The Cost of (Hopefully) Influence

President Barack Obama sent a $3.77 trillion budget up to Congress on April 10. It’s springtime in Washington. The cherry blossoms may be blooming but the knives are out as demand for tax dollars for health care from a broken public purse outstrips supply. As the musician David Bromberg wrote, “Everybody gets greedy when the well runs dry.”

Orthopedic Wish List

The demand for tax dollars for orthopedics is couched in the language of “jobs, innovation and patient access” by device manufacturers and physicians.

Among other things, manufacturers want the device tax repealed, lower taxes and smarter regulations while physicians want a flawed SGR (sustainable growth rate) formula scrapped and the IPAB (Independent Payment Advisory Board) abolished.

Budget Cuts

The budget calls for about $400 billion in Medicare cuts over the next ten years. The president has told Republicans he’s open to making some significant Medicare policy changes to reduce the federal deficit, such as expanding means testing for the wealthy, combining hospital and physician services under one Medicare payment structure, or adding a surcharge to Medigap plans.

Competing Interests and Economic Rent

But this story isn’t about public policy. This story is about competition for scarce resources and how medical device manufacturers and medical societies use campaign contributions and lobbying resources to influence public policy sausage-making in Congress. Competing with device makers and providers for those dwindling public dollars are hospitals, payers, and, in the case of physicians, competing sub-specialties. Economists call this “Economic Rent.”

Just recently, it was announced that a group of hospitals is teaming up with UnitedHealth Group Inc. to start studying the effectiveness of medical devices and whether cheaper alternatives exist. Those hospitals, Baylor Health Care System in Dallas, Dignity Health in San Francisco and Advocate Health Care in Illinois treat 7 million patients a year and UnitedHealth insures 40 million policyholders. The venture is called SharedClarity.

Hospitals have resisted efforts to dump the device tax because they say they’ve already “paid their rent” under the Affordable Care Act and device makers should take their medicine to insure 30 million new customers.

The American Academy of Orthopaedic Surgeons (AAOS) recently released a study demonstrating the societal benefits to keeping people moving and productive. When we know that most Medicare dollars are spent during a beneficiary’s last six months of life, making the case that society is better off keeping a 40-year-old productive with orthopedic care is one of the uncomfortable choices politicians are being asked to make.

Paying for Influencing

Do campaign contributions and lobbying Congress influence those tough choices?

Sectors of the healthcare industry thought so in 2012 as they made the following amounts in campaign contributions to Congress and presidential candidates:

We took a look at where campaign contributions are going and who is spending the biggest bundle to influence politicians and federal regulators.

We separated the campaign contributions and lobbying expenditures into two groups as defined by the Center for Responsive Politics (CRP). The CRP runs a website called opensecrets.org and tracks spending on campaigns and lobbying. All tables below are from the CRP.

Health Professionals includes physicians, psychiatrists, dentists, chiropractors, pharmacists, nurses, nutritionists and anyone else providing healthcare services—as well as their professional associations.

Medical Suppliers are made up of both medical supply manufacturers and dealers, who design and market everything from bedpans and artificial limbs to high-tech equipment for both home and hospital use.

Device Industry in Crosshairs

The device industry’s financial efforts to convince Congress to repeal the device didn’t escape the attention of The New York Times editorial board which wrote an editorial on April 1, 2013 titled, “One Industry’s Hold on the Senate.”

The editorial said the device industry has donated “generously” to lawmakers and candidates and spent “tens of millions” in lobbying. That investment has paid off as the Senate voted 79 to 20 to repeal the tax in a nonbinding vote last month. The effort “shows how easy it is for a concerted lobbying effort to bring even liberal senators like Elizabeth Warren and Al Franken to an industry’s side, ” concluded the editorial. Before the vote, device makers helped sponsor two fund-raisers for Senator Orrin Hatch, Republican of Utah, who wrote the amendment to repeal the tax.

Medical Suppliers

Since 2008, device makers have spent more than $150 million lobbying Congress.

According to the CPC, the industry’s rise to prominence began early in the first term of the Obama administration and was largely driven by the healthcare reform debate. The industry’s lobbying peaked in 2009, when it spent a total of $31.4 million lobbying Washington. The numbers have since declined slightly but remain above the pre-Obama era levels, with the industry spending $28.9 million on federal lobbying in 2012

Top Lobbying Spenders

Who were the top medical supply spenders to lobby Congress and the federal government in 2012?

Not surprisingly, the biggest medical device company, Medtronic, Inc. led the way. Other orthopedic device makers also made the top 40 list. The top five were:

Other notable orthopedic related lobbying spenders included:

Top Campaign Contributors

Medical device makers reported making nearly $5.98 million in campaign contributions to members of Congress in 2012. The top ten device industry campaign contributors included:

Of all industry campaign contributions to Congress, Republicans received a little under $3.6 million while Democrats got about $2.4 million.

Top Political Targets

So who got all that money?

Again, not surprisingly, the money went to politicians in states with large device manufacturers.

The bid to repeal the medical device tax is led by Senator Hatch, who rounded up 33 other senators, all of them of his party. He has four Democrats as co-sponsors, including so-called liberals like Senator Al Franken of Minnesota. Donations from industry executives to certain important Democratic allies, like Senator Klobuchar of Minnesota and Senator Casey of Pennsylvania, surged in the last election cycle as the industry played a significant role in their re-election efforts.

Health Professionals

While device makers have made some inroads on their legislative agenda, health professionals haven’t fared as well in efforts to fix the payment system or get rid of IPAB.

CPC reports that only four other industries, along with retirees, spent more than health professionals on political campaigns during the 2008 election cycle. Key players within the industry include the American Medical Association (AMA), the American Dental Association and the American Society of Anesthesiologists. All want more money under Medicare and expanded access to health care for people in underserved areas. The AMA is the industry’s largest trade group, and focuses on reforming the medical liability system, as well as resisting government-run health care.

Biggest Health Professional Campaign Contributors

The top 16 campaign contributors in 2012 were:

Their money went primarily to Mitt Romney and Barack Obama who received $12.6 million and $10.8 million, respectively. Rick Perry and Ron Paul received $889, 000 and $747, 000, respectively. The $42 million in contributions from the Adelson Drug Clinic is attributable to the owner of the clinic, Sheldon Adelson. Adelson, also chairman and CEO of the Las Vegas Sands Corporation, contributed all but about $30, 000 of the full amount to so called conservative super PACs. The rest went to Republicans.

Top Campaign Cash Recipients

Members of Congress, including orthopedic surgeons, Senator John Barrasso and Congressman Tom Price received the following:

Health Profession Lobbying

In 2012, health professionals, with 690 registered lobbyists spent over $78 million to influence the federal government.

The top ten spenders:

Notable orthopedic-related groups included:

Eyeing the Competition

Analyzing where device makers and physician groups sent their campaign contributions, it becomes clear that physicians give with their hearts and device makers give with their heads as money is spread around in a less partisan fashion. No sector in health care seems happy with current public policy, but physicians, device makers, insurers and hospitals have pulled out their checkbooks and are looking at each other a little differently as the public watering hole shrinks.