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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
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,
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
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
AAPS testimony at the various public hearings is posted
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.
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
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
"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).
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
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
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
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
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
contributed by George Fisher, M.D., HealthBenefitsReform
Legislative AlertMedicare 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
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
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