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Volume 60, No. 12 December 2004

ELECTRONIC MEDICAL RECORDS

What Hillary Clinton desired, President Bush has begun to implement with Executive Order 13335, which calls for widespread adoption of interoperable electronic health records (EHRs, or EMRs) within 10 years. Additionally, the Medicare Modernization Act requires the establishment of a Commission on System Interoperability and the development of standards for electronic prescribing.

Health Information Technology (HIT) is an essential part of what Sen. Edward Kennedy calls a "peaceful revolution" that will bridge the "quality chasm" while controlling costs. Our system "lavishes funds on sickness care and neglects...health promotion and disease prevention" (Congress Record 6/23/04).

Recognizing that "no socialistic approach to medicine has worked well anywhere in the world," reformers such as Bill Bysinger of Mercer Health Systems echo the call for the "public/private collaborative model" (HealthLeaders.com 10/22/04). So do the Markle Foundation and the Robert Wood Johnson Foundation in their Connecting for Health project (see www.markle.org for a list of stakeholders and a roadmap.)

With "electronic connectivity," overseers can "connect the dots of our conditions and our care over the years," Sen. Clinton explains (CCHC Insider Report, summer 2004). Computers will help doctors make treatment decisions, as by reminding them of "the conditions that must be fulfilled before surgery is considered appropriate." We need a "new social con- tract...premised on joint responsibility to prevent disease" and "individual responsibility reinforced by national policy."

While HHS Secretary Tommy Thompson says "we can't wait any longer," as of 2003 only 13% of hospitals and 14 to 28% of doctor's offices had implemented EHRs and made the touted "quantum leap in patient power, doctor power, and effective health care" (Murcko A, AzMed Sept/Oct 2004). And 27% of physicians using EHRs in Maricopa County, AZ, say they want to go back to paper (Round-Up Oct 2004).

There are profits to be made on hardware, software, consultation, and standards development both for data and disease management. Nearly 90% of authors of clinical practice guidelines have a financial relationship with the pharmaceutical industry (JAMA 2002;287:612-617).

For physicians, however, there are mainly costs, in dollars and practice disruption. An EHR system can cost $200,000, or can be obtained from open sources for $20,000 plus the cost of customizing the system (IM News 8/15/04). The American Academy of Family Physicians offers an on-line spreadsheet for help in purchasing a system; the bottom line is a 5-year cost of $126,239 (FPM April 2002). The hypothetical cost savings accrue primarily to public and private payers and will not be achieved just by using less paper.

Government subsidies are proposed. Bysinger suggests allocating from 1 to 5% of a wide variety of government budgets, as for highway projects, or tax revenues, as on alcohol or state lotteries, to build the new infrastructure.

Then there are incentives, such as "pay for performance."

Of course, the EHR also facilitates the next obvious step: refusing to pay for whatever is defined as an error. HealthPart- ners of Minnesota has announced that it intends to withhold payment when a certain type of error has occurred possibly for the entire episode of care (CCHC, 10/6/04).

The CMS pilot program called DOQ-IT (Doctor's Office Quality Information Technology Project), launched Sept 2, uses EHRs to track "key quality indicators." While a spokeswoman for the American Health Quality Association states that quality improvement organizations will not use the data against physicians in audits or in court, the same cannot be said for CMS (Medicare Compliance Alert 9/13/04).

Wonderful though HIT may be, the national IT infrastructure cannot happen without government involvement, stated Newt Gingrich (AM News 8/9/04). He thinks use of EHRs by physicians will be mandatory within 10 years.

"In the long run, it will be malpractice to have paper records because you kill people [with them]," Gingrich said.

And in the meantime, states can delicense physicians for having "inadequate" records.

Will the EHR, linking patient-entered information with the latest research, "translate finally into an important opportunity for resolving the access problem"? (AM News 7/12/04). Does that mean making doctors obsolete?

A key feature in connectivity, national unique billing numbers for physicians, will be available from CMS on May 23, 2005, and will be required for all HIPAA-covered entities by May 27, 2007. Physicians who participate in Medicare will receive their NPI automatically; all others must apply.

The pieces continue to come together for the radical transformation of American medicine (AAPS News Feb 2001, Sept 2003). Various features are clear:

  • Even if there is no central database, at least not by 2010, a "network of networks" will make vast amounts of patient data available to all "authorized" persons.

  • Health data are seen by the government (and by the Markle Foundation) as highly relevant to national security.

  • Unprecedented profiling of physician compliance with government-defined "best practices" will be possible. Outliers can and probably will be destroyed.

  • "Population health" has priority, implying discrimination against the sick and the old, especially as retiring baby boomers push the system into bankruptcy.

The construction of the tower of the Panopticon, reaching to Utopia, is underway. It requires connecting all with a universal artificial language in the EHR. Such grand projects have reportedly failed before, as in the Tower of Babel.


Core Functions of the EMR

The Institute of Medicine (IOM) has defined eight core functions for the standard electronic medical record:

  1. Key data (diagnoses, allergies, lab results)

  2. Access to all new or past tests done by all clinicians

  3. Order management (medications, tests, services)

  4. Decision support (reminders to improve compliance)

  5. Electronic connectivity with patients and clinicians

  6. Patient support (access to records, interactive education)

  7. Administrative tools (such as scheduling systems)

  8. Reporting (compliance with gov't and private requirements)

 

Language of the EMR

Most doctors keep their records in English and expect to have free text entry in their EMR. But while a person can translate "pharyngitis" into "sore throat," a computer cannot. To get clinicians into the system, the Markle Foundation advocates an incremental rather than a "big bang" approach:

"[T]here is an important trade-off between specifying a requirement that the data be minutely structured and coded...or allowing it to be represented as simple text, suitable for interpretation by a person. The former approach is required for computer decision support, abstracting for public health surveillance, or aggregation for research and quality determination. The latter approach is important in the short term because it minimizes the burden on users [emphasis added] (Achieving Electronic Connectivity in HealthCare: a Preliminary Roadmap from the Nation's Public and Private-Sector Healthcare Leaders, see www.markle.org) .

Which coding language will be adopted for a national system of EMRs? In 2003, HHS signed a $32.5 million, 5-year contract with the College of American Pathologist to license its SNOMED CT system (Systematized Nomenclature of Medicine Clinical Terms), which is said to be the most comprehensive multilingual system of hundreds on the market, and a "positive first step in developing a common language." It has already been mapped to the ICD-9 system. But some say SNOMED is too "granular" (complex and precise), and that a classification system such as ICD-10 or the AMA's CPT is still needed. The National Committee on Vital and Health Statistics voted in November 2003 to ask HHS to replace ICD-9 with ICD-10 (which would also replace CPT codes). ICD-10 has 60 codes for decubitus ulcers rather than just one, making it easier "to monitor the problem more specifically," in the view of a CMS spokeswoman (IM News 2/15/04).

"Unless you move from paper-based to EMR, you can't take advantage of any language," stated Dick Gibson, M.D., chief medical information officer for Providence Health System of Portland, Ore. (HealthLeaders 12/3/03).

 

Central Planning vs. Free Markets

In his novel Prey, Michael Crichton writes: "In the old days, programmers tried to write rules that covered every situation.... Eventually, the programs began to fail out of sheer complexity.... Then programmers developed `distributed processing,' in which thousands of independent agents working as part of a network would produce optimal results." This was "bottom up," rather than "top down" programming. "[T]he behavior of the system emerged, the result of hundreds of small interactions occurring at a lower level....[I]t could produce surprising results...never anticipated by the programmers."

 

Officers Elected

At the 61st annual meeting in Portland, the following officers were elected: Kenneth Christman, M.D.; President-Elect; Charles McDowell, Jr. M.D., Secretary; and R. Lowell Campbell, M.D., Treasurer. The following were elected to a three-year term on the Board of Directors: Arthur Astorino, M.D., an ophthalmologist from Newport Beach, CA; H. Todd Coulter, M.D., an internist from Ocean Springs, MS; Chester Danehower, M.D., a dermatologist from Peoria, IL; and Timothy Kriss, M.D., a neurosurgeon from Versailles, KY.

 

Resolutions

Resolutions are posted at www.aapsonline.org.

61-1: AAPS condemns the practice of sham peer review; declares that those who conduct or participate in sham peer review are engaging in unethical and/or unprofessional conduct; and urges existing physicians' "Whistleblower" and "Patient Advocate" laws...be extended to all physicians....

61-2: AAPS supports efforts to insist or require that agencies of the United States and United Nations permit, encourage, and fund the use of DDT in tropical countries where malaria is prevalent and health ministries wish to use it to save lives.

61-3: AAPS supports the continued and increasing availability of vitamins and nutrients for the public at large....

61-4: AAPS believes it is not in the best interests of patients, physicians, or taxpayers for government to arbitrarily limit the growth of physician-owned single-specialty hospitals and that Congress should end the moratorium on physician-owned specialty hospitals in the Medicare Modernization Act.

61-5: AAPS considers the standard of care for prescribing controlled substances for the relief of pain to be that the physician is acting upon his best judgment for the benefit of his patient, and that the federal government does not have the lawful authority to interfere with the practice of medicine by second-guessing physicians' judgment in the prescribing of controlled substances for the relief of pain, and should cease and desist from criminal prosecutions based on differences of medical opinion on medical necessity or the appropriate use of certain drugs.

61-6: AAPS calls for Congressional investigations into whether the Department of Health and Human Services is in compliance with Sections 1801 and 1802 of the Social Security Act of 1965, and that until such an investigation is completed, calls for a moratorium on any further laws, regulations, or policies that extend the powers of HHS over the practice of medicine.

61-7: AAPS urges medical facilities to adopt transparent pricing policies, providing for public disclosure of what it charges self-pay patients for specific service compared to Medicare and the average insurance plan, and for the right of patients to negotiate...charges without retaliation.

61-8 establishes a scholarship fund in honor of Dr. Nino Camardese and encourages contributions to this fund in the AAPS Educational Foundation.


Victory for Tort Reform in W.Va.

Trial lawyers run West Virginia. Lester Brickman, a professor critical of runaway asbestos litigation, said that suing trial lawyers in W.Va. is like the Christians facing off against the lions. Predictably, the W.Va. courts rebuffed the lawsuit brought by obstetrician Julie McCammon, M.D., against the West Virginia Trial Lawyers Association (AAPS News June 2004). (It is awaiting appeal to the U.S. Supreme Court.)

One of the most powerful justices on the West Virginia Supreme Court has been Democrat Warren McGraw, who was president of the West Virginia Senate before being elected to the High Court. His brother has been state attorney general since 1992, giving the name added recognition.

Brent Benjamin, referred to by the press as an "unknown Charleston lawyer," ran a campaign against Justice McGraw, emphasizing the need for tort reform and integrity in the judiciary. The trial attorneys and labor unions poured $1 million into McGraw's campaign.

Benjamin ousted the powerful incumbent by a 53-47% margin. Beating the trial lawyers in their own state sends a powerful message to the nation.

 

Pharmacies Sue FDA

A coalition of pharmacies from Texas, Arizona, Alabama, Wisconsin, California, and Colorado filed suit on Sept 27 against the U.S. Food and Drug Administration in the U.S. District Court for the Western District of Texas, claiming that the agency is illegally enforcing an arbitrary regulation that it had no authority to issue. Last year, the FDA issued a compliance policy guideline (CPG 7125.40 608.400), which made the use of bulk ingredients illegal in compounding prescriptions for pets and companion animals. The agency is waging an aggressive inspection campaign to enforce the CPG.

The pharmacies argue that (1) the FDA acts as though the CPG has the force of law while acknowledging that it does not; (2) federal law protects pharmacies that comply with state law from FDA jurisdiction; and (3) the FDA action contradicts its argument before the U.S. Supreme Court in Thompson v. Western States that compounded drugs like those in question cannot be treated as "new drugs."

"The FDA's unlawful actions are meant to intimidate law- abiding pharmacists to quit compounding medications," stated Steven Hotze, M.D., President of Premier Pharmacy in Katy, TX. "Many safe, legal medications which are not produced by drug companies would cease to exist without the...work of compounding pharmacies. Without being able to use bulk ingredients to prepare the medications prescribed by practition- ers, compounding pharmacies would not be able to meet the medical needs of millions of patients."

The AAPS Board of Directors voted to file an amicus brief in this action. Read the Complaint file in US District Court.

 

One Branch More Equal Than Others?

On Sept 24, 2004, the Supreme Court of Florida ruled "Terri's Law" unconstitutional, in the case of Jeb Bush v. Michael Schiavo (No. SC04-925). This law permits the Governor, under certain circumstances, to stay a court order that requires a patient's death from dehydration and starvation. Terri Schindler Schiavo (AAPS News Dec 2003) remains alive because of this law. The Court finds, however, that the law is an intolerable encroachment on the power of the judicial branch, which followed the forms of the law. The Court did not examine the substantive questions of alleged bias in the lower courts and actual error in determining the patient's wishes and the correct diagnosis. The patient is irrelevant: "this case is about maintaining the integrity of a constitutional system of government with three independent and coequal branches, none of which can encroach on the power of another branch or improperly delegate its own responsibilities."

The Court held that "If the Legislature with the assent of the Governor can do what was attempted here, the judicial branch would be subordinated to the final directive of the other branches."

 

Absolute Immunity

Judges have enormous power over life or death and can inflict tremendous harm, as through knowing wrongful conviction of the innocent. Yet they enjoy absolute immunity from being sued. The U.S. Supreme Court ruled in Pierson v. Ray [386 U.S. 547,554-55(1967)]: "This immunity applies even when a judge is accused of acting maliciously and corruptly."

State judges can be removed by the voters for outrageous conduct, but even then can retire on a comfortable pension. Federal judges can be removed only by conviction for a serious crime or by impeachment.

Former U.S. Supreme Court Justice Harlan Fiske Stone wrote: "While unconstitutional exercise of power by the executive or legislative branches of government is subject to judicial restraint, the only check upon our own exercise of power is our own sense of restraint."

Constitutional protections of the individual concern due process or adherence to procedural formalities, not actual fairness. "In federal court, innocence is irrelevant." The procedure is heavily weighted against the defendant. The overwhelming majority of trial judges' rulings favor the prosecution. Opinions that might precedentially favor a defendant are generally not citable, even if they can be found.

Some believe that the ongoing generation of wrongful convictions is not an aberration, but a result of the system functioning as intended. [PLN Aug 2004, prisonlegalnews.org, from N Ky Law Review 30(4).]

Tip of the Month: When the United States imposes criminal restitution and fines, it has almost unlimited powers of collection. But there are some useful statutory protections. Most notably, disposable earnings are exempt up to thirty times the federal minimum wage (30 times $5.15 per hour). Wages above that amount are subject to garnishment only up to 25% of the overall disposable earnings. "Disposable earnings" are the portion of a salary remaining after the withholding. The government cannot place a lien on one's personal residence unless a judge or magistrate expressly authorizes that in writing. And for creditors having less power than the federal government, such as mere malpractice attorneys, many more statutory protections are available in every state to safeguard assets against judgments.

 

AAPS Calendar

Jan. 21, 2005. Board of Directors meeting, Houston, TX.
May 21, 2005. Board of Directors meeting, TBA.
Sept. 21-24, 2005. 62nd annual meeting, Arlington, VA.


Correspondence

What Exactly Are They Building? In the same vein as in the movie Field of Dreams, incremental socialists believe that "if you build it, they will come," and if you build it slowly, incrementally, they won't recognize what it is until too late.

Those nice buildings with shower heads were to further public cleanliness. Little did people know that the Nazis intended to pump poison gas through them, and that the intended cleansing was ethnic rather than hygienic.

If people can be assigned unique numbers, and physicians can be forced to enter all medical information in a standard format, we can be more efficient and improve the safety and quality of medical care. We can compare actual practices to the "best practices" promulgated by the government.

Little by little, they string each wire to the chair, until one day all they have to do is plug it in and voilů: it's an electric chair! Unique identifiers, standardized claims data, and electronic records are the infrastructure to carry the current.
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY

 

Government-Assured Quality. The "evidence-based medicine" movement that is gripping medical academia is one of the scarier ideas of recent times. It was concocted by the people who spent hundreds of millions of dollars on "quality," only to discover that they couldn't even define it, much less mandate it. Medicine has always been evidence-based. That's why we have medical schools, journals, and grand rounds. The difference is that this time a panel will decide on an appropriate treatment and any physician who deviates will be punished. The hubris is astounding; we are still in "educated-guess" mode.
Greg Scandlen, Hagerstown, MD

 

EMR in Action. A Robert Wood Johnson Foundation-funded program in Bellingham and Whatcom County, WA, is supposed to be a model for improving medical care and lowering costs (Gina Kolata, NY Times 8/11/04). "Clinical care specialists" (nurses) armed with electronic medical records follow patients with diabetes or congestive heart failure. One large medical practice that participated in the planning declined to continue, saying "we were seduced by the concept, but it doesn't work." Our correspondents comment:

Gina Kolata bought the fantasy that "if we just had a better computer, health care would be so much better." This has proven to be false. Every HMO or group practice already has such a computer. The doctors, all employees of the HMO or practice, do as they are told, or quit. No patient gets better care because nobody cares.
Herbert Rubin, M.D., UCLA

 

For those who think participation in this "shared care plan" is voluntary, read this: "Participating in the program is costing each doctor in the group $500 a month for four years for the electronic medical record system. Other innovations, like group office visits and e-mailing with patients, are poorly compensated, if at all." In short, it's a form of slavery. Doctors will conform to the new record-keeping protocol, and pay for it. Doctors will participate in group teaching sessions, phone calls, and e-mails, and will NOT be paid for it. The liability risks of the nurse pseudodoctors will be borne by the physicians who "supervise" them (without pay).
Stephen Katz, M.D., Fairfield, CT

 

Expert Hubris. Newt Gingrich declares that "we will save so much money in the next decade by having an intelligent health system that we will ... enable virtually everybody to be insured." Perhaps Mr. Gingrich has little contact with industries that don't have the economies of scale found in, say, automobile manufacturing. Why isn't he proposing economies of scale and a national information technology system for lawyers? And how can he be so ignorant of government behavior as to think we need a national IT system? What a way to bog down innovation! Especially since the government has done its best to hammer any IT standard spontaneously created by consumers as an unacceptable monopoly.
Linda Gorman, Independence Institute

 

Can Computers Prevent Medical Error? Ask yourself the following: Would you have avoided your two biggest misdiagnoses in the past few years if you'd had an EMR? In my case, my charts were perfect, and the computer would have reassured me. But I had missed a few findings or misinterpreted the findings. When my computer becomes good enough to catch such errors, I'll ask it to guide my fingers so that I no longer play wrong notes on my piano.
Robert P. Gervais, M.D., Mesa, AZ

 

"Paperwork" Will Continue. IT will require just as much time to manage as real paper and cost more, not less.
Joseph Lee Pugh, Diamondhead, MS

 

Private Care for All. Between May 21 and Sept. 21, our clinic obtained prospective data on all 262 new patients. Of these, 157 (60%) were uninsured, 75 (29%) had conventional insurance, 12 (5%) had TennCare, 9 (3%) had Medicare, 6 (2%) had TriCare, 2 (1%) had an HSA, and 1 had a Christian Medical Cost Sharing Plan. Our clinic accepts no insurance of any kind, but only direct payment. It has existed for more than 42 months, and income is up 25% compared with this time last year.
Robert Berry, M.D., Greeneville, TN


Legislative Alert

The Meaning of the Bush Victory

The President won reelection with 51% of the popular vote, to Senator Kerry's 49%. Below the surface, however, there is a bigger story. Bush is the first President to win a clear majority of the popular vote since 1988, when his father defeated Governor Michael Dukakis of Massachusetts.

Additionally, Republicans picked up four Senate seats, giving them a 55-seat majority, and four House seats, for a 231- member majority. A Presidential victory coinciding with a such congressional victory is uncommon. This is the first once since Franklin D. Roosevelt won reelection in 1936. It is also the first time for a Republican President since 1924, when Calvin Coolidge won reelection amidst an election-year massacre of the Democrats.

The most significant Congressional loss is, of course, that of Senate Minority leader Thomas Daschle (D-SD), the first such leadership loss since department store owner and Phoenix city councilman Barry Goldwater defeated Arizona's Senator Harry McFarland in 1952.

From the standpoint of health policy alone, the Daschle loss is particularly significant. Daschle proved to be an inveterate opponent of Bush's health-care initiatives, particularly the tax- credit proposals included in the post-September 11, 2001, general economic stimulus package. The Senate blocked two such proposals that had been passed by the House, with Senate Democrats favoring instead a major expansion of Medicaid well into the middle class, plus a more restrictive tax credit for insurance tied exclusively to COBRA coverage. The Bush proposal would have provided a 60% refundable tax credit for health insurance for individuals and families who had lost their insurance coverage, and the credit would have applied to the health option of their choice.

The 2001 and 2002 House passage of individual tax credits was a major break with policy that ties favorable tax treatment to insurance obtained through employment. Breaking this exclusive link has been a central goal of conservatives and libertarians alike. Daschle lined up against the proposals, and saw his public approval rating fall like a stone.

In the election aftermath, Bush is being asked to help "heal" the country, by reaching out to the defeated Democrats in a spirit of bipartisanship. He should follow Ronald Reagan's advice: Trust the apparently sincere, but verify. (When you are in an electoral minority, without sufficient votes, the siren song of "bipartisanship" is pleasing to the ear and an excellent cover for crass manipulation of the public debate and the pursuit of raw self-interest.)

DNC chairman Terry McAuliffe quickly announced that Bush may achieved a hard-won victory, but he does not have a "mandate" for change. The President, however, apparently sees his victory as an accumulation of political capital that he intends to "spend" to secure major change. He says he is committed to a major overhaul of the federal tax code and a reform of the Social Security system to establish a system of personal retirement accounts for younger, working Americans.

The Bush Health Agenda

The President has the opportunity over the next four years to solidify his limited but significant gains, which are indeed systemic changes, not merely quantitative expansions of existing programs or policies. His overall goal is the promotion of private ownership and control of insurance exactly the right prescription.

Most important is the recent creation of tax-free Health Savings Accounts (HSAs). If a parallel tax credit system can be established to compete with the existing tax treatment of health insurance, the marketplace could be dramatically transformed.

Bush has a big problem area, however: Medicare and Medicare implementation. The drug benefit will become increasingly unpopular, particularly as companies send letters to their retirees saying that, because of the new Medicare law to be effective on January 2006, they are going to lose or have their private drug coverage cut back. The White House seems to be in denial that it is going to be a problem. But the happy face on the Medicare drug benefit will not last; that's guaranteed.

Thus far, neither the President nor any Congressional leader has told Americans how they are going to address the problem of the $8 trillion that the drug benefit alone has added to the unfunded promises that taxpayers will have to subsidize, somehow, someway, someday.

The Unfinished Business

Meanwhile, Bush has outlined a series of new steps to reform that will require a lot of work with Congress.

1. Refundable health-care tax credits to cover millions of uninsured Americans.

There is broad agreement now in Congress, given Kerry's conversion to the tax-credit option, that this is the best way to expand access to coverage and provide some equity in a profoundly unfair system. Workers who don't receive health insurance as an employer-provided benefit effectively pay 35 to 40% more for the same package in after-tax dollars.

Bush is proposing to end this tax regime with a refundable and advanceable tax credit of $1,000 per person and $3,000 per family, phased out at an family income of $60,000 or more.

There is some debate among economists about how much the credit would expand coverage. Some argue that it should be accompanied by insurance market reforms and a better device for administering the credit more efficiently and for securing serious take-up. Some favor targeting it not just to the uninsured, but to the working uninsured, particularly those employed by small business. The credit should also be designed in such a way as to allow state government officials to supplement the credit and make insurance more affordable in certain states where the cost of coverage is already high for a variety of reasons, many of them political.

Bush's proposed expansion of private coverage would cap the current growth in public coverage, which is often inferior and which the uninsured do not want. It is the opposite of the policy advanced by Senator John Kerry. The major focus of the Kerry health-care proposal was to expand government programs, especially Medicaid and the State Children's Health Insurance Program. Together, according to a recent analysis completed in September 2004 by the Lewin Group, these two government programs alone would have accounted for more than 21 million out of the projected 25 million increase in health insurance coverage under the proposed Kerry plan. While the Senator's supporters kept insisting that the Kerry proposal was not really a "government take-over" of the health care system, it really depends, as former President Clinton might say, upon what you mean by "takeover." The professional literature is clear: public program expansions always crowd out existing private coverage to a greater or a lesser degree. Given the incentives in the Kerry proposals, the crowd-out would have been greater, not lesser.

2. An expansion of the recently enacted HSAs.

The HSA option is starting to take off, and state legislators have been rewriting state laws to allow HSAs to become part of the mix of insurance options. Trade associations expect that the majority of large employers will start to offer an HSA option within the next five years. Meanwhile, the U.S. Office of Personnel Management will offer HSAs in the FEHBP, and 18 such plans will be participating in 2005, including a plan sponsored by the Order of Saint Francis Health Plans, a Catholic organization operating from Illinois. We can expect conservative governors and local officials to allow HSAs to be offered to state and local employees. Look also for the inclusion of a variant of the HSA in Medicaid, particularly for preventive care and routine doctor visits.

Bush is proposing to expand HSAs for low-income workers' families by depositing $1,000 deposited directly into their HSAs and providing a $2,000 refundable, advanceable tax credit for purchasing a high-deductible insurance policy. Individuals would receive a $300 federal contribution for a HSA and a $700 refundable, advanceable tax credit for purchasing a high- deductible health plan.

Beyond the tax credits, Bush would provide a new tax deduction for health insurance premiums connected with high- deductible health plans. He is also proposing a special HSA tax credit to help promote such accounts among small businesses: a special tax credit on HSA contributions for the first $500 contribution to a family policy and for the first $200 contribution to an individual policy.

While these tax proposals would surely advance HSAs and high-deductible health plans, some conservative analysts worry that this extra tax relief is reintroducing the very favoritism in the tax code that they have been long combating in the exclusively favorable tax treatment for employer-based health insurance.

3. Major changes to the health insurance markets through the establishment of broader association health plans, state-based health insurance pools, and interstate competition among health insurance plans.

Bush is recycling his proposal to allow small businesses to establish Association Health Plans (AHPs). This change would enable small businesses to band together through trade associations to purchase coverage for their employees. The big difference this time is that Bush is making changes in his proposal that go well beyond the business-based AHPs. The previous incarnation was basically a continuation of the current policy that favors employer-based health insurance.

Under the new Bush version of the AHPs, the plans would be individually accessible, and they could be sponsored by a variety of organizations, not just businesses. These could include plans sponsored by civic and charitable groups, unions, trade associations, fraternal and ethnic organizations, and even churches and religious organizations.

This expansion of AHPs would enable a new set of players to compete with traditional health insurance at the state level, and could spur desperately needed competition, particularly in the individual and the small-group market. In many states, this competition is being reduced by a variety of factors, including mergers and acquisitions, as larger insurance combines gobble up other plans. In the state of Maryland, for example, a stunning 92% of the covered lives in the state's small group market are covered by just two large insurers.

But the truly transformative potential of Bush's proposals lies in his provision to create a national market for health insurance: allowing residents of one state to purchase health insurance from companies incorporated in other states. For example, a family in a high-cost state like New Jersey, New York, California, or Maryland could buy a policy offered by a licensed insurer based in, say, Iowa. Indeed, as former House Speaker Newt Gingrich has noted, because Iowa has some of the most affordable insurance plans in the nation, the Iowa insurance companies could become a powerful players in a national market. With the creation of an interstate commerce in health insurance, state legislators would come under tremendous competitive pressures to reduce unnecessary regulation. With a national market, insurers would be able to establish national pools, enrolling not merely hundreds, or even thousands of people, but potentially millions of people. National information on the benefits and services of health plans, available through the internet, as well as the performance of doctors and hospitals contracting with those plans, could empower consumers further and intensify competition.

The combination of tax credits, HSAs, and the continued expansion of consumer information, together with Bush's major health insurance market reforms, could transform the health care system far beyond anything that we could imagine.

We are looking at big changes. But make no mistake: Bush's changes will only come after a long and hard battle with ideological opponents who have a vested interest in preserving the status quo. His most intense opposition will come from those who were hoping all along that they could continue, crab-like, to maneuver America, step by step, into a system of socialized medicine. The single-payer folks could turn out to be among the biggest losers in the 2004 election.

Robert Moffit is Director, the Center for Health Policy Studies at the Heritage Foundation, Washington, D.C.