Volume 50, No. 1 January 1994

KENTUCKY PROVIDER TAX UNCONSTITUTIONAL

The recently enacted Kentucky tax on physicians' gross revenues discriminates against physicians in an arbitrary manner and is therefore unconstitutional, ruled Judge Roger L. Crittenden on November 23, 1993, in a case brought by AAPS member Stuart Yeoman, MD (see AAPS News Sept, Nov, and Dec 1993). The case is styled Smith et al. v. Kentucky Revenue Cabinet et al.

``There is no reasonable basis to single out these health care providers to pay special taxes to support the Medicaid program. This program benefits the state's residents as a whole and there are no justifiable reasons for arbitrarily designating physicians to pay for it. Section 59 [of the Kentucky Constitution] was designed to restrict the legislature from favoring or disfavoring certain groups, however advantageous it may be to do so.''

The judge noted that Kentucky had rewritten a previous law that taxed only Medicaid providers, in order to avoid a loss of federal funding. The federal Medicaid Voluntary Contribution and Provider Specific Tax Amendments of 1991 (Pub. L. 102-234) restricted federal financial participation in states whose programs were partly funded by impermissible health care related taxes. Such taxes constitute the functional equivalent of a kickback in return for increased Medicaid reimbursement.

The federal government did not mandate a tax on all providers; it simply permits such taxes.

``Federal permission does not provide sufficient rationale to overcome Section 59 of the Kentucky Constitution,'' Judge Crittenden stated.

In addition, the judge invalidated the Health Care Data Commission because it was appended to a revenue bill and is unrelated to raising revenue. The Kentucky constitution requires that a bill relate to no more than one subject, thus preventing the legislature from sneaking hidden provisions into law without public debate.

``The Commission's authority to gather information applies to all health services performed in the state, not just Medicaid services. The Commission is authorized to collect data not only on cost but also on the `quality and outcomes of health services','' noted Judge Crittenden. ``The Commission's prescribed duties do not relate to raising revenue but to monitoring the medical treatment of every citizen in the state of Kentucky.''

Having invalidated the Data Commission on the grounds that it violates the constitutional prohibition of omnibus legislation, the judge did not comment on the issue of whether it also violated privacy rights or the Fourth Amendment to the US Constitution by permitting unbridled agency investigations of physicians' offices.

The judge enjoined the Data Commission from taking any action and the Revenue Cabinet from collecting any further taxes. Furthermore, the Revenue Cabinet was ordered to remit refunds on taxes already paid by plaintiff physicians and HMOs within 90 days.

The defendant, the Kentucky Revenue Cabinet, asked for a stay pending an appeal to the state supreme court. The stay was denied.

Plaintiff's attorney Kent Masterson Brown called the decision a ``total victory for the courageous physicians'' who took on the State.

In addition, Mr. Brown felt that ``the judge's reaction to the Health Care Data Commission is heartening for those who fear the increasing role of government with respect to patient privacy and unlimited government access to health care data under Clintonista health reform. The legislature created the Kentucky Health Care Data Commission to do just what the Clinton plan would require-and the dicta in this decision are a good indication of what government, legislatures, and regulators can expect from citizens and the courts if such commissions are established.''

Kentucky Physicians Respond to Tax

Even before the court decision, resistance was underway among Kentucky physicians.

One doctor crumpled his tax return into the size of a golf ball and mailed it to state tax collectors. Others wrote lengthy letters complaining of fascism and threatening to leave the state. Some refused to write numbers inside the boxes on the returns, making it impossible for the forms to be processed by optical scanning (Gil Lawson, Courier-Journal 11/10/93).

According to the Revenue Cabinet, 36% of the providers subject to the tax failed to pay it, or to inform the state that they were retired or inactive. And 44% of the returns were completed incorrectly (Courier-Journal 11/12/93).

Medical organizations said they were unaware of efforts to resist the tax. Their message to physicians was ``you must do what you have been legislated to do.'' Had the tax not been declared unconstitutional, delinquent physicians could have been subjected to penalties up to 40% of the tax owed plus interest. If they failed to pay up, their property would have been subject to seizure (ibid.).

The public and the media were not particularly sympathetic to the doctor's plight. However, they had little understanding of the implications of the Health Care Data Commission, according to plaintiff physician Stuart Yeoman.

If the Data Commission is introduced in a separate bill and subject to public debate and scrutiny, it should encounter much more resistance, Dr. Yeoman thought. Newsmen had no awareness of the implications of the Data Commission; they thought it was simply a mechanism for to collecting a tax.

Clintonista Sales Campaign in Full Swing;

AAPS Members Ask Questions

The American College of Physicians, the American Academy of Family Physicians, and the American Academy of Pediatrics are among two dozen organizations chipping in $5,000 each to the Health Care Reform Project to advocate ``health care reform.'' The Project has hired the DC-based public relations firm of Chlopak, Leonard, Schechter, and Associates, at $20,000 per month (Legal Times 10/11/93).

Other members of the Project include American Airlines; AARP; AFL-CIO; American Federation of State, County, and Municipal Employees; American Nurses Association; The Catholic Health Association of the United States; Children's Defense Fund; Chrysler Corporation; Citizen Action; Families USA; The League of Women Voters; National Association of Children's Hospitals and Related Institutions; National Association of Social Workers; National Council of Senior Citizens; National Education Association; National Health Policy Council; Older Women's League; Service Employees International Union; Southern California Edison; and United Mine Workers.

AAPS has the names and telephone numbers of the press contacts of these organizations if you would like to call them for further information.

The Democratic National Committee (DNC) is sponsoring a series of town meetings, featuring spokespersons for the Administration and Democratic congresspersons. Hillary Rodham Clinton herself is also making appearances, as is former Surgeon General C. Everett Koop, MD.

Dr. Koop denies that he has sold physicians out. He sits next to Hillary Rodham Clinton in order to serve as a moderator in the discussion between policymakers and the medical community, not as an endorser.

``Right now the various factions are yelling at each other like football players in the huddle during the fourth quarter of a losing game. Only the coach can call the play; only the White House can provide that kind of leadership,'' he writes (``Don't Just Say No,'' Hippocrates Nov/Dec 1993).

Koop believes that our health care system is a ``tyranny'' for some Americans, and that the President now ``desires a constructive dialogue'' with the physicians that he excluded from the Task Force (ibid.).

So far, the coach has excluded the opposition from equal opportunity to participate in the carefully orchestrated town halls. Selected panelists are allowed to give only brief presentations, often on short notice. Written questions from the audience are screened.

Hillary Rodham Clinton requested to attend a meeting with the Medical Association of Georgia. Some physicians with principled objections to the Plan were outside picketing. Among them were AAPS President, Charles McDowell, Jr., MD, AAPS Director W. Daniel Jordan, MD, and AAPS members Nancy Lord, MD, and Joel Smith, MD. Dr. Lord, Libertarian Party candidate for Vice President in the 1992 election, burned a replica of a Health Security Card.

The Arizona Medical Association was permitted to have two panelists at a Phoenix meeting where Ira Magaziner appeared. However, ArMA authorized Dr. Jeffrey Singer to say that they felt this did not represent a fair opportunity to present their views. Dr. Singer, Vice President of the new Arizona chapter of AAPS, organized a press conference outside the meeting hall, with Sydney Hoff-Hay of the Lincoln Caucus and other concerned citizens. Citizens carried a poster portraying the organizational structure of the Clinton Plan, as drawn by Representative Dick Armey (R-TX). Dr. Singer presented the case for free-market alternatives to the Clinton Plan. Paid agitators tried to shout him down.

When Dr. Singer remarked to one heckler that his sign was not visible on the radio, the man replied that his job was to make Dr. Singer nervous.

AAPS Director Jane Orient, MD, was invited to give a three- minute presentation on a panel in Tucson. (A congressman needed a physician in private practice to complete the ``provider'' panel.)

Dr. Orient pointed out that ``universal'' does not mean 100%. Federal government employees have demanded an exemption. `` `Universal' means `all the rest of us.' It also means mandatory or compulsory,'' she said.

``In the Health Security Act, the word `mandatory' occurs 24 times, `prohibit' 51 times, `penalty' 59 times, `obligation' 62 times, `enforce' 90 times, and `limit' 239 times.''

Mr. Richard Veloz, assistant to Ira Magaziner, ignored her question about why the Task Force has been so reluctant to divulge information about its operations. Instead, he stated that her reference to the ``new criminal penalties'' (a phrase also included in the materials accompanying her invitation to speak) was an example of the fear and insecurity that people always have when confronted with ``change.''

He denied that the criminal penalties are really new, and stated that no one would be treated like a criminal unless he or she really is a criminal. (See AAPS Legal Supplement #5.)

The press reported that ``Orient's accusations were an abrupt break with an otherwise congenial tone of the event'' (Tucson Citizen 12/4/93).

At the December AMA meeting in New Orleans, members were urged not to ``start drawing lines in the sand,'' but to curb attacks and take a cooperative attitude.

Citizens who favor a free-market approach are organizing their own town halls, often with the cooperation of congressional representatives. For information about meetings in your area, call Citizens Against Rationing Health, (202)546-6555 or the American Legislative Exchange Council (ALEC) at (202)547-4646.

AMA Supports Using RICO Against Protesters

The anti-racketeering law (RICO), enacted in the 1970s to combat organized crime, has increasingly been used in business disputes. In a series of cases, the Supreme Court has refused to narrow its scope. The law can be used to seize property (such as the home and life savings) of individuals who are never even charged with a crime (see the Freeman, July 1993 and AAPS News June 1992 and Jan 1993). It is now being aimed at right-to-life groups who block access to abortion clinics. The 7th Circuit Court in Chicago ruled that RICO didn't apply to anti-abortion groups because they did not have the economic motive required by the law. Abortion-rights advocates say the law requires no such motive.

The AMA along with the American College of Obstetricians and Gynecologists filed a brief amicus curiae in favor of plaintiffs in the case of National Organization for Women v. Scheidler (see p. 3).

Physicians will be the next target of asset seizures as the scope of RICO is broadened still further under the Clinton Plan (see next month's Legal Supplement).

Pennsylvania Medicare Recoupment May Foreshadow Future Recoupments by Other Medicare Carriers: Physicians Must Know Their Legal Rights

Pennsylvania Blue Shield, the Medicare carrier that administers Part B in Pennsylvania, New Jersey, Delaware, and the District of Columbia, is attempting to recoup about $12.6 million in alleged Medicare overpayments from 3,000 physicians and clinical laboratories. According to the Bureau of National Affairs (4 Medicare Report 1431, BNA, 11/19/93), Blue Shield conducted an internal audit of its records, uncovering a ``clerical error'' that resulted in ``paying more for certain panels of laboratory tests than it would have paid if the component tests were billed separately.''

According to David Sayen, a spokesman in the Region III Office of the Health Care Financing Administration (HCFA) in Philadelphia, new Medicare fee schedules adopted in 1993 eliminated the potential for such error, but during the preceding three years, the fact that fees were capped for individual tests but not for panels of tests created the opportunity for such a carrier mistake.

After discovering the alleged error on its part, Pennsylvania Blue Shield sent letters to physicians and laboratories, giving them 15 days to object to having future Medicare payments offset by the carrier to make up for the alleged overpayments. Blue Shield also notified physicians and laboratories that they would have a ``grace period'' of 30 days before recoupment would be initiated, after which interest would begin to accrue on the alleged overpayment at the rate of 13.6%.

According to BNA, Pennsylvania physicians and laboratories strongly objected to the recoupment on the grounds that they were not at fault for the carrier's alleged error and were being penalized unfairly.

Due to these objections, Pennsylvania Blue Shield put its recoupment plans on hold, ``pending the outcome of discussions with HCFA.'' According to the spokesman for the carrier, the decision as to whether to proceed with the recoupment rests entirely with HCFA.

Most importantly, BNA reported that HCFA's decision with respect to the Pennsylvania recoupment will apply nationwide to other HCFA regions where any similar situation may arise. Region III was simply the first region to be audited; other HCFA regions will also be audited to determine if their carriers made similar errors.

Physicians should be aware of their legal rights if notified of a recoupment action. First, don't agree to anything with the carrier either orally or in writing. At worst, such an agreement can result in a total waiver of physicians' rights to keep the alleged overpayments. At best, it can amount to an admission of liability for an alleged overpayment, which can be used against the physician in administrative and judicial proceedings to contest the contemplated recoupment.

Second, the physician should immediately retain competent counsel as soon as he receives notice of the recoupment. Counsel should notify the carrier in a formal legal document that the physician objects to the recoupment, that the physician is totally without fault, that the recoupment is contrary to equity and good conscience and constitutes the equivalent of retroactive rulemaking, violating the physician's rights under the Medicare Act, 1395 et seq., and the US Constitution. The document should demand a formal administrative hearing to contest the recoupment before an offset begins or alternately, without waiving the right to a pre-recoupment hearing, a hearing as soon as possible.

Under 42 U.S.C. §§1395gg, HCFA may not recoup an alleged overpayment if the physician is without fault and the recoupment would be against equity and good conscience. Additionally, the physician has the right to a hearing and appeal rights.

The Legal Service will serve a Freedom of Information Act request seeking all relevant documents. These will be made available to any AAPS member subjected to HCFA harassment.

AAPS-PAC Awakens

Your PAC has been virtually dormant for two elections because of a paucity of talent that fits our criteria for support. But with Bill and Hillary forcing ``health care'' as the issue to advance their totalitarian drive, plenty of natural opposition has arisen, and AAPS-PAC has something to offer.

I have already had many calls from AAPS members requesting consideration for specific candidates. The US Congress has been our focus in the past, but certain State races may receive consideration if the committee feels AAPS-PAC has a chance to further a free-market agenda. One such consideration is Henry Jordan, who has a good chance to become South Carolina's Lieutenant Governor.

A rising star in Arizona may be J.D. Haworth, whose heart knows freedom and whose ear recognizes AAPS.

PAC contributions may be sent to AAPS-PAC, 1601 N. Tucson Blvd. Suite 9, Tucson, AZ 85716. No corporate contributions can be accepted, and contributions are not tax-deductible.

James Coy, MD, AAPS-PAC Chairman

AMA Attorneys Speak on RICO

On Congressional intent: ``[A]t least one member of Congress opposed to the legislation appears to have specifically envisioned the possibility that it would be applied to politically motivated groups....''

``The fact that RICO has been applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth.''

``The statutory definition of a RICO enterprise encompasses `any' organization, individual, or group of individuals associated in fact....'' [Is this not guilt by association?-- Ed.] `` `[A]ny legal entity' quite clearly encompasses such organizations as non-profit corporations.''

``RICO defines racketeering as any act or threat that is unlawful under certain state or federal criminal laws....The court of appeals' adoption of the economic motivation requirement is precisely the sort of creative RICO-limiting interpretation not intended by Congress....''

On protesters' motives: ``Appellant's professed unselfish motivation, rather than a justification, actually identifies a form of arrogance which organized society cannot tolerate.''

AMA and ACOG amicus brief, US Supreme Court

New Members

AAPS welcomes Drs. Luis M. Albuerne of Houston, TX; Fred Aldrick of West Des Moines, IA; Brad Alexander of Highland Park, IL; Edward F. Arnett of Martinsburg, WV; Gordon P. Baker of Seattle, WA; William L. Benson of Tacoma, WA; Gerald Bernstein of Seattle, WA; Bernard Bettasso of Joplin, MO; Paul T. Bettinger of Ogden, UT; Jesse Blackman of Fremont, NC; F.M. Bonner, III of Houston, TX; Carl F. Brunjes of Spokane, WA; Jon L. Cheek of Shreveport, LA; Joel E. Colley of Scottsdale, AZ; Patrick W. Connelly of Osh Kosh, WI; Manuel Coto of Orlando, FL; Ron Cypher of Butler, PA; Daniel A. D'Auria of Medford, NJ; Lawrence De Angelis of Springfield, NJ; Thomas J. Degan of Edmonds, WA; Oliver Drabkin of Evergreen Park, IL; Dan Dugaw of Olympia, WA; Gordon W. Eller of Cape Girardeau, MO; George C. Ellis of New York, NY; Robin Y. Feigelis of Park Ridge, NJ; Catherine Fisher of Sun City, AZ; Richard Fisher of Sun City, AZ; Miguel Franco of Houston, TX; William Frankl of Wynnewood, PA; Jay S. Friedman of Scottsdale, AZ; James D. Fuchs of Lake Jackson, TX; Rocco A. Fulciniti of White Oak, PA; Ronald L. Furedy of Seattle , WA; Dennis K. Gabos of Pittsburgh, PA; Frank Gazzo of Cheektowaga, NY; Alex S.Y. Go of Anaheim, CA; Charles J. Godreau of Dedham, MA; Eugenia C. Goodman of San Antonio, TX; Michael Gordon of Fort Lauderdale, FL; Frank H. Gregg of Austin, TX; Lawrence J. Guzzardi of York, PA; McClure H. Hall of Seattle, WA; Richard S. Herdener of Spokane, WA; James K. Hill of Zionsville, IN; Scott Hillmann of Phoenix, AZ; William Holmes of Lewistown, MT; Harald Huff of West Point, NE; Allan E. Inglis of New York, NY; Lanny L. Johnson of East Lansing, MI; Margaret A. Kaiser of Oakland, MD; Bobby Joe Kennedy of Austin, TX; Kevin S. Kennedy of Tacoma, WA; Robert F. Kerr of Bellevue, WA; Paul Khoary of White Plains, NY; V. Kiledjian of Memphis, TN; William R. Kilpatrick of Scottsdale, AZ; Daniel Kim of Decatur, GA; Jacob J. Kornberg of Puyallup, WA; Steven Kunkes of Fairfield, CT; Thomas S. Lanava of Charleston, WV; Wallace R. Leachman of Spokane, WA; Diane Lefebvre of Atlanta, GA; Philip L. Leggett of Houston, TX; Mike Leppert of Germantown, TN; Lawrence Liebmann of Phoenix, AZ; Richard Limoges of Philadelphia, PA; Franklin R. Long of Sacramento, CA; Douglas J. Loughead of El Paso, TX; R. James MacNaughton of Greenville, SC; J. Laurence Manwaring of Warrenton, VA; Stephen J. Marks of New York, NY; Leila Martin of Atlanta, GA; William Martin of Waxhaw, NC; Michael Mateo of Huntingdon Valley, PA; Kraig C. McGee of Pocatello, ID; E. S. McKenzie, Jr. of Chapel Hill, NC; George McSwain of Bradenton, FL; Michael Mikkelson of Puyallup, WA; Glen Morgan of Ocala, FL; Jon R. Morgan of Columbia, SC; John Neblett, Jr. of Jackson, TN; Gary Nichel of Tacoma, WA; Douglas W. Nicolarsen of Boise, ID; Sean C. O'Donovan of Richmond, VA; Glen N. Peterson of Oakland, CA; Ed Preston of Durham, NC; Philip G. Prioleau of New York, NY; Dennis Raphael of Colorado Springs, CO; Doris J. Rapp of Kenmore, NY; Floyd Reifein of Atlanta, GA; Jay Reynolds of Mead, WA; William J. Rice of Phoenix, AZ; John P. Ries of Coos Bay, OR; Roger Robinett of Puyallup, WA; Bruce D. Romig of Puyallup, WA; Stephen L. Rose of Houston, TX; Anne Rottman of Gainesville, FL; Thomas M. Ryan of Spokane, WA; Steve Salisbury of Logan, UT; Horace Kimbrell Sawyer, Jr. of Tucker, GA; Kenneth I. Schlesinger of Charleston, SC; John M. Sherman of El Paso, TX; Ronald L. Silver of Chicago, IL; Richard Snodgrass of Moline, IL; Rita M. Snow of Spokane, WA; Kurt Sprunger of Muncie, IN; Gerald Stagg of Mt. Pleasant, TX; Martin F. Sturman of Melrose Park, PA; Phillip G. Sutton of Houston, TX; Debra D. Tabor of Galveston, TX; Joseph J. Timmes of Annandale, VA; Mark Tomski of Puyallup, WA; Thomas G. Troop of Lewiston, MT; William F. Ural of Middlebury, VT; Michael S. Vaughn of Birmingham, AL; Peyton Weary of Charlottesville, VA; Steven Weinberg of Denton, TX; Hugh M. Wilson of Charleston, SC; Robert A. Wohlman of Bellevue, WA; C.F. Wurster of Boise, ID; and the Northwest Cancer Center of Seattle, WA.

New student members are Shonda Asaad of WV and Eric Dorn of WI.

Other People's Money . . . Other People's Lives

Physicians for Patient Power, headed by AAPS member Steven Reeder, MD, of Dallas, has produced an outstanding 13-minute videotape along with information kits and brochures, explaining why we spend $400 billion more on medical care than we did 5 years ago, and how to solve the problem by putting patients back in charge. Write to them at 7777 Forest Lane Suite C-621, Dallas, TX 75230 or call (214)661-7373.

AAPS Calendar

Feb. 18, Regional meeting, Hyatt Regency, Bellevue, WA.

Tentative program: Dr. Lois Copeland; Michael Walker of the Fraser Institute, Vancouver, BC; Peter Ferrara, Heritage Foundation; Kent Masterson Brown; Rep. Phil Dyer of Washington State; Drs. Estelle Yamaki and Neal Shonnard on state physicians' response to Washington health-care reform; Citizens Against Rationing Health. Call Tim Schellberg at (206)459-8622 for information or registration.

Feb. 19, AAPS Board of Directors meeting, Bellevue.

Oct. 12-15, 51st annual meeting, Atlanta, GA.

Legislative Alert

Congressional Conservatives Go on the Offensive.

Just before the Thanksgiving Congressional recess, Senators Don Nickles of Oklahoma, Orrin Hatch of Utah, and Connie Mack of Florida introduced comprehensive health-care reform legislation, ``The Consumer Choice Health Security Act of 1993'' (S. 1743). The bill has been referred to the Senate Finance Committee.

The companion to the Nickles bill in the House of Representatives is HR 3698, introduced by Congressman Cliff Stearns (R-FL), whose cosponsors include most of the House Republican leadership, including House Minority Whip Newt Gingrich of Georgia, Dick Armey of Texas, Henry Hyde of Illinois, Tom Delay of Texas, and Dennis Hastert of Illinois.

With a total 25 cosponsors, including Senate Minority Leader Robert Dole, the Nickles bill has emerged as the leading Senate alternative to the Clinton Plan. The immediate political effect of the Nickles-Stearns initiative has been to eclipse the ``managed competition'' package among Senate Republicans, taking the wind out of the sails of Senator John Chafee (R-RI), who had been looking for a way to reach some kind of accommodation with the Clinton Administration and who had been encouraged all year by the backing of the powerful Dole. While Dole is still a cosponsor of Chafee's ``managed competition'' bill, the ``Health Equity and Access Reform Today Act of 1993'' (S. 1770), Dole's timely support for the Senate conservatives has shifted the political gravity among Senate Republicans.

At the same time, all of the big conservative dogs haven't barked: Senator Phil Gramm (R-TX) is also reportedly drafting a health-care reform bill. Gramm, with characteristic rhetorical color, says that if the Clinton bill, with its restrictions on choice and higher prices for taxpayers, becomes fully known, voters will be hunting liberal Congressmen with dogs next year.

Clinton's huge 1342-page bill, ``The Health Security Act'' (S. 1757), replete with even more ``technical corrections'' to the October 27th draft, is also now on the table. Introduced without fanfare by Senate Majority Leader George Mitchell (D-ME) and 29 members of the Senate, including Jim Jeffords (R-VT), it is the only Senate bill with more cosponsors than Nickles's ``consumer choice'' proposal.

Elements of the Consumer Choice Bill

The Nickles-Stearns bill is a major overhaul of the tax and insurance system and constitutes the most comprehensive alternative to the Clinton Plan to date. Its key elements include the following:

• Medical Savings Accounts. Each family would be entitled to one Medical Savings Account and would be able to deposit $3000 per year plus $500 for each dependent into the tax- free account. Funds could be rolled over year after year. The funds in the MSA could be used by families or individuals to pay medical bills directly or health insurance premiums. For depositing funds in a Medical Savings Account, a family would be entitled to a 25% tax credit for the deposits.

• Tax Credits For Health Care. Individual tax credits would replace the current tax exclusion for employer-based insurance. The bill provides tax relief to all individuals for their medical expenses. The tax credits would be effective on January 1, 1997. The credits would be structured according to income. In other words, families with greater medical costs compared to family income would get larger credits. Families with costs below 10% of gross income would be eligible for a credit reimbursing 25% of those costs; if costs were between 10 and 20% of gross income, the credit would reimburse 50% of the costs; if the medical costs were 20% or more of gross income, the credit would offset 75% of the costs. The tax credits would be refundable, meaning that if the value of the credit is more than the tax liability or a family's tax liability, the government would pay the difference. In this respect, for lower income families, the Nickles-Stearns tax credit system is much like the earned income tax credit or a voucher for lower income individuals and families.

• Insurance Reforms. The bill calls for guaranteed issue of insurance policies. Insurers, moreover, could not cancel or refuse to renew coverage of a health insurance policy, except for nonpayment of premiums and for misrepresentation or fraud. Health insurers would be allowed to vary premiums on the basis of age, sex, geography, and health risk, but insurers could not exclude coverage of any pre-existing medical condition. The bill makes provision for insurers to give incentive discounts to individuals and families to promote healthy lifestyles and to provide screening for the early detection of disease. Laws at the state level mandating benefits would be preempted by the federal legislation. At the same time, families would be required to purchase a minimum, catastrophic benefits package. According to Senator Nickles, ``Society should not have to pay the price for irresponsible individuals who refuse to purchase insurance and then expect us to pick up the tab when they become seriously ill or injured.''

• Employer Provisions. While individuals and families would still be able to purchase health insurance through their employer, this would not be their only option. Under the tax and insurance reforms, individuals could purchase insurance from other groups, including unions, farm bureaus, professional organizations, business associations and trade groups, or even religious organizations. Employers would have the legal responsibility to disclose the monetary value of the employment-based health insurance package, and if employees opt to purchase elsewhere remit that value in the form of cash wages. Employers would also be responsible for adjusting workers tax withholding to reflect the new credits and deducting premiums from employees' paychecks to send them to the plan of the employee's choice.

• Medical Malpractice Reform. The bill puts a limit of $250,000 on non-economic damages, limits lawyers' fees, provides for periodic payment of any award that exceeds $100,000, and limits the liability of a physician for damages to the percentage of fault, as determined by ``the trier of fact.'' The bill also provides for rules to settle malpractice cases through arbitration.

• Anti-Trust Reform. The Attorney General, in consultation with the Secretary of Health and Human Services, is required to promulgate guidelines under which a health care joint venture may be exempted from anti-trust laws.

The Nickles-Stearns bill is financed in a budget-neutral fashion by changing the tax code, replacing the multi-billion dollar tax breaks for employer-based insurance with a national tax credits, plus limiting the growth in Medicare and Medicaid.

A Cooper-Chafee Deal?

Senator John Chafee (R-RI) and Congressman Jim Cooper (D-TN) have been meeting on a weekly basis to try and reach a common ground. There are two key areas of disagreement between Cooper and Chafee. The first is the question of whether health care alliances should be able to compete in the same area. Chafee thinks yes; Cooper thinks no. A second point is whether Chafee's individual mandate to purchase health insurance kicks in too late (2005) and is properly drafted.

While Cooper and Chafee are talking with each other, the White House is likely to open up a dialogue with both of them. But while the White House is signalling an interest in talking with both Cooper and Chafee, Cooper's objections to the Clinton Plan are significant and not easily negotiated away. Cooper is strongly opposed to the employer mandate, the global budget, the way in which the Clinton Plan finances health care reform, the heavy regulation in the health alliances, the politicization of the standard health benefit package, and the ease with which the Clinton Plan enables states to adopt a single payer-system. Moreover, Cooper thinks that the cost of the prescription drug benefit is not entirely clear, recalling previous experience with such a benefit.

Cooper also realizes that the White House caved in to Senator Wellstone and the Congressional single-payer advocates in the House by easing the administrative obstacles to states' adoption of a direct government-run system in order to broaden support for the Clinton Plan among liberals. That gamble by the Administration has apparently paid off-at least in the short run, because many of the Congressional supporters of the Clinton plan in the House are also sponsors of the McDermott bill. However, this deal with the Left makes it nigh impossible for the Administration it to get back the ``center'' for any genuine negotiations with either Cooper and Chafee and the ``managed competition school'' or Senate conservatives led by Nickles.

Meanwhile, even as Ira Magaziner and friends talk about opening up talks with the Congressional ``moderates,'' liberal interest groups such as Families USA are taking a tough line on dissenting Democrats in Congress, attacking Cooper and his bill as insufficiently reformist, far too short of what they really want: full-scale nationalized health insurance. And it is dawning on more and more folks on Capitol Hill: the Clinton Plan, with its global budgets and regulatory alliances, provides the infrastructure of a nationalized health insurance system.

White House Reactions.

Ever since Hillary's emotional outburst at the insurance industry last month, all of the Sixties Kids at the White House team are taking a deep breath, trying to cool off and get in touch with their feelings again before they reach out and get in touch with the feelings of the rest of us.

The first effort has been to try and win the support of ``health care providers''-translated into non-wonk English, doctors. In the meantime, the White House team has shown industrial-strength chutzpa, marred only occasionally by signs of testiness over some pretty straightforward criticism of their complicated reform proposal. In a recent appearance before the Chamber of Commerce, Ira Magaziner insisted-after repeating the Administration's familiar mantra, the Six Principles, including ``simplicity''-that, instead of debating health care reform on broad philosophical terms, the national debate would be best served by all participants focusing on the details.

Naturally, with the huge Clinton plan there are a lot of details to focus on-thousands of them to keep us all busy and distracted while the broader philosophical issues are ignored. In the same breath, Magaziner told his audience that the Clinton plan with its vast array of new bureaucracies, boards, panels, and regulations actually simplifies the current health-care system!

Some things are negotiable and some things are not. Magaziner told his Chamber of Commerce audience that the Administration's differences with Senator Chafee and Congressman Cooper are negotiable. But differences with Nickles and the White House are not within the realm of civilized discussion because the Nickles bill does not provide universal coverage. Magaziner, in a creative attempt to reframe the terms of the emerging political debate, then characterized the political situation as a debate among advocates of a Canadian-style system, represented by Wellstone and McDermott, and ``managed competition,'' represented by the Cooper-Chafee gang. The appropriate resolution: the ``centrist'' Clinton Plan.

Not to be outdone by the relatively unimaginative Magaziner, last month, writing in the Wall Street Journal, Alice Rivlin of OMB went so far as to describe the Clinton Plan as ``conservative.'' George Orwell, call your office!

Senate Turf Battles

Senator Daniel Patrick Moynihan (D-NY), Chairman of the Senate Finance Committee, is reportedly livid. Moynihan got the worst of all possible deals in the assignment of the Clinton Health reform plan: drafting legislation to pay for all the goodies to be delivered by Senator Edward Kennedy (D-MA), Chairman of the Senate Committee on Labor and Human Resources. Moynihan and Kennedy disagree, for example, over whether or not the employer premium payments are or are not a tax, at least for purposes of committee jurisdiction.

The jurisdictional disputes between Senate committees go far beyond personal pique or Capitol Hill power struggles. At stake is the character and quality of the legislation itself. Moynihan has hardly been enthusiastic over the expansion of the public sector into the health field, remarking to the media earlier this year that a payroll tax of about zero percent would be ``just about right'' to finance health-care reform. Needless to say, liberals on Capitol Hill are ecstatic over the assignment of most of the Clinton bill to the Kennedy Committee.

In any case, the upcoming debate over health care reform could very well be complicated by a thunderous clash of the Senate's Irish Titans, and a lot of lesser mortals with their own agendas could be crushed in the collision. This even includes little people at the White House.