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Volume 55, No. 8 August 1999


What Clinton couldn't achieve for all Americans in his heady first 100 days, he may yet, as a post-impeachment lame duck, foist on those over the age of 55.

While calling for a "Patients' Bill of Rights" to protect against managed-care abuses, he proposes to turn HCFA into the world's biggest Managed Care Organization, which will micromanage choice of physician, treatment plan, and drug usage-or else delegate the details to a "private" partner.

In Clinton Newspeak: "The President's proposal would make the traditional fee-for-service program more competitive through the use of market-oriented purchasing and quality improvement tools to improve care and constrain costs."

The details from the White House ( www.whitehouse.gov/NH/New/html/medicare.pdf ) (also see pp. S1-S2):

  • Cost shifting: Beneficiaries get a "discount" on every prescription. While Medicare pays only for the first half of the first (after-discount) $5,000, other Americans "contribute" through increased prices on all of their prescriptions, and pharmacists and manufacturers earn less.

  • Risk shifting to "providers": "Cost-effective providers" would compete for a single rate for services related to certain conditions, in assembly-line facilities known as "Centers of Excellence."

  • Income-tax bailout: As Medicare is obviously not sustainable through payroll taxes, even with the more than 75% income-tax subsidy for Part B, the White House proposes to shovel in $794 billion in income-tax receipts (from the never-ending "surplus") over the next 15 years.

  • Lock-in ("choice"): Lured by additional benefits or lower cost-sharing, beneficiaries would "volunteer" to be locked into ("enroll with") Primary Care Case Management (PCCM) with a team of providers including a geriatrician, nurse, and social workers. "This is especially important for older and sicker [expensive] beneficiaries, who have diminished capacity to navigate the health care system [and will have even less]," states the White House.

  • "Incentives" ("fraud" if you use them): "Centers would be allowed to provide incentives such as reducing or waiving cost sharing, offering private rooms, or paying for travel and lodging expenses to attract beneficiaries."

The Administration apparently recognizes the perverse incentives in the current system. Therefore, it proposes a 20% copayment for laboratory services, and indexing the Part B deductible, which has fallen from 28% in 1967 to 3% in 2000, to inflation. To eliminate "overpayments that are built into the system due to disproportionate enrollment of healthy beneficiaries," a risk adjustment mechanism will be developed. Nevertheless, still more market-distorting features are in the works. Since hospitals have tried to escape the effects of DRG payment by expanding out-patient facilities, the Balanced Budget Act (BBA) decreed the expansion of the prospective payment system (PPS) to outpatients. Clinton's answer to hospitals' expected attempt to maintain revenues: a retreading of the previously proposed "volume control mechanism."

While attempting to decrease utilization of medical services by the sick, the Clinton Plan intends to increase utilization of preventive services by eliminating cost sharing for hepatitis B vaccine, colorectal cancer screening, bone mass measurements, prostate cancer screening, and diabetes self-management. Additionally, Clinton plans a blitz of public service announcements, a print media campaign, distribution of comprehensive information on benefits, plus an education and awareness campaign about the need for sturdy shoes and lighted stairwells. Then there will be a "health status assessment tool" so that beneficiaries can "raise the health issues identified to their health care provider" [and to identify candidates for PCCM?] All persons over the age of 50 will be targeted for education about how their capacity is beginning to decline. The cost of these measures: a mere $3 billion.

Clinton's plan has no "cuts," only "savings." And he would restore $7.5 billion of the $197 billion in cuts made by the BBA, to remedy any quality or access problems.

The Plan states that "no formulary would be established by the Medicare program." The public-private partnership concept comes into action: "[P]rivate benefit managers could establish formularies, subject to the coverage requirements...." The standards to be met by the PBM would be established by the Secretary of HHS and would include "strategies to encourage appropriate use of medications."

Recognizing that HCFA could use improvement, Clinton proposes increasing accountability through the formation of three new public/private advisory boards. This will no doubt "assure a process that new processes are accountable, transparent, clear, and certain (sic.)."

Clinton has contemplated a Medicare out-patient prescription drug benefit from the outset, as shown in documents of the Clinton Health Care Task Force. Initially, there was an option for the Secretary to develop the formulary, and to have an RxPRC (Prescription Payment Review Commission), to operate like the PPRC (Physician Payment Review Commission). The basic ideas of a formulary and price controls are changed but slightly.

As Paul Starr told the Task Force, in answer to the question "Why not Medicare for Everyone?": "...[I]t would be a step down for the great majority. And if we brought Medicare coverage up to par, it would break the bank."

The question that needs to be asked is this: Why not freedom for everyone, instead of enforced government dependency? And why not true insurance, instead of forced prepayment for rationed care?

Comments on the Clinton Medicare Plan

About the drug discount plan: "[T]here are no price controls in this and there is no use of an accumulated bargaining power by Medicare" (Gene Sperling, Clinton's national economic advisor, BNA's HCPR 7/5/99). [It depends on what "not" means.]

"A senior with $1,000 in drug expenses would in fact have to pay $1,028 under the Clinton plan ($500 for the 50% copayment and $528 for the premiums)...[M]ost seniors would actually pay more under the Clinton plan" (Peter Ferrara, Americans for Tax Reform).

"People don't need to pay $288 a year [at first] to get $100 worth of help on the first $200 of drugs. Processing $10, $20, $30 bills through an insurance mechanism is extremely wasteful....[Then, if a patient] has $5,000...or even $20,000 worth of...drug expenses, Mr. Clinton says, `Too bad, Granny. We aren't doing this to help people who really need help, but to get people accustomed to coming to Big Brother for things they do every day" (Greg Scandlen, Cato Institute).

"[NBC spotlighted an elderly woman] who spends $2,000 per year on prescriptions and, horror of horrors, has to dip into her savings. The message: It's wrong for her to have to dip into her savings, but it's not wrong for her to dip into someone else's" (Craig Cantoni, Capstone Consulting).

Prescription Drugs for the Needy

Many drug companies will supply medications to the truly needy free or at a nominal price. One example is Glaxo-Wellcome (see www.glaxowellcome.com and check out the patient assistance program).

AAPS Members May Save on Liability Insurance

A plan underwritten by OHIC, first developed by the Ohio chapter to provide savings on professional liability insurance, is expanding and can already be offered in 23 states. Members have saved up to $10,000 on annual premiums. You may receive information and a telephone call in the next few months. Or you may call our agent, Mr. Steve Trimborn, at (937) 293-6000 or (937) 293-8808.

AAPS Member Assumes Presidency of MedChi

Wayne C. Spiggle, M.D., an internist, is now President of MedChi, the Maryland state medical society. Dr. Spiggle has expressed his appreciation to other AAPS members for their work in defending medical confidentiality, including Richard Epstein, M.D., and James Kelly, D.O., a MedChi Trustee.

Nominating Committee Report

The following slate will be presented at the annual meeting in Coeur D'Alene:

President: Dr. Lawrence Huntoon of Jamestown, NY
President-Elect: Dr. Robert Cihak of Aberdeen, WA
Secretary: Dr. Robert Urban of Belle Vernon, PA
Treasurer: Dr. R. Lowell Campbell of Corsicana, TX

Directors: Drs. Art Astorino of Newport Beach, CA; Claud Boyd of Augusta, GA; Kenneth Christman of Dayton, OH; James Coy of Punta Gorda, FL; Chester Danehower of Peoria, IL; John Dwyer of Chicago, IL; Alieta Eck of Somerset, NJ: Robert Gervais of Mesa, AZ; Vernon (Bud) Goltry of Boise, ID; and Mark Schiller of San Francisco, CA.

Reflections on Insurance

Since I retired from practice in June, 1998, having reached the age of 77, the Medicare questionnaire is not of much value for me to fill out. But I can give a general overview of the state of medicine since I started practice in 1955 in the town of Clovis (pop. 25,000). As the only radiologist in the area, I had to accept all referred patients. Virtually no one had insurance, except for Blue Cross, and it did not cover x-rays outside the hospital. At that time, my uncollectible amounts came to about 40%. At the time of my retirement, the write-offs, including all uncollectibles and the "adjustments" made by various insurers, came to 55%. In essence, all this "insurance" increased my charity load from 40% to 55%. In addition, before all this "insurance" I needed a single receptionist-bookkeeper-biller to handle the business aspects of the practice. In 1998, I needed a receptionist-insurance agent, an insurance filer-assistant bookkeeper, and a transcriber-insurance filer.

Today, when a patient calls a doctor's office for an appointment, the clerk asks about insurance, and if he has none, the patient is often refused. This did not happen before, and has produced the phenomenon that 90% of ER patients should have been seen in the office....

As long as we have the employer tax advantage in so-called health programs, this problem cannot be solved. The employee should receive a full salary with no compulsory deductions for so-called benefits. We need to promote true insurance, only for fees over about $1,500.

Martin Goodwin, M.D., Portales, NM

SimpleCare Update

My colleagues and I founded the largest IPA in Washington State in an attempt to preserve independent medicine. We created a monster....We couldn't have been busier but were losing $80,000 per month. We decided it was unethical to charge cash-paying patients retail price, when all we had to do was bank their payments, and all others got a 30 to 60% discount. And it was insanity to be begging a 19-year-old clerk for permission to do a few tests. Therefore, we started Simple Care (see AAPS News, Sept. 1998). Since we now offer a totally different service, one without administrative involvement, the CPT codes do not apply. And the CPT-associated fees take into account staff time, computer down time, re-bill time, denial time, fight-them time, etc., which are not part of SimpleCare. We reversed our Patient:Paperwork ratio from 1:7 to 7:1. We do not offer discounts, but a fair price. In three months, we were $10,000 per month in the black. With our staff's input, we began sending 90-day cancellation notices to insurance companies that caused hassles and delayed payment.

Instead of being on the sinking side of the equation, doctors need to create a new field that puts the patient in charge....Imagine going to CME to learn about medicine instead of how to code so you don't get *** or thrown in jail!

Vern Cherewatenko, M.D., Renton, WA

AAPS Calendar

Oct. 13-16. 56th annual meeting, Coeur D'Alene, ID.
Oct. 25-28, 2000. 57th annual meeting, St. Louis.

The Quest for Data

School Data. Ursula Smith, a nurse and mother of five, volunteers at school. "I have worked directly with the Missouri state health department and seen their vision of the future," she writes. "It is scary." The lengthy data base required for participation in the state school health program includes family income, social security history, social history, etc. The only thing parents are required to sign is a form that says, in effect: "In order to provide the best care possible for your child, we may need to share information with other interested professionals. Please sign below to allow us to do so." Without knowing it, the family has agreed to put its most personal information on a national computer data base, accessible to almost anyone who tries at all. Moreover, all of this data has been promised (not even sold, just given) to the Robert Wood Johnson Foundation to use however they wish.

"Voluntary" Provision of Social Security Numbers. No governmental agency can lawfully withhold services solely because the SSN was not provided-or so claims the IRS. So how to get the information? Richard L. Westerman, M.D., reports that Michigan, in order to avoid losing $1 billion in federal child-care funds, passed a law requiring physicians to provide their SSN "voluntarily." "I elected not to volunteer," he writes. "This resulted in my being denied a license renewal."

National Child Support Monitoring. Congress ordered states to obtain SSNs when issuing professional, drivers, and hunting licenses so that they can be revoked if the holder is delinquent in child-support payments. Recently, Virginia officials apologized to 2,300 parents misidentified as delinquent due to a computer programming error and threatened with loss of hunting and fishing licenses (Buffalo News 6/27/99).

Defective Baby Data Base in Nevada. Pursuant to Assembly Bill 238, passed this spring, the chief administrative officers of hospitals or obstetric units must report to the state any child under age 7 with a "birth defect," defined as "any structural or biochemical abnormality." The names of such children may be used for research unless the parent makes a written demand for exclusion, in the prescribed manner. Physicians, midwives, or even relatives assisting any woman at childbirth are required to report babies with defects. According to Twila Brase, R.N., of the Citizens' Council on Health Care, such laws result from the Birth Defects Prevention Act of 1998, which makes $70 million available for registry development and tracking.

What Next? A 1998 amendment to the German constitution permits police to obtain court orders to eavesdrop on physicians' consultations with patients or parishioners' confessions to priests (World Press Review, May, 1999).

Gailey Conviction Upheld, Precedent Avoided

In an eight-line opinion, the U.S. Circuit Court of Appeals for the 8th Circuit upheld the mail fraud conviction of Raymond Keith Gailey, M.D., (see AAPS News Dec. 1998). By invoking a local rule (8th Cir. R. 47B), judges avoided addressing, and setting an appeals court precedent, for the use of the mail fraud statute to federalize and criminalize a private contract dispute. "[A]n extended discussion of the issues presented by this appeal will serve no precedential purpose."

On Removing Physicians Without Cause

"Missouri's ruling could dull CEO's ax" is the headline concerning a ruling that involves AMA Executive Vice President E. Ratcliffe Anderson, M.D. "If hospital administrators can't remove clinical department chairs without cause, how can they turn around a hospital that needs to head in a new direction?" (Modern Healthcare 4/26/99).

The decision in Goldman v. Truman Medical Center, Circuit Court of Jackson County, MO (CV97-31606), is posted at www.aapsonline.org/aaps/judicial/truman.htm ("legal matters"). It reads in part:

"After Dr. Anderson became Executive Director and Dean of the Medical School, existing problems deteriorated rapidly....As a result,...five Department Chairs...signed a letter...calling for Dr. Anderson's removal....Dr. Anderson thereafter began proceedings to remove...[three department chairs]....Dr. Anderson refused to describe to the Executive committee any factual basis for his action....In spite of overwhelming votes by the Executive Committee of the Medical-Dental staff and the Professional Standards Committee, Dr. Anderson indicated that he intended to go forward with seeking removal....Counsel for the hospital announced that the Executive Committee of the Board of Directors was free under the Bylaws to disregard the recommendations of [these medical staff committees]."

In finding for the Plaintiff, enjoining Defendant against further proceedings for the removal of Dr. Goldman as Chairman of the Radiology Department and assessing costs against Defendant, the Court wrote:

"The Bylaws also impose an affirmative duty on Department Chairs to safeguard the welfare of TMC's patients, which is inconsistent with TMC's position that Department Chairs can be removed for any reason."

Legal Extortion

  • The wedge audit, based on a tiny, statistically nonvalid sample of records, is favored by the government as a cheaper, faster way of collecting "recoveries." Consent settlement offers providers the choice of repaying the amount extrapolated from the sample or inviting a full audit that could result in a payment five times as large and expose providers to civil or criminal charges. Observers say HCFA is nailing providers for more trivial infractions (Medicare Compliance Alert 5/31/99).

  • Civil-criminal investigations put targets in a double vise. Threats of prosecution may leverage higher fines, and civil cases may be used to extract confessions. Through a civil subpoena, prosecutors may be able to obtain documents they could not get through a search warrant. The target may spend thousands of dollars and hundreds of hours complying with a warrant, only to be asked for the same material two days later. Two different types of defense are needed, and one may harm the other. Although midlevel employees are seldom targeted in civil cases, they may be investigated in a criminal case, and the employer may need to provide separate counsel for them. In 1998, 1,866 criminal health fraud matters were pending, and 3,471 civil matters (Medicare Compliance Alert 5/3/99).

  • Although professional courtesy may be acceptable under certain conditions (entirely free treatment, not "insurance only," and no prospect of referrals), many consultants recommend abandoning it altogether rather than risk being accused of fraud or abuse. In a compliance audit, it is likely to be a "suspect activity" (Part B News 4/12/99).

Members' Page

Physicians Must Fight Harder. In testimony before the House Ways and Means Subcommittee on Health, the AMA referred to "a growing sense...HCFA is about to collapse under the sheer weight of its administrative duties." Yet, after comparing HCFA to the IRS, the AMA suggests giving it more money! Better to cut HCFA's funds and watch the arrogant and bumbling behemoth collapse. After all, HCFA's errors could cause an underfunding of physicians' services of $1 to $2 billion next year, according to AMA estimates.

I believe that if enough physicians fought back and appealed and filed complaints against HCFA every time its agents did something wrong, the beast could be brought to its knees by the very bureaucracy that it wields against physicians.

If ever there was a time to fight, it is now. Well-motivated physicians, even if small in number, could provide the longed-for proverbial straw. Or, physicians could opt out.

A reminder: HCFA itself warns of anticipated "delays" in implementing the year 2000 physician updates because of the Y2K computer problem. That presumes that HCFA will be able to process claims at all after January 1, 2000. What better time to become a nonparticipating physician or to opt out!
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


Medicare Patients Seen Free of Charge. Our program to provide Medicare beneficiaries with services free of charge is coming along fine. There have been no adverse inquiries from third parties. Most of our patients agree with our choice. About 20 to 25% make a contribution to the Americanism Foundation or the Freedom in Medicine Foundation.
Nino Camardese, M.D., Norwalk, OH


Clinton Allies. I believe the recent survey sent by the American Academy of Family Physicians (AAFP), regarding universal coverage, is part of a public relations campaign to support a repackaged Clinton plan for government-controlled medicine. Also see the goals of the National Coalition on Health Care (americashealth.org), which has been funded by the Robert Wood Johnson Foundation. Its membership rolls, which have looked like a list from the Clinton Health Care Task Force, have added a number of prominent Republicans such as George Bush and Bob Dole.
Glenn P. Dewberry, Jr., M.D., Oklahoma City, OK


Wage and Price Controls Not Enough. In Canada, they have discovered that it's not enough to pay doctors whether they treat or not. Doctors must be given a direct financial incentive not to treat. Thus, Canada is moving toward managed care.
Robert P. Gervais, M.D., Mesa, AZ


Correction Demanded. From a letter to Medicare Part B, attention, Tanaisha Owens, Claims Analyst: Your letter of 4/9/99 concerning Mr. ** was incorrect. What are your credentials for making this determination? I am sending a copy of this letter, and of your letter, to U.S. legislators and requesting HCFA to review your performance and your credentials. I expect to hear promptly from you that you have corrected your error and notified the patient of your error.
Richard B. Swint, M.D., Paris, TX


No to Universal Coverage. From comments on the AAFP survey: AAFP should not seek universal coverage; the pursuit makes us look unwilling to provide charity care when indicated. We should establish local clinics for charity care as we have in Navarro County. Many of my patients are uninsured by choice. Should we force insurance on them? Food, clothing, and shelter are more important than medical care. Do we seek universal coverage for that?
R. Lowell Campbell, M.D., Corsicana, TX


Compassion in Arizona. Sociocrats are saying that 230,000 kids may be eligible for KidCare, but only 13,000 have enrolled. They say that too many parents don't want to go on the government dole. So what's their plan? Cut back on the program? Celebrate that their projections were way off? No: they're going to conduct a $700,000 ad campaign to get people signed up. Businesses are going to help; one will advertise the program on his 60 food push carts....
Craig Cantoni, Scottsdale, AZ


The Solution for Medicare. The solution is perhaps too simple: Medical Savings Accounts that can roll over into Medicare. "Liberals" would oppose the idea because it gives the consumer too much control over his own medical care, and is contrary to their cause for universal coverage or "single payer" to control this $1 trillion industry. Why do they favor this control? Their jobs depend on it.
Ernest J. White, www.mdhcrx.com


On Rapid Change. Some say that too rapid a change in our employer-based insurance would hurt some people. Any change at any pace always hurts somebody. Rosie the Riveter became unemployed when World War II ended. It reminds me of a joke: Had Abraham Lincoln proposed the Emancipation Proclamation as a constitutional amendment, instead of issuing an unconstitutional dictatorial decree, a Republican-controlled Congress, instead of granting all slaves their freedom instantly, would have phased in emancipation over 20 years. It all depends on your definition of compassion.
Gerry Smedinghoff, Wheaton, IL

Legislative Alert

Clinton's Major Medicare Expansion

Now opens another major chapter in the relentless effort of the Clinton Administration to expand government control over American medicine: the President s long-awaited Medicare reform proposal. The President says, of course, that he is proposing reform of the Medicare system to "modernize" it and make it more "efficient," but the specific changes he is proposing build largely on Medicare s well-established 60s framework of central planning and price controls.

With the addition of a prescription drug benefit and a proposal to include another whole class of Americans-those between ages 62 and 65-in the Medicare program, the latest Clinton proposal represents an historic expansion of bureaucratic control over medical benefits, treatments and procedures, and their prices.

While there are ample differences between the Clinton Health Security Act of 1993 and the latest Clinton Medicare proposal, the specifics demonstrate a recurrent theme: they depend upon a high degree of bureaucratic micro-management and contain various and specific restrictions on patient choice.

The proposals for Medicare managed care plans call for competition on "price," but make sure that the choices available to people are all basically the same. In other words, in the Medicare HMO area, it looks as if we are witnessing the resurrection of the old Clinton-style "managed competition" model of managed care networks.

The "competition" envisioned is actually another version of the government contract bidding-Pentagon style-in which the government as buyer uses its leverage to get the "best deal." As Congressional liberals always said about Pentagon practices, this often turned out to be not the best deal: $400 toilet seats, and such.

To "make Medicare efficient," the Clinton proposal calls for giving the Medicare bureaucracy new purchasing authority, plus incentives for patients to use lower cost "providers" and care "coordination" for patients with chronic illnesses. These provisions are expected to save the program $25 billion over 10 years. Additionally, Clinton would establish a "competitive defined benefit" for managed care plans, allowing them to compete on cost and quality. Savings for "wise choice" would be divvied up: 25% for the government and 75% for the patient. Over ten years, the Administration thinks this proposal will save "billions." Beyond these changes, the President proposes to slow the growth rate in Medicare spending from 4.9% to 4.3%, saving an estimated $39 billion over 10 years.

Expanding Eligibility

The President s proposal revives a proposal, rejected in the last Congress, that would permit persons aged 62 to 65 to "buy into" the Medicare program for about $300 per month. [But they will have to repay this "loan" later, after reaching the age of 65.] Persons aged 55 to 62 would be able to buy in for about $400 per month if they lost their jobs and job based medical insurance. [Persons paying more than $4,800 per year for medical insurance might be tempted; the White House admits that "some Federal costs are expected due to adverse selection."]

Enhanced Financing

The president proposes to dedicate 15% of the projected budget surplus-$794 billion over a 10-year period-to Medicare, thereby keeping the Medicare trust fund solvent until 2027.

Hooked on Drugs

The centerpiece of the Clinton proposal is the new Part D prescription drug benefit. Covering prescription drugs in an unreformed Medicare program may appeal to too many lawmakers in Congress, but it would saddle the financially troubled program with a costly new benefit that could threaten the quality and availability of drugs for senior citizens.

As proposed, the benefit would have no deductible, and would pay for half of a Medicare patient s drug costs up to $5,000 when the benefit is fully phased-in, in 2008. The monthly premium for the drug benefit would be $24, rising to $44 per month by 2008, under current projections. For patients with incomes below 135% of the official poverty line, there would be no premiums or cost sharing. Moreover, for seniors with incomes between 135 to 150%, there would be some premium assistance, but the details are not yet available.

Initially, Administration officials said that their prescription drug benefit would be universal but "fiscally prudent." Two things happened since that prediction of fiscal prudence. First, officials said that they were going to try to make the prescription drug benefit a universal benefit for all 39 million patients, displacing the private market. This is not fiscally prudent. Second, the Administration toyed with, and then dropped any attempt to means test the drug benefit. Liberal seniors lobbies don t like anybody telling the wealthy they can t have their "middle class" entitlements. They re entitled to them, even if they re no longer middle class.

Today, 65% of senior citizens, including upper-income senior citizens, already have prescription drug coverage, largely from private sources, including Medigap and employer-based insurance. According to the National Academy of Social Insurance, only 4% of seniors have costs exceeding $2,000 per year, and 10% have costs between $1,000 and $2,000.

According to ace health reporter Robert Pear, "Administration officials said the design of the President s prescription drug proposal had been heavily influenced by politics. Mr. Clinton, they said, wanted to provide some tangible benefit to a large number of people, rather than helping a small number with high drug expenses" (NY Times, 6/29/99). So, instead of targeting the limited financial resources of the Medicare program toward those who need the most help, the President wants to displace the already existing private market for prescription drugs and have the rest of taxpayers, including low-income working families who are struggling to pay their own medical bills, subsidize all Medicare beneficiaries, including Donald Trump.

Good old 18th century Bourbon Dynasty politics. But not exactly a lesson in fiscal prudence.

We know one thing: prescription drug costs can be huge. Right now Medicaid pays more for prescription drugs than it pays for doctors. It appears that the Clinton Administration estimates on prescription drug policy were changing every few days, up until the last moment. It was first reported that Medicare recipients would pay $10 to 25 more each month for the prescription drug benefit (NY Times, 6/9/99). Then, Administration officials said that they were looking at keeping the cost of the benefit below $70 to $90 per month, the amount that it would cost in a Medigap policy, but that it would be more generous (NY Times, 6/16/99). Next, officials said that the prescription drug coverage would fall somewhere between $20 and $90 per month (NY Times, 6/24/99). The Administration estimates a total cost of $118 billion over 10 years, beginning in the year 2002.

The estimates are likely to be wrong. If past experience is any guide, the benefit will prove far more costly than official government projections. Originally projected at $5.7 billion, the true costs of the 1989 Medicare Catastrophic drug benefit skyrocketed to over $11 billion within just 12 months. The erroneous cost projections of the drug benefit helped to sink the whole Catastrophic bill.

Notice a pattern here? Upon unveiling the 1993 Health Security Act, Clinton and his team said that the plan would pay for itself, and that it would not cost American families any more than they were already paying. In February of 1994, the CBO reported that the Clinton Plan would add $74 billion to the deficit.

Observe that the drug benefit is not insurance, but a straight subsidy. The government would pay up to $2,500, or half the cost, of prescription drugs up to $5,000: but no more, even if the beneficiary has drug expenses running up to $10,000 to $15,000 per year. Thus, the Medicare beneficiary would thus assume all of the risks in giving up the Medigap insurance for the cheap, but capped, prescription drug benefit. This is the reverse of a catastrophic policy, under which the beneficiary spends up to a certain amount-a stop loss-and is then guaranteed 100% coverage for the costs of a service or benefit.

Consider another odd twist. The benefit is supposedly voluntary, but if a Medicare beneficiary once chooses the Clinton Drug Option, he is locked into it: According to sources familiar with the proposal, Clinton will recommend that Medicare patients be allowed to choose to enroll in the drug benefit plan, but will not be able to drop in and out of it" (Wash Post 6/29/99).

The Administration expects 31 million Medicare patients to take advantage of the drug benefit, largely because of the price, which is expected [according to some estimates] to range from one-third to one-half of typical Medigap drug premiums. At first, seniors will be delighted by "cheap" drugs. The short-term politics for critics of the Clinton proposal will, therefore, be tough. But cheap government health care benefits can be very expensive. What Congress and the Clinton Administration can give, they can also take away. Curiously, even as the Clinton Administration is saying it wants to add a prescription drug benefit to Medicare, it is also, in its most recent budget submission, calling for a reduction of payments for certain drugs that are covered by Medicare under current law, including cancer drugs. These drug payments cutbacks amount to $2.5 billion over 5 years. Figure that out.

The design of the proposed program-with no deductible-is not one to dampen utilization. When the fine print is available, don't be surprised to see utilization or price controls, or drug formularies. Politicians and their bureaucrats cannot control demand; they can only control supply. They can do that in many subtle or not-so-subtle bureaucratic ways, as by refusing to pay except under certain carefully defined circumstances, all the while telling senior citizens that the drug or service is "covered" when "necessary."

Having Faith in HCFA

HCFA, of course, through the new Medicare Part D, would be responsible for running the Medicare prescription drug benefit. Charming. The General Accounting office (GAO) and others have underscored the inability of HCFA to efficiently handle its current responsibilities. Its handling of the processing of more than 800 million claims in Medicare Parts A and B is an historic mess. HCFA s management of Medicare Part C -the ironically named "Medicare Choice" program-has been a disaster. This time, apparently, HCFA will get it right. But please note that, for the historical record, HCFA s attempts to manage the first Medicare prescription drug program, under the ill-fated and repealed Medicare Catastrophic Act in 1988, was fraught with, shall we say, practical infirmities.

Instead of cutting back on HCFA s regulatory morass, the Clinton Administration, true to form, is adding to it. The Clinton Plan will thus increase, not decrease, the regulation and the paperwork that is smothering the program.

An Historic Opportunity

The President could have built upon the solid work of the Bipartisan Medicare Commission and created a better form of medical insurance for American seniors based on the principles of patient choice and real competition. But lawmakers can seize the opportunity the President has passed up and forge a superior policy.

If Congress really wants to give seniors the option of buying prescription drugs in a competitive market, at affordable prices, it should look to the best features of its own program, the Federal Employees Health Benefits Program (FEHBP), which covers nearly 10 million federal employees and their dependents. Federal employees enjoy a level of personal choice, quality, and efficiency that rivals many of the best corporate plans in America.

It is not out of the question for Congress to create a new, and better, system for the next generation of retirees based on private choice, private plans, and freedom for doctors and patients. The prescription is simple: (1) Adopt a "premium support" approach to Medicare reform. This would assure seniors they would have a basic package of benefits they could afford and encourage them to pick the most cost-effective coverage. (2) Allow the "fee-for-service" Medicare program to compete with private plans. Seniors who want to stay with the traditional plan would be better served by the program if it is given the flexibility to compete with private bidders.

As the Bipartisan Medicare Commission noted in its report, Medicare is poor value for money. Members of Congress know it. But too many seniors, unfortunately, don t, largely because they have not been exposed to anything other than Medicare for their primary coverage in retirement.

It is incredible that as Americans enter the 21st century, they must retire into an outdated medical "insurance" system in which it takes a major Act of Congress to add drug coverage-a benefit normally offered by private insurers in response to consumer demand. That fact alone ought to make Members of Congress realize that this relic of the 1960s is in need of a thorough overhaul.

Robert Moffit is a prominent Washington health policy analyst and Director of Domestic Policy at the Heritage Foundation.