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Omnia pro aegroto

Volume 58, No. 7 July 2002


For tragedy in ancient Greece, Fate or the hero's tragic flaw was responsible. In Christendom, the explanation was God's will. In the East, it was bad karma.

A narrow escape also had an explanation and was cause for thanksgiving. One night when dogfights raged over Haarlem as the Germans invaded the Netherlands, a ten-inch piece of shrapnel landed on the pillow of Cornelia ten Boom, who later became a leader of the Dutch Resistance and saved many Jews from the Nazis. Corrie wasn't in the bed. She told her sister:

"Betsie, if I hadn't heard you in the kitchen-"

But Betsie put a finger on her mouth and said, "There are no `if's' in God's world" (The Hiding Place, C. ten Boom, 1971).

In postmodern America, however, the operative words are "if only." If only [an entity or person with a deep pocket] had done something different, [the plaintiff] would have had a long, healthy life, earning millions of dollars and bringing only benefit to all around him. Moreover, it isn't fair that someone should be sick or disabled, or die prematurely. Nor is it fair that another should be exceptionally fortunate or rich. Therefore, the government must intervene through the court system to redistribute goods more equitably-with a hefty share for its servants, the legal teams on both sides.

The transcendent values-such as the worth of a human life- are infinite, and cannot be added, subtracted, multiplied, or divided. Blame is a function of intangibles and unknowables. Even economic losses, calculated from extrapolations and statistical expectations, are hypotheticals.

From a witch's brew of infinities and irrational and imaginary numbers, the courts pretend to derive a real number, accurate to the nearest hundredth of a dollar, which the unsuccessful defendant must pay to the plaintiff and his lawyer. (The successful defendant only has to pay his own lawyer.)

An equivalent of the Code of Hammurabi-even if it only demanded worldly possessions and not body parts or lives- would soon severely limit the practice of medicine or other productive activities under its jurisdiction. The market has mitigated the effect by inventing a method of cost-shifting called "malpractice [or more correctly, liability] insurance." Everyone who buys medical care or medical insurance must help pay for the lawsuit lottery. When physicians can no longer shift the costs, due to price controls or simple unaffordability, they will suffer decreased income and may relocate or restrict their practice-then patients pay in loss of services.

True insurance is a mechanism of voluntarily sharing risks, with premiums proportional to the probability of a loss or payout. Basically, it enables one to protect financial assets.

As it has evolved, malpractice coverage isn't insurance at all. It isn't voluntary, and physicians must carry limits that may be far in excess of assets that they own-or will ever be able to acquire while paying enormous "premiums." The doctor's policy protects the hospital's assets, serves as unpredictable third-party sickness and disability coverage for patients, and creates a deeper pocket to be targeted by the plaintiff's bar for unlimited judgments-which are an uninsurable risk.

U.S. tort costs rose by a factor of 400 between 1930 and 1994, as the GDP increased 100-fold. The divergence became apparent c. 1960. Medical malpractice payouts to injured parties have the largest transfer cost by percentage of any other type of insurance. Of tort costs, 24% goes to awards for economic loss; 22% to awards for pain and suffering; 24% to administration; 16% to claimants' attorney fees; and 14% to defense costs (data from Tillinghast & Towers-Perrin, cited by LW Luria, "An Epidemic of Malpractice May Be Sweeping Through Our Courtrooms," Key Issues Plast Cosmet Surg 1999;16:124-140).

Direct costs are only a small part of the effect on medical practice. The indirect cost of defensive medicine is estimated to be $50 to $90 billion annually. Incalculable losses include the unavailability of useful products due to strict liability and the impossible quest for perfect safety. In 1997, only 25% of raw material suppliers were willing to sell products to medical implant manufacturers (ibid.). Physicians not only withdraw services directly but may increasingly restrict care to comply with rigid, governmentally approved "practice guidelines."

The huge pool of third-party money has aided in the corruption of the judicial system, with outright perjury, as well as junk science, becoming pervasive. As Friedrich Hayek observes in The Road to Serfdom, this situation is destructive of all morals because it undermines the foundation of all morality: the respect for truth. Moreover, the claim of "victims" upon the property of defendants-with little regard for the plaintiffs' own contribution to the risk of a bad outcome-subverts the system of private property that Hayek calls "the most important guarantee of freedom, not only for those who own property, but scarcely less for those who do not."

While statutory limits on the spoils may be necessary and helpful, AAPS also offered for discussion more innovative proposals at the May 16 briefing on the liability crisis at the University of Nevada in Las Vegas (see enclosure). Given the stranglehold of the plaintiff's bar on Congress and State legislatures, a reasonable resolution may ultimately depend upon physicians' willingness to seek other forms of asset protection (or accept the risk of going bare), to withdraw from the liability insurance system that enables the explosion in awards, and to dare hospitals to lock them out.

More fundamentally, the crisis is a symptom of a profound cultural transformation: the entitlement mentality, the erosion of contract rights, collective guilt and scapegoats supplanting individual responsibility, the expectation of government-defined and guaranteed "equity" and "social (distributional) justice," and the hubris that all outcomes are under human control.

Standing Room Only in Las Vegas

A record number of physicians, including 30 new members, attended the 2002 spring meeting at the University of Nevada Las Vegas on "Thriving, Not Just Surviving."

Especially popular were panels of physicians explaining how and why they opted out of third-party contracts and/or Medicare. Describing his successful walk-in clinic in Ocean Spring, MS, H. Todd Coulter, M.D., head of the AMA's Young Physicians Section, said it shows what you can do "if you are willing to get off the plantation." Patients willingly pay him fees comparable to charges at the Waffle House or Dollar Tree, and he is doing well instead of subsidizing his practice.

Anne Hamilton, Executive Director of the McMinnville Physicians Organization in Oregon, and Mary Jo Curran, M.D., of Advanced Pain Treatment Centers of Chicago, explained how to run the numbers for your practice. The specialties represented included family practice (Mike Jaczko, D.O.), internal medicine (Dr. Coulter), anesthesiology (Dr. Curran and G. Keith Smith, M.D.), dermatology (John Kasch, M.D.), and gynecology (Lisa Underwood, M.D.).

For those who missed the conference, or want to review the wealth of material, tapes are now available.


Motion Passed to Dump E & M Guidelines

The 1997 AMA/HCFA Evaluation and Management Documentation Guidelines were made optional and sent back to the drawing board after AAPS threatened litigation and spearheaded physician opposition. At the Denver public hearing of the Secretary's Advisory Committee on Regulatory Reform, a motion to eliminate the guidelines passed on a vote of 20 to 1. The representative of AARP cast the "no" vote. What will happen to physician prosecutions based on alleged coding violations, if the Secretary accepts this recommendation, is not known. The AMA now expresses support for the committee's decision, despite having worked closely with HCFA/CMS on the guidelines since 1992 (AM News 6/10/02).

AAPS testimony at the various public hearings is posted here .


JCAHO Pain Standard and Declaration Rejected

At the annual meeting of the Arizona Medical Association, June 7, the House of Delegates passed Resolutions disapproving of the JCAHO Pain Standard and of the AMA's Declaration of Professional Responsibility: Medicine's Social Contract with Humanity, closely following the Model Resolutions posted at www.aapsonline.org. The medical society of Washington County, UT, has also voted unanimously to reject the Declaration, though the UMA does not meet until September. ArMA delegates will carry a request for the AMA to reconsider these matters to its annual meeting.

The AMA's web site claims that the Declaration has "universal applicability" and carries translations into German, French, Spanish, Chinese, and Japanese. Outgoing AMA Board Chairman Timothy Flaherty, M.D., urges physicians "to read and even recite it" (AM News 6/2/02).

"I hope that AMA members will prevail upon its officials to rethink this policy," stated AAPS Executive Director Jane Orient, M.D. "The philosophical assumptions of the Declaration are inconsistent with the Oath of Hippocrates and logically imply unlimited liability for physicians."


$1,000 Prize for Best Student Essay

The Arizona Chapter will offer a cash prize of $1,000 as an alternative to a weekend at Cato University for the winning medical student essay on "What Does a Right to Medical Care Really Mean?" The deadline has been extended to July 31. Call (800) 635-1196 for details.


Bureaucrat Census

Government at all levels in the U.S. now employs 21 million persons, 4 million more than the wealth-producing manufacturing sector, writes Craig Cantoni of Capstone Consulting Group. Federal employment is 4,000 times higher than in 1800, while the population is only 71 times greater. Federal expenditures at $1.6 trillion consume 18.7% of the GDP, up from 2.6% in 1900. State and local expenditures total 9.4% of GDP, up from 5% in 1900.

"Government employees reproduce faster than taxpayers because of self-serving advocacy groups that feed at the public trough and have a vested interest in bigger government. They hide their self interest behind overblown rhetoric about public safety, health, and general welfare," writes Cantoni.


Freedom Day in British Columbia

A reversal in the trend to big government is seldom seen. But on what government workers called "Black Thursday," Gordon Campbell and his Liberal government, that won 77 of 79 seats in the British Columbia legislature, slashed 11,000 civil service positions. The Liberals introduced massive tax cuts of 25% on personal income; began to implement the promise of cutting the regulatory burden by one-third; and announced that the province would no longer administer nor enforce the Federal Firearms Act. (Millions of Canadians are probably in violation of its licensing requirements.) Honest accounting-an end to "fudge-it budgets"-is pledged. Campbell has even promised to withhold 20% of the salaries of cabinet ministers and ministers of state until they are able to meet budget and service targets (Scott Carpenter, Sierra Times 1/2/02).


U.S. Government Fiscal Fitness

Annual audits of U.S. federal agencies and Cabinet departments reveal that trillions of dollars are "missing" or "unaccounted for," writes Kelly Patricia O'Meara (Insight 5/20/02). According to a report by Senator Fred Thompson (R-TN), Government on the Brink, "no one knows exactly how much fraud, waste, and mismanagement cost the taxpayers because the federal government makes no effort to keep track of it" (Insight 10/22/01).

Should You File for a HIPAA Extension?

Physicians have been urged to file for an automatic 1-year extension for compliance with the transaction code sets requirements of the Health Insurance Portability and Accountability Act (HIPAA). As Karen Trudel, director of the HIPAA Project Staff at CMS, noted at the AAPS spring meeting, CMS has no authority to approve or disapprove a plan, and no ability to audit the facts behind a plan. It will be approved if all the data elements are filled in.

The AMA web site advises that "penalties for noncompliance with the HIPAA standard and for not requesting an extension may be severe, including possible Medicare exclusion. The law also requires that by Oct. 16, 2003, physicians and providers submit claims electronically to Medicare."

Ms. Trudel, however, verified that the transaction code sets apply only to providers who submit claims electronically, and that providers with fewer than 10 full-time employee equivalents (FTEs) are exempt from the electronic filing requirement for Medicare claims.

Vickie Yates Brown, Esq., of Louisville, KY, emphasized that to be exempt, physicians must refrain from filing a single claim electronically, avoid use of a billing service or clearinghouse, and not become a business associate of a covered entity.

The government wants to force all physicians to file electronically, she said, and may succeed in Kentucky, in which there are no indemnity plans available.

Physicians should not rush to file for an extension, Ms. Brown advised. If they file and later choose not to comply with their own plan, this could be grounds for exclusion. The forms are quite detailed, including the projected start and completion dates for various phases such as software installation. Forms are included in the Compliance Resource Handbook from the spring meeting (see enclosed order form) or may be downloaded from www.cms.gov/hipaa/hipaa2.

"Although data formats and codes may sound boring and technical, they lie at the heart of the federal government's current quest to acquire centralized medical data about us," writes Charlotte Twight of Boise State University. Congressman Ron Paul, M.D., (R-TX) called the transaction rule "the most dangerous aspect of the new regulations" because "[o]nce standardized information is entered into a networked government data base, it will be virtually impossible to prevent widespread dissemination" (Independent Rev 2002;VI(4):485-511).

AAPS will challenge the rule in federal court. Meanwhile, physicians should consider whether it is their duty to remain or become a noncovered entity to protect patient confidences.

Tip of the Month: To be valid, a search warrant must specifically identify the place to be searched and the items to be seized. If it references another document for those details, then that document must be attached. Also, the warrant must be signed by a judicial officer. So what happens if a search is based on an invalid warrant? Thanks to a recent federal decision, the officer in charge of the illegal search is subject to a civil lawsuit. He loses his immunity if he did not read the search warrant or ignored obvious errors. Ramirez v. Butte Silver Bow Cty., 283 F.3d 985, 991 (9th Cir. Mar. 13, 2002).


AAPS Calendar

Sept. 18-21. 59th annual meeting, Tucson, AZ.
Sept. 24-27, 2003. 60th annual mtg, Point Clear, AL.


Federal Agents Can Be Held Accountable

Decades of unaccountability for federal raids on homes may come to an end, thanks largely to the courage of Judge Alex Kozinski of the Court of Appeals for the 9th Circuit. Earlier, Judge Kozinski was the lead voice in a decision allowing Idaho to prosecute FBI Special Agent Lon Horiuchi for killing unarmed Vicki Weaver during a 1992 raid on her home at Ruby Ridge. In Ramirez v. Butte Silver Bow Cty, Kozinski wrote that the particularity requirement in a search warrant protects an individual from "general, exploratory rummaging in [his] belongings." Moreover, the invalid warrant "deprived the Ramirezes of the means to be on the lookout and to challenge officers who might have exceeded the limits imposed by the magistrate." Leaders of a search expedition may not simply assume that the warrant authorizes the search.


EMTALA Has Limits

EMTALA was "not intended to be a federal malpractice statute," ruled the U.S. Court of Appeals for the 11th Circuit on May 16 in Harry v. Marchant et al (2002 U.S. App. LEXIS 9222; 15 Fla. L. Weekly Fed. C 590). The case involved a delay in moving a patient, who had been admitted to the hospital, from the emergency room to the ICU. The appeals Court granted a rehearing en banc solely to determine the scope of EMTALA's stabilization requirement.

The Court held: "By its own terms, the statute does not set forth guidelines for the care and treatment of patients who are not transferred [or discharged]."


AAPS View Prevails in Veeck

A 9-to-6 decision handed down on June 7 by the U.S. Court of Appeals for the 5th Circuit in Veeck v. SBCCI (see AAPS News Dec 2001) establishes that no one can own the law. Judge Edith Jones summarizes the case as follows:

The issue in this en banc case is the extent to which a private organization may assert copyright protection for its model codes, after the models have been adopted by a legislative body and become "the law." Specifically, may a code-writing organization prevent a website operator from posting the text of a model code where the code is identified simply as the building code of a city that enacted the model code as law? Our short answer is that as law, the model codes enter the public domain....

Laws, the Court observes, are "facts," which may not be copyrighted. "They are the unique, unalterable expression of the `idea' that constitutes local law. Courts routinely emphasize the significance of the precise wording of the laws...."

The Court was not persuaded that SBCCI would be unable to continue its "public service of code drafting" without the revenue derived from its copyright: "it is difficult to imagine an area...in which the copyright incentive is needed less."

* * *

"And [the king] will take the tenth of your seed, and of your vineyards, and give to his officers and to his servants.... He will take the tenth of your sheep: and ye shall be his servants.... Nevertheless the people refused to obey the voice of Samuel; and they said, Nay; but we will have a king over us; That we may also be like other nations; and that our king may judge us, and go out before us, and fight our battles" (1 Samuel 8:15-20).


Where Will It End? I just filled out this year's NY Physician Profile Survey, under pain of loss of license. I'm preparing to take the same State-mandated handwashing course-required every four years under threat of loss of licensure-for the third time. Then there are the "requests for further information" from Medicare that I must respond to, the Advance Beneficiary Notices that I must fill out and get signed if I want to be paid more than Zero for my services, the authorization forms that I must get patients to sign so that I can submit their Medicare claims, the State triplicate prescription forms that I have to file so the State or DEA can demand them at any time, ... and of course the tax forms. Most people already work half the year just to pay their taxes, and the other half of the year is rapidly being consumed by all these unfunded government mandates.

Few people are willing to speak out against this incremental destruction of our freedom. We are armpit deep in socialism. Simple as these concepts are, most people just don't get it: you can't get something for nothing, and everybody can't live at the expense of everyone else.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


A Service You Can't Live Without. There is a new diktat from Medicare that states: "Beginning April 1, 2002, assigned claims with invalid or deceased ordering/referring physicians' UPINs, or claims whose date of service exceed the physician's date of death, will be denied." I want all AAPS members to relax about these stringent rules and to know about a new service I will be providing. For the low, low fee of $100,000 per site per year and 10% of collections I will provide certification of physician nondeath. I will use the government approved "pulse test" to assure that the physician was not deceased at the time of service. So confident am I of my service that if any of your claims are denied due to your death, I will refund to your estate the value of your Medicare claims up to $15. (Note: due to unclear regulatory status, I will not cover you for services you perform while under deep hypothermic circulatory arrest as used for thoracic surgery.)
Stuart Boreen, M.D., Bethelehem, PA


The "Leadership Role" of the AMA/UN/WHO. The main foci of the AMA Declaration of Professional Responsibility are meant to be the same ones as espoused by Hillary Clinton et al: that we have "limited financial and health care resources," whose "most reasonable use" should be determined by the government in conjunction with "healthcare corporations." Doctors have a [new, socialist] "ethical responsibility" to see to it that our "scarce healthcare resources" are "rationally and equitably distributed without prejudice"-the "principle of justice-equity" espoused by postmodern pseudoethicists, as opposed to the principle of patient autonomy, which they still claim to promote [despite the internal inconsistency] but which socialists abandoned long ago. In short, it's "the greatest good for the greatest number." Consider the AMA's stands on legislation since supporting the Clinton Plan in 1993. It has either backed legislation, or ignored treacherous laws like HIPAA, that make government takeover seen a more rational and seemingly inevitable conclusion.
Stephen Katz, M.D., Fairfield, CT


The Only Hope. Other than Dick Armey (R-TX), who is retiring, there is no influential member of Congress who understands the ramifications of the insane HIPAA "administrative simplification" requirements. Dean Rosen, senior staffer for Senator Frist (R-TN), considers HIPAA the crowning glory of his career. The only thing that could turn it around is massive protest by patients and physicians.
Greg Scandlen, Fairfax, VA


The Use of Data. What is the legitimate purpose of collecting so much medical data? There is none. The only purpose is to do data mining to uncover some hidden real or imaginary correlation with a high-cost CPT code.
Gerry Smedinghoff, Actuary, Phoenix, AZ


On Regulatory Reform Hearings in Denver. After hearing a presentation describing how three attempts to regulate how doctors keep medical charts (E&M Documentation Guidelines) had failed over a period of 8 years, one panel member went on record saying that he needed more information before he could vote to abandon the project. Members of the committee also joked about not reading the regulations they were voting on.

I suggest that the public good would be served if all policymakers at HHS were locked in a room with the complete works of Friedrich Hayek. They would be released only when they could pass an oral examination on the technical reasons why using command-and-control techniques to run an organization the size of the South Korean economy will inevitably end up producing the level and quality of results enjoyed by the North Koreans.
Linda Gorman, Ph.D., Englewood, CO


Equal Pay for Equal Work. In Germany, many tasks formerly performed by nurses are now performed by physicians (now in surplus there). Apparently, if nurses are to be paid almost as well as physicians, it becomes cheaper to eliminate supervision costs through just eliminating the delegation of duties.
from T. Weil, Health Networks: Can They Be the Solution? contributed by George Fisher, M.D., HealthBenefitsReform

Legislative Alert

Medicare on the Front Burner

This month you can expect House legislative action on Medicare. In April, there were several press reports, in The Baltimore Sun, for example, that the House Congressional leadership was preparing to unveil a comprehensive Medicare reform program very much like the Breaux-Thomas proposal that grew out of the National Bipartisan Commission on the Future of Medicare, rich with consumer choice and market competition. The model for such a reform is the Federal Employees Health Benefits Program (FEHBP) that covers Members of Congress and federal employees and retirees and their families. This is an approach favored by the White House.

More recently, in May, the House Congressional rhetoric was toned down, and House Ways and Means Committee members were talking instead of modest reform. Likewise, Mark McClellan, member of the President's Council of Economic Advisors, testified before the House Commerce Subcommittee on Health, outlining the Bush Administration's position on "transitional proposals" for prescription drug coverage and Medicare reform. It does not appear that Congress is really prepared to enact comprehensive Medicare reform, but it may enact several piecemeal reform measures.

The key policy question is this: will these incremental reforms lead to a transition toward a genuine market-based, consumer-driven system for the next generation of retirees? Or will these measures tinker about with payment formulas, add benefits, and retain the current structure of central planning and price regulation which is at the source of Medicare's problems in the first place?

Leftists in Congress have demonstrated, in debate after debate, an unswerving loyalty to central planning and price regulation, and really do believe that the Medicare bureaucracy should not only do all of the things it is doing so badly in Medicare, but should expand its power to damage larger and larger chunks of the private medical sector, whether through an expansion of Medicaid up the income scale or expansion of Medicare down the age scale. Add benefits, especially prescription drugs, and cut expenditures by controlling their availability. As Judy Feder, former top Clinton Administration health policy advisor responded to this writer in a recent Capitol Hill debate on the subject, Medicare's administrative pricing "works." Price controls "control" costs; they dampen the spending on medical services and thus they are inherently successful. The Left really believes this stuff.

For the Republicans in Congress, the "incrementalist" approach always gets tricky. The rhetoric will be solid. The Republicans can be counted on to promote the free market and individual freedom-rhetorically. What is not clear is whether there will be a correlation between the rhetoric that Members of Congress use in describing what they are doing and the actual guts of the legislative text. Republicans with their free-market maps often manage to get lost in the tall, collectivist weeds. As this goes to press, the House Ways and Means Committee has not yet unveiled its legislative draft. So, nothing definitive can be said about it. Nevertheless, rest assured that three features will emerge in any final draft.

1. Stop the Bleeding in Medicare+Choice. In his budget, President Bush has proposed that next year's update for these plans be 6.5%. Look for House Republicans to propose something similar. They have good reason to rescue a badly damaged program. Today, one in seven senior citizens, roughly 5 million, are enrolled in the Medicare+Choice Plans. Because they were created with the notoriously bad provisions of the Balanced Budget Act of 1997, conservative analysts, including those at the Heritage Foundation, often criticized the program, noting that it was not at all like a true competitive private market for plans. In fact, Medicare+Choice was governed by an enormously heavy regulatory regime-plans can't breathe without permission from the Medicare bureaucracy-and a system of administrative pricing that ruthlessly roots out economic efficiency. Under this system, Medicare+Choice plans have gotten payment increases equal to 2% per year or less, while costs have increased much more rapidly, now by 13 to 17%. The predictable result: more than 100 plans have left the Medicare program, and 2 million beneficiaries have lost coverage. Since 1998, according to the President's Council of Economic Advisors, the share of seniors with access to Medicare+Choice plans declined from 74% to 60%. These Medicare patients have thus been forced back into the inappropriately named "fee for service" Medicare program. (Price-controlled Fee for Service has the ontological status of a Square Circle). Meanwhile, the Left in Congress and elsewhere has taken every opportunity to insult the intelligence of every available audience by criticizing the Medicare+Choice program as an exemplary reason why one cannot rely upon market forces and a system of competitive private plans to deliver quality care to seniors.

The truth is that Medicare+Choice plans, laboring as they do under a deadly combination of inadequate payment and a regulatory apparatus that would shame Rube Goldberg, have served many senior citizens well. They offer a more comprehensive set of benefits. Currently 72% of seniors enrolled in Medicare+Choice plans have drug coverage in their basic plan, and 15% can get coverage by paying a supplemental premium. The plans often offer innovative benefit packages including disease management programs for diabetes, different nursing care arrangements, preventive medical programs and testing, and special care programs for patients with cancer, mental health problems, such as depression and dementia.

Another attractive feature of these private plans is that they are less costly for seniors than traditional Medicare. According to the Council of Economic Advisors, the average premium for a beneficiary in Medicare+Choice plan is $32 per month, including prescription drug coverage.

In a remarkable study of the Medicare+Choice program, Professor Ken Thorpe, a health care economist at Emory University, found that lower-income Medicare beneficiaries without employer-based retirement coverage or eligibility for Medicaid coverage have a strong tendency to choose Medicare+Choice plans. According to Thorpe's analysis, 78% of Medicare patients with incomes between $10,000 and $20,0000 per year choose Medicare+Choice Plans, and 67% of those seniors in Philadelphia, Pennsylvania, choose these plans. Nationally, Thorpe found that 52% of Hispanic patients and 40% of black patients without employer-based coverage or Medicaid select Medicare+Choice plans. But the Left used to tell you-they don't so much anymore-that lower-income people are not really capable of choosing anything as a complex as a private medical plan.

2. Stop the Doctors' Medicare Pay Cuts. Look for the House Ways and Means Committee to present a proposal to reverse the pay cuts for Medicare physicians. This year, as every physician knows, Medicare-allowed fees have been reduced by 5.4%. Over the next three years, according to the Medicare Payment Advisory Commission, the formula that governs physician payment will result in a total cut of 17% between now and 2005. The Centers for Medicare and Medicaid Services (CMS-you know, that HCFA thing with a new name), estimates it will be 18.3%. The more Medicare patients a doctor sees, then, the bigger his financial losses. In a recent analysis of the magnitude of these cuts conducted by the American College of Physicians and the American Society of Internal Medicine (ACP-ASIM), assuming just a 3% rate of inflation over the period 2002-2005, the Medicare payments per service in constant dollars would be cut by 28.1%. This means, according to the ACP-ASIM analysts, that a 4-person medical group with only 20% of its patients in Medicare would see a $21,000 in loss of office visits alone. If the same practice had a 100% Medicare population, the practice would lose more than $105,000.

The American Association of Retired Persons (AARP) doesn't want any discussion of increased Medicare payments to doctors and other medical professionals to take place outside of a Medicare prescription drug benefit. In a recent policy statement, AARP issued this veiled threat: "Our members would not understand why Congress could find money again to increase provider payments above and beyond a reasonable and appropriate level, but could not help them with their prescription drug needs. Every dollar that is attributed to a 'givebacks package' means one dollar less for a Medicare drug benefit. We are also concerned about the impact of 'givebacks' on the status of the Hospital Insurance (HI) Trust Fund. Therefore, we urge Congress to be prudent in its consideration of a givebacks package before agreement is reached on a Medicare prescription drug benefit." AARP's statesmanlike commitment to fiscal prudence conveniently ends once the discussion turns to prescription drugs; the AARP's idea of a meaningful benefit is $750 billion over ten years, roughly twice the amount being bandied about in congressional deliberations.

3. Roll Back Stupid Regulation. The Medicare program has a regulatory structure that dwarfs that of any other federal agency. There is literally nothing like it. Look for the Ways and Means Committee to resurrect a popular Medicare regulatory reform bill that the House passed overwhelmingly in the last session of Congress, but died in the Senate.

The Drug Bust

Between now and 2030, the Congressional Budget Office (CBO) estimates that overall Medicare spending will more than double, sharply increasing the financial pressures on taxpayers and cramping spending on other government programs. As Comptroller General Walker also remarked in his testimony, the Medicare program is "already unsustainable in its present form."

If Congress simply adds a Medicare drug program to cover all projected senior spending on outpatient prescription drugs, CBO estimates an additional $1.8 trillion in Medicare costs between 2003 and 2012. In May 7 testimony before the Senate Finance Committee, CBO Director Dan Crippen concluded, "Thus, without other changes to Medicare's benefits or the way in which the program is financed, adding a comprehensive prescription drug benefit would add significantly to the program's future budgetary pressures." But many Congressmen favor precisely that.

A little history on recent proposals is instructive. In 1999, the projected cost of the Breaux-Thomas new drug program was $60 billion over 10 years. In 1999, President Bill Clinton, whose appointees voted against the majority recommendations, offered a separate new drug program without an FEHBP-style reform package; the Clinton proposal was costed out at $111 billion over 10 years. In 2000, the House passed HR 4680, which would have created a $140 billion Medicare prescription drug benefit. That same year, the Clinton Administration unveiled a second iteration of a Medicare drug proposal at a total ten year cost of $338 billion. In 2001, the Congressional Budget Resolution was the battle ground for two competing drug proposals: the Republican proposal was $300 billion and the Senate Democratic substitute was $311 billion-no real difference. In fact, from the statements of senior Senate Democrats in 2001, including Senators Max Baucus of Montana, Jay Rockefeller of West Virginia, Barbara Mikulski of Maryland, and Bob Graham of Florida, the $300 billion figure, spread over ten years, seemed just right. It wasn't. In the 2002 House Budget Resolution, the Congressional leadership proposed a $350 billion drug benefit. In the Senate, Senator Kent Conrad proposed a $400 billion drug benefit. Not to be outdone, the Senate Democratic Leadership proposal called for a Medicare prescription drug benefit that could reach $600 billion over ten years, depending how it is financed.

Then, of course, there is that "meaningful" $750 billion drug benefit over ten years, as proposed by AARP. In one variation of this proposal, the benefit would be financed by drawing down the Medicare Hospitalization Insurance (HI) Trust Fund. According to Mark McClellan of the President's Council of Economic Advisors, this would have the effect of cutting the life of the trust fund in half, with the HI Fund losing money as early as 2008 and reaching insolvency as early as 2016 (rather than 2030), just when the huge cohort of Baby Boomers are starting to retire in big numbers. McClellan told the House Commerce Committee, that under the current spending, Medicare would reach 4% of GDP by 2030, but the addition of the drug benefit of this magnitude would mean that it would raise that share to 6%. In today's dollars, notes McClellan, the cost of the drug benefit would be an equivalent to a tax of $2,170 on every working American.

But cost is not the key issue in Medicare prescription drugs. In this, as in every other health care policy, what is the key issue? It is who controls the benefit.

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