GAO says Medicare videos violated law

The Bush administration violated anti-propaganda law when it distributed videos to news stations earlier this year about the newly passed Medicare prescription drug law, the General Accounting Office said Wednesday.

Parts of the "video news releases" that the Centers for Medicare and Medicaid Services issued were not properly identified as coming from a government source, the GAO found, making their distribution a violation of the law that bans the use of public funds for publicity or propaganda.

Democrats have complained that, under the guise of educating beneficiaries, the administration hyped the new Medicare bill in a bid to curry political favor with voters, particularly older Americans.

Democrats requested that GAO look into whether the administration's advertisements and direct-mail fliers violated anti-propaganda law, and although GAO found the fliers were legal, it widened the probe to examine the use of VNRs.

GAO determined that part of the VNR materials did not make it clear the government was the source of the information, including "news stories" narrated by people acting as reporters who were actually hired by the government's subcontractor, and suggested scripts for TV anchors to use.

CMS had argued that it properly identified the entire package as coming from the government. But those portions of the video package were targeted not only at TV news producers, but TV viewers, GAO said. "CMS's effort to identify itself to the news organizations that received the VNRs did not alert television viewers that CMS was the source of the story package."

The finding could pave the way for lawsuits. An HHS spokesman said department officials disagreed with the ruling, arguing that TV producers were free to attribute the story.

"They could have said 'brought to you by,'" the spokesman said. He also noted that GAO rulings are nonbinding and would not say whether HHS plans to comply with GAO's determination that the agency should report the misuse of funds to Congress and the president.

Democrats, meanwhile, pointed to the GAO findings as another cloud over the passage of the controversial new Medicare law.

"It was bad enough to conceal the cost of the Medicare drug bill from the Congress and the American people," said Senate Health, Education, Labor and Pensions ranking member Edward Kennedy, D-Mass., referring to a related controversy over differing estimates of the cost of the Medicare bill. "It is worse to use Medicare funds for illegal propaganda to try to turn this lemon of a bill into lemonade for the Bush campaign."

Sen. Frank Lautenberg, D-N.J., who requested the initial GAO probe into the fliers, said he would introduce emergency legislation today requiring the Bush-Cheney campaign to return taxpayer dollars spent on the VNRs to Medicare.

"The Bush administration has illegally spent Medicare funds on covert political activities," Lautenberg said. "The Bush-Cheney campaign should pay every dime they spent on these fake news stories back to our seniors. These funds were meant to help our seniors, not the president's re-election campaign."

House Ways and Means ranking member Charles Rangel, D-N.Y., and Health Subcommittee ranking member Fortney (Pete) Stark, D-Calif., said they would ask local stations that broadcast the VNR to run retractions or corrections noting that the administration erred in sending out the VNRs.

The GAO's finding is the latest in a string of problems for the new law.

A group of House Government Reform Committee Democrats is suing to gain access to HHS cost estimates for the bill while Congress was debating it.

And an HHS inspector general's investigation also is under way to determine allegations by Chief Medicare Actuary Richard Foster that former CMS Administrator Thomas Scully threatened to fire him if he shared the administration's higher estimates for the Medicare bill with members of Congress.

Julie Rovner contributed to this report.