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A Project of The Annenberg Public Policy Center

Disconnecting the Dots in Arkansas

A TV ad says Rep. Tom Cotton was “paid handsomely working for insurance companies” before joining Congress and now wants to transform Medicare in ways that would benefit the industry at the expense of seniors. But there’s no evidence Cotton did work for insurers. His only established connection to the industry involved consulting work for a federal agency.

The Senate Majority PAC ad also makes an outdated claim when it says Cotton, who’s running for Senate in Arkansas, wants to “end Medicare’s guarantee,” costing seniors “$6,000 more a year.” That’s based on an old budget plan proposed by Rep. Paul Ryan in 2011 and supported by Cotton as a candidate that year. But that plan has been superseded by more current budget plans offered by Ryan — and supported by Cotton — and the $6,000 figure is no longer accurate.

Senate Majority PAC, a group dedicated to electing Democrats to the Senate, purports to “connect the dots” on Cotton’s career. It paints him as someone who is trying to help out his buddies in the insurance industry by supporting the Ryan budget. However, there is a disconnect between the claims and the facts.

‘Paid Handsomely’ for What?

The ad, “Connect the Dots,” was released on March 27 as part of the Democratic PAC’s push to counter advertising by Americans for Prosperity, a conservative group with ties to Charles and David Koch. Americans for Prosperity has already spent nearly $2 million on ads in the Arkansas Senate race attacking Democratic Sen. Mark Pryor.

The Cook Political Report rates the race a toss-up, making it an important battleground for both parties in the fight to control the Senate.

Here’s the text of the ad:

Narrator: Corporate special interests are spending millions to smear Mark Pryor and elect Tom Cotton. Why? Before Congress, Cotton got paid handsomely working for insurance companies and corporate interests. Now, Cotton wants to end Medicare’s guarantee, giving billions in profits to insurance companies while costing seniors [$]6,000 more a year. The real Tom Cotton: a politician we just can’t trust.

So, what exactly did Cotton do before running for Congress in 2012? After getting a law degree at Harvard University, Cotton clerked for a federal judge and spent some time practicing law. Then, he enlisted in the U.S. Army. After leaving the Army, he got a job at McKinsey & Co., a global management consultant firm, and worked there up to the time he launched his congressional campaign. So, were any of his clients insurance companies when he was there?

We checked the ad’s citations, but none of the articles or documents listed mentioned Cotton’s involvement with the insurance industry. When we emailed Senate Majority PAC spokesman Ty Matsdorf, he directed us to Rep. Cotton’s Facebook “about” page.

Matsdorf, March 31: In Congressman Cotton’s biography, seen here https://www.facebook.com/TomCottonAR/info, he clearly lists the insurance industry as one of the many companies he advised as a businessman.

In regards to his specific duties working for insurance companies, that is a question that should and must be directed and answered by Congressman Cotton’s campaign, not the least of which because he is required by law to list them on his financial disclosure form.

The pertinent section on Cotton’s Facebook page reads, “Following his active-duty service, Tom worked as a management consultant for McKinsey and Company. As a businessman, Tom has advised some of America’s most respected companies on business strategy, operations, finance, and marketing. His industry experience includes agribusiness, health care, oil and gas, food processing, insurance, and aerospace.”

So, Matsdorf is wrong when he says the Facebook post “clearly lists the insurance industry as one of the many companies he advised as a businessman.” It says “his industry experience includes … insurance.” What is that industry experience?

We took Matsdorf’s advice and looked at Cotton’s financial disclosure form and asked his campaign about his work prior to entering Congress. Cotton’s financial disclosure form for 2011, the year he left McKinsey to run for office, lists his salary from McKinsey as $84,999. Cotton also received honorariums totaling $4,000 from Harvard University and the Hudson Institute. However, this didn’t tell us anything about his clients, or what accounted for the insurance industry experience listed on his Facebook page.

Cotton campaign spokesman David Ray pointed us to a story in the Daily Caller that quoted Priam Dutta, a colleague of Cotton’s at McKinsey. Dutta told the Daily Caller that he was Cotton’s team leader on a project for the Federal Housing Administration, and that that had been Cotton’s only insurance industry experience. A spokesperson for McKinsey & Co. confirmed for us that Cotton did not do any work for insurance companies while at the firm.

Ray also provided us with a McKinsey Center for Government report called “Transforming government performance through lean management.” The report features a summary of the FHA project in which Cotton participated (see page 10). Cotton worked on behalf of the Office of Multifamily Housing Programs, a part of the FHA which “provides $80 billion worth of insurance to lenders who finance apartment buildings.” His McKinsey team helped the Office of Multifamily Housing Programs learn to better manage its backlog.

It is against McKinsey policy to provide details about the project, such as how much the agency was paid for its work, or the extent of Cotton’s involvement. However, the insinuation that Cotton’s time at McKinsey gave him ties to the insurance industry that are now influencing his views on Medicare is simply misplaced. Any money that McKinsey made from the FHA project would have ultimately come from the federal government, not from private insurance companies.

It’s worth noting that Pryor so far has received a bit more in direct campaign contributions from the insurance industry — $89,000 — than Cotton has — $66,905, according to the Center for Responsive Politics.

Digging up the Old Ryan Budget

The Senate Majority PAC ad also claims that Cotton “wants to end Medicare’s guarantee, giving billions in profits to insurance companies while costing seniors [$]6,000 more a year.” These claims are based on Cotton’s support in 2011 for Ryan’s “Path to Prosperity” budget plan, which included dramatic changes to the Medicare system. Cotton was only a candidate at the time. He won his congressional seat in the November 2012 election, so he never had a chance to vote on the plan this ad cites. More important, Ryan’s recent budget plans — also supported by Cotton — moderated the original Medicare proposal.

We have written a lot about Democrats’ claims that the 2011 Ryan budget “ends Medicare.” In fact, it was one of our “Whoppers of 2011.” It also showed up during the 2012 campaign, despite the fact that the Medicare plan in question had already been replaced. Every budget Ryan has created following his 2011 proposal has included a traditional Medicare option along with premium-support payments (like a subsidy) for seniors to buy private insurance plans. Ryan’s most recent budget isn’t much different in this respect. In fact, it may be more generous than any Medicare plan Ryan has put forth during his time as chairman of the House Budget Committee. Loren Adler, a health policy expert at the Committee for a Responsible Federal Budget, said in an email to Talking Points Memo:

Adler, April 3: Under the cap formulation in Ryan’s previous budgets beneficiaries would have been liable for increased premiums if Medicare per beneficiary costs rose faster than GDP+0.5% annually to make up the difference, which could have led to beneficiaries paying a higher percentage of Medicare program costs, on average, over time.

Ryan’s current budget plan eliminates this cap, and ties premium-support payments to insurers’ average bid for a region. The House Budget Committee’s new budget report says this change was made in light of a September 2013 CBO report on premium-support payment options for Medicare. The report found that when premium-support payments were tied to the average bid for a region, both the federal government and beneficiaries would see savings.

As for the $6,000 increase in costs for seniors, this was accurate of the 2011 Ryan budget, based on what a CBO analysis concluded 65-year-olds would pay 10 years from now. None of Ryan’s plans have advocated changing the Medicare system for those currently 65 and older. His most recent one is no different. The changes would only affect those turning 65 on or after Jan. 1, 2024. We will have to wait and see what the CBO has to say about Ryan’s latest Medicare proposal to know what, if any, cost increases would follow.

The bottom line is that the Senate Majority PAC used both false and outdated information in its attack on Cotton.

— Madeleine Stevens