Scandal number five: Insider-trading probe of Medicare announcement reveals hundreds of HHS employees had secret info

Is this scandal number five or number six? There’s Benghazi, the IRS, the DOJ snooping on reporters, Sebelius shaking down health executives for ObamaCare contributions, and now the NSA/PRISM/Snowden mega-clusterfark. This new WaPo story makes six. No, wait — seven. Ed just posted on the State Department covering up misconduct. We’re going to need a bigger boat.

Actually, there are two potential scandals here. One is HHS tossing around what was supposed to be sensitive information to a huge swath of employees in-house. The other scandal is who actually leaked it, assuming anyone did. It might not have come from HHS at all but rather from some old-fashioned Beltway congressional/lobbyist incest. As with most of the other Obama scandals, this story is less about O himself than about the foreseeable abuses that result as the federal whale grows. You can have bigger government or you can have more accountable government. The guy who signed ObamaCare into law has made his choice.

Sen. Charles E. Grassley (R-Iowa) told The Washington Post late last week that his office reviewed the e-mail records of employees at the Department of Health and Human Services and found that 436 of them had early access to the Medicare decision as much as two weeks before it was made public…

“In the statistical agencies, where the handling of sensitive information is their bread and butter, they’re very serious about confidentiality,” said Keith Hall, a former commissioner at the Bureau of Labor Statistics who has spent more than two decades in government. “But in other parts of the government that handle policy issues, there’s a whole different level of treatment.”

Hall said employees in other parts of the government, including the Medicare office, are not subject to the same types of potential consequences as employees at statistical agencies, who can land in prison for up to five years and face a fine of a quarter of a million dollars for disclosing information early.

Giving hundreds of government employees advance notice of a policy decision “is way too many,” said Hall, now a senior fellow at George Mason University’s Mercatus Center. “I’ve done my share of working on policy issues and policy decisions, and you just don’t spread that stuff around like that.”

A brokerage firm in D.C. announced late in the trading day on April 1 that a decision to boost funding for Medicare Advantage was forthcoming. Shares of Humana and Aetna skyrocketed. Later that day, after the markets had closed, the feds confirmed that, indeed, another $8 billion would be plowed into the program. So who at HHS blabbed? Maybe no one: Per WaPo and this WSJ report from a few weeks ago, the feds seem to be interested in a lobbyist who — ta da — used to work as a health-care policy advisor to Chuck Grassley himself and who now specializes in “political intelligence.” (He also had a “role” in writing ObamaCare, per the WSJ, and used to work on health-care legislation with someone who’s now a “senior official” at CMS, the division of HHS that made the decision on increasing funding for Medicare Advantage.) The SEC knows he was communicating with at least one current staffer in Grassley’s office; the question is whether that staffer slipped the information on the Medicare decision to the lobbyist or whether the lobbyist somehow “guessed” that Medicare funding would be increased based on tidbits of info he gleaned from various sources on the Hill. Even if it’s the latter, with no one having directly fed him confidential information, the surge in Humana/Aetna shares based on his analysis is a direct result of his access to government’s major players. When a former Grassley advisor and colleague of a bigwig at CMS tells you that he thinks a windfall’s coming, you listen. Big government takes care of its alumni.

No wonder those alumni are unhappy about this SEC probe:

The episode is sending tremors through Washington’s world of policy experts, lobbyists and Wall Street researchers. The investigation has signaled that federal prosecutors are trying to clamp down on what they see as the capital’s loose oversight of market-moving information.

More broadly, it has shaken a city where acquiring and sharing information is a basic tool of business. Some insiders say the traditional ways of operating may need to change.

It “is astounding that so many in Washington view the trading of unreleased government information as simply ‘business as usual,'” said William Pewen, a former Republican health-care aide who also was on the Senate Finance Committee.

Task one for the SEC is finding out who leaked the Medicare Advantage scoop. Task two is taking a hard look at movement in Humana’s and Aetna’s shares in the weeks before the news dropped and seeing if any HHS employees who knew what was coming had any investment epiphanies. As for HHS itself, this is a timely reminder of something that the NSA and Booz Allen are learning today the hard way: The sloppier you are about controlling access to sensitive information, the more certain it is that you’ll be haunted by it eventually. Even if no one exploited the Medicare Advantage decision this time, it’ll happen going forward if hundreds of people continue to receive sensitive scoops. That’s simple probability. And that points to an irony of Scandalmania: Whatever else comes from all this policy-wise, the one guaranteed result is tighter secrecy protocols within a government that already treats as secret too much information that isn’t truly sensitive. Information will get tighter, there’ll be more disaffected Snowdens trying to leak it, and of course more lobbyists making a buck on their special access to the many Washington secrets that haven’t leaked. The cycle of big-government life.

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