Obama cabinet official describes 'unusual' request from Menendez

NEWARK, N.J. – As secretary for health and human services during the Obama administration, Kathleen Sebelius was responsible for 90,000 employees and a nearly $1 trillion budget.

So Sebelius thought it was strange when then-Senate Majority Leader Harry Reid summoned her to his Capitol Hill office in August 2012 to meet with Sen. Robert Menendez over what she understood to be a Medicare billing dispute involving a Florida doctor.

"I think it's the only time I was asked to discuss a practice involving a billing issue" involving the Center for Medicare and Medicaid Services (CMS), Sebelius testified in federal court here Tuesday. It was also unusual, she said, for Reid, "to ask me to come to a meeting involving another member of Congress."

Sebelius spent about 40 minutes recounting the experience for jurors Tuesday at Menendez's bribery trial, as prosecutors sought to show the extraordinary steps they say the senator took to advocate for the doctor, Salomon Melgen.

The former cabinet member and former Kansas governor is the most prominent prosecution witness to date in the five-week trial, one that could have political recriminations if the longtime New Jersey Democrat is convicted and forced to resign. What's unclear is if prosecutors will also call Reid, the former Nevada senator, to the witness stand.

Prosecutors say Menendez tried to influence the outcome of Melgen's $8.9 million billing dispute with Medicare as part of a bribery scheme. In exchange for this and other acts, Melgen lavished Menendez with political donations, free trips on his private jet, and vacations at exclusive resorts in the Dominican Republic, according to prosecutors.

Menendez and Melgen, a Florida eye doctor, say their longtime friendship disproves the government's bribery contention.

Melgen used a drug called Lucentis to treat patients with a certain eye disease. The doctor's billing dispute stemmed from a complicated dosing practice. Whereas Medicare's policy was to reimburse doctors for each vial of Lucentis that they bought, Melgen would use multiple doses from a single vial to treat several patients, and then charge Medicare for each use. In effect, that meant he was billing Medicare for vials he never bought, prosecutors say.

Medicare discovered the discrepancy in 2009 and demanded repayment of $8.9 million. At that point, prosecutors say, Menendez began to lobby federal officials. Marilyn Tavenner, the former administrator of CMS, testified that at one point Menendez wanted her to clarify Medicare policy so that doctors could use multiple doses from a single vial of medication.

A prosecutor asked whether such a change would have benefited Melgen. "Yes," Tavenner said.

Menendez first reached out to Sebelius in 2009, but HHS staff directed him to Jonathan Blum, a high-ranking official at CMS. A staffer in the department emailed Blum to note that Menendez didn't want Melgen to be "punished" when the doctor had "complied" with CMS regulations, according to evidence introduced Tuesday.

Blum testified he understood that to mean that Menendez "did not want Dr. Melgen to have to pay back" the $8.9 million.

Sebelius told jurors that over the course of their 30-minute meeting back in Reid's office in 2012, Menendez told her he thought a Medicare reimbursement policy was "unclear and unfair to providers."

Under cross-examination, Sebelius said she couldn't recall whether Melgen's name came up during the meeting. But she testified the discussion involved the policy that was "triggered" by Melgen's case.

Sebelius testified that she thought Menendez "wanted me to do something differently than my staff had previously done."

The meeting didn't go well, Sebelius said: "We came in with a dispute, and left with the same dispute after about 30 minutes."

Sebelius also testified that by the time she met with Menendez, Melgen had appealed his dispute to an outside entity. Therefore, she didn't have the authority to change the outcome.

Abbe Lowell, an attorney for Menendez, earlier asked Blum, whether he recalled Reid saying the reimbursement issue was "one of fairness." Blum testified it was possible Reid had said that.

Lowell also suggested that Menendez had advocated for prospective changes to Medicare policy – not retroactive ones that could resolve Melgen's billing dispute.