy-hitter
          Isakowitz strategized frequently with Nickles and his staff during the
          health care debate. "He talks to Nickles staff every day," said a source
          close to Isakowitz. "Mark is very smart and hard-working. The
          Republican leadership knows him well and has a lot of trust in him."(36)

          Isakowitz had played a key role in helping derail President Clinton's health
          care proposal in 1993. After four years at the NFIB, he left in November
          1997 to become a name partner in his own lobbying firm. In 1998, he
          was hired as an outside consultant by the Health Benefits Coalition, which
          the NFIB chairs. For the HBC, Isakowitz's assignment was to continue to
          work on the campaign against managed care reform. Isakowitz "was very
          involved" in that lobbying campaign, said Dan Danner. "He served as a
          communication hub."(37)

          As another example of the close relationship between NFIB and Nickles'
          office, Nickles' legislative director Diane Moery had previously worked at
          the NFIB as a lobbyist in 1995. She left Nickles' office in February 2000
          to work with Isakowitz in his lobbying firm.(38)

 

 

                   The Leaders Pressure Their Party
 

          "What's impressive to me is that we're sticking together."

          Senator Bill Frist (R-Tenn.) quoted during climactic July 1999 Senate
          votes on Republican patients' rights proposals(39)
 
 

          Nothing indicates the influence of the increasingly generous pro-managed
          care donors and their special intermediaries on Senators Lott and Nickles
          more than Nickles' strenuous efforts -- against popular opinion -- to
          mobilize needed support from hesitant Republican colleagues.

          A leading political scientist has written, "Party campaign efforts on behalf
          of individual candidates and election-agenda setting efforts encourage
          legislators to vote for bills that are at the core of their party's agenda when
          Congress is in session."(40) Congressional party leaders/fundraisers
          possess important levers of influence for mobilizing reluctant followers
          behind a donor-influenced agenda. They may invoke the "carrot" of
          needed campaign assistance. Or they may rely on the "stick" of their
          control of daily legislative business and their ability to shape the party's
          core agenda. Here is how the process unfolded in the Senate during the
          patients' rights battle.
 

          Nickles Steers the GOP Health Care Task Force

          Following his appointment by Lott in February 1998 to chair the Senate
          GOP health care task force, Nickles proceeded to work closely with
          business, HMO and insurance lobbyists to block a variety of managed
          care reform bills, according to lobbyists and Republican and Democratic
          aides. Press statements issued by Nickles' office announced that the
          mandate of the task force, at "the very minimum" was to "ensure that
          Congress, in its haste to do good, does not cause an increase in the costs
          of health insurance" and to "protect consumer quality by ensuring that the
          best possible caretakers are monitoring the quality of (Americans') health
          care,"(41) among other issues.

          Over the next few months Nickles, along with other task force members
          -- including Republican Sens. John Chafee of Rhode Island, Susan Collins
          of Maine, Bill Frist of Tennessee, Chuck Hagel of Nebraska, Bill Roth of
          Delaware and Rick Santorum of Pennsylvania -- held a series of
          non-public meetings and conferences at which "leading health care
          experts" were "interviewed." The process was all part of an endeavor to
          "take a hard, honest look at issues of health care quality," various press
          releases from Nickles' office stated.(42)

          But to a great extent, the task force relied heavily on information supplied
          by those groups opposed to most -- if not all -- measures being proposed
          by health care reformers, according to interviews with several sources.
          "There were many meetings of Senate GOP heath care task force staff at
          which corporate (insurance and business) types were handpicked to
          provide briefings," said a former Republican Senate aide involved in the
          task force. "They were spoon-fed by the industry the entire time. No
          question about it. The task force did not spend any time with patient or
          consumer groups."(43)

          While the American Medical Association made one presentation to the
          task force, its requests for additional participation were refused. Said Jim
          Smith, a Washington lobbyist with the AMA, "It's safe to say task force
          members were pretty one-sided about who they consulted with. We
          petitioned Sen. Nickles again and again and again to meet with us to share
          our concerns about crafting a patients' bill of rights. They (Nickles' staff)
          just never found a way to put the two of us together despite our many
          requests to do so."(44)

          By contrast, Dan Danner, head of the Health Benefits Coalition, said his
          group, in addition to efforts by individual members, provided numerous
          briefings, fact sheets, surveys and studies to the GOP health care task
          force.(45) Over the next several months, Nickles emerged from his work
          on the task force from time to time to hold press conferences with
          representatives of the NFIB, the U.S. Chamber of Commerce and the
          Small Business Survival Committee to warn of the ill-effects that managed
          care reform would have on the ability of employers to provide health
          insurance.

          On July 15, 1998, Nickles and other members of the Senate Republican
          health care task force unveiled their own bill. This was essentially the
          relatively weak patients' rights bill that the Senate would pass a year later
          with "tacit support from the business community and insurers."(46)
          Although the HBC said it was "deeply disappointed" that the proposal
          "included government mandates which will only increase health care
          costs," it consoled itself that "it avoids the many excesses of
          Kennedy-Dingell [the Democratic alternative], which could create a
          monstrous new bureaucracy in Washington and a new pot of gold for trial
          lawyers. Our coalition will vigorously oppose any efforts to expand
          liability to health plans and employers."(47)

          Nickles' current senior policy advisor, Stacy Hughes ­ the senator's point
          person on patients' rights ­ did not return phone calls to comment on the
          activities of the task force, as well as to answer additional questions about
          Nickles' positions on managed care reform.

          Shutting Down Senator Jim Jeffords

          In late 1997, Senator Jim Jeffords (R-Vt.), chair of the Senate Health,
          Education, Labor and Pensions (HELP) Committee, set to work on a bill
          that would impose federal standards on managed care plans. From
          August to September 1997, according to a Senate aide, Jeffords teamed
          with Senator Edward Kennedy, the ranking Democratic minority member
          of the HELP committee, to put together a bipartisan bill. In October,
          Jeffords unveiled a draft of the "Quality Bill," which would require health
          plans to open up access to specialty care by providing out-of-network
          referrals at no additional cost; not discriminate based on a person's health
          status; apply the "prudent layperson" standard in covering emergency
          room care; set up an external quality assurance program; ban gag clauses
          on doctors, freeing them up to discuss treatment options with their
          patients; and allow women direct access to OB/GYNs.(48)

          As a House member from 1975 to 1988, Jeffords had been well known
          as an independent voice. He has maintained this reputation in the Senate
          with a moderate stance on such matters as the environment, education,
          civil rights and gay and lesbian issues. He was the only Republican to
          cosponsor the Clinton administration's sweeping health care initiative in
          1993. During the course of his 1997 work on the draft of the "Quality
          Bill," Jeffords stressed that "managed care regulation will be an
          unavoidable and necessary issue for Congress to address during the next
          legislative session."(49)

          But as Jeffords' seniority has increased in the Senate, particularly with his
          1997 move into the chair of the HELP committee, the "Republican
          leadership has tried to keep him on a tight leash," said a former aide to the
          senator. "There has been more pressure on him to conform."(50)

          "A day came when Jeffords said publicly that we would have a (bipartisan
          managed care) bill introduced and out of committee by October 1997.
          The leadership came down on him like a ton of bricks," said a
          well-informed Democratic Senate aide.(51) "As soon as he conveyed the
          seriousness of his intents, the leadership shut the process down. Literally,
          things came to a halt. This was the pivotal point at which it became clear
          that Senator Jeffords was in hock to the leadership." According to this
          aide, Jeffords' staffers were so intimidated by the leadership's mandate to
          shut down bipartisan negotiations, they stopped virtually all discussions
          with Kennedy's staff.

          In the opinion of a former Republican Senate aide deeply involved in
          health issues, Jeffords was compelled to participate in the GOP
          leadership's health care agenda because "he's boxed in by conservatives
          on his committee."(52)

          Both staffers' perspectives receive support from the leaked October 1997
          internal HIAA memo which highlighted Senator Lott's role. In her
          summary of the "NFIB coalition" meeting with an aide to Lott, the HIAA
          staffer wrote: "Lott told Senator Jeffords that he could not introduce his
          'Quality Bill' this session and was advised to work less with Sen. Kennedy
          and more with his fellow Republicans on the Senate Labor Committee.
          Sen. Lott has also spoken with all Republicans on the Senate Labor
          Committee and told them to get involved and express their concerns [to
          Jeffords]."(53)

          On March 18, 1999, by a party-line vote of 10 to 8, the Senate HELP
          committee approved the bill written by the GOP health care task force
          and sent it to the Senate floor. During the 13-hour markup of the GOP
          version, all 18 amendments offered by committee Democrats were
          defeated by party line votes. At various points throughout the process,
          Lott and Nickles and their staffs undertook the unusual action of standing
          in the back of the room to enforce the party vote, several sources said.(54)
          "The leadership staff, primarily Nickles people, also staffed other GOP
          members by answering their questions, talking to the press, etc.," various
          sources at the markup said. "During markup, Stacy Hughes (Nickles'
          senior policy advisor), held court."(55)
 

          Ostracizing Senator John Chafee

          The most visceral enmity within GOP leadership ranks was targeted at
          Sen. John Chafee, a moderate from Rhode Island. In 1994, Chafee led a
          bipartisan "mainstream coalition" which attempted to pass incremental
          health reform measures after the demise of Clinton's plan to achieve
          comprehensive overhaul of the industry. Again, in November 1997,
          Chafee formed a bipartisan Congressional Task Force on Health Care
          Quality with Sen. Joseph Lieberman (D-Conn.) and Reps. Nancy
          Johnson (R-Conn.) and Benjamin Cardin (D-Md.). Its mandate was to
          study the various proposed requirements on managed care plans.

          Chafee said he informed Senate Majority Leader Lott that he was
          organizing the task force. "I don't find myself in conflict with the leaders. I
          don't think anyone objects to our trying to educate ourselves."(56) But,
          that move and others to come resulted in Chafee's ostracism by senior
          party ranks, leading to intensely bitter relations that prevailed throughout
          the patients' rights debate and up until the time Senator Chafee died in
          October 1999.

          Chafee was marked by the GOP leadership to be "suspect from the get
          go," declared a former aide to the senator. When Nickles appointed
          Chafee to his newly-formed GOP health care task force in February
          1998, it was an attempt to co-opt him, according to the aide. "I'm not
          sure how anxious they (GOP leadership) were to have his participation."
          (57) After all, Chafee had already committed himself to a bipartisan
          approach through the congressional task force.

          In July 1998, right after the Nickles task force brought forth a Republican
          bill, Chafee and Sen. Bob Graham (D-Fla.) introduced a bill intended to
          be a compromise between the Democratic and Republican Senate
          proposals. The Chafee-Graham plan -- the "Promoting Responsible
          Managed Care Act" -- included many of the key benefit protections in
          Democratic plans and would have allowed patients to sue insurers and
          HMOs for economic damages, but not for pain and suffering or punitive
          damages.

          As GOP leaders began to move their bill towards the Senate floor in the
          spring of 1999, Chafee's health care legislative assistant Lisa Layman
          attended a patient rights' briefing session called by Chris Jennings, special
          assistant to the White House on health policy. Also, on hand were various
          Democratic staff assistants and representatives of the AMA. Layman was
          the only Republican representative at the meeting. "Chafee and his staff
          paid a price for it," said a Rhode Island managed care reform lobbyist
          who knew Chafee well and attended the meeting. "Nickles' staff became
          very demeaning" to the senator and his legislative aides.(58)

          Subsequently, another former aide related, Chafee and his staff faced
          continued alienation from GOP leaders. At meetings, conferences and
          floor debates, they received constant off-the-cuff remarks from other
          members and staff for not being "team players" supporting the leadership's
          agenda. When the Senate Republican Policy Committee conducted
          various briefings on the patients' bill of rights, Chafee was intentionally
          excluded from the sessions.(59)

          "When Senator Chafee had a difference of opinion with his colleagues, he
          embraced them still and tried his best not to alienate them. I felt [GOP
          leadership and their supporters] were constantly demeaning his position.
          And I think it was uncomfortable for him," this aide added.(60)

          Chafee himself shared these feelings with the aforementioned Rhode
          Island lobbyist. This was the first time ever in the lobbyist's history of
          dealings with the Senator on a myriad of issues that he had been made
          privy to such inside admissions. "The Senator, in a passing reference,
          verbally expressed his disgust to me. He was grossly offended by the
          treatment of the Senate GOP leadership given his 20 years of tenure in the
          Senate."(61)

          Added a former Chafee staffer: "No one can appreciate the extent to
          which pressure can be brought on by peers. It's a lonely, isolating feeling;
          a very alienating experience."(62) The lesson was presumably not lost on
          other Republicans weighing their patients' rights positions.
 

          Corralling Senators John McCain and Peter Fitzgerald

          As the Senate floor debate drew to a close with a prospective narrow
          victory for the Republican bill, Senators Chafee and Graham tried to
          broker a last-minute bipartisan compromise. They offered a version of
          their previous bill allowing patients to sue managed care plans for
          non-economic and punitive damages, but capping those damages at three
          times the economic damages or $250,000, whichever was greater. With
          half a dozen Democrats on board, Chafee sought to gather Republican
          support for the plan and obtained Sen. Arlen Specter's (R-Penn.)
          cosponsorship. On July 15, 1999, a press release at the Chafee-Graham
          news conference stated that Sens. John McCain (R-Ariz.) and Peter
          Fitzgerald (R-Ill.) also would appear to back the compromise.(63)

          However, McCain and Fitzgerald were not at the news conference. "The
          night before the press conference to unveil the agreement, McCain and
          Fitzgerald were pulled back by Republican leadership and were told
          'Don't go to that thing. It wouldn't be good for you,'" said a former
          Republican Senate aide.(64)

          Those two Republican senators' support of the potential bipartisan
          compromise could have helped to "generate momentum for real change,"
          Mike Dorning, a Washington bureau reporter for the Chicago Tribune,
          wrote on July 18, 1999. "[Chafee and Graham] thought they had fellow
          GOP Sens. Fitzgerald and John McCain of Arizona on board. Senate
          Whip Don Nickles acknowledges Fitzgerald and McCain were talked to
          when it looked like they would join the compromise. And when asked
          about those discussions, Nickles gave only a cryptic smile."(65)

          Fitzger