1601 N. Tucson Blvd. Suite 9
Tucson, AZ 85716-3450
Phone: (800) 635-1196
Hotline: (800) 419-4777
Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 54, No. 8 August 1998


The Clinton-Gore agenda continues to inch forward like a glacier, with the help of regulatory agencies, private partners such as the AMA, foundations, and Republican legislators and governors. If there were a strategic map in a secret war room, it would have a lot of pins in it as one state after another enacts pieces of the Plan, such as immunization tracking and Kid Care. The outlines of the 21st Century Health Care System are emerging from the fog.

There are no war slogans against killer diseases. No promises to drive malaria off the face of the earth, to wipe out drug-resistant tuberculosis, to open new fronts in the war against cancer, or to find the cure for heart disease.

The enemy is not cancer, but Big Tobacco. Not heart disease, but Fat. Not microbes, aging, degeneration, or autoimmunity, but Lifestyle, Industry, or Greed. The soldiers are not scientists, following up clues wherever they lead (we have the FDA and government funding to stop that), or physicians, caring for the sick and the injured with whatever remedies they think best. The weapons are not new diagnostic tests, surgery, drugs, or therapeutic breakthroughs.

The army is made up of quiet, boring bureaucrats, backed up with contingents of Stormtroopers. The mission: to enumerate and track every provider, every patient, every sniffle, and every pill. Once all the are data linked in a vast computer network, with every ailment or treatment coded to five significant figures, they promise to find out What Works and assure uniform, excellent-by-definition care. Or else.

The campaign stresses "outreach," to be sure that babies get every "cost-effective" shot, that mothers are correctly counseled, and that everyone is constantly striving to acquire the prescribed, up-to-date certificate-a Certificate of Initial Mastery for Goals 2000 schoolchildren, an AMA/JCAHO/ NCQA accreditation for physicians and other providers, etc.

Directing the course of the National Information Infrastructure (NII) is the 50-year old National Committee on Vital and Health Statistics (NCVHS), whose mission was dramatically transformed by the Health Insurance Portability and Accountability Act of 1996 (Kassebaum-Kennedy).

Buried in the reams of turgid legalese produced by NCVHS are some very interesting points.

 To achieve a "global health structure" for a global society, Vice President Gore wants every classroom, library, hospital, and clinic connected to NII by the year 2000.

 The goal of NII is to "manage and monitor" the health of the entire population (and costs, disease, and demand).

 The main problem of 41 million uninsured is that they are outside the reach of data systems and cannot be tracked.

 Stronger public-private partnerships are envisioned, as with the AMA and its CPT coding system.

 New tools are under development, such as provider and employer surveys to give an "integrated look at care," and "monitoring and surveillance tools needed in the event of anti-tobacco legislation."

Some difficulties are recognized by the committee: One is the fear that "individual privacy will be compromised and people s health records will be used to harm them." Another is the prohibitive cost of automation for small providers. A third is the lack of a "locus of accountability" outside of a managed- care setting since focusing on the individual provider would involve insufficient numbers of cases.

Some participants recognize that the whole project is the "antithesis of administrative simplification," and that proposed documentation guidelines require so much "stupid and irrelevant" intellectual activity, at the patient s expense, that all visits are turned into complex ones, even as "half of the things that are important to specific patients" are disregarded.

Nonetheless, the process continues and has already produced lengthy proposed rules for assigning the National Provider Identifier (NPI) and for incorporation of the AMA's Current Procedural Terminology (CPT) codes into the mandatory electronic standard. AAPS has submitted extensive comments on both rules (see http://www.aapsonline.org).

AAPS finds that the proposed NPI standards would impede physician-patient communications in an unconstitutional manner; violate the Administrative Procedure Act and the Paperwork Reduction Act; and extend far beyond the statutory mandate in an arbitrary and capricious manner.

AAPS objects to HCFA's delegation of standard setting to the AMA: "The statute requires HCFA to adopt electronic standards...[to] simplify current electronic transfers of information. Instead, HCFA has proposed transferring the authority for developing, maintaining, and revising the rules to a business entity that has financial incentives to make the rules as complicated as possible." AAPS has found that "a replacement of the CPT coding system with a simple, easy-to-understand coding system could ultimately cost the AMA as much as $100 million per year in CPT-related revenue."

Moreover, AAPS remarks that the proposed rule fails to disclose all the information necessary to comment, such as the contractual obligations governing HCFA's selection of the AMA. AAPS filed a Freedom of Information Act ("FOIA") request for this information in April 1998, but has not yet received a single responsive document.

As the public-private partnership demands more and more intrusive surveillance of physicians and patients, its own data practices continue in the pattern set by the Clinton Health Care Task Force: stonewalling, denial, withholding, and burial of pertinent information in a mountain of irrelevancy.

But one thing is becoming clear: The Enemy is not death and disease, but private medicine and noncompliant citizens.

The Problem of the Uninsured

The problem of the uninsured is not necessarily lack of medical care, nor is it nonpayment of physicians (which happens often enough even with insured patients). In fact, it may be difficult to remain uninsured, once a patient presents to an emergency room, as an Arizona patient discovered:

"Last week I was admitted to my local hospital via the Emergency Room. I have insurance through my employer but couldn't find the insurance card in the 30 seconds they gave me at the admitting desk. The clerk...told me to call a certain phone number to report my group number. The next day, someone in the admissions department called my hospital room to ask me questions so they could do AHCCCS paperwork. [The Arizona Health Care Cost Containment System is the Arizona managed-care Medicaid system.] I explained again that I do have insurance and would be calling the number in. Yesterday, I received...DE-enrollment forms for AHCCCS. Apparently, I am enrolled! What a screening process! ... I could be a millionaire and get enrolled; [it] was absolutely automatic!" [And they got my Social Security number wrong.]

This patient was asked why she thought insurers and government agencies wanted so much data. She replied:

"Some have suggested that the health data would be useful when the government sets up labor boards, if all this `school-to- work' legislation passes,...to determine one's `fitness' for job assignments. But I think there has to be more to it than that. Having so much private information implies so much control .... Browsing through some web sites linked to Twila Brase's privacy page (www.cchc-mn.org), I found some HHS proposals to collect data on `lifestyle' and `living arrangements'....If I let my imagination run wild, I can see how this health care data could be used to track people...or to limit movement of people. If the government made permanent assignments of patients to physicians or hospitals, many people could not/would not relocate."

[The regional alliances in the Clinton plan would have provided this mechanism, as individuals would have had to change health plans upon moving.]

Tracking Immunizations

Like many other states, Texas recently enacted a computerized immunization registry, called ImmTrac. On July 1, 1998, three citizens (Dawn Richardson, Alison Mullins, and Rebecca Rex) submitted written testimony to the Sunset Advisory Commission calling for legislation to shut down the program and prohibit the connection of Texas data bases with other state or federal data bases. (See http://home.swbell.net /prove/txregistry/sunset.htm or call AAPS for a copy.)

Citizens complain that the Texas Department of Health (TDH) misled the legislature and the public about ImmTrac uses and has consistently tried to circumvent the privacy protections and parental consent requirements built into the law. In fact, ImmTrac entered more than 3 million children's records, often without consent, before they even had the statutory authority to do so. Citizens believe they are being exposed to threats of identity theft and financial fraud.

Although the negligent release of information is a Class A misdemeanor, no action was taken when information was FAXed to parents or legislators without the required consent.

Parents fear that if they do not follow government recommendations for vaccines, they will be subjected to continual harassment, including home visits. They do not necessarily want their children to receive every approved vaccine just because it has been declared cost-effective for society as a whole (as to avoid lost workdays when a parent stays home to care for a sick child).

As all vaccines have potential adverse effects, parents want the right to make their own decisions. Many feel that their children are at such minimal risk for hepatitis B, for example, that they would not willingly accept even a very small risk of such effects as erosive polyarthritis, central retinal vein occlusion, myelitis, thrombocytopenic purpura, acute respiratory distress syndrome, or sensorineural hearing loss. [In Italy, mandatory immunization reduced hepatitis B morbidity by about 1.4/105, with a 3.4/105 incidence of adverse vaccine reactions, about 7% of them "severe" (Lancet 350:114, 1997)].

Parents suspect that strong financial interests are driving the ImmTrac program. Texas can collect up to $100 per two-year- old child proven to be fully immunized by inclusion in the state registry. The Comprehensive Childhood Immunization Act of 1993 appropriated $417 million to provide funding to individual states to create their own nationally connectable tracking systems. Beneficiaries of such systems include the vaccine industry, which is expected to triple its revenues in the next decade. U.S. Representatives and Senators who appear supportive of immunization registry programs have received numerous campaign contributions from vaccine manufacturers.

In 1991, two years before any federal immunization tracking legislation existed, the Robert Wood Johnson Foundation launched the All Kids Count project to develop vaccine monitoring systems. A large portion of RWJF's $186 million/year grants go to fund AKC. The testimony states that the AKC program "virtually guarantees RWJF access to every child's medical files." The writers' conclusion is that "private foundations...[such as RWJF], whose founding companies will profit from a national immunization registry, manipulate public policy to serve their self-interests."

Parents' suspicions were fueled by their exclusion from the rule-making process, which took care to include AKC, pharmaceutical companies, physicians groups, NCQA, PPOs, and the Texas Education Association. Despite minimal notice of the rule posting, TDH received an unprecedented number of letters (120) during the 30-day comment period.

Groups founded by concerned parents include Pennsylvania Parents for Vaccine Awareness in Mill Village, PA (814-796-9094); the National Vaccine Information Center in Vienna, VA (800-909- SHOT); and Parents Requesting Open Vaccine Education (PROVE) of Cedar Park, TX (512-918-9661).

The National Vaccine Information Center opposes the creation of any tracking system "because there can be no guarantee that an electronic database operated by the government for the purpose of tagging and tracking every citizen will not be used to punish citizens for noncompliance with federal health care or other policies."

According to materials cited on the National Immunization Program (NIP) website (cdc.gov/nip/registry), "immuni- zation registries can contribute toward what could ultimately be more comprehensive clinical and preventive data bases" (CCHC Update, Spring 1998).

AAPS Calendar

Oct. 9-11. 55th annual meeting, Raleigh, NC
Oct. 12-16, 1999. 56th annual meeting, Coeur D'Alene, ID

Recoupment of Trust?

"The E&M flap is the perfect opportunity for HCFA to recoup some of the physician trust it has lost over the years," according to AM News 5/11/98. A possible step in that direction is a June 3 memorandum issued by Deputy Attorney General Eric Holder concerning the use of the False Claims Act. This could be in response to congressional pressure, as from the May 7 hearings before the Subcommittee on Commercial and Administrative Law of the House Judiciary Committee (see AAPS News, June 1998, pp. S1-2).

As guidance to all United States Attorneys and others, Holder makes the remarkable statement that attorneys must make inquiries "before alleging violations of the False Claims Act" [emphasis added], to ascertain that false claims exist and were submitted knowingly. Among the issues to be considered: the clarity of the Rule or Policy, the magnitude of the false claims, and compliance efforts. Holder states that Department attorneys are obligated to "make a reasonable effort to notify the opposing party about the nature of the allegations," as through a contact letter.

The Department may be abandoning the intimidating "demand letter," which urged hospital executives to pay triple damages quickly to avoid larger fines. The American Hospital Association called the change "cosmetic."

At a May 21 meeting, the Healthcare Leadership Council, which represents hospital systems, health insurers, and drug manufacturers, accused the Department of Justice of engaging in "fishing expeditions."

"In certain cases, health care providers have been accused of fraud by DOJ before the facts are [collected] to justify an investigation," stated Dr. Robert Waller, CEO of Mayo Foundation. "It's hard for me to believe that every hospital is committing fraud" (BNA's Health Care Fraud Report 6/3/98).

Despite reassuring noises from the AMA leadership, individual physician's practices also fear increasingly intensive audits. A June 12 letter from Roxane Bolinger of Part B News warns that "mistakes -- no matter how innocent -- can lead to charges of fraud and abuse."

Short of a fraud investigation, solo practitioners are being targeted for harassment. Dr. Huntoon reports that one Thursday night in May he had to work, without pay of course, from 7 p.m. until 3 a.m. responding to "Focused Medical Reviews." One of them questioned the medical necessity of providing services to a patient who had suffered a brainstem stroke. Each Medicare assault received a computerized reply to at least 9 persons, including Senators and Congressmen. (This is called launching a game of "bureaucratic pinball.")

Dr. Huntoon believes that if doctors don't start fighting back vigorously, HCFA bureaucrats will succeed in shutting down many small medical offices. He also states that "if a substantial number of doctors did this, ...we could literally bury these evil HCFA bureaucrats up to their necks with paper...They would soon get the idea that it isn't cost-effective to attack physicians on a random basis like this."

Dr. Linda W. Wilson of Culver City, California, reports receiving up to 40 requests for hospital progress notes per week, mostly for the 99211 level of service. She has sent approximately 200 pages of typewritten notes so far and has received no replies to her questions. She observes that there is no way that a physician can bill for less than the lowest code, and that the cost of sending the paperwork to justify a $12 service is about $8.

The attitude of the Medicare Administration toward patient confidentiality is well illustrated in a letter to Dr. Wilson from Carl Reinhardt, Education and Training Specialist at Trans- america Occidental Life: "I understand you and your patients may have some concerns regarding confidentially [sic.] but you are required by law to submitted [sic.] all information requested for review. If the requested information is not submitted then the claim would be denied and the beneficiary would not be liable for payment even if they [sic.] signed an ABN. Any monies received would be an overpayment and should be refunded to the beneficiary....When you bill for an evaluation and management service, that is primarily counseling you must document the time spent and the areas discussed. This documentation should include the pertinent details of the topics discussed."

According to HCFA Transmittal No. B-98-12, of April 1998, Change Request #468, HCFA Pub. 60B, attached to correspondence received from Nancy-Ann Min DeParle dated 5/21/98, patients may refuse to have claims submitted to Medicare in order to preserve confidentiality, even if the physician does not opt out of the program for two years. However, once a claim is submitted, the physician can apparently receive no payment for the service unless she divulges every detail requested by HCFA. Patients need to be aware that their signature in Box 12 of form HCFA 1500 is a total waiver of the right to withhold information.

Nominating Committee Report

Chairman Don Printz, M.D., presents the following slate to be considered at the 55th annual meeting:

President: James Weaver, M.D., of Durham, NC

President-Elect: Joseph Scherzer, M.D., of Scottsdale, AZ

Secretary: Claud Boyd, Jr., M.D., of Augusta, GA

Treasurer: R. Lowell Campbell, M.D., of Corsicana, TX.

Directors: Samia Borchers, M.D., of Dayton, OH; John Dwyer, M.D., of Chicago, IL; Robert Gervais, M.D., of Mesa, AZ; W. Daniel Jordan, M.D., of Atlanta, GA; Charles McDowell, M.D., of Atlanta, GA; Ignacio Sarmina, M.D., of Durham, NC; and Robert Urban, M.D., of Belle Vernon, PA.

Enumeration: Historical Background

If asked what was the greatest offense committed by King David, many people would think of the Bathsheba affair. (The King seduced her and got her husband killed in battle.) But a much greater offense, which did not even seem wrong to him at the time, brought a plague on Israel that killed 70,000 men. The crime was to send his captain to number the people (II Samuel 24:2 and I Chron. 21:2).

Scholars have speculated about what was wrong with this (see Matthew Henry's Commentary, published 1708). After all, Moses took a census twice, without committing any crime. Perhaps David's wrong was to put people to a great deal of trouble for no purpose but to satisfy his own vanity.

Fraud in School-Based Health Programs

The comptroller's office found that the NY City Health Department and the Board of Education each submitted claims to the state for the same school health service costs between 1990 to 1995, resulting in overpayment of $9.16 million (Post Journal, Jamestown, 5/1/98). No arrests were mentioned.

Members' Page

On Medicare's EDI "Agreement" and Other Matters. Believe it or not, my battle on the EDI contract has been going on for four years now (see AAPS News July, 1994). Medicare originally told us that all new electronic billers would have to sign their new EDI contract, effective Feb. 25, 1994, and all existing EMC billers would have to sign by 1996. I have written to Mr. Lowen many times regarding the atrocious provisions of this contract of adhesion and have received a number of FINAL WARNINGS telling me that I must sign. But I never signed, and they continue to accept my claims. The carrier is required by law to process them, and I threatened to sue them if they refuse. I also told them that if they wanted paper they would get it. I would save them all up until just prior to the one-year deadline for filing. I never heard any more from them, and there it stands.

I continue to advise all home health care providers that I am no longer signing any government medical necessity certification forms. It is far too risky.

Mandatory electronic claims submission in New York State was supposed to be phased in starting in October, 1997. State officials said they were having problems coming up with the list of physicians such as me who are exempt from the new law. They refuse to acknowledge receipt of the waiver forms. I have heard no more about enforcement.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


Necessity. Airplanes can fly without radar and radios. Perhaps such items should be removed from commercial aircraft, along with other monitoring equipment that is not necessary.

We order laboratory tests to monitor a medical condition. I am starting to tell my patients that absolutely nothing is necessary. Why won't the insurance companies just come out in the open and say they are unwilling to pay for certain things and let patients know that they are responsible for their own bill? Instead, they prefer to use physicians for punching bags.
James Durand, M.D., Mt. Vernon, IL


Surgeons Pay to Do More Work. Most surgeons probably don't know that Medicare beneficiaries with breast cancer have a biopsy done at the expense of the surgeon. If surgery is performed immediately, there is no payment at all for the biopsy because that would be "unbundling." If surgery occurs within 10 days of the biopsy, the biopsy is paid for but the surgical fee is reduced by 29% (more than the cost of the biopsy). Is Medicare trying to encourage cancer surgery without establishing a definite diagnosis? What maniacs devised these payment schedules, and what idiots approved them?
A California Surgeon


Real Administrative Simplification. The family practice gurus who see nothing but large organizations in the future are stuck in the age of mainframe computers....The way to the future is called "solo practice."... The solo model equals or beats the group six ways out of six, [including] a bias for action,...staying close to the customer,...[and] keeping things simple....Let's take the example of medical records. All of my records are handwritten during or immediately after the patient encounter. The records go from the shelf, to the receptionist, to the nurse, to me, to the receptionist, to the shelf-a round trip of about 20 feet....My mode of practice spares me from such a wide range of problems that I can afford to skip much of what fills the pages of Family Practice Management, ... [such as] continuous quality improvement (CQI) teams (CQI being unconscious in a well-run solo practice)....

The solo practice model...offers the highest probability for happiness and high profits and...it should be adopted as a structure even in large medical groups, just as cutting-edge companies all over the world have learned to give small cells independent authority to design, build, and market their products and services.
Douglas Iliff, M.D., Topeka, KS
excerpted from Family Practice Management, Feb., 1998


Our Own HMO. In Canada, we have our own HMO, and we call it Government. In the last ten years, quality and accessibility in medical care have been seriously eroded. Politicians of all stripes say it is only the doctors who are greedy and want to ruin the system for their own monetary gain. Yet if we were all really that money hungry, we would have emigrated to the United States. The doctors in this country, just as in yours, are mostly hard-working individuals who have increasing frustration with the personnel and policies of an unworkable system.

In the end, it is up to the public, who will have to start disbelieving political promises of something for nothing.
H.N. Fitterman, M.D., Vancouver, BC


Criminalize Accident Insurance, Too. After McDonaldizing health insurance, let us now pervert accident insurance to criminalize and pauperize the doctors. They need to be checked and choked by an army of health police that sees to it that every claim is examined, priced, repriced, audited, monitored, and (maybe) paid to the patients and their attorney. Doctors-pardon, providers-are turning their offices into collection agencies. They are being drowned by mindless reviews, surveys, and statistics. Orwell and Machiavelli couldn't have dreamed up this scenario. The purpose of insurance is supposedly to pay, not to police.
Marion Redlich, Alexandria, VA

Legislative Alert

Ignoring the Root of The Problem

On one point, health care policy analysts are generally agreed. The tax treatment of health insurance is unfair and inequitable. It unquestionably distorts the health insurance market. It generates perverse incentives and contributes powerfully to persistent problems of cost, access, and quality in the so-called private sector of the medical economy. If this is the problem, one would expect that serious policy makers in Washington would address it. But they do not.

Since the collapse of the Clinton Plan in 1994, Members of Congress have insisted on adopting a rigid and increasingly intrusive regulatory approach to real problems largely caused by the distortions of the health insurance market; problems and distortions directly created by their own tax policy.

The Kassebaum-Kennedy bill of 1996, establishing an unprecedented level of federal regulation of the health insurance market, has been driving up costs and has been of little help to those who need it most. Liberals and conservatives are now starting to agree. As Marilyn Moon and Joanne Silberner note: "The Health Insurance Portability and Accountability Act of 1996 primarily helps people who already have insurance to hang on to it-but with as much as a 600 percent increase in premiums" (Washington Post, 6/29/98). More than three years after Clinton Care was declared dead, we now have 42 million Americans who are uninsured at any given time, up from 37 million-and this at a time when unemployment has been hitting an all-time low.

Recent good news on medical costs is also likely to become a memory. Early indications are that the once feverish medical costs are about to rise again, even as managed-care companies do everything they can this side of barely civilized behavior-and beyond-to "manage" costs and still insist, in the face of an increasingly hostile public, that they are not compromising the quality of medical care. And, of course, The Federal Register gets fatter and fatter, as Congressional Republicans add layer after layer of new rules, regulations and guidelines on the already over-regulated medical economy.

A forthcoming Heritage Foundation report by Grace Marie Arnett and Melinda Shriver of the Galen Institute examines how state regulations drive up the cost of medical insurance. The 16 states that have been most aggressive in imposing mandates and enforcing small group insurance reforms (such as guaranteed issue and community rating) experienced an annual growth in the uninsured population eight times that of the states that were less regulated. Kentucky drove 45 insurance companies out of the market. The upshot: regulation designed to increase access had the opposite effect. For state policymakers, it was the law of unintended consequences gone berserk.

Members of Congress, overseeing the imposition of federal regulation on top of state regulation, have not yet seemed to grasp the remarkable connection between their good intentions and poor policy outcomes.

Meanwhile, the power and reach of HCFA, once narrowly confined to Medicare and Medicaid, has expanded into the private insurance market; its reach, nurtured and strengthened by Congressional health care policy, has never been longer than it is today.

A Disappointing Performance

President Clinton and Senator Kennedy have outlined a clear and strong regulatory agenda: using growing popular dissatisfaction with managed care to expand government control over medicine. Reining in voracious and greedy pharmaceutical companies, one may recall, was worked up into the political justification for the Clinton Health Plan of 1993, which would have, one may also recall, created hundreds of government- sponsored managed-care networks from coast to coast. But so what? Any excuse is just fine, as long as the regulatory structure is put into place.

The Congressional Republicans, seemingly caught between their desire to placate popular opinion on insurance abuses and their reluctance to add as much regulation as the White House, could end up losing out in the political bidding war. After more than four months of internal deliberations, the "House Working Group on Health Care Quality", chaired by Congressman J. Dennis Hastert (R-IL), has come up with some band-aids, some recycled standard remedies, and some new government mandates.

On June 24, 1998 Hastert declared: "We increase the accessibility of insurance so millions more Americans can received high quality health care coverage. We increase affordability of insurance so people can actually purchase the health care that best fits their personal and family needs. And, we increase accountability so that patients have confidence they will receive the quality care they were promised. Quite frankly, we believe that patients should get their treatment in hospital rooms, not courtrooms. Moreover, we are protecting patients without big government." This sounds good, but there is not yet any bill to enact any of these good intentions.

In effect, the House Working Group, presented with an opportunity to make real changes, has blown it. There are no significant tax changes in their proposal-changes that would have a major structural impact-just more regulatory adjustments to compensate for the problems generated by their insistence on preserving the current tax treatment of health insurance. What the House Republicans have produced, in fact, is a press statement, with bill language to follow.

For health policy analysts, this will prove to be another exercise in discovery. Of course, anyone familiar with health care policy in Washington should not, under any circumstances, accept anything without checking the fine print -which, of course, could always contain more real nasties like §4507 of the Balanced Budget Act of 1997.

More Federal Mandates

Instead of making changes that would enable an employee to fire his HMO and simply choose his own insurance plan, the House proposal forces the employer to offer a point-of- service plan whenever a "closed panel" HMO is offered. According to the Association of Private Pensions and Welfare Plans, in a June 23rd analysis of the House proposal, this mandate was "considered and rejected" by the President s Advisory Commission on Consumer Protection and Quality in the Health Care Industry. The reason: " because of concerns that it would cause some smaller employers to drop coverage altogether or discourage new health plans offering in the small group market." In other words, Congressional Republicans are prepared to go where even the Clintonites, hardly known for warm sympathy for the plight of small business, had feared to tread.

A proposed substitute for real patient choice which has gained ground recently with health policy analysts is the government s creation of a "Due Process" system for employment-based insurance. If the employer or the private health plan under contract with the employer does not provide a service, then the government will make the private plan do it. The House proposal includes a variation on this theme: the federal government will hold plans accountable for establishing an internal review process, making sure that patients have access to "immediate decisions about what is covered for routine and emergency services." In effect, the patient would be granted an appeals process. The proposal also calls for an external review process, whereby the law will make sure an "independent doctor" will decide if a requested service is "medically necessary," if the patient is turned down in an "internal review".

There is no greater testimony to the advanced breakdown of the patient-physician relationship in the system than the perceived necessity to have an "independent doctor" review the decisions of another doctor-who is, after all, not the doctor of the patient, but the employee of the plan. Under the House proposal, doctors are simply presumed to be "independent" of patients.

The details governing these review processes are unclear. It is not even clear whether the decisions of the external review would be binding or "merely advisory."

The inability of patients to choose their own insurance is an outstanding invitation for bureaucratic intervention in determining the kinds of doctors and medical services that the plan covers. Under the House proposal, the federal government will impose a Medicare model on private plans. Mandates include a "prudent layperson standard" for coverage of emergency care; a right for a woman to select an obstetrician-gynecologist for her primary care physician; and prohibitions on a "gag-rule" on physicians who want to tell patients about treatment options. Of course, in a real market, nobody would buy insurance that could not meet such conditions. But employer-based health insurance market is not a "real" market driven by real consumer choice.

The House proposal also proposes confidentiality protec- tions for medical data. This is, in principle, a good idea. Once again there is no detailed information on what these protec- tions might look like in the absence of a bill. Doubtless, the fine print will have to be checked very carefully for exceptions and qualifications that weaken them dramatically as for disclosure of information without patient consent in pursuit of health care fraud and abuse cases, public health investigation or surveillance, or law enforcement. One particular exception to be wary of is "health care re search"- which might be primarily concerned with an agenda of central planning, as in the State of Maryland.

The positive elements of the proposal include the creation of association health plans, enabling small businesses to pool in order to gain the economies of scale enjoyed by large corporations; the creation of "Health Marts," a cooperative group market place where employees and their families and shop for plans and benefits; the expansion of medical savings accounts by lifting or increasing the cap on the number of such plans available; and reforming medical malpractice laws, establishing caps on damages. These are good, as far as they go, and without the appropriate tax changes, that is not likely to be very far.

Looking at Tax Policy?

House Republicans have been looking toward the establishment of some sort of "commission" to study alternatives, including the roll-over of existing Section 125 accounts in employer- based insurance, which would, in effect, create the equivalent of medical savings accounts for millions of Americans.

The focus on tax policy is a prime interest of Congressman Bill Thomas (R-CA), the Chairman of the House Ways and Means Subcommittee on Health, and Congressman Jim McCrery ( R- LA), a member of the House Ways and Means Committee.

Several proposals would expand the deductibility of health insurance premium to 100% for all individuals, not just the self-employed, for individually purchased coverage. Currently, an individual can deduct health insurance premiums only to the extent to which they exceed 7.5% of adjusted gross income.

While members of Congress are right to look at expediting full tax deductibility, they should also understand its limitations in getting at the continuing problem of the uninsured. To take advantage of the deduction, a person must first be able to purchase a medical insurance policy in the individual market, which has been subject to an extraordinary degree of expensive government regulation. Moreover, as the Government Accounting Office points out, nearly 15 million people, who had no insurance or who had an individual insurance policy, had no tax liability and thus would not have benefited from such a tax deduction. Refundable tax credits or vouchers for these people make more sense [if one wishes to continue using the tax code as a social-engineering code].

A Bold New Tax Credit Policy?

That option may not be just wishful thinking. Regardless of what Congress does or does not do with the Working Group proposal, McCrery and Thomas are also reportedly working on a major health policy proposal that goes beyond the adjustments to employer-based insurance and calls for a universal tax credit system. According to the June 24th edition of the New Orleans Times Picayune, the McCrery-Thomas proposal would go beyond commercial insurance and would include Medicare and Medicaid as well. The giant government entitlement programs would be phased out in favor of a national system of tax credits, enabling individuals and families to pick and choose the kinds of plans and benefits and physicians that they want. Once again, the proposal is in the working stage, and details won t be available until the end of the summer. But it looks like a radical departure from business as usual in Washington health care policy. Details later.

Robert Moffit is Director of Domestic Policy at the Heritage Foundation.