09-25-1999

BUDGET: Crunch Time for K Street

K Street heavyweights will go into overdrive in coming weeks to influence
what Congress puts into--or leaves out of--the must-pass appropriations
bills and the few other measures likely to win approval before adjournment
this fall. What follows are snapshots of several of the most expensive and
contentious lobbying campaigns:


Health Care Industry Assistance


Wounded by deep cuts in Medicare payments, the health care industry is
demanding relief. Hospitals, nursing homes, managed care companies, and
others are urging Congress to restore billions of dollars in Medicare
reductions mandated by the 1997 Balanced Budget Act. The health care
interests contend that the cutbacks in Medicare reimbursements have been
much larger than Congress intended.


The financially stricken nursing home industry has mounted perhaps the
most aggressive lobbying effort. Several months ago, the Alliance for
Quality Nursing Home Care, a coalition of 12 nursing home companies, hired
a trio of top guns: Haley Barbour, a former chairman of the Republican
National Committee, who's now at Barbour Griffith & Rogers; and former
Reps. Vic Fazio, D-Calif., and Vin Weber, R-Minn., both partners in the
Washington office of Clark & Weinstock Inc., a public affairs firm
based in New York City.


On Capitol Hill, the nursing home industry has already garnered both
attention and support for its cause, in part because several companies are
close to failing, and one, Vencor Inc., with 300 nursing homes and 38
hospitals in 46 states, filed for bankruptcy in mid-September. "Even
the most conservative and solid companies are losing money on their sicker
patients," said a lobbyist for the nursing homes.


After being lobbied by Barbour and others earlier this year, top GOP and
Democratic leaders--House Speaker J. Dennis Hastert, R-Ill., House
Minority Leader Richard A.Gephardt, D-Mo., Senate Majority Leader Trent
Lott, R-Miss., and Senate Minority Leader Thomas A. Daschle,
D-N.D.--jointly urged the White House to alleviate the nursing homes'
problems through administrative action.


After the Clinton Administration declined to help, the industry turned to
Congress for more money.


The alliance and the American Health Care Association, a trade group for
nursing homes, are together spending several million dollars on an
advertising effort designed by Kieran Mahoney, a New York City-based
political consultant. During Congress's August recess, the alliance
launched a television and print ad campaign in 10 states to turn up the
heat on members of the Senate Finance Committee, which has jurisdiction
over Medicare issues and is considering legislation to increase Medicare
reimbursements. The alliance has also tapped the John Grotta Co., a
Washington firm specializing in grass-roots political efforts.


Meanwhile, the American Health Care Association is using Bruce Yarwood, of
Helmsin & Yarwood Associates, to lobby on the issue, and it has hired
Ketchum, the New York City-based public relations giant, to help with
media and grass-roots efforts.


Hospitals are also pushing Congress for more Medicare money to alleviate
their growing financial problems. Under the 1997 Balanced Budget Act,
hospitals expected reimbursements to decline by $51 billion between 1998
and 2002. A new American Hospital Association study, however, projects
that the decline in Medicare payments to hospitals would actually amount
to $71 billion during that period.


To fight for additional Medicare payments, three trade groups--the
Federation of American Health Systems, the Catholic Health Association of
the United States, and the Association of American Medical Colleges--have
formed the Coalition to Protect Access to Medicare and Medicaid. The
coalition expects to spend roughly $7 million this fall to pressure
Congress to restore Medicare funds, which account for about 40 percent of
hospital revenues.


The managed care industry has also given Congress an earful about its
financial woes and the problems caused by the reduction in Medicare
reimbursements. Since last fall, the American Association of Health Plans,
a trade group that represents about 1,000 managed care companies, has
waged a multimillion-dollar campaign to build support for its
cause.


The AAHP drive has included an ad campaign in several inside-the-Beltway
publications and a 50-city grass-roots effort organized with the help of
the Direct Impact Co., an Alexandria, Va., consulting firm. In October,
the group plans to launch a TV ad drive to deliver the message that
managed care companies need more Medicare funds. Murphy Pintak Gautier
Hudome, a Falls Church, Va.-based media consulting firm, is producing the
TV spots.


Because of these advocacy efforts, lobbyists predict that Congress will
provide the health care industry with billions of dollars in additional
Medicare payments. But it's uncertain which bill will include the money.
Some analysts bet that Medicare adjustments could be part of a continuing
resolution. Others think that they could be included in a broader health
care bill aimed at imposing new strictures on managed care plans. Or the
extra dollars could be part of a package that includes several Medicare
fixes. No matter the bill, health care interests will fight hard to get
much more than the five-year, $7.5 billion increase in Medicare
reimbursements that the Administration has proposed.


Prescription Drug Benefits


The drug industry and allied interests are fighting Administration
proposals to provide a government-run prescription drug benefit for the
nation's 39 million Medicare recipients. In late July, the biggest
drugmakers teamed with other interest groups to form Citizens for Better
Medicare, which plans to spend as much as $30 million by the end of this
year to kill both Administration and Capitol Hill prescription drug
proposals.


Citizens for Better Medicare tapped Alex Castellanos to quarterback its TV
ad blitz, and retained APCO Associates for help in organizing a
grass-roots effort to supplement the TV advertising.


Meanwhile, the lobbying effort began earlier this year, when the
Pharmaceutical Research and Manufacturers of America hired the Clark &
Weinstock duo of Fazio and Weber to help set up the coalition and to lobby
for a private-sector approach to providing prescription drugs to Medicare
patients. To drive home its message on Capitol Hill, PhRMA also uses a
number of top K Street firms, including Greenberg Traurig, the Miami-based
law firm; podesta.com; and Steelman Health Strategies.


The coalition ran two ads on national TV this summer. The first ad did not
directly slam the Administration's prescription drug proposal, but in late
August, a second ad blitz specifically went after the Clinton
plan.


The coalition backs a private-sector approach to providing drug benefits,
that's much like one Sen. John Breaux, D-La., and Rep. Bill Thomas,
R-Calif., have recommended as part of Medicare reform. Moreover,
legislation being drafted by a bipartisan group of Finance Committee aides
is also expected to include a private-sector approach. But neither
proposal is likely to pass this year, so the coalition is working to kill
the Administration's plan.


Minimum-Wage Increase


Several of Washington's most powerful business groups, including the
National Restaurant Association and the National Federation of Independent
Business, are once again battling Democratic-sponsored legislation to
raise the minimum wage from $5.15 to $6.15 an hour by Jan. 1, 2001. Early
last year, the business community established the Coalition for Job
Opportunities, a loose-knit organization of roughly 40 trade groups that
includes the National Association of Convenience Stores, the National
Retail Federation, and the U.S. Chamber of Commerce. The coalition is
pressuring moderate Republicans and conservative Democrats to defeat the
wage increase.


Headed by restaurant association lobbyist R. Lee Culpepper, the coalition
has worked hard to cultivate grass-roots opposition to the proposed
minimum-wage increase. Besides tapping its own members, the coalition has
retained an outside grass-roots firm, which Culpepper declined to
name.


Support for a wage increase--long a priority for organized labor--has
gained ground on Capitol Hill. As a result, the coalition has focused its
energy on efforts to obtain tax benefits if the wage increase passes.
"When alternatives are offered, the coalition and trade groups will
have to assess their possibilities," Culpepper said.


But business is split over what kinds of tax breaks are needed. For
example, the restaurant group stresses the need for a permanent, or at
least multiyear, extension of the work opportunity tax credit, which
provides tax breaks to companies that hire and retain low-skilled
employees, such as former welfare recipients. Tricon Global Restaurants
Inc., which owns the KFC, Pizza Hut, and Taco Bell chains, has retained
Fierce and Isakowitz, a GOP lobbying shop, to push for a permanent tax
credit. The restaurant group also wants to raise the business-meal
deduction from 50 percent to 80 percent.


Meanwhile, the NFIB emphasizes the need for a wide range of tax cuts, such
as payroll tax relief, increased deductions for capital expenditures, and
reductions in the estate tax.


Business lobbyists agree that both the House and Senate will vote on the
minimum-wage issue this year. Some lobbyists predict that an amendment
increasing the minimum wage--but also containing tax benefits--could be
attached to a continuing resolution.


Gun Control


In a year marked by highly publicized mass killings, the National Rifle
Association continues to run an expensive advertising and grass-roots
drive against legislation that would impose new limits on the sale of
firearms at gun shows. The NRA especially objects to a Senate-passed
measure, sponsored by Frank Lautenberg, D-N.J., that would require
three-day background checks for those buying firearms at gun shows. The
legislation would also require that new handguns be sold with trigger
locks and would bar juveniles from acquiring assault weapons. Lautenberg's
provisions are in the juvenile justice bill that is now part of a
House-Senate conference. The House bill contains none of these
provisions.


Given the differences between the two bills, NRA lobbyists and gun control
advocates agree that Congress won't pass a juvenile justice bill that
includes the Lautenberg language.


Still, the NRA is spending $600,000 to $800,000 on radio ads seeking to
block anything that resembles the Lautenberg bill. The ads, which began
after the congressional recess, are running on Washington stations and on
conservative talk shows nationwide. The NRA also plans to run print ads
during the remainder of this Congress in The Washington Post, The
Washington Times, and The Wall Street Journal. Further, the NRA recently
spent $350,000 on a mailing to its 2.8 million members, urging them to
write or call their lawmakers to express their opposition to the
Lautenberg bill. The gun group may send some 60,000 mailgrams from its
members to Capitol Hill.


All of this firepower is in response to a continuing push by gun control
advocates for tighter restrictions on gun-show sales. On Sept. 17, Handgun
Control Inc. launched a TV ad blitz in Washington and about a dozen other
markets to press for tougher gun control measures. The group will spend
about $100,000 on the first set of ads, which feature actresses Susan
Sarandon and Rosie O'Donnell. Other ads are likely to run before Congress
goes home.


Meanwhile, in mid-September, the U.S. Conference of Mayors brought
approximately 50 mayors and 30 police chiefs to Washington to press for
additional curbs on firearms. The American Jewish Congress has decided to
make gun control a top priority. The group, which has begun a drive to
collect 1 million signatures, is also trying to enlist other religious
groups to support its gun control campaign.


"I have every expectation," says James J. Baker, the NRA's chief
lobbyist, "that the proponents of restrictive gun control will
attempt to amend any appropriations vehicle that presents itself."
Baker points out that gun control advocates could use both an omnibus
appropriations bill or a continuing resolution to achieve their goals this
year. Such a prospect is keeping Baker busy.


Industry Tax Breaks


For weeks, it has been clear that President Clinton would veto the $792
billion tax cut package that Congress passed in August. But many
industries and tax cut proponents are prepared to keep fighting this year
for some key tax breaks.


One of the most significant business lobbying drives has been mounted to
keep the tax credit for research and development. A coalition headed by
Mark A. Weinberger, a partner at Washington Counsel, is taking the lead on
the issue. The coalition, which includes 53 trade associations and more
than 1,000 companies, depends heavily on the muscle of the
high-technology, pharmaceutical, chemical, and telecommuncations
industries to get its message across on Capitol Hill.


It wanted to make the R&D tax credit permanent, but Congress went with
a five-year extension. Weinberger said that five years has become
business's bottom line.


Meanwhile, financial services companies are championing a provision that
would renew a recently enacted tax benefit giving banks, insurers, and
financial institutions the same tax treatment on foreign income that other
U.S. businesses have long enjoyed. Under this extender, financial
institutions wouldn't have to pay U.S. taxes until they transfer foreign
income to their U.S. parent. The American Council of Life Insurance, the
Coalition of Service Industries, and the Securities Industry Association,
as well as Citigroup Inc., are pushing the measure.


Weinberger said that this year's tax benefit extenders "are likely to
be considered as a group." He and other lobbyists say that the
provisions could wind up in an omnibus appropriations bill, which is what
happened last year. The extenders could become part of a package to
sweeten a minimum-wage bill for business, as was the case in 1996, or they
could end up in a stand-alone bill, as happened in 1991.


Peter H. Stone

National Journal