Nofziger Role Held Key in Medicare Lobbying : Firm’s Multimillion-Dollar Scheme to Loosen Rules Involved Hiring of Ex-Officials, Report Says

Former White House aide Lyn Nofziger played a key role in a private health firm’s multimillion-dollar lobbying campaign to loosen federal regulations protecting Medicare patients, congressional investigators said Sunday.

C. McClain Haddow, the government official Nofziger lobbied, ruled in favor of the firm, and received a $40,000 consulting fee from the company less than six months after he left his post at the Department of Health and Human Services, a House report said.

Haddow testified last year before the House Government Operations Committee that Jeb Bush, the son of Vice President George Bush, also contacted former Cabinet officer Margaret M. Heckler as part of the campaign by International Medical Centers, the report added. Nofziger was paid $300,000 by the firm for his role in the lobbying effort, according to the report by the subcommittee on human resources and intergovernmental relations.

Eight Join Firm

In addition, the report said, eight other former officials of the Department of Health and Human Services left their government posts for “lucrative” jobs at IMC, which was once the nation’s largest health maintenance organization, but is no longer in business.

The company’s Medicare contract was canceled in 1987 after its president, Miguel Recarey Jr., was indicted on labor racketeering charges. He fled the country and is still a fugitive. Recarey later was indicted on additional charges of embezzling more than $350,000 from the Medicare program.

Nofziger recently was sentenced to 90 days in prison and fined $30,000 after being convicted of illegally lobbying the White House on behalf of a labor union and two defense contractors, one of them the scandal-stained Wedtech Corp.

Nofziger’s lawyer, reacting to the latest House report, said the former White House political director had not been provided with an advance copy or asked to comment on it.

“Any lobbying Mr. Nofziger might have done at (Health and Human Services) would have been completely legal,” said the attorney, E. Lawrence Barcella.

“Congress complaining about lobbyists is like hookers complaining about johns (customers),” Barcella added.

At issue in the lobbying campaign was a federal regulation requiring health maintenance organizations, such as IMC, to limit Medicare patients to no more than 50% of their caseload to assure that they could attract private patients and not become “Medicare mills” with lower standards of care.

IMC, whose enrollment consisted of nearly 80% Medicare patients by the time its contract was canceled, sought a waiver of the rule by Health and Human Services because, the report said, “if the company lost its Medicare contract, it could not have survived.”

The company was granted a waiver of the rule in 1985 on condition that it try to reduce its proportion of Medicare recipients. Two months later, however, IMC challenged the government’s authority to enforce such a rule.

Becomes Key Target

Haddow, who was acting administrator of the Health Care Financing Administration (HCFA) that supervises Medicare contractors, became the key target of the lobbying effort by IMC, the congressional investigators found.

“The subcommittee’s investigation revealed that the key contact between Haddow and IMC on the 50% waiver issue was not IMC’s attorneys, but Lyn Nofziger, the former White House aide hired as IMC’s lobbyist,” the report said.

“Haddow also testified that Nofziger had contacted then-Health and Human Services Secretary Margaret Heckler about the IMC waiver,” the report added. “Haddow also testified that Secretary Heckler was also contacted by Vice President George Bush’s son, Jeb, in behalf of IMC. In fact, Haddow testified that Secretary Heckler made the decision to accede to IMC’s challenge, based on his recommendation.

“Regardless of who made the decision, it was enacted by Haddow. All the information available to him at HCFA indicated that granting IMC’s request was improper and not in the best interests of the federal government or its Medicare beneficiaries,” the report said.

“The only information favorable to IMC’s position came to Haddow from paid lobbyists and attorneys who received enormous sums to present the (company’s) views to the federal government,” the congressional panel said.

Hired as Lobbyist

Haddow left the government post in February, 1986, and in April, 1986, was hired as a lobbyist by IMC at a $5,000-a-month salary. After a dispute in August of that year with Recarey, Haddow said, his contract was canceled but he received a three-month lump-sum payment for a total salary of $40,000 in 1986.

Eight other Health and Human Services officials went to work for IMC at “enormous” salaries, according to the congressional finding.

The report said Juan del Real, former general counsel of the department, was paid $325,000 a year, or four times his government salary, at IMC. His wife, Claire, a former deputy assistant for public affairs at Health and Human Services, nearly doubled her salary to $130,000 when she joined IMC.

Wayne Fowler, director of Group Health Plan Operations at HCFA, the office with direct responsibility for the IMC contract, became IMC’s supervisor of health plan operations at a salary of $165,000.

“Recarey’s attempts to sway (Health and Human Services) were not limited to the hiring of federal employees,” the report said. “He also paid exorbitant fees to politically influential law firms and consultants. . . . “

Cites Lobbying Scheme

The subcommittee found that IMC “used a multimillion-dollar lobbying scheme, involving the hiring of numerous former federal HHS officials, to persuade (Health and Human Services) to improperly waive laws and regulations designed to protect Medicare beneficiaries.”

The report also said that negligence by HCFA officials allowed IMC to receive $11.9 million in improper payments and to provide poor care to Medicare patients.

“This report outlines a classic case of conflict of interest, involving greedy federal officials, whose selfish actions could have caused great harm to Medicare patients,” said Rep. Ted Weiss (D-N.Y.), chairman of the subcommittee.