Wednesday, February 15, 2017

Making Health Care Conflicts of Interest Great Again: A Consultant to Medicaid and Simultaneously to Medicaid Vendors for CMS?

President Trump campaigned on behalf of the neglected middle class, but at least in the health care sphere, those he has chosen for their advice or considered for nomination seemed to be more the corporate class.

Tomorrow, Ms Seema Verma, nominated by the Trump administration to be director of the Center for Medicare and Medicaid Services (CMS), one of the most powerful US government health care positions, will have an opportunity to appear before a Senate committee.  Ms Verma, unlike some other people President Trump has considered for health care leadership or advisory positions,  does seem to have a background in health care policy, if not actual on the ground health care.  But like many of those people, she has been accused of having important conflicts of interest.

Working as a Indiana State Consultant on Medicaid While Consulting for a Prominent Medicaid Vendor

Back in 2014, the Indianapolis Star reported on conflicts of interest affecting Ms Verma, then a consultant to Indiana state government on Medicaid services, while her company simultaneously worked for a Hewlett-Packard subsidiary that was a vendor to the Indiana Medicaid program.

The Star described Ms Verma's work for the state thus:

Verma enjoys a tremendous amount of sway for a private contractor. She has her own office at the state government center. Earlier this year, Pence turned to her to broker a deal with the state's hospital industry to help finance his plan to expand the Healthy Indiana Plan. And when Verma and one of Pence's Cabinet members — Family and Social Services Administration Secretary Debra Minott — butted heads over how soon to roll out the program, it was Minott who lost her job.

Verma's influence reaches back at least a decade and across the administrations of four governors, two from each party. During his first term, Gov. Mitch Daniels tapped Verma to help create a new health-care plan to address the state's uninsured population. Her solution: the Healthy Indiana Plan, a new low-income health insurance program that features high deductibles and requires participants to contribute a portion of their income to a health savings account.

Furthermore, in 2014,

Now, Pence wants to expand the plan to an additional 350,000 low-income Hoosiers through what he's calling HIP 2.0. And like Daniels, he turned to Verma for help in developing the plan and negotiating a financing agreement with the state's hospital industry. If approved by the federal government, billions of new Medicaid funds would flow to the state.

However, at the same time Verma and her company had this powerful role for the state, she also worked for HP.

HP's claims management and information system contracts show it has agreed since 2007 to pay Verma's company $1.2 million as a subcontractor for 'health consulting services.'

Yet Verma's work for the state clearly affected HP.

her duties involve crafting requirements for contractors, negotiating with contractors and supervising vendors. Her company's website also says she provided 'requirements for the state's three technology vendors to support HIP.' That would include Hewlett-Packard. One contract gives her the authority to 'initiate and/or track' a contract or contract amendments with the state's fiscal intermediary, which is HP. Another puts her in charge of technical changes to the state's medical management information system, which is operated by HP.

HP clearly had a major relationship with the state.

During that time, HP received more than $500 million in state contracts, including millions of dollars in contract changes to accommodate the Healthy Indiana Plan that Verma helped create and other new programs.

In 2014, the Star made a strong argument that Verma had a major conflict of interest, yet she appeared not to have made it explicit, or perhaps disclose it at all. 

'Certainly on the face of it, there is the appearance of a conflict,' said Trevor Brown, an expert on government purchasing and director of Ohio State University's John Glenn School of Public Affairs.

If Verma was a federal contractor, her dual roles 'would certainly raise tremendous concern for regulators and purchasing officials,' he said. 'This is exactly the kind of thing that would land an agency in a hearing before a legislative oversight committee.'

Lawmakers in Indiana, however, were unaware of Verma's work for HP.

'I was only aware she was working for the state,' said Sen. Patricia Miller, R-Indianapolis, chairwoman of the Senate Health Committee.

'There certainly appears to be the potential for conflict, and appearances matter,' said Ed Clere, R-New Albany, chairman of the House Health Committee

Verma's arrangement with HP also came as a surprise to former FSSA Secretary Debra Minott, who said she learned about it sometime in 2013.

'We had delayed paying an HP invoice because of an issue we were trying to resolve, and HP sent Seema to our CFO to resolve the issue on their behalf,' Minott said. 'I was troubled because I thought Seema was our consultant.'

At the time, though, all of this was legal, since Indiana had very weak regulations on conflicts of interest affecting state government operations.

Minott said when she brought her concerns to FSSA's ethics officer, she was told Indiana's ethics rules didn't apply to conflicts of interests among state contractors.

The lack of any such rule is just the latest in a litany of loopholes that good government advocates say Indiana needs to address.

A 2017 Update: Still Working for Hewlett-Packard, While Advising Nine State Governments

Apparently there were no changes in Ms Verma's relationships with the state of Indiana, and in her conflicts of interest since 2014. In fact, on February 14, 2017, the Associated Press published an updated description of her conflicts (via WKRN). Apparently, her conflicts of interest actually affected eight states other than Indiana.

A review by The Associated Press found Seema Verma and her small Indianapolis-based firm made millions through consulting agreements with at least nine states while also working under contract for Hewlett Packard. The company holds a financial stake in the health care policies Verma's consulting work helped shape in Indiana and elsewhere.

Her business activities continued to be very lucrative.

Since 2011, her firm, SVC Inc., collected more than $6.6 million in consulting fees from the state of Indiana, records show. At the same time, records indicate she also received more than $1 million through a contract with Hewlett, the nation's largest operator of state Medicaid claims processing systems.

Last year, her firm collected an additional $316,000 for work done for the state of Kentucky as a subcontractor for HP Enterprises, according to documents obtained by AP through public records requests.


Verma reported her salary with SVC is $480,000 and her business income from the company as nearly $2.2 million.

The AP found more experts to state that Ms Verma has serious conflicts of interest,

However, legal and ethics experts contacted by AP say Verma's work for Hewlett, and offshoot HP Enterprises, raised questions about where her loyalties lay — to the company, or to state taxpayers.

Richard Painter, former President George W. Bush's chief ethics lawyer, called Verma's arrangement a 'conflict of interest' that 'clearly should not happen and is definitely improper.'

Such arrangements are typically prohibited for rank-and-file state employees under Indiana's ethics rules and laws, but they're murkier when it comes to consulting work. Contractors have often replaced state employees in a GOP bid to drive down the number of public employees and distinctions between the two can be hard to discern.

'She was cloaked with so much responsibility and so much authority, people thought she was a state employee,' said Debra Minot, a former head of Indiana's Family and Social Services Agency under Pence who worked with Verma.

Indiana University law professor David Orentlicher compared Verma's dual employment to an attorney who represents both the plaintiff and the defense in a lawsuit. It's also similar to federal contract negotiator with a side job for a company they regularly negotiate with, he said.

'If you have one person on both sides of the negotiating, they can't negotiate hard for both sides,' said Orentlicher, a former Indiana Democratic state lawmaker.
Ms Verma's conflicts got little notice at the time of her nomination, but the 2014 Indianapolis Star was first noticed by PRWatch in January.


Revelations about these ongoing conflicts of interest have not apparently caused the Trump administration to rethink her nomination to be head of CMS.

Ms Verma happily went along working as an authoritative consultant for multiple states' Medicaid programs while also working as a consultant for a prominent vendor to these programs.  The 2014 report about these conflicts did not deter her from continuing her lucrative work for parties on both sides of the table.  Apparently, she continued to have similarly conflicted relationships with multiple other states, without anyone being the wiser.

If Ms Verma saw no problem with acting while subject to these conflicts, does anyone seriously expect that as head of the Medicare and Medicaid programs for the whole country she will put theinterests of the forgotten middle, working, and lower class patients who get health care insurance from these programs ahead of the interests of her corporate buddies?

Previously, the Trump administration nominated another heavily conflicted individual to be Secretary of Health and Human Services (look here and here).  He has gotten health advice from a silicon valley magnate who declared corruption was needed to prevent boredom (look here).  Several people he has reportedly considered to run the US Food and Drug Administration had their own substantial conflicts.  One was a  and one was a former pharmaceutical and biotechnology executive (look here and here).  One of the first people he sent to oversee FDA operations was a former pharmaceutical company lobbyist (look here).  A person proposed as "health care czar" is a billionaire biotechnology CEO (look here). 

Are these the sort of people who will first think of the welfare of the forgotten multitudes, or how much wealth they and their cronies can attain?

Finally, the Medicaid program is meant to be part of the safety net for the poorest Americans who cannot afford health insurance.  It seems bitterly ironic that the person proposed to become its leader has become rich as a consultant to state Medicaid programs (note above that Ms Verma made a salary of $480,000 a year, and received "business income" of $2.2 million presumably also a year from her consulting firm).  It is also bitterly ironic that many states have turned much of the operations of their Medicaid programs over to vendors who similarly have made a lot of money from a program for the poor.  

True health care reform requires leadership that puts patients' and the public health ahead of corporate health and managers' enrichment.

NOTE - Post revised on 16 February, 2017, to update links and add discussion of Ms Verma's salary and income.  


Afraid said...

Sad to see these under both Democrat and Republican administrations. Kind of proves how powerful the forces are to extract money from the unfortunate who contract disease, or even those not so sick who are convinced more treatment is better.

How are we ever going to get healthcare back on the right track if leaders show no interest in addressing the root causes of the problems that we all can see?

If our political leaders can't be trusted to do the right thing, then it's back to the MDs to fix their profession.

Doctors, heal thy system!

Anonymous said...

Yes, Afraid: Democrats as well as Republicans are responsible for the lack of "interest in addressing the root causes of the problems that we all can see." One bipartisan outrage is the law that prevents Medicare from negotiating prices with the drug companies. The VA and Medicaid negotiate; why not Medicare?

I've started a petition anyone else who finds this law unacceptable. It can be signed at