Senator Warner, in responding to a constituent's inquiry about the "anti-fraud" provisions of the Kassebaum-Kennedy bill (H.R. 3103), attached a copy of an unsigned "rebuttal" to my May 30 article, which the Wall Street Journal entitled "Health Bill Would Shackle Doctors-Literally." The analysis was attributed to the Senate Special Committee on Aging. It accuses me of misrepresenting the legislation. Here is my response:

June 19, 1996

The Hon. John Warner,
U.S. Senate, Washington, D.C. 20510

Dear Senator Warner:

I have received a copy of your letter to Dr. Guanzon, dated June 7, regarding the Health Insurance "Reform" Act, to which you attached a "detailed rebuttal" to my article in the Wall Street Journal. In light of your express recognition of the need to implement revisions, I am hereby alerting you to several continuing problems.

First, your assurance that HCFA is "expected" to institute enforcement actions only against certain types of activity is meaningless. HCFA policy continually changes, and expectations about what it may or may not do is an improper basis for supporting legislation. The legislation may last for decades; HCFA policy and personnel change, at a minimum, every four years.

As to the unsigned "rebuttal" to my article (attributed to the Senate Special Committee on Aging), it is riddled with errors and unacceptable conclusions. In fact, each of the eight points is misguided.

• Prison terms for misstatements: See Sec. 544. The Senate version imposes prison terms for misstatements made "knowingly and willfully." The House version, however, omits the term "willfully." If enforcement of this statute is modeled on present enforcement policies, the "should have known" standard may be applied. And this has been taken to mean that the doctor should have read a paragraph buried in pages of irrelevancies. The phrase "by exercising reasonable diligence would have known," which is highly subjective, occurs multiple times in the House version.

  In many cases, patients do knowingly fail to disclose a preexisting condition, and that is currently grounds for denying coverage. But according to the plain language of this statute, this conduct is elevated to an offense punishable by five years in prison.

  The writer of the rebuttal has failed to give a citation for the "False Statements statute." If she means the False Claims Act, the conclusion that prosecutors must prove specific intent is not consistent with recent court decisions. See, e.g., United States vs. George O. Krizek and Blanka H. Krizek, Civ. No. 93-0054 (SS) (adopting presumption of fraud in imposing substantial penalties against physicians). In this instance, the initial amount of penalties was $80 million (or probably more than the physician's net income for 800 years of hard work). This was in addition to the destruction of his ability to earn a living, because of what ultimately proved to be about 11 questionable claims over six years. No proof of intent to defraud was ever produced (nor could it have been produced in this case.)

  Sect. 232 of the House version says "no proof of specific intent to defraud is required" to impose civil monetary penalties, thus codifying in the statute the lower standard of proof preferred by prosecutors.

  The Senate version does not contain a section on the clarification of the level of intent required.

• Rendering of "medically unnecessary services": Under present Medicare law, a practitioner's statutory obligations include the restriction of services to "medically necessary" care. "Incorrect coding" or "medically unnecessary services" are specifically named as sanctionable offenses in Section 231 of the House version. The Senate Act as passed also specifically penalizes the submission of claims for items that a person "knows or should know" are miscoded are "not medically necessary." These terms are not further defined. In Section 546 of the Senate version as passed, the term "intentionally misapplies [the assets of a health plan]" (a criminal offense) is also undefined. Maybe the Committee thinks this term doesn't include the rendering of a medically unnecessary service, but its opinion may carry little weight in court. Furthermore, in many instances the rendering of a service the physician suspects may be called "unnecessary" by an insurer (in a context of cost control) is both intentional and required by the physician's code of ethics.

• Failure to turn over a patient's records: This language is taken directly from the House version of the bill:

SEC. 245. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF HEALTH CARE OFFENSES.

(a) In General.--Chapter 73 of title 18, United States Code, is amended by adding at the end the following: ``Sec. 1518. Obstruction of criminal investigations of health care offenses ``(a) Whoever willfully prevents, obstructs, misleads, delays or attempts to prevent, obstruct, mislead, or delay the communication of information or records relating to a violation of a Federal health care offense to a criminal investigator shall be fined under this title or imprisoned not more than 5 years, or both. ``(b) As used in this section the term `criminal investigator' means any individual duly authorized by a department, agency, or armed force of the United States to conduct or engage in investigations for prosecutions for violations of health care offenses.''

In other words, this statute could subject a physician to criminal penalties for protecting the patient-physician relationship.

• Life imprisonment: The House bill specifically mentions life imprisonment. Is there any other instance in which a death purportedly resulting from a fraud perpetrated against a financial institution is punishable in the same way as first-degree murder? If a direct connection could be proved, why not just prosecute the crime as murder?

  Indeed, the legislation does give latitude to judges. However, responsible legislation sets limits on the ability of judges to impose Draconian sentences.

• $10,000 fines for mistakes: The law does indeed provide $10,000 in penalties for each instance of miscoding. The term "pattern" of miscoding is undefined. And what determines whether a doctor "should have known" about an incorrect code? This statute unconscionably makes physicians liable for fines that could mount to the earnings of many lifetimes, for what could constitute failure to monitor every action of a billing service or failure to read minutely every paragraph of the avalanche of paperwork from insurance carriers. Is there any individual in Congress who is willing to stand up in public and defend this provision as being "appropriate"?

  The Committee errs in stating that the monetary penalties apply to "federal programs"; they apply to any health plan. The Committee fails to acknowledge the fact that the Act constitutes an enormous expansion of the power of the federal government.

• Punishments for charity: Here is the definition of "remuneration" taken directly from Subtitle D, section 231:

Remuneration defined.--Section 1128A(i) (42 U.S.C. 1320a-7a(i)) is amended by adding at the end the following new paragraph: ``(6) The term `remuneration' includes the waiver of coinsurance and deductible amounts (or any part thereof), and transfers of items or services for free or for other than fair market value.''

The statute does NOT specify that the free services must be given as an inducement to get beneficiaries to order services for which Medicare or Medicaid may pay. If that is the intent of the statute, then the statute should make that plain. Perhaps prosecutors would not consider the use of a facility for charitable services to constitute misapplication of the assets of the health plan, and charity would not be punishable by prison. Shall we be reassured that tens of thousands of dollars in fines are the worst possible punishment for charity?
• Lifelong poverty and imprisonment: These are in the new "range of penalties" provided for violation of the Byzantine rules. Apparently, the committee believes these are justified because "beneficiaries must have some protection against incompetent or excessive medical care." They could actually be "protected" against receiving any medical care at all: what physician would take the risk? (There was a similar experiment in the time of Hammurabi, to which the Committee might refer.)

• Fines and seized property fund more prosecutions: The Committee refers to the Crime Victims Fund. The word "victim" does not occur in either House or Senate version. The term "Assets Forfeiture Fund" likewise does not appear in either House or Senate version. The Act creates a "Health Care Fraud and Abuse Control Account" in the Federal Hospital Insurance Trust Fund (see Sect. 501(b)). This fund receives the criminal fines, civil monetary penalties, and forfeited assets. These funds are used to "cover the costs (including equipment, salaries and benefits, and travel and training) of the administration and operation of the health care fraud and abuse program[.]" (Section 501(b)(3)(c), emphasis supplied.) In effect, the Act creates a "bounty system." Under such a system, prosecutors have an incentive to "find" fraud, even where none exists. In 1990, Prime Time Live documented prosecutorial abuses in the Office of the Inspector General of HHS as a result of such incentives; one innocent physician was driven to suicide.

  Some of the funds may be used to "pay for" the increased deductibility of health insurance by the self-employed. The May, 1996, issue of Managed Healthcare notes that the Act "increases penalties for defrauding government Medicare and Medicaid programs,...and legislators need it to raise some of the money required to fund expanded deductions."

  Clearly, the purpose to which the funds are put has nothing to do with the justice of seizing them in the first place. Imposing penalties vastly out of proportion to the offense is hardly a just method of funding a tax deduction.

In addition, our Association has made a number of positive suggestions for true reform, which would help to eliminate the incentives and opportunities for fraud.

Sincerely yours,

Jane M. Orient, M.D. Executive Director