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Young Case Spotlights Health Care

By Charles Babington and Avram Goldstein
Washington Post Staff Writers
Sunday, January 18, 1998; Page B01

The ethics scandal that toppled Maryland Sen. Larry Young last week highlights the fierce lobbying and growing potential for corruption involved in the state's supervision of the lucrative health care industry, lawmakers and lobbyists say.

Young, a Baltimore Democrat who was expelled from the Senate in an unprecedented vote Friday, became an authority in health legislation and won the influential chairmanship of a new health care subcommittee in 1995. Ethics investigators concluded last week that he abused that position to attract grants and contracts worth many thousands of dollars from health care firms interested in government business, even though he performed little work for them in return.

Now Maryland's special prosecutor is subpoenaing documents from those companies to see if criminal charges should be lodged against Young or others. Also, Gov. Parris N. Glendening (D) says he will accept the advice of the Joint Committee on Legislative Ethics to "initiate a formal review of state contracts, bidding procedures and vendor practices applicable to the public health care industry in Maryland," and to punish violators "if warranted."

The Young affair comes amid what many describe as a developing feeding frenzy of health care lobbyists in Annapolis, where the state sets hospital fees, approves Medicaid rates and enacts laws instructing insurance companies what services they must cover.

Like other state legislatures across the country, the General Assembly annually becomes a battleground of competing interests, with doctors, hospitals, health maintenance organizations, pharmacists and others sending lobbyists and campaign contributions in hopes of shaping laws that will protect or increase their share of the giant industry.

In the last year, for example, Glendening raised nearly $650,000 in contributions of $1,000 or more: About 10 percent of that money came from companies, political committees or individuals affiliated with health care. Campaign finance reports for leading legislators also show large sums being expended by health care interests on General Assembly races.

Health care "is the most lobbied issue in Annapolis, there's no doubt about it," said prominent lobbyist Gerard E. Evans, whose clients include Glaxo Wellcome Inc., Magellan Health Services, Blue Cross and Blue Shield of Maryland and several other health-related firms. A company often can achieve better results with a few thousand well-spent dollars in a statehouse than with millions spent trying to promote a product to the public, he said.

"It's much easier to legislate a mandated benefit [in health insurance policies] than to battle for it in the free market," Evans said. Two years ago, he said, Maryland's retail pharmacists won 11th-hour passage of a bill prohibiting mail-order delivery of prescription drugs for Medicaid patients, effectively wiping out a major competitor.

Such an advantage "would be impossible to win in the marketplace, but in Annapolis, you can get it because you go to a committee and get seven votes," said Evans, whose clients opposed the measure.

The gatekeepers to such committees or subcommittees -- including Young in Maryland -- are well-positioned to extract favors from the big companies if they are so inclined, lawmakers said. That's exactly what Young did, the ethics committee report said.

But several lawmakers said that the health care industry is no more prone to intense lobbying -- and possible bribes or similar violations -- than are other major industries represented in every state capital.

"I don't think you can hold out the health care industry as any different from huge industries" such as banks, savings and loans, utilities and insurance, said House Speaker Casper R. Taylor Jr. (D-Allegany). "Any one of these huge industries is a temptation and is ripe for the picking if an individual is inclined to do that. The strongest laws in the world don't eliminate temptation. And that's why the laws are there."

Sen. Thomas L. Bromwell (D-Baltimore County), chairman of the Finance Committee, said yesterday that he may abolish the health subcommittee that Young chaired for three years. He said that is no reflection on the work done during that time, which he called "impeccable."

But with health care such a major topic -- and the ethics report singling it out for scrutiny -- "it's probably better for the [full] committee that we take all the issues," Bromwell said.

Health care is a major issue in virtually every state capital, largely because of the growth of HMOs and other forms of managed care and the escalating dollars spent on Medicaid, the federal-state health care program for the poor. In this climate, governmental decisions can mean the difference between profit and loss.

"These multimillion-dollar managed care organizations are trying to get politicians' attention, and it just exacerbates the problem we have with campaign finance reform generally," said Paul Offner, D.C. health care finance commissioner, who held a health care leadership post years ago when he was a Wisconsin state senator. "The health industry is going to get more and more concentrated, and it will get more and more difficult to deal with this political pressure. This is a precursor of things to come."

The efforts of one company that figured in the Young ethics case -- New Jersey-based Merit Behavioral Care Corp. -- illustrate the lengths to which some firms are willing to go to try to win favor with politicians. Merit provides mental health and substance abuse services and employee assistance programs to more than 21 million enrollees and 800 clients in all 50 states. It had revenue of $680 million last year.

In 1996, Merit sought a $25 million contract to handle mental health services for the Maryland government. Merit's chief executive, Albert S. Waxman, hosted a $1,000-a-person fund-raiser for Glendening at his New York City home in July 1996, flying the governor to and from the event in his corporate jet. Young, working as a Merit consultant, attended the event.

Glendening announced he would reject all money from the fund-raiser after newspapers reported that Merit actively was bidding for the state contract at the time. Merit's lobbyist, Ira C. Cooke, said he had suggested a Glendening fund-raiser as one means of becoming politically involved in Maryland, where the company had no previous contacts.

The ethics report on Young paints a broader picture of Merit's willingness to spend heavily to link itself with with important Maryland political figures. The report said Merit paid nearly $66,000 in 1996 to Young's private company, the LY Group, to help run a New York conference. The event apparently cost LY Group only $9,000. The conference involved so little work for Young and his staff, the committee said, that the $57,000 profit amounted to an illegal gift.

Young told the Senate on Friday that the payments were justified. He said he did no work for Merit in Maryland and did not try to advance its state interests, so there would be no conflict of interest.

Merit now is a subsidiary of one of the nation's largest behavioral services companies, Magellan Health Services. Coincidentally, Magellan also owns Green Spring Health Services, a Columbia-based business that provides similar mental health services to most of Maryland. Green Spring, whose officials have contributed generously to Glendening's campaign, won the 1996 state contract that Merit had wanted.

© Copyright 1998 The Washington Post Company

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