State Auditor Says Gruber Contract Raises Questions
State Auditor Doug Hoffer has concluded his inquiry into a state contract with MIT health care economist Jonathan Gruber. And he says he believes that Gruber likely overstated the number of hours a research assistant worked on the project.
The case is now headed for a review by the office of the attorney general.
The Shumlin administration hired Jonathan Gruber to determine the economic impacts of a single-payer health care system. Hoffer launched his inquiry into the matter after several legislators raised concerns about Gruber’s billing practices.
Hoffer says Gruber’s first two invoices to the state sought $100,000 for 1,000 hours of work by a single research assistant over a period of six weeks. But Hoffer says that means the person would had to have worked 14 hours a day for 70 straight days, a number Hoffer says he finds “implausible.”
While Hoffer says the Shumlin administration should have done more to hold Gruber to account, he says the questionable invoices cover only a portion of the contract term. And he says that all in all, taxpayers have gotten a good value for money spent on the contract.
“Both parties did not meet their obligations, but in terms of the money it looks like we’re going to end up okay,” Hoffer says. “We got what [administration officials] call a good product. And it’s going to be for very much less than what we contracted for.”
Hoffer says Gruber's first two invoices to the state sought $100,000 for 1,000 hours of work by a single research assistant over a period of six weeks. But Hoffer says that means the person would had to have worked 14 hours a day for 42 straight days, a number Hoffer says he finds "implausible."
Hoffer focused his inquiry on two invoices from Gruber, submitted to the state late last year, in which he sought $200,000 in payment for work performed over a ten-week timeframe. Hoffer says the bare bones invoices were identical, and that each billed 500 hours for a single research assistant, at $100 per hour, and 100 hours for Gruber, at $500 per hour.
Hoffer says the invoices didn’t meet the billing standards spelled out in the contract, which called for a more extensive description of the work performed. And he says he finds it hard to believe that one person could have racked up 1,000 hours in labor over a ten-week period.
Hoffer’s report also notes discrepancy between the amount Gruber billed for the research assistant, and the amount the assistant was paid.
Gruber provided Hoffer with the W-2 tax form that Gruber issued the research assistant for calendar year 2014, a pay period that includes the entirety of Gruber’s contract with the state. While Gruber billed the state $100,000 for work performed by that research assistant, he paid the person only $32,000 in wages for the entire year. That sum, according to Gruber, included payment for work on other, non-Vermont projects as well.
“Unfortunately there was not documentation with regard to the hours reported for the research assistant,” Hoffer says. “And Dr. Gruber indicated … that there basically was a verbal arrangement between the two of them.”
The state’s contract with Gruber initially called for a maximum payout of $400,000. That contract was amended, however, when Gruber, who helped design the federal Affordable Care Act, came under fire nationally for comments he made about “the stupidity of the American voter.”
The state has paid the first two invoices, minus a standard 20-percent “hold back,” meaning the state has paid Gruber only about $160,000 this far.
"Both parties did not meet their obligations, but in terms of the money it looks like we're going to end up okay." - State Auditor Doug Hoffer
Hoffer says there’s nothing to indicate the state won’t get what it paid for. He says administration officials – Director of Health Care Reform Robin Lunge and her deputy, Michael Costa – worked closely with Gruber and his research assistant during the period the contract was in effect. Hoffer says the administration gave every indication that Gruber was putting in the time that his invoices claimed.
“It’s not as if this is someone who had had no contact and just popped up with an invoice for a lot of money,” Hoffer says. “(Administration officials) knew what was going on, and they knew the product that had been provided to them.”
Hoffer says the administration by all accounts was also satisfied with the “quality and quantity” of the work.
Nonetheless, Hoffer says the state should have held Gruber to higher invoicing standards than it did.
The auditor's report was submitted to Attorney General Bill Sorrell, according to standard operating procedure, according to Hoffer. Sorrell says he takes Hoffer’s report seriously, and that his office will conduct its own inquiry.
“We’ll see what reliable, compelling, convincing evidence is out there to demonstrate the work for which the state’s been billed was in fact performed,” Sorrell says.
The state will withhold any future payments to Gruber - the maximum remaining payout on the contract is $120,000 - until Gruber provides "more detailed invoices," according to Administration Secretary Justin Johnson.
In a letter to Hoffer, Administration Secretary Justin Johnson says the state was satisfied with Gruber’s first two invoices precisely because Lunge and Costa had been working closely enough with the MIT economist to be certain he was performing the work he claimed he was.
But Johnson says the state will withhold any future payments to Gruber – the maximum remaining payout on the contract is $120,000 – until Gruber provides “more detailed invoices.”
Johnson also told Hoffer that he has sent notice throughout his agency to “remind all relevant staff of the controls surrounding all contracts” to ensure “proper levels of accountability … going forward.”
Hoffer says he’ll leave questions of civil infractions to the attorney general’s office. But he says that for him, the case above indicates the need for sounder contracting procedures in the future.
“It’s not the kind of thing that to me should lead to sanctions,” Hoffer says. “It’s the kind of thing that leads to a conversation about, 'Hey, we can do better.' And the administration should be a model of best practices.”
This story was edited at 8:36 a.m. on 2/24/15