Volume 53, No. 2 February 1997

FREEDOM-BASED REFORM

The debate over the future of American medicine will be won by those who control the high ground of semantics, especially in the arena of the sound-bite. Without Orwellian Newspeak and the Memory Hole, proponents of socialism (legal plunder) would be disarmed.

Congressmen thought it was impossible to vote against Kennedy-Kassebaum as an ``insurance reform,'' ``anti-fraud,'' ``administrative simplification'' bill. In actuality, it increases the cost of insurance, criminalizes medicine, threatens privacy (and aids the socialist agenda), but the public still doesn't know that.

Collectivists are skilled at packaging their nostrums in seductive language. They are also masters in the use of a tarbrush to paint the opposition-but the proponents of liberty use it on themselves often enough.

It is a mistake to frame the public debate in terms of markets, choice, competition, and capitalism.

``Market-based reform'' has been used to describe ``managed competition'' or even the Clinton plan. The term may mollify so- called conservatives but probably doesn't sell to the public. The market, after all, is not a warm and fuzzy concept. Say ``market'' and people think of a cold, impersonal, ruthless, and chaotic mechanism, like the stock market. Trusting ``The Market'' to decide their fate may seem even less desirable than leaving it up to ``Society.'' Moreover, being in favor of ``the market'' is like being in favor of gravity: both are inevitable natural phenomena. Some sort of market, or exchange mechanism, will exist; the question is, what kind?

The term ``choice'' probably appeals to focus groups but has been preempted by abortion and euthanasia advocates and managed- care companies. HMO risk contractors offer Medicare beneficiaries the opportunity to choose their benefits (vision care, prescription drugs, dental care, etc.)-but not to choose any doctor or treatment that they want. It's like a multiple- choice test in which the right answer is not on the list. Some advocate adding an ``option''-the death option-while opposing access to the means of restoring the desire to live, such as pain relief through ``elective'' surgery, palliative radiation, or adequate doses of narcotics.

``Competition'' is another potentially threatening idea; it could mean gladiators fighting to the death. And Mussolini was a fan of ``capitalism.''

Patrick Henry did not say: ``Give me markets [or choice or competition or capitalism], or give me death!''

We must never forget the key word: Liberty, or Freedom.

We are not in favor of decisions being made by an automaton, with strings being pulled by robber barons. We favor peaceful, voluntary decision-making by free men and women, acting on their own behalf. The area in which this occurs may be called a ``free market,'' but if the terminology is confusing, or suggests lawlessness, let us try to be more clear.

Peaceful, voluntary decisions do not occur in a lawless, anarchic society (which some try to equate with ``unfettered'' free enterprise, implying that productive citizens should by rights wear shackles like criminals on a chain gang). But the laws of a good society are simple and clear to all. Moreover, the government is not exempt from them.

The good society runs mostly on an honors system, like the one that Bill Clinton is trying to destroy at VMI (``A cadet will neither lie, cheat, steal,nor tolerate those who do'') or the one that existed for decades at the California Institute of Technology (``You will not take unfair advantage of your fellow man''-AtE 1/97). In such a society, force is used only as necessary to restrain those who violate the rights of others.

Listen carefully to the political rhetoric on both sides of the aisle: there are constant, thinly veiled references to the use of force-either to compel one type of activity or to obstruct (prohibit or ``regulate'') other activities. Listen also for the other side to each and every government ``benefit'': a cost to be paid, unwillingly, by someone else, or a burden or often crippling disadvantage to be borne.

The language of forced collectivism-legal plunder-is becoming ever more prevalent and its concepts ever more deeply ingrained, for words are the tools we use for thinking. We must insist on the proper semantics at every opportunity.

How, then, shall we define the reforms that we favor? AAPS is for freedom-based reforms that permit individual patients and physicians to contract with each other privately and voluntarily, on mutually agreeable terms, and that allow individuals (and not just employers) to own insurance policies that best meet their own needs, without subjecting them to tax discrimination. We oppose all incremental steps toward command-and-control medicine (especially for children).

Some small steps in the right direction are occurring as insurers begin to offer products that take advantage of the Medical Savings Account provision in Kennedy-Kassebaum. However, some of the big players (such as Time and Blue Cross Blue Shield of Texas) are treating MSA withdrawals exactly like insurance claims (with EOBs and checks to providers on a fee schedule), possibly tripling administrative costs. Either they are ``missing the point''(Greg Scandlen's Patient Power Report, PO Box 2095, Alexandria VA 22301, Oct 1996), or they understand very well where their own interests lie-in maintaining control over their subscribers' money.

Americans need to vote with their dollars for products that enhance their freedom, while demanding more freedom- based reform from their congressmen.

For all legislation, we should ask whether it initiates the use of force against peaceable citizens, say by compelling them to channel funds to a privileged group, such as big insurers? The litmus test is this: How does the law affect freedom?


Maryland Doctors Win a Battle for Privacy

At the eleventh hour, Maryland psychiatrist James Kelly, D.O., learned that the Medical and Chirurgical Faculty of Maryland (the state medical association, ``MedChi'') was about to cut a deal with the Health Care Access and Cost Commission (HCACC) and back down from its insistence on patient consent for entering medical information into the state computer data bank. Among other actions, Dr. Kelly requested a letter of support from AAPS and sent it by FAX to all delegates, who were expected to vote overwhelmingly in favor of compromise.

The tide turned. On Jan. 1, 1997, Richard S. Epstein, M.D., who testified for requiring consent in the last session of the Maryland legislature, wrote: ``We won the MedChi vote on confidentiality 16 to 1! MedChi now supports only consent. There will be no `deal.' It shows you what a few good people can do. Our plan is now to set up petition booths at shopping centers to petition the legislators to require consent.''

AAPS stated, in part, that ``the government's case that it `needs' personal information from every single medical encounter is completely unconvincing. It makes sense only for use in the coercive central planning of every detail of citizens' lives, down to rationing access to medical services and dictating physicians' treatment of their patients....At best, the HCACC is performing an experiment involving human subjects. If their consent is not required for an experiment that could lead to irreparable harm to individuals, why not just open the door to any type of human experimentation that a government agency says will benefit society?''

AAPS Member Runs for Governor in Michigan

Gary Artinian, M.D., is seeking the governorship of Michigan in order to stop laws that undermine patient care. There will probably be no incumbent in the race.

Dr. Artinian writes that ``my role on the State Board of Medicine was, first and foremost, to protect the public. My colleagues on the board described my work there as `unselfish, enthusiastic, and zealous.' After having served for a period of time, I realized that the actions of the state's Attorney General were often autocratic and punitive. The filing of charges against physicians for such `infractions' as the type of suture used is an outrage. Furthermore, leaks to the media of ongoing investi- gations...with the resultant defamation of the physician, to me, represent the very worst of government. Under recent legislation, the State Board of Medicine has lost control to bureaucrats. Since 1994, allegations against [a physician's] license may be secretly initiated, investigated, and prosecuted by staff without the knowledge of [physicians] on the Board.'' A lay member of the board has veto power over all the physicians.

Dr. Artinian also states that ``legislative support and encouragement of managed care must cease.''

On crime and drugs, Dr. Artinian believes that ``if there is a `paranoid and macho militia' here in Michigan, I believe it is on the state payroll (DNR, OSHA, Department of Regulation, A.G., etc.)'' Moreover, because of their high potential for abuse, he believes that Michigan property forfeiture laws should be overturned in total.

Dr. Artinian is seeking the support of physicians (one month's malpractice premium). His Exploratory Campaign Committee can be contacted at (810)334-GARY, or at http://www.perc.net/gov.htm

Action Plan for the Month

Put your Congressional Delegation (two Senators and one Representative) on notice:

NO MORE INCREMENTAL CLINTON CARE.
A sample letter, with proposed corrections to Kassebaum-Kennedy, is enclosed.

Medicare Spending-and Water over Niagara Falls

Many have asked how Medicare contractors get paid. The answer, obtained by Preston Lowen from staff in the New York Regional Office of HCFA: ``The carrier submits to HCFA a budget for its estimated administrative expenses for the Federal fiscal year. Such budget requests shall be accompanied by supporting documentation....The carrier and HCFA shall negotiate the amount of the annual budget....A carrier cannot exceed the annual amount on the NOBA [Notice of Budget Approval] without prior approval of HCFA.''

The short answer, according to AAPS Director Lawrence Huntoon, M.D., Ph.D.: ``Medicare contractors basically get paid whatever they ask for. They apparently get paid the same way that Medicare previously paid hospitals-on a cost or cost-plus basis-a way that they determined led to inflated costs and increased expenditures.''

From the 1996 HCFA Statistics, Dr. Huntoon has abstracted the following facts: HCFA pays out $40 million per hour. (About 40 million gallons of water pour over Niagara Falls every minute; a ``purely overwhelming'' spectacle, according to Dr. Huntoon.) Between 1967 and 1996, the number of Medicare patients doubled (from 19.5 to 38.1 million), and the number of Medicaid patients nearly quadrupled (10 to 37.5 million). We subsidized poverty and got more of it. National health expenditures per person are now 14 times more than they were in 1967 ($247 per person in 1967 and $3510 per person in 1996).

The cost of processing a Medicare claim has decreased from $2.90 per claim in 1975 to $1.11 in 1995, possibly due to electronic data processing. Dr. Huntoon suspects it is cheaper to process an assigned claim, and the percentage of assigned claims has increased from 51.5% in 1980 to 94.7% in 1995. Most claims (85.5% of assigned claims and 82.8% of unassigned claims) get their charges reduced [are they arguably fraudulent?]. The average amount of claims reduction is $67.08 per claim for assigned claims and $13.24 per claim for unassigned claims. And what if charge reductions are appealed? The reversal rate for Medicare appeals to carriers is 76.9%.

``That means it pays to appeal when you think the government is cheating you,'' writes Dr. Huntoon, ``because usually the government is cheating you.'' [However, under Kassebaum- Kennedy all perpetrators of fraud, abuse, or waste are assumed to be ``providers.'']

From the Memory Hole: ``In some respects robbery by subsidy is no less effective than highway robbery.''

Frederic Bastiat, Economic Sophisms, 1845 <``When plunder is abetted by law, it does not fear your courts, your gendarmes, and your prisons.''

Frederic Bastiat, The Law, 1850 [vocabulary drill, Robinson Self-Teaching Home-School Curriculum, version 2.0]


From Doctor to ``Provider'' to ``Target''

In a letter to AM News (Sept 23-30, 1996), Marion Friedman, M.D., of Baltimore quotes from a seminar held by the U.S. Department of Justice: The ``B7'' exclusion may be used when the ``target'' is not convicted. In other words, physicians need not be convicted to be excluded from the Medicare program. Imposing punishment without proof of guilt is consonant with a 7- 2 Supreme Court decision to reinstate longer prison terms for convicted drug dealers, which were based on conduct of which the accused were acquitted.

The justices noted that an acquittal ``does not prove that the defendant is innocent; it merely proves the existence of a reasonable doubt as to his guilt. ``We therefore hold that a jury's verdict of acquittal does not prevent the sentencing court from considering conduct underlying the acquitted charge, so long as that conduct has been proved by a preponderance of evidence.''

In his dissent, Justice John Paul Stevens wrote that ``the notion that a charge that cannot be sustained by proof beyond a reasonable doubt may give rise to the same punishment as if it had been so proved is repugnant'' (Az Daily Star 1/7/97).

The assets of a suspect may be targeted, even before he has actually committed any offense. A report prepared by the Division of Governmental Affairs and Public Policy of the American Society of Internal Medicine (ASIM) stated that ``the government can freeze the assets of an individual committing or about to commit a federal health care offense.''

When asked for clarification, Robert P. Doherty of ASIM replied that ``it would have been better had we differentiated between permanent forfeiture of assets that were obtained as the result of health care fraud-which can only occur upon conviction-and temporarily enjoining an individual from disposing of such assets.'' He referred to language in the conference committee report:

If a person is violating or about to commit a federal health care offense, the Attorney General of the United States could commence a civil action in any Federal court to enjoin such a violation. If the person is alienating or disposing of property or intends to alienate or dispose of property, the Attorney General could seek to enjoin such alienation or disposition, or could seek a restraining order to prohibit the person from withdrawing, transferring, removing, dissipating or disposing of such property or property of equivalent value and appoint a temporary receiver to administer such restraining order [emphasis added].

The statutory authority for such actions is the Health Insurance Portability and Accountability Act of 1996 (Kassebaum- Kennedy),  247, INJUNCTIVE RELIEF RELATING TO HEALTH CARE OFFENSES. (a) IN GENERAL- Section 1345(a)(1) of title 18, United States Code, is amended-(1) by striking `or' at the end of subparagraph (A); (2) by inserting `or' at the end of subparagraph (B); and (3) by adding at the end the following: `(C) committing or about to commit a Federal health care offense.'. (b) FREEZING OF ASSETS- Section 1345(a)(2) of title 18, United States Code, is amended by inserting `or a Federal health care offense' after `title)'.

The anti-fraud funding provided by K-K will give HCFA a ``stable funding stream'' to enable the building of computer data systems which can ``tell us before we pay the bill that there is something wrong,'' stated Judith Berek, senior advisor to the HCFA administrator. They will apply techniques developed for the Dept. of Defense at Los Alamos National Laboratory to make war on provider targets.

Suspending payments is one method, but Berek noted that HCFA is ``working with aggressive U.S. attorneys who are going out and snatching bank accounts before [perpetrators] go offshore. This is a technique we are using or planning to use nationally'' (BNA's Medicare Report 12/20/96).

Additional weapons in the arsenal are in the ``minimum'' requirements for a physician ``compliance program,'' without which the Inspector General of HHS or the Dept. of Justice will not settle a claim of health care fraud, for example: (1) Blanket authority to interview an entity's employees without counsel or the entity being present; (2) the establishment of a toll-free number for the reporting of suspected violations; and (3) waiver of the attorney-client privilege with respect to any investigation conducted of suspected wrong-doing. Most of these are also components of a ``voluntary cooperation'' component of Operation Restore Trust.

While some observers are optimistic that some of the more onerous requirements can be modified for smaller practices, others remain skeptical about the IG's willingness to be ``reasonable'' in setting requirements for physicians' offices, even though their programs are inconsistent with the Federal Sentencing Guidelines against imposing compliance programs on organizations with fewer than 50 employees (ibid.).

Whether intentional or not, the disparate impact of the ``anti-fraud'' initiative on small ``targets'' makes it appear that it is really an anti-private medicine, anti-independent physician effort. For example, the nation's largest clinical laboratory, Laboratory Corporation of America, agreed to pay $182 million in civil fines and $5 million in criminal fines to settle what was not its first offense of fraudulent billing. Although that is the largest settlement ever, it constitutes only about 12% of the company's annual revenues, and nobody went to prison. In contrast, Dr. Rutgard was fined 100% of his total insurance revenues for many years and sentenced to 11.25 years.

Corporate Practice of Medicine Under Fire

Texas has become the first state to take action against corporate interference with medical judgment. In Dec., 1996, the Texas Board of Medical Examiners, consistent with section 3.06(l) of the Texas Medical Practice Act, took the position that the determination of medical necessity or appropriateness of proposed care, so as to effect the diagnosis or treatment of a patient, constitutes the practice of medicine. Further, a person who practices medicine in Texas without a license or permit, so as to cause financial, physical, or psychological harm, shall be subject to prosecution for a third-degree felony as provided for in section 3.07 of the Medical Practice Act.

Those who might be suspected of violating this Act include insurers, case managers, third-party review companies, agency employees, managed-care companies, managed-care gatekeepers, and out-of-state medical directors.

It is expected that this policy will be challenged in court.

The California board also intends to expand its role in enforcing the ban on the corporate practice of medicine, according to an Action Report of October, 1996. The purpose of the prohibition is to ``protect patients from interference with a physician's judgment....The physician should not be forced to choose between the dictates of his or her ``employer'' and the best interest of the patients.


Members' Page

The Boo-Jump Test, much like the Babinski sign, is an abnormal, primitive reflex in physicians. It is seen only when there has been damage to the central ethical pathway known as the Median Fortitude Bundle. If the physician jumps every time the managed care companies yell ``Boo,'' the test is positive. The test is pathognomic for a new epidemic sweeping the nation known as Physician Yellow Fever.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

Is the Decline Irreversible? It has been said that when a government can confiscate 30% of the income of its citizens, that society will be on an irreversible course to socialism. That mark was passed many years ago. History records that free societies last barely two centuries. Again, that anniversary has come and gone. We now have 21 million bureaucrats directing the lives of 260 million people. The Department of HHS employs more than 1 million people, directly and indirectly. More than 80 million citizens receive tax subsidies.

Yet we have more people than ever before pointing to the obvious and immutable truths on which our Declaration of Independence and Constitution were founded. We must remember the words recalled by a solitary British soldier in a far-flung part of the empire: ``I believe that one man can make a difference and that every man should try.''

Each AAPS member should go to the doctor next door and ask her or him to join AAPS. I recruited 54 or 57 good members in a week some years ago.
Frank Rogers, M.D., Reno, Nevada

The Doctor's Dilemma. The physician's soul will be caught between the proverbial rock and hard place if he tries to curb society's costs (society owning half of his soul) and at the same time attempts to provide ``needed services'' to any person (the owner of the other half) laying claim to them....It is imperative that physicians recognize the fundamental philosophical and moral issues at stake. The entire system hinges on what we as physicians will accept....We must ``not go gently,'' but ``rage, rage against the dying of the light.''
Michael A. Sandquist, MS IV, Albuquerque, NM
[Quoted from The Pharos, Fall 1996; request reprints from author at 1613 Hazeldine SE, Apt. B, Albuquerque NM 87106.]

To California Congressmen: I am a member of the AAPS, an organization of private physicians dedicated to upholding the principles of the Oath of Hippocrates....We champion patients' and physicians' rights, especially the right of patients to contract freely with their chosen physician in obtaining medical care. We are extremely concerned about the ongoing erosion of these rights by outside third parties, i.e., the federal government (Medicare, Medicaid) and insurance companies/ HMOs under the protective favors of the federal government.

Find enclosed a copy of an Affirmation of Citizens' Rights, based on the Magna Carta of 1215.

I, as an individual, a private physician, and a member of the AAPS, respectfully demand that you, my duly elected representative sworn to uphold the Constitutional guarantees of my patients' and my rights, sign the enclosed Affirmation.

Should you find yourself unable to sign, I request that you explain, in writing, why you will not sign, keeping in mind that the tyrant King John was somehow able to recognize these fundamental individual rights.
David E. Kim, M.D., Laguna Beach, CA

Some Are More Equal. HCFA is ``recalculating'' the practice expense component of our allowed fees, and predictably they will be lowering surgical fees again from 15% to 25%. Already, my fees were lowered by Medicare from $2500 in 1984 to $900 currently, ignoring the more than 36% additional cut due to inflation [currency depreciation]. The new fee for cataract microsurgery will be between $650 and $700. Subtract 55% for overhead and then more for taxes to see how little is left. This would not really matter to me if it involved only reimbursement and I could set my own fees to the patient, [making allowances for ability to pay]. Every time the ``allowable'' fee is cut, the patient gets a windfall because the copayment is also reduced. Would Congressmen tolerate an annual cut in their own incomes according to a government formula?
T. Glendon Moody, M.D., Tempe, AZ

A Letter to Gov. Voinovich, concerning the Merck-MedCo Managed Care Prescription Benefit service: I previously wrote to the Ohio State Medical Board because these pharmacists are essentially practicing medicine. They are refusing to fill prescriptions on the basis that ``it does not fit with the diagnoses'' according to their own rules and manuals....They demand ``citations of pertinent scientific literature for consideration by our Medical Appeals Consultant.'' I would have it the other way around: Let their medical consultant come up here and interview my patient....If they have some advice about side effects or interactions or something of that nature I would be willing to be so informed. But for a consultant to prescribe or disallow medications without interviewing the patient is in itself malpractice. Furthermore, their consultant is probably making medical determinations for Ohio patients without having an Ohio license...
Samuel A. Nigro, M.D., Cleveland Heights, OH

54th annual meeting: Chicago, September 17-20.


The Politics and Economics of KidCare

At the top of the so-called liberal agenda is the creation of a new middle-class entitlement through KidCare.

Recall that ``KidCare'' was one of the earliest options considered by the Clinton team back in 1993. It's the easiest way to get the public to support the infrastructure for a federally controlled system of financing and delivering medical care, something that Americans were obviously unprepared to accept for themselves, once they realized its costs and its coercive character. Now we have the paradox: What's X-rated for adults is OK for the kids.

Interestingly, coverage for children is, based on the raw facts, no more of an issue today than it was a few years ago. The percentage of children who are uninsured is about the same as for adults: slightly more than 13%. The figure hardly varied over the period from 1989 to 1993, according to a recent analysis by the National Center for Policy Analysis (NCPA), a Dallas-based think tank. As NCPA analysts point out, a close examination of the 1995 Census Bureau numbers shows that the most important determinant is citizenship status. While 13.6% of native-born Americans lack medical coverage, 32.5% of the foreign born and 40.6% of noncitizens are uninsured.

While there has been a decline in employer-based coverage for adults, and therefore for their dependents, much of the slack in children's coverage has been picked up by Medicaid, which requires coverage of children significantly above the official poverty line.

Facts aside, Senator Ted Kennedy (D-MA) and the key fans of socialized medicine in the House (especially Pete Stark and Henry Waxman of California) understand very well the politics of the health care debate; far more so than Republicans, who've clearly demonstrated an inability to frame the debate and seize the high ground, even with the benefit of majority control in both Houses of Congress. Worse, they can't seem to maneuver (stumbling around is a better description) without expanding federal regulation and control and driving up the costs for individuals and families-a fact amply demonstrated in their shockingly poor performance during the Kennedy-Kassebaum mess last year, when they copied word for word portions of the Clinton health plan, hoping that folks back home wouldn't notice. Incredibly, these guys celebrate ``incremental reform,'' baby steps toward a Clinton-style health care system, merely because it is not a full-blown version of the hated Clinton plan, which they rail against rhetorically and say they wish to avoid. The Clintonites and the White House understand this ``minority mindset'' of the Congressional majority perfectly. So, their drive for ``KidCare'' will be carried out with the spirit of a reinvigorated team that acts as if they are controlling the national health care agenda-because they are.

So what will conservatives in Congress do? Perhaps they will take the time to study the issue, and get a grip, for once, on serious policy that will advance a freedom-based reform of the system. One idea, proposed by the National Center for Policy Analysis (NCPA), based in Dallas, is to rearrange the current Earned Income Tax Credit (EITC) to enable low-income families with children to purchase medical insurance. The basic principle is to target the relief and accompany it with expanded personal freedom.

Currently, the EITC amounts to $25 billion annually in refundable tax credits to about 18 million low-income workers. Under current law, the maximum a worker with kids can collect is $3,556 on annual earnings between $8,890 and $11,610. The sizable tax credit of $3,556 (already exceeding the cost of average family coverage for mid-sized companies) could easily cover the cost of a basic high-deductible sickness insurance plan with a medical savings account.

The Continuing Crisis in Insurance

The more serious problem-the one that both sides of the aisle refuse to address-is, of course, the inherent weakness and instability of a fundamentally distorted employment-based medical insurance system. It has historically not been able to control expenditures; and its recent attempts to do so through an aggressive use of managed care to cut back on services and specialists will not long be tolerated politically. In any case, there is good reason to believe that the temporary lull in medical cost increases is about to come to an end. According to Foster Higgins, a prominent employer benefits consulting firm, in 1997 employers' health insurance rates could climb anywhere between 7 and 15% for traditional indemnity insurance; 7 to 12% for PPOs; and 4 to 10% for HMOs.

As the number of uninsured workers continues to grow, the choices available to those who are insured continue to narrow. A recent survey of mid-sized employer health plans (companies with fewer than 1000 employees), conducted by Hellmuth and Associates in December 1996, reports that the number of companies offering the traditional indemnity plans dropped from 46% to 38% between 1994 and 1995. Thus, the choice of physician is gradually being constrained for millions of Americans. Among employers with fewer than 500 employees, 84% offer only one type of medical plan.

Dissatisfaction with managed care is moving organized labor, long the strongest institutional supporter of a ``single payer'' health care system (socialized medicine with no private option), to establish, at least in the short term, its own medical insurance options. The National Health and Human Service Employees Union, No.1199, which represents 120,000 workers in New York, wants to market its own medical plan, not only to its own members, but also to other union members next year (New York Times 12/17/96). The union is proposing to set up its own managed-care model, which will negotiate with doctors and hospitals, set up its own claims processing system, and establish blood pressure and asthma monitoring programs for its members. Dennis Rivera, President of 1199, told the Times: ``What bothers us is for-profit companies taking health care dollars, putting them in their pockets and then not delivering care. We think we can do it better and cheaper ourselves. We're here, and we're ready to compete.''

While first-dollar coverage has been rapidly disappearing since the 1980s, average employee contributions to health care plans have been steadily mounting. The good news is that employees are learning rapidly that their employer is not ``really'' paying for their health insurance coverage; they are. And that's progress. Consider again the results of the 1996 survey by Hellmuth and Associates. For mid-sized firms covering individuals, 61% of employers require an employee contribution averaging 39% of the cost of an individual HMO plan; 41% of employers now require an employee contribution averaging 39% of the premium for an indemnity plan. For family coverage, the employee contributions are becoming significantly larger, often nearly 60% of the cost. And this for options that are narrow or nonexistent.

The Growth of Government Regulation

While Congress fiddles around with new federal mandates on the private sector, perhaps using KidCare as the next federal mechanism to standardize benefits, make proclamations on the kind and duration of treatment that is to be used in certain medical conditions, or otherwise control prices, states are hell-bent to make sure that not one nook or cranny of the already highly regulated health-related industry escapes their micromanagerial intrusions.

In California, Mr. Keith Bishop, the state's Commissioner of Corporations, assessed a $100,000 penalty against Blue Cross of California and its affiliates for ``misleading'' advertising on the availability of Medical Savings Accounts for Californians. The California Blues described the option as the ``best tax break'' since the IRA, and encouraged Californians to consult their tax advisors about the MSA, noting that if they can get in early, they can join the exclusive minority of 750,000 Americans who will be able to take advantage of the new, but highly regulated, tax-free savings option. Interestingly, the California Commissioner said that the MSA ad was misleading because it did not spell out-in sufficient detail-the regulatory hoops that Members of Congress created for Californians and other Americans to jump through in order to get an MSA. Specifically, the ad was deemed misleading because it did not specify the tight eligibility requirements that Members of Congress imposed on Americans who want to open up an MSA, nor did it make clear that the Blues' MSA option has not yet been approved by the Commissioner. That's right, under the Kennedy-Kassebaum bill, as an American citizen, you not only have to be one of select 750,000 folks who can get it, you must also be eligible under the federal rules and have IRS approval for your MSA. Moreover, you must also be lucky enough to live in a state where the state bureaucrats are willing to approve of your spending your own money on services provided by your doctor. Perhaps this is what the Congressional ``revolutionaries'' mean when they talk of ``returning power'' to the states?

At the federal level, the Health Care Financing Administration (HCFA) is doing an internal reorganization. These things are seldom good news. Bruce Vladeck, HCFA Administrator, has announced the abolition of the Office of Managed Care in order to integrate the functions of that Office ``throughout the Agency.'' Nobody at HCFA will lose his or her job due to bureaucratic reorganization (that kind of thing happens in the private sector). The new ``Office'' is going to have all of the standard trappings of HCFA-style central planning-a ``strategic planning'' function; a ``quality and clinical standards'' operation dealing with clinical coverage issues, clinical quality ``standards,'' technology assessment, etc.; and an office of ``Beneficiary Services and Operations,'' to do things like ``beneficiary satisfaction assessments.''

More Problems in Paradise

So-called liberal intellectuals and their allies on Capitol Hill and in state legislatures, after loading new packages of perverse incentives on top of the federal government's tax-created employer-based health insurance mess, and after engaging in micromanagerial incompetence, have proclaimed that the ``free market'' doesn't work. Commenting on the backlash against managed care and the inability of the private insurance market to expand coverage, Robert Kuttner, writing in the Washington Post, epitomized the argument: ``This consumer backlash reveals the failure of ``free markets'' and the profit motive to solve the crisis of health care costs. Nor has the private sector solved the problem of lack of access to insurance. More people now are uninsured-nearly 40 million-than when the Clinton Plan was derailed in 1994.''

Kuttner and others have recommended, of course, a system far more highly regulated than the one we have now: the favorite of so-called liberals as a means to control costs while providing quality care to everyone: Canadian medicare.

That being the case, Canada is worth at least a statistical check up. Anthony De Palma supplied some of the most recent data for the patient's chart (New York Times, 12/15/96).

Canada's vaunted free health care system is facing a financial crisis. The Canadian Government, faced with rising costs, is cutting back, and the waiting lists for medical procedures are growing. The central government of Canada used to pay for approximately 50% of the cost of the system, but it is now paying only 32%, shifting the rest of the cost to the Canadian provinces. Lesson #1: Cost shifting is not cost control, even in Paradise.

In protest against Canadian government regulations, specialists are not seeing new patients, and the exodus of doctors from Canada is increasing. According to the Times account, there are 55,000 doctors in Canada, but over the last four years 2,500 have left the country. The trend lines are not good. In 1995, 700 doctors left, ``more than double'' the number that left 10 years ago (ibid.). Lesson #2: You need doctors as well as bureaucrats, even in Paradise.

The fiscal crisis is compromising patient care. While life-threatening emergencies are dealt with, more routine care is delayed. Today, according to the Times, the Canadian who has already been seen by a family doctor or a general practitioner must wait at least 10 weeks to see a specialist. Douglas Hitchcock, a Canadian, has put together the ``Free Trade Medical Network'' to market American care for an estimated 170,000 Canadians who do not want to wait. Also, ``a number of pregnant women from the Windsor area who could not get to see an obstetrician have been sent by the province to the Detroit Medical Center for pre-natal care, and will have to cross the international border when their babies are due.''

The Times quote from Mr. Hitchcock should be put up somewhere on the White House Lawn in Neon Lights: ``We are very fortunate as Canadians to have the US, where the competitive marketplace lets us cherry pick what we require without having to make the necessary investment in equipment.'' Lesson #3: You also need patients as well as bureaucrats, even in Paradise. And Lesson #4: You can make a profit from the growing miseries of Paradise.

The Canadian Government has established a National Forum on Health and has been polling the folks on what they think about the recent problems in Paradise. One of the more stunning results is that the Canadians are split over the question as to whether physicians should be required to tell their patients whether or not they are getting the best available medical treatment. Some said that they would want to know, so they could go to the United States for medical treatment. But others, according to the Times report, ``said they would have more peace of mind not knowing.'' Lesson #5: What you don't know could kill you, even in Paradise.