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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
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Volume 48, No. 4 April 1992
PHYSICIANS' STATUS TAX UPHELD 4 TO
In a decision just handed down by the Florida Supreme
Court in the case of Coy v. NICA (see p. 3), the Court agreed
that the assessment of physicians to support a ``malpractice
reform'' scheme constitutes a tax.
Furthermore, it is, in the words of the dissenting judges, a
``status tax,'' imposed on physicians because of their membership
in a class. The class is not a ``suspect'' class within the
meaning of the equal protection provision of the Florida
constitution. (A ``suspect'' class is any group that has been
the traditional target of ``irrational, unfair, and unlawful
discrimination.'') Therefore, to determine the constitutionality
of the status tax, the test of ``rational basis'' is the only one
that applies. This means that although every presumption in
favor of the validity of the tax is indulged, the state must
proceed on a rational basis and may not resort to a
classification that is ``palpably arbitrary.''
Four of seven judges on the Supreme Court panel felt that it
was rational to impose a discriminatory tax on physicians who do
not practice obstetrics, even if they don't have hospital
privileges. The judges reasoned that a medical malpractice
crisis that disrupted obstetrical practice reduced referrals to
physicians and caused the deterioration of relationships between
physicians and the general public. Furthermore, the crisis put a
strain on hospitals and made them less pleasant places in which
``Because health care services are delivered by a team of
providers, all of whom interact and depend upon one another, a
breakdown in one area of service impacts the other areas,'' wrote
Nevertheless, only one member of the ``team''-the physician
who does not deliver babies-is singled out to pay the
tax. Apparently, four judges believe that the primary goal of
hospitals is to benefit physicians, not patients, nurses, ad-
ministrators, lawyers, or the general public.
The Next Step
If physicians can be taxed to pay for a patient compensation
scheme intended to increase the availability of obstetrical
services, why shouldn't they be taxed to provide any and all
medical care? According to the logic in the Florida Supreme
Court's majority opinion, physicians can be forced to bear the
entire cost of a scheme simply because they are believed to
derive greater benefit from the scheme than the general public or
other medical personnel.
The Virginia legislature has introduced a law to tax
physicians to pay part of the cost of the Medicaid program. The
tax would be a percentage of practice gross income (before any
overhead expenses are deducted).
The introduction of this law followed a unanimous decision
of the Virginia Supreme Court upholding a law similar to the
Florida Birth-Related Neurological Injury Compensaton Act. The
Virginia decision will not be contested.
Many states have passed or are considering laws that tax
physicians indirectly by limitations on their fees. Two examples
are West Virginia (see AAPS News June, 1991) and
Pennsylvania (see April 1991). Recently, the Ohio House of
Representatives passed a law that not only prohibits balance
billing of Medicare beneficiaries, but also forces Ohio physi-
cians to treat enrollees of a state high-risk coverage plan, for
minimal fees, under threat of fines. (H.B. 478 is in a Senate
committee at the time of this writing.)
The dissenters in the Florida Supreme Court recognize the
implications of allowing the legislature to impose status taxes
without proper reasons: ``Such a precedent would make equal
protection an illusory right....Equal protection means that
similarly situated people are treated similarly by the law and
that, at a minimum, irrational distinctions may not be drawn.''
The three dissenting judges recommended quashing the
opinion, holding the relevant statutes unconstitutional, and
remanding the issue to the trial court to determine whether and
to what extent the state owes refunds to the petitioners.
A petition for rehearing has been filed. An appeal to the
US Supreme Court will be considered if the petition is denied.
On Access to the Courts
Democrat Harris Wofford is thought to have won a Senate seat
in Pennsylvania because he said: ``If a criminal has a right to
a lawyer, working Americans have a right to a doctor.'' We have a
question: Do doctors have a right to a day in court?
According to the Medicare statute as amended:
There shall be no administrative or judicial
(A) the determination of the adjusted historical payment
(B) the determination of relative values and relative value
(C) the determination of conversion factors...;
(D) the establishment of geographic adjustment factors...;
(E) the establishment of the system for the coding of
physicians' services under this section (See 42 USCS
The statute makes no exceptions even for situations in which
the allowed fee for a service is suddenly reduced to zero.
Although courts have upheld certain statutory restrictions on
judicial review, no court has ever addressed a total statutory
denial of judicial and administrative review.
[From a letter to the N.C. Congressional delegation]
The congressional promise in 1965 was medical care for the
elderly....This promise is resulting in a distortion and a
perversion of some basic constitutional values.
Physicians have rights to life, liberty, and property as
does any citizen in this country. The current system of the Re-
source-Based Relative Value Scale is an active enslavement of the
physician labor in this country. It is the result of a
promise...that apparently cannot be kept without continued
coercion and oppression of...other citizens....
I request that you free the American citizen from participa-
tion in the Medicare system....I believe that I should have the
right to practice medicine in a free economic system....
It is a joke to tell me, as a thoracic and vascular surgeon,
that I can ``do something else.''
One additional comment: the concept is ``medical care'' and
not ``health care.'' The use of the term health care is a
delusion. Health can only be obtained through the will of God or
through your own personal actions in taking care of it yourself.
Medical care, however, is a service that is offered by other
people. I believe the American public needs to know that they
are asking for the services of other people when they discuss
``universal access'' to medical care.
James P. Weaver, MD, Durham, NC
From Positive ``Rights'' to Affirmative Obligations
The right to have an abortion was at first understood to
mean the removal of governmental impediments. Now,``rights''
imply ``access,'' the ability to have something accomplished
rapidly, conveniently, and cheaply. The original meaning of a
right-``Congress shall pass no law''-has been inverted.
Although abortion is legal, practical impediments remain, as
outlined in Resolution 9117 passed by the American Public Health
Association (APHA) in 1991. America's capacity to provide
abortions is shrinking, especially in rural areas; 83% of the
counties in the US have no abortion provider. From 1976 to 1985,
there was a 22% decline in the number of residencies in
obstetrics and gynecology that offer training in first-trimester
abortion procedures, and half of these programs offer such
training ``only as an option and not as a mandatory part of
APHA reaffirmed its commitment to achieve ``accessible,
affordable, and safe abortion services for all women who need and
choose them, regardless of their geographic location or economic
means.'' It recommends that ``all residency training programs in
obstetrics and gynecology promote the integration of abortion
care as a required component of residency training.'' A joint
symposium of the National Abortion Federation and the American
College of Obstetricians and Gynecologists made a similar
statement. Also recommended: ``international training
fellowships to expose physicians to the consequences of
insufficient access to safe abortion.''
The University of Washington has developed a joint training
program with Planned Parenthood. ``Those with religious
objections will not be required to learn the procedure but will
be required to participate in the counseling training to learn to
speak sensitively and nonjudgmentally to women about their
options.'' Others will do about 36 abortions in Planned
Parenthood ambulatory facilities.
Sharply Divided Florida Supreme Court Upholds
Constitutionality of Physician Tax
On February 13, 1992, the Florida Supreme Court upheld the
constitutionality of the Florida Birth-Related Neurological
Injury Compensation Act (NICA) in a four-to-three decision.
The case, James F. Coy, MD, Sidney R. Steinberg, MD and
Claud A. Boyd, Jr., MD, v. Florida Birth-Related Neurological
Injury Compensation Plan, et al., will undoubtedly gain national
attention as states continue to debate financing schemes
underlying proposed ``medical malpractice reform.''
Plaintiffs have filed a Motion for Rehearing, arguing that
the Supreme Court of Florida misapprehended both controlling
Florida constitutional precedents and the facts of the modern
NICA was enacted in 1988 as part of a package of medical
malpractice reforms. The statute essentially creates a no-fault
insurance system for obstetricians to insure against certain
types of birth injuries. Florida obstetricians are not required
to join the plan or to pay an annual assessment, but the no-fault
insurance is available only if the obstetrician elects to join.
In contrast, the statute forces all Florida-licensed physicians
to pay an annual fee of $250. Further, while Florida-licensed
hospitals that deliver babies are required to pay an annual tax
of $50 per infant delivered, hospitals that do not provide
obstetrical care are exempt from the tax. Other medical
professionals who do not hold a degree of M.D. or D.O. are not
taxed under the statute.
To date, only 535 Florida-licensed obstetricians have
elected to join the no-fault plan, while over 40,000 Florida-
licensed physicians have been forced to pay the annual tax
assessment to fund the plan.
The statute gives the Florida Commissioner of Insurance the
power to raise the annual taxes on physicians who do not practice
obstetrics in order to keep the no-fault plan on an ``actuarially
The plaintiffs alleged that the financing scheme of the
statute discriminates against physicians as a class, in violation
of the Equal Protection and Due Process Clauses of the US and
Florida Constitutions, as well as the Privileges and Immunities
Clause of the Fourteenth Amendment to the US Constitution.
Additionally, the plaintiffs claim that the statute
unconstitutionally delegates the power to tax to the Florida
Commissioner of Insurance, in violation of Article VII, Section
1, of the Florida Constitution.
The trial court and the Florida District Court of Appeals
upheld the constitutionality of the statute. The Supreme Court
of Florida granted the plaintiffs' Motion for Discretionary
Review, and after oral arguments were held, deliberated 9 months
before rendering an opinion. The narrow majority of the Court
affirmed the rulings of the lower courts, relying almost
exclusively on the ``factual'' findings of the trial court.
The majority held that the tax classification was not
arbitrary (and thus not unconstitutional) because it believed
that ``all physicians, regardless of whether they practice
obstetrics, derive a benefit from [the] legislation that is
greater in degree than that derived by the general public.'' The
Court also concluded that ``actuarial soundness'' was a
meaningful standard to guide the Florida Commissioner of
Insurance in making future tax increases, and that therefore the
legislative scheme did not involve an unconstitutional delegation
of the power to tax.
Justice Kogan, joined by Justice Barkett and Chief Justice
Shaw, filed a strong dissent. The dissenters observed:
[T]he state has enacted a program
designed in principle to benefit the public
as a whole, but that effectively benefits
only obstetricians who elect to join the plan
and those persons who suffer losses caused by
certain birth-related injuries attributable
to the member-obstetricians. While this is a
laudable purpose, I can find no rational
basis for imposing much of the burden of this
program primarily on physicians as a
class....I think this particularly is true in
light of the fact that obstetricians are not
obliged to join the plan, and many have
exercised this option.
The dissenters also were troubled by the imposition of a
``status tax'' on physicians to pay for insurance against certain
birth-related injuries. Such a tax is no different, in their
opinion, from ``taxing only schoolteachers to pay for new
educational facilities, or taxing only licensed psychologists to
pay for public mental-health care, or taxing only policemen to
pay for victims' compensation programs.''
The implications of allowing the decision to stand, in the
dissenters' view, was to encourage society to shift its most
onerous tax burdens exclusively onto those minorities or groups
that lack a sufficient voice in the state capital. Although the
Florida Constitution does permit some inequities in taxation, the
dissenters believed that it would not tolerate the ``gross
inequity apparent in the present case.''
Motion for Rehearing
In view of the strong dissent and the majority's extensive
reliance on the ``factual findings'' of the trial court,
plaintiffs have filed a Motion for Rehearing. This motion states
that the Florida Supreme Court misapprehended points of law and
First, the Court employed a tautological approach to Equal
Protection analysis, which sharply departs from numerous prior
decisions of the Florida appellate courts. Essentially, the
Motion argues that the Equal Protection standard employed by the
majority virtually immunizes any state classification from
constitutional scrutiny, whereas under prior precedents, the
Court has nullified statutory classifications on state Equal
Second, the Motion argues that the trial court's ``findings
of fact'' were based solely on post hoc rationalizations
of government witnesses who favored the legislation.
Finally, the Motion argues that the Court completely
overlooked the plaintiff's assertion that the statutory scheme
fails to provide an apportionment mechanism setting forth how
increases in future tax assessments will be distributed among
those covered by the statute. This will lead to unfairness and
favoritism in the apportionment of future tax burdens by the
Florida Commissioner of Insurance.
The State of Florida has ten days to file a response to the
Motion for Rehearing and the Court's decision will not become
final until the Motion is acted upon by the Court.
AAPS is pleased to welcome the Richland County Medical
Society, which joined us as an association, along with the
following new individual members: Drs. Bolivar Albainy of Parma
Heights, OH; Saroj A. Bavishi of Olathe, KS; Martin C. Carr of
San Francisco, CA; Earl Dipirro of Teaneck, NJ; Donald A. Dyer of
Pocatello, ID; Charles Goodno of Morehead City, NC; Ivan Halfond
of Centreville, VA; Paul A. Hein, Jr. of Ballwin, MO; Terry J
Keller of Boise, ID; Keith R. Koepke of Parma Heights, OH; J.M.
Lackey of Pocatello, ID; Andrew W. McRoberts of Pocatello, ID;
Daniel L. Meges of Parma Heights, OH; Paul Megibow of Tenafly,
NJ; Thomas Mueller of Everett, WA; Carl N. Reilly of Port
Charlotte, FL; J. Bruce Resnik of Parma Heights, OH; Charles A.
Rush, Jr. of Ft. Worth, TX; Pete Spinella of Atlanta, GA; Timothy
D. Steege of Mercer Is, WA; Ronald Surowitz of Jupiter, FL; David
T. Sward of Mountain Home, AR; Gerald Volcheck of Essex, CT; Gary
Webb of Dallas, TX; Charles W. Williams of Parma Heights, OH; and
Kim Brian Wright of Seattle, WA.
New student members are: Carol Grant of Piscataway, NJ;
Sadiasept Guillont of Ponce, PR; Chip Hardy of Bloomington, IN;
Chris Hosfeld of Columbus, OH; Genevieve Neal of Piscataway, NJ;
Jos‚ O. Santiago of Ponce, PR; and Thomas M. Yunger, Jr. of
Letters to the Editor
[From letters to Congressmen]
Dr. Bob Moffit's Feb. 6, 1992 Heritage Backgrounder No. 878
(``Consumer Choice in Health: Learning from the Federal Employee
Health Benefits Program'') is a real eye-opener for me. Somebody
needs to answer his fundamental question: How come every
Medicare beneficiary is assumed to be a dope and need the
``protection'' of the Federal Government, while every one of the
9,000,000-plus Federal employees, down to the latrine cleaner in
Leavenworth prison, is assumed to have the smarts to choose
between dozens of competing health plans? Why don't Medicare
citizens have the same options?
Robert Cihak, MD, Aberdeen, WA
While old oligarchies are being dismantled in the spirit of
freedom, the US government is creating a shadow totalitarian
regime within itself....Individuals are only important in their
ability to add to the general welfare of the state. Like the old
USSR, the Medicare Socialist Republic ... makes rules [by decree]
based on what is good for everybody and demands adherence to
policy [under threat of] stiff penalties....I can see some
operative armed with a stopwatch coming to a physician's
office to assure that the doctor is face to face with the
patient for the defined interval, measured in 15-minute
[How have the bureaucrats managed to foist these new
guidelines on us?] The first reason was our individual and
collective cooperation with their efforts....The second factor
was the long years of preparation...in the form of assignment of
fees and the Berlin Wall (the MAAC). But it took the Big Lie to
seal the deal. By assuring physicians that direct patient
cognitive services were undervalued and would be rewarded,
physicians were split by personal, pocketbook issues.
We have reached the Rubicon....
David A. Westerbrock, MD, FACP, Dayton, OH
The medical profession is a unique wagon train. It is the
only wagon train going across America that, when circled to
protect itself, tends to shoot inward.
Miguel A. Faria, Jr., MD, Macon, GA
The fees determined under the Relative Value Scale are
totally unrealistic to compensate for the Evaluation and
Management services that we provide our patients. If the rate
does not increase significantly, we will be forced to stop
providing services to Medicare patients. (This 5% of our
patients consumes 20% of the physician's productive time.)
Except for employee benefits, our costs are outside our control.
About 40% of our cost is billing, including over 40 hours a year
in seminar attendance to learn insurance regulations. One
alternative is to close our solo medical practice in the inner
city neighborhood and join a group practice in the suburbs. This
would leave the neighborhood without an internist, but we guess
this does not bother the Medicare program.
Wanda Velez-Ruiz, MD, Detroit, MI
From Organized Medicine
``The underlying issue cannot be physician rights, per se;
rather, it is the balance between rights and the commonweal.''
C. Burns Roehrig, MD, Internist 9/91
``...[S]ocial conflicts, protest marches, negotiations, job
actions-all of these techniques are a matter of reallocation or
attempts to influence power to determine primarily how-not if-
government will intrude in the fabric of society.''
Eugene S. Osgrod II, MD, op.cit.
``With luck, we will never go back. Instead, we must
further refine [the RVS], which always has had a great potential
for unifying the profession in a way that nothing else can.''
Lonnie Bristow, MD, AMA Trustee
Legislative Alert AAPS Report from Washington
The Bush Administration's ``Health Care'' Plan. As
predicted in our last Alert, the Bush Administration plan
emphasizes tax credits or vouchers. The basic elements are as
- For low-income Americans, a ``transferable'' medical in-
surance voucher of $3,750 for a family of four that is large
enough to purchase a ``basic'' health insurance package.
- For middle-class families without employer-provided
medical insurance, a tax deduction of up to $3,750 (a benefit of
about $1,050). (``Middle class'' means a gross income of less
than $80,000 per year.)
- State-based insurance market reform. This would require
insurers to sell insurance to all employers requesting it.
Coverage would be guaranteed and renewable for employees, with
limits on preexisting medical conditions removed. Health
Insurance Networks (HINS) would be promoted, to create pools for
- Regulatory reforms to ``streamline'' insurance paperwork.
The Bush plan envisions a uniform system of claims processing for
all insurance firms.
- Malpractice reform. States would be encouraged to
eliminate ``joint and several'' liability for noneconomic
damages; to place caps on noneconomic damages; to eliminate rules
that allow ``double recovery''; and to promote pre-trial
alternatives for the settlement of liability issues.
- More spending for community health centers, migrant health
centers, and the National Health Service Corps.
Response on Capitol Hill. Liberal Democrats have
dismissed the Bush plan as a weak effort that does not control
costs. By ``cost control,'' they normally mean some system of
rigid price controls on medical services. Conservative
Republicans generally applaud the use of tax credits and vouchers
as a step in the right direction, but ask how it is going to be
Capitol Hill conservatives wonder why the Bush voucher is so
generous. Last year, the average employer contribution to
employee health insurance was approximately $3,600. Should the
taxpayer have to subsidize the average cost of already overly
expensive employer-based insurance to guarantee a basic level of
coverage for low-income Americans?
The estimated cost of the Bush tax credit/voucher plan,
which would apply to over 90 million Americans, is $35
billion in the first year alone. This is not ``budget
neutral.'' The Administration claims, however, that billions will
be saved through a deliberate promotion of managed care in
private plans as well as Medicare and Medicaid, in streamlining
claims processing, and in promoting competition through health
insurance networks. Democrats and many Republicans are not
Beyond the budget issue, conservative reformers are pleased
that the Administration is willing to make a fundamental change
in the tax treatment of health benefits. Right now, virtually all
of the tax breaks for health insurance are directed toward
employer-provided health benefits. Additionally, conservatives
are pleased that the President has directly and vigorously
attacked Democratic proposals for ``national health insurance''
(pointing to costs of from $250 to $500 billion per year in
new taxes) and the concept of mandatory insurance or ``play
Already, there has been a notable change in the mood on
Capitol Hill. While 18 months ago, socialized medicine seemed
inevitable, nobody thinks that it is even likely now. Canada's
reputation as a model for America fades with each passing day,
especially in light of the latest news that the Canadians are
also struggling with soaring costs and cutbacks in services.
Moreover, the attack on ``play or pay'' by critics relying on the
gold-standard statistical research of the predominantly liberal
Urban Institute, a prestigious Washington-based think tank, is
daily damaging mandatory insurance (see AAPS News
Supplement, March 1992.)
An Exercise in ``Cold Feet''? The Bush plan stops far
short of engineering the critical changes in the federal tax code
that could bring real reform to fruition. That is why the Wall
Street Journal labeled the Bush plan a ``pale imitation'' of the
Heritage Foundation proposal, and why liberal New Republic
champion Michael Kinsley labeled it another exercise in ``cold
feet,'' strong on rhetoric but weak on substance.
Bush's avoidance of the issue of the basic tax breaks that
undergird the employer-based third-party payment system was not
due to failure to discuss the options. HHS Secretary Louis
Sullivan and his new Undersecretary Kevin Moley, formerly a
Reagan appointee at HHS, have strongly favored addressing the tax
treatment of medical benefits. At the Office of Management and
Budget (OMB), Tom Scully, an aide to Richard Darman, has also
pointed out the need to introduce market efficiencies.
Conservative critics of the current system were fighting within
the Administration for a fundamental change up to the last
minute, just before showtime on February 6, and were even backed
by OMB Director Richard Darman, an unlikely ally of beleaguered
conservatives in the White House and HHS. But conservative forces
in the Administration were overridden at the last minute by Hill
Republicans, led by House Ways and Means heavyweight Bill Gradi-
son of Ohio.
Wilensky Leaving HHS. HCFA Administrator Gail Wilensky
is leaving HHS to accept a new appointment in the White House,
where she will have a strong hand in policymaking. Previously,
her role was largely confined to carrying out Congressional
edicts such as the Relative Value Scale.
Market Alternatives on the Ascendancy in Maryland. A
three-way fight is in progress in the Maryland state legislature:
a single-payer government insurance system versus ``play or pay''
mandatory insurance versus a consumer-based, market-oriented
alternative. Legislative hearings have been long and grueling.
Despite the fact that Maryland is one of the most liberal and
Democratic states in the country-with a Republican minority so
small it barely counts-consumer choice may get a real chance.
The Maryland Consumer Choice Bill, which will be voted on later
this year, entirely replaces Medicaid with a voucher system and
establishes a tax-credit program for middle income citizens.
Democrats have shuddered at the impact of high payroll taxes
and heavy regulation on business amidst the recession. It is
possible that Bush and the Republicans could be outflanked by
Democrats, strategically beating them to the tax credit punch on
Tax and Insurance Reform Proposals on Capitol Hill.
New life is being breathed into market-oriented reform on Capitol
Hill. Conservative critics of the current system argue that the
employer-based insurance that dominates the American medical care
system is a fundamental distortion of the market. It negates the
forces of supply and demand that play such a dynamic role in
other areas of the economy in controlling costs and allocating
goods and services efficiently. Furthermore, consumers have
virtually no say or control over the kind of insurance that their
company offers, effectively limiting the number of options that
The linkage between insurance and the job limits the
personal freedom and mobility of the workforce. No other type of
insurance-whether homeowners insurance, auto insurance or life
insurance-is so inextricably tied to the place of work.
The promotion of consumer choice and the portability of
medical insurance benefits from job to job are thus common
features of market-oriented approaches.
Some of the major proposals are:
- HR 3084, ``The Affordable Health Insurance Act,''
introduced by Rep. Bill Dannemeyer (R-CA). The bill provides
refundable tax credits for the purchase of health insurance by
low-income persons, financed through a limit or a cap on the
value of employer-provided medical benefits. Dannemeyer's bill
preempts state mandated benefits laws and provides for the
creation of Medical IRAs or tax-free medical savings accounts.
The bill has been referred to the House Committee on Ways and
- HR 3951 ``Comprehensive Health Care Access Improvement
and Cost Containment Act,'' introduced by Michael Bilirakis
(R-FL). The bill would give tax credits to low-income families
and expand deductions for the self-employed and small
businessmen. Like the Dannemeyer bill, it preempts state mandated
benefits. For Americans who are uninsurable, the bill provides
federal assistance to aid in the creation of state risk pools. HR
3951 also promotes reform of medical malpractice laws.
- S 314 ``Comprehensive Health Care Act.'' Introduced
by Sen. William Cohen (R-ME). Cohen's bill gives Americans who
are not covered by employer-based insurance a refundable tax
credit. The bill also provides for federal grants to the states,
financed through general revenues, to assist states in setting up
state risk pools for persons who are otherwise uninsurable. Like
the House bills, Cohen's legislation also preempts state mandated
- S 454, ``The Comprehensive American Health Care
Act,'' introduced by Sen. Mitch McConnell (R-KY). S 454
provides a tax credit worth up to $1,750 for the purchase of
health insurance for active employees. The credit would be based
entirely on income and would be phased out for persons with
incomes in excess of $40,000. For retirees, a new tax credit
would be enacted to purchase long-term care; likewise the credit
would be income tested. It would be phased out at $40,000 per
- S 2095, ``The Affordable Health Insurance Act,''
introduced by Sen. Steve Symms (R-ID). The Symms bill is modelled
explicitly on the medical care reform proposals of the
conservative Heritage Foundation. It would provide a refundable
tax credit of $2,500 per year for a family's medical insurance
costs, plus $250 per year for long-term care insurance costs.
The bill does not allow every purchaser of health insurance to
claim a full tax credit, but the generosity of the credit is
linked to family income. The Symms bill finances the credits by
replacing the current tax relief for employer-provided insurance
with a national system of tax credits. The estimated annual value
of the tax exclusion on employer-provided health benefits is
$66.6 billion, or $2 billion short of the total spending
recommendations of the Pepper Commission chaired by Senator Jay
Rockefeller (See AAPS News Supplement, March 1992).
Medi-Save Accounts Proposed. While Democratic
proposals focus on how much bigger the government's role should
be, House Republicans have a proposal to expand the individual's
The ``Health Care Savings Plan Act of 1992'' (HR
4130) was introduced on Feb. 5 by Rep. Rick Santorum
(R-PA) with 18 cosponsors, including Newt Gingrich (R-GA),
Richard Armey (R-TX), John Miller (R-WA) and Tom Delay (R-TX).
The bill would allow individuals and families to set up tax-free
``Medisave'' accounts for purchasing medical services. Up to
$4,800 per year, plus $600 for each dependent, could be deposited
According to Rep. John Kasich (R-OH), employers now pay
nearly $400 per month for medical coverage for an employee and a
family of four. Under the Medisave concept, $100 would be used
to purchase high-deductible coverage for catastrophic illnesses,
and the remainder deposited to save for routine medical expenses.
The proposal ``puts cost-conscious, savings-oriented
medicine in the hands of the consumer [by] applying free-market
approaches that will ultimately retain physician choice and
quality of care, increase access, and control costs,'' said Rep.
Santorum (BNA's Medicare Report Feb. 17, 1992).
According to the National Center for Policy Analysis, more
prudent buying fostered by Medisave accounts could reduce US
medical expenditures by $147 billion per year. In addition,
the use of savings to pay smaller medical bills would reduce
administrative costs by as much as $33 billion (John C.
Goodman and Gerald L. Musgrave, ``How to Solve the Health Care
Crisis, Human Events, 2/22/92).
The concept of self-insurance for medical bills has been the
basis of Singapore's medical system since 1955.
The idea of allowing workers to keep money that they don't
spend on medical care has even captured the imagination of
liberal columnist William Raspberry. Commenting on the idea as
presented to OMB by J. Patrick Rooney, Raspberry wrote: ``As
clever as the Rooney proposal looks,...it looks even better when
compared to the `play or pay' idea being advocated in Congress''
(Everett Herald 1/21/92).
Medicare Bundling Law for Out-Patient Services. House
Minority Whip Newt Gingrich (R-GA) plans to introduce legislation
to repeal the provision of a 1986 budget law that requires
hospitals to ``bundle'' out-patient services under one fee. HCFA
expects to release regulations this spring. Hospitals fear that
their out-patient services will be changed from profit centers to
losers when they have to start paying for diagnostic tests and
durable medical equipment received by patients after discharge
from the hospital.