Aetna Offers Settlement
In one of the largest lawsuits ever in the medical field,
Aetna broke rank with nine other insurers to offer a settlement.
Almost all the 700,000 practicing physicians in the country are
to share $100 million (about $150 each), and all 12 or so lawyers
will share $50 million in legal fees. A newly created foundation
will get $20 million to "improve health care" by reducing medical
errors, childhood obesity, and racial disparities. The AMA gets
general acceptance of its treatment guidelines, and physicians
will be allowed to have input on how claims-processing software
evaluates reimbursements, along with access to a Billing Dispute
External Review Board and the elimination of some fee cuts that
might otherwise have been made (Wall St J 5/22/03).
AAPS Joins Amicus Brief Supporting Privacy
With the American Psychiatric Society and other groups,
AAPS filed an amicus brief in
the case of Harold I. Eist, M.D., v. Maryland State Board of
Quality Assurance (civil case no. 240300). The issue
concerns whether a state licensure board can sanction a
psychiatrist for defending the therapist-patient privilege and
insisting that patients have an opportunity to protect their
privacy prior to disclosure of records to the state.
Dr. Phillips Allowed to Withdraw Plea
In an extraordinary ruling, the Nevada Supreme Court agreed
with AAPS in permitting Dr. Mitchel Phillips to withdraw a plea
of nolo contendere: "It would be manifestly unjust not to allow
Dr. Phillips to withdraw his plea in light of the unforeseen
consequences suffered as a result of that plea." AAPS filed an
amicus brief in favor of Dr. Phillips, which was hotly opposed by
the State of Nevada (see AAPS News, April 2002).
Tip of the Month: In fraud prosecutions under HIPAA,
18 USC 1347, a N.Y. court established this requirement of intent:
"Because an essential element ... is intent to defraud, it
follows that good faith on the part of the defendant is a
complete defense to the charge of healthcare fraud. A defendant,
however, has no burden to establish a defense of good faith. The
burden is on the government to prove fraudulent intent and the
consequent lack of good faith beyond a reasonable doubt. Under
the healthcare fraud statute even false representations or
statements, or omissions of material facts, do not amount to
healthcare fraud unless done with fraudulent intent." U.S. v
Kalani, 2002 WL 31453094 (S.D.N.Y. 10/31/02).
Even Experts Disagree on Coding
In a recent study reported in the Annals of Emergency
Care, patient records were sent to four different agencies
specializing in Medicare coding, and five different experts
working in the same coding shop. For the five E&M codes that
cover 70% of emergency visits, coders all agreed in only 15% of
cases. In 29%, the codes differed by more than two coding
levels a range of disagreement much larger than that used to
extract a $10 million fraud settlement from the University of
Chicago (Wall St J 11/20/02).
"[N]othing is more effective in persuading the masses to
stop cooperating with the government than the constant and
relentless exposure, desanctification, and ridicule of government
and its representatives as moral and economic frauds and
imposters: as emperors without clothes subject to contempt and
the butt of all jokes."
Hoppe H-H. Democracy: the God That Failed
What HIPAA Really Means. I was just about to throw away
the AM News of April 7, when I read the article from the
"HIPAA Minute" series. The lead sentence is: "Give it up for the
public good protected health information that is." Later it says
that "...doctors can share patients' health information with
employers. The physician has to be working for or on behalf of
the company as part of a worker-safety program mandated by
federal agency or state law." I guess that pretty much tells it
like it is. The doctor works for whoever pays him. I wonder what
employees think about this open chart policy. I wonder whether
they even know.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY
Doctors Know What to Charge. To those who claim that
physicians' fees are very complex because they charge for
thousands of different services, such as 40 different types of
wound closure, I say baloney. That's what happens when people who
don't belong between patients and physicians (such as government,
insurers, and MCOs) insinuate themselves between the two. They
claim to "systematize and bring objectivity and uniformity," but
all they do is muck things up so they can charge fancy and
unnecessary middleman fees.
I always had a fee schedule in my Ob/Gyn office. When
patients complained that it didn't "conform" to the insurer's
codes, I told them that was between them and their
insurance company: I knew what service I had rendered,
and the skill and intellect involved, whereas the insurance clerk
If doctors started to post their standard fees, and took a
few minutes to explain to an occasional patient why they were
being charged more (say for a procedure done at 3 a.m. 40 miles
from my home), there would be no problem between doctor and
patient. But the code-makers and others who thrive on the system
would soon feel the heat as patients recognized what an
interposed nuisance they are. Then you would rapidly see demands
to keep "insurance" and government out of day-to-day medical
transactions and retreat to true insurance: occasional coverage
of the rare and expensive occurrence.
Stephen Katz, M.D., Fairfield, CT
Get Out Now. Managed care is on its last legs, and the
last one out will be left holding a mountain of unpaid claims.
We signed up for one HMO 10 years ago. We paid no attention
to them until they asked for 20 patient records, had "expert
coders" look at them, decided we charged too much, extrapolated,
and demanded money back. They left us no phone number to call.
That was the last straw. How silly we were to join in the first
place! When we wrote our letter of resignation, we got a call
begging us to reconsider: that was the first human being who
would speak to us. I told them no way. We have not sent them a
dime and await a written answer.
We calculated that if half of their patients chose to stay
with us and go out of network, we would be ahead. And the
patients, who would be reimbursed 80% of our usual fee after
meeting their deductible, would be actually be better off than
with their former copayment.
Alieta Eck, M.D., Somerset, NJ
PIFATOS Works. We have been taking payment
in full at time of
service since SimpleCare began 4 years ago. Collecting
has not been a problem. People are happy to pay a fair
price for a service. White and blue-collar patients are equally
delighted to learn about high-deductible insurance plans. Many
were never told of the availability of such plans when they
called their broker or insurance company.
Physicians who learn the financial logic of PIFATOS are
seeing an increase in their cash-based practice and a much
happier group of patients.
What doesn't work is giving a "discount" from a
CPT-coded visit for cash payment; this can potentially be a
breach of contract with some insurance companies.
Vern Cherewatenko, M.D., Renton, WA
Give Them a Price. At first, I described Patmos Clinic
as offering "affordable, quality care through payment at the time
of service." People did not know what that meant. After
researching the Tennessee Medical Board's policy on advertising
prices and finding that it was acceptable, I began listing my
fees. My patient volume increased as a result.
I charge the fees that I post. Those who think my fees are
too high (although less than the local veterinarian's fees thus
demonstrating Americans' entitlement mentality and the value they
place on their own health) are invited to consider seeking care
elsewhere the next time they need medical services. Typically,
other local physicians and urgent care centers charge twice as
much, and the wait is longer.
Some patients are hard to please; if they choose not to
become part of your practice, will you be very unhappy?
Robert Berry, M.D., Greeneville, TN
Why More Insurance Is Less. People can control their
own routine costs by changing their utilization patterns.
However, most employees are offered a single medical insurance
product with extensive first-dollar coverage, take it or leave
it. This being the most expensive type of coverage, more people
and businesses are going uninsured. In an attempt to wipe out
financial barriers to day-to-day care, we are driving most of the
most vulnerable out of the insurance pool altogether.
James Knight, M.D., San Diego, CA
Medicare Debate Enters a Dangerous Phase
Here's something different. The latest news on Capitol Hill
is that the Senate, not the House, is likely to go first in
enacting "comprehensive" Medicare reform legislation. Majority
Leader Bill Frist is driving for action by July 4, and the Senate
Finance Committee is now working feverishly on the language of a
The latest word is that the Senate bill would incorporate
key elements of the so-called "Tripartisan Plan" that was
developed last year by Senate Finance Committee Chairman Charles
Grassley (R-IA), Sen. John Breaux (D-LA), and Sen. James Jeffords
(I-VT). Under that approach, Medicare beneficiaries would be
required to pay a $250 deductible for drug coverage and half of
all drug costs between $250 and $3,450. As with last year's House
Ways and Means bill, there would be a "donut hole" between $3,450
and $3,700, and then the federal government i.e. the
taxpayers would pay all of the costs. (This is a profoundly bad
idea, of course.) Last year, the Congressional Budget Office
(CBO) estimated that the costs of the bill's drug provisions at
$340 billion over ten years.
The Tripartisan language would introduce competitive
elements into the Medicare program, establish a new fee-for-
service option, establish a catastrophic coverage limit of $6,000
a year, and add preventive services.
Senator Grassley has been at loggerheads with Representative
Bill Thomas (R-CA), chairman of the House Ways and Means
Committee, over tax policy. Moreover, Grassley is committed to
increasing Medicare payment for doctors and hospitals in rural
areas, and is concerned about the ability of private health plans
to deliver the goods in rural areas. HMOs, for example, are
notoriously absent in rural areas, because population density is
not high enough to sustain a viable HMO market. Grassley is also
at odds with the White House over the value of the drug benefits.
The White House Plan calls for a less robust prescription drug
benefit in traditional Medicare and a more robust prescription
drug benefit in the new Enhanced Medicare a new system of private
competing health plans, with the intention of enticing seniors to
join the new system. Grassley's position is to guarantee equal
levels of drug coverage in traditional Medicare and private
health plans, and allow seniors to choose which option they want
on a level playing field.
In the Senate, there is another political problem needing
careful calculation. Grassley runs into serious trouble with
conservative Republicans if the Senate Finance Committee bill
ends up being the proverbial Nothing Burger: more spending for
doctors and hospitals and other medical professionals, additional
Medicare drug spending, and little in the way of serious
How will the Left react to a serious Medicare proposal if
(indeed, a big if), the Senate Finance Committee should actually
produce such a bill? A serious Medicare reform proposal would, we
repeat, maximize freedom of patient choice of plans and benefits,
and also maximize free-market competition among plans and medical
professionals. As Ron Pollock, Executive Director of the Families
USA, a grassroots group lobbying for even more government control
of medicine, recently told The New York Times, any
significant step toward "privatization" of Medicare is likely to
invite a Democratic filibuster. It would require 60 votes to
overcome such an obstacle on the Senate floor. Meanwhile, the
Senate Democrats have not promoted any comprehensive Medicare
bill of their own. This is puzzling unless the entire Senate
Democratic agenda would be to obstruct change.
As the Medicare debate heats up in Congress, the President
is likely to start to weigh into the fray. In his State of the
Union, after all, the President made comprehensive Medicare
reform the second biggest item on his domestic policy agenda
after the tax and economic stimulus package. Now that that bill
has been enacted, the stage is set for round two. If anything is
clear, this is a very disciplined White House, and they can
expect to stay on schedule.
Congressman Bill Thomas is also readying language,
rumored to be largely a rehash of the bill enacted by the House
of Representatives last year. That bill would have created a
Medicare prescription drug benefit as a new federal entitlement
at a projected cost of $311 billion over a 10-year period,
enrolling nearly nine out of ten seniors in a new entitlement
program and displacing existing private drug coverage, which now
covers 78% of seniors.
Chairman Thomas has to cope with a challenge from
conservative members of the House Energy and Commerce Committee
led by Representatives Charles Norwood (R-GA) and Joe Barton (R-
TX), known informally as the "Rump Group." This group has been
skeptical of the Ways and Means efforts, and has started drafting
provisions of its own, including a serious structural change in
Medicare that would create a new system of competing private
plans, and a targeted drug benefit that would look like a medical
savings account with a debit card for drug purchases. The
inspiration for the Rump Group's drug benefit is the drug
discount card and account proposal developed by former CBO
economist Joseph Antos and Galen Institute President Grace-Marie
Turner. Estimated cost, courtesy of PriceWaterhouseCoopers, of
the AEI-Galen drug proposal: $302 billion over 10 years.
As of this writing, no language in either body has been
presented to the public. Both Senate and House are keeping the
text very close to the vest.
The Potential Pitfalls of the Medicare Legislation
Most members of Congress have routinely talked of
Medicare almost exclusively in terms of prescription drugs, even
though there is no universal prescription drug problem in
Medicare. But the adults on Capitol Hill also know that this
issue is nothing more than a sideshow to the big business of
structural reform: getting the program ready to absorb the shock
of 77 million baby boomers who will start to retire in just eight
While the drafting of legislative language is now underway,
the pressure is building and will explode in the debate. Look for
some contentious fights over certain key issues. Forget the
money: if the structure is wrong, the function will be wrong. If
the function is wrong, then there will be a whole series of
consequences, some of them explosive. For example:
#1. Beware of the importation of Medicare price
controls into private health plans. In Medicare,
historically, the budget process has driven the policy process.
This is absurd on the face of it, but that is the way it is now,
ever has been, and ever shall be, according to some folks on
Capitol Hill, amen, forever and ever and ever. The rumor on
Capitol Hill is that the CBO will only score the cost performance
of private plans in terms of the cost control performance of the
Medicare program. But Medicare "cost control" is government price
controls, all dressed up with complex and often stupid or
unintelligible fee schedules the RBRVS, the DRG system, etc.
Thus, the private plans are routinely expected to cost more, and
that means that we "can't afford" Medicare reform. We can only
afford the price-controlled system of the current Medicare
entitlement under which expenditures increased 9% in 2001, with
skilled nursing care increasing by 20% and home health care by
30%, with no end in sight.
Expect the Left to use this argument, which is precisely the
reverse of the argument it has used in the past, and do so with a
perfectly straight face. In the past, Congress could not rightly
reform Medicare because that reform would mean
decreasing Medicare spending, and cutting Medicare
spending is not a good thing for seniors and congressmen who want
to be reelected by seniors. Now, the new argument is that we
can't reform Medicare because that would mean increasing
Medicare spending. Can't spend too much on seniors! We've
got to be fiscally responsible about these things. Let's see:
Decreasing spending is bad; increasing spending is bad. Gotcha!
You've got to give the Left credit; they understand the
debate. They know it is not about spending; it is not about
money. That's for green eye-shaded accountants and too many
Republicans and their friends. Those who are clueless about the
debate don't get the basic issue: government control versus
personal control of the key decisions. The fiscal argument can
work both ways, with the same result: No real Medicare reform.
The CBO process is the way it is; and it coincides neatly
with the recent intellectual offensive of the Left, recently
highlighted by the Urban Institute's Marilyn Moon in a recent
edition of Health Affairs, in which she stated that
Medicare outperforms the private sector because of its
"aggressive pricing," among other things. Of course, the
continuance on this path to Socialist Nirvana is increased
rationing of medical services, denials of services, bureaucratic
delays, longer lines for appointments with doctors and medical
specialists, and more doctors refusing to take new Medicare
The problem of access is now starting to show up in
different areas of the country. The data is not scientific, nor
does it yet appear in peer-reviewed journals of economics. But
the evidence is there, and it is growing. For example, 22% of
doctors in San Diego, California, say that they will leave
Medicare within one to three years (AM News 2/3/03). And
Reuters News Service reported on September 5, 2002, that in 2001
more than 40% of Medicare patients had to wait a week or more to
get an doctor's appointment, up from 34.6% in 1997.
The next rumor is that in order to keep the cost of reform
down, some members of Congress or congressional staffers are
pondering the importation of Medicare's price controls into a new
system of competing private health plans. They call it "deemed"
pricing. So, for the short term at least (the ten-year budget
cycle?) private plans will have all of the price regulation that
accompanies the traditional Medicare program. To accept that is
to accept the basic policy prescription of the Left (it's the
structure, stupid!). If that's "Medicare reform," the
Congressional conservatives, you can expect, will have none of
it. Keep watch and see whether this piece makes it into the final
language of either the House or Senate bills.
#2. Beware of "competitive bidding" as a means of limiting
plan choice. The phrase "competitive bidding" means different
things to different people. That's the problem; it has a nice
"free market" tone to it, something that a fiscal conservative
might like if he doesn't look at the process too closely.
Competitive bidding can mean bidding by one firm against
another to sell a product and to attract customers' dollars and a
bigger market share. That's good competitive bidding, and it is
what we also call free-market competition. But it can also mean
government purchase of services, devices, or insurance products
on the basis of a request for a bid. The government then picks
the two or three most desirable (to the government) products or
services, and disallows the rest of the suppliers in the market
to compete for the dollars of consumers. In other words, the
government picks winners and losers; the customers can have only
what the government picks. This kind of structural change is
incompatible with market-based reform. Yet, it is in the "air" as
they say; you can smell it on Capitol Hill, like you can smell
rain in the wind.
No one has made a more articulate case against the
"competitive bidding" approach than Lois E. Quam, CEO of
Ovations, a United Health Group Company, in testimony before the
Senate Finance Committee on April 3, 2003: "Our experience has
shown that competition that focuses on 'competitive bidding'
tends to be process oriented, rather than results focused. Often,
it serves to reduce competition and limit consumer choice. It
tends to reflect the preferences of the contracting organization,
which often are not aligned with those of consumers. Competition
that places great emphasis on low cost most likely would result
in a more restrictive health care options, not unlike a staff-
model HMO with limited networks, rigid medical management
practices (denial of care) and fewer beneficiary options. In our
estimation competitive bidding that relies on low bids or a
'winner take all' approach provides high risk for both
beneficiaries and the government." Amen.
This is the month for Medicare reform legislation. Pay
attention to the details.
Robert Moffit is a prominent Washington health policy
analyst and Director of Domestic Policy at the Heritage