Ahead of Nomination Hearing, Senator Warren Raises Ethics Concerns with Medicare and Social Security Public Trustee Nominee

Letter

Dear Mr. Kouzoukas

I write today regarding my concerns about conflicts of interest that would arise if you are
confirmed to serve as Public Trustee of the Social Security and Medicare trust funds. In particular,
your extensive corporate ties and ongoing financial interest in the work of the Trustees appear to
create irresolvable conflicts of interest.

You are scheduled to appear at a confirmation hearing before the Senate Finance Committee on
September 28, 2023.1 I intend to discuss these matters at that hearing and ask that you come
prepared to do so.

The Public Trustees' responsibilities include "report[ing] to the Congress each year on past and
future status [of the Medicare trust funds], report[ing] to the Congress immediately if the amount
in either trust fund is too small, [and] review[ing] policies followed in managing [the Medicare]
trust funds and recommend[ing] changes."2 Trustees play an obvious and significant role in

1 Senate Finance Committee, "Hearing to Consider the Nominations of Marjorie A. Rollinson, of Virginia, to be Chief Counsel for the Internal Revenue Service and an Assistant General Counsel in the Department of the Treasury, Patricia Hart Neuman, of the District of Columbia, to be a Member of the Board of Trustees of the Federal Supplementary Medical Insurance Trust Fund; to be a Member of the Board of Trustees of the Federal Hospital Insurance Trust Fund; to be a Member of the Board of Trustees of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, and Demetrios L. Kouzoukas, of Virginia, to be a Member of
the Board of Trustees of the Federal Supplementary Medical Insurance Trust Fund; to be a Member of the Board of Trustees of the Federal Hospital Insurance Trust Fund; to be a Member of the Board of Trustees of the Federal OldAge and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund," September 28, 2023, https://www.finance.senate.gov/hearings/hearing-to-consider-the-nominations-of-marjorie-a-rollinson-of-virginia-tobe-chief-counsel-for-the-internal-revenue-service-and-an-assistant-general-counsel-in-the-department-of-the-treasurypatricia-hart-neuman-of-the-district-of-columbia-to-be-a-member-of-the-board-of-trustees-of-the-federalsupplementary-medical-insurance-trust-fund-to-be-a-member-of-the-board-of-trustees-of-the-federal-hospitalinsurance-trust-fund-to-be-a-member-of-the-board-of-trustees-of-the-federal-old-age-and-survivors-insurance-trustfund-and-the-federal-disability-insurance-trust-fund-and-demetrios-l-kouzoukas-of-virginia-to-be-a-member-of-theboard-of-trustees-of-the-federal-supplementary-medical-insurance-trust-fund-to-be-a-member-of-the-board-oftrustees-of-the-federal-hospital-insurance-trust-fund-to-be-a-member-of-the-board-of-trustees-of-the-federal-old-ageand-survivors-insurance-trust-fund-and-the-federal-disability-insurance-trust-fund.
2 Social Security Administration, "Social Security/Medicare Trustees," https://www.ssa.gov/history/reports/trustees/historypt.html.

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protecting the Medicare program -- a role that, in your case, will be compromised by your
financial conflicts of interest.

If you are confirmed, one of your most important roles will be to assist in the preparation of the
annual Medicare Trustees Report -- a report essential to the public's knowledge and
understanding of the solvency of the Medicare trust funds.3 This report, and its projections
regarding the financial outlook of the trust funds, is an essential tool for Congress, the Centers for
Medicare and Medicaid Services (CMS), and the public to evaluate the health of the program and
the need for changes.4 However, your role on the board of directors for the for-profit health insurer
Clover Health5 -- a company that derives nearly all of its revenue from Medicare, including a
substantial share of its total revenue from Medicare Advantage6 -- gives you an inseparable
personal financial stake in the Trustees' Medicare projections and should disqualify you from the
role of Public Trustee.

The Public Trustee positions were created in 1983 to "represent the public in the report
development process," and help establish the underlying assumptions of the Medicare Trustees
Report,7 an important role in the context of the wide range of threats facing Medicare, including
well-documented overpayments to Medicare Advantage plans.8 Previous Medicare Trustees
Reports have repeatedly noted that costs for taxpayers were higher in Medicare Advantage than in
traditional Medicare, due in large part to "higher risk scores for beneficiaries" in these plans.9 This
should be an obvious concern for the Trustees and any other officials responsible for Medicare's
financial health.

But according to your personal financial disclosure, you have served on the Board of Directors of
Clover Health since July 2021.10 Clover Health is a provider of Medicare Advantage plans, and
Medicare Advantage premiums "account[] for a significant portion of [Clover's] [t]otal

3 Id.; Centers for Medicare & Medicaid Services, "Trustees Report & Trust Funds," https://www.cms.gov/dataresearch/statistics-trends-and-reports/trustees-report-trust-funds.
4 Government Accountability Office, "Social Security and Medicare: Improved Schedule Management Needed for More Timely Trust Fund Reports," July 2019, p. 3, https://www.finance.senate.gov/imo/media/doc/social security and medicare improved schedule management needed for more timely trust fund reports.pdf.
5 Clover Health, "Board of Directors," https://investors.cloverhealth.com/governance/board-of-directors.
6 Clover Health, "Clover Health Reports Strong Second Quarter 2023 Results; Highlights Improved Financial Performance and Guidance Ranges," press release, August 8, 2023, https://investors.cloverhealth.com/staticfiles/23b381f6-142e-4653-8834-4823d022adf2.
7 Government Accountability Office, "Social Security and Medicare: Improved Schedule Management Needed for More Timely Trust Fund Reports," July 2019, p. 4,
https://www.finance.senate.gov/imo/media/doc/social security and medicare improved schedule management needed for more timely trust fund reports.pdf.
8 USC Schaeffer Center, "Medicare Advantage Enrolls Lower-Spending People, Leading to Large Overpayments," Steven M. Lieberman, Paul Ginsburg, and Samuel Valdez, June 13, 2023, https://healthpolicy.usc.edu/research/maenrolls-lower-spending-people-leading-to-large-overpayments/.
9 Center for Medicare and Medicaid Services, "2018 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds," June 5, 2018, p. 26, https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-andreports/reportstrustfunds/downloads/tr2018.pdf.
10 Office of Government Ethics, Executive Branch Personnel Public Financial Disclosure Report (OGE Form 278e) for Demetrios Kouzoukas, January 5, 2023, [On File with the Office of U.S. Senator Elizabeth Warren].

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revenues."11 In 2022, Clover made more than $1 billion in revenue from Medicare Advantage,
which was approximately one-third of the company's total revenue for the year.12 Your disclosure
stated that not only do you actively hold more than 25,000 shares in the company (worth
approximately $25,000 as of today),13 but you plan to remain on Clover's Board for the duration
of your service in government.14 In 2022 alone, you received compensation of more than $100,000
from Clover Health for your role.15

As I have repeatedly warned, rampant profiteering in the Medicare Advantage program costs
American taxpayers billions of dollars each year, including through a practice called "upcoding,"
which involves adding diagnosis codes to a patient's medical record to make a patient appear
sicker on paper.16 Insurers can collect more money from the government to provide coverage for
sicker beneficiaries, and whatever the insurance company does not pay out in claims, it gets to
pocket.17 Clover Health faced an inquiry from the Department of Justice (DOJ) regarding this
exact practice.18 DOJ has alleged that Clover's proprietary software, Clover Assistant, is used to
"identify opportunities to increase a patient's Medicare risk score and "nudge' physicians to
update a patient's chronic conditions."19

In addition, a "significant" portion of Clover's revenue -- and its health as a business -- is
dependent on the federal government continuing to fund Medicare Advantage programs at current
or higher levels, presenting an inherent conflict of interest should you be confirmed as a Public
Trustee.20 In its most recent SEC filing, Clover Health warned that "changes or developments in
Medicare or the health insurance system and laws and regulations governing the health insurance
markets in the United States could materially adversely affect [Clover's] business, results of
operations, financial condition, and prospects."21 The Medicare Trustees Report informs and
impacts those decisions, which could directly affect Clover's bottom line.

11 Securities and Exchange Commission, "Clover Health Investments, Corp.," Form 10-K, pp. 58 and 39, https://www.sec.gov/ix?doc=/Archives/edgar/data/1 801170/000180117023000015/clov-20221231.htm.
12 Id.
13 Nasdaq, "Clover Health Investments, Corp. Class A Common Stock (CLOV)," accessed September 25, 2023, https://www.nasdaq.com/market-activity/stocks/clov.
14 Office of Government Ethics, Executive Branch Personnel Public Financial Disclosure Report (OGE Form 278e) for Demetrios Kouzoukas, January 5, 2023, [On File with the Office of U.S. Senator Elizabeth Warren].
15 Id.
16 NPR, "Medicare Advantage's cost to taxpayers has soared in recent years, research finds," Fred Schulte, November 11, 2021, https://www.npr.org/sections/healthshots/2021/11/11/1054281885/medicare-advantage-overchargesexploding.
17 Stat News, "Upcoding: one reason Medicare Advantage companies pay clinicians to make home health checkups," Robert M. Kaplan and Paul Tang, January 19, 2023, https://www.statnews.com/2023/01/19/rein-in-upcodingmedicare-advantage-companies/.
18 Fierce Healthcare, "Clover Health settles lawsuits alleging that it hid a federal probe from investors," Frank Diamond, June 23, 2023, https://www.fiercehealthcare.com/payers/clover-health-settles-lawsuits-alleging-it-hidfederal-probe-investors.
19 Becker's Payer Issues, "Clover Health settles accusations of misleading investors for $22M," Jakob Emerson, April 24, 2023, https://www.beckerspayer.com/payer/home-page/clover-health-settles-accusations-of-misleading-investorsfor-22m html.
20 Securities and Exchange Commission, "Clover Health Investments, Corp.," Form 10-K, p. 39,
https://www.sec.gov/ix?doc=/Archives/edgar/data/1 801170/000180117023000015/clov-20221231.htm.
21 Id.

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Federal ethics law bars any government official, "including a special Government employee" such
as a Public Trustee, from "participat[ing] personally and substantially" in any "particular matter in
which … he [or an] … organization in which he is serving as … director … has a financial
interest."22 Given your stock holdings and retainer from Clover Health, this would appear to
require recusal from many actions by the Trustees.23 These recusal requirements could be waived
-- but only if Clover's financial interest in the matter were "not so substantial as to be deemed
likely to affect the integrity" of your services.24 But Clover has a clear and direct financial interest
in the Trustees' projections and recommendations, so a recusal waiver would not be appropriate.
And recusing from these actions would gut your ability to contribute substantively to the Boards.
In short, it will be impossible for you to serve as a full member of the Boards of Trustees while
also complying with federal ethics law.

While I am supportive of President Biden's efforts to fill the roles of Public Trustees, which have
been vacant since 2015,25 I believe your service on Clover Health's Board of Directors presents an
unavoidable conflict of interest that would prevent you from effectively serving as a Public
Trustee. I ask that you come prepared to discuss these conflicts at your September 28, 2023
nomination hearing before the Senate Finance Committee.

Sincerely,
__________________

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