Harkin Calls For Investigation into South Carolina Governor’s Use of Taxpayer Dollars

WASHINGTON – Following revelations that South Carolina Governor Nikki Haley may have dictated the findings of a nonpartisan health care panel funded by taxpayer dollars, Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Tom Harkin (D-IA) today called for a federal investigation into whether Governor Haley exploited taxpayer dollars for political purposes.  In a letter sent today to Department of Health and Human Services Inspector General Daniel R. Levinson, Harkin requested that the IG determine whether Governor Haley improperly used a $1 million grant awarded to South Carolina for the purpose of planning their state health care exchange under the Affordable Care Act, and if so, whether the state should repay the taxpayers. 

“In authorizing exchange planning grants through the ACA, Congress intended that taxpayer funds would enable states, working in good faith, to carefully review insurance market options under state and federal law, including the ACA,” Harkin said in the letter.  “It was certainly not the intent for those taxpayer funds to be distributed for a predetermined and meaningless outcome.  Spending taxpayer funds to construct an ideologically-motivated façade not only violates Congress’s intent, but also the public’s trust in government. 

“In light of these facts, I ask that you examine whether the state of South Carolina met the requirements of federal law in spending its exchange planning grant and whether that grant should be returned to the federal government in full.”

The full text of the letter is below:

Dear Inspector General Levinson:

Over the last several weeks, evidence has come to my attention that raises serious concerns about whether the state of South Carolina made improper use of taxpayer funds provided under the Patient Protection and Affordable Care Act (“ACA”).  As you know, a centerpiece of the ACA’s historic expansion of insurance coverage is the Affordable Insurance Exchange, which the law establishes in every state by 2014.  An insurance exchange is a transparent marketplace where individuals and small businesses will be able to compare and purchase insurance plans.  Modeled on successful prior State efforts, the exchange is a “one-stop shop” that will provide access to coverage to millions of consumers currently locked out of the market. 

The ACA requires an exchange to be operational in every state by 2014 and financially self-sustaining by 2015.  In writing the law, Congress was mindful that states would need significant resources to implement this task, and those resources were provided in the form of “planning and establishment” grants under section 1311 of the Act.  The statute requires recipients of these grants to use them “for activities (including planning activities) related to establishing” an insurance exchange.

In its application for such a grant, state officials wrote that the funds would be used to “[d]etermine the feasibility of establishing a health insurance Exchange or Exchanges in this State in accordance with the provisions of the Affordable Care Act.”[1]In a March 10, 2011 executive order, Governor Nikki Haley established the nonpartisan South Carolina Health Planning Committee to “build trust and consensus among stakeholders” and to decide “whether or not the state should establish a health insurance exchange.”

Unfortunately, recently released emails reportedly demonstrate that Committee member and state Department of Health and Human Services Director Tony Keck was under clear instructions from the Governor regarding the outcome of the process.  A March 31 email from the Governor to Keck and other advisors reportedly reads:  “[t]he whole point of this commission should be to figure out how to opt out and how to avoid a federal takeover, NOT create a state exchange.”[2]  Indeed, the Committee’s final report, issued on December 5 and authored by Keck, recommended against creation of a state exchange.  As Committee member Frank Knapp reportedly stated, “Oh my God, we just threw $1 million away here.  This confirms this whole thing was an effort to justify the million-dollar grant, but the reality is they had no intention of even exploring whether the state should establish an exchange -- which is exactly what the grant called for.”[3]  The state’s latest quarterly report shows that it has spent almost $109,000 of the federal grant on the Committee’s activities.[4]

In authorizing exchange planning grants through the ACA, Congress intended that taxpayer funds would enable states, working in good faith, to carefully review insurance market options under state and federal law, including the ACA.  It was certainly not the intent for those taxpayer funds to be distributed for a predetermined and meaningless outcome.  Spending taxpayer funds to construct an ideologically-motivated façade not only violates Congress’s intent, but also the public’s trust in government.

In light of these facts, I ask that you examine whether the state of South Carolina met the requirements of federal law in spending its exchange planning grant and whether that grant should be returned to the federal government in full. 

Thank you for your consideration. If you have any questions regarding this request, please contact Beth Stein of my staff.

Sincerely,

Tom Harkin

Chairman, Senate HELP Committee

[1] The State’s full description of its intended uses of the grant can be found at page 118 of the Committee’s final report here: http://doi.sc.gov/Documents/ACA%20Grants/SCHPCFinalReport.pdf.

[2] SC Gov. Haley Dictated Health Panel Finding: Outcome Ordered Before Committee Met, Renee Dudley, Charleston Post and Courier, 12/14/2011, emails at media.charleston.net/2011/pdf/haley_exchange_emails121411.pdf

[3]Id.

[4] http://doi.sc.gov/Documents/ACA%20Grants/Budget_Exchnage_11.30.2011.pdf