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Executive Summary

HHS appears to be nearing a selection for chief of the Health Care Financing Administration. The acting HCFA administrator, Terry Coleman, leaves the job on March 13 to join the D.C. law firm of Fox, Weinberg & Bennett. Coleman held HCFA's top spot for one month as a short-term replacement for William Roper, who returned to the White House as the top health policy advisor in early February ("The Pink Sheet" Feb. 6, p. 6). Coleman has been with HCFA for 2-1/2 years and was deputy general counsel at HHS, where he worked on HCFA regs for the preceding five years. Coleman also worked at FDA between 1973 and 1976, overlapping with senior partner Alan Bennett. He will be leaving government, ironically, to join one of the law firms which handled the preliminary screening of candidates for HHS positions in the Bush Administration. Sen. Minority Leader Dole's Chief of Staff Sheila Burke is still perceived as the lead candidate for the HCFA position. She is understood to have had a callback interview with Sullivan during the last week of February after a cool first meeting earlier in the month. Burke would obviously have a powerful supporter on Capitol Hill in Sen. Dole (R-Kan.) and a large number of other contacts that could help in the expected debates with the legislative branch over trimming HCFA expenditures. However, it will also be important for the next HCFA chief to have the full backing of the HHS secretary. The HHS budget fight with the Hill is likely to be long and protected. Office of Management & Budget Director Richard Darman has been carrying much of the early burden of defending the Bush Administration's health budget plans. At a March 7 hearing before the House Ways & Means Committee, Darman pressed the attack against the existing policy of baseline budgeting for current services, which he described as "a local habit of mind ]with[ a curious Wonderland quality." For Medicare, Darman pointed out that President Bush is actually proposing to increase spending from FY 1989 levels of $84.5 bil. to $92.5 bil. in FY 1990. "Advocates of current services budgeting claim that ]the Bush budget's[ proposed increase of $8 bil. should be called a 'cut' of $5 bil.," Darman said. "This defies common uses of language, but worse, it may be phony." Darman pointed out that the current services baseline figure "not only increases Medicare expenditures for inflation, utilization and growth in the beneficiary population," but "also conveniently assumes that several current provisions all disappear." HHS Secretary Sullivan got into the budget debates during March 7-8 appearances on the Hill. Sullivan said the Bush Administration proposes to increase physician prevailing charges for primary care by the full amount of the Medicare Economic Index while freezing rates for other physician services for one year. That freeze, adopted from the Reagan budget, would save about $375 mil. HHS also proposes continued reductions, of up to 12%, for certain physician services considered "overpriced." House Ways & Means Chairman Rostenkowski (D-Ill.) reiterated the tough public position being taken by senior Hill Democrats on the Health budget, telling OMB's Darman on March 7 that he "would prefer to let ]Gramm-Rudman across-the-board[ sequestration happen before passing your budget as it presently stands." The Illinois Democrat added that the Medicare "cuts" of $5 bil. in 1990 and $53 bil. over five years are "huge" and "members on both sides of the aisle have indicated an unwillingness to go anywhere near that level of cuts in the Medicare program." Among other top HHS appointments disclosed during the first week of March, one key appointment in the internal HHS budgeting process was the choice of Kevin Moley as HHS assistant secretary for management and budget. Moley has been director of HCFA's Office of Prepaid Health Care and a transition aide to Sullivan. He will be replacing Anthony McCann. The assistant secretary oversees budget policy for all HHS agencies, including the Health Care Financing Administration, Food and Drug Administration and the National Institutes of Health. In another executive appointment at HHS, the White House announced March 6 that the nominee for the post of assistant secretary for legislative affairs is Pillsbury executive Gerald Olson. Olson, 55, has served as the food conglomerate's VP-government relations since 1978, based in Minneapolis. Previously, he was executive director for government and community relations at the Cummins Engine Company in Columbus, Indiana. The HHS legislative post was being filled on an acting basis by Mary Goedde. Other Reagan officials leaving to make way for Bush appointees include Robert Helms, assistant secretary for planning and evaluation. Helms will join the American Pharmaceutical Institute, which was established by the American Pharmaceutical Association as a foundation to encourage policy research on pharmaceutical issues (see related item, p. 12). Former HHS Chief of Staff Thomas Burke will join the consulting firm A. Foster Higgins in April as a principal. Burke will be advising Fortune 500 companies on their health care and benefit packages. He will be based in the firm's Washington, D.C. office. Burke joined HHS in 1981 and was elevated to chief of staff when Otis Bowen became secretary in 1986. Burke developed ties to Bowen when the latter chaired the National Advisory Council on Social Security. Burke was the panel's executive secretary. Medicare reforms formulated by the council formed the basis for Bowen's proposals to establish catastrophic illness coverage under Medicare. HHS Inspector General Richard Kusserow will remain in his post, staffers said. Kusserow was not asked to submit the pro forma resignation provided by most other political appointees. Departing HCFA officials include Ellen Shillinglaw, who has been serving both as director of HCFA's Office of Legislation and Policy and as acting associate administrator for communications. Two key HCFA political posts that so far remain unchanged include that of associate administrator for program development, held by Ross Anthony, and associate administrator for operations, held by Louis Hays. A career civil servant, Hays is a key figure in the implementation of the Medicare outpatient drug benefit. In addition, Secretary Louis Sullivan has asked about 100 HHS "Schedule C" political appointees -- those serving at the secretary's discretion -- to leave their positions effective April 1. Staffers submitted pro forma resignations in January when the Bush Administration arrived; Sullivan accepted a broad cross-section of those resignations as of March 3. Schedule C employees include those at or below the federal employment level of GS-15, who are in policy-making positions and/or whose work involves a close and confidential working relationship with the head of an agency or other key officials. Senior executive service employees are either career or non-career employees with a grade above GS-15.

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