GOP lobbyists open fire on one of their own

A gaggle of right-leaning healthcare lobbyists have lashed out at one of their own, blaming a Republican former House Ways and Means Committee aide for assisting Democrats in an attempt to gut an insurance concept conservatives view as the future of healthcare.

Opponents of the Democratic bill have accused the former staffer and current lobbyist, John McManus, of selling out Republican principles by helping the other party weaken a signature conservative policy victory, the creation of tax-free health savings accounts (HSAs), in order to help his client leverage one of its patented products.

{mosads}McManus and his client vigorously refute such claims.

“My job is to represent my client, and of course I did that,” McManus said.

Yet the heated, and even nasty, fight between the sides illustrate not just the tense political atmosphere of Washington but also the difficulties former congressional staffers face when they return to the Hill as lobbyists and represent their clients’ interests.

At the center of the donnybrook is what, at first glance, appears to be an ordinary tax bill.

In a mostly partisan vote Tuesday that reflected the strong differences of opinion between the parties on HSAs, the House passed a multifaceted tax bill that included language requiring people who have the accounts to verify at the time of purchase that the money they spend goes to medical expenses.

Currently, there is no such requirement, though account holders are subject to government audits, which Democrats say makes the accounts vulnerable to fraud.

The White House threatened to veto the bill in large part because of the so-called “substantiation” requirement. Republican lawmakers and healthcare interest groups say the bill is a solution in search of a problem and that it raises administrative costs, which would squelch employer, bank and consumer interest in HSAs.

These Republican lawmakers are backed up by a plethora of special interests, from the U.S. Chamber of Commerce to the banking industry to the health insurance industry. Letters decrying the bill and carrying the signatures of at least 40 companies and trade associations landed on Ways and Means Committee members’ desks last week.

But how the language ended up in the bill, just days before the markup, is disputed and has generated resentment within Washington’s conservative healthcare lobbying community. That group swiftly went on the war path, taking aim at McManus and his client, the Connecticut-based company Evolution Benefits, which manages electronic systems used to handle healthcare transactions, including those made through HSAs.

The Ways and Means Committee Democratic staff did not respond to written questions from The Hill.

McManus, the senior health staffer for the Ways and Means Committee under then-Chairman Bill Thomas (R-Calif.), has represented the company since he formed his lucrative one-man lobbying practice in 2003. His former boss, Thomas, was one of the chief authors of the 2003 legislation that created health savings accounts.

“The irony is not lost on any of us that [McManus] helped create these things, and now he would essentially kill it,” said John Greene, a lobbyist with the National Association of Health Underwriters.

Pro-HSA lobbyists contend that Evolution Benefits and McManus gave anti-HSA Democrats enough rope to hang the program by suggesting that people were using HSAs to avoid paying taxes on non-medical expenses.

The concept was especially valuable to committee Democrats, opponents say, because it provided them with budgetary offsets for their tax bill. The Joint Committee on Taxation estimated that the measure would increase tax revenue by $308 million over 10 years.

Criticisms from HSA advocates have been blunt and, at times, personal.

“There is considerable anger and alarm that John McManus … is attacking HSAs by convincing the Democratic Ways and Means Committee staff to amend the HSA,” Dan Perrin, the executive director of the HSA Coalition, wrote in an April 5 dispatch that he e-mailed to supporters and published on his website.

National Retail Federation lobbyist Neil Trautwein, in an e-mail distributed on April 10, said the substantiation provision was “proffered by a company with a direct commercial interest; will its name and that of its lobbyist echo in infamy?”

Evolution Benefits Chairman and CEO Robert Patricelli rejected such comments, calling them “mudslinging” and asserting that “John and I were trying to protect the program.”

“To say that John is a sellout and anti-HSA is just unfair,” Patricelli said. “I’ve learned one of those lessons about Washington, and it’s that if people tell a lie often enough, people start to believe it,” he said.

McManus defended his and Evolution Benefits’ actions and motives.

“My job is to represent my client, and of course I did that. There is a real policy issue on how best to effectively enforce the current law. We brought the issue to Republicans’ attention first and did not receive a negative reaction at the time. It was only after the substantiation provision was inserted into the tax bill — without prior hearings or deliberation — that there was a visceral reaction from HSA advocates,” McManus said in a statement.

Conservatives believe HSAs will turn patients into smarter shoppers for lower-cost, higher-quality medical treatment. Democrats generally disdain them, arguing that wealthy people will use the accounts to shield their income from taxes and that healthy people will leave traditional insurance for HSAs, which would drive up the cost of insurance premiums for everyone else.

Evolution Benefits and McManus strongly deny they had any ulterior motive or that the firm would derive any exclusive benefit from the legislation, because other firms would be capable of providing substantiation services. The company publicly repudiated the Democratic bill last week, including sending two letters to the committee.

A House Republican aide said that it appears Evolution Benefits was trying to drum up business but backed up the company’s claim that it would not have a monopoly under the House-passed bill.

Evolution Benefits’ rejection of the tax bill came too late and amounted to too little, the pro-HSA forces responded.

“They deny that they’re trying to corner that market but that’s how it looks to all of us,” Greene said. “They’ve been shopping this for a while.”

The sharp rhetoric directed at Evolution Benefits and McManus has generated mixed feelings among those at the center of the debate. “Some of the attacks on him were over the top,” the GOP aide said. “I don’t think he was trying to harm HSAs.”

“I’m not here to bury that particular company … [and] John’s a good guy and a smart guy,” said Trautwein. The anger factor has been overblown and will dissipate, he predicted. “I’ve seen no burning effigies in the street,” he said.

Perrin defended the tenor of his dispatch. “This story needed to be told for people to understand why this happened, and I told the story,” he said.

“That’s the nature of the lobbying beast,” Trautwein said.