Obamacare's Slush Fund Fuels a Broader Lobbying Controversy

From American Media Institute

By Stuart Taylor

A little-noticed part of President Obama’s Affordable Care Act channels some $12.5 billion into a vaguely defined “Prevention and Public Health Fund” over the next decade–and some of that money is going for everything from massage therapists who offer “calming techniques,” to groups advocating higher state and local taxes on tobacco and soda, and stricter zoning restrictions on fast-food restaurants.

The program, which is run by the U.S. Department of Health and Human Services (HHS), has raised alarms among congressional critics, who call it a “slush fund,” because the department can spend the money as it sees fit and without going through the congressional appropriations process. The sums involved are vast. By 2022, the department will be able to spend $2 billion per year at its sole discretion. In perpetuity.

What makes the Prevention and Public Health Fund controversial is its multibillion-dollar size, its unending nature (the fund never expires), and its vague spending mandate: any program designed “to improve health and help restrain the rate of, growth” of health-care costs.  That can include anything from “pickleball” (a racquet sport) in Carteret County, N.C. to Zumba (a dance fitness program), kayaking and kickboxing in Waco, TX.

“It’s totally crazy to give the executive branch $2 billion a year ad infinitum to spend as they wish,” said budget expert Jim Capretta of the conservative Ethics and Public Policy Center. “Congress has the power of the purse, the purpose of which is to insure that the Executive branch is using taxpayer resources as Congress specified.”

The concerns are as diverse as the critics. The HHS Inspector General, in a 2012 “alert,” was concerned that the payments to third-party groups came dangerously close to taxpayer-funded lobbying. While current law bars lobbying with federal money, Obama administration officials and Republican lawmakers differ on where lawful “education” ends and illicit “lobbying” begins.  Nor have federal courts defined “lobbying” for the purposes of this fund. A health and Human Services (HHS) department spokesman denies that any laws were broken and the inspector general is continuing to investigate.

Republicans in both the House of Representatives and Senate have complained that much of the spending seems politically motivated and are alarmed that some of the federal money went to groups who described their own activities as contacting state, city and county lawmakers to urge higher taxes on high-calorie sodas and tobacco, or to call for bans on fast-food restaurants within 1,000-feet of a school, or total bans on smoking in outdoor venues, such as beaches or parks. In a May 9 letter to HHS Secretary Sebelius, Rep. Fred Upton (R,Mich) wrote that HHS grants “appear to fund lobbying activities contrary to the laws, regulations, and guidance governing the use of federal funds.” His letter included the latest in a series of requests for more documents and complaints about responses to previous requests.

Some Democrats, including Obamacare champion Sen. Tom Harkin (D, Iowa), are extremely unhappy with another use of Prevention Fund money. The Obama Administration plans to divert $453.8 million this year from that fund to use for administrative and promotional efforts to enroll millions of people in health insurance exchanges that are said to be vital to Obamacare’s success. Harkin calls this shift, which has not been authorized by Congress, “an outrageous attack on an investment fund that is saving lives.”

This extraordinary fund transfer coincides with HHS Secretary Kathleen Sebelius’s much-criticized solicitation of health industry officials for large “voluntary” corporate donations — on top of hefty tax increases — to help implement Obamacare. Together, they give the appearance of a desperate Administration effort to avoid the kind of “train wreck” that Senator Max Baucus (D, Montana), a principal architect of Obamacare, recently said he fears. That’s also one reason why Republicans who want to kill Obamacare refuse to provide additional funding for the exchanges.

An HHS spokesperson responded to an inquiry about the “lobbying” complaints by saying that “HHS is committed to proper oversight and monitoring of appropriated funds, and to awardees’ compliance with all applicable regulations and statutes related to lobbying activities.” As to the shifting of the $453.8 million, the spokesman said that it was necessary “because Congress did not provide the resources requested” and it would help individuals “sign up for affordable health coverage by supporting . . . call centers that provide customer service, consumer education and outreach.”

The lobbying controversy is akin to conservative complaints about the 2009 “stimulus” legislation, in which HHS directed some $373 million to a “Communities Putting Prevention to Work” fund to states, counties and cities and then onto to health advocacy organizations described in a Wall Street Journal editorial as “liberal pressure groups lobbying for fast-food taxes.”

With those stimulus grants largely spent, the Administration has used Prevention Fund money — dispensing more than $290 million in fiscal 2012 and 2013 combined — for very similar “Community Transformation Grants.”  As in the case of the earlier grants, HHS made the grants through the federal Centers for Disease Control and Prevention (CDC). Public documents, including CDC descriptions of grants’ goals as well as the reports that grantees must file, are honeycombed with references to seeking state and local policy changes, such as tax hikes on sugary beverages and tobacco and zoning restrictions on fast-food establishments.

Congressional investigators point to documents and federal websites, which detail the spending that critics call “illegal lobbying.” A few of the more than 100 examples cited by critics:

• In Washington state, the Prevention Alliance, a coalition of health-focused groups, reported in notes of a June 22, 2012 meeting that the funding for its initial work came from a $3.3 million Obamacare grant to the state Department of Health. It listed a tax on sugar-sweetened beverages (SSB), “tobacco taxes,” and increasing “types of outdoor venues where tobacco use is prohibited” as among “the areas of greatest interest and potential for progress.”

• The Sierra Health Foundation, in Sacramento, which received a $500,000 grant. in March 2013, described its plans to “seek local zoning changes to disallow fast food establishments within 1,000 feet of a school and to limit the number of fast food outlets,” along with restrictions on fast food advertising. A $3 million grant to New York City was used to “educate leaders and decision makers about, and promote the effective implementation of. . . a tax to substantially increase the price of beverages containing caloric sweetener.”

• A Cook County, Ill. report says that part of a $16 million grant “educated policymakers on link between SSBs [sugar-sweetened beverages] and obesity, economic impact of an SSB tax, and importance of investing revenue into prevention.” More than $12 million in similar grants went to groups in King County, Wash. to push for changes in “zoning policies to locate fast-food retailers farther from . . . schools.” And Jefferson County, Ala., spent part of a $7 million federal grant promoting the passage of a tobacco excise tax by the state legislature.

Among those who have expressed concern about questionable and possibly illegal use of Obamacare Prevention Fund money to lobby — an ambiguous term that the Administration interprets narrowly and its critics broadly — are HHS Inspector General Daniel Levinson; Sen. Susan Collins (R, Maine); and Chairmen Darrell Issa (R, CA) of the House Oversight and Government Reform Committee and Fred Upton (R, MI) of the House Energy and Commerce Committee.

Inspector General Levinson, a respected and veteran independent investigator, was first appointed to his position overseeing the vast HHS bureaucracy by President George W. Bush. He was retained in that job by President Obama, who also named him to the Government Accountability and Transparency Board. Last June 29, Levinson sent CDC Director Thomas Frieden an “EARLY ALERT.”

It warned that reports posted by CDC grantees “contain numerous examples of activities that, on their face, may violate anti-lobbying provisions,” and that “some of the CDC information, as well as the non-CDC resource materials posted to the CDC web site, appear to authorize, or even encourage grantees to use grant funds for impermissible lobbying.” The “alert” said that the IG would continue to “evaluate more broadly” compliance with lobbying restrictions. A Levinson spokesman declined recently to elaborate.

Collins, a leading Senate moderate, cited copious evidence in a May 1, 2012 letter to Sebelius that CDC has provided “official guidance to grantees that appears to include an expectation that federal funds are to be used for strategies that result in changes to state and local policies and laws.”

While stressing strong support for “the wellness and prevention mission of the CDC,” Collins cited examples including a report to the agency by the Pennsylvania Department of Health, which received a $1.5 million CPPW anti-tobacco grant in 2010. Thanks to the federal money, the Health Department reported, “210 policy makers were contacted . . . 31 ordinances were passed . . . there were 26 community presentations made to local governments .. . and 16 additional ordinances were passed this quarter, for a cumulative total of 47.”

HHS and CDC say that not only have they heeded these complaints, but as HHS stressed in an April 1 letter to Upton, they have been committed all along to “proper oversight and management of appropriated funds, and to awardees’ compliance with all applicable regulations and statutes related to lobbying activities.”

Spending to influence state and local legislation, critics claim, violates a web of overlapping federal laws, beginning with the federal Anti-Lobbying Act of 1919, as amended in 2002, which says: “No part of the money appropriated by . . . Congress shall . . . be used directly or indirectly to pay for any personal service, . . . telephone, letter, printed or written matter, or other device, intended . . . to influence in any manner a member of Congress, a jurisdiction, or an official of any government, to favor, adopt, or oppose, by vote or otherwise, any legislation, law, ratification, policy, or appropriation.”

This language is clear, unambiguous, and much broader than the HHS regulations on lobbying. To be sure, these restrictions have long been interpreted narrowly by the executive branch, a bipartisan tradition that goes back at least to the administration of President George H.W. Bush. And the Justice Department has never enforced the law against anyone.

Still, the Sebelius interpretation of the Anti-Lobbying Act takes narrow interpretation to extremes, flying in the face of the statute’s very specific language. Sebelius testified on March 1, 2012 that the statute’s lobbying provisions don’t apply to “local lobbying” or lobbying by grantees, while acknowledging that a 2012 appropriation provision — which unlike the Anti-Lobbying Act provides no penalties for violators — barred such forms of lobbying.

HHS Assistant Secretary for Legislation Jim Esquea made a more detailed argument to the same effect in an April 1, 2013 letter to Rep. Upton, asserting that the statute prohibits “only large-scale, high-expenditure, ‘grass roots’ lobbying campaigns conducted by federal agencies that expressly encourage members of the public to contact their elected representatives with respect to legislative matters.”  But Esquea relied on strained interpretations of obsolete precedents predating major amendments that, in 2002, explicitly broadened the Anti-Lobbying Act to cover for the first time lobbying of state and local officials.

CDC guidelines permit the state and city agencies that it funds “to work directly on policy-related matters across their equivalent branches of state or local government.” That sounds reasonable enough. But to critics it sounds like the guidelines would allow, if not encourage, a city health department to spend federal money on lobbying (in the fullest sense of that word) state and local lawmakers to raise taxes on tobacco and sugary beverages.

Some grants seem to fit this interpretation. A $7.6 million CPPW grant to the County of St. Louis to fund an anti-smoking “Community Action Plan” for local activists. Under that plan, “the Leadership Team will meet with the Governor and state legislators to advocate for the repeal of [the state law] that prohibits municipalities from levying their own cigarette excise taxes.” In quarterly reports to CDC for late 2010 through mid-2012 on how it had spent the federal grant, St. Louis County said: “Leadership Team members . . . met with officials from two municipalities about adopting a comprehensive smoke-free ordinance. . . . Coalition members met with two County Council members and the County Executive about strengthening the County’s new smoke-free ordinance. . .. Several people, including restaurant owners, testified at three consecutive County Council meetings in support of removing exemptions from the County’s smoke-free ordinance.”

Finally, St. Louis County used almost $2 million of its federal grant to pay the public relations-lobbying firm Fleischman Hillard for a media campaign to strengthen an anti-smoking ordinance  and push related agendas.

Many grantees and the federal bureaucrats who finance them maintain that they can legally engage in efforts to “educate” both the public and officials about, say, the public health benefits of taxing tobacco and sugary beverages so as to reduce consumption. Chairman Upton, on the other hand, rejected in an August 2012 letter what he called “the improper distinction made by CDC between lobbying and ‘education campaigns.’ ”

“Enlisting other levels of government to do things [the federal government] can’t do openly on its own is the latest example of propaganda and politicizing efforts that only pretend to represent policy reform,” said Tom Miller, an expert in health policy and law at the American Enterprise Institute.

Other conservative health care policy advocates, such as Dr. Eric Novack, an orthopedic surgeon in Phoenix, complain that using federal dollars to lobby for more taxes and other liberal causes at the state and local levels is an abuse of power that skews the natural balance of state and local political forces. “With the hundreds of millions of state and federal dollars annually flowing their way, [health care advocates] are engaging in the lobbying equivalent of  ‘shock and awe’ to get ever more money for themselves and to thwart efforts at real reform”, said Dr. Novack.

Critics have also suggested that Sebelius (and Obama) “lack the legal authority,” as Rep. Issa put it in his April 19 letter to Sebelius, to divert $453.8 million in Prevention Fund dollars to help pay for the establishment and operation of health insurance exchanges. Argues Grace-Marie Turner, president of the Galen Institute, an Alexandria, Virginia-based health-care think tank:

“The Obama administration is being very creative in devising programs it says fit within the definitions of ‘prevention’ and ‘public health.’ The reality is that this is a slush fund.  The administration is using taxpayer dollars to further its political goals, without any congressional input.  That is an open invitation to misuse and abuse of taxpayer dollars.”

But short of an unlikely bipartisan agreement, there’s not much that anyone in Congress can do about such complaints.

Strikingly, the most passionate denunciations of the $453.8 million diversion have come from a senior Democrat, Sen. Tom Harkin, self-described author of the Prevention and Public Health title of the Affordable Care Act. Harkin succeeded the late Ted Kennedy, (D, MA) as Chairman of the Senate Health, Education, Labor and Pensions Committee and has vowed to carry on Kennedy’s legacy of seeking universal access to health care and, especially, full funding of prevention programs.

“It is ill-advised and short-sighted to raid the Prevention Fund, which is making absolutely critical investments in preventing disease, saving lives, and keeping women and their families healthy,” Harkin said in his May 7 floor speech. “When it comes to Prevention, this Administration just doesn’t get it. . . . To slash money from this fund . . . is to cannibalize the Affordable Care Act in ways that will cost both money and lives. It is a violation of both the letter and spirit of this landmark law.”

In other words, the Democratic Chairman of the Health Committee is calling the Democratic President’s “raid” on the Prevention Fund illegal. But an HHS spokesperson counters that “this short term investment will result in a long-term public health gain by helping millions of people get access to care and improve our nation’s health.” Other officials stress that with an October 1 Obamacare deadline to start enrolling millions of individuals online, finding the money to create and implement the insurance exchanges is a major challenge to the success of Obamacare.

And money for setting up the exchanges is very, very short, despite an overall Obamacare price tag of trillions over coming years. One reason is that the Administration underestimated the cost, in part because contrary to its expectation, only 17 states have chosen to operate their own insurance exchanges. Another reason is Congress’s refusal to appropriate more money for such administrative expenses.

Meanwhile, it may not be easy to convince young or healthy people without employer-based insurance — especially men, and especially with incomes too high to qualify for Obamacare subsidies — that it would be a rational economic choice to buy a government-approved insurance policy costing (the Congressional Budget Office estimated in 2010) over $4,500 a year for an individual. By contrast, the Obamacare fine will be far smaller for some individuals.

The alternative choice of paying a relatively inexpensive Obamacare penalty for refusing to buy insurance may seem more attractive to many, especially after the Supreme Court stressed last June that such a choice carries no stigma of law-breaking. The Affordable Care Act set the penalty (which varies depending on income and the year) at only a fraction of what the insurance would cost people who don’t qualify for subsidies. At the same time, it guarantees a healthy person who chooses the penalty rather than the insurance the right to reverse course and buy the insurance at no extra cost not too long after he gets sick or injured.

So, as the Administration sets out to recruit enough young, healthy people to keep premiums from soaring, it may need every dollar it can find for advertising and outreach.

What some critics call a “slush fund,” may well turn out to be Obamacare’s own insurance policy.

Stuart Taylor, Jr. is a Nonresident Senior Fellow of the Brookings Institution. The American Media Institute, a non-profit that promotes investigative journalism, contributed to this report.