Trump team’s use of big insurer to dispense recovery funds comes under scrutiny

A senior economist for the White House Council of Economic Advisers, whose nomination to a post overseeing health insurance floundered in the wake of revelations of his financial ties to UnitedHealth Group, is now playing a key role overseeing a $30 billion recovery program being administered by UnitedHealth.

The choice of UnitedHealth, a leading health insurer, to serve as a conduit in funneling billions of dollars to hospitals and other providers, surprised many in health care, including employees at the Department of Health and Human Services who had assumed that HHS would administer the program itself. Though UnitedHealth says it will make no profit off of the deal, its role in handing out billions of federal dollars to hospitals could boost its relationships with the White House and the public during a tumultuous year and possibly provide it with valuable health care data, experts say.

“I’ve never heard of anything like this. The U.S. government pays hospitals all the time. Why would they need to pay a third party -- a for-profit insurer?” said Wendell Potter, a former insurance company employee turned industry critic.

Stephen Parente, an economist at the Council of Economic Advisers, is one of the Trump administration officials advising the program, according to three people familiar with his work. One HHS official described Parente as one of three key decision-makers in determining how the CARES Act recovery money is allocated to health care providers across the country.

As a Minnesota-based health economist before joining the Trump administration, Parente served as a consultant to companies including UnitedHealth, which has also backed some of his non-profit activities. Five months after President Donald Trump nominated Parente to an HHS post overseeing health insurers in 2017, UnitedHealth donated a $1.2 million multi-year grant to a small research center that Parente directed and helped found at the University of Minnesota.

After the White House withdrew Parente’s nomination in the face of congressional concerns about his relationships with the healthcare industry -- and UnitedHealth in particular – and omissions about finances that Parente had made on his financial disclosure form, the president appointed him to his current post, which does not require confirmation.

A spokesperson for the CEA, Rachael Slobodien, said that Parente was not responsible for the choice of UnitedHealth to administer the program. “Parente has had no role whatsoever in determining contracting decisions at HHS, neither for the recovery funds nor any contract ever,” she said.

Because UnitedHealth funded Parente’s academic center and nonprofit, and the company is not a former employer, his involvement with the project does not on its surface appear to violate any federal conflicts of interest guidelines. In addition, Parente’s consulting work for the company in recent years -- which extended up until 2017, when he was nominated for a post at HHS -- does not appear to have paid a large enough amount of money in recent years to trigger conflict-of-interest rules. But ethics experts still expressed concerns about his role.

“It’s certainly the kind of thing you’d expect ethics officials to look into,” said Jennifer Ahearn, policy director at the watchdog group Citizens for Responsibility and Ethics in Washington. “There’s a great urgency to get this money out the door. But when that happens, that’s when safeguards for getting that money where it needs to go are under the most strain.”

Slobodien of the Council of Economic Advisers did not address whether Parente had conversations with ethics officials before working on the project, or if he had requested guidance about the ethics of working on a project involving UnitedHealth. “As with any CEA employee, Parente was made aware of his ethical obligations through compulsory training,” Slobodien said in an email.

Parente declined to comment.

Getting funds to hospitals and other health care providers has been a chief mission for HHS in recent days. Congress set aside a total of $100 billion for the department to distribute to hospitals and other health care providers to help stem losses from the coronavirus outbreak, and health care officials have been rapidly trying to determine how to fairly distribute the money. Parente, William Brady and Jim Parker, the latter two serving as senior advisers at HHS, have been leading the decision-making process, and Parente decided the methodology for how to make the initial $30 billion in payments, the HHS official said.

In the days after Congress passed its coronavirus relief bill, some HHS employees expected the department to use its regular Medicare contractors, who frequently oversee payments to hospitals, to distribute the money, according to the official, but on April 7, Brady announced on a call that UnitedHealth would be making the disbursements instead.

Now, there are lingering questions about why UnitedHealth was selected to distribute the $30 billion in funds.

As the country’s largest health care insurer, UnitedHealth and one of its subsidiaries, Optum, have the cash and the financial infrastructure to quickly move $30 billion to hospitals, proponents of the arrangement say.

“HHS considered a number of factors, including whether potential partners had a system already in place that could handle the distribution and how quickly the distribution could happen,” the HHS spokesperson said in an email. “UnitedHealth Group was positioned to facilitate the immediate delivery of more than 85 percent of the funds today.”

A separate HHS official also said that HHS' Health Resources and Services Administration made the contracting decisions and is running the program. “UnitedHealth was picked because it was better positioned and more cost-effective to get the money out the door more quickly than other options that we considered,” the official said.

But emergency funds don’t necessarily need to be sent through a private company, one Obama administration appointee said, recalling that the distribution of emergency funds for providers during the Ebola crisis were handled within the health department.

While UnitedHealth has financial relationships with the many hospitals who take its insurance, Medicare’s relationships are even more extensive, as it is used by an overwhelming majority of hospitals across the country.

UnitedHealth will take a $1 million fee for administering the program and use it to set up a relief fund for family members of UnitedHealth employees who die from Covid-19, said UnitedHealth spokesperson Matt Wiggin.

"This is one of a number of things that we’ve been doing to support every stakeholder in the health care system as we go through this together," Wiggin said. Wiggin said that Parente "wasn’t involved in the contract that we signed [with HHS], though we have been working with a broad group of folks over there."

UnitedHealth and Optum are also boosting their profiles during a year when insurers could later face scrutiny over their handling of both coronavirus bills and of medical premiums, which they’re collecting as many hospitals face big losses. The distribution of federal funds may also enable the companies to collect basic data on providers that aren't already in their networks. UnitedHealth currently has relationships with eight in 10 hospitals in the U.S., Wiggin said.

“It was absolutely a nice advertisement for the folks at Optum, and their parents at United, for their size and scale,” said one health care lobbyist, who spoke on the condition of anonymity because of UnitedHealth’s prominent position in the healthcare space.

Before he was nominated by Trump for the top policy job at HHS, Parente had built up a lucrative academic and consulting career that included running a center at the University of Minnesota’s Carlson School of Management, called the Medical Industry Leadership Institute, that operated on gifts from corporate donors including UnitedHealth.

Parente and others had solicited UnitedHealth in 2017 for a $1.2 million grant that successfully came through after Parente was nominated for a post at HHS. The grant was the largest in the center’s history. UnitedHealth told POLITICO at the time that the funds had nothing to do with Parente’s possible role in the Trump administration, and Parente has since taken leave from the center.

“Steve’s a great faculty member and administrator,” said Michelle Wills, director of finance for Carlson School of Management. “He does a lot of great things for the school.”

Another person who knows Parente, but spoke on condition of anonymity, called him “one of the smartest, most decent people I’ve met in this town” and said “he doesn’t deserve the crap he’s gotten.”

In addition to running the center, Parente has served as director of the Health Care Cost Institute, which was founded with donations from UnitedHealth, Aetna, Humana and Kaiser Permanente. He has also consulted with UnitedHealth and other health care companies, including Pfizer.

In a video he did for the online learning company Coursera before joining the Trump administration, Parente talked about the “five hats” he holds in his life, including his consulting firm, and, with some pictures, noted that he lived on “a nice lake” in Minnesota, has a sailboat in the Caribbean and “a tiny cottage” with WiFi in the Scottish highlands overlooking the ocean.

“It’s an odd combination," he said, speaking about his life. "Basically coffee glues the ADHD down. But sometimes great synergies occur from it. Sometimes it’s just complete frustration, but it’s a life, and we try to make it well-lived.”