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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
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
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
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
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
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
[The regional alliances in the Clinton plan would have
provided this mechanism, as individuals would have had to change
health plans upon moving.]
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
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
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
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).
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
"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
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
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
Secretary: Claud Boyd, Jr., M.D., of Augusta, GA
Treasurer: R. Lowell Campbell, M.D., of Corsicana,
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.
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
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
Douglas Iliff, M.D., Topeka, KS
excerpted from Family Practice Management, Feb.,
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
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 AlertIgnoring the Root of The
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
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
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
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
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
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