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Association of American Physicians and Surgeons, Inc.
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Volume 58, No. 1 January 2002


In days when smallpox was a clear and present danger, Thomas Jefferson wrote: "to secure these Rights [as to Life, Liberty, and the Pursuit of Happiness], Governments are instituted among Men, deriving their just Powers from the Consent of the Governed."

In 2001, long after smallpox was pronounced extinct, "our nation has awakened to the realization that the government's foremost responsibility is to protect the health, safety, and well being of its citizens." Or so declares the preamble to the Model State Emergency Health Powers Act (MEHPA), which HHS Secretary Tommy Thompson is urging States to adopt.

Under this Act, the Governor would derive dictatorial power from declaring a public health emergency, with the consent of no one. No unalienable rights would be recognized. Liberty and property rights could be suspended; after 60 days, the State legislature could terminate the state of emergency, but only by a two-thirds majority of both chambers.

A public health emergency is whatever the Governor defines it to be. The only pretext needed is "a disease caused by a living organism." The draft states, "An infectious disease may, or may not, be transmissible from person to person, animal to person, or insect to person" (emphasis added).

Public health officials, among others, would have broad, unfettered access to personal health records. Pharmacists and physicians would be required to report any "unusual" health patterns, and personal information about patients exhibiting an "unusual" pattern.

Individuals suspected of harboring an "infectious disease" could be forced to undergo medical examinations-and physicians could be forced to provide them, or be liable for a misdemeanor. Patient refusal of a vaccine or medical treatment as directed by the Governor would also be a misdemeanor.

Any inconvenient laws or regulations could simply be suspended, and new laws-and penalties-effected by fiat.

The Governor could commandeer any private facilities or resources considered necessary, including, but not limited to, communication devices, carriers, real estate, fuels, food, clothing, and medical facilities. He could impose price controls and rationing, and otherwise control the allocation, sale, use, or transportation of any item as deemed "reasonable and necessary for emergency response"-specifically including firearms.

The State is supposed to provide "just compensation" to owners for seized property-unless there is "reasonable cause" to believe that it "may endanger the public health," in which case it may simply be destroyed, with no recourse.

With the whole structure of checks and balances abolished, there is nothing to stop a Governor from condemning the property of a political opponent and subjecting him to "quarantine" [imprisonment] in a pesthouse on an ex parte order. His only right would be to a hearing within 72 hours- or nearly a week if the isolation began on Friday afternoon before a three-day weekend. State officials would have no meaningful accountability for taking such actions.

Adjectives such as "reasonable," "significant," and "substantial" are in the Act-for the State to define. There is no requirement for scientifically valid assessments, risk: benefit analysis, or judicial or even administrative review. And risks less than 1 in 1 million are already the pretext for intrusive, costly regulations such as mandatory vaccinations.

These powers should "scare the immune system out of any American"; though desperate times call for desperate measures, "ceding this much power to states is too desperate by far" (Investor's Business Daily, 12/3/01). "This law treats American citizens as if they were the enemy," stated George Annas, chairman of the Health Law Department at the Boston Univ. School of Public Health (San Francisco Chronicle, 11/25/01).

Since the Act relies exclusively on force and central planning, it is not surprising that the author, Lawrence O. Gostin, was a member of the informal single-payer group, as well as the bioethics group, of the Clinton Task Force on Health Care Reform. The ideas are not new; September 11 is the occasion for what AAPS Past President Robert J. Cihak called "political war profiteering" (WorldNetDaily, 11/29/01).

Dr. Cihak notes that in the State of Washington, public financing of a sports stadium is an "emergency."

Many powerful groups, such as the National Governors Association and the National Association of Attorneys General are promoting this legislation (see www.forhealthfreedom.org for a list). The AMA apparently concurs by silence, although it has opposed mass smallpox vaccination because of the adverse effects, including a 1 in 1 million risk of death and 1 in 1,000 risk of potentially serious reactions.

AAPS has posted a detailed analysis of the Act, a one-page alert suitable for distribution to patients in your office, and a letter sent to about 500 State, county, and specialty medical societies, at www.aapsonline.org. The analysis includes a number of suggestions that States should consider for improving emergency preparedness.

Helpful laws would protect physicians and others from civil liability when helping disaster victims, and suspend regulations that impede public health measures (e.g. mosquito control) but have no scientifically proven benefit.

To survive bioterrorism or other hazards, the State needs trained personnel, state-of-the art laboratories and equipment, stockpiled essential drugs and supplies, and protected utilities and communications systems. Emergency electrical power would save lives-potential empowerment of would-be dictators or stormtroopers is a grave risk.

The destruction of citizens' freedoms and rights also imperils their very lives, as 20th century history shows.

Plan B

I have given some thought to Plan B if our lawsuit against the new "privacy" regulations should fail, and have concluded that I have already implemented as much of Plan B as possible.

As painful as the withdrawal may be for some, Plan B, as I see it, involves withdrawing from participation in insurance, HMOs, and government-run health programs. Except with Medicare, if you don't participate with the insurer or HMO, you incur no obligation to file claims. By providing patients with a superbill containing all of the necessary information, and allowing patients to file their own claims, one removes one's self from the "electronic transaction code standards." [Patients are not a "covered entity."] As for Medicare, under which physicians are required by law to file claims-except when seeing Medicare HMO patients out of network-file paper claims. This also takes one outside the "electronic transaction code standards." After more than ten years of submitting claims to Medicare electronically, our office returned to submitting paper claims to Medicare. This costs the Medicare carrier more money, and it dislikes paper claims intensely. There is no reason, however, to make life easier for Medicare functionaries as they have made life as miserable as possible for physicians, with 132,000 pages of incomprehensible, constantly changing regulations.

As we do all of our own billing, we are not required to have any privacy agreement with a third-party biller. We do not have any "business associates"; yes, we even clean the office ourselves so no privacy agreement with the janitor is needed. We do not release medical information over the phone. Medical information is released only with the patient's written consent. We have no shared computer network. Our computers are not connected to the internet or to phone lines in any manner.

In summary, the best "protection" against government destruction of medical privacy may be to return to the solo "mom and pop" style practice with superbills, paper Medicare claims, and as little interaction as possible with insurers and other outside entities. It will be hard for most physicians to give up the "guaranteed" direct payment from Medicare, HMOs, and insurers (which has become increasingly less certain and less remunerative), but to do otherwise will mean complicity with government-sponsored destruction of privacy- or noncompliance, with ruinous fines and possible prison time.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


State Reports

Arizona. The State chapter is sending all current and lapsed members, as well as 300 randomly chosen Arizona physicians, a copy of three annual meeting talks: "Medicare Administration" by Leslie Aronowitz, GAO; "HIPAA Privacy Regulations" by Vickie Yates Brown; and "Fraud and Abuse Audits" by Amy Woodhall, with an invitation to join or rejoin AAPS.

Pennsylvania. The State chapter presents Merrill Matthews explaining Medical Savings Accounts on video or audiotape. The unedited 35-minute speech is available, along with a 20-minute tape for physicians, a 13-minute tape for the public, or a 12-minute video for insurance agents and their clients. Accompanying handouts include a call to simple actions. Videos $17.25 to $18, audios $3.45 to $3.95, plus $4.50 S/H. To order, call Barrie Audio-Video, (215) 723-4469. For more information, contact Dr. Pendleton, (215) 938-0781.


Medicare in the Rear-View Mirror

In 2000, Medicare patients comprised 67% of my urology practice. My clinical research in minimally invasive prostate cancer surgical technique and outcomes was thriving with the steady infusion of men older than 65 and their cancerous prostate glands. On December 31, 2000, I de-participated from Medicare and sent a nice explanatory letter to my patients. Some of my Medicare patients were upset with the hassle that they then experienced from Medicare. My usual 4-to-6 week backlog for new- patient appointments decreased to one week. Skiing was very good last winter, so I was happy.

I had de-participated from all commercial insurers two years earlier and stopped submitting electronic claims for non-Medicare services. After my office overhead decreased, I lowered charges for many services, but my income still increased. I started collecting for elective surgery in advance to avoid being "stiffed"-this was happening weekly!

On October 1, 2001, I opted out of Medicare entirely. My office sent out 800 letters to Medicare patients seen in 2000 and 2001. By the first of December, we had transferred records of about 60 patients to other urologists. While Medicare-eligible patients comprise about 15% of my practice, the number of new Medicare-eligible patients has declined sharply. Why not? They can see other urologists in my community who participate with Medicare. Those who value my expertise are the ones I want to care for. My clinics are sufficient but often have openings. My practice income is adequate, but much reduced. I have free time to do the things I have longed to do since starting practice 8 years ago.

Most importantly, I am at peace! When I conclude a day in the office, I have been paid, and no billing duties remain. In the absence of billing charges and unpaid services, I am doing well despite a reduced fee schedule. Many of my office charges are lower than Medicare rates. Imagine the simplicity and purity of practicing medicine in the absence of CPT and ICD-9 coding stress or massive accounts receivable!

I believe that the first doctor in a community to go to a "cash and carry" policy will find it easier to succeed than doctors who do it later. In my community, many doctors are waiting to see whether I remain viable. They would like to join the ranks of third-party-free doctors, but fear the pain of third-party-money withdrawal. I am not going back!

Evaluating Medicare as a business partner, no reasonable person would ever do business with it. Medicare makes the rules and changes them on a daily basis, without notice. If doctors make an honest mistake, they can be prosecuted. If Medicare makes a mistake, patients are told that the doctor has committed fraud. Administrative burdens are placed on the practice of medicine without benefit to anyone.

Physician happiness and the future of medicine await the exodus from Medicare and all third-party relationships.
Michael J. Harris, M.D., Traverse City, Michigan

HHS Moves to Dismiss HIPAA Complaint

As expected, on November 30 the US Department of Health and Human Services filed a Motion to Dismiss the complaint filed by AAPS, Congressman Ron Paul, and several citizens, challenging the HIPAA privacy regulations.

As AAPS member Taj Becker, M.D., of Utah explained: "A Court is like a boxing ring. But to get your day in Court, you have to overcome a number of barriers designed to keep you out of the ring."

Disregarding all the expense that physicians are supposed to incur in preparation for the April, 2003, deadline, HHS asserts that the plaintiffs' claim is unripe because they have not yet suffered any injury due to enforcement. Patients' fears of disclosure of their records to the government, and the resulting chill on patient-physician communications, is called a mere hypothetical that depends on "a succession of increasingly unlikely events." After all, "the Secretary may decide not to request access to any protected health information," and the chance of accessing that of the individual plaintiffs is "statistically remote." Privacy is thus relative and subject to lottery.

HHS apparently believes that the scope of regulations can be much broader than the actual content of a law. The fact that Congress included only electronic transmissions does not limit rulemaking, in HHS's view, as long as the regulations "contain" the standards called for by law along with whatever else is "reasonable and appropriate to effectuate the purpose of the Act." That purpose, as HHS perceives in its omniscience, was "to promote the computerization of medical information." Congressional intent would be thwarted "if, by reverting to paper, covered entities could circumvent parts of the statute and the regulations." Congressional inaction after the rule was promulgated is taken by HHS to mean acceptance.

On the other hand, HHS does seem to recognize the Constitutional problems that would result from federal regulations of patient-physician communications that are not arguably part of a national, multi-billion-dollar industry:

It bears repeating that the Privacy Rule applies only to covered entities. The proverbial country doctor who deals only in paper, or who has a computer but conducts none of the transactions referred to in section 1173(a) electronically, would not be a covered entity and would not be subject to this legislation.

As to the Regulatory Flexibility Act, the Secretary demonstrated "reasonable compliance" by "retain[ing] an outside consultant to assess concerns raised in the public comments about the cost of systems compliance by small businesses." Prosecutors, of course, apply a much higher standard to physicians accused of fraud and abuse.

The Paperwork Reduction Act, HHS argues, does not provide for judicial review. The "sole remedy ... is the ability to raise non-compliance with the Act as a defense to an enforcement action." If a form lacks the required control number, "no person shall be subject to penalty for failure to comply with the collection of information."

Even if some provisions of the rule might not pass Constitutional muster, HHS argues that the "final" rule might change before it is enforced, rendering the complaint moot.

This Motion gives an interesting insight in the HHS view of privacy: (1) HIPAA "protects" privacy in that it only permits but does not require disclosure to government. (2) "There is no common law or federal physician-patient privilege." (3) Invasions of privacy are merely an "unpleasant" aspect of many facets of health care. (4) Being in a government data base is a small price to pay for preventing the x-ray technician from getting an unnecessary glimpse of your chart.

The Judge has scheduled a conference for January 4.

Litigation is being funded by the American Health Legal Foundation. Contributions are tax-deductible.


Tip of the Month: Medical Staff Bylaws may require a physician to consent to outside review of his charts. If the physician suspects foul play and refuses to consent, then the bylaws can mandate immediate suspension of privileges. Solution: Consider providing consent as required by the bylaws, but restrict it to specifically identified cases and do not consent to immunity for the reviewer. If the hospital does suspend, and the physician then consents to immunity, the consent was arguably under duress, and the reviewer may not be comfortable with it.


Parents Fight Mandatory Vaccines in Court

In Arkansas, two Catholic mothers, Shannon Law of Little Rock and Susan Brock of Royal, filed a federal lawsuit claiming that the Arkansas statute on religious exemptions from vaccines discriminates on the basis of religion. Mrs. Law wants her children exempt from chickenpox vaccine because the vaccine was developed using aborted fetuses. (Polio, MMR, rubella, rabies, and hepatitis A were also derived from fetal tissue; in the US, there are no alternate vaccines available for rubella, hepatitis A, or chickenpox.) The Vatican, however, has not taken a stand on the issue, and a committee headed by a Denver archbishop ruled that the vaccines were acceptable. Mrs. Brock objects to hepatitis B vaccine because of the mode of transmission of the disease. The Arkansas Dept. of Health denied an exemption because their religious beliefs are not officially "recognized." Thus, the State is defining which beliefs are orthodox and worthy of protection (www.cnsnews.com, 12/07/01; www.lc.org, Liberty Counsel press release 11/5/01).

In New York, Joseph and Heyde Rotella and Maja Leibovitz refused hepatitis B shots on behalf of their children, who were expelled from school. In one case, Child Protective Services was called to the scene because the children were not in school. Liberty Counsel filed suit and obtained a court order to allow the children back in school and prevent the school system from overriding parents' religious beliefs (www.lc.org).

Also in New York, Liberty Counsel has objected on behalf of Lynn Friedman to a lengthy questionnaire and a deposition under oath-an "inquisition"-concerning her religious beliefs, after which the exemption was denied and her son expelled.

In New Jersey, Rick Shaftan is home-schooling his son Zachary pending State court action to readmit him to sixth grade in public school. The Shaftans have no religious objection to the vaccine, but believe it to be "without substantial benefit, unrelated to the school's educational mission, and an unwarranted and illegal intrusion into their rights, as parents, to direct the care and upbringing of their child." The Shaftans argue further that "the state should not be permitted to compel plaintiffs to choose between exercising their constitutional rights to privacy and self-determination and securing a constitutionally mandated education." Arguments are to be heard State Superior Court in Morristown, NJ, December 11.


Priorities. For more than 30 years, New York State paid $7.50 to treat live Medicaid patients to help bring them back to health. Now the State is offering more than $300 ($30 for office visits and up to $272 for RU 486) to kill unborn Medicaid recipients. In New York State, unborn Medicaid recipients are targeted for elimination (a cost-containment program?) and taxpayer funds are being used to carry out the death sentence. [Elective, as opposed to "medically necessary," medical abortions are covered only for New York City residents. DOH Medicaid Update 1/01.]
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


Backlash. Baby Boomers may think that their generation has the political clout to preserve their Social Security benefits even if it destroys the economy for their grandchildren. They live in dreamland. When we get old and feeble, no amount of voting power will make the younger generation treat us kindly. I think they will realize that our generation thought so little of theirs that we killed many of them off with abortion. Faced with extreme financial collapse, they will do the same for us with "assisted suicide." No way will they put up with a 50% payroll tax to keep us going.
Alieta Eck, M.D., Somerset, NJ


Reversal. When we were primarily an agrarian nation, no one imagined that we could provide taxpayer largesse to a large portion of the population. As the number of farmers diminished, their clout actually improved; and the remaining subsidy recipients didn't have to share their "rewards" with as many people. Richard McKenzie projected that as the number of Social Security beneficiaries grows, this cohort will have less ability to extract proportionally similar amounts out of the remaining taxpayers. Think in terms of the concentrated benefits/diffused costs tenet of public choice theory. An aging population may reverse the political dynamics for broad-based entitlement programs. A majority really can't effectively subsidize itself.
Tom Miller, Cato Institute, Washington, DC


It's the Money. Dr. Eck asks, "Why do people so vehemently defend big-government medicine when it has failed all over the world?" Because, just because, only because of the money. Change the paradigm so that the money that purchases care or insurance lies within the control of the patient/subscriber and not in the control of politicians, central planners, employers, and HR executives, and the world changes dramatically- but not in ways that everyone other than the patient desires.
Steve Barchet, M.D., Issaquah, WA


Unbalanced Incentives. Managed care came about because of faulty analysis advanced especially by Paul Ellwood and Alain Einthoven. They thought the incentives in fee-for-service medicine were for physicians to provide excess care and earn more money. They were wrong. The problem isn't FFS; it's third-party payment, which removes the counter-incentive for consumers to resist overtreatment.
Greg Scandlen, Frederick, MD


Untruth and Consequences. Consultants have every incentive to lie to politicians about the consequences of their schemes if (1) they are paid up front and (2) the cost of their errors is spread over all taxpayers. In ancient Rome, the engineer who designed the arch was forced to stand under it as the scaffolding was removed. Could we adopt a similar strategy for incentivizing our bold, radical would-be health care reformers?
Gerry Smedinghoff, Actuary, Phoenix, AZ


Shrugging. Medicare, Medicaid, Social Security, and [other unconstitutional government programs] should be abolished. Working as a contract physician for the federal government, I see first-hand the failure of socialized medicine. Things have deteriorated to the point that I cut my hours to half-time, sacrificing all my benefits. By careful budgeting and maintaining a lifestyle not much better than a medical student's, I have been able to pull half an "Atlas Shrugged." I am trying to reach a point at which I can abandon white-collar assembly line medicine entirely. I have a few ideas about completely private medicine, but I don't know whether they're economically viable, and I fear being targeted by the federal government, as others have been. I can always flip burgers or do clerical work when medical factory work gets intolerable!
Bari Bett, M.D., Lake Ridge, VA


Redefining "Is." In Canada, a clear lensectomy is a cosmetic, noncovered service. Doctors and hospitals can charge whatever they want for noncovered services, whereas it is illegal to charge a Canadian patient anything for a "medically necessary" service. Canadian doctors reduce their cataract surgery waiting lists by redefining "cataract" to mean a "clear lens," and then charge the patient for extracting it.

In the U.S., on the other hand, doctors have an incentive to call a clear lens a cataract (and are accused of doing so in order to be paid for doing "unnecessary surgery")!
Robert Gervais, M.D., Mesa, AZ,


AAPS Calendar

Feb. 9. Board of Directors meeting, Dallas, TX.

Sept. 18-21. 59th annual meeting, Tucson, AZ.

Legislative Alert

The Stimulus Debate

As this goes to press, Congress, under increasing public pressure from the President Bush, is struggling to come up with an economic stimulus package to revive the economy. The partisan divisions, muted in the aftermath of the September 11 terrorist attacks, are deep, and compromise will be difficult.

The Bush proposal, being promoted by Senator Charles Grassley (R-IA), is calling for accelerated depreciation, fast- tracking cuts in all tax rates, elimination of the corporate alternative minimum tax, an extension of unemployment compensation benefits, a $3 billion grant to the states to pay up to 75% of medical insurance premiums covered by COBRA, and the encouragement of states to use $11 billion in unspent State Children's Health Insurance Program (SCHIP) matching funds to expand medical coverage for the uninsured.

The Daschle proposal is calling for supplemental tax rebates for taxpayers who did not get the full amount in 2001; a 10% bonus depreciation for investment in capital and software over the next 12 months, thus emphasizing more spending; direct assistance to displaced workers; changes in unemployment insurance; and subsidized COBRA coverage and expanded Medicaid coverage for displaced workers.

A recent econometric analysis by the Heritage Foundation's Center for Data Analysis indicates that the Bush proposal would result in 211,00 new jobs in 2002. Disposable income would rise $75 billion per year from 2002 to 2006, and personal and corporate investment would increase by an average of $13.4 billion per year over the same period. Under the Daschle Plan, 108,000 jobs would be created in 2002, and investment would increase an average of $1.1 billion per year. The Heritage report (CDA01-09) is available on line at www.heritage.org.

While a national crisis can bring out the best in Americans, it can also tap the resourcefulness of the worst instincts of politicians and lobbyists. For example, a major agriculture bill (H.R. 2646), renamed "The Farm Security Act of 2001," would transfer billions of farm subsidies to enormously wealthy Americans who happen to own farmland, including Ted Turner, Scottie Pippen of the Portland Trailblazers, and David Rockefeller. Congressional disaster relief and legislation to stimulate the economy have become the latest vehicles for special subsidies and pork-barrel projects. Particularly disturbing is that, given a real opportunity to make significant changes of direct benefit to working families, particularly in the area of medical insurance, Congress appears to be ready to either do nothing, or to reinforce the most undesirable features of current arrangements.

How Government Punishes the Unemployed

Displaced workers and their families are punished by current government policy. The key federal policy, of course, is tax policy. American workers and their employers both get unlimited tax relief for the purchase of medical insurance on one and only one condition: that they obtain it through the workplace. If they want a different policy or a different package of benefits, that is too bad. The reason is that they don't own the policy; their employer does.

It is not economically feasible to have a thriving individual market for medical insurance when the same package of benefits costs 35 to 40% more if the worker has to buy it with after-tax dollars. For middle-income workers, that is a steep extra cost. Most people can't-or won't-pay it.

Assume for a moment that a worker does not want to participate in the employer's plan, or that the person who is temporarily out of work wants to buy a far less expensive plan on the individual market. The government has already cut off options there. State legislators have been literally working overtime to undermine the effectiveness of that market with reams of rules and regulations governing health insurance. In Kentucky, for example, a lot of health insurers just packed up and left. In many states, where the level of regulation is high, the insurance companies have decided to stay and do business, but they have passed the cost of these regulatory impositions off to workers in higher premiums.

Additionally, in the individual market, the cost of marketing may be 30 to 40% higher. But government policy discourages association plans, or the creation of large group insurance pools outside of the place of work. Such pools could stabilize premiums and encourage a decline in administrative costs. But here politicians have an unrepentant commitment to inaction.

If workers are without coverage in some states, their plight might be bad, but it could be worse. They could be governed by "carin' and compassionate" state legislators, who bow to the itinerant mobs of special-interest lobbyists who cram the corridors of power and enact mandates specifying what kinds of benefits, treatments, or medical procedures you must have and pay for if you are to have insurance at all. California has 42 such mandates. Maryland, a national repository of regulatory excess, has 50. Nationwide, there are 1,403 mandates and more on the way, including acupuncture, alcoholism treatment, chiropractors, contraceptives, dietician services, drug-abuse treatment, in-vitro fertilization, infertility treatments, marriage therapists, massage therapists, professional counselors, psychologists, social workers, and treatments for TMJ. A worker may want major medical, but the state politicians want to force him to pay for things he doesn't need or want-next session it could be South Sea Island Witchdoctor's chanting therapy. See the fellow with the beads and feathers sitting in the state Senate dining room with the esteemed Chairman of the House Multicultural Subcommittee on Expanded Health Care Alternatives.

Of course, mandates price coverage out of reach for many families, especially those who have a breadwinner who has just been laid off. According to a recent study for the Health Insurance Association of America, as many as one in four of those who are without insurance are without coverage because of the rising cost of these mandates. Unfortunately, the leading Congressional proposals to deal with the rising number of the uninsured rely on amorphous federal subsidies to state governments and would mean less personal choice of plans or benefits.

Flawed Policy: The Limited COBRA Option

Some in Congress, notably Senators Tom Daschle (D-SD), Max Baucus (D-MT), and James Jeffords (I-VT), want federal subsidies for displaced workers to continue their employer's medical coverage under a provision of the Consolidated Omnibus Reconciliation Act (COBRA), under which they now pay the full premium out of pocket for 18 months. Daschle and Baucus want to subsidize COBRA coverage directly with federal funds, and Jeffords to establish a new tax credit for COBRA coverage-a sharp break with previous tax policy.

COBRA coverage is generally available to workers, as long as they are eligible based on the size of the firm. Employees of firms with 20 or fewer employees-millions of American workers-are not eligible. Worse, COBRA plans, and large company plans generally, are often very expensive for family coverage, often running between $6000 and $8,000 per year. Even with significant federal subsidies, COBRA coverage may still be too costly for many families. According to a recent Urban Institute survey, only 25% of workers eligible for this extended COBRA coverage would be able to afford it.

Bad Policy: Medicaid Expansion

Some in Congress, notably Senators Baucus, Carnahan, and Kennedy, want to enroll displaced workers and their families in Medicaid, a welfare program. If unemployment rises from 4.5% to 6.5%, according to the Urban Institute, more than 43 million would be on Medicaid rolls, surpassing Medicare.

Medicaid is financially troubled in most states, characterized by poor quality of care and less access to doctors and medical specialists. In fiscal 2001, Medicaid costs increased 11%, and 28 states are considering budget cuts. Medicaid patients are facing rationing. This program is not, of course, on the menu of Congressmen who consider it the leading policy option for displaced workers.

A Better Policy

It doesn't have to be this way for Americans facing hardship. Congress could do the right thing, and allow them to keep or get private health insurance. One suggestion is an individual tax credit or a voucher to help cover the cost of the plan of the worker's choice-preferably including a Medical Savings Account option. Individuals are likely to select a less expensive alternative to COBRA.

If the tax credit or voucher system is set up as a temporary relief effort, it could be administered through the state unemployment compensation system, the joint federal-state program that assists workers with unemployment insurance. This would not be difficult. The administrative apparatus is already in place, and the standard for eligibility is already established. If you are eligible for unemployment compensation, you would also be eligible for assistance for private medical coverage. If the Left is so certain that displaced workers and their families should be enrolled in Medicaid, there is no reason why Medicaid should not be made an explicit option. Let so-called liberals advertise it, and see how many of the folks they say they so desperately care about would actually sign up for that program by choice.

Simultaneously, as part of its effort to expand private coverage for displaced workers, Congress could override-or pre- empt-costly state mandated benefits and premium taxes for those who lost their jobs, making private options far more affordable.

The chief political effect of a tax-credit approach for private insurance would be structural: it would put a cap on Medicaid expansion. Moreover, the provision of individual tax relief or assistance to private insurance, giving individuals and families the ability to pick and choose their own plans and benefits, is a radical break with all previous tax policy. The right thing to do is to make it permanent, and build upon it. That's why the extreme Left will vigorously fight it.

Rising Medical Liability Costs

Medicaid, Medicare, and managed-care organizations cap reimbursement for doctors, hospitals, and other medical professionals. But doctors are operating in an environment in which medical liability costs are sharply rising again, particularly among obstetricians, gynecologists, and surgeons. This is especially true in New York, New Jersey, and Florida. According to a New York Times report, rising liability insurance costs account for about 10% of the overall increase in medical costs this year. In California, according to the Times, the average jury award is $2.9 million in medical malpractice suits. Of course, in many states there are no caps on medical malpractice punitive damages or damages for pain and suffering. For attorneys trying medical malpractice cases, there are no caps on contingency fees in medical malpractice cases in such states as Alabama, Alaska, Arkansas, Colorado, District of Columbia, Georgia, Idaho, Kansas, Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Vermont, Virginia, and West Virginia. Strange how lawyers somehow manage to escape the kinds of regulatory initiatives that routinely are imposed on the medical profession.

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


HIPAA Compliance Extension

On Nov. 27, the Senate passed S. 1684 by unanimous consent. This provides a one-year extension for compliance with the electronic transaction code sets.

The House of Representatives passed H.R. 3323, introduced by Rep. David Hobson (R-OH), which extends the deadline only if the entity submits a compliance plan prior to October 16, 2002. Entities failing to submit such a plan and failing to be in compliance can be excluded from Medicare-and such exclusion shall not affect the imposition of other penalties. Additionally, the House bill extends the deadline for small health plans to comply with Privacy Rules to April 14, 2004.

A new requirement included in H.R. 3323 is that all Medicare claims must be submitted electronically, except by "small" providers of services (those having less than 25 full-time employee equivalents).

The bill appropriates more than $44 million for technical assistance, education, outreach, and enforcement activities.