In My Opinion

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Between a Rock and a Hard Place
by Paul E. Lacko

On March 14, The New York Times published a report under the headline "Democrats Demand Inquiry Into Charge by Medicare Officer." The report alleges that "the Bush administration threatened to fire a top Medicare official," Richard S. Foster, the chief actuary of the Medicare program, "if he gave data to Congress showing the high costs of hotly contested Medicare legislation."

An editorial in The New York Times two days later noted that "Mr. Foster privately cautioned that [the Medicare changes'] cost could amount to as much as $600 billion, while the White House stuck publicly to the Congressional Budget Office figure of $400 billion over 10 years."

I subscribe to The Wall Street Journal, but not The New York Times, so the first report I saw was on page four of the March 18 Wall Street Journal. This article shows an exchange of memos. Mr. Foster's memo to Tom Scully says, "I have a personal and professional responsibility" to respond to three requests from members of Congress for specific estimates with relevance to the proposed legislation. The reply, from Mr. Scully's top assistant rather than Tom Scully himself, tells Mr. Foster, "Tom Scully was very explicit—do not share information on #2 and #3 with anyone else until Tom Scully explicitly talks with you—authorizing the release of information. The consequences for insubordination are very severe. Please call me if you have any questions regarding this instruction."

The article does not say if Mr. Scully "explicitly" talked with Mr. Foster. The article does not say what estimates, if any, Mr. Foster sent over to Congress. But it appears that Congress was surprised to find out how high Mr. Foster's estimates were, and more than a little upset to find out after the legislation had already been passed into law.

According to the newspaper reports, Mr. Foster is scheduled to sit before Congress on Wednesday, March 24, to present his annual report about the Medicare system. For you, Mr. Foster's report to Congress is already old news. I write this column for The Actuarial Review about six weeks before you read it. This time lag makes it difficult to reflect on current events in this column. Either I have too little information on which to base an opinion, or the issues are resolved or forgotten before you read the column.

My hunch is that some Democrats in Congress, and probably some Republicans, will treat Mr. Foster respectfully. They will welcome Mr. Foster as a "good guy" who has brought to light evidence that the Bush administration intentionally withheld important information from Congress and the American public. They will commend Mr. Foster for coming forward in a manner that was clearly judicious, reasonable, and ethical given the circumstances.

Other Democrats and Republicans may be less kind, especially some who voted in favor of the legislation. Mr. Foster's silence led to the passage of the Medicare legislation—by one vote. If members of Congress had been aware that Mr. Foster's analysis showed the price tag to be 50 percent greater than Congressional Budget Office (CBO) predicted, the legislation probably would not have been passed into law. Mr. Foster may be pressed very hard to explain in great detail why he didn't come forward sooner, much sooner, like, for instance, before the legislation was passed. Some members of Congress may see nothing judicious, reasonable, or ethical by waiting so long to bring this incident public.

The CBO should be asked to explain a few things, too. Does CBO still believe that its estimates are reasonable? If not, then why did the CBO analysts fail to discover this before the vote? If so, on the other hand, does it believe that Mr. Foster's estimates are also reasonable? Let's not argue about whether $400 billion or $600 billion is the "right" answer. Let's not argue again about who is trustworthy and who isn't. Let's see if we can agree on the reasonable range of estimates.

Maybe then we can approach an intelligent decision.

The reports made Mr. Scully sound like Captain Queeg, but the reports did not describe what kind of working relationship Mr. Scully and Mr. Foster had. Being a political appointee, Mr. Scully probably had a set of marching orders from on high. He would have been especially sensitive to political agendas, hidden or otherwise, on the part of the people who sent information requests to Mr. Foster. Mr. Foster had no political agenda; apparently, he simply provided his best advice to whomever asked for it. According to The Wall Street Journal article, a member of the Clinton administration said that he received complaints from the White House occasionally about Mr. Foster's "independence."

It would be nice if the White House and the Congress could play cooperatively in the federal sandbox and build some nice sandcastles for us all. But politics more often resembles a poker game than a daycare outing. (What's the difference between poker and politics? In poker, somebody always wins.) The game itself is noncooperative. Cooperation occurs at the process level—how the game is played. The players do expect one another to abide by the rules of the game. (What's the difference between politics and poker? Poker has a rulebook.)

In politics, and in poker, a winning strategy requires that you figure out the other players' hole cards and prevent them from figuring out yours. The same can be said of the business world. (What's the difference between business and politics? Depends—how much can you donate to the campaign?) One rule that some people follow in business and politics is this: If your work will create a nasty mess that your boss will have to clean up, then you make sure your boss is the first one to know.

Corollary: Since you don't know what might create a nasty mess for your boss to clean up, give your boss an opportunity to review your work before you send it out.

My bosses have explicitly told me many times over the years, "Do your analysis, but don't send it out before you discuss it with me." I have learned a lot about business on these occasions. In general, I find it helpful to subject my work to scrutiny. My boss and my nonactuary peers discuss with me questions such as these: In 25 words or less, what does the analysis say? How realistic are the assumptions? What do we actually know and what are we only guessing at? How realistic is the model? How sensitive are the results to the assumptions? How bad, and how likely, is the worst-case scenario? How might this be interpreted differently by someone who knows less about the subject than we do? What objections, concerns, and additional questions might we expect from the recipient? How do we respond?

I don't worry about these questions while I'm doing my analysis, or, rather, the first draft of my analysis. (Good thing, or I'd never finish.) The discussion is my chance to step back from the numbers and consider the broader business concerns. This is my chance to find out things I didn't know that I didn't know. Hence I couldn't build these things into my analysis in the first place. The discussion usually leads me to change the analysis in some way. I am improving my work product, not caving in under political pressure.

Granted, I can't use my circumstances and experiences as the yardstick by which to measure the behavior of Mr. Scully and Mr. Foster, but it's a reasonable first approximation. I am willing to cut Mr. Scully some slack, for now, with respect to that memo to Mr. Foster.

I'm more interested in what information Mr. Scully and his superiors withheld from Congress, and why. I'll bet Congress is, too.