Nuclear Controversy, Elections Loom as Malaysia's New Leader Steps Out of Predecessor's Shadow

By Patrick McDowell Associated Press Writer
Published: Feb 7, 2004
KUALA LUMPUR, Malaysia (AP) - Exceeding many expectations, Abdullah Ahmad Badawi has stamped his authority on Malaysia since becoming prime minister 100 days ago - but a nuclear scandal, personal tragedy and looming elections signal a harder road ahead.
Though he'd held high positions for decades, Abdullah remained an enigma to most Malaysians when he was sworn in Oct. 31, succeeding the larger-than-life Mahathir Mohamed, who retired after dominating this Southeast Asian country for a generation.
In the previous four years, Abdullah's self-effacing style and nice-guy reputation as Mahathir's deputy contrasted sharply with the combative Mahathir, and many Malaysians wondered what kind of new leader they were getting.
They saw a devoted family man when Abdullah flew to his hometown hours after taking office and knelt at his mother's feet, seeking her blessing.
Over the next three months, he stepped out from the shadow of his ex-boss and won public support by tackling some of the down-to-earth problems from Mahathir's grandiose era - police corruption, inert bureaucracy and cronyism.
"I'm not aware that I was going through a honeymoon period," Abdullah said Saturday on the eve of his 100th day in office. "But there will be challenges ahead, I'm very sure."
They included two hammer blows over the past week.
His revered 79-year-old mother, Kailan Hassan, died of natural causes Monday. Abdullah wept at her funeral, striking a well of public sympathy.
On Thursday, Malaysia was swept up in the nuclear proliferation scandal uncovered when Pakistan admitted that its top atomic scientist had leaked weapons technology and know-how to Libya, Iran and North Korea.
Police disclosed that an engineering company controlled by Abdullah's only son, Kamaluddin Abdullah, is being investigated for making centrifuge components destined for Libya's nuclear weapons program.
The company, Scomi Precision Engineering, denies that it knew the parts would be used for nuclear purposes. They were ordered by a Dubai-based firm through a Sri Lankan middleman married to a Malaysian.
Abdullah vowed Thursday that the probe will be conducted "without fear or favor." His son owns 53 percent of the parent company, Scomi, but has no management role. Police said that the company is cooperating fully with the investigation.
The magnitude and impact of the scandal remain to be determined. For now, Malaysians appear content to size up Abdullah and take a break from the confrontations that Mahathir relished.
Ideris Maidin, a taxi driver, wasn't impressed with Abdullah's bland style Thursday during a speech in Kuantan, 160 miles east of Kuala Lumpur, but he liked the substance.
"Mahathir liked big projects and big statements," Ideris said. Abdullah "seems to be more interested in pleasing the public by making improvements in the civil sector, the police and government efficiency."
Mahathir ended 22 years in office in deep controversy, asserting at a summit of Muslim leaders that Jews rule the world.
Though Mahathir's trademark attacks on everything from globalization to Western-style democracy won notoriety, he turned this former tin-and-rubber-producing backwater into one of Asia's richest countries. For a time, Malaysia was home to the world's tallest buildings.
Abdullah has promised to build on the economic achievements, but his eye is on the grass roots.
Abdullah found public favor by shelving a rail project that Mahathir had granted to a favored tycoon, and by launching a royal commission into reforming the police. One commissioner will be the former chief justice who Mahathir sacked during a clash with the courts in 1988.
Abdullah faces his biggest test by leading the ruling coalition in general elections expected by mid-year.
His goal will be to roll back gains made in 1999 by the Pan-Malaysian Islamic Party, which runs two of Malaysia's 13 states. The party advocates harsh Islamic law, scaring moderate Muslims and the large, non-Muslim ethnic Chinese and Indian minorities.
If Abdullah checks the fundamentalists, he should sail through subsequent internal elections in his party. But if the Islamic opposition gains another state, Abdullah could face a party leadership challenge, with his premiership at stake.
"He's shown that in his own very sort of courteous, civil way that he's his own man," said Chandra Muzaffar, a think-tank head who worked with Abdullah on economic policy in the 1980s. "But after the election, people are going to expect results."
AP-ES-02-07-04 0548EST


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chatterbox Gossip, speculation, and scuttlebutt about politics.

http://slate.msn.com/id/2094992/
Get Your Bush Docs Here!
Ron Suskind posts the evidence online.
By Timothy Noah
Posted Thursday, Feb. 5, 2004, at 8:55 AM PT
What's at the end of the paper trail?
The various revelations in Ron Suskind's book The Price of Loyalty are based largely on a trove of 19,000 documents that former Treasury Secretary Paul O'Neill gave him. Some have criticized Suskind for striking a Faustian bargain in which he accepted at face value O'Neill's often comically outsized self-regard in exchange for the information O'Neill was in a position to provide about the inner workings of the Bush White House (which might be summed up by the formula, "Crude Political Calculation + Discipline = Success"). But whatever his personal failings and shortcomings as Treasury secretary (some of them previously documented in Chatterbox's "O'Neill Death Watch"), O'Neill is a smart and principled man whose blunt storytelling, supplemented by Suskind's independent reporting, provides what is by far the most vivid and valuable accounting of this administration. And unlike the typical White House memoirist, O'Neill made sure the public would have the documents to back up his description of what he saw.
Suskind has now begun the process of putting those documents online. Today he has posted 20 documents touching on some of his book's more striking revelations. He plans to release roughly the same number of documents on a weekly basis for some time to come. Suskind says that this trove--a sort of "The Smoking Gun" for policy wonks--will eventually include many newsworthy documents that, due to constraints of time and narrative, he failed to use in his 328-page book. As with these initial 20 documents, they will cover all aspects of government policy, not just economic matters.
One document that seems likely to become news (even though the book's allusions to it have thus far attracted little notice) is a memo by Alan Greenspan, chairman of the Federal Reserve Board, excoriating corporate governance in America. (It was written March 4, 2002, in response to the Enron implosion.) Many of Greenspan's complaints--expressed, for once, in plain English--would not be out of place in The Nation. To wit:
CEOs, under increasing pressure from the investment community to meet elevated expectations, in too many instances have been drawn to accounting devices whose sole purpose is arguably to obscure potential adverse results.
Greenspan says that Generally Accepted Accounting Principles, or GAAP, which Treasury Secretary Lawrence Summers in 1998 praised as "the single most important innovation shaping [America's] capital market," are a sham:
So long as the corporate duty to disclose is viewed as limited to conforming to GAAP, disclosures will remain inadequate. ... [A]bsent a fundamental change in the perception of the duty to disclose, firms will have incentives to continue to game the accounting system.
Greenspan also discusses the harmful effects of stock options:
The Federal Reserve staff estimates that the substitution of option grants for cash compensation added about 2-1/2 percentage points to reported annual growth in earnings of our larger corporations between 1995 and 2000. One must assume that this led to some misallocation of the nation's capital assets especially in the high-tech sector.
He concludes:
[C]hanges in critical areas of governance to align CEO interests more closely with those of shareholders in our judgment are essential and, indeed, overdue. The stock market has begun to place a premium on corporate disclosures that inspire trust. Government policy can, and should, reinforce this powerful market incentive.
Judging from Greenspan's tone, the Corporate Fraud Accountability Act of 2002, signed into law a few months after he wrote this memo, does not go nearly as far as he'd like. It established a new accounting oversight board, but did not, for instance, require corporate expensing of stock options.
Other highlights from Suskind's documents:
White House budget director Mitch Daniels stating confidently in a February 2001 memo that "the president's budget is so fiscally conservative that the government will be able to retire all of the roughly $2 trillion in debt that is financially practicable to retire by 2011. ... [A]fter 2007, projected surpluses will be larger than the annual amount of maturing debt." The Congressional Budget Office currently puts the federal budget deficit at $375 billion and projects a deficit of $162 billion in 2011.
Environmental Protection Agency chief Christine Todd Whitman making a last-ditch plea in March 2001 that Bush "indicate that you are exploring how to reduce U.S. Greenhouse gas emissions internally and will continue to do so no matter what else transpires. Mr. President, this is a credibility issue (global warming) for the U.S. in the international Community." Bush brushed her off, pledged not to regulate carbon emissions, and papered over his inaction with a voluntary greenhouse program that he no longer even bothers trying to tout. (Indeed, his State of the Union didn't mention the words "environment," "pollution," "natural resources," "clean air," or "clean water" at all.)
National Economic Council chairman Larry Lindsay picking a fight with O'Neill (about Treasury estimates on the proposed tax cut) a mere five days after Bush's swearing-in. Both men would be pushed out within two years.
Chatterbox will be returning to the Suskind documents frequently in weeks to come. This fishing expedition's just getting started!
[Update, Feb. 6: Treasury Secretary John Snow informed Congress today that some of the documents in Suskind's possession "contain classified information" and that Treasury shouldn't have cleared these for O'Neill to haul off. (According to Suskind, none of the documents is stamped, "classified.") In the Feb. 7 Washington Post, Dana Milbank and Lucy Shackelford have spokeswoman Anne Kolton saying that no steps will be taken to prevent the documents' publication or to punish O'Neill or Suskind. (Kolton, incidentally, is not the Treasury spokeswoman who in a February 2001 memo urged O'Neill to stay "monotonously on-message." That was Michele Davis.) Suskind told Milbank and Shackelford, "I have no intentions to publish anything that would compromise national security." Apparently none of the classified information to which Snow refers appears in the documents Suskind has posted thus far.]


Timothy Noah writes "Chatterbox" for Slate.
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>> KAUS AND EDWARDS CW...
Three = a Trend!
A fuller picture of Kerry starts to emerge.
By Mickey Kaus
Updated Thursday, Feb. 5, 2004, at 11:34 AM PT
Michael Kinsley seems to share kausfiles' enthusiasm for Sen. Kerry. ... Key point for Kerry profilers to identify: What made him change from bold boat commander to almost obsessively non-courageous politician? Did he take so many risks in Vietnam he that was determined never to take another risk again? ... 3:28 PM
The CW now holds that the extended, multicandidate primary tussle is helping the Democrats in general and Kerry in particular. (See, e.g., today's The Note.) Does this mean that Terry McAuliffe will now be demanding that Dean, Clark and Edwards stay in the race? ... 11:50 A.M.
Hula! Hula! Hula! Due to possibly offensive choreography accompanying a blog reference to "credulous puffers," kausfiles has been replaced with Hawaiian-themed entertainment. Back shortly. ... 11:18 P.M.
City of Lakes blogger Greg Abbott has totaled up the popular votes received by each Democratic candidate so far. (He omits Iowa, where the raw "pre-viability" vote isn't readily available). Kerry's ahead, obviously (with 39%). The surprise is how well Edwards is doing (24%) compared with Clark (15%) ...[You're not giving up, are you?-ed. Not when Kerry has a grand total of 11 percent of the delegates he needs to win, no.] 11:07 P.M.
ABK404: Here's a larval but highly promising Anybody But Kerry blog, and here's a skeptical "We're not really going to end up with Kerry are we?" blog. .. 12:14 P.M.
Will Saletan argues that when it comes to going negative on the Democratic frontrunner, "Edwards is being way too subtle ...to hurt Kerry." I agree. But that was also true of the oh-so-subtle anti-Kerry messages Saletan discerned in Edwards' debate performance a week ago. ... I can't help but thinking that Bill Clinton would have carved Kerry up and smiled while he was doing it. That may be one way that Edwards ain't Clinton. ... (This point was made by, yes, MSNBC's Joe Scarborough a week ago. It may also be made in Michelle Cottle's TNR comparison of Edwards and Clinton--I don't know because Cottle's piece is locked behind a subscriber firewall, reducing its impact by a factor of ... what? 50X? 100X? [You don't subscribe to TNR Digital?--ed It's another damn "username" and password to remember.]) ... P.S.: If Edwards is going easy on Kerry so as not to blow his chances of being Kerry's running mate, isn't this a vain hope? Kerry, if he wins, is unlikely to pick Edwards because a) Kerry's a vain man and won't want a running mate the press will continually say is a better speaker and campaigner than he is; and b) like virtually all candidates, Kerry will want a #2 who can go negative on the opposing party while he remains above the fray. But that's exactly what Edwards has shown he can't or won't do, for fear of blemishing his goody-goody image. (See Lieberman, Joe, 2000 general election.) ... Update: also c) kf hears semi-reliably that Kerry's polling shows that Edwards on the ticket doesn't win any states for Kerry, even in the South--while Evan Bayh does win Indiana (which is hard to believe, Indiana being a pretty Republican state). ... Might as well go after him, John! ...10:56 A.M.
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Democratic Enemies List
Kerry's simple-minded populism shows his is a camaign about nothing.

BY HOLMAN W. JENKINS JR.
Saturday, February 7, 2004 12:01 a.m. EST
If this column sounds like one four years ago, that's because Democrats are running against their usual list of "enemy" industries. The party's standard trope is that you're being denied things you need and deserve because enemies are keeping them from you, cheap drugs being today's case in point.
Let's make sense of the industry once more for a Democratic presidential cadre now reaching a high pitch of populist dudgeon. There's a reason analysts, investors and pharmaceutical reps talk about a "pipeline." In one end goes a bunch of money, and out comes a dribble of products years later. The metaphor is also useful in understanding drug pricing. Whatever comes out the end, whether it's nose drops or a chemotherapy drug, is priced at whatever level will allow its maximum contribution to recouping all the money that went into the front end of the pipe.
Abbott Labs demonstrated this effect when it recently raised the price of its aging AIDS drug, Norvir, by 400%. Activist groups were outraged, never mind that Abbott froze the old price in place for charity groups and continues to make the drug available at cost in developing countries. Abbott was accused of "greed." But wait? Wasn't it already stipulated that drug companies were maximally greedy? How could a change in Abbott's greed state account for a change in pricing strategy?
In fact, Abbott was recently saluted by the AIDS Healthcare Foundation for making cheap drugs available in Africa. But Norvir, introduced in 1996, is no longer a drug of choice. Instead it's been relegated to a "booster" role in cocktail therapies consisting of new, higher-priced drugs from rival manufacturers (though much of the therapeutic benefit actually comes from combining their pricey products with cheap Norvir).
Abbott saw other drug makers generating large revenues from its drug and is attempting to tilt more of the revenue flow from treating AIDS back to itself. Other companies will respond by cutting their own prices a bit to maintain market share and maximize their own revenues. Which goes to show what a competitive market AIDS drugs are, with 12 essential medicines now on the World Health Organization list.
Drug companies are in the business of funding large R&D establishments, which typically account for a bigger share of total costs than manufacturing and distribution. That's why companies can charge high prices to rich, insured Westerners and next to nothing to poor Africans--because any price that's even a penny above current manufacturing cost produces at least some revenue to support the research bill.
Now we come to the politics. It's tempting to say in these circumstances, "Hey, we can mandate lower prices for Medicare, treating American retirees the way we treat AIDS sufferers in Africa, because drug companies will keep making and selling drugs even at a much lower price as long as it's higher than current manufacturing costs."
That's right, and the price of drug company stocks will crash instantly, and no more capital will be available to research new products.
This is not really hard to understand, and certainly our Ivy League-educated Democratic presidential candidates can understand it. Were any of them to land in office, you can bet their threats against the drug industry would be quickly filed away in a circular keeping place until the next election. President Kerry wouldn't want to bear the political cost of its collapsing stock values, massive layoffs and the media reporting the folding up of research into cures for diseases like Alzheimer's and Parkinson's.
If this were only Mr. Kerry's problem we might wonder about the IQ behind his campaign rhetoric. Instead we are forced to wonder about the contempt nearly the whole Democratic field seems to feel for the Democratic base.
No demagogue, left or right, fails to present himself as champion of the great, victimized majority against some tiny and exploitive elite. This argument is convenient for two reasons. Difficult issues like health-care financing, involving real tensions between hard-to-reconcile goals, can be reduced to utmost simplicity: On one side are the legitimate claims of voters who want cheaper drugs or whatever; on the other are the illegitimate claims of those who "stand in the way."
Populist claptrap serves another purpose, visible on the very persons of the candidates: They swell with confidence and invulnerability when posing as defenders of the "little guy" rather than as champions of the party's own array of special interests and voting blocs (which is what they are).
The force really at work is fear--fear on the part of Democratic leaders that they have nothing to offer; fear that their party's captivity by groups tied to existing programs forecloses any chance of innovative thinking. Notice that the party did not even wait for eight years of unrivaled Clinton prosperity to expire before Al Gore, in a panic, reverted to what a Washington Post editorial called "primitive business bashing" as a substitute for saying what some Democratic lobby group somewhere wouldn't like. Notice what a miserable disappointment even Howard Dean has been in this regard.
Notice, too, the wonder of John Kerry, an asterisk six weeks ago, who reached his present eminence based on the repetition of meaningless phrases: "I know something about aircraft carriers for real." "Bring it on." "Don't let the door hit you on the way out."
There is, literally, nothing else to the Kerry campaign. He's the default option of Democratic voters after the amazing rise and fall of Howard Dean, with the mother of all buyer's remorse coming down the pike about a minute or two behind. That's too bad but as a party they asked for it--and will keep doing so until they stop relying on the mindless naming of "villains" in place of dealing honestly with the voters whom they claim to represent.

Mr. Jenkins is a member of The Wall Street Journal's editorial board. His column appears in the Journal on Wednesdays. He is also editor of OpinionJournal's Political Diary, a new premium e-mail service. Click here for subscription information and sample columns.



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Kerry 'Bundlers'
The campaigns of Howard Dean and John Kerry, two Democrats who have opted out of the public financing system, have released lists of top fundraisers who have collected individual contributions in "bundles" of $50,000 or $100,000. For the primary season so far, Dean has 14 $100,000 bundlers and 18 $50,000 bundlers; Kerry has 32 $100,000 bundlers and 87 $50,000 bundlers. (In addition, Kerry has made a personal loan of $6.4 million to his campaign.) Use this search engine to find information about Dean's and Kerry's bundlers.

Your search resulted in 119 records.

Name State Occupation Employer Industry Sector
Faraj Aalaei CA CEO Centillium Communications Communications & Electronics Telecommunications
Susan Akbarpour CA co-founder and publisher Iran Today newspaper Communications & Electronics Media & Media Entertainment
Mark Alderman PA Chairman Wolf Block Schorr & Solis-Cohen Lawyers & Lobbyists Lawyers/Law Firms
Kent & Diane Alexander GA Senior Vice President and General Counsel Emory University Other Education Workers
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Jeff Anderson CA Priincipal & Founder Ignition Point LLC Finance, Insurance & Real Estate Finance & Investment
Ben Barnes TX Founder & Principal Entrecorp Lawyers & Lobbyists Lobbyists
Matthew "Mac" Bernstein DC Lobbyist Piper Rudnick Lawyers & Lobbyists Lobbyists
Arthur Blackwell MI President & CEO Deway Development Co. Finance, Insurance & Real Estate Finance & Investment
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Lori Bonn CA Founder Lori Bonn Jewelry Miscellaneous Business Retail Sales
James Brenner MA Investor Self Finance, Insurance & Real Estate Finance & Investment
Norman Brownstein CO Founding Member & Chairman of the Board Brownstein Hyatt & Farber Lawyers & Lobbyists Lawyers/Law Firms
Susie Tompkins Buell CA Co-Founder Esprit Clothing Miscellaneous Business Retail Sales
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John Coale DC Attorney Coale Cooley Lietz Lawyers & Lobbyists Lawyers/Law Firms
Ken S. Cohen MA Senior Vice President Mass Mutual Financial Group Finance, Insurance & Real Estate Insurance
Jack Connors MA Chairman Hill Holiday Connors Cosmopulos Communications & Electronics Advertising
Clay Constantinou NJ Dean, School of Diplomacy Seton Hall University Other Education Workers
Don & Charmaine Cook TN Producer Sony/ATV Music Publishing Miscellaneous Business Entertainment
Robert Crowe MA Lobbyist Perkins Smith & Cohen Lawyers & Lobbyists Lobbyists
Nelson Cunningham DC Managing Partner Kissinger McLarty Associates Lawyers & Lobbyists Lawyers/Law Firms
Tom Daley DC Consultant Hotels.com Miscellaneous Business Entertainment
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Ed & Judy Garland GA Attorney Garland Samuel & Loeb Lawyers & Lobbyists Lawyers/Law Firms
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Robert Gregory NJ Owner New Jersey Galvanizing Miscellaneous Business Misc. Manufacturing & Distributing
Sam & Peggy Grossman CA Founder Grossman Company Properties Finance, Insurance & Real Estate Real Estate
Doug Hickey CA Partner Hummer Winblad Venture Partners Finance, Insurance & Real Estate Finance & Investment
Fred Hochberg NY Dean, School of Management New School University Other Education Workers
Herbert Holtz MA Attorney Holtz Gilman Grunebaum Lawyers & Lobbyists Lawyers/Law Firms
Dennis and Victoria Hopper CA Actor Self Communications & Electronics Media & Media Entertainment
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Mark Iola TX Attorney Stanley Mandel & Iola Lawyers & Lobbyists Lawyers/Law Firms
Irwin Jacobs CA Co-founder, Chairman & CEO Qualcomm Inc. Communications & Electronics Telecommunications
James A Johnson DC Vice Chairman Perseus LLC Finance, Insurance & Real Estate Finance & Investment
Dennis Kanin MA Attorney Foley Hoag Lawyers & Lobbyists Lobbyists
Sam & Sylvia Kaplan MN Attorney Kaplan Strangis & Kaplan Lawyers & Lobbyists Lawyers/Law Firms
James Karam MA President First Bristol Corporation Finance, Insurance & Real Estate Real Estate
Samuel Kelley M.D. MA Doctor Self Health Health Professionals
Cameron Kerry MA Attorney Mintz Levin Lawyers & Lobbyists Lawyers/Law Firms
Judy Droz Keyes CA Attorney Morrison & Foerster Lawyers & Lobbyists Lawyers/Law Firms
Orin Kramer NJ General Partner Kramer Spellman Finance, Insurance & Real Estate Finance & Investment
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Sherry Lansing CA Chairwoman & CEO Paramount Pictures Communications & Electronics Media & Media Entertainment
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Jonathan Lavine MA Managing Director Bain Capital Finance, Insurance & Real Estate Finance & Investment
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Robert Lieff CA Attorney Lieff Cabraser Heimann & Bernstein Lawyers & Lobbyists Lawyers/Law Firms
Jeffrey & Susan ` Liss DC Attorney Piper Rudnick Lawyers & Lobbyists Lawyers/Law Firms
Peter Lowy CA CEO Westfield Corp. Finance, Insurance & Real Estate Real Estate
Joan Lukey MA Attorney Hale & Dorr Lawyers & Lobbyists Lawyers/Law Firms
John J. Mahoney MA Executive Vice President Staples Inc. Miscellaneous Business Retail Sales
Jack Manning MA President & CEO Boston Capital Finance, Insurance & Real Estate Real Estate
Rodney Margol FL Attorney Margol & Pennington Lawyers & Lobbyists Lawyers/Law Firms
John Merrigan DC Lobbyist Piper Rudnick Lawyers & Lobbyists Lobbyists
Eric Mindich NY Investment Banker Goldman Sachs Finance, Insurance & Real Estate Finance & Investment
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John Neu NY Chairman Hugo Neu Corporation Miscellaneous Business Misc. Manufacturing & Distributing
Wendy Neu NY Vice President Hugo Neu Corporation Miscellaneous Business Misc. Manufacturing & Distributing
Jerry & Vicki Neuman CA Attorney Allen Matkins Lawyers & Lobbyists Lawyers/Law Firms
William Newsom CA Attorney Newsom Associates Lawyers & Lobbyists Lawyers/Law Firms
Ben Nye MA Senior Vice President Veritas Software Communications & Electronics Computers
Vance Opperman MN President Key Investment Inc. Communications & Electronics Media & Media Entertainment
William Orrick CA Attorney Coblentz Patch Duffy & Bass Lawyers & Lobbyists Lawyers/Law Firms
Manuel Ortiz DC Lobbyist Quinn Gillespie Lawyers & Lobbyists Lobbyists
Joseph Paolino Jr. RI Principal owner Paolino Properties Finance, Insurance & Real Estate Real Estate
Bruce Percelay MA Realtor Mt. Vernon Companies Finance, Insurance & Real Estate Real Estate
Michael Perik MA Chairman & CEO Achievment Technologies Inc. Communications & Electronics Computers
Chris Putala DC Lobbyist Cellular Telecommunications and Internet Association (CTIA) Communications & Electronics Telecommunications
Wade Randlett CA CEO Dashboard Technology Communications & Electronics Computers
Bernard Rappoport TX Chairman Emeritus American Income Life Insurance Finance, Insurance & Real Estate Insurance
Bruce Regenstreich NJ Attorney Callan Regenstreich Koster & Brad Lawyers & Lobbyists Lawyers/Law Firms
Tom Rothman CA Co-Chairman Fox Filmed Entertainment Communications & Electronics Media & Media Entertainment
David Roux CA Co-Founder and managing director Silver Lake Venture Partners Finance, Insurance & Real Estate Finance & Investment
Richard Rubin CA Attorney Rubin Associates Lawyers & Lobbyists Lawyers/Law Firms
Pat Sarma NJ President Access Methods Inc. Communications & Electronics Computers
Lynn Schenk CA Member California Medical Assistance Commission Other Civil Servants/Public Officials
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Barbara Schraeger CA Retired None Ideological Democratic/Liberal
William Singer IL Attorney Kirkland & Ellis Lawyers & Lobbyists Lawyers/Law Firms
Ruth & Sonny Singer CA Retired None Unknown Unlisted
Tracy Snyder NY Wife of President HBJ Investments Health Pharmaceuticals/Health Products
Alan Solomont MA President Solomont Bailis Ventures Health Nursing Homes/Home Care
Jeff Soukup CA Chief Financial Officer PlanetOut.com Communications & Electronics Computers
Peter Stamos NY President SP Capital Management Finance, Insurance & Real Estate Finance & Investment
Thomas Steyer CA Managing Director Farallon Capital Management Finance, Insurance & Real Estate Finance & Investment
Larry Stone CA County Assesor Santa Clara County Other Civil Servants/Public Officials
Louis B Susman IL Vice Chairman Citigroup Global Markets Finance, Insurance & Real Estate Finance & Investment
Nancy Tellem CA President CBS Entertainment Communications & Electronics Media & Media Entertainment
Arn Tellem CA Sports Agent SFX Entertainment Lawyers & Lobbyists Lawyers/Law Firms
Mike Thorsnes CA Attorney Thorsnes Bartolotta McGuire Lawyers & Lobbyists Lawyers/Law Firms
Michael Thorton MA Attorney Thorton & Naumes Lawyers & Lobbyists Lawyers/Law Firms
William Titleman PA Lobbyist Self Lawyers & Lobbyists Lobbyists
Stanley Toy M.D. CA Doctor Cal Western Emergency Medical Group Health Health Professionals
Kirk Wagar FL Attorney Wagar Murray & Feit Lawyers & Lobbyists Lawyers/Law Firms
Dwain Wall DC Consultant Hotels.com Miscellaneous Business Entertainment
Harold & Najwa Wehby AL Dentist Self Health Health Professionals
Mark Weiner RI President Financial Innovations Miscellaneous Business Misc. Manufacturing & Distributing
Tom Wheeler DC former President & CEO Cellular Telecommunications and Internet Association (CTIA) Communications & Electronics Telecommunications
Richard and Daphna Ziman CA Chairman & CEO Arden Realty Finance, Insurance & Real Estate Real Estate

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Mad cow case suspected in Saudi
RIYADH, Saudi Arabia, Feb. 7 (UPI) -- A Saudi who visited Britain in 1996 is suspected of having contracted the mad cow disease and is being treated in a Jeddah hospital, reports said.
Daily Okaz quoted medical sources as saying "the patient is undergoing thorough medical tests to verify initial indications that he might be suffering from mad cow disease especially that the symptoms were alarming."
The sources said additional tests will be made to determine if he has actually contracted the disease.
"The mad cow disease is not contagious and the patient does not pose any threat on others," the sources added.
They noted the unidentified patient stayed in Britain for a while in 1996 and that he might have contracted the disease there.

Copyright 2004 by United Press International.
All rights reserved.
----------------------------------------------------------

Arabs: US fuelling Iraq sectarianism
CAIRO, Feb. 7 (UPI) -- The 22-nation Arab League Saturday accused U.S. occupation authorities in Iraq of fuelling sectarianism and factional divisions among Iraqis.
A report prepared by the League's secretariat general and published Saturday in Cairo's mass-circulation daily al-Ahram sounded the alarm over "the dangers of sectarian fuelling campaigns which started spreading since the beginning of the U.S. occupation."
The report, which was distributed to all League members, warned that "sectarianism is taking strong hold in Iraq and at all levels."
"The sectarian structure of the Iraq Governing Council contributed to the stimulation of sectarianism and factionalism at all levels including jobs in the administration and in the newly-created official departments in Iraq," the report said.
It also cautioned that the federal system that Iraqi Kurds are seeking to establish "will usher in the eventual partitioning of Iraq."
The 50-page report was based on a study conducted by an Arab League team led by the League's assistant secretary general, Ahmed Bin Hali of Algeria.
Copyright 2004 by United Press International.
All rights reserved.
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Jordan aborts forgery of $20 million
AMMAN, Jordan, Feb. 7 (UPI) -- Jordanian authorities have foiled an attempt by three Pakistanis to forge $20 million.
Daily al-Rai said Saturday the Department for Combating Corruption affiliated to general intelligence was informed a Pakistani national has showed a money dealer forged $100 bank notes, asking him to circulate them.
The authorities were informed of the attempt and apprehended the Pakistani and two of his compatriots. Officials said the suspects were in the process of forging $20 million for circulation in the Jordanian market.
Copyright 2004 by United Press International.
All rights reserved.
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Analysis: Why Schroeder quit as SPD leader

By ROLAND FLAMINI, Chief International Correspondent
COLOGNE, Germany, Feb. 6 (UPI) -- German Chancellor Gerhared Schroeder?s sudden resignation as leader of the Social Democratic Party Friday came as a surprise even to many senior SPD members. In his announcement, the chancellor said he wanted to be free of the burden of also running party affairs in order to concentrate his energies on the government?s recently launched program of economic and social reforms.
The opposition, predictably, was quick to interpret Schroeder?s latest move as a sign of desperation. Christian Democrat party leader Edmund Stoiber called on the chancellor to resign, and to make way for new elections.
But to some observers it looked like a shrewd political tactic. After a long period of indecision, of fits and starts, Schroeder may at last be coming to grips with the political reality that there is no escape from forcing the Germans to swallow some very strong medicine. By resigning as party leader, these observers say, Schroeder is sending the message that he is serious about the reforms.
If so, it is going to take all the chancellor?s reputed public relations skills to sell the targeted cutbacks in social benefits and services to a dismayed and indignant German public.
A drastic streamlining of the legendary but extremely costly social "net" that takes care of every German from birth to the grave is crucial to the country?s economic recovery. And while it is true that the German economy is showing some signs of improvement, the reforms continue to be necessary.
Schroeder?s decision came at a time when his reform program was losing steam. For example, the introduction of fees for health services were being undermined by an increasing list of exemptions from paying them. At the same time, the cost of an ageing society continues to increase faster than the pay-as-you-go pensions system.
"This is the first attempt to reform the biggest social system in the world, and it makes sense that Schroeder should want to devote all his energies to it," a source close to the SPD said Friday. But whether a "I have to be tough for your own good" approach will reverse Schroeder?s downward slide in the polls is another story. With elections in the spring-summer of 2006, he has less than two years to see positive results.
The problem for Schroeder, one commentator wrote in the Frankfurter Allgemeine Zeitung newspaper Friday, is that "such social policies can hardly serve to secure majorities. But in the best case a government can persuade the public that hard measures are necessary, but that supposes a steady and reliable policy approach. If anything, it?s a move he should have made before: It may be too late."
Schroeder is not the first SPD chancellor to give up the party leadership, but the precedent is not very promising. As chancellor, Helmut Schmidt handed control of the SPD to Willy Brandt -- and lived to regret it. Brandt moved the party to the left in the hope of undermining the Green Party, a maneuver that contributed to the SPD?s defeat in the 1982 German elections and to the return of the Christian Democrats under Helmut Kohl.
This time the switch could help Schroeder?s chances, observers say. If he has any hope at all of re-election, his party must first win the state elections in North Rhine -- Westphalia -- in the spring of 2005. In this respect, Schroeder?s successor, party secretary Frany Muntefering has a key role to play in Schroeder?s chances of survival. An efficient and indefatigable politician, Muntefering is from Westphalia with -- analysts say -- a strong power base in that state.

Copyright 2004 by United Press International.
All rights reserved.
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White House Watch

By PETER ROFF, UPI Senior Political Analyst

WASHINGTON, Feb. 5 (UPI) -- George W. Bush entered the White House with the expectation that he would be the president who put the "M" back into the Office of Management and Budget.
Prior to Bush, most OMB's director seemed more concerned with the enormous task of producing the federal budget, almost $2.5 trillion for fiscal year 2005. From all appearances the management part of the job largely functioned on autopilot, lacking clear direction and with reforms merely tinkering at the margins.
Whether it was President Reagan's Grace Commission investigating government waste, fraud and abuse or former Vice President Al Gore's "reinventing government" initiative, the White House appeared aware of the problem but ill equipped to do anything about it.
On of the biggest hurdles anyone who wishes to manage the federal government more efficiently is Washington's attitude toward problem solving. It is all too often, as James Payne described in his book "The Culture of Spending," evaluated in terms of dollars budgeted or dollars spent rather than performance and results.
As the first M.B.A. president, Bush is perhaps more sensitive to management issues than any of his immediate predecessors. His first OMB director, Mitch Daniels, began his career in the political world, moving in mid-life into senior executive positions in the U.S. operations of one of Eli Lilly, one of the world's largest pharmaceutical manufacturers. Under his leadership, the OMB, at the direction of the president, began the laborious process of turning the federal government by 2008 into a results-oriented organization.
Under Bush, the watchword has been performance. Administration managers are asked, as they evaluate and monitor programs, costs, service levels and government assets, to consider whether programs work and, if not, what can be done to improve them.
The Bush management agenda has five parts: strategic management of human capital; increased competitive sourcing; improved financial management; greater investment and reliance on technology; and the integration of program budgets and performance.
To further these objectives, the administration inaugurated the President's Budget Performance Integration Initiative, to analyze all federal programs, scoring them for effectiveness and establishing performance standards.
The five-year project, which is a little more than half way complete, analyzing 20 percent of programs each year, will produce, senior officials hope, will produce real cost savings as well as greater efficiency that will help the president meet his deficit reduction target, cutting it in half as a percentage of gross domestic product in the next five years.
This is a politically arduous task, with many Democrats and some Republicans unwilling to go along because they view the operations of the federal government from a spending-based rather than performance-based perspective. House Minority Whip Steny Hoyer, D-Md., described the FY '05 budget proposal as "taking a meat cleaver to vital domestic programs, cutting funding for environmental, agricultural, transportation and justice programs" even though the cuts the administration is proposing are relatively minor. In more than a few cases, the amount simply to cuts in the rate spending goes up instead of fewer dollars being spent in FY '05 than in FY '04.
Clearly, any effort to change the way government performs requires changing the way Washington thinks, the culture of the city.
The Bush administration wants managers to ask questions like "What are we accomplishing," and "How might we get the same results for less money" as well as calling for tighter, clearer, faster financial information. White House officials say the analysis thus far, of just half of federal spending, shows a level of erroneous payments approaching $40 billion. The total figure, some fear, could go as high as $100 billion when the process is complete.
Once the process is complete the cost savings can be applied, they believe, to deficit reduction, better spending on programs that work or additional tax cuts -- all of which would have the support of the American people.
The administration is moving forward, as quickly as it can and as slowly as the political process requires. Because every government program provides the reason for re-election to at least one member of the House or Senate, much of the management tinkering must be done through executive order; otherwise politics will intrude on the cause of reform.
The effort took a significant step forward Wednesday when the president issued an executive order outlining a new system for federal real property management telling agency heads to designate a "Senior Real Property Officer" from among their senior managers.
The SRPO's are tasked with developing asset management plans that include efforts to identify and categorize all real property "owned, leased or otherwise managed" by the federal government.
A basic step in the private sector for Intel or Boeing or Wal-Mart; a giant leap forward in the application of sound management principles for the federal government.
Copyright 2004 by United Press International.
All rights reserved.
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>> POLICY WATCH...1

Senate Banking Chairman Proposes New Regulator for Home-Loan Giants
By Jeffrey McMurray Associated Press Writer
Published: Feb 7, 2004
WASHINGTON (AP) - Senate Banking Chairman Richard Shelby said Saturday he will move to eliminate the regulator of Freddie Mac and Fannie Mae and replace it with a stronger, more independent federal watchdog for the home-loan giants.
The Alabama Republican's announcement was made in an address prepared for an American Bankers Association conference in Fort Lauderdale, Fla. He said he expects his Senate panel will take up the legislation next month.
Shelby had been vague in the past about his desire to beef up regulation in response to accounting problems at the government-sponsored corporations. In his remarks Shelby said the current regulator, the Office of Federal Housing Enterprise Oversight, isn't capable of properly supervising them.
"The agency was, in many regards, designed to fail in its mission," Shelby said. "We cannot tolerate inadequate and ineffective regulation of entities as important to the U.S. home mortgage market as Fannie Mae and Freddie Mac."
An advance copy of the lawmaker's speech was given to The Associated Press.
The Bush administration has sent to Congress its plan for enhanced regulation, which would essentially move OFHEO from the Department of Housing and Urban Development to the Treasury Department. Shelby said his legislation will do far more, making the regulator independent of either agency.
"This new regulator should have the power to quickly and forcefully remedy problems that are detected," Shelby said.
Fannie Mae and Freddie Mac, both publicly traded corporations, were created by Congress to pump money into the multitrillion-dollar home mortgage market by buying home loans from banks and other lenders and bundling them into securities for sale on Wall Street. Both have grown rapidly in recent years and are among the nation's largest financial institutions.
Federal regulators ordered Freddie Mac to pay a record $125 million fine in December for alleged management misconduct and violation of its public trust in its $5 billion misstatement of earnings.
Fannie Mae's accounting practices are also under review. Regulators are pushing to split Fannie Mae's top executive position to diminish the concentration of power.
On the Net:
Fannie Mae: http://www.fanniemae.com
Freddie Mac: http://www.freddiemac.com
Office of Federal Housing Enterprise Oversight: http://www.ofheo.gov
AP-ES-02-07-04 0812EST
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>> POLICY WATCH...2


Out of the Asylum, into the Cell
http://www.aei.org/publications/pubID.19467/pub_detail.asp
By Sally Satel, M.D.
Posted: Friday, November 14, 2003
ON THE ISSUES
AEI Online (Washington)
Publication Date: November 1, 2003
Prisons have become default mental-health treatment centers to the severe detriment of those experiencing genuine mental illness. Properly treating--rather than criminalizing--mental illness requires reforming our fragmented mental healthcare system and relaxing regulations to encourage patients to seek treatment.
A new report by Human Rights Watch has found that American prisons and jails contain three times more mentally ill people than do our psychiatric hospitals. The study confirmed what mental health and corrections experts have long known: incarceration has become the nation's default mental-health treatment. And while the report offers good suggestions on how to help those who are incarcerated, a bigger question is what we can do to keep them from ending up behind bars at all.
The Los Angeles County jail, with 3,400 mentally ill prisoners, functions as the largest psychiatric inpatient institution in the United States. New York's Rikers Island, with 3,000 mentally ill inmates, is second. According to the Justice Department, roughly 16 percent of American inmates have serious psychiatric illnesses like schizophrenia, manic-depressive illness, and disabling depression.
Life on the inside is a special nightmare for these inmates. They are targets of cruel manipulation and of physical and sexual abuse. Bizarre behavior, like responding to imaginary voices or self-mutilation, can get them punished-and the usual penalty, solitary confinement, only worsens hallucinations and delusions.
How did we get here? Actually, with the best of intentions.
Unfulfilled Promises
Forty years ago, President John F. Kennedy signed the Community Mental Health Centers Act, under which large state hospitals for the mentally ill would give way to small community clinics. He said of the law that the "reliance on the cold mercy of custodial isolation will be supplanted by the open warmth of community concern and capability."
Kennedy was acting in response to a genuine shift in attitudes toward the mentally ill during the postwar years. The public and lawmakers had become aware of the dreadful conditions in the state hospitals, largely through expos?s like Albert Deutsch's book The Shame of the States and popular entertainment like the movie The Snake Pit, both of which appeared in 1948. In addition, Thorazine, an anti-psychotic medication, became available in the mid-1950s and rendered many patients calm enough for discharge.
Between Kennedy's signing of the mental health law in 1963 and its expiration in 1980, the number of patients in state mental hospitals dropped by about 70 percent. But asylum reform had a series of unintended consequences. The nation's 700 or so community mental-health centers could not handle the huge numbers of fragile patients who had been released after spending months or years in the large institutions.
There were not enough psychiatrists and healthcare workers willing to roll up their sleeves and take on these tough cases. Closely supervised treatment, community-supported housing, and rehabilitation were given short shrift. In addition, civil liberties law gained momentum in the 1970s and made it unreasonably hard for judges to commit patients who relapsed but refused care. Those discharged from state hospitals were often caught in a revolving door, quickly failing in the community and going back to the institution. And they were the lucky ones-many others ended up living in flop-houses, on the streets or, as Human Rights Watch has reminded us, in prison.
Real Reforms
Reforms like segregating mentally ill prisoners in treatment units would help. Of course, the ultimate solution is keeping psychotic people whose criminal infractions are a product of their sickness out of jails in the first place. This requires a two-part approach. The first entails repairing a terribly fragmented mental-health care system. The most important change would be liberating states from the straitjacket of federal regulations surrounding the use of money from Medicaid and Medicare-programs that account for two-thirds of every public dollar spent on the mentally ill.
These regulations force many states to make rigid rules dictating what services will and will not be reimbursed, which forces practitioners and administrators to perform bureaucratic gymnastics to circumvent them. For example, Medicaid will not pay for clinicians who provide "assertive community treatment"--a system in which professionals work as a team, making home visits, checking on medication, and helping patients with practical day-to-day demands. Yet such teams have been proved to reduce re-hospitalization rates by up to 80 percent.
Relaxing regulations would be great progress in helping those mentally ill people who seek treatment. Unfortunately, about half of all untreated people with psychotic illness do not recognize that there is anything wrong with them. Thus the second part of any sensible reform would be finding ways to help patients who have a consistent pattern of rejecting voluntary care, going off medication, spiraling into self-destruction or becoming a danger to others.
One approach is encouraging their cooperation with "treatment through leverage." This process, not new but underused, involves making social welfare benefits, like subsidized housing and Social Security disability benefits, conditional to participation in treatment.
A more formal approach is to have civil courts order people to enter community treatment. New York State's Kendra's Law, named in memory of a woman killed in 1999 after being pushed into the path of a subway train by a man with schizophrenia, is a good model. From 1999 to 2002, about 2,400 people spent at least six months in mandatory community treatment under the law.
And for those who end up committing crimes, some states have developed special mental-health courts that can use the threat of jail to keep minor offenders with psychosis in treatment and on medication at least long enough for the offenders to make informed decisions about treatment. Such efforts may get help from Washington: last month the Senate approved a bill authorizing $200 million for states to develop more mental-health courts and other services for nonviolent, mentally ill offenders; it awaits action in the House.
For many thousands of mentally ill people, America has failed to make good on John F. Kennedy's promise of forty years ago. Releasing them from the large state institutions was only a first step. Now we must do what we can to free them from the "cold mercy" that comes with criminalizing mental illness.

Sally Satel, a psychiatrist and resident scholar at AEI, is coauthor of the forthcoming One Nation under Therapy.
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>> POLICY WATCH...3


Can Medicare and Medicaid Promote More Efficient Health Care?

By Joseph Antos
Posted: Tuesday, September 30, 2003

TESTIMONY
Federal Trade Commission/Department of Justice (Washington)
Publication Date: September 30, 2003
Thank you for inviting me to appear before you. I am Joseph Antos, the Wilson H. Taylor Scholar in Health Care and Retirement Policy at the American Enterprise Institute. I am also adjunct professor in the School of Public Health at the University of North Carolina at Chapel Hill. I have previously served as the assistant director for health and human resources at the Congressional Budget Office (CBO), and earlier held several research and management positions in the Health Care Financing Administration, the precursor to the Centers for Medicare and Medicaid Services (CMS). The views I present today are my own and do not represent the position of the institutions with which I am associated.
Federal, state, and local governments account for 45 percent of the $1.7 trillion that will be spent in the health sector in 2003. Medicare will spend over $260 billion this year for some 40 million elderly and disabled people. Medicaid, which is funded jointly by the federal and state governments, will spend over $275 billion for about 50 million people, including some who are eligible for both Medicare and Medicaid.
As impressive as those numbers are, they understate the influence that Medicare and Medicaid have on the health care of all Americans. Medicare's administrative requirements shape the business environment for physicians, hospitals, and other providers across the country, and changes in the Medicare program have spillover effects on the rest of the market. Medicaid also has substantial impact on the health system, particularly in the long-term care market.
Some of those spillovers from federal health insurance programs have improved the functioning of the health system and benefited most consumers. For example, Medicare's adoption of prospective payment for hospital services during the mid-1980s caused a massive shift in the way hospitals manage their patients that lowered lengths of stay and cut unnecessary costs. The more efficient use of inpatient services led to an expansion in the use of outpatient facilities and promoted technologies that could treat more severe conditions without having to admit the patient to the hospital.
More often than not, however, Medicare and Medicaid have failed to promote innovation and efficiency in the health sector. Reforms are often met with political gridlock, resulting in the maintenance of the status quo even when conditions in the market are changing dramatically. Even modest initiatives are likely to be controversial because of the enormous financial leverage that Medicare and Medicaid have over the rest of the health system.
The government faces a conflict of interest as a major purchaser of health services and a regulator of the health system. In a period of rising budget deficits, for example, the government-as-purchaser might reduce provider reimbursements spending in ways that result in higher overall health care costs (with those costs borne by beneficiaries or others in the private sector) and worse health outcomes for patients. The Medicare reform debate seems particularly affected by a policy myopia that focuses on budget impact rather than the effects of proposals on broader outcomes for the elderly and the health system as a whole.
The Federal Trade Commission (FTC) and the Department of Justice (DOJ) are promoting vigorous competition within a large and growing health sector. The objective, as expressed by Chairman Timothy Muris of the FTC, is lower prices, higher quality, greater innovation, and enhanced access to care. However, the FTC and the DOJ are both fighting this battle with one hand tied behind their backs. Medicare and Medicaid continue to rely on regulation and micromanagement rather than competition and consumer choice, and that is a dominant factor in the business environment of the health sector. The FTC and the DOJ should make this point strongly to Congress and the Administration.
The federal government could do more to promote consumer information and efficient health care delivery within Medicare and Medicaid, with positive spillover effects for the private health system. Even seemingly simple actions, such as more widely disseminating data on health care providers, pose considerable technical, legal, and political challenges. Other actions, such as giving Medicare beneficiaries more choices among competing health plans, require broader program reforms that have been the subject of many years of debate. Moreover, some policies might yield short-term improvements in the federal programs while undermining broader efforts to empower consumers and improve health care. The discussion that follows considers each of those points in the context of the Medicare program.
Improving Consumer Information
Consumers make numerous decisions regarding their health care. Many consumers have a choice of health plan or insurance program, offered through their employer or available in the non-group market, as well as the choice to go without coverage. Every consumer at some point picks a primary physician or other caregiver. Increasingly, consumers with health problems are taking an active part in deciding their course of treatment.
Each of those decisions is improved if objective, reliable, timely, accessible, and understandable information is available. Information on price, quality of care, patient outcomes, access to services, and customer satisfaction may all be needed to make a wise decision. However, consumer-friendly information is frequently not available when the need arises. Sadly, many people continue to make health care decisions the old fashioned way, by asking the advice of a friend or relative who has no special expertise in the matter.
The government could help remedy this acute information deficiency by more effectively utilizing the resources that Medicare already has at its disposal. The government is in a better position to collect and disseminate health sector information than private companies. Medicare requires all providers to report certain information as a condition of payment. Moreover, those data are available from nearly every provider, making the information relevant to all consumers.
Caution in developing useful measures of health care performance is needed. Care must be exercised to avoid violating individuals' rights to privacy or jeopardizing the confidentiality of sensitive information from providers and health plans. Government should also avoid the temptation to use clinical information in overly prescriptive ways in Medicare or more broadly. Large variations in practice patterns across the U.S. clearly indicate that medical care is inefficient in many local areas. But the de facto imposition of national standards runs the risk of stifling innovation and imposing cookie-cutter medicine on patients.
Medicare contracts with nearly every health care provider in the U.S. and has a vast, under-utilized storehouse of information from billing records on beneficiaries, their use of health services, and the providers of those services. In addition, Medicare has information based on facility inspections and mandatory reporting that measure some of the capabilities of health care facilities and their performance in terms of patient outcomes.
Although there are technical and legal barriers to the use of those data, they can in concept be the basis for important information for consumers (including people who are enrolled in private insurance), purchasers (including employers and state governments), and providers of health care. Issues that might be addressed include:
? Tracking the effectiveness of treatments over time,
? Measuring the performance of individual providers or health plans, and
? Determining how the health system adapts to changes in its environment (including changes in policy, clinical practice, and the incidence of disease).
Several decades of research have been invested in making better use of Medicare data, but progress has been slow. Legal and confidentiality issues impede access to data files. The analysis is often complicated and the data must be carefully interpreted if it is to be useful. Moreover, the program's commitment to this research has been limited.
Some provider-specific information has been published that could be useful to all health care consumers. From 1986 through 1992, Medicare published a "report card" on hospitals, reporting patient outcomes for certain health conditions for every acute care hospital in the country. (Former Medicare administrator Bruce Vladeck discontinued that report on the grounds that it misstated the performance of inner city hospitals.) Medicare currently publishes outcomes-based report cards for nursing homes and dialysis facilities, and a report on the quality of home health care available now for agencies in 8 states is scheduled to go nationwide in late 2003.
Medicare's existing database is a valuable resource that was costly to develop. It should be exploited as fully as possible, giving the widest possible access to analysts in the private sector who are likely to develop a variety of useful measures and insights into the quality of care offered by providers. Groups such as the Leapfrog Group, and other coalitions of purchasers, would incorporate data from Medicare to inform their purchasing decisions if those data were more usable and accessible.
Other applications might also be developed if the data were more generally available. Measures of performance from Medicare are good indicators of the overall performance of providers. Competing health plans could be given an overall quality assessment by combining information from each physician and hospital participating in the plan's provider network. Combined with information on plan premiums, such an assessment would be a useful guide to consumers who have a choice of health plans. This type of analysis is exceptionally challenging and is unlikely to be undertaken without full cooperation between the government and private entities.
Improving Consumer Choice
The ongoing debate in Congress over Medicare reform reflects the tension between the program's regulatory roots and the growing demand for long-needed improvements. Beneficiaries in traditional Medicare cannot use their purchasing power to demand a drug benefit, as they can in private insurance markets. The only recourse is political. It literally takes an act of Congress to make even modest changes to Medicare.
Previous legislation intended to promote competition among health plans and choice for consumers through the Medicare+Choice (M+C) program. That program is a failure. It failed to attract new types of health plans, such as preferred provider organizations (PPOs). It failed to retain the health maintenance organizations (HMOs) that were already participating in Medicare, and half of those HMOs dropped out of M+C within a few years. As a result enrollment in private health plans fell. This year only 13 percent of Medicare beneficiaries are enrolled in M+C plans. The rest are in traditional fee-for-service Medicare.
This record does not mean that competition cannot work in Medicare. On the contrary, competition has yet to be tried. The problems of M+C are simply new variations on the problems of the regulatory Medicare model that has increasingly failed to meet the expectations and needs of consumers and providers alike. Those problems include:
? Unrealistic prices. M+C plans receive a capped payment that is unrelated to the actual cost of providing care. In recent years, most M+C plans received 2 percent annual payment increases while health costs rose at 8 to 10 percent a year, virtually guaranteeing that most plans will drop out of the program. Traditional Medicare is an uncapped entitlement to federal payment. The program relies on administered prices that give health care providers strong incentives to increase the use of covered services.
? Administrative inflexibility. It has been said about Medicare that if something is not mandated, it is prohibited. Congress specifies in detail the benefits that must be offered and other conditions that must be met by health plans and providers for reimbursement. Medicare's benefit package remains largely unchanged after 38 years despite advances in medical science and changes in consumer demand because Congress has failed to take action.
? Unstable business climate. The only certainty about Medicare is that there will be major unpredictable changes every year. Congress micromanages the program through legislation, and the Centers for Medicare and Medicaid Services (CMS) micromanages the program through fiat. The resulting unstable business environment is a major barrier to plan participation.
Medicare must be reformed if we are to meet the needs of seniors and get the best value from taxpayers' dollars. The Federal Employees Health Benefits Program (FEHBP) provides an immediately usable model of competition that is responsive to consumer demand, successfully controls cost, and provides strong protections for beneficiaries. Under FEHBP, beneficiaries are free to select from a variety of health plans, with federal payments subsidizing about 75 percent of premiums subject to a cap. Beneficiaries who enroll in more expensive plans pay higher premiums. The plans are free to design and manage their benefits in ways that will attract enrollees and limit spending growth.
Unlike Medicare, FEHBP has had a drug benefit and PPOs for many years--innovations that were adopted without new legislation. Unlike Medicare, consumers have a wide choice of health plans and there has not been a mass exodus of plans from FEHBP. Every FEHBP beneficiary has a choice of 12 national plans and, in most cases, a number of local HMOs. About 39,000 Medicare beneficiaries are expected to lose their M+C plans in 2004, which is a big improvement from preceding years. In contrast, FEHBP will be adding 17 new health plans in 2004. Unlike Medicare, FEHBP gives reasonable incentives to plans and beneficiaries to control costs. As a result, the growth of spending under FEHBP has averaged 6.5 percent annually over the past two decades (measured on a per capita basis), while Medicare spending has grown by 6.7 percent annually.
An FEHBP-style reform for Medicare would dramatically alter the incentives in the current program that drive up cost without a commensurate increase in value. Giving seniors an effective market voice would create powerful new incentives for health plans and providers to seek more cost-effective care. With new flexibility under the reformed program, plans would begin to compete on the basis of price, quality, access, convenience, and service, rather than price alone. Beneficiaries would be able to transfer to another health plan if they were discontented with the performance of their current choice, an option not available to most Medicare beneficiaries today.
Because Medicare is such a dominant actor in the health sector, this type of reform would have positive spillover effects in the private market. Business and clinical practices would begin to change, placing greater emphasis on value. Such spillovers have been documented in markets experiencing growth in managed care as providers change their practice styles to satisfy the dominant payers, and the impact of Medicare reform is likely to be even stronger. The structure of health care delivery is likely to evolve and improve for everyone under a less regulatory, consumer-driven Medicare program.
Promoting Innovation
As the dominant purchaser in the health sector, Medicare has substantial market power. That power to affect the market is magnified because it acts as the de facto federal health regulator, establishing conditions of participation that health plans and providers must satisfy to receive Medicare reimbursement. With that much control, Congress can force dramatic changes in the health sector through Medicare policy if it musters the political will. But such actions often sow the seeds of their own destruction through unexpected, undesirable consequences that are not sustainable politically, socially, or economically. That is, Congress can make pigs fly--but not for long.
In the debate over a Medicare prescription drug benefit, concern about federal spending has resulted in various proposals to control costs by limiting drug prices. Some policymakers favor direct price controls, euphemistically referred to as price negotiation that would be conducted by the Secretary of Health and Human Services (HHS). Others support indirect means of establishing price controls. The Senate bill, for example, includes a fallback plan in certain geographic regions that would effectively require a federal price list for pharmaceuticals. Proposals to allow individuals and commercial distributors to import pharmaceuticals (often called reimportation) attempt to lower U.S. drug prices to levels established in countries that have their own price controls.
Medicare's market power ensures that the program could set pharmaceutical prices at levels well below those available to even the best customers in the private sector. If past practice is a guide, HHS would establish an initial federal price schedule for the thousands of drugs used by Medicare beneficiaries--literally every prescription drug on the market in every dosage form, strength, and packaging. An inflation factor would ratchet up the entire price structure after the first year, as is the case with the physician fee schedule.
Negotiations would be necessary whenever a new drug appeared on the market. The Secretary would be able to withhold access to any new pharmaceutical, a powerful threat that could lead to low prices for new drugs under Medicare. However, there are bad side effects with this policy prescription:
? Competition from generics and therapeutically similar drugs would no longer force down prices of branded drugs under a rigid federal price structure.
? Delaying the entry of a new drug onto the federal formulary could hurt some patients.
? If Medicare set prescription prices at very low levels, manufacturers will try to raise prices to private purchasers, including most people under age 65.
? The threat of a low launch price set by the government would deter the research and development of potentially valuable or life-saving drugs, particularly those that treat illnesses associated with older age groups.
A competitive approach can strike a better balance between lowering prices and promoting innovation. This is the conceptual basis of the House prescription drug provisions, and it relies on the proven ability of competing private plans to negotiate substantial discounts and manage the cost of the benefit.
If private drug plans are placed at risk for the cost of providing prescription drugs to their Medicare enrollees, they have a strong incentive to limit cost growth. The plans can act on that incentive if they are given the flexibility to manage the benefit aggressively. With a wide choice of plans, beneficiaries will be able to select a plan that meets their needs--and change plans if they are dissatisfied.
The budget savings from top-down regulation are immediate and seductive. But the consequences of such an approach are long-term and serious, discouraging the research and development that could lead to more effective and potentially cost-saving drug therapies. Even in the near term, lower prices for Medicare could mean higher prices for everyone else. Instead of creating an elaborate new price-setting scheme that can have dire consequences for health care, Medicare should rely on the proven ability of pharmacy benefits managers (PBMs) to manage costs through careful benefit design and effective price negotiation.
Conclusion
Government policies implemented through Medicare and Medicaid directly impact the health care, and ultimately the health, of every American. Those programs are the largest purchasers of health services, and for that reason alone would be able to dictate the terms under which services are delivered, even if they were private health plans. However, the legal authority to compel consumer, providers, and health plans to modify their behavior conveys a far greater responsibility on Congress and the managers of those programs to consider the greater public good in establishing policies and procedures. Regrettably, that is often not the case. Actions that might achieve important policy goals for Medicare or Medicaid impose inefficiencies on the private health sector or unnecessary constraints on consumers.
The Medicare reform debate brings to light many of these conflicts. Congress has a second chance to design a competitive Medicare program that will work and that can begin to transform the health sector. Reforms should give more flexibility to health plans and beneficiaries alike. Restrictions on the number and types of plans that may compete in Medicare, and on the way those plans design and manage the benefit, should be relaxed. The government should work hard to overcome its well-deserved reputation as a bad business partner by reducing administrative burden and opening lines of communication. And the government should shed the conceit that it can control a complex and inherently unpredictable health system by the application of more and better laws and regulations.

Joseph Antos is the Wilson H. Taylor Scholar in Health Care and Retirement Policy at AEI.
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>> MART WATCH...

SAL UNDER SIEGE
By JENNY ANDERSON
February 7, 2004 -- EXCLUSIVE
The American Stock Exchange's leading associations of traders, and at least one board member, have asked Amex Chairman Sal Sodano to resign when a deal to sell the exchange is completed, The Post has learned.
The group met with Sodano on Wednesday in his office and asked that he leave when the NASD completes a deal to sell the Amex, which it bought in 1998, back to the owners.
"Our executives serve at the pleasure of the board," said Amex spokeswoman Mary Chung. "Their primary focus is to see this sale through and not be distracted by rumors. Everyone will have a chance to vote on this deal shortly, and that is what they are focused on."
The movement is significant because it includes the traders - market makers, specialists and floor brokers - who represent the core businesses of the exchange.
While these groups do not have the power to remove Sodano - only the Amex board can do that - they asked Sodano to bow out, rather than force the membership to seek a petition for his ouster, sources said.
It is far from certain that such a petition would be successful, as many traders work for firms that would not allow them to sign a petition.
Seat owners and members have expressed frustration over a number of problems at the exchange.
Leading the list of their grievances is Sodano's more than $22 million pay package, negotiated in 1999 by the NASD. They are also miffed about delays in technological improvements, poor communication from management about the fate of the exchange and a bonus given to Amex Vice Chairman Anthony Boglioli for his role negotiating a deal with the NASD that some members say should have been disclosed more fully.
Already a number of options traders have shrunk their business on the Amex or abandoned it altogether.
Among them are Goldman Sachs's Spear Leeds Kellogg and Van Der Moolen.
The deal to give the exchange back to the Amex membership corporation is expected to be completed soon.
It will mark the end of a long sale process.
In June, the NASD struck an agreement in principle to sell the Amex to Chicago-based private equity firm GTCR.
That deal hit the skids as the Amex lost significant market share in options trading and regulatory problems surfaced in a damaging SEC report.
Soon after GTCR backed out, the NASD and Amex announced a deal in which the exchange would be sold back to the Amex Membership Corporation.
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ITALIAN COPS SEARCH
UBS OFFICES
Reuters
February 7, 2004 -- MILAN - Italian tax police searched two UBS offices in Milan yesterday to investigate a 420-million euro bond the Swiss bank bought from Parmalat five months before the dairy group went insolvent, a judicial source said.
UBS is the latest financial institution to have its offices searched by authorities investigating the food giant's multi-billion-euro accounting scandal.
"We can confirm as expected that Italian investigators have visited our offices in Milan in connection with the investigation into Parmalat. We are fully cooperating," a UBS spokesman said in London.
Ten people are under arrest and at least 28 are under investigation in the case, which U.S. regulators have called one of the world's biggest frauds. No charges have been brought.
Milan prosecutors investigating for market rigging are trying to establish how much banks that helped Parmalat issue some eight billion euros in bonds knew about the state of its finances.
The search warrant asked tax police to gather documents on the 420 million euros of bonds the bank said it bought from Parmalat last July, the judicial source told Reuters.
A report on Parmalat's finances by its new auditor, PriceWaterhouseCoopers, found that only 130 million euros of the bond's proceeds went to the food group's operations.
The other 290 million euros went into a tax-related scheme that involved buying for that sum bonds issued by a Cayman Islands unit of Banco Totta, itself a Portuguese subsidiary of Spain's biggest bank Santander Central Hispano.
For reasons not explained, the Totta bonds' repayment was linked to Parmalat's own credit quality so that if the food group defaulted on its debts they would become worthless, PWC said.
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