Thomas A. Scully, the administrator of the federal Centers for Medicare & Medicaid Services (CMS), which runs both programs, is resigning effective December 15.

The announcement of Scully's resignation sparked controversy after it was revealed that while he was working on the Medicare bill that recently passed Congress, Scully was negotiating with five prospective employers that do business in the health care field. All of the possible employers '” law firms or investment houses -- represent corporate clients who had a major stake in the bill's outcome, the New York Times reports. One of the firms, Ropes & Gray, represents the Pharmaceutical Research and Manufacturers of America, the main lobby for the brand-name drug industry, which under the new Medicare law will reap billions in profits and be protected from having to lower drug prices.

Scully, who has served as CMS administrator since May 2001, said that he decided to leave the agency in May, but Bush administration officials requested that he remain to work on the Medicare bill. Scully received an ethics waiver from the Department of Health and Human Services (HHS) that allowed him to work on "matters of general applicability like the Medicare reform bill" and negotiate with potential new employers at the same time. The terms of the waiver have not been made public. HHS rules require that employees who have begun seeking jobs in the private sector must immediately recuse themselves from "any official matter" that involves the prospective employer, including legislative initiatives and proposed rules.

Gail E. Shearer, a health policy analyst at Consumers Union, told the New York Times that Scully's discussions with prospective employers were troubling. "At a time when there are questions about whether the Medicare legislation serves special interests or consumers, we want to know that our public officials have their minds totally focused on doing what's best for consumers," she said.

Scully, who currently earns a salary of $134,000 a year, reportedly could easily earn five times that in the private sector.

During his tenure at CMS, Scully promoted the idea that the Medicare system should rely more on market competition, a view now incorporated into the Medicare bill, and he also championed a Bush Administration proposal to give states far more control over the Medicaid program.

An acting CMS administrator will be named prior to December 15. According to news reports, the leading candidates to replace Scully are Leslie Norwalk, acting deputy administrator of CMS; Peter Urbanowicz, deputy general counsel at CMS; and William Winkenwerder, assistant secretary of health at the Department of Defense.

For the New York Times article on Scully's possible conflict of interest, click here. (Free registration required and article may no longer be available.)

For an article in the Washington Post on Scully's resignation, click here. (Article may no longer be available.)

For the CMS press release, click here.