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Thursday, February 14, 2013

Sen. Reid Aiding a Contributor in Averting Fiscal Cliff: The End Justifies the Means?

The law passed by Congress on January 3, 2013 to avert the across-the-board tax increases and “sequester” (i.e., across-the-board budget cuts) was “stuffed with special provisions helping specific companies and industries.” While many of the provisions would increase the U.S. Government’s debt, at least one would decrease it. Is the latter any more ethical because it is in line with the more general interest in reducing the federal debt? Put another way, does the end justify the means?  Do good consequences justify bad motives?  These are extremely difficult questions. The best I can do here is suggest how they can be approached by analysis of a particular case study.
In the Act is a provision reducing the Medicare reimbursement rate for a radiosurgery device manufactured by the E.U. company Elekta AB. The cut was pushed by a competitor, Varian Medical Systems. Senate Majority Leader Harry Reid asked Sen. Max Baucus, chair of the Senate Finance Committee, to write the cut into the legislation. While both senators could point to the public interest in the debt-reduction result of the cut, their relationship with Varian makes their motives suspect.  
While it is perhaps simplistic to relate campaign contributions to a senator’s subsequent action, it is significant that Varian spent  $570,000 in 2012 on lobbying. The company added Capitol Counsel, which had contacts to Sen. Baucus. Vivian already had connections to Reid through Cornerstone Government Affairs lobbyist Paul Denino, a former Reid deputy chief of staff. Additionally, the leading beneficiary of the contributions of Varian executives and the company’s PAC over the previous four years was Sen. Reid, whose committees received $21,200. Varian’s lobbyists added $42,700 more to Reid’s campaign. While Sen. Reid’s subsequent urging of the reimbursement rate cut could have been unrelated to these contributions and contacts, the senator’s involvement compromises him ethically. Put another way, it is at the very least bad form, or unseemly. It implies that companies making political contributions and hiring lobbyists connected to public officials do so (or worse, should do so) to have special access to those particular officials to turn upcoming legislation to the companies’ financial advantage. Even if the public also benefits, it can be asked whether the companies deserve their particular benefits. In the case of Varian, it may be asked whether the company deserved the cut in the reimbursement rate going to Elekta.
As could be expected, spokespersons at both companies sought to argue the merits of their respective cases in the court of public opinion.  It is more useful to look at the regulators’ rationale for increasing the reimbursement rate for Elekta’s  “Gamma Knife” in the first place. Originally, the knife and Varian’s linac machines were lumped together by the Centers for Medicare and Medicaid Services (CMS) under the same CMS code. In 2001, the Centers separated the devices in terms of data collection so an analysis could be conducted on whether the devices should receive different reimbursement rates. The Huffington Post reports that the reimbursement rate for the Gamma Knife was increased because “it typically requires only one treatment, while the linacs often require multiple treatments.” Also, “Gamma Knives machines are more expensive to obtain and maintain due to the storage of radioactive cobalt and regulation by both the Nuclear Regulatory Commission and the Department of Homeland Security. Linacs don’t use nuclear material and are regulated by the Food and Drug Administration.” So, due to the cost and use differential, CMS  increased the Gamma Knife reimbursement in 2006 to $7000. From the standpoint of the criteria of regulators, the data-collection and analysis method and the rational rationale are legitimate. In contrast, because neither the use or cost differential had changed by January 2013, the cut in the reimbursement rate cannot enjoy such legitimacy. Hence it is possible that exogenous factors, such as the political influence of Varian’s lobbyists and campaign contributions, were behind the change. From the standpoint of the previous rate differential, the change cannot be justified. Neither Sen. Reid nor Sen. Baucus could justify their actions (and motives) by the substance of the case. However, they could still appeal to the salubrious budget-cutting effect as justifying their involvement.
The question here is whether the favorable consequences of the cut on the government’s subsequent deficits mitigates or reduces the shady scenario of a senator acting on behalf of a company that had contributed to his or her campaign. I would advise a member of Congress to avoid even the appearance of a conflict of interest. If the result in this particular case is in the public interest (i.e., reducing the deficit), does this positive consequence justify the senators’ actions and even the questionable appearance?  It’s a no-brainer that the senators would immediately point to the public interest in the consequence, but does it effectively remove the taint of immoral political conduct (and perhaps motive)?
The link between the company-senator relation, the senators’ action in which the company stands to benefit financially in a material way, and the financial benefit to the company can be distinguished ethically from a good consequence to the public. A bystander would naturally view the consequence to the public as salubrious even while having a sentiment of disapprobation toward the company’s own benefit as well as the senators’ action and relation to the company. In other words, the favorable impact on the public does not remove the stain on the company and the senators. To be sure, that stain would be greater were the public harmed rather than helped, but even with the positive general consequence the senators may have acted for the private benefit. Also, their action could have come from other senators, hence obviating the ethical problem. In short, the public interest does not remove either senator from the ethically problematic situation in which they decided to occupy.  Even if their motive had been solely for the public interest, they violated the appearance of unethical motive and conduct.
“The end justifies the means” is a slippery slope in terms of what the human mind can rationalize as legitimate. Great harm has been seemingly justified by great ideals. Even in the face of the ideals, the harms provoke a sentiment of disapprobation by the observer (excepting sociopaths). This suggests that the ideals cannot completely justify unethical means.  It may indeed be that unethical means are necessary in some particular cases, but this does not render the devices ethically pure. Ethical principles do not know practical compromise. Rather, people do.


Paul Blumenthal, “Varian Medical Systems Used Fiscal Cliff Deal to Hurt Competitor,” The Huffington Post, February 8, 2013.