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Volume 55, No. 2 February 1999


"Are you a doctor? " asks a patient in an episode of the NBC television series The Pretender.

"I am today, " responds Jarod. His training at the Center, which abducted him from his family in infancy, equipped him to penetrate any organization, in whatever capacity he chooses. Now that Jarod has escaped from the Center, it is devoting enormous resources to recapturing him.

The Center has an imposing headquarters, huge archives of computerized data, unlimited money, a helicopter, an on-call squad of "Sweepers, " and a brilliant staff. It is controlled by a shadowy Triumvirate. Its agenda is shrouded in fog. It is, of course, purely fictional.

From the Internet, you can download publications from a nonfictional entity called The Center for the Health Professions, headquartered at the University of California at San Francisco (see http://futurehealth.u csf.edu).

First on the list of Center Programs is the Pew Health Professions Commission. The National Fund for Medical Education and the Robert Wood Johnson Executive Nurse Fellows Program are among more than a dozen others.

Members of the Pew Health Professions Commission include Robert Graham, Executive V.P. of the American Academy of Family Physicians, and several luminaries who held leadership positions on the Interdepartmental Working Group of the Clinton Task Force on Health Care Reform (Stuart Altman, Uwe Reinhardt, Troyen Brennan, and Phil Nudelman). Documents of particular interest are those entitled "Reforming Health Care Workforce Regulation " (RHCWR) and "Strengthening Consumer Protection: Priorities for Health Care Workforce Regulation " (SCP). The latter recommends "periodic competency checks for all health care professionals. "

"These recommendations should not be seen by health professionals as an infringement on their prerogatives. Rather the recommendations allow health professionals to insure that all practitioners deliver care in ways that help, not harm, the public, " stated Ed O'Neil, executive director of the Commission. "This is the best assurance that managed care organizations are not the only voice for real quality in health care " (BNA's Health Care Policy Report 10/26/98, emphasis added).

Key explicit features of the Pew Commission agenda are:

  • Centralization. National standards and regulations, supervised by a national advisory body (as in the Clinton Plan), would override local and state law. Global standards are ultimately envisioned. Barriers to "international mobility of competent health care practitioners " are to be identified and removed; international trade agreements (NAFTA and GATT) are cited (RHCWR).

    With easier interstate mobility for "qualified " practitioners (and impervious barriers for the "nonqu- alified ") comes the prospect of importation of compliant, low-cost labor that might be unable to meet state requirements.

    The desired outcome is apparently to facilitate the establishment of "integrated delivery systems " and to enhance "workforce planning " and "resource allocation. " [Incidentally, the Pew Charitable Trusts' - interest in central, global economic planning is not restricted to medicine. It also funds an ambitious program to persuade private industry to support global energy rationing under the Kyoto Treaty.]

  • Higher status for nonphysicians. A broader scope of practice for nonphysicians, based on "competency " as opposed to traditional requirements, is a key objective. Not surprisingly, nursing associations are "key stakeholders. " The leveling effect should not be mistaken for a move toward greater independence for all professionals, but as a means to weaken the "petit bourgeois or self-employed. "

  • Compliance. If "less than 10% of all inadequate medical practice is due to a lack of practitioner knowledge " (RHCWR), then required courses and examinations would not suffice. "States should require that their regulated health practitioners demonstrate their competence in the knowledge, judgment, technical skills, and interpersonal skills relevant to their jobs throughout their careers " (SCP). The preferred model, from Ontario, Canada, involves "targeted office visits...to ferret out substandard practitioners. " It includes random chart reviews and retesting to assess competence according to articulated practice guidelines (RHCWR). "Personal character assessments " might be entry requirements (to weed out the "disruptive "?).

Not mentioned in Commission documents are:

  • A right to maintain patient confidentiality, which is a hindrance to data collection and central planning: "The burden in disclosure decisions rests with those seeking to restrict access to information " (RHCWR).

  • Due process rights. All concern about licensure boards has to do with inadequate penalties, or slow or inadequate investigation of complaints. There is no acknowledgement that the vast majority of complaints are groundless, or that physicians can be (and have been) deprived of their livelihood unjustly and without an adequate right to defend themselves.

  • Free market regulatory mechanisms. The most important real protection for patients is the freedom to choose their own physician and medical treatment─-without being confined to the Commission's "range of safe options. " The most important quality assurance comes from free exchange of information; the duties implied in an individual patient- physician relationship; and collegial relations of free men and women.

From content and omissions, it is clear that commissioners are pretenders. They pretend to be white knights protecting consumers. They pretend to have the mantle of science and the consent of physicians, as well as the constitutional─-indeed the godlike─-authority to determine what is just and ethical.


From "A Marxist View of Medical Care " by Howard Waitzkin, M.D., Ph.D. (Ann Intern Med 1978;89:264- 278):

"[P]rofessionalism, elitism, and specialization...divide health care workers...and prevent them from realizing common interests....Bureaucratization, unionization, state intervention, and the potential `proletarianization' of professional health workers may alter future patterns of stratification. "

"[T]he private sector drains public resources and health workers' time, on behalf of private profit and to the detriment of patients using the public sector. "

"Along with other institutions such as the educational system, family, mass media, and organized religion, medicine promulgates an ideology that helps maintain and reproduce class structure and patterns of domination. "

"Advocates of a `vanguard party' believe that historically all successful revolutions have resulted from the efforts of a small vanguard who hold consistent ideology. "

From a former Clinical Scholar of the Robert Wood Johnson Foundation (RWJF): "Large foundations, particularly the RWJF, are pernicious influences on our system of health care. They carry on their activities under the banners of access and quality and buy off academicians and legislators with grant money in ways the benefactors of those foundations never intended....From 1973-1974, I saw first-hand the people and processes that pay lip service to patient care, but promote a system of socialized medicine run by an academic elite. When the program at Duke challenged the scientific legitimacy of their concept of constructing clinical guidelines, Duke was booted out of the program. The same small band of ruthless academicians has run the foundation with an iron hand for the past 30 years. Now they are invading our school system and further distracting the schools from their primary goal.... "

From New York in 1998, Dr. Lawrence Huntoon writes: "Watching the widespread implementation of `Clinical Pathways' in our hospitals,...one cannot help but be reminded of how the Nazis reinvented German medicine using a technique called Gleichschaltung [`political coordination, bringing into line, elimination of opposition'─-Cassell's German Dictionary, 1958]. In today's Newspeak, Gleichschalt- ung would probably be called `integrated delivery' or the `realignment of hospital and physician incentives.' This technique involved appointing mediocre but bureaucratically compliant professionals to infuse the entire profession with Nazi ideology. "


Sentinel Events

"JOBS Inc....will continue with the concept of bringing students from [Communist] China to Jamestown Community College....As we move forward in attempting to consolidate government, school systems, health care with the overall goal of reducing taxes, this is an opportunity that would appear to be perfectly timed " [WCA Healthcare System Updates, 8/14/98].

IPRO, self-styled "Experts in Defining and Improving the Quality of Health Care, " to a neurologist who had discharged patients under a relevant DRG in 1997: "IPRO will continue to monitor hospital-based practice activities in New York State in our ongoing efforts to promote optimal stroke prevention therapy [warfarin] for patients with atrial fibrillation. " The same neurologist was cited by IPRO for a "Level II quality issue " for diagnosing Binswanger's disease wrongly (in the opinion of a reviewer who had never heard of that disease); for not working up a slightly elevated hematocrit in a chronic heavy smoker; and for not extensively discussing the presence of nonsignificant prerenal azotemia in a patient who had trouble swallowing and refused intravenous fluids.

Ethics forum, AMA Interim Meeting, Dec., 1998, an item for the semantically challenged: "Throughout history, doctors have participated in the torture of prisoners. Determining what constitutes torture, as well as doctor participation therein, proves to be a difficult task. Is verifying health in the midst of torture incompatible with the physician's role as a healer? Can doctors act as agents of the state and participate in the torture of prisoners in the name of the greater good? (AM News 12/7/98).



The AMA's American Medical Accreditation Program (AMAP), the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), and the National Committee for Quality Assurance (NCQA) are joining forces to bring consistency to their "independent " efforts to define and monitor quality. The currently redundant and conflicting measures are said to make it difficult for the public to make "apples-to-apples comparisons among health care providers. " And physicians are "confused about how they are being judged. " Some say the collaborative effort is a response to the threat of Vice President Al Gore's planned Forum for Health Care Quality Measurement and Reporting ( http://www.ama- assn.org/sci-pubs/amnews/pick_98.pick0608.htm ) [or is it a good cop/bad cop ploy?]

The AMA has representatives on the governing bodies of a number of accreditation organizations. The 1997 AMA JCAHO Commissioners were: Yank Coble, Timothy Flaherty, Palma Formica, Richard Frankenstein, William Jacott, Randolph Smoak, and Richard Tompkins. The Joint Commission was established in 1951 by the AMA together with the ACP, the AHA, the ACP, and the Canadian Medical Association (the last withdrew in 1959). JCAHO accreditation is required for participation in Medicare and Medicaid.

AMAP is being aggressively promoted as a "central component of the AMA's standard setting activities "; the AMA's 1999 budget projects a $3.7 million loss for the program. As of last October, only 261 physicians had received AMAP accreditation. Many physicians are finding it quite difficult to meet AMAP criteria regarding written policies and procedures. This fact may "quiet the skeptics who contended that the AMA would be tempted to water down accreditation standards in lieu of alienating members " (AM News 12/28/98).

The AMA has sent "guidelines " on how to diagnose and treat alcoholism in older patients to 100,000 primary care physicians (only $2.50/copy). Selected physicians also received an AMA Quality Care Alert promoting beta blockers after myocardial infarction, together with a Quality Care Alert Questionnaire asking whether they had read the alert (and if not, why not). Jane Orient, M.D., is recipient number 43370.

NCQA is seeking official Washington stature as the arbiter of quality in health plans. NCQA, which primarily assesses the quality of plan administration rather than clinical care, is heavily subsidized by the managed- care industry.


AAPS Calendar

Feb. 20, 1999. Board of Directors meeting, Dallas.
Oct. 12-16, 1999. 56th annual meeting, Coeur D'Alene, ID

Criminalizing "Mistreatment "

A sentinel event in Montana is the introduction of Senate Bill No. 75 by Democratic Senator Halligan, at the request of the Department of Justice.

The bill would establish an extremely broad duty to report to the county attorney and the Medicaid fraud unit any incident in which there was "reasonable cause to suspect that an older person or a person with a developmental disability ... has been subjected to abuse, sexual abuse, neglect, or exploitation. " It provides that the Medicaid fraud unit, "when appropriate, shall investigate and initiate criminal proceedings, " and in addition, shall refer for collection or sanctions any cases involving overpayments, inappropriate use of services, or other improper activities discovered in the course of its activities. The subpoena powers now residing in criminal prosecutors would be expanded to Medicaid fraud unit investigators.

A new criminal offense is created: "mistreatment of [a] patient, " applying to anyone who receives compensation for caring for a patient and who, "without lawful authority, fails to provide a patient with food, shelter, clothing, or services necessary to maintain the physical or mental health of a patient. " Presumably, causing bodily injury or defrauding a person are already covered under existing statutes. However, bodily injury that purportedly results from medical malpractice may become a criminal, rather than a civil matter.

"A person convicted of the offense of mistreatment of a patient shall be imprisoned in a state prison for a term not to exceed ten years or be fined an amount not to exceed $50,000, or both. "

Another new criminal offense involves failure to maintain for five years all records necessary to "fully demonstrate the nature and medical necessity of goods, services, items, facilities, or accommodations for which a claim was submitted... ", even if no payment was received. Negligent failure to maintain the records carries a fine of $500, but intentional destruction or concealment of such records carries a prison term of one year.

Under cover of preventing elder abuse, this statute appears to create a vastly expanded authority for fishing expeditions by the Medicaid fraud control unit. Moreover, it appears on its face to create a legal responsibility to provide unlimited services to a patient, once any compensation is received, while implying that a provider may deny services and even starve a patient to death upon obtaining the legal authority to do so.

Who can understand what constitutes "mistreatment "? It could mean providing too little, too much, an inappropriate or unapproved service, or it could simply mean failure to satisfy a patient, a family member, or a bureaucrat.

Whatever the intentions of this bill's proponents, its enactment could have the effect of making it extremely difficult for any elderly or disabled person to find a caregiver willing to assume such awesome liability.


Incrimination of Self and Others

Public confession or self criticism, methods developed by Chinese Communists, are being ever more widely deployed in American entitlement programs.

Recall that in 1966, the Supreme Court handed down the Miranda ruling that required police to inform suspects of their Fifth Amendment protection against self- incrimination before an interrogation began.

In 1998, the federal government encourages all physicians and medical facilities to voluntarily report any fraud or billing errors that they discover, in the mere hope that their punishment will be more lenient. The OIG "encourages " the culprit to place the overpayment in an interest-bearing escrow account pending final settlement. There is no guaranteed protection against criminal liability under the False Claims Act, although self-reporting might be a mitigating factor in the sentencing guidelines.

Few providers reportedly came forward during a demonstration project (MSSNY's News of New York 12/98) although one New Jersey hospital paid $840,000. The government refrained from seeking treble damages or other sanctions from that hospital (BNA's HCFR 11/4/98).

The Inspector General's voluntary disclosure guidance is posted at http://www.dhhs.gov/ progorg/oig.

Attorney Gregory M. Luce warned that entering the protocol constitutes a waiver of attorney-client privilege, and there is no guarantee of confidentiality of information. This means that a potential qui tam relator could use it in a whistleblower suit (ibid.)

Lewis Morris, deputy associate general counsel for the HHS IG said the main reason for voluntary disclosure is that "you don't want us in your buildings, " where employees might offer still more incriminating information (ibid.).

Backing up voluntary disclosure are more incentives for informal law enforcers (informers), such as billing companies─- primarily the mitigation of penalties that could be imposed on the company for subsequent wrongdoing (BNA's HCPR 12/7/98). In general, cooperation with government is not enough: one must be instrumental in securing convictions and even this may be insufficient to avoid exclusion (Civil Money Penalties Reporter, Fall, 1998).


Law Enforcement Updates

DOJ's information exchange program will help private insurers petition for a share of assets forfeited in health care fraud cases. Insurers may be able to claim qualified statutory immunity from civil liability for making certain information disclosures to government (BNA's HCFR 11/4/98).

Since the False Claims Act was expanded to include Medicare in 1986, DOJ claims to have recovered $2 billion. "To those inclined to gut the False Claims Act [due to overaggressive use in minor billing errors], here are two billion reasons why we need it more than ever, " stated Senator Charles Grassley (R-IA) (ibid.).


AMA: Leader on Global Ethics

Some local medical societies have protested that the $250,000 annual AMA expenditure for the World Medical Association is just a perk: international travel for AMA leaders. However, the money also buys three seats on the 15-member WMA Council. AMA leaders are very active, and in 1997 AMA past president Daniel ( "Stormy ") Johnson was the unopposed candidate for WMA President-Elect.

The WMA was founded in 1947, when in the wake of the Nuremberg Trials, "it became apparent that only the medical community could develop a workable code of ethics that would serve the profession as well as governments and individuals around the world. "

According to the 1997 Board of Trustees report, AMA ethical positions often serve as a model for WMA policy.

Members' Page

Can Solo Physicians Make the Grade? I called the AMA's AMAP Program recently and asked whether they had any contract with the government for implementing AMAP as the national standard. The person answering the phone said she didn't know but would get back to me (she hasn't, six months later). But she did send me a description of AMAP's requirements and said that "President Clinton has already recognized AMAP as a national standard. "

As I watched my wife help a narcoleptic patient to her car today, I thought about AMAP and how we didn't have a "written procedure " to cover that kind of thing and hence could be cited for the deficiency. I also have only one examination room in my office, which is perfectly adequate for what I do, but I wonder whether it would meet AMAP's criterion for an "adequate number of exam rooms [plural]. "

The solo fee-for-service physician in private practice is slowly but surely being degraded and viewed as not providing quality care "by definition "─-AMAP's definition.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


Profiling. Insurance companies have started to "profile " physicians like criminals or cattle to be slaughtered. A "state-of-the-art episode treatment grouper " groups claims into "episodes of care " and "filters out " claims unrelated to episodes for which the specialist is responsible. Patient mix is adjusted for age, sex, and severity of illness for "apples-to-apples " comparisons among specialists for "quality measures "....Today, a patient wanted to make an appointment, and we found out we were not "invited " to be a "preferred provider " because our "claims volume with them was negligible. " The fact that for 22 years we were a participating provider with considerable volume is meaningless; thanks to managed care, our volume has shrunk to about $10,000. Because this amount is "negligible, " we are not profiled; since we are not profiled, we cannot be asked to join; since we cannot be asked to join, we cannot get any patients;....

Medicine is supposed to be an independent profession, not a cattle-ranch operation or a totalitarian- type networked insurance-police bureaucracy, manipulating questionable data in the name of cost management. The only object seems to be to manage the few solo practitioners into obsoleteness, so that only the highest volume specialists can survive. In the 21st century, physicians' practices will resemble insurance mergers, i.e. marriages of elephants reigning and trampling over standardized and McDonaldized herds in an unfathomable jungle of bureaucracy.

Let's start profiling accountants, engineers, scientists, and above all, attorneys.
Marion Redlich, M.D., Alexandria, VA


Medicare's View of Specialists. Unless I misunderstood, an official of Transamerica Occidental Life Insurance told me by telephone today that a specialist by definition cannot document "complexity of medical thinking " because "since they are a specialist, the complex medical decision-making is not warranted because it is easy for a specialist to make complex medical decisions by virtue of the fact that they are a specialist " [sic.]. This non-oncologist, non-physician, who had not even seen my patient, was absolutely certain that I was wrong about the medical decisionmaking in her case.
Linda W. Wilson, M.D., Culver City, CA


Competency Tests. From a letter to George Mitchell, Chairman, Pew Health Professions Commission: I read in disbelief about your organization's proposal to further harass doctors and nurses with competency tests and on-site inspections....What about lawyers, corporate executives, lawyers, teachers, lawyers, accountants, stockbrokers, lawyers, judges, politicians, [Medicare carrier officials], etc.?....I am not at all surprised that you were once a Senate majority leader. A similar gang of irresponsible politicians is now trying to turn medicine over to thieving con-artists known as HMOs.

Who is going to do the testing? And what happens if a physician, who daily practices good medicine and has satisfied patients, vast experience, and peer respect, fails the test? Will you destroy his livelihood and deprive his patients of his care?

It's a classic tactic, used by the power-hungry since the beginning of history: create a crisis, develop a bureaucracy, make villains and victims, and then rush in with the appropriate stormtroopers to save it, gaining control and milking the system for your own self-righteous glorification in the process.
Gary K. Keats, M.D., Clearwater, FL


Monopoly. I object to comparing Microsoft with the HCFA/ AMA monopoly on CPT coding, which is government-granted and enforced by law. [Another example of true monopoly is TCI cable:] competitors are deterred by the courts, backed up by government agents with guns. Microsoft's business practices may be unfair, but it is by no reasonable measure a monopoly.
Steven J. Adler, M.D., Seattle, WA


Employers Have to Get Out of the Medical Insurance Business. In speaking at two executive conferences recently, this was my theme. Three-fourths of the audience agreed with me. What drove the point home was this question: With whom do you, as an employee, have an insurance contract? It dawned on them that as individuals they have no contract with anyone: It's their employer who has the contracts. Bingo. That simple idea turned on a lot of light bulbs.
Craig Cantoni, Capstone Consulting, Scottsdale, AZ

Legislative Alert

A Dawn of Hope?

Despite the process of Presidential impeachment, one can smell something different, and far sweeter, in the Washington air concerning health care policy. Perhaps it's an emotional hangover from the festivities of the Holiday season. Perhaps it is just wishful thinking that the next Congress won t belly up to the same old bar and order another round of the same old regulatory rotgut for what ails us.

Yes, one can expect the Capitol Hill gang to go through the same old motions. Expect Congressman Charlie Norwood (R-GA) to reintroduce his "patient bill of rights " to curb HMO abuses. Likewise expect Clinton and his allies to reintroduce their own version, and Senator Minority leader Thomas Daschle to insist that he and his colleagues will settle for nothing short of a new avenue for patient lawsuits against employer plans in 1999. More litigation on top of more regulation. And even higher levels of uninsurance.

Today, according to the recent Census Bureau estimates, America s uninsured number approximately 44 million at any given time. According to the 1997 Kaiser/Commonwealth National Survey of Health Insurance, 73% of those who are or recently were uninsured are in working families. And nearly half of these working uninsured people report having difficulty paying the costs or getting access to care. Instead of micromanaging the insurance market, federal and state legislators might start to consider how to expand that market to benefit more families and reverse the trends.

And yet there are positive signs. Even the heavy imbibers of the same old stuff are starting to realize that their own policies are driving up costs and increasing the numbers of the uninsured. Since the enactment of the Kennedy- Kassebaum Bill of 1996, the Balanced Budget Act of 1997, and several other regulatory initiatives, the counterproductive results just may be getting the notice of politicians. Among the ruins of whatever it is that the politicians in places like Washington State and Kentucky think they have been creating, future political fossil hunters might yet find evidence of intelligent life.

Consider Maryland, of all places. In the wake of Maryland Governor Parris Glendening s convincing victory in the November election over conservative Republican Ellen Sauerbrey (Maryland s would-be answer to Margaret Thatcher), Mike Miller, President of the Maryland State Senate and a leader of one of the most liberal state legislatures in the country, recently opened a big meeting in Annapolis. The purpose: to discuss the need to overhaul Maryland s regulations of the health care system. That right! Annapolis. A town where the few gainfully employed Republicans have been reduced to a fringe group nursing their battered self- esteem at the corner bar. Imagine what could happen in places where conservatives legislative caucuses attract a respectable number of budding statesmen!

Cogitations Among the Captains of Industry

Equally important is what goes on in the heads of the big guys who travel around the Republic at 30,000 feet. The November 1998 issue of Business and Health carried a remarkable article by two Cornell University Professors, Roger Battistella and Daniel Burchfield. Their conclusion: positive change is inevitable. The combination of the return of rising costs, aggressive government regulation of benefits at the federal and state level, the threat of litigation, and shareholder pressures to keep compensation expenditures reasonable, will force companies to move from the defined-benefits model of employer health insurance to a system of defined- contributions. The real options of the captains of industry are closed. The big guys know that there is no political will in the country to solve their problems through adopting a Canadian style national health insurance system─-at least not yet. They also know that they cannot get out of the mess they are in simply by discontinuing employer-based insurance and throwing their workers and their families out of their coverage. A defined contribution, the Cornell professors argue, is the only thing left. They write:

"The paternalistic relationship between business and employee health insurance is on its last legs. The new economy, featuring an older and more transient workforce and competition from foreign firms unburdened by high labor costs, is compelling American companies to rethink health benefits. " Watch the response of corporate power brokers to proposed changes in the tax treatment of health insurance. With a defined-contribution system, the employees are in charge of key health insurance and benefit decisions, and then they have a direct interest in making sure that they get the best value for money. Government mandates take on the character of a metaphysical abstraction when they hit the company s bottom line. But government interventions and mandates and excessive regulation become less popular when they hit the family budget's bottom line. The survey research already bears out the fact that Americans are not so enthusiastic about Government Good Deeds when they have to pay the bill. For example, Chuck Rund of the Charlton Research Company of San Francisco noted that 46% of Americans say they are unwilling to pay any more for the right to an independent review of insurance decisions. Only 13%, notes Rund, are willing to pay as little as $10 a month extra in premiums for more government protections or a right of independent review.

Rethinking Business as Usual

Not only are more people uninsured as a result of federal and state legislation, but the best prognosticators in the business predict higher medical costs, not lower. According to an article by Milt Freudenheim, a seasoned health care reporter, costs will jump from 8 to 20% for many American workers and their families in 1999 (NY Times 11/7/98). Look for medical costs to grow at more than 3 times the rate of inflation. A survey of the nation s 50 largest companies and 1000 medium-sized companies shows that HMO premiums are going up by 8%. For small businesses, the cost increases will be devastating, and they will start to drop their insurance.

There are two big reasons for the projected cost increases. First, the HMO revolution is over, having saturated the private employer-based market: 85% of all workers are now enrolled in HMOs or other managed care plans. There are now no other areas for HMOs to penetrate. Much of the big cost control of the early to mid 1990s was attributable to the transitional savings that companies achieved in moving employees out of traditional indemnity plans and into managed care plans, not to any kind of magic bullet. Second, managed care plans have not been able to effectively weather the political and public relations backlash that has accompanied their "management of care. " One state legislature after another is passing laws to mandate certain benefits and prohibit managed care companies from doing the denial of "medically inappropriate or unnecessary " procedures─-as termed by HMO officials─- that they were designed to do. Curiously, both the Clinton Administration and the leading proponents of "managed competition " have largely escaped, pardon us, "censure " for aggressively promoting the very form of "health care delivery " that folks like Helen Hunt and Jack Nicholson now find so downright objectionable on stage and screen.

Cost-Plus Consolidation

A particularly pernicious side effect of the evolution of the employer-based system is the continuing consolidation of the health insurance industry itself: fewer suppliers of health insurance and a less competitive market. All in all, delightfully good news for the academic and Congressional champions of Canadian- style socialism─-if a defined-contribution or tax-based reform doesn t cut the Canadian caucus off at the pass.

In recent years, HMOs were losing money, even as they were gaining larger and larger shares of the employer-based market. At the same time, the highly regulated industry went through a frenzy of mergers and acquisitions. During the last three years, according to the NY Times report, 16 of the nation s 25 largest HMOs were "swallowed up " by other managed care companies. Freudenheim quotes Dorothy Finigan, a benefits manager at J. Baker, a retail shoe chain hit by a 9% premium increase:

"There are only a few national carriers left: Aetna, Cigna, United Health Care. Because the number is so limited they are calling the shots. " It s the kind of thing that the old Marxists, between cheap beers at the Rathskellar, used to call the "concentration of capital. " That s what happens before the "immiseration of the proletariat. " The proletariat is us, the poor slobs who pay the bills, work hard and play by the rules, as a prominent Washington Communicator might remind us.

These changes in the industry are precisely the ones that conservative economists feared would happen through the proposed "regional alliances " of the Clinton Health Plan. But it's happened anyway, with a big assist from policies at the federal and state level that resemble very much the popularly rejected policies embodied in the 1993 Clinton Health Plan.

A Congressional Change in the Terms of Debate?

The Clinton Administration and its allies in Congress want to focus once again on their "Patient Bill of Rights " initiative, making it their top legislative priority. But one detects stirrings in Congress, and a very different focus among prominent and influential Members of Congress on both sides of the aisle.

This past year, Congressman Bill Thomas (R-CA), Chairman of the Health Subcommittee of the House Ways and Means Committee, delivered remarks on several occasions that caught his audiences by surprise. Thomas emphasized that if America is to enjoy the fruits of a system based on the principles of patient choice and competition, then the Congress must overhaul the tax treatment of health insurance. A similar case is being routinely made by Congressman Jim McCrery (R-LA), another influential member of the House Ways and Means Committee. McCrery wants to replace the entire system of federal insurance programs, Medicare and Medicaid, with a defined contribution system, enabling the eligible patients to use that government contribution to pick and choose their own private health care options with "minimal " interference from HCFA. McCrery, like Thomas, also favors a national system of tax credits for private insurance, replacing the current tax system with a new tax policy targeted directly to individuals and families.

Targeting tax relief directly to families is likely to rectify the current imbalances that gear tax subsidies toward high- income folks, who benefit most from the exclusive tax treatment of employer-based insurance. Recent estimates from the Lewin Group reveal that the average federal tax benefit per family is a little less than $1000 per annum. For those making between $15,000 and $20,000 per year it is $288. But for those making $100,000 or more, it exceeds $2000 per annum.

Even more curiously, the idea of using tax policy to expand access to insurance coverage and promoting consumer choice and competition, once confined to a limited circle of thoughtful moderate and conservative Republicans, is now starting to find favor in the unlikely camp of liberal Democrats. For example, Congressman Jim McDermott (D-WA), a psychiatrist by training and a champion of Canadian-style socialism, has already introduced a tax credit proposal. McDermott thinks─- correctly─-that the Kennedy-Kassebaum bill has made the overall situation for the uninsured in America worse, not better. The McDermott bill would provide a flat 30% partially refundable tax credit for Americans who do not have employer-based insurance. Also not to be overlooked is a proposal by Senator Barbara Boxer (D-CA) to expand dramatically the personal deduction for health care.

It s too early to predict what, if anything, the next Congress will do. If the political chemistry is right, and partisanship could be put on hold for at least a decent interval, perhaps serious statesmen in the House and Senate might be able to keep a tax-based reform relatively clean, and targeted.

The Real Issue

A defined-contribution system may naturally and quickly emerge, under the increasing economic pressures. But, as a policy matter, changing the tax treatment of health insurance is, of course, the real issue. If it is presented as it should be, as a way to combat rising uninsurance and broaden access to health care, then it is the ground on which those in Congress favoring real patient choice want to fight.

Tax policy is also studiously ignored by those who either don t know what they are talking about, or who are obsessed with avoiding the subject of real market reform. The agents of the Nanny State don t like such talk. The new Nannies are big on obedience. They envision a nice neat single-tiered health care system where everybody follows all of the rules, fills out the right forms, collects all the right data, and calculates, pays and charges all the right prices in system run by the right people─-in a 21st century equivalent of the Health Care Financing Administration (HCFA).

Beginning in 1999, perhaps the new Nannies too will become obsolete.

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