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Volume 55, No. 12 December 1999

THE FOURTH AMENDMENT...According to Shalala

By missing its self-imposed deadline for passing legislation to protect privacy, Congress has defaulted to the back-up option that it enacted in the Kassebaum-Kennedy bill: getting the Clinton Administration to do it.

HHS Secretary Shalala has been circulating regulations to federal agencies for months. They are published in the Nov. 3 Federal Register, with a Jan. 3 deadline for public comment (see www.access.gpo.gov/su_docs/aces/aces140.html).

Bill Clinton stated: "In 1999 Americans should never have to worry about nightmare scenarios depicted in George Orwell's 1984. I'm determined to put an end to such violations of privacy. That's why I'm honoring the pledge I made in the State of the Union Address and using the full authority of this office to create the first comprehensive national standards for protection of medical records."

The regulations fill 147 pages and comprise 1.3 megabytes. Penalties for unintentional violations range up to $25,000 per person per year. Intentional [illegal] disclosures are punished by fines of up to $50,000 plus one year in prison, or $250,000 plus up to ten years in prison if there was an intent to sell the data.

Just as physicians are now confronting a demand to have a compliance plan for billing federal programs properly, they will soon be required to write policies and procedures, including the appointment of a privacy officer, concerning the protection of any health records ever transmitted electronically.

The regulations define "covered entities" to include health plans, health care clearinghouses, and health care providers. Noncovered entities include workers compensation carriers, researchers, life insurance issuers, employers, and marketing firms: "an important gap" in the protections. Immune entities include the protectors themselves (law enforcement). Individually identifiable health information that is part of an "education record" is not considered "protected health information."

The Secretary attempts to bridge the gap in her authority by requiring the covered entities to apply many provisions of the rule to "business partners" with whom they contract for administrative and other services. Doctors can't throw their billing agents in jail, of course, but they can and must attempt to make them mitigate any damages they cause by unauthorized use of information, on pain of loss of future business.

The key feature of the "protections" is that "most uses and disclosures of an individual's protected health information would not require explicit authorization by the individual....[W]e propose to substitute regulatory protections for the pro forma authorizations that are used today."

Specifically, covered entities would be permitted (or, often, required) to use or disclose "protected health information" without patient authorization for "specific public and public-related purposes, including public health [broadly defined], research, health oversight, [and] law enforcement..."

Shalala states: "The need to obtain authorization for use of health information would create significant obstacles in efforts to fight crime, understand disease, and protect public health."

While acknowledging that "privacy is a fundamental right ...[that] speaks to our individual and collective freedom," the Secretary asserts that "the right is not absolute." Moreover, the Fourth Amendment only guarantees "the right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures." Rights, in her view, are a balancing act, with the government acting to determine when the public good outweighs the individual's interest. And the health, including the mental health, of the citizenry is "a public good of transcendent importance."

A problem that especially troubles the Secretary is "any provider who maintains a solely paper information system." As she views it, HHS must have authority over all individually identifiable health information in order to protect it. Thus, the statute must be interpreted as broadly as possible, with terms defined to permit implementation of its perceived purpose. For example, information becomes covered once it passes through any computer, as by FAX, though paper-to-paper FAXes are outside the rules at present.

"Health information is considered relatively `safe' today, not because it is secure, but because it is difficult to access. These standards improve access...." states House Report No. 496, 104th Congress, 2nd Session, at 99. The perceived protections offered by the regulations might help alleviate concerns about requiring electronic data transmission.

The primary right accorded to individuals under these rules is the right to complain to the Secretary, who can then punish the covered entity. As the proposal notes, there is no individual cause of action to recover damages for unlawful disclosure of protected information.

The cost of the rule is estimated to be more than $1 billion in its first year, including nearly $400 million to develop policies and $120 million to issue notices. The Secretary posits "significant, non-quantifiable social benefits" to offset the cost, as by better health due to increased utilization of medical services.

The unique cost to the federal government will be for enforcement, through the Office of Civil Rights.

Through these rules, individuals are to be protected against marketing efforts, job discrimination, or insurance underwriting by noncovered private entities-while health will benefit from increased government-approved research that can now be done without the burden of obtaining consent, as well as from the oversight of all medical care. We have HHS assurance.

The Fourth Amendment was written to protect individuals against incursions by government. Now that government is our protector, the Amendment is being turned on its head.

AAPS Annual Meeting Report

At the 56th annual meeting in Coeur D'Alene, the gavel was passed to our new President, Lawrence R. Huntoon, M.D., Ph.D., of Jamestown, NY. Robert Cihak, M.D., of Aberdeen, WA, is President- Elect. Claud A. Boyd, Jr., M.D., of Augusta, GA, remains as Secretary, and R. Lowell Campbell, M.D., of Corsicana, TX, as Treasurer.

Elected to three-year terms as Directors are: Chester Danehower, M.D., of Peoria, IL; John J. Dwyer, M.D., of Chicago, IL; Vernon L. Goltry, M.D., of Boise, ID; and Mark Schiller, M.D., of San Francisco, CA.

The Assembly passed one Resolution: That the Association of American Physicians and Surgeons consider starting an organization which might be called American Association of Presidents of Private Medical Staffs, as another way of commitment to an undertaking of reclaiming the private practice of medicine in America.

Audiotapes and videotapes are available: see enclosed order form, or www.aapsonline.org.

"Single-Payer" Doctors Are Coming On Strong

On Nov. 6, an AAPS representative attended the Fall Meeting of Physicians for a National Health Program (PNHP) in Chicago. More than 200 of their 8,500 members gathered to plan strategies for state and national government-controlled single payer plans. Our representative files this report:

PNHP makes no bones about its position: health care is a right. True to their socialist leanings (which they choose to call "progressive"), their policy statements include these: "The allocation of medical care should be based on need, not wealth." And, "We can t have one system for the old, one for the young, one for the sick, one for the well, one for the working, one for the unemployed."

Many of the attendees were medical students belonging to the 30,000-strong American Medical Students Association, which has endorsed single payer and the goal, as stated by the president, of "making sure that the day students hit medical school they believe medical care is a right."

The group is backing several state single-payer initiatives, such as those in Maryland and Washington. Both are extremely well-organized and have substantial financial backing.

Other efforts include aggressive media outreach to publicize surveys which show that 72% of Americans support "universal health care for all" (of course, the question doesn t address the who and how of paying for it), writing curricula for health policy courses to slant to single-payer, bringing single-payer supporters to grand rounds, house parties, and a nation-wide act of civil disobedience.

They are geared up for a long term battle-planning for the initiatives stretches out to 2004, and their simplistic message could easily seduce the public.

This should serve as a reminder to AAPS members to recommit their efforts to fight those who would destroy the independent practice of medicine in this country.

Reports from Single-Payer Land

Accessibility. Dr. Patrick Hewlett reports that in Ontario, the "Health Care Accessibility Act" passed in 1986 makes it illegal for physicians to provide any "necessary medical services" except at the government-dictated fee. If a patient complains about having a bill from a doctor, the government pays the patient the amount of the charge, then deducts that from the doctor's account plus an administrative fee. Dr. Hewlett fought three of these-small charges for nonmedical services. He won, but it wasn't worth legal fees and three years of hassles.

Canadian Opinion Changing. About 41% of Canadians, a larger minority than elected the present federal government, have come to believe that individuals should be permitted to pay privately for medical services if they wish.

"If one proves one's patriotism by suffering for one's country, then Canadian medicare patients are among the most patriotic people in the world," writes David Frum. "Thousands of them every year endure unnecessary pain and danger because of our dilapidated national health-care monopoly."

Among the luxuries that Canadians must do without is anesthesia during childbirth. Doctors' waiting rooms are jammed because decision-makers value patients' time at zero. An extra infusion of $11.5 billion from Ottawa will "vanish into the maw of our stumbling medicare system without a trace," states Frum. The hopeful news: "The crisis in medicare is creating something that Canada seemed to have lost decades ago: a constituency for freedom" (National Post 9/7/99).

HMOs Fail, MSAs Thrive in South Africa

An aggressive invasion by U.S. Health Care has mostly failed in South Africa-in part because physicians were armed with the facts about managed care in America, thanks to the efforts of AAPS Past President Bud Goltry and local activist physicians such as H. Hamersma. Some of the same U.S. companies that opted for managed care at home are choosing MSAs abroad. In South Africa, MSAs have soared from nowhere to capture 50% of the market. More than 75% of employers either offer MSA plans or intend to do so. South African law permits much more flexibility in the design of the product, while American MSAs are crippled by provisions written by opponents such as Sen. Kennedy, writes John Goodman, Ph.D., of the National Center for Policy Analysis.

Regulation vs. Freedom: "Patients' Rights"

The "Patients' Rights" debate (see pp. S1-S2) will probably

carry over into the next session of this Congress. The Norwood-Dingell approach, favored by the AMA and the Democrats, imposes costly regulations on all insurance plans, not just HMOs. External reviews are more likely to be demanded in plans that allow doctors the most discretion. The more severe impact of this regulation will put fee-for-service at a worse competitive disadvantage, risking the destruction of such plans: an ironic result of legislation that pretends to correct HMO abuses. Remarkably, Norwood-Dingell protects HMOs from the only costs that they can't shift-punitive damages-as long as they go through the prescribed process.

The AMA, though officially in favor of MSAs, is criticizing the Talent bill, which would help expand access to insurance, stating that "Bid to revive MSAs could thwart patient protection legislation [Norwood-Dingell]" (AM News 11/1/99). The AMA would apparently prefer increased federal regulation of all insurance to putting control back into the hands of patients.

The Norwood-Dingell and Talent bills, and pertinent excerpts, are posted at www.aapsonline.org.

More HMOs Sued, Despite ERISA

Three huge class action suits have recently been filed against HMOs: O'Neil v. Aetna (S.D. Miss. No. 2:99CV284PG); Conte v. Aetna-U.S. Healthcare (E.D. Pa. No. 99-CV-4929); and Price v. Humana (S.D. Fla. No. 99- 8763). More such suits are probably to be expected in the wake of a number of state and federal court decisions. Successful causes of actions have included medical malpractice and negligence claims; the Third Circuit has held that ERISA did not preempt such claims, in Dukes v. U.S. Healthcare, 57 F.3d 350 (3d 1995).

In O'Neil, plaintiffs allege that Aetna engaged in a "nationwide fraudulent scheme" to enroll members, promising quality health care and then denying services to boost profits, in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO) as well as ERISA. The complaint cites multiple acts of mail and wire fraud and a breach of fiduciary duty under ERISA. Aetna's mergers and acquisitions gave it the market power to engage in "heavy-handed profit and market dominance strategies designed to coerce physicians into accepting contracts and policies and practices on a `take it or leave it' basis."

In Conte, plaintiffs claimed that Aetna failed to disclose physicians' incentives to limit care. Fuller knowledge would have prompted plaintiffs "to weigh their physicians' recommendations more accurately, ... investigate treatment options more aggressively, and ... exercise more intelligently their right to pay out of pocket."

Price, also a RICO case, alleges that Humana failed to inform beneficiaries that it employed "undisclosed cost-based criteria, using factors different from and more restrictive than those described in the Humana Medical Necessity Definition."

Plaintiffs hope to be compensated for the cost of care that was promised but denied them, and to "change forever the way this HMO operates." See: BNA's Health Care Policy Report 10/18/99 and BNA's Health Care Fraud Report 10/20/99.

Fraud Sentences Handed Down

Jerome Maciejewski, former executive vice president of Upstate Medicare in New York, was been sentenced to two years in federal prison and a $15,000 fine for Medicare fraud. The Judge departed from mandatory sentencing guidelines of 5.8 to 7.25 years in prison because he felt that the government would be fully compensated and Maciejewski didn't need rehabilitation. Maciejewski did not "try to line his pockets with government money," but persuaded employees to engage in "improper cost shifting" of more than $1 million to pay private business costs, and to file falsified performance reports. Blue Cross/Blue Shield is negotiating a repayment deal with the government to cover the misappropriated funds (Buffalo News 10/22/99).

Fraud by the private partners of HCFA is apparently rampant. More than a quarter of the contractors have been or are currently under investigation for fraud. Only three of the contractors found to have "integrity problems" were identified by HCFA. The agency prefers to rely on self-policing and gave the contractors $1.6 billion in 1998 to fund their own internal fraud detection units. Government investigators found that the corporate fraud units are often incompetent and conceal their mistakes by destroying backlogged claims, manufacturing documentation, and hiding files (Post-Journal 7/23/99).

Providers recently sentenced for fraud include two Kansas physicians and a Baptist Medical Center executive. A federal judge found that the government lost no more than $65,716 in connection with a patient referral scheme-even though the hospital paid a $17.5 million fine to resolve the issue.

Dr. Robert LaHue, 58, owner of a medical practice that served 7,000 patients in 200 Kansas and Missouri nursing homes, was sentenced to 5.83 years in prison, a $75,000 fine, and $142,040 in restitution. Dr. Ronald LaHue, 52, was sentenced to 3.1 years, and former CEO Dan Anderson, 59, to 4.25 years. The plea that defendants intended to secure better treatment for underserved elderly and did not intentionally violate the law against paying for referrals, did not cause the judge to depart from sentencing guidelines (Kansas City Business Journal 10/15-21/99, Kansas City Star 10/29/99).

Lawyer Jailed for False Affidavit

Doris Houser Allen, a Walnut Hills lawyer, was sentenced to one year in prison for filing a false affidavit that resulted in one night in jail for an innocent man. The affidavit included false charges of domestic violence, in an attempt to help her client win custody of her children. Ms. Allen was convicted of perjury and tampering with records. Judge Steven Martin said that a prison term is necessary because she broke a cardinal rule for lawyers and sent an innocent man to jail (Cincinnati Enquirer 4/28/99).

Carrier Accused of Retaliation Against Patients

Richard Swint, M.D., of Abilene has asked Senator Phil Gramm: "When is the Texas Medicare carrier going to be investigated and audited?" He submitted documentation of 11 instances in which patients were denied all reimbursement on properly submitted claims totalling about $396. (Dr. Swint never accepts assignment.)

Dr. Swint stated that in 1992, after his complaints to Congress about the ineptitude of the Medicare carrier, every one of his patients' claims was denied for a whole month.

Dr. Swint also sent copies of Medicare Remittance Notices mailed by the carrier to his office, concerning claims for patients he had never seen and using an incorrect clinic identification number. He informed Senator Gramm that had he filed claims on patients he had not seen, each claim would incur a $10,000 fine plus triple damages.

The header on the notice reads: "Help prevent Medicare fraud-report all suspected instance [sic.] of fraud and abuse."

Government-Approved Research

From a verbatim transcript of the Advisory Committee on Immunization Practices, Feb. 18, 1999:

Dr. Pickering: "The Academy has come out in the published statement and has stated the premature infants should be immunized with rotavirus vaccine, and hopefully the ACIP statement will somewhat mirror so there is not confusion in the field about administration of rotavirus vaccine to these infants."

Dr. Modlin: "Obviously a situation where we have to make a judgment in the absence of data and with a vaccine that has not yet been tested in this group."

The vote for modifying the recommendations of ACIP to agree with the Red Book was: 9 in favor, 1 opposed, 1 abstaining because "conflicted with Wyeth-Lederle."

Members' Page

The Difference Between Private Enterprise and a Public- Private Partnership. When entrepreneurs in the free market offer a product that consumers don't like, they lose money and either adapt or go out of business. When public-private partners in the non-free market, however, offer a product that consumers don't like, they get a federal grant so they can continue doing it! WCA Hospital in Jamestown recently got a $368,000 grant from the Community Health Care Conversion Demonstration Project, a $1.25 billion program, to "help make systematic changes necessary to participate more fully in managed care networks."

Trying to trace the source of funding isn't easy. I called the New York State Health Dept. and was transferred 7 or 8 times until I finally got someone in budget and fiscal management, who I suspect simply told me it was "federal money" to get me off the line. She couldn't tell me whether a not-for-profit foundation gave the money to the federal government to distribute to the states. It seems that $1.25 billion is a lot of money for those who transfer it not to know where it comes from.

The amount the hospital got is about the same as was dema- nded from a Buffalo-area physician who was hit by a "random Medicare audit." He was told he had no right to appeal unless he paid up the $300,000 first. After taking out a loan from the bank, he hired a knowledgeable lawyer and got most of the money back. From this, he had to pay rather high attorney's fees. How many of us can afford to be innocent?
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NYPresident, AAPS


Why an Actuary May Need to Repent. My article exposing the Total Quality Management (TQM) scam [see enclosed pamphlet], originally written in 1996 for Contingencies, the journal of American Academy of Actuaries, got me into a lot of trouble with my employer. Naively, I didn't realize that most consultants are in the business of generating billable hours, and there's no future in telling people not to spend their money on consultants. My expertise fell into the category of "pay no attention to the man behind the curtain"-like the one selling the smoke and mirrors and snake oil called TQM.

What finally did me in as a consultant was that the job required making the assumption that Medicare was a financially solvent system that our clients could depend on.
Gerry Smedinghoff, Consulting Actuary


Sunshine on Research. Thanks for the information on the Shelby provisions (OMB Circular A-110). This piece of legislation is monumental in its ramifications. For example, the federal government has financed more than 100 studies on the connection between Simian Virus 40 (SV-40), vaccines, and cancer. The data are scrubbed and filtered, then published. Public access to the raw data would be very valuable....
Michael Horwin,
[email protected]

[See Mr. Horwin's letter concerning ABC Nightline's program on vaccines, and AAPS comments on the OMB Circular ("comments on regulations") at www.aapsonline.org.]


SimpleCare. From a letter to the Spokane Spokesman-Review: In your coverage of our meeting, you implied that our group was financially motivated. One speaker [Dave MacDonald, D.O.] founded an innovative program for the uninsured which makes medical care affordable and puts the patient back in charge. He said, "I'll work for one-half the salary of the average physician if I can spend the time caring for patients instead of caring for paperwork." I disagree with him somewhat. When the doctor is delivering my baby, I'd like to think he's worth at least half as much as a good airplane mechanic....
Gregory N. Laurence, M.D., Memphis, TN


Simple Targets. Insurance carrier influence is on a scale much larger than the restriction of provider networks or the nightmares associated with referral/prior authorizations. I recently asked a fraud investigator why regulation does not follow the money trail. Understanding that the trail leads back to carriers, his response was very direct: "Insurance companies have too much money and too much influence allowing them to fight the system." He further stated that he was responsible for delivering positive investigation results. The discussion ended with my suggestion that doctors are "simple" targets.
Debbie Fehr, CPC/APC, Glendale, AZ


Opt Out! Articles in a recent dermatology newsletter tell how to deal with the Goon Squad when it breaks down the door to your office and terrorizes you and your staff. It can invade anyone's office because it operates on the basis of tips and denunciations. Once the finger is pointed at you, your rights are zero, and it will cost you tens of thousands of dollars to extricate yourself-if you're lucky.

When stationed in Vietnam, I took umbrage at protestors comparing the U.S. with Communist states. Thirty years later, I am not sure they were wrong. Cross the bureaucrats and elites who run our country, and they will do you serious harm.

If at all possible, the best thing a doctor can do to protect himself is to drop out of all insurance, particularly Medicare. (No doctor with any sense has anything to do with the farce and lie called Medicaid.) The old-time docs of the 60s who objected to Medicare were absolutely right.
Frederick A. Pereira, M.D., Flushing, New York

Legislative Alert

Patients' "Bill of Rights" Debate: Part III

Now that the House has overwhelmingly passed (275-151) the Bipartisan Consensus Managed Care Improvement Act (H.R. 2723), popularly known as the Norwood-Dingell bill, Congress is preparing for the next phase of the debate: the House-Senate Conference. The House and Senate bills are very far apart- particularly on the question of health plan and employer liability-and Capitol Hill observers expect it to be a rough and drawn-out conference.

An indication of just how contentious the Conference is going to be is already evident in the controversy surrounding the appointment of the House conferees. On final passage, 68 Republicans voted for the bill. House Speaker Dennis Hastert has appointed 12 House Republican conferees-including the big names such as Congressmen Bill Thomas (R-CA), John Boehner (R-OH), and Jim Talent of Missouri (R-MO)-but only one of his appointees (Mike Bilirakis, R-FL) voted for H.R. 2723. The chief co-sponsor of the bill, Congressman Charles Norwood (R-GA) has been excluded. Dr. Norwood and Dr. Greg Ganske (R-IA), as well as House Democrats, are furious with Hastert s decision. And on Nov. 3 the House approved a non-binding motion that the House conferees insist upon the House position. Norwood, meanwhile, turned down an offer by the Democrats to join John Dingell as a conferee.

Then, of course, there is the omnipresent Clinton question. Bill Clinton holds the final card in the game and will only be too happy to veto a bill he doesn t think is strong enough-in other words, if there is not enough litigation in it for him. Since 1994, the Congressional Republicans have never had confidence that they could frame the health policy issue better than Clinton, and thus they have been at the mercy of his superior political skills. Look for the conference wrangle to carry over into next year.

The House Republican leaders' October strategy was a mixed performance. They succeeded in winning adoption of the Talent Bill, the Access and Choice Act (H.R. 2990), which provided for various modest but valuable tax-related measures designed to expand health insurance coverage, including expanded medical savings accounts (MSAs) and a 100% deduction for health insurance expenses for all Americans, including the self-employed. MSAs provide the essence of portability and patient control, but they are a top political target of the Administration.

The Talent bill promotes tax equity in the treatment of health insurance through tax deductions. Tax deductions are good as far as they go, but they do not go very far-if the object is to reduce the number of the uninsured. The most likely families to be uninsured are those who are working: about 65% of the uninsured are in working families who earn $ 25,000 or less per year. Most work for small firms, which may not offer coverage. Moreover, one in five of the people who are offered health insurance through the workplace, according to a recent report by the Center for Studying Health System Change, turn it down- usually because they can t afford it. The working uninsured, like most Americans, pay more in payroll taxes than in income taxes, and thus the income tax deduction does little to relieve them from a fairly regressive system of federal taxation. Some conservative economists have thus argued for a tax credit system. Tax credits are portable, and they can be targeted to people who need the most help. But the key feature is that they enable individuals to make real choices and force insurance companies into direct competition with each other for consumer s dollars. But Congress, at least this year, is not listening.

The Talent Bill also provides for the creation of health insurance cooperatives for small businesses and promotes the establishment of private association plans. The access provisions, which are generally pretty good as a matter of policy, may survive the conference, if the conservatives can hold on to them in the face of the Clinton Administration s displeasure.

Lost Opportunities

After the Coburn-Shadegg and Boehner floor substitutes failed, the House Republican leadership had no amendments ready to attach to H.R. 2723, and that partially explains its overwhelming passage on the final vote. It wasn t as if there were no solid policy proposals ready and waiting to be included in the debate. The House Rules Committee received, just before HR 2723 went to the floor, dozens of amendments, including some very sound proposals for debate-but they were not allowed to see the light of day. Examples include:

  • An amendment that limited the terms of the law according to its impact on insurance enrollment, ensuring that premiums would not increase and that the number of uninsured would not increase by more than 100,000 as a result of the passage of the Act-offered by Congressman Tom Bliley (R-VA).

  • An amendment that would have given insurance subscribers a choice of a lower rate for less liability coverage, just as consumers can do today in the purchase of auto insurance- also offered by Congressman Tom Bliley.

  • Limiting damages from "pain and suffering" to $250,000, while allowing patients to recover all medical expenses, lost wages, future earnings, and out-of-pocket expenses. The amendment would have also established a uniform statute of limitations of two years, joint-and-several liability reform, and a reasonable limitation on attorneys' fees. This was offered by Congressman John Boehner (R-OH).

  • An amendment to give enrollees in ERISA plans a choice of legal remedy-offered by Rep. Christopher Cox (R-CA).

  • An amendment that would have established, as a preliminary qualification for any external review, the requirement that the items in the dispute must be covered benefits.

  • Application of "patients' rights" to Medicare and other government health insurance programs-offered by Congressman John Peterson (R-PA).

None of these amendments were even discussed on the floor of the House. Clinton had warned Congressional leaders not to load up the bill with "poison pill" amendments, and the Republicans obeyed-at least it appears they did so.

It is surprising that there was no major debate on key policy issues, such as rising cost and rising numbers of uninsured, as well as the provisions of the Norwood-Dingell bill. After all, Republican leaders had been saying for months that they were concerned about these issues. Then why weren t Congressman Bliley s amendments in order? And why shouldn t Rep. Bliley or Peterson force the Congress to make a trade-off between the patients' rights provisions and the likely increases in premiums? There is no real dispute that higher premiums lead to higher rates of being uninsured.

Likewise, if patients can sue private plans, why should Medicare patients not be able to sue HCFA or its contractors for personal injury? Why should HCFA not be required to meet timeliness requirements on appeals? Fairness is not a "poison pill."

As usual, instead of forcing the debate on their terms, Congressional leaders let the White House and its political allies in Congress define the terms of the debate for them. The result was not surprising. House Republicans, including those who had grave misgivings over the impact of H.R. 2327, felt compelled to vote for the bill. They did not feel that they could be perceived as being against "patient protections."

The Medicare Fix Is In

As Congress and the Clinton Administration wrangle over the final details of the budget package that will boost federal spending by at least $30 billion, with no tax cuts, look for Congress to restore between $10 and $15 billion to Medicare in an effort to undo the reimbursement reductions enacted as part of the Balanced Budget Act of 1997. Meanwhile, Congressional leaders have shown no interest at all in fixing more egregious policy problems embodied in the Balanced Budget Act, as by recognizing the right to contract privately. Moreover, they don t seem interested in blocking HCFA s collection of sensitive personal data (OASIS).

Congress is into budget expansions. Medicare spending has been slowed in the past year to 1.5%, more than anticipated. But lobbyists for home health agencies, nursing homes, HMOs, and others have been successful in drawing attention to their plight. The Congressional Budget Office (CBO) predicts that Medicare spending will more than double in the next ten years and will exceed $400 billion by 2008. And then Medicare spending will skyrocket. Assuming no changes, taxes will have to be raised, other spending will have to be cut, Medicare benefits will have to cut, or big deficits will be incurred-or there will be a nasty combination of all of these miseries. As Robert Samuelson noted, Clinton had a clear shot at a real legacy: work with Congress and bring entitlements into line. Instead, he has chosen to ignore the options and has proposed expanding benefits, ratcheting up the political costs for any sober-minded legislators of either party who disagree (Washington Post 11/4/99).

The Big Picture

In a remarkable 1997 speech to the Service Employees International Union in Washington, Bill Clinton said: "Now what I tried before won t work. Maybe we can do it another way. That s what we ve tried to do, a step at a time, until we finish this." Remarkably, Congress has responded to this agenda by offering watered-down versions of White House proposals for changes in the private insurance market. Republican leaders are, in effect, surrendering to the Administration on the installment plan.

Since 1994, the Clinton Administration has taken every opportunity to bring additional sectors of the health care system under government control. Key components have included an unprecedented expansion of federal regulation over private health insurance markets through the Kassebaum- Kennedy bill; the creation, in that same bill, of a "unique patient identifier" that threatens patient privacy; and, perhaps most notably, a remarkable statutory restriction on the right of Medicare patients to contract privately with physicians and spend their own money on medical services without bureaucratic interference. This provision, Section 4507 of the Balanced Budget Act, resembles the restriction on private care in Clinton s proposed regional alliances in the then ill-fated Clinton Health Security Act of 1993. Sure, under that proposal, patients could spend their own money on a physician of their choice-as long as that physician dropped out of the government-sponsored managed-care network. Norwood-Dingell would continue the trend toward expanding bureaucratic control.

The President and his Congressional allies know that there is not far to go if they keep up the pressure and put the squeeze on the private sector. The prescription is simple: keep the tax treatment of health insurance just as it is, and sit and wait for the downturn in the economy, when the numbers of the uninsured get really big. Then, declare another crisis, issue ringing denunciations of the "profiteers" in the private sector- drug companies, doctors, private insurance companies, employers- and propose some complicated measure, packed with vast new responsibilities for HCFA or its clone, which will, at the end of the day, guarantee a system that looks like Britain or Canada. We can make sure that the treatments will not only be medically "necessary" and " appropriate" according to new government standards, but "politically correct" as well.

The White House team and its allies on Capitol Hill know very well that medicine today is a "mixed" economy. Government pays 47% of America s medical bills. On the one end, they propose to expand Medicaid, largely through Kidcare. At the other end, they propose to expand Medicare, and try to get millions of Americans between the ages of 55 and 65 into the Medicare program. That option will become increasingly attractive if there is a downturn in the economy, and millions more have difficulty holding on to their private employment-based health insurance.

Employment-based medical insurance is increasingly fragile, and will be made more so if Congress opens up a serious avenue for litigation over benefits and services provided by employers. The health insurance system is already one of the most highly regulated sectors of the American economy. It is not a "free market" in any normal meaning of the term; for there is little real consumer choice and the competition in this system is increasingly constrained by law and ever more detailed, intricate, and intrusive regulation. Big insurance companies, meanwhile, are consolidating their market share. With the "information explosion" and the knowledge transmitted in micro- seconds comes "individual empowerment" in virtually every sector of the American economy. The health care sector is the big and glaring exception.

Needed: A new class of Washington policy makers who can think of the next generation rather than simply the next election, and who understand that the key to reforming the health care system is returning the key decisions in the system to individuals and families in consultation with their doctors.

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