Judgment Day in Washington: Why Andy Slavitt Must Not Run Medicare

Andy Slavitt during a speech. US Capitol Dome by Brandon Hirsch/Flickr

Many of us cheered in January of this year when Marilyn Tavenner, the woman who headed the disastrous rollout of the healthcare.gov website, announced she’d be stepping down from her position as Administrator of the Centers for Medicare and Medicaid Services (CMS). At the time, we weren’t too focused on who would be replacing her.

Waiting in the wings was Andrew M. Slavitt, now Acting Medicare Chief, who had been biding his time as CMS’ deputy administrator since July 2014. Even though he’s been accused of possible cronyism and conflicts of interest, Andy Slavitt has a special brand of insurance that shields him—protection only provided to those with powerful connections and the right pedigree. Why would a man with two successful decades in the private sector want to join such a bloated bureaucracy? Maybe because a dear friend called. Or maybe because he had $4.8 million tax free reasons.

Santa Fe, New Mexico, 29 July 2015
By TAMMM Staff

How the Foundation is Being Built for the Biggest Healthcare Heist in History

In June 2014, Sylvia Mathews Burwell had just been sworn in as the 22nd Secretary of Health & Human Services (HHS), the position that Marilyn Tavenner reported to as CMS administrator. Almost immediately after Burwell took her oath, she tapped Slavitt to become Tavenner’s deputy administrator, replacing Jonathan Blum. In “response to lessons learned from the rollout,” Burwell had high confidence that Andy Slavitt was the man to help fix healthcare.gov.

Slavitt left his investment banker practice at Goldman Sachs to become a top executive at UnitedHealth Group, where he was responsible for both its Ingenix and Optum divisions. Ingenix had been sued and kicked out of New York in 2011 for price fixing and fraud over flawed calculating algorithms on short payments on claims. Why would Burwell name a tainted executive from a tainted insurance giant to run the largest government agency in the world?

As Tavenner was taking a lot of hits from the Obama administration for the dysfunctional site launch she wasn’t surprised that Slavitt was coming on board to provide more cover. Like her, he’d been berated in front of Congress as United was one of the contractors responsible for building the site. How astonishing that no one was going to fire her, even when it was blatantly evident costs were going to end up being $2 billion to basically create a system to process applications online. On the announcement of his hiring as her deputy in July 2014 she said Slavitt, “will focus on managing day-to-day operational issues across all of our programs and be a key part of our leadership team.”

Six months later, when the site was still plagued with glitches, it was clear that Tavenner would have to be the fall gal. She resigned in January 2015 and Slavitt immediately moved up from deputy into her place as acting administrator, where he sits now. Today, with his nomination on the horizon to become CMS’ head, some are taking much more interest in exactly who Slavitt is, and how he fits into Medicare’s overall landscape.

As for Ms. Tavenner, we needn’t worry. She just snapped up the job of CEO of America’s Health Insurance Plans, a powerful lobbying group that needed a CMS insider. She is now personally making big dollars in the Medicare to Millions Club.

Strangers in the Night?

So where did Burwell and Slavitt meet? Maybe at the Harvard Club? It turns out Burwell and Slavitt are also both “alumni” of McKinsey & Company, Slavitt (LAN 93-95) and Burwell (NYO 90-93), where they learned management jargon par excellence. McKinsey is the biggest strategy adviser for governments and corporations worldwide.

James O. McKinsey, a University of Chicago professor and expert on management accounting, founded the consulting firm in 1926. Their About Us page today is quite a heady reading experience. Insiders say that it’s a classy, cool place to work because you feel as though you’re in with the smart guys, the powerful and the elite—but they also admit the real world doesn’t work like McKinsey. One thing is for sure, they are a major establishment player that opens golden doors.

(As an aside, McKinsey is at the top of the Common Core State Standard Initiative and the Council on Foreign Relations is at the bottom, as seen in this great flow chart assembled by Morna McDermott for the site TruthOut.org.)

Burwell—who served in the Clinton administration and later as Obama’s Director of the Office of Management and Budget (OMB)—is one smart cookie, being Harvard educated followed by a Rhodes Scholar designation at Oxford. Burwell ran two charities: the Walmart Foundation in Arkansas where she oversaw more than $1 billion in giving and she was the first COO of the Bill and Melinda Gates Foundation in Seattle.

As if that weren’t enough places to peddle influence, she also became a member of the aforementioned Council on Foreign Relations. When she became Secretary of HHS, her buddy, and Council Adjunct Senior Fellow, Peter R. Orszag had high praise for her. He said if she took bold steps to transform HHS she would “drastically alter prospects for everything from the federal budget to state and local priorities (including education) and the take-home pay of America’s workers.” So far, our take-home pay seems to be drastically altered in the negative.

Setting her sights even higher, Burwell is also a member of David Rockefeller’s Trilateral Commission, (Orszag’s there, too) along with other Obama notables including Tim Geithner, Susan Rice and Paul Volker. How tight can you get? The real world looks much different for those in this cozy club.

The Sad Tale of How UnitedHealth Bought Medicare

Slavitt, who we’ve written about before, formerly served as group executive vice president at UnitedHealth’s Optum and was CEO of OptumInsight, Optum’s health information technology division. Don’t forget that it was Ingenix that became OptumInsight. Our article on Optum put the Ingenix fraud into perspective with Governor Andrew Cuomo, then New York’s Attorney General, describing Ingenix and UnitedHealth’s use of data as “deception, manipulation of data and outright fraud.”

As Slavitt stepped into Tavenner’s pumps, we were told he was to be our champion for combatting healthcare fraud while improving health outcomes. Right. We wonder what Governor Cuomo has to say about this fox guarding the Medicare hen house.

While at Ingenix/OptumInsight, Slavitt was hunkered down, devising the way electronic health records and evidence-based medicine would overtake the technology and operational sides of delivering patient care (really, how to manipulate insurance dollars). There is no reason to believe that Slavitt will not ram this pseudoscience he hatched at United down the throats of the public through the Medicare programs for which he is slated to become its imperial director, should his ominous appointment be confirmed by Congress.

Slavitt ran one of Optum’s subsidiaries, the blandly-named company, Quality Software Services, Inc. (QSSI), one of the main contractors hired by CMS to build the healthcare.gov hub and registration tool (the Canadian firm CGI Federal was the main contractor, earning at least $93.7 million for the job).

UnitedHealth acquired QSSI in 2012, about a year before healthcare.gov launched. The contract awarded to QSSI received considerable media attention because of the fact that the QSSI acquisition by United was suspiciously made only months after HHS had awarded the contract to QSSI. United now had a huge financial stake in the operation of the healthcare.gov exchange.

When the website launched on October 1, 2013, QSSI’s tool was totally obliterated by a bottleneck. When Slavitt and the other government contractors testified before a House Energy and Commerce Committee on October 22, 2013,their finger pointing was laughable. We were shaking our heads listening to their incredible and shameful ineptness. They had testified before the same Committee on September 10 that they were totally ready to handle the October 1 surge of users.

Caught in that lie, Slavitt blamed all the problems on CMS—the government division he’s now tapped to run. He blamed the problems on CMS’s decision to ask users to register for an account before browsing for health plans. He testified he had pushed CMS for more time to do end-to-end testing, but all that was out of his hands.

Would any reasonable person believe that a deliberate cover-up of the cozy arrangement between CMS and UnitedHealth could be disguised by trying to hide that United was really the force behind and owner of Quality Software Services?

Then, even after this United subsidiary completely botched the rollout, CMS gave QSSI yet ANOTHER contract to fix the site. And still the site lagged and spewed. Finally, in July 2014, Burwell told Slavitt to come on over to the public side to fix the darn thing, and to “help solidify leadership and decision-making” under Tavenner. He was now the single point of contact for the marketplace.

QSSI, owned by United, made millions for screwing up. In September 2014, just two months after Slavitt left, they were awarded an eight-month contract extension worth up to $29 million. Such a deal!

Soldier On Andy: $4.8 Million in One Day

In January 2015, after Tavenner was toast (seeing as she’s now heading up the country’s biggest healthcare lobbyist that’s not exactly toast) Slavitt moved into her place on an acting basis and is now expected to be confirmed as her permanent replacement.

Some started objecting. A red flag was raised over Slavitt’s ethics waiver. Craig Holman, a lobbyist for Ralph Nader-founded Public Citizen, said Slavitt’s nomination is “highly inappropriate,” because when he took Burwell up on her job offer in July 2014 as deputy, he was issued an ethics waiver that allowed him to be exempt from Obama’s executive order on ethics in government that would bar federal appointees from working on issues related to a former employer—in Slavitt’s case that would be anything related to UnitedHealth—for two years after leaving that company.

With Slavitt’s waiver, he could immediately work on any projects or policy decisions that involved UnitedHealth, or any of the other insurance cartel members for that matter, all who use the same industry lobbying group, America’s Health Insurance Plans, now run by none other than his old boss, CMS’ former head, Ms. Marilyn Tavenner.

During Slavitt’s transition from United to CMS in 2014, some very interesting transactions took place. Slavitt, thanks to the federal government and his old friend and colleague, Secretary Burwell, had an extremely handsome payday.

A Daily Caller article exclusive revealed that shortly after Slavitt stepped in as acting administrator of CMS in June 2014, he pocketed at least $4.8 million in income—made tax free—by the government-issued special waiver.

Though first denied by the CMS, it was later confirmed that Slavitt sought and received a special “certificate of divestiture,” which is a loophole that allowed him to indefinitely defer capital gains taxes on the sale of millions of dollars in equities. He was allowed to sell 23,711 shares of his UnitedHealth Group stock while avoiding any capital gains taxes on the transaction. The day he sold, United’s stock price was $82.72.

On the same day, Slavitt sold 11,670 additional shares of Partners Group Private Equity, which, according to an Office of Government Ethics official, included underlying health-care investments. The stock was at a whopping $249 a share.

Slavitt sold additional stock he personally held, raising his total windfall from the health industry to $7.2 million. His days as an investment banker for Goldman Sachs certainly paid off.

$4.8 million in a day. Tax free. Here’s how that played out for Andy on that infamous day, July 9, 2014:

• Certificates of Divesture issued to Slavitt
• Sells 23,711 shares of UnitedHealth Group’s stock priced at $82.72/share
• Pockets $1.96 million in tax-free income
• Sells 11,670 shares in Partners Group Private Equity at $249/share
• Pockets $2.9 million in tax-free income

The article closes on this pitiful note: “Holman believes the administration awarded the waiver because Slavitt would have faced so many conflicts he would be continually recusing himself and could not do his job.”

Senate Finance Hearing TBD

The Senate Finance Committee has not scheduled a date for his appointment hearing. A call to their office confirmed they will be in recess from August 10 to September 8, 2015 but they will not say if Slavitt’s hearing will be held before or after the break. Committee Chairman Orrin Hatch (R-Utah) said, “Mr. Slavitt will need to answer a number of tough questions regarding his former employer and their relationship with the agency.”

Mitch McConnell (R-Kentucky) has weighed in, saying, “The head of the agency that oversees Medicare and Medicaid should be focused on what the American people expect him to do: administer these important programs, not allow his attention to be diverted instead to the implementation of some gigantic, unworkable health care law that hurts hardworking Americans.”

In effect, Slavitt has been imposing standards on the industry through Medicare—and previously through United—for the practice of medicine. He’s dictating standards of medical care to doctors and patients, making him tantamount to practicing medicine without a license.

Back in April, Senators Hatch and Chuck Grassley (R-Iowa) raised red flags in a letter to Burwell. They grumbled about possible cronyism and conflicts of interest, but do you think the Secretary will be objective when it comes to her old pal Andy?

Who will hold Slavitt accountable? What will he do to bend Medicare to the self-inuring models of “accountable” and “value based care” he designed at United? These models help to explain why the consolidated health insurance players—now soon to be three in number—have never been more profitable while simultaneously paying out record low amounts of patient, physician and hospital claims.

If Andy Slavitt is a great pick to head up Medicare, who is the real beneficiary? Where will his past allegiances lie? What of those allegiances that made him a rich man? And what of the allegiances which are now poised to place their industry’s own man to take, arguably, one of the most powerful positions on the planet?

Is Andy Slavitt’s nomination consistent with what our Founders envisioned as the people’s government, made for the people, made by the people, and answerable to the people? Hopefully, the bright light we have shed on this web of intrigue will help our readers decide for themselves and spread the word that Slavitt is not the man to run Medicare.

Senators Hatch and Grassley have a right to be concerned. We should all share their concern!

Please call your Congressional representatives repeatedly and plead with them to deny the appointment of Andy Slavitt.