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Volume 57, No. 1 January 2001


If pills are being sold on the street, to be ground up and injected or snorted, the usual response is to ratchet up the War on Drugs. Physicians can be delicensed or even jailed for prescribing such pills to the wrong patient, say a drug addict or an undercover agent who is lying about his migraines. Patients can be deprived of needed medications, suffering unnecessary pain and side effects from inferior substitutes. Children can be expelled from school under a "Zero Tolerance" policy.

If the drug is Ritalin, however, and the diagnosis attention deficit hyperactivity disorder (ADHD), patients may be forced to take the drug and physicians punished for not prescribing it.

One difference between the two classes of drugs is the person who is evaluating the condition. No one except the patient-not even Bill Clinton-can feel the patient's pain. And sometimes nobody except a government school official can judge whether Tom Sawyer manifests ADHD.

ADHD is a relatively new and controversial diagnosis. According to Sapira's Art and Science of Bedside Diagnosis, ed. 2, the term was first used in 1980 to describe a syndrome of behavior that was called "minimal brain dysfunction or damage" in the 1960s. In the 1940s and 1950s, similar behaviors were attributed to brain damage associated with encephalitis.

In 1994, 90% of the 8.5 tonnes of Ritalin produced worldwide was prescribed for American children, adolescents, and adults. As of 1995, more than 2 million persons, mostly boys, had this diagnosis, and 10 to 12% of American boys between the ages of 6 and 14 were using Ritalin. In 2000, 3 to 4 million schoolchildren are taking the drug.

The diagnosis is often suggested by schoolteachers or school psychologists. Diagnostic criteria, delineated in the DSM- IV, are purely subjective. Quantitative tests (the Continuous Performance Test and the Matching Familiar Figures Tests) have shown sensitivity and specificity not much better than 75%, although increased motor activity ("fidgeting") can be quantitatively demonstrated. ADHD symptoms are normally distributed in the population, with an arbitrary level being designated as pathological.

The fact that money may flow into schools and school-based clinics on the basis of numbers of children with this diagnosis has contributed to the development of a medical, social, and educational subculture of ADHD. Diagnoses may be made, nearly exclusively, to meet payors' requirements, or at least an element of bias is introduced.

Even if the diagnosis of ADHD is accepted (and a long list of other conditions including deafness, posttraumatic enceph- alopathy, and lead poisoning are ruled out), etiology and treatment remain controversial.

One of the most contentious hypotheses is that childhood vaccines could trigger ADHD (see, for example, testimony of Bernard Rimland, Ph.D., a psychologist who founded and directs the Autism Research Institute, before the House Government Reform Committee on April 6, 2000.) There is no scientifically valid evidence of a causal relationship, only an ecological association with an increase in mandatory vaccines. However, no appropriately designed studies have been done.

Some physicians believe that dietary deficiencies or excesses-such as the ingestion of excitotoxins like aspartame - can cause ADHD symptoms. Such a hypothesis is in the tradition of Hippocrates, who enjoined physicians to study "what man is in relation to the articles of food and drink, and to his other occupations, and what are the effects of each of them to every one" (Hippocrates, On Ancient Medicine, 20).

Because of treating patients on this basis, Robert Sinaiko, M.D., a board-certified allergist, came under the California licensure board's microscope. Dr. Sinaiko treated a boy whose mother thought he was not responding well to Ritalin. On a regimen of allergy shots, off-label use of oral amphotericin B, a special diet, and no Ritalin, the boy's symptoms resolved. Dr. Sinaiko had his license revoked by an administrative law judge and was ordered to pay $99,000 for the costs of his own prosecution. Though his license was restored, his practice was severely restricted, forcing him to close his office ( www.treatmentchoice.com/mercury.html).

Children may be forced to take psychotropic drugs as a condition of attending school, or child protective services may investigate parents for neglect if they refuse treatment (see 9/29/00 testimony by Patti Johnson and Peter Breggin, M.D., Subcommittee on Oversight and Investigations, Committee on Education and the Workforce, edworkforce.house.gov).

Hillary Clinton used parental concerns about Ritalin in her Senate campaign. Citing the threefold increase in the number of preschoolers on psychotropic drugs-11 in 1,000 are on Ritalin (JAMA 2000:283:1025-1030)-she proposed more clinical trials on toddlers. She also said that "we are not here to bash the use of these medications." And she did not retract her commitment to "identify and get help to children who need it, whether or not they want it or are willing to accept it."

Hillary Clinton and Tipper Gore were said to have "taken the lead on forced psychotropics" at a June, 1999, White House Conference on Mental Health (Insight 6/12/00). Sally Zinman, director of the California Network of Mental Health Clients, called the highly publicized conference an "infomercial for drugs...[with] absolutely no mention of potential risks."

Some activists have called for stringent regulations that would make it virtually impossible for physicians to prescribe psychotherapeutic drugs to children-as in legislation successfully opposed by the Arizona chapter of AAPS.

The proper answer is to restore the right and duty of the physician to prescribe regimen for the good of his patient (not the school or society) on the basis of his own best judgment.

The Mental Health Partnership

Public funding to the public-private partnership involved in mental health would be augmented in legislation proposed by Senators Pete Domenici (R-NM), Ted Kennedy (D-MA), and Paul Wellstone (D-MN): S2639, the Mental Health Early Intervention, Treatment, and Prevention Act.

This bill would allow the Secretary of HHS to award grants to private nonprofit organizations to conduct outreach screening programs to identify children, adolescents, and adults with a mental illness (§586). It would also provide grants to "train teachers and other relevant school personnel to recognize [diagnose?] symptoms of childhood and adolescent mental disorders and appropriately respond" (§582). It would establish, through NIMH, a research program to "design innovative ways to enhance compliance" with outpatient treatment programs. It would create a grant program to provide integrated child welfare and mental health services. And it would appropriate $75 million to fund an "anti-stigma" campaign (§581).

"Many argue [that this campaign] is a promotion for the the pharmaceutical industry and should not be funded with taxpayer dollars," writes Kelly Patricia O'Meara (Insight 10/16/00). "In question also is why taxpayers should be burdened with funding an anti-stigma campaign which many believe was created by the mental-health community when it first began labeling individuals as defective."

If Tipper Gore is not First Lady, mental health/mass medication programs may lose some momentum, as the Clinton-Gore Administration has had a special relationship with psychopharmaceutical manufacturers (ibid.).


Reinvented Government

In 1993, Bill Clinton said: "We intend to redesign, to reinvent, to reinvigorate the entire national government." To accomplish this, the National Performance Review was set up, which stated that power needed to be transferred from Congress to the executive branch and bureaucracy. The core of the new government is public-private partnerships.

The public-private partnership is a business arrangement- which has profit as its goal-between government and business or nongovernmental organizations (such as "nonprofits" or tax- exempts). Joan Veon explains the implications: The public-private partnership transfers ownership of an asset, such as a sewer facility, from government to a new entity. The taxpayers lose an asset and become customers instead of citizens. The objective of the partnership changes from service to profit, and a corporation is empowered to take on "governance" responsibilities-which used to be responsibilities of government, which was responsible to an electorate.

"All across America," Veon writes, "public-private partnerships are being established that solidify the government/corporation as ruler. One of the organizations facilitating this change is the National Council for Public- Private Partnerships in Washington, D.C."

The United Nations is also using this mechanism in establishing global governance. "At Al Gore's first Global Conference on Reinventing Government, over a dozen countries came to testify how they were ... all doing the same thing: public- private partnerships!" (WorldNetDaily 9/6/00).

This mechanism represents a fundamental change in our form of government, with the coercive potential manifesting itself in immunization and mental health policy, as well as insurance fraud investigations (see AAPS News Dec 2000). Review the pamphlet on Economic Fascism.


Insurers Barred from Monitoring Lawyers' Fees

The Montana Supreme Court held that the attorney-client relationship is violated when insurance companies that pay lawyers attempt to require prior approval for legal services or to review the fees and expenses of lawyers hired to defend policyholders. The Court held that such actions by insurance companies would amount to supervising the conduct of the case, which the Court found to be in violation of State rules controlling the professional conduct of lawyers. The Court further held that the attorney-client relationship did not extend to the insurance company (Wall St J 5/4/00).

Frederick J. White, III, M.D., of Shreveport, LA, suggests that AAPS bring a parallel case on behalf of physicians.

A Montana plaintiff would be needed, stated AAPS General Counsel Andrew Schlafly.


Forty States Forfeit KidCare Funds

Robert Pear reports that 45% of the $4.2 billion allocated by Congress to the SCHIP program (another public-private partnership) remains unspent after 3 years and will have to be returned. Yet the number of uninsured children has increased to 11 million compared with 9.6 million in 1993. Some reasons: difficulty finding eligible children; reluctance by States to put up matching funds; and rigid federal rules. Only 1,000 of New Mexico's 30,000 uninsured children were eligible for the program (NY Times 9/24/00).


Indictments Skyrocket

Aggressive health care fraud investigations are here to stay, according to John Hartwig, deputy in the HHS Office of Inspector General. The FBI's caseload has increased five-fold, from 500 cases in 1992 to 2,700 in 1998. Indictments increased from 400 to 600, and convictions from 100 to 500.

FBI special agent John W. Roberts said: "The lack of internal controls to stop potential problems is negligence. Repeated negligence can be considered fraud. You have the duty, if you are going to be in the system, to know how it works and why" (BNA's HCFR 11/15/00).

"What can physicians do in the face of the onslaught?" asks BNA-as when lawyers, consultants, and agency personnel can reasonably disagree on the interpretation of variance guidance materials.

Call the AAPS expanded Limited Legal Consultation Service at the first sign of trouble. And opt out ASAP.


AAPS Calendar

Dec. 21. Belden hearing (rescheduled), Milwaukee.

Feb. 9-10. Chaos in Medicine: an International Perspective, Oakland, CA, presented by the Health Care Reform Educational Institute. Speakers include Vincent Cangello, M.D.; William McArthur, M.D., Fraser Institute, Canada; Stephen Pollard, columnist with the International Daily Express of London; and Jane Orient, M.D. Cost: $245. Contact: Dr. Cangello, (510) 834-4282, [email protected].

Oct. 24-27. 58th annual meeting, Cincinnati, OH.

Novartis, APA Are Sued Over Ritalin

American parents have engaged the legal talent that brought lawsuits against tobacco, guns, and HMOs to sue the manufacturer of Ritalin and the APA. Billions of dollars in damages are sought. Two lawsuits filed in federal courts in California and New Jersey in September follow on a class-action suit filed in Texas in May (Br Med J 9/23/2000). Also named in the lawsuit is Children and Adults with Attention Deficit/Hyperactivity Disorder (CHADD).

Plaintiffs allege that "Ciba/Novartis planned, conspired, and colluded to create, develop and promote the diagnosis of Attention Deficit Disorder (ADD) and Attention Deficit Hyperactivity Disorder (ADHD) in a highly successful effort to increase the market for its product Ritalin." Additionally, they allege that "the American Psychiatric Association `conspired, colluded and cooperated with the other Defendants' while taking financial contributions from Ciba as well as other members of the pharmaceutical industry...."

Plaintiffs' attorney Dick Scruggs accused the company of "overdefining or loosely defining the disease such that it would fit every child in America, and creating a market for clinical psychologists to treat these kids" (abcnews.com 12/13/2000).

The APA cites a Surgeon General's report concluding that 3 to 5% of American children have ADD. "The diagnosis of attention deficit disorder is supported by a mountain of scientific evidence going back more than 50 years."

The mountain of scientific evidence concerns treatments, not scientifically determined causes of mental illness, states investigative reporter Kelly Patricia O'Meara (Insight 10/16/00).

The concept of mental illness as brain disease is the rationale for drug treatment-and for organizations such as the National Alliance for the Mentally Ill (NAMI) to push for forced medication-according to psychiatrist Leon Mosher, former chief of the Center for Studies of Schizophrenia at the National Institute of Mental Health (NIMH). Dr. Mosher resigned from the APA in 1998, stating: "The major reason for this action is my belief that I am actually resigning from the American Psychopharmacological Association.... [I]n my view, psychiatry has been almost completely bought out by the drug companies" - (ibid.).

NAMI is a nonprofit self-help support and advocacy group, which has been accused of having its "grassroots watered by pharmaceutical millions": $11 million in four years from 18 drug companies.

O'Meara presents a table of selected NIMH researchers, the other groups and foundations they serve (such as NAMI, APA, and DSM-IV), and the source of the groups' funding. This illustrates the interlocking directorate structure of the public-private partnership, which resembles that involved in the Advisory Committee on Immunization Practices (ACIP).

The lawsuits have potential far-reaching consequences both for manufacturers and the "mental-health establishment," O'Meara believes. If the courts find the scientific data for ADHD to be inadequate, Novartis could be forced to return millions or even billions of dollars earned from Ritalin sales (and feed enormous sums to the coffers of the plaintiffs' lawyers). Such a judgment would open the doors to additional lawsuits requiring proof of mental illnesses.

"It is interesting that the anti-tobacco lawyers are taking the lead in this," comments Jane Orient, M.D., Executive Director of AAPS. "Both Ritalin and tobacco can be addicting. And both are subsidized by the federal government."


Forced Medication

Educational neglect is a rationale that can be used to force psychotherapeutic drug treatment (as well as immunizations) on unwilling children and parents.

In an Albany case, the parents of 7-year-old Kyle Carroll were hauled into court when they informed the school district that they wanted to discontinue their son's Ritalin to see whether his sleeplessness and anorexia would improve. The case is apparently the first in the nation in which parents were pressured by a judge, if not outright ordered, to administer Ritalin. There was no fact-finding hearing or written opinion and thus nothing to appeal. The Carrolls consented to an adjournment in contemplation of dismissal (ACOD) under at least the theoretical threat of having their son removed from their custody. The ACOD directed the parents to comply with the doctor's treatment, which was a prescription for Ritalin.

Professor Jeffrey Schaler, a psychologist who teaches at American University, stated that the consent decree constituted an inappropriate use of judicial authority. The judge acted "in parens patriae," he stated. "Invading a child's body or person with a chemical is an invasion of privacy and a deprivation of due process." The appropriate remedy would have been to impose on parents the responsibility to see that their child was not disruptive in school and allowing them to find their own solution (NY Law Journal 8/17/00).


Accused Neonatologist Commits Suicide

After rounds on Nov. 8, Naren Jadeja, M.D., of Bradenton, FL, was scheduled to plead guilty to charges of mail fraud, health care fraud, and giving false statements related to health care. He faced at least ten years in prison, fines up to $250,000 on each count, loss of medical license, and forfeiture of $1.4 million in assets. Instead, he went to the doctors' lounge at Manatee Memorial Hospital and shot himself.

Dr. Jadeja was the only neonatologist in the county, working seven days a week and 24 hours a day. He frequently cared for seriously ill premature babies without compensation.

Federal agents met Dr. Jadeja at the door to his home at 7 a.m. one morning, handcuffed him, and took him to jail. He had to post a $1 million bond.

According to Owen McCarthy, M.D., of Bradenton, "this doctor was a quiet, unassuming, and extremely competent physician. He cared for the premature children of many doctors. There are many, many parents who would be happy to march their children into the courtroom and tell the court that he is the reason why their children are alive and healthy. This man had a whistleblower employee, who I feel created a lot of this supposedly fraudulent billing in order to get her whistleblower bounty."


Lyme Specialists Persecuted

About 50 physicians in NY, NJ, CT, MI, OR, RI, and TX have been investigated, disciplined, or delicensed over the past three years because of treating chronic Lyme disease in ways they believe to be necessary and scientifically valid-as with prolonged antibiotics. NY attorney Michael Schoppmann states that a physician treating a significant number of patients with that diagnosis can count on being investigated because the financial implications are the insurance industry's worst nightmare (MSSNY's News of New York, Dec 2000).

Members' Page

Education Is Not the Answer. "Fraud and abuse"-and the impact of this government assault on physicians-is getting to be a hot topic everywhere (see, for example, the President's message in the Bulletin, Medical Society, County of Erie, Spring 2000). The government dependency system- based on the "something for nothing" lie-is breaking down, and more people are being adversely affected by the government- sponsored robbery needed to pay for the lie. Thus, a more threatening bureaucracy, more display of brute force, and more government abusers paid by the victims are required to accomplish the same task. This spawns the growth industry whose sole purpose is to educate and/or defend against some attack by the government on the individual.

The AMA and many state and local medical societies (ibid.) are looking to work more closely with HCFA "to focus on a collaborative approach to educating physicians" about coding and government rules. The problem, of course, is the government rules, not lack of education. More education so that physicians can become more compliant and submissive is not the answer. Fighting back is the answer.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


Patients' Rights and Lies. The American sheeple may have rights, but the right to know the truth is no longer one of them. Patients with private medical insurance are not informed that part of their hospital bill goes to pay for the government mandate to treat the uninsured or that 59% of the increase in the uninsured in the Southwest is due to the influx of low-skilled immigrants, about 40% of whom are here illegally, courtesy of the government. Until recently, people were not told about Medicare cost-shifting either. Now that private insurers have started reimbursing at Medicare rates, the press and the public blame HMOs (a government creation), rather than the Medicare monopsony, for the resulting cuts in care.

Speaking of cuts, for a recent one-hour operation of mine, the surgeon was paid $416 and the anesthesiologist $320. For comparison, Pinnacle Nissan wanted $300 in labor and $300 in parts to replace a power window in my car, a repair that takes about an hour (I saved $300 by doing it myself). With more regulations and more ersatz rights to "free" care, expect rationing and shortages as in Canada. The specialists will be at Pinnacle Nissan, repairing power windows for a living.
Craig Cantoni, Scottsdale, AZ


Still Decertified. Thank you for the results of the Freedom of Information Act request regarding the decertification of Ambulatory Surgery Clinics. I notice how quickly reinspections were done at other facilities. Mine has been waiting since March, 2000. One delay of months was occasioned because I signed a form in the wrong color ink. My problem (See AAPS News Jan 2000) resulted from my inability to find and hire a professional legal team within six days to rewrite documents. The regulations and the inspectors' guidelines have not changed since my facility was certified in 1988, and nothing in the ASC has changed. Only the inspector's interpretation changed.
Robert P. Gervais, M.D., Mesa, AZ


"Do Good" Government. George Washington declared that "Government...is force. Like fire, it is a dangerous servant and a fearful master." In our attempt to "do good," we have made government our master. And fearful it is!

Abraham Lincoln for instance had this to say about alcohol prohibition in 1840: "Prohibition will work great injury to the cause of temperance. It is a species of intemperance within itself, for it goes beyond the bounds of reason in that it attempts to control a man's appetite by legislation and makes a crime out of things that are not crimes...."

Most of our government today is made up of prohibitions, compulsions, rules, and regulations to control our lives. This "do good" activity has resulted in disrespect for all law.
Ernest Phillips, Sodus, NY


"Good Insurance." The so-called health insurance industry, supported by government policy, expanded prepaid care- which was offered by hospitals to save themselves from financial destruction in the 1930s-into a system for financing most medical expenses. This perverse system would surely have collapsed save for a 1954 IRS ruling that permitted use of pre-tax dollars for medical care paid for by employer- provided insurance. Now Americans spend only 5.3% of after-tax income on direct payment for medical care, less than half the amount spent on restaurants and entertainment. With the destruction of free-market competition, the system has made it impossible for anyone to afford even more or less routine care without third-party support. A partial solution: end the financial penalty for individuals who pay for medical care directly by making all such expenditures tax deductible.
Steven D. Field, M.D., Northbrook, IL


Punishing Honesty. According to the June issue of Coding & Medicare Updates, a voluntary refund of a payment resulting from an honest error may trigger a Medicare audit, with the prospect of huge fines and loss of the financial stability required to continue practicing. Every day, as a solo physician, I find more reasons to discontinue seeing Medicare patients.

Thank you for being our voice. The AMA is making far too much money changing codes and selling the coding books.
Dale H. Foster, M.D., Elk Grove Village, IL

Legislative Alert

The Unresolved Medicare Mess

Regardless of the eventual outcome of the Presidential election-hanging on chads, dimples, and the legal machinations of lawyers in Florida and the federal courts-Medicare's many problems show no signs of going away; no, they deepen and darken. The new Congress and the new President will not be able to continue to put off dealing with Medicare-even if they want to-at least not in any responsible fashion.

The Technical Review Panel of the Board of Medicare Trustees, as reported by veteran health care reporter Robert Pear (NY Times 11/30/00), has just concluded that Medicare costs are going to go up a lot faster than anyone previously thought. Last April, the Medicare Trustees said that the Hospitalization Trust Fund was going to be insolvent by 2025, meaning that it would run out of funds to pay for hospital benefits; the Trustees' technical experts say that the real date must now be advanced four years to 2021. The reason: Medicare costs will grow much faster because of advances in medical technology, not simply growth in the elderly population. The panelists say that medical technology advances will account for between one-half to two-thirds of the growth in medical spending that is not to be attributed to general economic inflation. In any case, the Medicare spending wave will build faster than previously expected, and indeed, according to the technical review panelist, it will mean that Medicare's annual costs will double by 2010, amounting to about $440 billion in today's dollars, the year before the first wave of Baby Boomers start to retire.

What about the long-term outlook? Projecting the cost out over the 75-year period, which is the standard long-range projection made by the number crunchers for both the Social Security and the Medicare programs, the technical panelists say that this means the future annual Medicare costs could be 60% higher in those out-years, and total medical spending the could jump from 13.5% to 30% of the GDP.

The United States, of course, is not alone in dealing with this pressure in its Medicare program; it is universal among the industrialized nations of the world. In a remarkable speech to the Royal College of Surgeons in London, Sidney Taurel, CEO of Eli Lilly and Company, noted that health policy is going to be changed by three separate, but soon to be interrelated trends, which will sharply increase the demand for higher quality medical care.

First, of course, is the rapid aging of human population; it is far more advanced in Europe, where the ratio of workers to retirees will drop to 2 to 1 by 2020, than the United States, which lags about ten years behind the European age wave. Nonetheless, the Medicare debate is being fueled by the sheer size of the coming demand for Medicare services.

Second is the "wave of innovative technologies from biomedical industries": "The key point is that a succession of breakthroughs in pharmaceuticals and equivalent advances in other medical technologies will inevitably have a powerful expansionary influence on demand and utilization patterns in all systems where they are introduced."

Third is the revolution in information technology. Taurel states: "The Internet and related technologies will transform health care in many ways, including huge efficiency gains in all aspects of health care management. But I think their significance for the future of health care policy will be manifest primarily in two ways. First, they will continue to amplify the power of consumer choice in health care as in all other transactions. Second, medical systems will feel intense and growing pressure toward transparency in decision-making. By the algorithms of connectivity, one persons' experience becomes the common knowledge of millions with the click of a mouse."

All of this reopens the debate, with a special urgency, over the costs and benefits of adding a prescription drug component to the financially troubled Medicare program. In 1999, the cost of prescription drugs grew by an estimated 15%, roughly three times the level of overall health care spending. New drugs are coming on line at a faster rate. According to the Pharmaceutical Research and Manufacturers Association, there are 700 new drugs in the research and development pipeline geared toward conditions that primarily affect the Medicare population.

Drug costs will be a driver in coming medical insurance increases. In 1999, according to an analysis published by the Center for the Study of Health System Change, those medical economists who predicted the end of the slow growth in medical costs have been proven correct. As the Center noted in its November Data Bulletin, between 1994 and 1998 health insurance premiums have increase on average only 2%, but in 2000 they registered a sharp 8.3% climb, with fully insured plans seeing a 9.6% increase and self-insured plans seeing a 7.1% increase. In 1999, the Center noted, prescription drug spending alone accounted for 44% of the cost increase, while the growth in physician spending accounted for 32%. Inpatient hospital spending, interestingly enough, accounted for only 3% and outpatient hospital spending for 21%.

So, drug spending is the item to watch. Since the mid- 1980's there has been a sharp increase in the overall growth of spending on pharmaceuticals; they are a much bigger part of medical treatment today, of course, and the evidence points, as the Medicare trustees panel has noted, to an even larger role in the years immediately ahead of us. The problem is, of course, that prescription drug delivery is affected by the very same ills that affect the delivery of medical services in the current employer-based or government third party payment-based system. In 1987, according to the November edition of Business and Health, more than 50% of all American drug spending came directly out of the pockets of individual patients. By 1997, that dropped to 29%, with the share of insurance payment for drugs jumping from 30 to 51% during that same ten-year period. Prescription drug costs, like all medical costs, are reflecting the inefficiencies of third-party payment. Yet another argument for medical savings accounts....

Drugs are expensive, but expensive compared to what? In a recent and remarkable paper for the National Bureau of Economic Research and Columbia University, "The Benefits and Costs of Newer Drugs," Frank Lichtenburg argues that the overall increase in drug spending must be understood in terms of the quality of modern drugs and their impact on reducing the other costs of the medical sector of the economy. Spending is not simply a reflection of price. While about two-thirds of drug spending reflected price changes, the increased utilization of drugs accounted for about one-third of spending growth in recent years, especially increased utilization of newer drugs. New drugs cost more than older drugs, and the replacement of old drugs by newer drugs is the most important reason why drug spending has increased rapidly in recent years. For example, citing the work of other economists, Lichtenburg notes that the average cost of treating a heart attack patient increased from $11,175 in 1984 to $14,772 in 1991, reflecting a shift from older treatment regimes, like catheterization and intense medical management, to newer approaches, like angioplasty and bypass surgery. But the outcome is better so that while there has been a raw increase in cost measured by dollars, there has also been a real reduction in costs in terms of the value of the services and the quality and length of life effected by changes. Lichtenburg argues that this same approach should be taken with regard to an evaluation of prescription drug costs, as well as other medical advances.

The Medicare cost issue bedevils Congress. Since Congress and the Clinton Administration started congratulating each other for the effects of the Balanced Budget Act of 1997, and then quickly realized that they had cut the rate of spending in Medicare too much and too quickly, pressure has built up to reverse the economic impact of the BBA. Congress is prepared to do just that with a $30 billion restoration package, and Clinton is prepared to veto that package because he thinks that payments to managed care plans, now dropping out in large numbers, are excessive. This is the inevitable price we must pay for an outdated system of central planning and price regulation.

Paving the Way for Medicare Reform

The new President and the Congress should help educate the public on the reasons for reform. To move a consumer-choice agenda for Medicare, there are certain areas that are ripe for Congressional oversight investigations. For example:

The Real Financial Crisis in Medicare. The Clinton or Gore prescription drug proposal would add $338 billion over ten years, and 1 billion claims, doubling the total number of claims to be processed by the carriers and Medicare contractors. The financial problem is not just the Medicare trust fund, but rather the coming explosion in Medicare spending, which will start to hit about 2011, with a profound effect on premiums, taxes, and the national economy.

Medicare's Mountain of Paperwork. Congress should focus on the size of Medicare's regulatory regime, now estimated at more than 111,000 pages of regulations, and its cost. Congressional inquiries should also focus on how the Administration's drug proposal will add to HCFA's authority; and how HCFA's system affects the financing and delivery of care, invites fraud and abuse, and diverts precious time, energy, and resources away from caring for patients.

Medicare and Medical Technology. There is growing evidence that Medicare delays and denies life-saving medical technology to Medicare patients that is readily available to millions of Americans covered by private insurance. If that is the case with current and future Medicare technology, it will also be the case with prescription drugs. These examples should be highlighted.

Medicare's Benefit Setting. The Congress should look at the process whereby benefits are limited in practice by Medicare carriers and HCFA officials. The Congress should also address the perennially troublesome problem of denials on the basis of medical necessity and the cumbersome problem of trying to appeal Medicare's benefit denials. The Clinton and Gore proposals would set up the same type of system for prescription drugs.

How Medicare's Price Controls Affect the Quality of Care. The Congress should re-examine the Medicare price control regime for doctors and hospitals. It is never too late to go back and force the academic supporters of the Resource Based- Relative Value Scale (RB-RVS) to defend the theoretical underpinnings of that structure in public hearings and ask professional economists to give their best advice and counsel on how to repair the damage. The Congress should explain to the public precisely how complex and cumbersome this entire system is, and how it negatively affects the quality of care. They should look into the recent HHS proposal to limit payment for cancer drugs.

What Consumer Choice Teaches. At this time of year, a special class of Americans-Members of Congress and federal workers-are choosing from a broad range of private medical benefits made available to them in the Federal Employees Health Benefits Program (FEHBP), which has been in existence since 1960. It is not a perfect system. There are irrational restrictions on market entry and irrational underwriting practices. There are no medical savings accounts or flexible spending accounts. But, these weaknesses aside, it is still a far superior system to that available to most Americans under the terms of employer-based medical insurance. And, by every measure, it is far superior to the Medicare system. Federal workers and their families enjoy certain privileges:

Broad Choice of Plans. This year about 300 plans are competing for consumers' business. Virtually all plans cover between 80 and 90% of prescription drug costs. Federal workers and retirees do not have to go outside of the system to buy supplemental coverage for drugs and catastrophic protection, nor will they pay nearly half their medical bills out of pocket as Medicare beneficiaries do.

Rational Financing. While the government spends about $220 billion for the Medicare program, covering almost 40 million retirees ($5,200 per person), it spends about $20 billion for the FEHBP, covering 9 million persons ($2,200 per person). Beneficiaries choose the level of benefits and cost.

Less Bureaucracy, More information, and Higher Satisfaction. Unlike with Medicare, the government does not make all FEHBP beneficiaries pay the same for the same package of benefits. A lot of solid information is available, and persons are generally satisfied with the plan they choose. Probably no more than 5% of enrollees will choose to change plans this year.

The majority of The National Bipartisan Commission on the Future of Medicare proposed just such a system for the next generation of senior citizens. For critics who want to know just how such a system would work, they can look at the dynamics right in front of them. It is happening right now.

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