‘Exchange’ for the Worst

‘Exchange’ for the Worst

ObamaCare is already proving to be unworkable in state practice.

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Democrats promised that health-care reform would be a smooth exercise in expert planning, but so far its "implementation" has been as anarchic and improvisational as the Affordable Care Act’s passage. Yet amid the mayhem, there’s a chance to mitigate some of the damage.

On the ever-lengthening fiasco list, the "exchange" problem is one of the worst. Congress told states to build these bureaucracies that will dispense health insurance subsidies and regulate coverage, but by and large the states aren’t doing so. The National Academy for State Health Policy reports that only 13 states are making "active" progress on their exchange. That means they’ve checked off five or six of the seven basic boxes that the Health and Human Services Department says they must, like pass legislation or issue an executive order establishing an exchange.

But even progress among these 13 states—home to only about a third of the U.S. population—is an overstatement, given that the exchanges need to be running by October 2013 for coverage in 2014. The National Academy lists 109 specific exchange "milestones." Massachusetts is doing best, and well it should be, given that RomneyCare was such a head start. It has met just 56% of these requirements.

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California, another liberal leader, is at 44%. Oregon and West Virginia are in the 30s. Illinois, Colorado and Washington state are in the 20s—and then every other state gets much, much worse. Eighteen states have made zero progress and don’t want to make more.

Many states run by Republicans are refusing to cooperate as a kind of civil disobedience. But HHS’s regulatory and fiscal demands are overloading the bandwidth even in states that support ObamaCare. Vermont is at 19%. New York of all places is at 6%.

The exchanges do not merely subsidize but must verify who is eligible by income and residency, police compliance with the individual mandate and report scofflaws to the Internal Revenue Service; regulate insurers and enforce price controls; and penalize businesses that don’t insure their employees. All this is a vast, complex, extremely technical and expensive undertaking that the states can barely handle, even if they wanted to.

To gauge the scale, consider that the IRS inspector general recently reported that ObamaCare "represents the largest set of tax law changes in more than 20 years and affects millions of taxpayers." The IRS needs to hire 1,278 people this year and another 859 in 2013 to usher in the revolution. For comparison, there are only 6,750 U.S. companies that employ more than 2,000 workers.

Our prior advice to anti-ObamaCare states was to ignore the HHS-IRS afflatus and start from scratch, attempting to design clearinghouses that could make the individual and small-business insurance markets function more efficiently and transparently. If 10 or 20 states had banded together on a better model, at least the confrontation with HHS would have been constructive and educational.

But it is too late. The law empowers HHS to impose a federally run exchange, which conservative states will hate far more than their own handiwork. States must prove to HHS by this November—10 days after the election—that they are making progress or else the federal exchange swoops in, and only a handful of states are still trying. In 30 states or more, the feds are now in control.

The intriguing and possibly better news is that, according to ObamaCare’s statutory text, only state-run exchanges are allowed to pay subsidies. The IRS and HHS characterize this as a glitch and the result of bad draftsmanship—a "scrivener’s error." So they ignored this problem when they wrote up the exchange rules.

Yet in a forthcoming paper in the journal Health Matrix, Jonathan Adler of Case Western and Michael Cannon of the Cato Institute argue persuasively that this omission was intentional. Taking a deep dive into the Congressional record, Messrs. Adler and Cannon argue that Democrats left out federal subsidies as an incentive for states to set up an exchange. The point was to put Governors in the supposedly tough spot of choosing to deny their voters benefits if they didn’t set up a state exchange.

A state or a penalized business could decide to sue on the Adler-Cannon argument, though the outcome is far from certain. Some judges are literal, others "textualist," and they may uphold the IRS. But this dispute does erase any urgency for states to lend a hand to the Administration.


The other lever states have is that a federal exchange is still not a certainty. HHS is grappling with the same implementation problems that states are—and it is out of cash. Democrats appropriated about $1 billion for implementation, split with IRS. But Congress needs to affirmatively give HHS another $750 million next year, which the House so far has refused to do. The White House has been quietly issuing veto threats if Congress refuses to spend such sums, and it may become a major issue this autumn.

We hear more than a few Congressional Republicans are apprehensive about this strategy and want to back down, because Democrats call ObamaCare’s subsidies "tax credits" and claim opposing them amounts to a tax increase. But Republicans shouldn’t help Democrats overcome their own errors in writing what is still a very unpopular law. If the GOP ends up rolling over, it will become a collaborator in the burgeoning chaos in the states.

A version of this article appeared July 31, 2012, on page A12 in the U.S. edition of The Wall Street Journal, with the headline: ‘Exchange’ for the Worst.

On Exchanges: This Summer The Policy Community is Sweating Implementation Details

July 27, 2012 – 5:17 p.m.

On Exchanges: This Summer The Policy Community is Sweating Implementation Details

By John Reichard, CQ HealthBeat Editor

It was not everything they wanted to know about health insurance exchanges, but it was a lot. With deadlines looming, audience members at a standing-room-only Capitol Hill forum Friday peppered federal and state officials with dozens of questions about the nitty gritty of creating the new insurance marketplaces. And they got answers.

For example, it now appears that a proposed rule for the “essential health benefits” that must be offered by plans sold in exchanges will come out in August.

A supplemental guidance document on the operational details of the “federally facilitated exchange” is likely to come out next month too. The federal government will run exchanges in states that are not ready or that choose not to run their own exchanges. A previous guidance document on the federally facilitated exchange was released in May.

Michael Hash, acting head of the Center for Consumer Information and Insurance Oversight (CCIIO) at the Centers for Medicare and Medicaid Services (CMS) did not specifically mention August as a release month for either document. But he did say “shortly” with regard to the essential benefits proposal, and “summer” in the case of the guidance document.

Brian Webb, an exchange expert at the National Association of Insurance Commissioners who also spoke at the event, said afterwards he is assuming both will be out in August. Washington and Lee University law professor Timothy Jost, a third speaker at the forum sponsored by the Alliance for Health Reform, said the benefits proposal has to be released within a month.

Time is pressing on exchange developers. Insurers have to know what benefits they will be required to offer as they prepare to begin signing up people for coverage on the exchanges 14 months from now. The first open enrollment period starts Oct. 1, 2013.

Much has been written about how troubled the mammoth undertaking of creating exchanges is.

But Hash said the federally facilitated exchange is going to be up and running and ready to go in October, 2013. Webb said that every time he has heard from federal officials about the federal data hub that states will need to access to verify citizenship and income information, they say that the hub will be ready on time too.

Speakers were asked to say how many states will be ready to run their own exchanges by next fall with a questioner setting the “over-under” at 19 states. Webb said “over,” adding later that he expects the number of states to be 26.

Jost was more conservative. “If we’re looking at strict state-run exchanges with no federal involvement, then maybe under,” he said. “You’re not going to be able to vote in the spring of 2013 to establish and have one up and running.”

One questioner wanted Hash to address the widespread speculation by hospital officials that plans offered on exchanges would pay Medicaid level payment rates, which are relatively low.

“I’m not aware of anything in the Affordable Care Act that imposes requirements on issuers of health insurance or qualified health plans and the providers that will actually deliver the benefits,” Hash replied. “That’s a matter between the health plans and the providers and I don’t believe there are provisions in the Affordable Care Act that actually speak to that.”

Krista Drobac of the National Governors Association (NGA) said that the Congressional Budget Office (CBO) has assumed that health plans on exchanges will pay providers payment rates more typically found in the commercial health insurance market.

In remarks at the forum and in an interview afterward, Webb said states — with the exception of Massachusetts and possibly New Jersey or Vermont — will not try combining small businesses and individuals into a single exchange. But small businesses in all states will be able to go to exchanges in 2014, he said, either because the state has a “SHOP” exchange — the term for insurance marketplaces for small businesses — or there will be a federally-run SHOP exchange.

Webb also said that essential health benefit minimums will vary from state to state, even where the federal government operates the exchange. HHS will use the small business plan with the largest enrollment in a state to set the minimum benefits for that state, he said.

In June, the Department of Health and Human Services posted the three biggest small business plans in each state and federal officials will choose from among the three, he said.

Webb also said NAIC is gearing up an effort to educate those who will assist consumers learn about exchanges and the plans they offer, including training “navigators” required in the health law to provide that help, as well as insurance agents and brokers.

NAIC has a meeting coming up in Atlanta that will address the issue, he said. It will start developing educational materials for those who will educate consumers and for consumers themselves, he said. “As we saw in Massachusetts it takes a lot of effort and frankly a lot of resources to get people the knowledge they need to make good choices,” Webb said.

Source: CQ Online News

Same-day coverage of the people and events shaping health care policy from Washington.

© 2012 CQ Roll Call All Rights Reserved.

HHS Top 3 Plans by State Update 070312.pdf

Catania Says No to Mayoral Run

David Catania: The Thrill Is Gone
Posted by Alan Suderman on Jul. 20, 2012 at 4:23 pm, City Paper

In case you were wondering whether a white, gay former invitee to George W. Bush’s Crawford ranch was going to run for mayor in D.C. in 2014 (or perhaps sooner), the answer is no. At-Large Councilmember David Catania said on The Kojo Nnamdi Show today that while he once would have "loved" to be mayor, he no longer feels that same passion.

"I think you have to have a certain fire in the belly. You have to want to do it, and you have to be consumed by it," said Catania, who added that his work overseeing the city’s health agencies would have augured well for what kind of a job he’d do as chief executive. But “I don’t want it as much as the others, that’s just the truth.”

(How a Catania mayoral campaign would have affected his other job, as a vice president for city contractor M.C. Dean, didn’t come up.)

Catania was the first of three councilmembers to call for Mayor Vince Gray to resign. You can listen to the show here.

Mayor Gray should resign, most D.C. residents say

Mayor Gray should resign, most D.C. residents say

By Mike DeBonis, Nikita Stewart and Peyton M. Craighill, Washington Post, Wednesday, July 18, 9:01 PM

A majority of District residents say Mayor Vincent C. Gray should resign, according a new Washington Post poll that reveals how deeply the continuing campaign corruption scandal has eroded the city’s support for its mayor.

Gray’s support is dwindling even among his political base, with 48 percent of African Americans saying he should resign. Among those who say they voted for him in 2010, nearly four in 10 think that he should step down.

Fifty-four percent overall say Gray should resign, while 37 percent say he should not and 9 percent have no opinion.

Gray has said the federal investigation into his campaign has not affected how his administration is running the District, but only three in 10 approve of the job he is doing as mayor. Forty-four percent say the city would be better off if he left office.

The mayor’s political supporters and other city leaders have rallied behind him, saying calls for his resignation are premature because he has not been accused of wrongdoing. But only 22 percent of residents surveyed say they view Gray as honest and trustworthy.

The public sentiment that Gray should resign crosses virtually all demographics in the city, according to the poll. Across categories of sex, ideology, party identification, income, age and geography, more say Gray should resign than not. African Americans and those 65 and older are closely divided on whether Gray should step down.

The numbers suggest that Gray cannot rely on a deep well of support from any particular group as he fends off questions about the investigation and his continued tenure as mayor. East of the Anacostia River, an area where 82 percent of voters preferred Gray in the 2010 Democratic primary, a plurality of residents now think he should step down, 48 percent to 43 percent.

So far, three campaign associates have pleaded guilty to felonies, including charges relating to secret payments to an opponent and a clandestine “shadow campaign” to get Gray elected.

Dorothy Kelly, 73, said Gray must resign because she thinks he had knowledge of the illegal activity in his campaign. “If you’re working around people, you know what’s going on. I think he knew what was going on and ignored it,” said Kelly, a retired secretary who lives in the Bellevue neighborhood of Ward 8.

The survey also shows a continuing drop in Gray’s popularity since The Post’s last D.C. poll. Only 33 percent of the city’s voters have a favorable opinion of Gray, down from 47 percent in May 2011 and a pre-election high of 60 percent.

The new data show Gray’s favorability has dropped most precipitously among women — particularly white women. Thirty-seven percent said in May 2011 that Gray was honest and trustworthy compared with 6 percent today. Among black women, his job approval has plummeted 18 points, to 32 percent, in the same period.

Opinion driven by evidence

Talk of Gray’s political fate accelerated last week after a public relations consultant with ties to the mayor, Jeanne Clarke Harris, admitted in federal court to helping to orchestrate a “shadow campaign.” The effort was funded by $653,800 from a prominent city contractor, she said.

Citing the details revealed in court last week — prosecutors said the shadow effort was coordinated with Gray’s official campaign — three D.C. Council members have called on him to resign.

Gray’s campaign had previously been rocked by allegations that it paid fellow mayoral candidate Sulaimon Brown to verbally attack incumbent Adrian M. Fenty. Prosecutors have not alleged that Gray participated in or had knowledge of either scheme.

Gray has not detailed his knowledge of the spending but has lamented the campaign scandals in general terms. “This is not the campaign that we intended to run,” he said July 11.

Louis Clark, 65, said his opinion that the mayor should resign is driven by evidence. “First of all, there’s more than the appearance of wrongdoing, in terms of campaign finance violations. These people were integral to the campaign itself,” said Clark, a lawyer who lives in Chevy Chase. “I don’t think it’s believable that he had no idea what was going on.”

Clark, who is white and voted for Gray, said that if the mayor didn’t know about the secret spending, “it raises doubts about his ability to run a campaign and subsequently the administration.”

Gray has called on residents to draw a distinction between his campaign and his administration. He pointed to his accomplishments, including a declining unemployment rate that at 9.1 percent is the lowest since April 2009. He attributed the rate partly to his “One City, One Hire” initiative, an ambitious effort to match 10,000 unemployed residents with private jobs.

But the poll, conducted Sunday to Tuesday via land-line and mobile phones, shows that the public gives little credit to the administration amid campaign scandals.

Only one in four respondents agree that Gray is running an ethical administration. Among those questioning the administration’s ethics are about half of those who said they voted for Gray in 2010.

In addition, more than six in 10 residents say Gray is doing a less-than-satisfactory job on his main policy priority — creating jobs for city residents — and over half says he is not doing well on improving schools or services.

Kelly said she had hoped Gray would counter his predecessors in getting more services to poor residents and those living east of the Anacostia River. But she said she still thinks that her community is not getting enough attention.

“When it’s time to vote . . . then they come around,” she said.

Wider problems seen

Meanwhile, there is a broad sense that the ethical questions and criminal investigations represent a challenge in city politics.

More than two-thirds of poll respondents say they have closely followed the recent scandals — including the federal pleas and resignations of D.C. Council Chairman Kwame R. Brown (D) and council member Harry Thomas Jr. (D-Ward 5). Among registered voters, three-quarters say they are watching very closely or somewhat closely.

About three in four say the scandals represent wider problems in city politics rather than representing isolated incidents. Forty-four percent say they believe corruption in D.C. government is getting worse.

The poll of 1,002 D.C. adults has a margin of error of plus or minus four percentage points.

Those paying close attention are more likely to disapprove of Gray’s tenure, think that he should step down and consider corruption to be worsening or a sign of broader problems.

At the same time, there is little sense that District leaders are being unfairly targeted by federal authorities.

Only 8 percent of poll respondents say they felt the investigations into Gray, Thomas and Brown have been unfair. Six percent cite race — all three politicians are black — as having something to do with the probes. Among black residents polled, 13 percent say the politicians were being unfairly targeted, with 9 percent citing race as a factor.

Morris Gordon, 33, a black resident who supported Gray in 2010, said he thinks the probes have been fair but “as of yet” he does not think Gray should resign. “That’s beyond us,” he said, referring to the public. “It’s up to the U.S. attorney’s office.”

Gordon, who lives in Northeast and works in construction management, said he needs definitive evidence of wrongdoing by the mayor. “It needs to be a blatant display of corruption through a legal means,” he said. “It can’t be mere speculation.”

There is evidence of a continuing divide between opinions on the District’s progress and opinions on its political leadership.

Compared with May 2011, more residents think the city is on the wrong track — 45 percent vs. 36 percent of those polled 14 months ago. Those figures are comparable to the summer of 2006, when the city was rocked by a crime wave and concerns over public education and affordable housing were widespread. But they are nowhere near the depths plumbed in the early to mid-1990s, when 70 percent or more thought the city was on the wrong track.

Gray’s current approval ratings — at 29 percent, a near-record low for a D.C. mayor — are significantly lower than Marion Barry’s 50 percent approval in May 1996. Then, 36 percent of city residents said Barry should step down from his post.

At the time, Barry set off rumors about his physical and emotional health when he unexpectedly announced that he would take a two-week retreat to reflect and rejuvenate.

The beginning of his fourth term in office had been filled with setbacks, from his battle with prostate cancer to the congressional decision to establish a financial control board.

Despite that, 25 percent of residents said then the city would be worse off without Barry. Today, only 5 percent say the city would be worse off without Gray.

Jon Cohen and Scott Clement contributed to this report.

AHIP’s Ignagni Suggests Health Care Law Won’t Work

July 17, 2012 – 3:45 p.m.

AHIP’s Ignagni Suggests Health Care Law Won’t Work

By John Reichard, CQ HealthBeat Editor

The health care law won’t work unless it is changed or delayed, America’s Health Insurance Plans President Karen Ignagni strongly suggested Tuesday.

There’s still time to make those changes before health insurance exchanges begin offering coverage under the law starting next fall, Ignagni added in remarks at a health policy forum.

Ignagni said the combination of the law’s new insurance industry fees, weak penalties levied on those not buying coverage, rating bands and an essential benefits standard requiring much more generous coverage in the individual market will make coverage unaffordable to the young. She suggested that the essential benefits minimums might have to be phased in over a period of time.

“You need to have the young and the healthy participating in order to assure affordability,” Ignagni told the forum, which was sponsored by Health Affairs.

Without people in their early 20s through early 30s buying coverage, there won’t be enough good risks to offset the costs of older and sicker Americans who in 2014 can no longer be denied coverage because of pre-existing medical conditions or charged premiums that are based on their medical histories.

“The incentives to buy coverage in the ACA [Affordable Care Act] year one is roughly $95,” she said. That’s not enough, she implied, to get enough people to purchase insurance. But there are “productive discussions” at the state and federal level about increasing the incentives to buy coverage, she added.

As examples, she cited the penalties in Medicare Part D and Part B. Under those provisions, the longer beneficiaries delay enrollment, the higher the premiums for prescription drug coverage and doctor care. “We think structured open-enrollment periods are valuable,” she said. “And I know that folks who are operating exchanges in the states and at the federal level are looking at a range of incentives as well.” She didn’t specify what such inducements might be.

“As we move from now toward Jan. 1, 2014, there’s time to talk about provisions that could encourage participation,” she said.

Ignagni also said the fees to be paid by insurers, which she called premium taxes, will increase premiums charged to individuals and small businesses under the health care law (PL 111-148, PL 111-152). Small business premiums will be 3 percent higher as a result, she said. Medicaid and Medicare Advantage plans also will be affected, she added.

Under the health care law’s age bands, rates based on age can vary no more than threefold, she said. Now, rates vary fivefold in 85 percent of the individual market. In other words, older people pay five times what younger people do, whereas under the health care law they would pay three times more.

“That’s the issue we want to point to while there’s time to look at this,” Ignagni said.

The health care law “compresses to 3-to-1 overnight.” Older people will pay lower rates as a result. But for younger people that means higher rates that “will be a challenge,” Ignagni said.

In addition, essential benefits minimums require coverage in 10 categories of services. That’s often more than policies in the individual market cover now, she said. The minimums also could mean lower co-pays for consumers than they typically pay now. For the most part, people buying plans now in the individual market are getting catastrophic coverage in order to pay affordable premiums, she said.

States on their own are assessing the impact of essential minimum benefits on premiums, she said. “This is important to study, to look at where do people stand now in terms of what they are purchasing as individuals or as small businesses, where do they need to go and how do we get them there in what period of time.”

In the dozen or so states developing exchanges, there’s been much discussion about the interactions of these various provisions and their impact on premiums, Ignagni said. “In the end, whether or not the costs are affordable will be very dependent on whether individuals who are young and healthy purchase coverage.”

If Congress could be persuaded to reduce the new fees on insurers, less money would be available to expand coverage or benefits under the law. If lawmakers were to change the rate bands the way AHIP wants, premiums for older Americans would increase. Congress has so far resisted changing any of the revenue-raising fees on the health industry.

Md. examines taxes, fees to fund health exchange

Md. examines taxes, fees to fund health exchange

July 16, 2012 | Modified: July 17, 2012 at 1:35 pm

Hayley Peterson

Staff writer – White House/campaign and Maryland politics

The Washington Examiner


The state of Maryland is looking for ways to raise up to $50 million annually through an assortment of taxes and fees to finance the state’s health benefits exchange, an insurance marketplace that the federal health care law requires states to have operational by 2014.

Proposals under consideration include broad-based assessments, such as statewide increases on alcohol and cigarette taxes, as well as targeted levies on patients and providers participating in the exchange, according to Gov. Martin O’Malley’s office.

A state-appointed committee is meeting in Annapolis on Tuesday to decide which proposals should be investigated further by the state’s actuaries. The committee is charged with recommending financing options to the state by Dec. 1.

"We are trying to provide decision-makers with more information on how much revenue could be raised and what the impacts of that revenue are," said Jon Kromm, deputy director of the Governor’s Office of Health Care Reform.

The exchange is expected to cost the state up to $43 million in 2015, and up to $51 million in 2016, according to Maryland’s state-hired actuary, Wakely Consulting Group. The federal government is covering the cost of the exchange through 2014, with the state taking on full funding responsibility on Jan. 1, 2015.

"This [exchange] is an enormous economic positive for the state," Joshua Sharfstein, Maryland secretary of health and mental hygiene, told The Washington Examiner. "So it makes sense to spend money to build it."

He referred to a report claiming the exchange will generate more than $1 billion annually in economic activity for the state, due to an increase in the number of insured needing health services. The report was conducted by the University of Maryland, Baltimore County’s nonpartisan research center, the Hilltop Institute.

"Who gets some of that economic activity?" Sharfstein asked. "We want to understand these revenue sources and their connection to the exchange."

In deciding who will be taxed, Maryland officials are planning to target beneficiaries of the new insurance marketplace, Sharfstein said.

The state wants to steer away from overtaxing members of the exchange because that would disincentivize participation — meaning patients and providers not participating in the exchange will likely be on the hook for some sort of tax or fee.


Embattled D.C. mayor seeks support from Council members

Embattled D.C. mayor seeks support from Council members
By Tim Craig, Published: July 12, Washington Post

Just hours after three council members called for his resignation, embattled D.C. Mayor Vincent C. Gray phoned most of the remaining council members, asking they stick by him until the U.S. Attorney’s Office completes its investigation into his 2010 campaign.

In phone calls on Wednesday evening and during the day Thursday, the members said Gray reiterated in private what he has been saying publicly: He has no plans to resign. Underscoring his continued hold on power, Gray also gauged members’ legislative needs and stressed that he remains committed to working on projects of importance to them.

“We talked, and I expressed to him what I guess he wanted to know,” said Council member Yvette M. Alexander (D-Ward 7), a chief ally of the mayor on the 12-member council. “I told him, I was not going to call for his resignation. And then we talked about some priorities I had in my ward.”

Gray’s outreach to council members, similar to private pep talks he’s holding with senior staffers, illustrates how rapidly the political landscape is shifting around him. On Tuesday, U.S. Attorney Ronald C. Machen Jr. said that a secret $653,000 effort funded by one of the District government’s most prominent contractors corrupted the 2010 mayoral race and helped Gray get elected.

After the extent of the alleged fraud was revealed in federal court, Council members Mary M. Cheh (D-Ward 3), Muriel Bowser (D-Ward 4) and David A. Catania (I-At large) called for Gray’s resignation.

In an interview Thursday, Gray said he has called “almost every other council member” to tell them he hopes “they wouldn’t join the other three.”

So far, no other council member has called for his resignation.

Gray added he was agitated that his former colleagues — particularly Cheh, who he considered an ally and friend — spoke out without “letting the process play itself out.”

“I’m very disappointed in Mary Cheh doing this,” Gray said after he swore in the three members of the city’s new ethics panel. “She is an attorney, supposed to be a constitutional lawyer, [and] until someone has proven something, there is no reason to raise those kind of issues.”

In response, Cheh said: “We are not talking about a court of law. We are talking about the health of the District. And on that matter, my request stands.

“I consider him a friend. . .but it’s a matter of healing the city. If you have deep wounds, you can’t heal until you clean them out.”

Gray appeared to be helped by concerns among some council members that the District government could be crippled if he is forced from office.

If Gray were to resign, Council Chairman Phil Mendelson (D) would become acting mayor until a special election could be held. The council would then have to agree on a temporary replacement for Mendelson, who became chairman June 13 after Kwame R. Brown was forced out of office after admitting he fraudulently obtained two bank loans.

A special election for chairman is scheduled for November. On Thursday, the U.S. Senate sent a bill to President Obama that gives the District more flexibility in setting its special election schedule in case there are vacancies for the mayor’s office and council.

“If the mayor steps down, he will put the leadership of the government into turmoil and uncertainty for at least two years, and that is a major decision,” said Council member Tommy Wells (D-Ward 6), adding he worries that experienced officials will flee the government for more stable jobs. “So, while I am angry and frustrated regarding his campaign activities, we really have to be reasoned and sure before we put our city through this.”

Mendelson, who met with Gray late Wednesday night, said Thursday he has “no ambition to be mayor.” But he added, “I try to be ready for whatever I have to do.”

Mendelson, who also expressed concern about disruption to the city government, said he is urging his colleagues to “just sit down in the boat” instead of rushing to judgment.

When Gray called council member Jim Graham (D-Ward 1) Wednesday night, Graham told Gray he had “only a couple of days” to better explain his role in the alleged “shadow campaign” before he, too, would seek his resignation.

“He is going to make his own decision on this, but I have to make a decision too,” said Graham, who spoke to Gray for 20 minutes. “I really want a statement, and I want it to occur soon.”

DC Health Information Exchange Policy Board Appointments

See attached appointments, per Mayor Gray’s executive order issued earlier this month.


Vincent Gray unloads on D.C. Council members demanding his resignation

Posted at 01:47 PM ET, 07/13/2012

Vincent Gray unloads on D.C. Council members demanding his resignation

By Mike DeBonis, Washington Post

DePuyt pressed Gray on the “shadow campaign” revelations and the reaction to them. (NewsChannel 8)


In his first extended interview since prosecutors disclosed that he was the beneficiary of a vast “shadow campaign” during his 2010 election effort, Mayor Vincent C. Gray lashed out at the legislators who called for his resignation in the wake of the news.

Gray (D) appeared Friday morning on NewsChannel 8’s NewsTalk. Host Bruce DePuyt asked Gray to respond to the resignation calls, which came Wednesday afternoon from David A. Catania (I-At Large), Mary M. Cheh (D-Ward 3) and Muriel Bowser (D-Ward 4).

“I think it depends on which of the three you’re talking about,” Gray said.

Gray dismissed Catania’s critique as politically motivated: “Let’s be honest, David Catania is a Republican who became an independent. We forget that we have partisan politics in the District of Columbia. … He never supported me; he certainly didn’t support me in the election.”

Catania, elected to the council as a Republican in 1997, left the GOP in 2004 after breaking with then-President George W. Bush over his support for a constitutional amendment banning gay marriage. Since then, he has been one of the council’s most socially liberal but also fiscally conservative members.

Gray noted that he’d moved to lessen Catania’s influence in government health-care agencies. Catania, as chairman of the council’s health committee, had a relatively free hand under Mayor Adrian M. Fenty (D) to shape policy and management in the agencies he oversaw. Gray said he found that “completely inappropriate” and reasserted his control.

“I don’t think he liked that,” he said. “So it doesn’t surprise me at all that he came out and made the statements he did.”

Bowser, he said, “wants to be mayor, so I’m hardly surprised at that.” The Post reported last month that she was among several council members who have taken steps to prepare for citywide runs.

Gray repeated statements from Thursday that he was surprised and disappointed that Cheh, a constitutional law professor and supporter of Gray’s campaign, wouldn’t “let the process play out.”

“That is normally the way it works in America,” he said.

But Gray also expressed personal hurt at how Cheh informed him she’d be calling on him to step down: “I would have even appreciated something other than just a phone call. … I got a voice mail message that said she was going to do that. She could have come upstairs and said, ‘Let me sit down and talk with you about this.’ I was a bit surprised about that.”

Update, 1:45 p.m.: Earlier in the interview, Gray repeated his previous defenses of the campaign, calling it “truncated” and fast-paced and reiterating that he was not aware of illegal activities inside the campaign.

“We ran a campaign that was based on the laws and the principles of the District of Columbia,” he said. “That’s the kind of campaign I was running. That’s the kind of campaign I supported.”

Gray deflected the notion that he shouldn’t have kept a closer eye on things, including the two campaign operatives who have pleaded guilty to federal felonies.

“I had a full-time job as council chairman, and I had to spend a lot of time doing that,” he said. “I was in a situation where I wish I had more than 24 hours a day, where I wish I could have been in the campaign office more extensively. I wasn’t there very often at all.”

Gray specifically addressed his fundraising, saying he was not aware of problems, including the “straw donation” scheme revealed in the prosecution of public relations consultant Jeanne Clarke Harris. “The money that I was involved in raising,” he said, “went through the campaign and was recorded on our financial reports.”

He also claimed that money man Jeffrey E. Thompson, the city contractor implicated in the Harris prosecution, “never asked me for anything” and did not suggest that he intervene in a contractual dispute involving his heath-care company — settled during Gray’s tenure for $7.5 million. “There was no quid pro quo,” he said. “I was not involved in it, nor did Jeff Thompson ever ask me to be involved in it.”

Gray declined, however, to discuss details of his Jan. 10 meeting with Harris: “This is a part of the investigation that continues to unfold, and as it unfolds, those details will be revealed.”

More generally, Gray said he lamented that his attorney, Robert S. Bennett, has advised him not to speak more freely: “My makeup, my propensity really is to talk, and talk as extensively as I can about issues, so this is not really consistent with who I am.”

DePuyt mentioned Gray’s campaign slogan — “character, integrity, leadership” — and asked him whether he thought it was possible that illegal money, whether through straw donations or “shadow” spending, bought the literature bearing it.

“I certainly hope not, Bruce,” Gray said.

Mayor Vincent C. Gray knew of campaign finance violations in January, sources say

Mayor Vincent C. Gray knew of campaign finance violations in January, sources say

By Mike DeBonis and Nikita Stewart, Published: July 11

Mayor Vincent C. Gray knew in January that associates spent money on behalf of his successful 2010 election that was not properly reported, a violation of campaign finance laws, according to people with knowledge of the ongoing criminal investigation.

Gray (D) was said to have discussed the expenditures in a private meeting with Jeanne Clarke Harris, the public relations consultant who admitted Tuesday to helping orchestrate an illegal secret campaign on his behalf.

On Wednesday, Harris confirmed the meeting, which she said took place Jan. 10 in Gray’s private suite on the sixth floor of the John A. Wilson Building. She declined to describe the nature of the meeting, but three people close to the federal investigation who have knowledge of the meeting said it concerned the 2010 campaign and the investigations into it.

The disclosure of the meeting marks the first indication that Gray knew of undocumented funds before the federal raids in March at the homes and offices of Harris and business associate Jeffrey E. Thompson, who is believed to have funneled more than $650,000 in unreported funds to a “shadow campaign.”

The disclosure also comes as Gray faces mounting political pressure to make a fuller accounting of his role in the campaign. The city’s political fabric showed signs of fraying Wednesday as three of 12 D.C. Council members became the first elected officials to call for his resignation.

At the time of the January meeting, the official Gray campaign was pulling together an amended report to submit to the D.C. Office of Campaign Finance, which is conducting an audit. Gray and Harris discussed the unreported spending, and Gray later told her to submit records of any expenditures to his campaign staff, according to the people with knowledge of the meeting.

One person said that before the meeting, Harris had prepared invoices for the secret spending so that, if asked for, they might be provided to Gray’s legitimate campaign for reporting. It is unclear whether Harris exchanged information with Gray or his campaign staff or whether Gray knew about the source of the money or the amount of the spending.

Asked Wednesday when he first knew about unreported expenditures, Gray said, “That’s part of the investigation.”

Robert S. Bennett, Gray’s attorney, declined to comment about the January meeting. “This is a pending investigation, and I don’t think it’s appropriate to comment on it, and I have so advised the mayor to do the same,” he said.

Harris, 75, pleaded guilty Tuesday in U.S. District Court to obstruction of justice and conspiring to break federal and local campaign finance laws. She faces 30 to 37 months in prison under federal sentencing guidelines. Among the acts she admitted to was helping to disburse and conceal $653,800 in campaign funds secretly spent by Thompson.

Thompson has not been charged, and his attorney has said he won’t comment on pending investigations.

U.S. Attorney Ronald C. Machen Jr. said Tuesday that the 2010 mayoral race was “corrupted by a massive infusion of cash that was illegally concealed from the voters of the District.”

Two other Gray campaign operatives have pleaded guilty to federal felonies related to illicit payoffs made to Sulaimon Brown, a mayoral candidate who alleges that he was paid to verbally harass the incumbent, Adrian M. Fenty (D).

The city audit of the Gray campaign, expected to be scathing, is pending.

In light of disclosures by prosecutors, the campaign finance office is “expanding the scope” of its efforts to include the $653,800 in unreported expenditures, said Wesley Williams, an agency spokesman.

During his first public appearance after Harris’s plea Wednesday, Gray declined to address specifics, but he decried the idea of a “shadow campaign” in general terms. “This is not the campaign that we intended to run,” he said.

However, three former colleagues on the D.C. Council called on Gray to step down — David A. Catania (I-At Large), Mary M. Cheh (D-Ward 3) and Muriel Bowser (D-Ward 4).

“The people you chose to surround yourself with engaged in a criminal conspiracy to undermine the election process in this city, which means as the leader of that campaign, you forfeit the fruits of that effort,” Catania said.

He said he considered it immaterial whether Gray knew about campaign violations. He also said: “Does any reasonable person believe that Jeff Thompson invested $653,000 in a shadow campaign and didn’t tell the beneficiary? That makes no sense. None.”

Cheh, who supported Gray’s campaign against the inclinations of many of her constituents, left the mayor a voice-mail message late Wednesday telling him that she was calling for his resignation.

“I don’t see how there is any way out except by him stepping aside,” Cheh said. “The more I thought about it, whether he knew about it or not, it’s such an extraordinary election fraud, he has to take responsibility for it.”

Cheh, a constitutional law professor at George Washington University, called Gray’s situation as one that is described in law books as “willful blindness.”

“How could all this go on and you don’t know?” Cheh asked.

Bowser also said Gray should resign because the public has been asking him for months to disclose what he knew about problems with his campaign. “The best thing a person who loves this city could do for this city is to step aside so he can concentrate on his legal issues and we can get on with the business of the city,” said Bowser, who supported Fenty in 2010 and is now mentioned as a potential mayoral candidate.

Council Chairman Phil Mendelson (D) said in a statement that the spending revelations are disturbing but that it is premature to call for Gray to resign when he has not been charged with a crime. In a mild rebuke to his colleagues, Mendelson said the call for Gray’s resignation “creates instability at a time when we need just the opposite.”
Pedro Ribeiro, Gray’s spokesman, said calls for the mayor’s resignation were reckless. “This is the kind of irresponsible talk we’ve come to expect” from Catania, he said in an e-mailed statement. “It’s disappointing however that a constitutional scholar of Cheh’s caliber would call for a resignation before an investigation is complete.”

Disappointment over the allegations extends to former workers in Gray’s mayoral campaign. Mo Elleithee, a political consultant, called the shadow operation “shady, illegal and politically stupid.”

“That shadow campaign has tainted the hard work of staff and volunteers who worked on the legitimate campaign,” Elleithee said. “I haven’t had any evidence that the mayor knew anything about it at the time. I trust and I hope that was the case.”

Elleithee urged Gray to speak out in more detail about campaign dealings. “By remaining silent, it just generates more questions and it fuels people’s mistrust of the government,” he said. “He could be a voice for our community’s shared betrayal.”

In what one person described as a “pep talk,” Gray met Wednesday afternoon with senior staff, including the city administrator and his four deputy mayors, and he encouraged them to stay focused on the city’s business. He also told them that he is not resigning.

Asked at his Wednesday news conference whether he planned to serve out his full term, which ends in January 2015, Gray said, “I have no plans to do otherwise.”

Gray said he remains able to lead the city, and he urged the public to distinguish between the “issues” in his 2010 campaign and his mayoral administration.

He entered the race “for the right reasons,” he said. “I got out there to be involved in this because I loved the District of Columbia. . . . I know who I am. I get up every morning and look in the mirror, and I see someone I respect.”

Gray would not discuss the identity of the figure — described by Harris but unnamed in court — who is said to have planned the shadow campaign.

“I feel absolutely certain . . . that that will be revealed as this investigation continues to unfold,” he said. The Washington Post reported in March that Vernon Hawkins, a close Gray associate, played a key role in organizing the shadow campaign. Prosecutors said Tuesday that it was “coordinated” with members of the official campaign.

Otherwise, Gray generally declined to comment on specific allegations in the criminal investigation before his security team whisked him away to his sport-utility vehicle.

“I would like to comment on all of this, to be honest with you,” he said. “This investigation is continuing. . . . Obviously, there is additional information that is unfolding.”


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