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Volume 52, No. 1 January 1996
CLINTON CARE THROUGH THE KITCHEN DOOR
``This plan will be declared dead many
times,'' said Ira
Congress killed the Health Security Act. But the dough in
Hillary's kitchen is rising again and coming out the sleeve. The
yeast (a dedicated cadre), with a little bit of sugar (grants
from tax-exempt organizations such as the Robert Wood Johnson
Foundation), is doing its work under cover.
The fifty States have been called the ``laboratories of
democracy.'' Some of these kitchens are cooking up schemes from
recipes developed by the Clinton Health Care Task Force.
Ingredients include Medicaid waivers, school-based clinics,
``outcome-based education,'' ``outcome-based practice
guidelines,'' and computerized information systems.
Attempts to enact much of the Clinton Care program at the
state level succeeded in Washington, Kentucky, and Minnesota. (In
Washington, most of the law was later repealed, largely through
the efforts of the state chapter of AAPS.) Kentucky and Minnesota
showed a similar pattern (see AAPS News, Jan 1995) of RWJF
grants, contingent upon passage of correct legislation.
Minnesota implemented Option 3, outlined in Health Care Task
Force Documents (e.g. ``TOLLSTAG'' on Disk 017), or ``Kids First
Coverage.'' The Task Force envisioned that the national version
would be first implemented on January 1, 1995, with ``phase-in by
population, starting with children,'' and universal coverage
achieved by January 1, 2000.
The Minnesota version derived from a 1987 Children's Defense
Fund program for poor children, costing $1.3 million per year,
and expanded into a $1 billion/yr, mandatory managed-care program
for all Minnesotans. (A detailed analysis of the Minnesota Health
Reform Act and the role of the RWJF-available soon on the web
site-was prepared for the Medical Liberties Defense Fund by Kent
As Task Force documents showed, ``Kids First is really a
precursor to the new system.'' It could be implemented through
Medicaid or another plan. The Task Force advocated school-based
health services, built upon ``the highly successful models
sponsored by the Robert Wood Johnson Foundation.'' The school-
based clinics are a ``point of access to comprehensive systems.''
About 60% of children who receive services from a school-based
clinic located near a health center eventually become health-
The latest pilot program is now underway in Pennsylvania-
without so much as a by-your-leave from the legislature. Involved
officials have been less than cooperative when legislators try
to find out what is going on.
``The more questions we ask, the harder it is to get
information,'' stated Rep. Sam Rohrer.
HillaryCare is coming in as an educational program. The
Department of Education is receiving ``free money'' by billing
Medicaid directly for ``mental health'' services provided in a
school setting. Eligibility for Medicaid has been extended to
any child who is ``learning disabled,'' including anyone who does
not meet the goals of ``Outcome-Based Education.''
The program bypassed the normal regulatory review process
and was put in place on the basis of a memorandum of
understanding with the governor. RWJF was a key player.
Parental consent is not required to perform surveys;
although these ask intrusive psychological questions, they are
classified as ``education.'' A cabal of lawyers devised a
``consent'' process for the school-based clinic. If a permission
slip is sent home and placed in the student's file, and a refusal
is not returned within 7 days, treatment is ``authorized.''
This really constitutes notification rather than consent,
Mr. Rohrer stated, but there is not even a requirement to show
that the form actually arrived at the student's home. Parents
might never find out that their child was undergoing
psychotherapy, as Medicaid does not sent them an Explanation of
Treatment may be prescribed, according to Mr. Rohrer, not
only for students who are ``at risk'' for substance abuse,
suicide, antisocial behavior, etc., but also for those who are
``at risk of being at risk.''
Pennsylvania provides 45% matching funds for Medicaid. Mr.
Rohrer noted that one line item on the budget mysteriously
increased from $10 million in 1994 to $65 million.
Mr. Rohrer is holding hearings and has introduced House Bill
2105, the Pennsylvania Education Restoration Act, which would
prohibit treatment without informed written consent and would
protect the confidentiality of student records.
H.B. 2105-and publicity-are major threats to the success of
what has been called a ``cookie-cutter children recipe.''
Another potent threat is posed by independent physicians.
There is a concurrent drive (television ads, etc.) to expand the
power of managed-care networks, which, just coincidentally, might
be the providers for school-based clinics.
That's probably why there is such a furor in Bucks County,
near Philadelphia, over a proposal by a union negotiator for
teachers at a small technical high school. Ed Moffit suggested
that the school board could save money for taxpayers while
offering a better medical plan for teachers: medical savings
accounts. Instead of applauding the idea, the administrators were
furious. They refused to release the health census information
needed to seek quotes from insurers.
``Comprehensiveness'' is not just a buzz-word for social
engineering schemes. It is essential for assuring ``cooperation''
with the goals of the program, and MSAs would defeat it.
Secrecy and belief in inevitability are other essentials.
Blackbirds who don't want to be baked into the pie had better
sing now about the message of freedom and independence.
AAPS Information, Please...
World-Wide Web page address:
CompuServe: AAPS files are in the Politics forum,
Health Care Section, or the Issues forum, Rush Limbaugh section.
FAX: Current documents are available from our FAX-on-
demand service, (703)716-3404. Many older documents can be
obtained for a charge from the Heartland Institute's PolicyFax
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has changed! Our FAX is (520)326-3529.
Medi-Cal HMOs Won't Let Go
Several public-interest law firms have filed suit against
the California Department of Health Services (DHS), seeking
enforcement of the patient's right to leave the program on
request (Rodriguez v. Belshe, Calif SuperCt(Los
Angeles), No. BS 035856, filed 9/27/95). Hurdles to
disenrollment in managed care allegedly include refusal to
respond to requests for disenrollment forms; placing Medi-Cal
recipients on endless ``hold'' when they telephone for
disenrollment forms; ``losing'' forms instead of sending them to
DHS; failing to have bilingual staff or answering machine
messages; and requiring recipients to make an appointment for
formal plan grievance procedures prior to disenrollment
(BNA's Medicare Report 10/6/95).
Doctor Shortage in Kentucky?
Thanks to ``health care reform,'' Kentucky hospitals are
having trouble filling vacancies. And while established
physicians are hesitant to leave because of the large investment
they have in their practices, new doctors are not eager to stay.
Surveys done by the University of Kentucky and by The Family
Foundation in Lexington showed that only 19 to 20% of new
graduates intended to stay, compared with 43% in prior years.
One reason: the 2% tax on gross income, which may amount to 6%
on the personal income of physicians with high office overhead.
On the average, taxicab drivers are paid more for bringing a
patient to the office than physicians are paid for medical
treatment, including lab tests (Liberty Standard 10/95).
Guidelines Used Successfully by 13%
Only 20% of medical organizations surveyed by HHS reported
using clinical practice guidelines produced by the federal
government, and 63% of the users had difficulty with them. Only
8% of the users made an attempt to measure their impact. The most
common difficulty was uncertainty about how to use the guideline;
second most common was resistance by clinicians.
In 1994, the Agency for Health Care Policy and Research
(AHCPR) spent $5 million of its $154 million appropriation on
guideline development and $10 on distribution and evaluation.
Though no benchmark for successful use of guidelines has
been established, AHCPR considers the 32% of respondents who
reported they had used or planned to use a guideline to be
``extremely encouraging'' (BNA's HCPR 10/30/95).
CLIA Reduces Lab Testing
About two thirds of physician office laboratories (POLs)
have reduced or eliminated on-site lab testing due to additional
procedures and costs associated with the Clinical Laboratory
Improvement Act of 1988, according to a survey conducted by
Mathematica Policy Research, Inc. The survey contradicts studies
done by the federal government that showed no decrease in tests
done by POLs.
``The law has set back testing about 20 or 30 years by
preventing POLs from taking advantage of the latest technology,''
stated M. Edward Keenan, vice president of the Amer. Academy of
Pediatrics (BNA's Medicare Report 10/13/95). Some large
companies have abruptly changed course and found new markets for
their diagnostic kits in European and Third World countries,
according to a Heritage Foundation study.
Although CLIA has added an estimated $1.3 to $2.1 billion to
the nation's medical bill, an exemption for POLs was dropped from
Budget Reconciliation under the Byrd rule because CBO calculated
that no deficit reduction would result.
Under the GOP budget plan, Medicare per capita spending
would rise from $4,800 in 1995 to $6,700 in 2002, a 40% increase
over 7 years. Critics argue that it's unfair to ``cut''
Medicare. By similar math, we could celebrate a middle-class tax
``drop'' from $4,966 to $6,994 (Budget Watch 11/1/95).
Government Breaks Law to Avoid Default
When the government shut down nonessential services on
November 15, sending around 800,000 employees home, it made
interest payments to creditors on time. To do this, Treasury
Secretary Rubin illegally used assets that do not belong to the
Treasury Department: he raided the pension funds of federal
employees. This shows what backs the ``full faith and credit'' of
the US government.
According to Martin Weiss, this is the first time in history
that high government officials actually considered default as a
viable alternative. And though Wall Street seems relieved about
the agreement to balance the budget in 7 years, the agreement is
based on the assumption that nothing will go wrong during that
time. Weiss points out that the US has its most highly leveraged
economy in history. Total interest-bearing debts in the US are
up to $17 trillion; in addition, there are at least $20 trillion
in obligations that do not bear interest (such as guarantees on
bank deposits). While focused on the deficit, no one is speaking
of lowering the national debt (Safe Money Report
11/17/95), which has passed $4.752 trillion.
The Law of the Land
Article XIV, Section 4 (ratified July 9, 1868):
``The validity of the public debt of the United States,
authorized by law, including debts incurred for payment of
pensions and bounties for services in suppressing insurrections
or rebellion, shall not be questioned. But neither the United
States nor any State shall assume or pay any debt or obligation
incurred in aid of insurrection or rebellion against the United
States, or any claim for the loss of emancipation of any slave;
but all such debts, obligations, and claims shall be held illegal
Confidentiality Data: Essential to ``Reform''
Key participants in the Clinton Task Force on Health Care
Reform included corporations (e.g. CIS, EDS, and WEDI) offering
information systems, which hoped to set the standards and win the
contracts for the extensive data collection required by the
Health Security Act. The objectives were much broader than
speeding up claims submission and payment.
The Minnesota model establishes extensive data collection
initiatives, ``including the creation of outcome-based practice
parameters to provide an absolute defense against malpractice
allegations, and consolidation of existing data,'' according to
the Medical Liberties Defense Fund report.
Under the HealthRight program, the Health Care Analysis Unit
was authorized to require providers and carriers to provide
patient health records, with unique patient identification
numbers. The Unit was also required to negotiate with private
organizations such as United HealthCare and ``establish
linkages'' with them. Data collected on individuals could be
released to ``researchers'' (a class not limited by definition)
or to purchasers of health-care services.
The commissioner can seek funding from private sources,
which acquire a property right in the data. In
Pennsylvania, where the governor signed a grant agreement similar
to that in Minnesota, the Foundation acquires an irrevocable
royalty-free license and access to all the medical data, which
they could use or sell to third parties, according to Rep. Sam
Uses of Minnesota data include ``educational efforts''
regarding practice parameters; measuring physicians' performance
against ``outcome-based'' parameters for purposes of licensure
and staff privileges; and collection of the provider tax.
In Pennsylvania, mental health problems are included in the
educational records to which the federal government has full
access, and very detailed information can be sent to private
entities without parental knowledge.
Medical Records Confidentiality Act of 1995
Senators Bennett, Leahy, Kassebaum, Kennedy, Frist, Simon,
Hatch, Gregg, Stevens, Jeffords, Kohl, Daschle, and Feingold have
introduced S. 1360, a bipartisan bill ``to ensure personal
privacy with respect to medical records and health care-related
While the bill is possibly well-intentioned to protect
patients against abuse of information in rapidly proliferating
electronic networks, the American Psychiatric Association stated
that it could ``codify and legitimize release and transmission
for profit of an individual person's medical record without that
patient's consent'' (written testimony to the Senate Labor and
Human Resources Committee, Nov 17, 1995).
The APA fears that patients will decide not to seek care if
they fear damaging disclosures of personal information. Already,
patients refrain from filing insurance claims for this reason.
The creation of a computerized information network ``threatens
the doctor/patient relationship by jeopardizing, in a global
fashion, the confidentiality of that relationship.''
In oral testimony, Denise Nagel, M.D., warned that the bill
authorizes the creation of databases without the patient's
knowledge or consent; allows police broad authority to search
databases directly (without even knowing a patient's name),
instead of obtaining a specific record from the patient's doctor;
preempts all common law and existing state statutes; and sets a
ceiling rather than a floor on medical confidentiality.
Senator Bennett himself said that he hoped his bill would
``head off the cacophony of state laws that hinder the creation
of large regional or national medical data bases.'' George Annas,
health law professor at Boston Univ, called the bill the ``data
bank efficiency act of 1995'' (NY Times 11/15/95).
According to Dr. Nagel, a Maryland law will soon require
physicians to report on every patient encounter, even those paid
for by the patient. Nothing in S. 1360 would interfere with
compulsory data reporting.
One rationale for databases is cost control. Equifax claims
that ``we can do for the system what miracle drugs have done for
the individual patient.'' But Henry Aaron of the Brookings
Institution argues that computerized data bases will drive up
medical costs (Beverly Woodward, NY Times 11/15/95).
In written testimony, AAPS stated that the effective
protection of patient privacy requires the following:
1. The right of all Americans to seek medical treatment
outside of any medical insurance plan in which they may be
enrolled should be explicitly guaranteed-especially (but not
exclusively) if the plan requires electronic data storage or
transmission as a condition of coverage.
2. Electronic data storage or transmission should require
the patient's explicit, fully informed consent.
3. No medical professional may be required to perform any
act that violates his conscience as a condition of being
permitted to practice his profession or specialty.
4. Patients should have a cause of civil action against any
individual, including an agent of the government, who
causes him harm by the misuse of computerized data. To this end,
an electronic data processing system should include a mechanism
for tracking all persons who access identifiable records.
[Complete AAPS testimony is available from our FAX-on-demand
service. Dial (703)716-3404 and follow the directions.]
Bill Clinton on Privacy and Private
From a July 31, 1995, letter to Mr. James C. Pyles, Counsel,
Coalition for Patient Rights, signed by Bill Clinton:
``I do not advocate prohibiting an individual from
purchasing outpatient mental health services directly from a
practitioner, even if those services are also provided by the
individual's health plan. Neither the Health Security Act nor my
current health care proposals are meant to curtail this
prerogative. I support the right of patients to receive these
services without being compelled to disclose clinical records to
health plans or to the government. Further, I endorse the right
of practitioners to provide outpatient mental health services
directly to individuals without penalty.''
Note to George and Nancy from Walt:
``Draft Boards: I once wrote a paper extolling this
model as an example of `democratic administration.' It was
nothing of the sort. It was a cynical veneer.
``School Boards: School systems are, in fact, very well
insulated from parental control....In practice, local educational
bureaucracies and the state educational authorities are in
substantial control and the Boards are something of a foil. A
great sounding, popular model, is also largely a cynical
Box 1796, Interdepartmental
files from National
A Letter to Bill Clinton. Dear Mr. President: I would
like to thank you from the bottom of my heart for shutting down
the Federal Government. I think that this is the best idea you
have had your entire term....It is my understanding that
approximately 40% of federal workers are considered
``nonessential.'' As a physician, who is constantly being told
by some undereducated HCFA/Medicare bureaucrat that the
government is not going to pay for what it considers to be
``nonessential'' medical services (after they have been
provided), I am wondering why it is that we pay ``nonessential''
government bureaucrats at all....
L.R. Huntoon, M.D., Ph.D., Jamestown, NY
A Letter to AMA President Lonnie Bristow (upon
reviewing comments to Congress re the AMA Medicare proposal):
...You state: ``We must correct the current competitive
disadvantage of physician-sponsored health plans. Physicians are
positioned to ultimately balance the cost and quality equation
better than any others in the marketplace....A simple program to
help stimulate physician plans, much as was done for HMOs in the
1970s, is a necessary direction to pursue.''
This is chilling stuff, sir....Is this a request for a
handout? Do you know where this money will come from? Managed
care companies owned by corporations are bad enough. Managed
care organizations owned by physicians are without doubt the most
effective rationing organizations that could possibly exist. A
physician who agrees to participate in a corporate managed care
company is what I call an appeaser...He is willing to compromise
his principles, i.e. to ration to just a few patients, such that
his life may go on for the most part undisturbed....If, however,
the physician owns the company (which will profit from such care
denial) his take per denial will be substantially greater and the
incentive to ration will become irresistible. The physician has
now become not an appeaser, but a collaborator...An appeaser
would say, ``managed care is here to stay. Might as well learn
how to get along with it.'' A collaborator would say, ``Hey,
let's see if we can get on the inside, maybe form our own
rationing company and get rich!'' Coupled with tort reform, this
is a recipe for true unaccountability....
G. Keith Smith, M.D., Edmond, OK
Is Anesthesia Essential? I congratulate Dr. Huntoon
for his continuing efforts to expose the bungling of the Medicare
bureaucracy. I contribute the following example: I received a
mailing (two months after the date of publication) from the
Kentucky Medicaid program that announced that all the anesthesia
codes were being deleted as not payable under the system;
payments to anesthesiologists for ``deep lines'' were no longer
going to be paid for if performed at the time of surgery; and
emergency modifiers were no longer going to be paid for providing
emergency services for labor epidurals or C-sections.
About two weeks after I wrote to the Medicaid commissioner,
I received a one-page mailing that restored the anesthesia codes,
carrying a two-month earlier date....Emergency modifiers for 3:00
a.m. epidurals were not restored....
Apparently the system is now designed to squeeze private
practitioners to provide service without adequate payment until
they go out of business....
Why do most professional organizations want to cave in,
saying, for example, that managed care is inevitable? (They said
the same thing about the Clinton Plan)....To AAPS I say: ``you
are our only hope.''
Lee A. Balaklaw, M.D., Louisa, KY
Zoapathy. A new degree, Z.D., is needed for the New
Medicine found in managed care. The Doctor of Zoapathy, Willy
Savemore, or Dr. Zip as we call him for short (very short on
care) has earned his name by signing up for BIG, Inc.'s double
reverse incentive plan, whereby he gets paid more if he cares
less (i.e. does not show up as an outlier on the printouts) and
he gets blacklisted from any and all BIG's if he acts like a real
doctor by giving BIG any flak....
BIG has been good at selling its story to the government
that by using ``modern business strategies,'' BIG will solve the
national medical crisis. The plan involves separating physicians
from physicians, separating physicians from patients, and
separating physicians and patients from their money....
I believe we should seek help from the SPCA. This is
veterinary medicine, zoo care, zoapathy, as we are now dealing
with patients whose care is dependent on their owner's decisions,
their boss's decisions, and their contract's fine print. The
hapless physician had no choice but to sign up with BIG if he
wanted to continue to treat those patients. But did he care
enough about the patients (before they became pets) to give them
sound advice and fair warning before they rolled over, jumped,
crawled, and are now begging?
AAPS is making this battle seem feasible to win. If only we
would all help fight ignorance and discourage zoapathy, zoapaths,
and apathy on the part of patients in the zoo!
Thomas Jackson Tidwell, M.D., Columbus, GA
Jan. 6, 1996. Board of Directors meeting, Harvey Suites Hotel,
near Dallas-Ft.Worth airport (all members welcome).
Oct 10-12, 1996. 53rd annual meeting, La Jolla, CA.
Legislative AlertThe Continuing Budget Battle
The rhetorical rubber has hit the policy road. Both the
House and Senate have passed an historic measure to balance the
federal Budget, embodied in a huge Omnibus Reconciliation Bill.
At stake in the debate are the big questions of public policy-the
size and kind of government and the future of Medicare and
Medicaid, plus the availability of such reforms as Medical
Savings Accounts (MSAs).
Meanwhile, November's Presidential veto of the Continuing
Resolution (CR)-to keep the federal government operating at
current funding levels-briefly shut down some nonessential
functions of the federal government. The President's reason for
vetoing the CR is that it would retain the Medicare premium
contributions among the elderly at the current 31.5% of the cost
of the program, rather than 25%, as is supposed to happen under
current law, effective next year.
The new CR, passed immediately after Congress and the White
House agreed to work out their differences, only lasts until
December 15th. If broader budget disagreements are not resolved,
there could be another shutdown. There might not be another CR.
Instead, Members of Congress could send the President individual
appropriations bills for the agencies and departments of
government. Another possibility is the passage of ``rifle shot''
Continuing Resolutions, which would keep certain key agencies and
functions open for business but leave other agencies unfunded.
This was the rhetorical prescription, but not the actual policy,
of President Ronald Reagan in the last big budget crises of the
1980s: ``Let's shut down the government and see if anyone
In preparing for the November shutdown, the Clinton
Administration had to make a managerial determination about which
employees in the many different federal agencies and departments
would be ``essential.'' Remarkably, the Clinton Administration
determined that 58% of the employees at the US Department of
Health and Human Services (HHS) were ``non-essential'' and thus
subject to the furlough.
After intense negotiations, the Congressional leadership and
the White House agreed to a 7-year commitment to balance the
federal budget, the timetable of the ``Contract with America.''
The balanced budget is to be estimated by the Congressional
Budget Office (CBO), following ``thorough consultation'' with the
Office of Management and Budget (OMB).
Some of the troops in the House majority seemed willing to
cave under increasing political pressure. The polls started to
show that the Congressional leadership has been taking a public
relations beating, especially over Medicare, and that Americans
were blaming Gingrich and Co. for the budget impasse, rather than
the Clinton team, by a two-to-one margin. At the same time, a
much broader sentiment started to take hold of Members that if
they caved to the White House on the balanced budget, they would
have only made things worse for themselves and would ensure
political defeat later on. They would have gone through all of
the Sturm and Drang without reaping any of the rewards
of the policies they had so publicly committed themselves to in
the 1994 election.
Hernando Cortez, when he invaded Mexico in the 16th Century,
had the right idea about big adventures into uncharted
territories: Best to Burn the Boats. If no retreat is possible,
victory is all there is left.
Another odd development was that while polls showed that
public opinion was divided and increasingly hostile to the GOP
position on the budget, Members of Congress were getting large
numbers of calls from people in their own districts to hang in
and hold the line for a balanced budget.
The political problem for the Congressional leadership is
standard for any majority in Congress. For the President, the
battleground is different; he can, and does, speak directly to
the American people on his agenda and his priorities,
overshooting the Beltway debate, thus defining the terms of the
national debate. President Ronald Reagan did it to Tip O'Neill
and his Democratic majority in Congress; Clinton is doing it to
Speaker Newt Gingrich with similar success. Gingrich, in terms of
the poll numbers, has been in the basement.
In the Senate, the same dynamics were at play. Some of the
senior Senators were weakening and actually pushing for a
``goal'' of 7 years to balance the budget instead of a hard
target, and were even willing to concede the assumptions and
calculations to the OMB. The CBO/OMB divide is critical, for the
assumptions are quite different. The OMB baseline allows for
hundreds of billions in extra federal spending, the main source
of federal deficits in the first place.
Senate Majority Whip Trent Lott of Mississippi, House Budget
Committee Chairman John Kasich of Ohio, and House Majority Leader
Richard Armey of Texas were the chief spine stiffeners in the
Congressional leadership. The language of the White House
Congressional agreement was drafted by Lott.
The White House had to make sure that the Democratic
leadership was willing to go along with any deal; the agreement
promises to ``protect veterans and the environment.''
While Clinton won the initial PR battle, the question was
whether he could keep it up. Hardly noticed in the general
media, except for the November 20th Baltimore Sun, was a
weapon that the Republicans had already tested in selected media
markets. It was a short ``infomercial'' of Clinton talking about
his timetable-rather, his timetables-for balancing the federal
budget. In one shot after the other of official footage, Clinton
talks about his 5-year commitment to balance the budget, then his
8-year proposal, then his 10-year proposal, his 9-year proposal,
and then his concession that it probably could be done in 7
years, etc. The piece was devastating. One White House staffer,
quoted in the Baltimore Sun, conceded: ``They are
killing us with that ad.''
Coming Crack Up
Whatever the outcome of the budget battle, liberalism may
lose. In wild twist, the editorialists of the Washington
Post and other liberal outlets recognize this, and are
calling upon the White House to get serious on the Budget and
come to terms with Congress. The reason: If the Balanced Budget
effort fails, including efforts to curb the huge and growing
entitlements, then Congress will not have the guts to do it
again. But that too comes with a price, a price even liberals
can't afford to pay. The price: liberal government, as we know
it, won't survive anyway. It's all over. Finished. The reason:
The federal entitlements will, at their current pace, gobble up
all remaining tax dollars and programs will necessarily shrink or
be financed through ever larger chunks of wealth-killing deficit
spending. The guarantee: A lower standard of living for working
The National Commission on Entitlement Reform, headed up by
Senator Bob Kerrey (D-NE) and John Danforth of Missouri said as
much, noting that at the current rate of spending, in 16 years
Social Security, Medicare, Medicaid and rising interest on the
national debt will consume all federal revenue. Former Reagan
Administration Director of the Office of Personnel Management
Donald J. Devine likewise argued in the November 22, 1995
Washington Times: ``The liberals will not be able to buy
more dependent clients to justify their centralized power system
that is the welfare state.''
Health Policy Stakes
Under the proposed Balanced Budget Act of 1995, medical
savings accounts (MSAs) are afforded equal tax treatment with all
other types of employer-provided health insurance. There is to be
no federal taxation on deposits into MSAs. Moreover, those who
are self-employed may contribute to an MSA and get a 100 %
deduction for their contribution. Under the Congressional
proposal, money in the account belongs to the worker, who will
have complete control over it. Therefore, it is portable; the
worker can take it with him if he moves or changes jobs or is
fired. The funds can be rolled over from year to year for future
medical expenses or for retirement needs, including longterm care
insurance. And the interest earned on the MSA is also not subject
As the Congressional MSA is structured, it is designed to
appeal to both low-income and high-income workers. Under
conventional insurance plans now in the private sector, a worker
or his family normally have to pay a $250 or $500 deductible with
after-tax dollars before being entitled to insurance payment for
medical services. For very low-income working people, the $250 or
$500 deductible is a stiff payment. But with the MSA, low-income
workers effectively have first-dollar coverage for medical
On Medicare, the final package will have $265 to $270
billion over 7 years in ``savings'' (diminished growth). The
Senate has accepted the House language on copayments and
deductibles for Part B enrollees; that is, there will be no
change in either. The Medicare Part B premium level is set at
31.5% of the cost of the Part B program. This would yield $47
billion in savings over 7 years. Means testing has been adopted.
The House version called for the elimination of the CLIA
regulations on doctors offices, authored by Congressman Bill
Archer of Texas. But this provision was dropped in the House
/Senate conference because of the Senate's so-called Byrd Rule, a
procedural restraint on the kinds of items that can be
incorporated into a budget reconciliation bill. Likewise, the
House anti-trust reform provisions that would apply to physicians
in the reformed Medicare system is, at this writing, also in
MSAs have been a regular point of procedural and policy
controversy since the beginning of the budget battle. Under the
Medicare reform plan, senior citizens who choose a health plan
with a $3,000 deductible could get an MSA deposit up to $2,100.
This means that they would pay the first $2,100 out of the MSA
for medical services and the next $900 out of pocket. Any senior
who spent less than the $2,100 would keep the balance. The
private plan would pay all medical expenses greater than $3,000.
The standard argument of the opponents of MSAs is that they
would be too attractive to younger and healthier beneficiaries,
and thus would aggravate the problem of adverse selection.
Indeed, the theory is that many of the older and sicker folks
would remain in the traditional Medicare program. CBO has made
just such an argument. But the premise that MSAs would only
attract younger and healthier beneficiaries may not at all be
true; in fact, some of the oldest and sickest beneficiaries may
think that they have the most to gain from high-deductible plans.
For someone who is likely to incur large physician and
hospitalization costs, say $15,000 or more each year, it makes
sense to take out a plan with a $3,000 deductible instead of the
traditional Medicare 20% copayment requirements, which can
quickly add up.
One can never second-guess a market. MSAs need a trial.
MSAs in the Medicare program were in trouble because of the
Byrd Rule. They were eliminated under 313(B)(1)(b) of the
Budget Act of 1974 because the provision would be construed as
increasing the deficit, presumably because of revenue losses from
the tax change. But now they are out of trouble. Sheila Burke,
Senator Robert Dole's powerful and controversial health policy
staffer, has told conservatives that the MSAs would be drafted in
such a way as to be compatible with the Byrd rule. The Senate
Finance Committee members and staff have thus been redrafting the
MSA provision. Senator Paul Coverdell of Georgia has been the
point man in effort to restore the Medicare MSAs.
On another front, Senate Members are thinking about an
omnibus legislative vehicle to catch all of the Byrd Droppings in
one package, if they can't do it through the budget
The development and composition of the giant 1342-page
Clinton Health Care Plan, undertaken by the President's Task
Force on Health Care Reform, headed by Hillary Rodham Clinton,
cost almost $14 million. So says the General Accounting Office,
the investigative arm of the Congress, according to an Associated
Press Report of November 9, 1995. The GAO found that the biggest
bucks went to HHS at $9.1 million. Question for the House (and
Senate?): How many members of the federal work force assigned to
work with Hillary's team have been designated ``non-essential''
during the recent budget impasse? Just curious.
It seems that the Administration officials, who were
prepared to exercise unprecedented central planning authority
over one seventh of the national economy, were no better at
forecasting the cost of the development of their health plan than
they were on the broader financial implications of the plan
itself. The President told Congress and the nation on September
22, 1993, that his numbers were checked and rechecked by the best
experts and numbers genii this side of Einstein and that the plan
was fiscally sound. The CBO disagreed, and in February, 1994,
said that the Clinton Plan would add $70 billion to the deficit.
Here's a scary thought. The original estimate of the cost of
developing the Clinton Plan was put by Administration officials
in March 1993 at $100,000. In 1994 testimony before Congress,
White House aide Patsy Thomasson upped the estimate to $211,000.
Turns out Patsy, and a few others over there-including grownups
like Leon Panetta who should know better-were a bit off. And now
they want Congress to entrust them with assumptions and scoring
on the federal budget?
In 1995, we know the truth.
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