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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 57, No. 12 December 2001
At the recent AAPS Board of Directors meeting, Past
President John Dwyer, M.D., of Illinois, asked: "What is Plan B?"
What will we do if our challenge to the HIPAA Privacy Regulations
fails? All lawsuits against the government are a long shot-and
these days the government, as our Protector against Terrorists,
receives even more deference.
All lawsuits take a long time to adjudicate. The government
has already asked for and received a 30-day extension for
responding to our complaint. Their first response is now due
early in December. The enforcement deadline, however, remains the
same: April, 2003. Compliance with the transaction code standards
by insurers-the key to establishing a national data base of
medical records-is earlier: October, 2002.
It is virtually certain that your office will be
noncompliant with some portion of the 1,500 pages of the rules
come April, 2003. It is absolutely certain that you could be
accused of noncompliance should you, for some reason, be
Like the other penalties in HIPAA, punishments are harsh.
Potentially, you could spend a year in prison for using
a bit of lawfully acquired information before getting the patient
to sign a form (see Donna
Boswell's presentation at the 2001 spring meeting.)
There is no reason to expect that you will be able to obtain
more reliable guidance on these regulations than on Medicare
rules. The General Accounting Office (GAO) "could not have been
more stunned" to discover the error rate in official CMS sources
about billing. According to Leslie Aronovitz, GAO Associate
Director for health financing and public health services,
speaking at our annual meeting, the GAO placed 60 telephone calls
to carriers, posing frequently asked questions from carriers' own
web sites. Only 15% of the answers were correct; 50% were
incomplete and would lead to denials if followed, and 35% were
Silver Bullet compliance seminars are being offered
throughout the land. From them you might be able to learn the
list of 649 types of "business associates" with whom you will
need a compliance agreement (yes, the janitor is one). After
outlining some of the details, attorney Vickie Yates Brown
advised: "Pray that the AAPS lawsuit succeeds."
The AMA offers to "help" with compliance, but is definitely
not working to help overturn the regulations. The
reason: The AMA actually chairs the National Uniform Claim
Committee (NUCC), with the HCFA/CMS as a critical partner. The
uniform claims and the national data base are the rationale for
the privacy regulations-and a "huge step toward the
federalization of medicine," stated Ms. Brown. The regulations
assure a lucrative revenue stream for the AMA, which triumphantly
announced a major victory:
"The intention and primary goal of the AMA's CPT-5 Project
was to have CPT chosen by the Secretary of HHS as the national
standard procedure code set for physician services. This
Final Rule [Standards for Electronic Transmission]
represents an unequivocal success for the AMA's effort and
investment in CPT-5" [ notice on every page of NUCC site].
There is one obstacle in the path of establishing a cradle-
to-grave medical dossier on all Americans: the lack of a unique
patient identifier. This was once again defunded by legislation
introduced by Rep. Ron Paul, M.D. (R-TX). This year-by-year
effort needs to be made permanent, although the federal
government is seeking an alternate method to connect the data.
Though seminar ads emphasize the privacy regulations,
remember that October, 2002, is the month in which all data
submitted to insurers will be in a conduit to the government, in
the format of the standard transaction code set. "There is no
latitude," stated Ms. Brown. If you do business with any insurer,
you will soon have to transmit electronically.
There will be a radical change in most medical
practices by October, 2002, or April, 2003: either to
attempt HIPAA compliance, or to stop submitting insurance claims.
It is likely that most practices will obtain a stack of new
forms, as from the Kansas Medical Mutual Insurance Company,
attempt to carry on business while pretending to comply, and hope
that the Office of Civil Rights doesn't target them.
Alternatives include: (1) Retiring from the practice of
medicine; (2) Participation in a campaign either to refrain from
work or to demonstrate the effects of minute attention to
compliance, with a bureaucratic roadblock at every step, until
the regulations are withdrawn by HHS or repealed by Congress; (3)
Civil disobedience, with or without publicity; (4) Changing your
practice to make the rules inapplicable. Only (3) or (4) can
protect your patients' privacy, and (3) carries heavy civil or
Option (4) may be impossible if the government successfully
argues that the rules are triggered by using any piece of
information that has ever been in electronic format anywhere.
Such an extreme position may not pass constitutional muster, even
in today's courts. HIPAA could be the stimulus needed for
practices to perform an administrativectomy and free themselves
from all third parties. HIPAA-free offices would transmit
information only to patients or-orally-to medical professionals
directly responsible to patients. Patients would have to file
their own insurance claims-if any.
Unthinkable? Older clinicians know that before Blue Shield,
most doctors didn't "take insurance." Before Medicare Part B,
Blue Shield, managed care, and other first-dollar-coverage
schemes, most physician services were not covered. Costs were
lower, most patients paid, and fewer physicians experienced
bankruptcy. The first to try it may prosper most.
AAPS Re-Affirms: No Right to Medical Care
At the 58th annual meeting, the General Assembly of AAPS
passed the following Resolutions, with no nays being heard (full
text posted here).
Resolution 2001-1: Be it resolved that: the Association
of American Physicians and Surgeons declares that medical care is
a not a right that can be bestowed by the state and that any
laws, regulations, or policies that attempt to establish a
government-mandated entitlement to medical care are not only
unconstitutional and therefore illegal, but immoral and inimical
to the physician's ethical principles; and AAPS will actively
oppose any initiatives to legislate such a "right" or
Resolution 2001-2: Be it resolved that: AAPS oppose
continued and increasing government interference, supervision,
and control in the practice of medicine; promote the immediate
repeal of all laws, regulations, and policies that allow direct
or de facto supervision or control over the practice of medicine
by federal officers or employees; and call for a moratorium on
any further laws, regulations, or policies that authorize
government control over the practice of medicine.
Officers for FY 2001/2002 are:
President: Robert Urban, M.D., of Belle Vernon, PA
President-Elect: Chester Danehower, M.D., of Peoria, IL
Secretary: Charles McDowell, Jr., M.D., of Alpharetta, GA
Treasurer: R. Lowell Campbell, M.D., of Corsicana, TX
Elected to three-year terms on the Board of Directors are:
Samia Borchers, M.D., of Dayton, OH; Melissa Kline Clements,
M.D., of Oklahoma City, OK; David MacDonald, D.O., of Renton, WA;
and Hilton Terrell, M.D., of Florence, SC. Claud Boyd, Jr., of
Augusta, GA, will serve for one year.
HIPAA Risk Matrix
Just developing a "map" for HIPAA compliance at CentraState
Health Systems took several months and extensive outside
consultation. The resulting matrix listed all the entities to
which information is sent; the reasons; security issues (such as
use of mail or FAX or a "workstation vulnerable to unauthorized
viewing"); minimal use policy; and requirements for a business
agreement, consent, or authorization.
Additionally, the privacy officer needs to find out what the
state laws are (www.ncsl.org),
especially in California (
www.leginfo.ca.gov), with attention to statutes, regulations,
and case law. Then, one needs to determine whether or not the law
is preempted by federal law (the process is outlined at
www.aha.org/hipaa/hipaa_home.asp). All states where your
patients reside must be checked. HIPAA also requires compliance
with other federal privacy laws that you might not be in
compliance with already (the Privacy Act of 1974; FOIA; ERISA;
the Electronic Standards in Global National Commerce Act; Gramm-
Leach-Bliley; the Food, Drug, and Cosmetics Act; and OSHA
standards) (HIPAA Compliance Alert 11/01).
Sept. 18-21, 2002. 59th annual meeting, Tucson, AZ.
Dan Burton Chosen for Shining Scalpel Award
"In recognition of his outstanding service to the American
people in cutting through the jungle of misinformation to reveal
the truth about vaccine mandates," the Shining Scalpel Award of
AAPS was conferred on the Hon. Dan Burton (R-IN), who has
courageously persevered with controversial hearings on vaccine-
related issues, such as conflicts of interest in the committee
that "recommends" vaccines. Beth Clay accepted the award in the
Eliminate the Agent?
In a book entitled Health Networks: Can They Be the
Solution?, Thomas Weil makes the point that medical care in
Germany and Canada is 25% cheaper than in the U.S., despite
flagrant overutilization of hospitalization, even if one adjusts
for lower physician pay and less utilization of technology.
George Fisher, M.D., in a HealthBenefitsReform discussion asks:
"Would you care to guess where the other 25% goes?"
The best solution Weil can devise is a combination of the
three failed approaches of regulation, brutalized competition,
and micromanagement. But as Greg Scandlen points out, all of
these rely on supply-side rationing, as opposed to patient-driven
care in which patients self-ration based on their own values,
resources, and preferences.
There is also the "agency problem" of employers negotiating
insurance contracts on behalf of employees-and also of third
parties acting on behalf of others. It is not just a problem of
betrayal of trust, as Dr. Fisher points out, but of the former
agent taking charge, and those formerly in charge (physicians, in
his view) becoming vassals.
The key problem is that the "normative question" is "to
determine how much redistribution is to be required." James
Blumstein states that physicians wishing to return to 1965-75 are
"not being realistic." He is undoubtedly correct.
If medical care-and the fruits of redistribution (legal
plunder)-are taken to be a right, as implied in the 1965
establishment of Medicare, the result is inexorably a complete
government takeover. Can we change direction? In many, the
entitlement mentality seems to be fixed in stone. Congress could
help by expanding MSAs and private contracting, but shows no sign
of acting soon.
Change will not come from the top down. It will start with a
few bold physicians and patients declaring independence and
asserting their rights. October, 2002, could be the last
opportunity. What will you do?
* * *
"...it does not require a majority to prevail, but
rather an irate, tireless minority keen to set brush fires in
Coding Case to Be Reheard En Banc
In an unusual action, the Fifth Circuit Court of Appeals
granted a petition for rehearing en banc in the case of Peter
Veeck v. Southern Building Code Congress Intl, No. 9940632
(see AAPS News March 2001). AAPS
filed a brief amici curiae in support of Veeck's right to post
building codes on the Internet, together with Eagle Forum
Education and Legal Defense Fund.
"The First Amendment right of free speech protects Veeck's
actions, and precludes SBCCI's ownership of the law," AAPS
argued. "Robust public debate about the law can only take place
if the law itself is freely restated, copied, and criticized."
Amici have encountered similar infringements on free speech. In
the case of the AMA's CPT billing requirements, "a restatement of
its absurd complexities and ambiguities, replete with criminal
sanctions for violations, would itself constitute a powerful
criticism of government requirements."
Virtually all states now provide electronic access to
statutes, regulations, and judicial opinions over the Internet,
promoting a more informed citizenry. "The lone exception to
freely available, electronic legal requirements is material
withheld ... due to a proprietary interest asserted by private
entities like SBCCI."
"Currently, private organizations like the SBCCI and the AMA
can tailor their codes, with the force of law, for the benefit of
their own financial interests." CPT codes, by "constantly
changing in trivial ways," provide a "prodigious revenue stream
to the AMA as it sells the revised versions."
The development of codes in the public domain, with
unfettered access to the law, has worked well, as demonstrated
with the Uniform Commercial Code (UCC). This model should also be
applied to building and medical codes.
The full brief is posted at here. Funding was
provided by the American Health Legal Foundation.
AAPS Wins Round in Pediatric Rule Case
On October 26, Judge Henry Kennedy, Jr., of the U.S.
District Court for the District of Columbia denied the
government's motion to dismiss the case of AAPS et al. v.
United States Food and Drug Administration (Civil Action 00-
02898 (HHK), see AAPS News April
AAPS argued that the FDA's rule would reduce the number of
available drugs and hence inhibit the physician's ability to
practice effectively. The government argued that plaintiffs had
no standing to sue and that the matter was not ripe for
adjudication. The court ruled that "agency's policy has
crystallized, as the FDA has already begun enforcing the rule in
ways that may cause delays in drug approval."
Tainted Prosecutions of Tainted Claims
Physicians are very nervous about the Stark rules against
self-referral, and for good reason. A particularly harsh
enforcement "tool" that they should be aware of is the use of the
False Claims Act, with its triple damages and per-claim fines. In
a September 2000 letter to Rep. Pete Stark (D-CA), the Justice
Department stated that it is pursuing 50 false claims cases
alleging illegal self-referrals, all brought by whistle-blowers
(Medicare Compliance Alert 10/22/010).
In fraud prosecutions under the anti-kickback statute,
prosecutors must show a mens rea of knowing
participation in an illegal arrangement to exchange referrals for
remuneration, and prove that a violation occurred "beyond a
reasonable doubt." In contrast, under the FCA, the mens rea
element is satisfied by merely showing, by a preponderance of the
evidence, that the defendant acted in "reckless disregard" or
with "deliberate indifference to the truth or falsity" of the
claim submitted. "Tainted claims," which are neither false nor
fraudulent in themselves, may still be actionable under the FCA
because the defendant requested payment from the government while
allegedly in violation of a separate law.
The tainted-claims approach under the FCA creates a private
cause of action, though Congress did not. Because the funds
"recovered" are ultimately the source of appropriations for
future antifraud action, both the private plaintiff and the
public prosecutor have a financial incentive to proceed. This can
corrupt the process in a manner not unlike the "kickbacks" that
the Stark rules are intended to deter.
An extensive analysis by Dayna Bowen Matthew in the
Indiana Law Journal, Summer 2001, concludes that the
tainted-claims approach is based on a faulty economic assumption
that all referral fees are harmful. Further, such litigation is
"more effective at serving the financial self-interest of both
government and private enforcers than at actually reducing the
incidence of fraud."
Dr. Krizek Files Petition for Writ of Certiorari
In a petition to have their case (see AAPS News Sept. 2000) heard by the U.S. Supreme
Court, Dr. and Mrs. Krizek claim: "The government has `won' in
this case through legal criteria created ex post facto
and applied retroactively.... Dr. Krizek has been judicially
punished for some sort of alleged billing transgressions, even in
the absence of proven damages. Yet, the petitioners have never
had a fundamental question answered...: what exact legal
standard have they breached?"
Key questions include: (1) Does alleged injury to the
Government's sovereignty, without proof of actual
economic damage, establish standing to sue civilly under the
False Claims Act? (2) Does allegedly incorrect use of the AMA's
CPT codes, which are privately copyrighted, not promulgated as a
rule under the Administrative Procedure Act, and utilized by the
Government pursuant to a contract, constitute injury to
sovereignty, as contemplated in the Stevens decision?
In Stevens (529 U.S. 765 at 772-773), the court
held that to have a valid claim for damages under the FCA, the
Government must seek "compensation for, or [to] prevent the
violation of a legally protected right." The Government does not
possess a legally protected right to interpret CPT codes,
Testifying at Dr. Krizek's trial, Dr. Tracy Gordy, current
chairman of the AMA's CPT Editorial Panel, stated that CPT codes
are "guidelines" and not legal mandates.
This case highlights a key dilemma: Does the CPT have
the force of law, or not? If so, the AMA's copyright is
threatened. If not, how can physicians be criminally prosecuted
or civilly fined for coding disputes, and why do they need to
have an expensive plan to comply with a non-law?
Petitioners also argue that in making an award of
restitution for unjust enrichment, the District Court substituted
its own judgment for that of both HCFA and the doctor in
determining what constituted a "proper" medical treatment, thus
threatening physicians' freedom to make medical decisions.
The brief is posted here. The American Health
Legal Foundation helped support this Petition.
No Legal Obligation. Recently, Upstate
Medicare sent me a letter threatening OIG sanctions if I fail to
file claims with Medicare HMOs. In 1998, Congressman Ron Paul
investigated this question and wrote that "my staff ... has been
assured by [HCFA] that a physician who does not take assignment
and is not part of a Medicare HMO network incurs no legal
obligation to file with Medicare when treating a patient enrolled
in a Medicare HMO. Furthermore, the physician does not have to
abide by Medicare's price controls."
Nevertheless, the Blue Bunglers, having misinterpreted the
law, have wrongfully informed my patient that I "have a
contractual obligation" to provide her care free of charge. I
have signed no contract with Medicare or any HMO, for
professional ethical reasons. Truth and actual laws don't deter
the Blue Bunglers in their ongoing efforts to destroy my patient-
physician relationships. When proven wrong, there is never any
consequence for their egregious misdeeds. HCFA/ CMS has
consistently told them that they have no obligation to write back
to patients to tell them the truth. The truth is irrelevant to
this evil, destructive bureaucracy.
Lawrence R. Huntoon, M.D., Ph.D.
Sisyphus Must Stop. From an open letter to Diane
Lardie, National Director, Universal Health Care Action Network:
Your support of the government as the answer is totally wrong....
[T]he government is the biggest corporate monster to defeat if
genuine Universal Health Care is to become available. An elephant
is a dog designed by a committee, while HCFA/CMS is a
hippocampelephantocamelos (from Cyrano de Bergerac)
designed by Congress. In no way can you decry "corporate" waste
without condemning government waste more. The megabureaucracy
model fails without fail.
The answer is Medical Savings Accounts. MSAs create an
ownership experience with all its psychological benefits,
fostering and teaching freedom, self worth, and enterprise.
Samuel Nigro, M.D., Cleveland Heights, OH
Role Reversal. At the start of the 20th century, it was
believed to be the government's duty to protect the public from
snake-oil salesmen who failed to deliver what they promised.
Today, the public needs protection from low-life politicians who
promise paradise but can't even deliver a first-class letter.
Gerry Smedinghoff, Actuary, Scottsdale, AZ
Opted Out. It is more than a year since I opted out of
Medicare. How sweet it is! I want to thank AAPS and Andrew
Schlafly for helping me to get out.
Richard Ucci, M.D., Stamford, NY
Pass It Along. A gentleman from Hawaii, who was born in
China, called AAPS after visiting his ophthalmologist's office,
where he saw our Thanksgiving pamphlet. He asked for permission
to reprint. He plans to stand out in front of high schools and
pass it out. He is disgusted with our schools and with other
restrictions on our freedom.
Anne, President, Grassroot Grannies
Caution on Bylaws. I appreciate your sending me an
example of the pitfalls in signing bylaws. I used this
information in my presentation to the MEC, along with a petition
signed by 60 doctors on the medical staff. It turns out these
rules were recommended by Tenant lawyers and originated from the
California Medical Association. There is now a committee assigned
to getting rid of the thing; I am co-chairman.
Linda W. Wilson, M.D., Culver City, CA
Carrier Error. It has become clear that Arthur Pagan,
Branch Chief for CMS in Dallas, does not understand Medicare
rules and terminology [or] misconstrues them so as to illegally
deny claims to my patients. Additionally, it is interesting that
Medicare carriers are required to have a 95% accuracy rate and
the Texas carrier admittedly falls below that standard. How much
further would it fall if CMS did not cover for it? What is the
amount of money involved in a 5% error rate for the carrier? Note
that every physician is supposed to be 100% accurate in claims
Richard Swint, M.D., Paris, TX
Are You Next? A friend and son of one of my patients
was arrested, handcuffed, and put in jail today for "insurance
fraud" [billing for the midwife's services at a birthing center].
He is one of the most honest physicians that I know. And I
learned that Munson Medical Center is being audited, soon after
receiving some of the highest marks in the country from JCAHO.
The insanity is running wild.
Michael Harris, M.D., Traverse City, MI
Trade-Off. The average American could save $300,000
over a lifetime by buying moderately priced cars for cash,
keeping them for 10 years, and investing the savings. Americans
complain about having to pay for life-saving technology, but
willingly buy cup holders, CD players, and leather seats. As a
former human resources executive, I know that low-wage earners
commonly go without medical insurance to buy a $30,000 car.
Rather than endure withdrawal from the opiate of the masses-an
overpriced status symbol-we expect business and government to
subsidize medical care, making it more expensive for everyone,
especially the poor.
Craig Cantoni, Scottsdale, AZ
Legislative AlertDisplaced Workers
While Medicare reform, Medicare prescription drugs, and the
Patients Bill of Rights (PBOR) have clearly been knocked off the
Congressional table by the September 11 terrorist attacks, the
issue of medical insurance for displaced workers is very much on
the agenda. Without any assistance, many of these workers will be
left without private coverage, and their plight will fuel the
Left's campaign for a complete government takeover of American
medicine-a goal recently repeated by Senator Kennedy during the
summer debate on the PBOR.
The Left, as noted previously, has a simple plan: enroll
these previously working families in the welfare program-
Medicaid. Sen. Max Baucus (D-MT) proposes to earmark $17 billion
to subsidize 50% of COBRA coverage for displaced workers and to
allow states to extend Medicaid coverage.
Congressional Republicans are proposing to put aside $3
billion dollar for these folks, but they are not entirely clear
about how it is to be spent. Sen. Charles Grassley (R-IA) is
proposing to give states grants to provide coverage to displaced
workers, but he limits assistance to COBRA coverage.
Sen. Jim Jeffords (I-VT) is proposing an advanceable,
refundable tax credit, which makes sense, but he restricts the
credit to COBRA coverage, which doesn't. A better idea is to
broaden the debate into the bigger question of the tax treatment
of medical insurance, and how it limits portability, choice, and
ownership of medical insurance. Congress could build on
Jeffords's proposal by extending the tax credit to all displaced
workers, whether or not they have COBRA coverage, and allowing
them to use the credit for any private plan they wish, including
medical savings accounts. Once again, the issue is not money; it
is structure. How you organize the financing and delivery system
is key, and there are only two major ways to do it: through
government programs or through the private market. Now is a
chance for the free-market folks on Capitol Hill to make a
compelling case. We'll see whether they do.
Medical Cost Increases
Hewitt and Associates is projecting cost increases
between 13 and 16% next year, following a pattern of sharply
rising premiums. Indeed, the Center for the Study of Health
System Change says that in 2001 premium increases amounted to
11%. This is the highest increase in employer-based medical
insurance since 1992, when large firms reported an annual
increase of 10.9%. In 2001, those firms reported increases of
10.2%. So, for all intents and purposes, America is back again to
the spending debate that kicked off the "health care reform"
debate in the early nineties, converging in the presentation and
defeat of the ill-fated Clinton Health Care Plan.
Why are costs going up? There are several factors, including
the aging of the population and the development of new therapies,
particularly pharmaceuticals. Also, medical liability costs are
rising dramatically, reflecting a rise in jury awards, now
averaging $3.49 million (NY Times 9/10). Some malprac-
tice insurers are increasing premiums by more than 30%. Hospital
spending accounts for 43% of the cost increase, according to the
Center for the Study of Health System Change, representing the
largest jump in medical spending.
Aging of the population is probably the biggest factor
driving up the costs. In 1920, life expectancy was 54 years.
Today it is 76. While persons over 65 today make up 12.5% of the
population, they account for 34% of hospital expenditures.
Are we spending too much? Let us assume that leftist policy
analysts are generally correct: Americans are spending too much
on medical care-a big assumption. Even so, it does not logically
follow that either the White House or Congress knows what we
should be spending. There is no algebraic formula in Senator
Kennedy's bottom drawer that will reveal, like the Oracle at
Delphi, what the right level of spending is for the citizens,
individually or in general. The contrary assumption-that some
government official has some special competence in this area-is
not borne out by experience, either in Medicare, Medicaid, the
British National Health Service or the Canadian system.
What we say for certain is this: In an advanced society,
where people are living longer, are healthier and wealthier than
ever before, and are free to have access to high-quality care, we
are likely to have a high level of spending.
The current debate is, for those of us who came of age in
the 60's, quite ironic. We were routinely treated in college
seminars to tirades against the powerful military-industrial
complex and the war profiteers who made billions out of burning
villages in Vietnam and elsewhere, and told that money wasted on
cruise missiles and B-1 bombers would be better spent on medical
care or hospital construction. Then, medical spending was a good
thing, and the more, the better.
A more important question is this: Are we getting value for
our money? And the answer is-on balance-probably not. The reason:
medical care is the only sector of the American economy that is
not subject to the ruthless discipline of a consumer-driven
market. Most of the population is insulated from direct costs
through an outdated third-party payment system, in which people
use insurance to pay for routine medical expenses, so there is no
normal collision of supply and demand. A socialist system
guarantees lesser value for money and a remarkable level of
inefficiency in the financing and delivery of wheat, widgets, or
medical services. The free market, on the other hand, is the most
ruthless mechanism designed in history to control costs and
allocate limited resources efficiently. Without a free market in
medical care, we have no mechanism to assure value for money.
The FEHBP Premium Hikes
The Federal Employees Health Benefits Program, the
largest group health insurance program in the world, is projected
to have an average premium increase of 13.3%. Federal employees
union chiefs are going wild, and say that the FEHBP increases
prove that the market-driven structure for insurance doesn't
really work after all. On October 16, the House Subcommittee on
Civil Service and Agency Organization, chaired by Rep. Dave
Weldon (R-FL), held a hearing on the premium increases, and
invited a range of witnesses, including the District of Columbia
Commissioner of Insurance Lawrence Mirel, who argued strongly for
the inclusion of Medical Savings Accounts in the popular program,
and this writer, who made the same argument for MSAs and then
The Left has a different take on this, of course. The
National Treasury Employees Union is asking Congress to given
them a seat at the table so they can help the Office of Personnel
Management (OPM) keep the pressure on Big Insurance. One of its
top recommendations is to give OPM authority to purchase drugs
and other benefits at big discounts on the theory that a
government monopoly of purchasing would guarantee economies of
scale. So the government would become the customer, and vendors,
doctors, and hospitals would henceforth be beholden to the
government instead of the patients. While we are at it, why not
have the government monopoly purchase food, clothing, and
housing, so we can all enjoy the economies of scale of socialism
on a grand scale?
If FEHBP becomes like Medicare, then it will have the same
dynamics as Medicare. The government will purchase the services,
but households will still pay 100% the costs-in a different way.
Will a Medicare style system control costs? It all depends upon
how you measure cost. A government system can cut spending, while
the actual cost to individuals and families, in terms of out-of-
pocket expenses as well as the denial of care or the loss of
access to care, can soar. In 1997, the Congress reduced payment
for hospitals, nursing homes, and home health care agencies. The
result was a crisis in which 2,000 home health agencies shut
down. Employers have done much the same thing through HMOs-and
employees and their families have borne the cost.
The new Bush team at OPM is not buying any of this, but the
professional career civil servants there still like the idea.
They have been hankering for years to turn the FEHBP into
something that looks the Medicare program.
The FEHBP increases should be worrisome to everybody, not
just federal workers and retirees. Since the FEHBP has a superior
historical record of cost control, the increases are an ominous
indication of even higher premium increases in the rest of
America's employment-based medical insurance system.
FEHBP cost increases surely reflect broader changes in the
market, particularly the growing patient demand for high-quality
prescription drugs. But there are also factors, peculiar to the
program, which are not inherent in its structure. The first is
the artificially skewed demographics of the federal workforce,
which is significantly older than the private sector workforce
and aging rapidly. Not only do older worker have higher costs,
but a disproportionately large portion, about 40%, of FEHBP
policyholders are retirees. In sharp contrast, many private
companies have ceased or limited coverage for retirees.
A second reason for cost increases is the recent tendency of
OPM to break with what the Congressional Research Service has
described as its "passive" management (they didn't meddle much)
and the adoption of a active, aggressive, regulatory approach
during the Clinton years. Between 1990 and 2001, the Executive
Branch, either independently or sometimes at the urging of
Congress, made 44 specific decisions relating to health benefits.
If understood as ancillary to the basic statutory benefit, these
additions have the equivalent economic impact of the benefit
mandates that are a prominent feature of state medical insurance
laws. Whatever the merits of any particular intervention,
mandates impose higher costs. So why are leftists in Congress so
surprised that their premiums are going up? They are getting a
taste of their own medicine. At least there is some small measure
of justice in this world.
So Goes Maine?
The state legislature of Maine, toward the end of its last
session, voted to set up a commission to work out the details of
a government monopsony ("single-payer health care system"). Of
course, they have plenty of models to choose from: our own
Medicare or Veterans Administration; the Canadian system that is
a walk across the border; or the British National Health Service,
the groaning Mother of All Socialized Medicine, a mere 5«-hour
plane trip away. It is not as if the commission were charged with
reinventing the wheel. The inside betting is that the Maine
Commission will look a few miles north and adopt the Canadian
system. They are to make their recommendations to the State
legislature in March 2002. So, Maine is off and running to
socialized medicine, right?
Well, not quite. The broad, attractive themes of superior
socialist efficiency, an end to HMOs and administrative costs,
and sentimental appeals to the equality of universal coverage
really never quite cut it. The commission is not likely to
complete its big job on time. It is really not so simple. The
Commissioners will have to ask some really tough questions. For
example: Will state employees and legislators be enrolled in the
same system as everybody else with no favoritism in medical
treatment? Or, as in so many cases, will there be a double
standard-separate treatment for the rulers and the ruled? Will
Maine citizens be forced to give up their private plans? Will
they have access to private plans or the right to choose private
plans instead of the government plan? Will they have a right to
contract privately with their doctors and pay cash directly for
medical services without penalties or regulatory obstructions?
Will Maine citizens who are on Medicare or Medicaid or state and
federal employees be compelled to enroll in the single-payer
plan? And will they seek, and get, a waiver from the Bush
Administration to make that happen? How will they pay for it?
Some form of payroll tax, cigarette or alcohol tax, or general
revenues? How can they raise the level of taxation as high as
they must and keep business in the state? How do they prevent
their legislation from becoming the Vermont Economic
Redevelopment Act of 2001? How will they control costs? Will they
set budgetary limits on spending? And if they do, will they
forbid private medical spending? Will they impose price controls
on doctors and hospitals? And if they do, how will they prevent
shortages in the quality and quantity of medical services? If
government officials take over the responsibilities, and create
the equivalent of a giant government HMO, will Maine citizens
have a right to sue government officials who deny them coverage
for medical service? Will patients have redress against those
whose regulatory actions result in injury and death? Will there
be a patients' bill of rights for patients? Just a few questions.
Robert Moffit is a prominent Washington health policy
analyst and Director of Domestic Policy at the Heritage