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Volume 60, No. 1 January 2004
DOWN WITH "HEALTH PLANS"!
"The insurance industry has effectively ruined American health care, causing multiple times the systemic damage of the oft-maligned trial attorneys," writes John E. Stone, Director of the U.S. Freedom Foundation.
With average family premiums running $9,000 a year, despite median family incomes of only $42,000, "the comprehensive health insurance economic model is no longer viable." Therefore, Stone concludes, "it's time for an all-out revolt...."
This means recognizing that the proper function of insurance is to serve as a financial service, not a health agency. Even many insurers have now stopped calling the product that the uninsured lack "insurance." In enrollment materials, Blue Cross Blue Shield, Aetna, United, and others use the term "health care plan" or "health benefits plan."
An insurance contract is a two-party contract between a consumer, who pays a premium, and a carrier, who "indemnifies" the insured in the event of a loss. Third-party plans, on the other hand, involve a triangular relationship, with the "insurer" paying the "provider." In such arrangements, there is little accountability between the partners: and thus continuing demand for government intervention.
After 100 years of government regulation, "we are left with an industry that is too expensive, too bureaucratic, and too indifferent to the needs and desires of consumers," writes Greg Scandlen of the Galen Institute.
In the early twentieth century, Scandlen notes, sick workers lost two to four times as much in wages as they spent for medical costs. As medical costs were a relatively minor risk, comprehensive "major medical" coverage did not exist in 1940.
The first serious effort at prepayment for medical care was a prototype Blue Cross plan in 1929. Blue Cross and later Blue Shield, insisting that they were not insurance companies, were organized under special enabling acts that provided them with tax-exempt status and immunity from many insurance regulations. Owned by hospitals, Blue Cross served to ensure them a constant revenue stream.
The Blues' market domination enabled them to dictate the shape of medical benefits. Commercial insurers adopted "assignment of benefits" as a substitute for "service benefits" paid to "participating providers."
Medicare was also modeled after BCBS.
In 1965, the founding of Medicare and Medicaid launched the great spending spree. Out-of-pocket payments dropped from nearly 56% of the total in 1960 to 36% by 1967 (and 15% by 2000). Excess demand outstripped supply and caused a surge in prices, as predicted by basic economic theory. The government response, Scandlen writes, was to "create a vast bureaucracy of health planning agencies to further reduce supply!"
In order of occurrence, Scandlen lists major market distortions caused by government: (1) professional licensure; (2) state laws enabling hospitals to form vertically integrated payment systems; (3) exemption of fringe benefits from World War II wage and price controls; (4) a tax break only for employer- provided insurance; (5) federal seed money only to hospitals, encouraging high-tech institutional care; (6) an antitrust exemption solely for insurance; (7) Medicare and Medicaid; and (8) "cost-containment" programs, including price controls and certificate of need.
Health benefits are unaffordable, with no end in sight for the cost spiral. A young family in New Jersey has $600 per month taken from its paycheck for an employer-sponsored HMO, and pays a $30 copay for each office visit while the total cost of all childhood vaccines is about $450 per child.
If this family could buy a $5,000 deductible policy for $250 per month (forbidden by New Jersey law), it would have an extra $350 per month and could accumulate savings sufficient to cover the deductible in a little more than a year, if it were not for taxes. Most will not need to spend all of their savings for medical care. Compare the potential economic stimulus to that of the tiny Bush tax cut of $30 per month.
The main impediment to realizing this savings apart from state mandates and the tax code, the latter ameliorated if the Health Savings Accounts (HSAs) in the new Medicare law survive Sen. Daschle's attempt to repeal them is fear.
The realistic basis for fear is the enormous burden of cost- shifting imposed on patients who pay directly. Hospitals are the most recalcitrant in resisting negotiation and have even used "body attachment" having patients arrested for nonpayment of grossly inflated charges (Wall St J 10/30/03).
After K.B. Forbes filed seven lawsuits against California Tenet hospitals, AAPS California chapter president Tom LaGrelius, M.D., was able to persuade his main hospital to give a 60% discount from published fees on all hospital services to cash patients who paid their bills within 30 days.
A critical mass of patients with their own money to spend, as in HSAs, could create powerful disruptions in existing third- party arrangements. "Stop the HSA Tsunami!!" writes Don McCanne, M.D., President of Physicians for a National Health Program (PNHP), listing the usual objections (www.pnhp.org).
"HSAs and consumer empowerment will be the death of their long-cherished hopes for a nationalized health insurance scheme," writes Greg Scandlen, rebutting PNHP objections (Consumer Choice Matters #42, 12/02/03, see www.galen.org).
Physicians can take insurance reform "in their own hands right now," states AAPS President Mark Schiller, M.D., in a letter to the editor of the Wall Street Journal. "If physicians would require patients to pay at the time of service, we would start to remove ourselves from this quagmire." If his patients wish to use insurance, they can submit his bill themselves for reimbursement while remaining in control.
CPT Codes and AMA Revenue Safe for Now
A little noticed provision of the Medicare expansion, H.R.1, on p. 583, Subtitle E, Sec. 941 (d) reads: "The Secretary shall carry out a study of...systems other than current coding and documentation requirements for payment for physician services" and report to Congress by October 2005.
On Nov. 5, the National Committee on Vital and Health Statistics (NCVHS), as part of its responsibilities under the Health Insurance Portability and Accountability Act (HIPAA), recommended that the ICD-10-CM and ICD-10-PCS be adopted as the HIPAA standard, replacing ICD-9-CM. NCVHS concluded that the benefits would outweigh the significant implementation costs. Only in-patient procedure codes would be affected; CPT-4 would not.
ICD-10 proponents lobbied Congress to include instructions to implement this code set in all settings as part of Medicare reform. The AMA lobbied aggressively to prevent a move to ICD-10 in physician offices.
"The AMA developed CPT codes in 1966, and in an agreement with the Association, the government in 1983 adopted the codes for reporting physician services in Medicare. The AMA generates significant revenue from the licensing of CPT codes," writes Markian Hawryluk (AM News 10/20/03).
"Right to Die" Groups Merge
Last Acts, the beneficiary of 6 years of grant support from the Robert Wood Johnson Foundation (RWJF), has merged with Partnership for Caring to form Last Acts Partnership. An RWJF grant is in process to help transition to multiple funding streams to help support vigorous advocacy for social change.
"The actions of these groups, while helping in many ways to promote better end-of-life care, threaten to sabotage the very best of end-of-life care because `aid in dying' (killing the patient) is incompatible with dedication to provide the very best care till a natural death occurs in its own timing," writes Ron Panzer of Hospice Patients Alliance.
Physician Backlash
In the wake of an 80% reduction in copayments for dual- eligible patients, 58% of New York physicians have considered disenrolling from Medicaid, and 73% from Medicare, according to a survey conducted by the Medical Society of the State of New York (MSSNY's News of New York 11/03).
"As a result of this new state initiative to further enslave physicians, we may see patients crossing the border into Canada to obtain medical care," writes AAPS Director Lawrence Huntoon, M.D., Ph.D., of Lake View, NY.
RIP: Francis Coy, M.D.
Francis M. Coy, M.D., of Orange City, FL, an anesthes- iologist, died on Dec. 1, 2003. For service in World War II, Dr. Coy received the Bronze Star, the Combat Medical Badge, and the Asiatic Pacific Ribbon with three Battle Stars. His medical career spanned 45 years. Dr. Coy served AAPS as National Membership Chairman from 1972-1976 and as a Director from 1974- 1976. He is survived by his son James F. Coy, M.D., who was President of AAPS in 1988 and is currently an AAPS Director and Chairman of AAPS-PAC.
Medicaid Recipients Can Be Billed
The July 2003 Medicaid Update issued by the New York State Dept. of Health announces in a headline that "Medicaid recipients cannot be billed." However, the article reads:
A provider may charge a Medicaid recipient, including a Medicaid recipient enrolled in a managed care plan, ONLY when both parties have agreed PRIOR to the rendering of the service that the recipient is being seen as a private patient. This must be a mutual and voluntary agreement. It is suggested that the provider maintain the patient's signed consent to be treated as private pay in the patient record.
The physician must also notify Medicaid managed-care enrollees ahead of time that "the services may be obtained at no cost to the recipient from a provider that participates in the recipient's managed care plan."
Physicians may not charge privately for ER visits.
"This is the same type of bureaucratic spin that we saw following Judge Politan's ruling in Stewart v. Sullivan," writes Dr. Huntoon. "The Judge found no written rule to prohibit private contracting with Medicare patients, and HCFA continued to forbid it anyway."
Sign Contracts "Just in Case"
In an information sheet for his patients, Robert Shannon, M.D., of Country Doctor House Calls, Bear Lake, MI, advises his patients to sign a private contract with a physician who has opted out of Medicare before they need services.
"You can only sign a contract when you are not sick, or maybe a little bit sick but don't need to be seen right away."
Dr. Shannon offers patients the opportunity to sign contracts, which are valid for two years, at no cost. "Of course, you can still see your regular doctor who takes Medicare, and you are under no obligation to call us ever: but if you have not signed the government contract, and call us when you get sick, we won't be able to see you."
Dr. Shannon charges $35 for a 20-minute home visit, if the patient calls before noon, $45 if before 6 p.m., and $75 between 6 and 10 p.m. Off-hours visits (Sunday, Monday, and when closed for the day) are $95. Longer visits cost extra. A full one-hour visit is only $40 more than the basic charge.
AAPS Calendar
Jan. 16, 2004. Board of Directors meeting, Orlando,
FL.
Jan. 17, 2004. Thrive Not Just Survive IV:
Practice manage- ment seminar, Orlando Science Center.
Oct. 13-16, 2004. 61st annual meeting, Portland,
Oregon.
AAPS Objects to Language "Guidance"
Although the recently published revision of guidance concerning EO 13166, which requires physicians to provide translation services for patients with limited English proficiency (LEP), supposedly allows more flexibility, the rule is still unconstitutionally vague, stated AAPS in written comments.
The threat of litigation or prosecution adds risk to treating LEP patients. For example, a refugee assistance agency in Maryland distributes the following notice to clients:
"My name is ______. I have limited English
skills and require qualified language assistance in
_________.
Title VI of the Civil Rights Act of 1964 requires
that your office provide a qualified interpreter for me
to have equal access to your services. It is a
violation of the law for you to require me to bring my
own interpreter in order to receive services.
If you have any questions about how to comply with
these legal requirements, call the U.S. Department of
Justice Civil Rights Division at 1-888-848-5306
The Office of Management and Budget (OMB) estimates that physicians' offices would incur $156.9 million of the total $267.6 million cost of the LEP Rule.
The AMA calls for federal funding of interpreter services (AM News 10/13/03). (AAPS urges withdrawal of the Rule).
AAPS Supports Aimster Petition for Writ
Can an internet service be completely shut down unless the provider polices every transmission for potential copyright infringement? To impose secondary liability expansively would permit a single copyright holder to hold entire industries hostage, as the Supreme Court has found. What applies to music could also apply to statement and criticism of medical codes. Therefore, AAPS assisted in drafting a Petition for Writ of Certiorari in Deep v. RIAA et al., see aapsonline.org.
Pediatric Testing Requirement Passed
Led by Sen. Hillary Rodham Clinton (D-NY), Congress passed legislation that effectively overturns the victory of AAPS and the Competitive Enterprise Institute in AAPS et al. v U.S. FDA et al. (AAPS News Dec. 2002).
The effect will be to increase drug costs, make guinea pigs of children, and put everyone at risk as the introduction of new drugs is delayed, writes Henry I. Miller, M.D. (Health Care News, 1/03). "It is a disturbing example of Big Brother deciding where private R&D resources are best spent."
Ethical problems in pediatric drug testing have been extensively discussed by Vera Sharav of the Alliance for Human Research Protection ( bioethics.net/in_focus/sharav.pdf and www.ahrp.org/testimonypresentations/FDAmodernization03.html ). The bill contains no protections against exploiting children for profit, Sharav observes.
HIPAA Enforcement
"Given the slow rate of penetration, enforcement may be the only way to spur the industry into compliance," stated Rachel Foerster of Beach Park, IL. If CMS doesn't enforce compliance well, she said, "you might as well kiss [transactions] compliance [goodbye]. You might as well say it is dead."
Contingency plans could phase out in early 2004. But if there is no shift in industry readiness over the next four months, private plans will probably continue to accept old formats, Foerster believes (HIPAA Compliance Alert 11/24/03).
"Sooner or later we're going to have to face [enforcement], a CMS official told Eli Research, but "we're not going to set a date" (Eli Research Compliance Alert, 12/03).
As to the Privacy Rule, Janlori Goldman, director of the Health Privacy Project, complains that the Office of Civil Rights (OCR) has yet to impose even a $100 fine, despite receiving 2,000 complaints. Under HIPAA, the Secretary of HHS has the power to conduct compliance reviews of covered entities. Ms. Goldman believes that OCR is "abdicating its responsibility" by its failure to seek out violators, instead relying on consumers to make reports.
WSMA Protests Proposals to Seize Property
The Washington Dept. of Health has proposed changes to the Uniform Disciplinary Act that would permit it to enter a physician's office and seize property, such as computers, totally disrupting a practice. Also permitted would be self-executing orders that could impose a final action without a hearing.
The Washington State Medical Association (WSMA) strongly opposed these amendments at a November "work group" meeting: "The notion of health care professionals, or any class of citizens, giving up their due process rights because of a few undocumented instances is poor public policy and contrary to the very principles upon which this country was founded" (WSMA Membership Memo 12/5/03).
Four Stages of Marxist Systems
An economic system based on the Marxist Labor Theory of Value ignores market information and fixes prices in an attempt to achieve a predetermined result. Medicare and Medicaid are examples. All such systems have failed and will fail. There cannot be a rational allocation of resources when participants are rationally ignorant because they are not responsible for the consequences of their actions.
The stages of failure are: (1) a New Economic Policy; (2) shock workers; (3) show trials to root out "wreckers and saboteurs"; and (4) purges.
In Medicare, we have seen (1) DRGs and CPT codes; (2) fee cuts under the Resource-Based Relative Value Scale; (3) prosecutions for "fraud and abuse." What will happen when patients can't find a physician to care for them, or when the system runs out of funds to pay claims?
The "most important change which extensive government
control produces is a psychological change, an alteration in the
character of the people. This is necessarily a slow affair, a
process which extends...perhaps over one or two generations....
[E]ven a strong tradition of political liberty is no safeguard if
the danger is precisely that...policies will gradually undermine
and destroy that spirit."
Friedrich Hayek, The
Road to Serfdom
Correspondence
The "Right" Number. According to a New York State Health Department official, the government is poised to begin regulating specific surgeries, producing "report cards" for hospitals that include the number of procedures done. Carotid endarterectomies are the first target.
Academic physicians at large institutions will probably be fully cooperative with this government initiative. Hospitals that meet arbitrary frequency parameters will be declared "Centers of Excellence," and others will be labeled as providing substandard care. It is far easier to ration care and thereby control costs if supply is limited. It is far easier to regulate a small number of compliant sheep than a large number of independent entities.
Although volume and morbidity and mortality statistics are important in selecting surgeons and hospitals, patients and their referring physicians need to be in control of making the choices. Timeliness and access may be of equal or greater importance as for acute stroke when there is only a three-hour time window for administering t-PA. Steering patients to urban centers will also cause rural physicians to lose their skills.
We have learned from prosecutors that if a physician
performs "too many" of a particular procedure, he becomes a prime
target for investigation (the outlier outlaw concept). If he
performs too few, he may be labeled "substandard." Picking the
"right" number will be left to medically incompetent bureaucrats
whose choice will be guided by a global budget. As this equation
regresses, the "right" number may be zero.
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY
Limiting Supply. The AMA achieved its objective of a
"uniform elevated standard of requirements for the M.D. degree"
by getting control of licensing and accreditation of medical
schools. I have a letter from the Illinois Health Department
stating that the AMA accredits medical schools; I had written for
the requirements to start a for-profit school. Illinois has not
had a new medical school for more than 20 years. By the way, the
Carnegie Foundation along with the Council on Medical
Education a creature of the AMA backed Flexner's report [see
J Am Phys Surg 2003;8:37-40].
Charles Courtney, La Grange, IL
Who's Responsible? Who held a gun to the heads of
doctors, labs, and hospitals and forced them to join PPOs? For a
truly bad idea to be successful, it must have supporters. Is it
the "evil" insurance companies that should be tarred and
feathered? Or those who joined in, thinking it would be a gravy
train, with the insurance company sending them patients and
dollars?
Danny M. O'Grady, CLU, Midland, TX
Artificial Shortages. HMOs do not negotiate with doctors; they dictate. They present a take-it-or-leave it contract, and when they get "enough" doctors, they close the panel. If there are only enough surgeons to do 75% of the needed cholecystectomies, they save 25% on that operation.
HMOs, of course, do not do well when they actually have to give care. I saw a report about the Kaiser HMO on the left coast that stated that if Kaiser were to provide all the annual physicals it had promised to members, it would take 2.5 years, providing it did nothing else during that time.
Even Stalin learned from killing the Kulaks that artificial
shortages do not lower prices or increase availability.
Stephen Katz, M.D., Fairfield, CT
An Offensive Question. I asked the head of a New York
Times regional bureau whether people should receive medical care
that costs more than their lifetime earnings. She squirmed and
didn't or couldn't answer. She agreed that she didn't want to
equate money and medical care so directly. So I asked the second
question: "How many people can we treat without regard to their
lifetime earnings?" And who should decide?
Philip R. Alper, M.D., Burlingame, CA
Whom Do You Trust? Do you really want to trust [medical
decisions] to people who suspend kindergartners for using finger
guns or who herd hysterical sixth grade girls into a room, block
access to their parents, and force them to undergo pelvic
examinations by an imported doctor who was supposedly checking
for sexual abuse? Or the folks who threatened to take a child
away from his parents when they informed a counselor that they
were going to try a Ritalin holiday because of their child's
weight loss and mood changes?
Linda Gorman, Englewood, CO