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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 50, No. 12 December 1994
TASK FORCE COVER-UP CONTINUES
Is the government-in-the-sunshine law meaningless? Can the
executive branch define legal requirements out of existence and
eviscerate the role of the judiciary as a check on the unbridled
use of presidential power?
The Clinton White House is field-testing a procedure for
defying the Federal Advisory Committee Act (FACA) in its defense
against AAPS v. Clinton, the lawsuit brought to
challenge the President's secret Task Force on National Health
Care Reform. The steps are as follows: Convene a top-secret
commission stacked with special interests. Fail to keep a precise
record of its membership so that even top officials can plead
ignorance. Label its product ``Presidential Records'' (without
foreclosing the option of arguing that the commission never
advised the President). If someone sues, mobilize the unlimited
resources of the Department of Justice to delay, evade, and
stonewall-until plaintiffs run out of money or the work is
already accomplished. If necessary, release an avalanche of
mostly useless paper and challenge plaintiffs to prove that
something is missing. Then use this partial and tardy disclosure
as a reason to throw the plaintiffs out of court.
On November 10 (after this newsletter goes to press), oral
arguments will be held in District Court on the narrow issue of
whether AAPS v. Clinton is moot.
AAPS was permitted to depose Ira Magaziner, Marjorie Tarmey,
and Terry Good on the single issue of whether the Administration
has made adequate disclosure. The Department of Justice deposed
AAPS Executive Director Jane Orient, M.D.
AAPS researchers noted that a few stray records at the
Archives referred to meetings after May 30, 1993, when the Task
Force and its Working Groups were allegedly disbanded. They
wondered what had happened to Tollgates 6 and 7, which were
initially scheduled to occur in April and May.
Testifying under oath, Magaziner admitted that certain
documents had been deliberately removed from boxes-those dealing
with work performed during the summer of 1993. The ``Working
Group Drafts'' produced after May, 1993, were from a different
``Working Group,'' Magaziner said.
According to Magaziner, the summer work was done by ``audit
groups,'' involving people from the private sector. Although
this function was part of the initial work plan, the White House
later determined that it should be ``separate'' (and therefore
exempt from disclosure). Magaziner's memory was very fuzzy about
the names and positions of the participants in this inner circle,
although he did convene the small group of about 20 to 25 people
and make their initial assignments.
Although Magaziner signed a sworn declaration on March 3,
1993, which asserted that the Interdepartmental Working Group was
made up of 340 government employees and consultants, he ``didn't
concern [himself] with the specifics of reviewing lists.'' In
fact, no official data base was prepared until after March 29.
Various lists have been produced, with differing numbers of
participants. The list maintained at the Archives has added a
number of names, bringing the total to 614. New boxes still
continue to dribble in, despite the Administration's assertion
that they made a serious effort to collect documents in the
spring of 1993. On April 29, 1993, both Hillary Rodham Clinton
and Bill Clinton thanked more than 1,000 participants who were
working in a ``regular way.'' The White House now contends that
it does not have a list of the participants who were sent an
invitation to the South Lawn event or a Certificate of
AAPS contends that Mrs. Clinton was factually correct about
the number of participants, although the White House now contends
that her statement was an overestimate or a confusion in terms.
AAPS is compiling its own data base from a number of sources,
including documents at the Archives. Interestingly, most of the
previously unlisted participants found by AAPS are wholly private
individuals. The White House vigorously disputes the accuracy of
the AAPS list, but the Department of Justice has failed to
provide a list certified to be complete.
``The position of the defendants today is more of a
seemingly endless supply of semantical smoke obscuring the clear
picture,'' stated AAPS Counsel Thomas Spencer in a brief filed
November 3, 1994.
``The declaration that the groups ended on May 31, 1993, was
simply planned theatrics to (i) continue the advisory process in
secret, and (ii) tactfully and tactically eliminate undesired
Although the President failed to push his revolutionary plan
through Congress this session, the idea of reinventing American
medicine is by no means dead. HHS Secretary Donna Shalala has
stated the Administration will ``get another kick at the cat''
and will refine its strategy, probably making use of the
``regulatory budget process.'' The ``shrewder'' approach will be
an incremental one designed to overcome public opposition.
``People in the United States told us ... they were very gun
shy over taking on the whole system, every aspect of it....They
would like to see it be in stages'' (AP, 10/21/94).
The work product of this illegal Task Force will surely be
used in future legislative and regulatory agendas. Full public
disclosure is essential; no information about the funding of this
gargantuan effort has been revealed. Declaring mootness at this
point will serve to reward and encourage stealth and the
``institutional strategy of attrition for which the federal
government is so infamous,'' stated Mr. Spencer.
AAPS continues to seek a declaratory judgment that FACA was
violated, plus full disclosure and sanctions.
The following resolution, submitted by Tony Kampner, M.D.,
was passed by the General Assembly of AAPS at the 1994 annual
meeting in Atlanta: BE IT RESOLVED THAT:
1. leaders of national organizations (especially
medical societies) who endorse legislation that
would socialize the delivery of medical care
within America are in violation of their
citizenship responsibilities. These leaders
should be replaced by the membership of their
respective organizations with leaders who would
abide by the Constitution as the law of the land;
2. that to cast a vote for socialized medicine is for an
elected official a violation of the oath of office
he/she has taken to defend the Constitution of these
3. that the practice of private medicine is not a
Constitutionally authorized function of the federal
4. that the federal government be made to renounce its
unconstitutional and unauthorized intrusion into
The slate presented by the Nominating Committee was elected
by acclamation: President, Lois J. Copeland, M.D., of Hillsdale,
NJ; President-Elect, Don Printz, M.D., of Lilburn, GA; Secretary,
W. Daniel Jordan, M.D. of Atlanta, GA; Treasurer, R. Lowell
Campbell, M.D., of Corsicana, TX. Open positions for the Board
of Directors, all for three-year terms, will be filled by Joseph
Scherzer, M.D., of Scottsdale, AZ; John H. Boyles, Jr., M.D., of
Centerville, OH; Donald Quinlan, M.D., of Northbrook, IL; and
Nino Camardese, M.D., of Norwalk, OH.
Limited Legal Service to Be Reorganized
The Limited Legal Consultation Service has been unavailable
since the resignation of Kent Brown as General Counsel. The
Board of Directors has decided to continue this service in a
reorganized format as soon as possible. Legal questions should be
referred to AAPS (800-635-1196).
``Physicians will have to learn to take the pulse of the
population-not just individual patients-to succeed in the health
system of the future'' (AM News, 9/12/94).
For example, ``capitated providers'' have ``promised to
spend money in a way that maximizes the health of the
population,'' stated David Eddy. That means ``withholding some
things from some patients.''
David Eddy is Senior Advisor for Health Policy and
Management to Kaiser-Permanente and Professor of Health Policy
and Management, Duke University. He headed Group 10 (Information
Systems) of the Interdepartmental Working Group of the
President's Task Force on Health Care Reform.
Eddy is one of several key Task-Force participants who
failed to return documents to the National Archives.
News Briefs from Canada
What is a Community Health Center? To Grey Nuns
Hospital in Edmonton, Alberta, its new status means the loss of
its intensive care unit and its ability to offer ``highly
specialized services'' such as hip replacement or treatment of
The ``incredible overhaul'' of medical facilities in the
province means the loss of thousands of jobs, untold bed
closures, and the cancellation of plans to replace aging
buildings and equipment (Edmonton Journal 7/15/94).
Rights Threatened in Ontario. The presumption of
innocence and the concept of equality before the law do not apply
to citizens accused of ``racism,'' according to guidelines
recently adopted by the Ontario Human Rights Commission.
``The commission should stop demanding corroborating
evidence from witnesses before accepting a complaint [of racism]
as genuine,'' stated a secret report.
``Anti-white verbal behavior'' is a ``struggle for self-
identity,'' not racism (Mackenzie Newsletter 9/94).
More Than 80% of Labs in Trouble with CLIA
By May, 1995, HCFA plans to have completed the first round
of inspections of Physician's Office Laboratories (POLs), about
nine months behind schedule. Enforcement actions have been
initiated against 1,015 POLs.
About 11 percent of inspected labs have ``serious''
problems, while 80 to 84 percent have some kind of problem.
The number of regulated labs has declined by 8 percent in
the past year. One reason may be the average compliance fee of
$950. HCFA estimates that several thousand labs have still not
enrolled in the program.
CLIA warnings called ``alerts'' have been generated by about
22 percent of the 1.1 million weekly Medicare billings from POLs
because the labs do not have a certificate to perform the
services for which they have billed (BNA's Medicare Report
One physician was told by inspectors that they were being
``nice'' this time and were emphasizing ``education.'' It would
be different, they warned, for POLs that had not registered. One
way of finding such labs would be by investigating purchasers of
Urine dipsticks may be contraband.
Fraud Squads Augmented
The Department of Justice has transferred 10 percent of the
FBI's agents and assistant U.S. attorneys to the health-care
fraud arena in 1994. Agents are being routed away from savings
and loans and other white-collar crime. The number of agents
increased from 163 in FY 1993 to 300 in 1994 and will increase to
450 in 1995. There are 1,000 criminal investigations in progress
(up 160 percent), 900 civil investigations (up 119 percent), 224
prosecutions (up 67 percent), and 118 convictions (up 23
In addition to $411 million collected by Justice in civil
settlements, $378 million was taken as a result of qui
tam (whistleblower) lawsuits.
One current target of investigators is physicians who accept
inducements to refer work to a clinical laboratory. These might
include free disposal of biohazardous waste, free testing for
family members or managed-care patients, or use of a computer or
FAX machine except for purposes directly related to the outside
lab's work (Medicare Compliance Alert with Civil Money
Penalties Reporter, 10/24/94).
Court Dismisses Challenge to Ohio Balance-Billing Law
In December, 1993, Medicare beneficiaries and two Ohio AAPS
members challenged an Ohio statute that forbade balance billing
of any Medicare patient whose family income was less than 600% of
the federal poverty level (see AAPS News Feb. 1994).
On October 7, 1994, US District Court Judge James G. Carr
granted the defendant's motion to dismiss the case, styled as
Warren J. Downhour v. Ohio Department of Health.
One reason given by Judge Carr is that Ohio law does
not require a Medicare claim to be filed each and every
time a medical service is rendered. Carr further states that
``if the service is unnecessary or unreasonable, Ohio cannot
impose a sanction against the physician [who collects fees for
the service despite denial of Medicare payment].'' (Plaintiffs
had argued that the law barred nonaffluent Medicare patients from
contracting outside the system or from paying for services
declared to be ``unnecessary.''
Attorneys for the Ohio Department of Health stated in a
reply brief that ``the Medicare Handbook does not specifically
define `covered service,' but the context in which the words are
used indicates that it means `services for which Medicare
pays'.'' Medicare cannot pay if the patient chooses not to have
a claim filed.
Defendant's attorneys quoted the Ohio statute definition:
``Balance billing'' means charging or collecting an amount in
excess of the amount reimbursable under the Medicare program for
the Medicare-covered services or supplies provided to a
beneficiary....'' (R.C. 4769.01(B).
``There is no reason to believe that the term `Medicare-
covered service' is intended to mean anything different in the
Ohio law than it does in the federal statute....Therefore, a
service for which a patient chose not to file a claim...cannot
result in a penalty to a doctor who balance bills.''
While asserting that physicians would not ``run afoul'' of
the Ohio law by failing to file a claim under any
circumstances, the defendant states that physicians might violate
federal law by not filing a claim. This could happen if
federal balance-billing restrictions apply to instances in which
the patient chooses not to file a claim, and if physicians are
found to have charged ``too much.'' How much is too much? The
Ohio Department of Health asks (but cannot answer), ``how is the
limiting charge determined for those cases in which no claim is
The plaintiffs will appeal the decision to the Sixth Circuit
Court of Appeals.
Litigation is being funded by the Ohio Physicians Defense
Foundation, PO Box 458, Delphos, OH 45833.
Medicare Technical Amendments
In the closing hours of Congress, almost anything can
happen. Provisions can be slipped into bills that pass with
unanimous consent, without the awareness of anyone except
powerful committee staff members. This procedure illustrates the
tremendous power of the Majority Party in Congress under current
At midnight, just before Congress adjourned for elections,
the following provisions were enacted in H.R. 5252:
(A) In the case of a nonparticipating
physician...who does not accept payment on an
assignment-related basis for a physician's service
furnished with respect to an individual enrolled under
this part, the following rules apply: (i) No
person may bill or collect an actual charge for the
service in excess of the limiting charge; (ii) no
person is liable for payment of any amounts billed for
the service in excess of such limiting charge...
(B) If a physician...(i) knowingly and willfully
bills or collects for services in violation of
subparagraph (A)(i) on a repeated basis, or (ii) fails
to comply with [provisions to refund the excess
the Secretary may apply sanctions.
Note that the Act refers to an ``enrolled individual'' and
not to ``Medicare beneficiaries '' or ``covered services.'' The
significance of this change is under review by AAPS.
On the Lawful Nature of the Private Contract
``The Secretary has not promulgated any rules or regulations
either formally or informally espousing the policy [of forbidding
Medicare beneficiaries to contract outside the system for certain
medical services]....It is difficult for me to conclude that Dr.
Copeland is facing the real dilemma of complying or being
sanctioned'' (Judge Nicholas Politan, Stewart V Sullivan
816 F. Supp 281 DNJ 1992).
This case provides protection to physicians engaging in such
contractual relationships with their senior citizen patients and
can be cited in any case that might pertain to such right to
Note that the Medicare Technical Amendments referenced above
provide a method by which a physician may respond to Medicare
carriers without incurring fines or sanctions, should a senior
citizen change his mind after agreeing to a private contract.
The physician is given a 30-day period to refund any amount above
the RBRVS-determined limiting charge.
It is of paramount importance to senior citizen survival
that the right to contract outside of government entitlements be
maintained, as it is well known that all socialized medical
systems in the world forcibly ration care to the elderly, who are
usually pensioners receiving money from the state rather
than contributing significant money (taxation) to the
state. Their value is perceived as negative to the state, and
thus preservation of their lives is given a low priority, a
reflection of the Hegelian concept of rational utility.
As the population of Medicare-eligible citizens rises and
funding decreases, privatization through contracting or the
inception of private insurance alternatives to Medicare Part B
would help relieve the pressure on the system. Charity work
could continue to survive.
Socialists have always feared this so-called ``two-tiered''
system, wishing to keep all programs uniformly gray. In reality,
however, the socialist system is two-tiered as well, with its
second tier located either over the border or under the table.
Lois J. Copeland, M.D., Hillsdale, NJ
``To do anything that suggested a taste for solitude, even
to go for a walk by yourself, was always slightly dangerous.
There was a word for it in Newspeak: `ownlife,' meaning
George Orwell, 1984
Managed Care Harms Children. Managed-care companies
play a bait-and-switch game: they promise quality care, consumer
choice, and preventive medicine, then erect barriers to care.
The ratio of patients to physicians, which should be about 1 in
400 has been increased to 1 in 800. The case load for some
primary physicians is 2,700; some third-world countries do better
HMOs deny choice of care on the incorrect assumption that
all doctors are interchangeable. Not all plastic surgeons are
specialists in cleft palate and lip. The cost of one operation by
a specialist is much less than the cost of redoing an improperly
performed operation, which may leave a child with infinitely
worse deformities....I may be forced to choose between leaving a
child permanently deaf or sending him to an ENT surgeon with less
skill and experience, who might botch a reconstructive operation.
Some managed-care companies earn up to 20% profits annually
by denying care. Utilization reviewers, who implement a secret
computer protocol, often receive more money than the nurses or
doctors. The physician is liable for inadequate care, but the
insurer is not liable for blocking care! I have been in
practice for 15 years. The first 10 years, my patients received
excellent care with minimal outside interference. The last five
years have become a nightmare....
Pamela Gallagher, M.D., Garden City, NY
``Voluntary'' Practice Guidelines. In a letter from
Blue Cross Blue Shield of Florida, Participating Obstetricians
are informed that the practice parameter entitled ``Cesarian
Birth'' is ``defined in the current State of Florida
Administrative Code and is mandated by the State for use by many
physicians.'' The letter further states that: ``We believe
that it ... would be inappropriate to depart from the parameter
according to one's clinical judgment.''
Yet letters from the Florida Agency for Health Care
Administration and the Florida Obstetric and Gynecologic Society
clearly indicate that this is a wholly voluntary
``Demonstration Project.'' Data collection has barely begun; no
conclusions are yet to be formulated.
It would be outrageous, irresponsible, and immoral for a
physician to fail to follow his clinical judgment to intervene
when a mother's or infant's life is endangered, for fear of not
being paid. We will continue to follow the course of treatment
that is in the best interest of our patients.
Eric S. Mudafort, M.D., Bradenton, FL
Is Managed Care Illegal? New York State Education Law
states that it is ``professional misconduct to request, receive
or participate in the division, transference, splitting or
refunding of a fee or to receive a discount, credit, commission,
or gratuity in connection with the furnishing of professional
Most of the present managed-care systems and all capitated
systems violate one or more aspects of this law. Organizations
that discount fees and withhold 10% to 20% of the discounted fees
consistently engage in complex kickback arrangements....
If an insurer sells a product to cover a set of services,
while simultaneously creating financial incentives not to have
those services performed, its actions could also be construed as
fraud....In addition, many HMOs encourage physician stock
ownership so that company profitability becomes a significant
consideration for the owner physician....
All managed-care products are organized for the sole purpose
of influencing clinical decisions in exchange for financial
Carl Weber, M.D., White Plains, NY
Rights. (1) Health care is supposedly a right. (2)
We have an inalienable right to life, liberty, and pursuit of
happiness. (3) By limiting benefits and not letting us seek
medical care in an open market, we can die waiting (a death
sentence), as people in other countries do. (4) What is a
greater ``right'': equality (within the group) or life (for an
Carl R. Meisner, M.D., Stafford, TX
Please Exclude Me. Dear C., I have received your
disingenuous..., hand-addressed letter, in an envelope which did
not identify your mailing as a Medicare mailing, in which you
threaten to fine me $2,000 plus $2553.96, and to expel me from
Medicare for an alleged overcharge of a Part B Medicare patient.
Your office knows that I never accepted this patient as a
Medicare patient....Your office has had returned all mail
addressed to me in the form of ``Refused, return to sender.''
In your letter, you also threaten to expel me from Medicare.
Since I do not participate in Medicare, I respectfully demand
that you expel me. I have been attempting for two years to
compel the Inspector General of HCFA to expel me....
If you contend that I have no choice to accept the patient
as a private patient and the patient has no choice to see me and
accept my services only as a private patient, I suggest you and
your legal counsel immediately read Stewart v. Sullivan, 816 F.
Supp 281 (D.N.J.) 1992....
John H. DeTar, M.D., Bellaire, MI
Jan. 14, 1995. Board of Directors, Dallas.
May 20. Regional Meeting, Boise, ID.
Legislative AlertAnother Correct Prediction
You read it here first. (See last month's Legislative
Alert): Ira Magaziner is taking the fall for the failure of the
Clinton Plan. According to an article by Robert Pear (NY
Times 10/13/94) an internal White House fight has broken out
over the future role of Magaziner, dubbed the Dr. Strangelove of
Health-Care Reform by conservative critics on Capitol Hill. Maga-
ziner is opposed by forces within the Administration, including
staff at HHS, Treasury, and senior Democrats in Congress and
their increasingly influential congressional staff, the unelected
representatives of America's taxpayers. White House Chief of
Staff Leon Panetta has been discussing a downgrading of
Magaziner's role in the next stage of the health-care fight. But
the quote of the week came from outside the Beltway. Alain Entho-
ven, the chief architect of the ``managed competition'' scheme,
quipped: ``They ought to make Ira Magaziner the Ambassador to
For Your Fat Seat-at-the-Table File
Remember how many doctors were saying that Clinton
Health plan was inevitable, and that we needed to make sure that
we got a seat at the table to cut the ``best deal'' under the
circumstances? Remember, too, how many official representatives
of organized medicine were trying to enhance their self-esteem as
``Players'' by abasing themselves before the White House and its
Congressional allies, trying to help them craft the ``best''
version of government-run medicine? Well, the disciples of defeat
were not confined exclusively to politically incompetent medical
professionals and their malpracticing representatives in
Washington. Recall this precious gem: ``With the pharmaceutical
industry under withering attack from Clinton, `preemptive
surrender,' I think, is the best strategy,'' said Mitch Daniels,
an Eli Lilly executive and former Reagan political aide (Wall
St J 2/13/93, p. 1). He predicted the industry will reverse
its previous opposition to government reimbursement for
prescription drugs. Remember Senator Phil Gramm's advice: Those
who are desperate for a ``seat at the table'' are the ones likely
to end up as the main course.
A New Congress?
As of this writing, House Speaker Tom Foley was struggling
for his political life, although no Speaker of the House has been
defeated since 1860. If he loses, one lesson is: Don't sue your
own voters, even if you think Congressional term limits are
positively terrible for ethereal reasons beyond the preservation
of your political career.
What happened to the health-care issue? You would not even
know that Congress was torn by an extensive debate on the issue
from the character of the Congressional campaigns. According to
Washington's political cognoscenti, this was the issue
that was going to result in a bloody massacre of obstructionist
Senate Republicans and conservative Democrats at the polls. But
Conservative Democrats are desperately making it clear that they
differ with the White House on a lot of key issues, including
health care. In the few races in which health care is an issue,
Congressional aspirants are pointing out that their opponents
supported the Clinton Plan.
Large numbers of senior Congressional staff could be facing
something that they normally read about in the Department of
Labor reports: rising unemployment. Their own. If the surveys and
pollsters are right, official Washington could be due for a life-
changing experience. The anti-Washington wave is crashing in on
the careers of some of the President's most prominent allies in
In the final days of the 1994 campaign, Congressional
Democrats will target specific voter blocs to try to salvage the
situation, including younger women and minorities, organized
labor and the liberal groups, such as environmental
organizations. When in trouble, the most important job is to play
to the political base and get out the vote, a dependable vote.
Will it be enough? (This newsletter goes to press on Election
While it was considered smart Republican Congressional
strategy all year to ``nationalize'' the election and have
Republican Congressional candidates run against the Clinton White
House, the Democratic Congressional counter-strategy, which
should have been to keep all politics local (Master Tip O'Neill
understood these things), reverted instead to a counter
``national'' strategy of attacking the Republicans' ``Contract
With America'' (balanced-budget amendment, tax cuts, terms
limits, all the old ``Reaganite'' stuff). Senior Congressional
Democrats hope to convince taxpayers that these things are all
purple rhetoric and empty promises, the stuff of which huge
federal deficits are made. To target the Contract, the Democratic
National Committee set aside $2 million. The problem: If the
Contract is bad because it is a recycled Reagan program, then
somehow you've got to open up a debate on the contract without
attacking Ronald Reagan, whose popularity still remains high with
the American public, especially in light of the performance of
the current incumbent in the White House. Tough task. Another
little problem is talking about the Contract without talking
about its specifics: term limits, balanced budgets, tax cuts,
which folks generally like. And then there's the latest
complication, the menu from Alice's Tax and Spending Restaur-
That's the name of the leaked memo (``for handout and
retrieval in meeting'') prepared by OMB's Alice Rivlin. It has
the White House in a state of denial. The problem: What is to be
done in the face of Republican Congressional attacks and the
Kerry-Danforth Commission report on entitlements? The White House
needs a response.
According to the Alice: ``Since August, two things have
happened that make this discussion more urgent: First, without a
health bill, we are deprived at least temporarily, of the
`centerpiece' to our legislative agenda, and also our answer to
the question: what are we doing about entitlements (or about the
projected rise in the deficit)? Second, we know that the
Republican strategy-at least for the 1994 election and probably
longer-features empty promises about deficit reduction and
unspecified spending cuts coupled with attractive sounding tax
cuts.'' While Rivlin thinks that the attacks on the Congressional
Republicans' ``Contract With America,'' have met with some
success, she sees the need for the White House to try to
recapture the domestic agenda, and outlines some suggested
priorities. These include ``increased public investment''
(translation: more government spending), deficit reduction,
ensuring the solvency of the Social Security system, and middle
class tax cuts, now the preserve of Congressional conservatives,
especially after the Clinton White House jettisoned the promise
of a middle-class tax cut shortly after the election.
For the medical community, it was clear that the health-
care reform effort is still front and center: ``Provide universal
health security and reduce the rate of growth of health-care
costs.'' The Problem: ``The big problem is that we cannot do any
of these things without freezing resources that are now devoted
to other things.'' In her memo, Rivlin outlines various options,
including discretionary spending cuts, entitlement spending cuts,
and, of course, new tax increases. In the health care area, this
tax policy could include ``a tobacco tax or a tax on high-cost
health plans tied to health care reform'' (basically the Cooper
``managed competition'' approach, so unpopular with both
conservatives and organized labor.) Rivlin's comments on reducing
entitlement spending are refreshingly candid. They are likely to
be met with strong Congressional and public resistance,
especially since ``90 percent of savings would come from Social
Security and Medicare, and would probably be labeled by opponents
as tax increases.''
Whatever happens in the elections, Congress is going to be
faced with tough choices. Spending in entitlement programs is
estimated at $803 billion in 1994 dollars, and will reach well
over $1 trillion by 1999. There are approximately 400 entitlement
spending accounts in the federal budget; approximately ten of the
largest programs account for over 92 percent of all entitlement
spending and about 50 percent of all federal outlays. The
largest: Social Security ($317 billion); Medicare ($160 billion);
Medicaid ($ 85 billion). Under current trends, by 2030 all
projected spending for Medicare, Medicaid, Social Security, and
federal employee retirement programs will consume all tax
revenues collected by the federal government. In the near term,
the solvency of Medicare is threatened, and will force long
overdue reform of the program.
The Medicare Trust Fund is projected to run out of money in
2001, according to the Entitlement Commission's report of August,
1994. One can envision a bipartisan consensus developing around
the idea of means testing Medicare. While liberal seniors groups
were making friendly noises about the Clinton Plan, it is
instructive that the Clinton Health Plan called for $124 billion
in Medicare cuts over several years.
Lessons for Round Two of the Health Care Debate.
Americans, including physicians, have got to be clear about
what kind of medicine we want. Throughout this year's debate,
physicians have failed to communicate a clear message and thus
have generally been sidelined, while the big scenes were being
stolen by small business, insurance companies, and organized
labor. Do we want a market-driven system, with real consumer
choice and genuine competition? Or do we want a government-
managed system choosing what kind of benefits Americans receive
and forcing them into managed-care options?
Americans have also learned yet another important lesson
from the health-care debate: Congress cannot lead on this issue.
Unless they want to set up a British-style system where
government runs the health service, cradle to grave, it is simply
And, because of that fact, it is foolish for members of
either the medical community or the business community or anybody
else to think that they can impose some backroom deal in an area
that will affect every American family. Divisions between big
business and small business only strengthened enemies of market-
based reforms in Congress. In no case should business, the
insurance industry, or the medical community attempt to use the
health-care reform issue as a way to get Congress to micro-manage
its competitive situation.
Look for the next round of the debate to be more focused,
and yet even more intense. Undeniably, there are fundamental
problems. First, there are far too many people who are uninsured,
and that number will go up. Second, there are still far too many
people who have gaps in their insurance coverage. For example,
they may have terrific coverage for routine medical services, but
are vulnerable to catastrophic illness and its financial
devastation. Third, there is still no portability in the system.
Loss of a job usually means loss of medical insurance. This is
not true of any other type of insurance-auto, life, or
homeowners' insurance. This is absurd. Finally, and most
importantly, costs are still out of control; the current dip in
corporate premiums is temporary. One major reason is that the
United States has a rapidly aging population, and therefore the
volume and intensity of the demand for medical services among
this population is bound to increase. But it will do so outside
of the normal collision of market forces that control costs.
The flurry of wrong-headed state-based reform efforts will
accelerate, and many states are likely to follow the lead of
Washington State, Minnesota, Florida, Maryland, and Tennessee to
enact ``managed competition'' style proposals. Expect single-
payer advocates to pursue a Long March through the States toward
a Canadian-style system. Whatever happens to the single-payer
initiative in California-at this writing it is projected to fail-
the proponents of straight socialized medicine feel that they
will have the best chance of reaching a government-run system
through state-based ``reform.'' The Clinton White House and its
appointees in Washington's bureaucracy can be expected to assist
these efforts by granting waivers to state reformers.
One of the main stumbling blocks for pro-socialist reformers
is the current Employee Retirement Income Security Act, which
establishes federal rules enabling private employers to escape
state-based regulatory initiatives. Under ERISA, private
companies can avoid state mandated-benefits requirements and can
self insure, designing their own medical insurance packages.
Liberals in Congress are likely to try to change the ERISA laws
to strengthen the hand of state government allies who want to
impose comprehensive standardized benefits packages and broad
The coming ERISA debate is an awkward one for Congressional
conservatives. The states rights team in the House and Senate-a
small team, to be sure-is going to have a hard time legitimizing
their opposition to state ``flexibility.'' But the debate is
likely to be dominated, not by ideological concerns, but by power
politics. Big companies, who have been generally favorable to
``managed competition'' schemes and other regulatory initiatives
to control benefits, are likely to oppose any changes in ERISA.
But who knows? The Clinton team is resourceful. They are down,
but not out. They could use changes in ERISA to accomplish their
goals through the states instead of through Congress.
The new Congress may be more favorable to market-based
reform. It is important to present the case early and