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Phone: (800) 635-1196
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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 48, No. 75 July 1992
CLINIC RAIDED; VITAMINS SEIZED
At 8:45 a.m. on May 6, 1992, agents of the Food and Drug
Administration (FDA), assisted by local law enforcement
officials, broke down the doors of the Tahoma Clinic in Tahoma,
Washington, 15 minutes before it was scheduled to open.
To enforce their search warrant, the FDA was willing to
kill. Not hypothetically, as by blocking access to a detachable
silicone balloon or a life-saving drug. ``Kill,'' literally, as
in a law of firearm safety: ``Never point a gun at someone you
are not willing to kill.''
Employees of the clinic testified that officers pointed guns
at them, ordering them to ``put your hands up where we can see
them.'' Officers stated that one of them had simply
``unholstered'' his weapon and pointed it at the ceiling.
Fortunately, no one actually died of fright or suffered an
accidental gunshot wound, although one woman was treated for an
The search warrant, issued by the US District Court for the
Western District of Washington, did not list cocaine, designer
hallucinogens, heroin, marijuana, nerve gas, or illegal firearms.
Rather, it called for the seizure of ``subject compounds'' and
``foreign subject compounds,'' including folic acid, vitamin-B
complex, and adrenal extract; literature and other materials
describing the ``subject compounds''; correspondence; floppy
disks; computer hardware; and the Interro device (which is used
for allergy testing).
A truckload of such items was seized, including a hard drive
removed from the computer and a number of patient records.
No charges have been filed against the owner of the clinic,
Jonathan V. Wright, MD, a member of AAPS.
Dr. Wright describes himself as a longtime advocate of
natural, conservative principles and treatments, is the author of
two books on nutritional therapeutics, and writes regular columns
for Prevention and Let's Live magazines.
Dr. Wright stated that he used vitamins of German
manufacture because these are the only available preparations
that do not contain preservatives (to which many of his patients
are reportedly sensitive).
``Every item used in my clinic is cleared by legal counsel
before it is employed,'' he stated. ``And all items seized in
this raid are safer than the generally available alternatives.''
Using electro-galvanic skin response to test for allergies
is controversial, but Wright states that in comparisons he has
made with RAST tests and skin tests, his results are just as
accurate and considerably cheaper. The Interro device has not
been alleged to do harm. However, it has not been approved by
``We must wonder about the timing of the FDA action,'' Dr.
Wright said. The raid occurred just before hearings were
scheduled on a lawsuit brought by Dr. Wright, challenging the
confiscation of his uncontaminated stocks of L-tryptophan.
FDA representatives stated that they are concerned about
``illegal drug manufacture.'' Dr. Wright stated that the FDA is
targeting pharmacies that compound medications to a physician's
order, the traditional job of the apothecary. These are often
vitamins, minerals, and herbs.
The FDA stated it is concerned about the intravenous
administration of dangerous materials. The evidence was a moldy
vial of a magnesium compound retrieved from a dumpster shared by
According to Dr. Wright, the FDA violates the Helsinki
Declaration of the World Medical Association, enunciated in 1964:
``In the treatment of a sick person, the physician must be free
to use a new diagnostic and therapeutic measure, if in his or her
judgment it offers hope of saving life, reestablishing health, or
The Tahoma Clinic has been deluged with calls from
supporters, and a legal defense fund has been established by a
group called Citizens for Health.
Dr. Wright will present his views on patient confidentiality
and medical ethics at the AAPS annual meeting in Seattle.
Fraud Squads Hampered
According to testimony of the US Department of Justice on
May 7, 1992, fraud by ``every type of provider'' is not only
costing the Treasury billions of dollars but is adversely affect-
ing ``one of the most basic rights of American citizens-the right
to quality health care.'' The FBI's enforcement powers, however,
are ``pitifully weak.'' They are hampered by issues of
confidentiality and by the fact that ``witnesses are often infirm
and ill-equipped to testify in court'' (for example, as to the
``victimization of government programs'' by mobile diagnostic
laboratories). Moreover, ``prison costs limit incarceration as a
remedy for crime.''
Thus, the need for seizing assets through civil procedures
(H.R. 4930, see AAPS News July 1992). ``The potential of
asset seizure is virtually unlimited. Additionally, forfeiture
hurts criminals in the same place it helps taxpayers: in the
pocketbook. Over the past seven yearw, more than $2 billion in
criminal assets have been forfeited by DOJ and reinvested in law
enforcement (Asset Forfeiture News Mar/Apr 1992).
Organized medicine says it ``strongly endorses measures to
crack down on health care fraud,'' although some unintentional
billing mistakes may be called ``fraud'' (AM News 5/25/92).
Anatomy of a TKO
The stage was set. The Governor, a Democrat and President
of the National Governor's Conference, had announced his plan for
statewide universal health coverage in the State of the State
address and had also announced that health care reform was his
number one priority. The Democratically controlled House of
Representatives had among its ranks the chief health care reform
advocate, well-armed with a Canadian style health reform bill
(see AAPS News, July, 1991). The Senate, with a
Republican majority of only one vote, was in disarray with no
strong voice for private medicine. Citizen Action, an
organization said to be 40,000 strong, had announced its support
for universal health care coverage by means of a single payor
system. The task for the proponents of socialized medicine
But it failed. Our opponents were not retired-yet-but
private physicians won a convincing TKO (technical knockout). On
a shoestring budget. With a statewide organization of less than
100 doctors. And without compromising our principles. The
basis for the victory was the judicious application of facts to
No doubt, private physicians were aided by the brevity of
the 1992 legislative session (60 days). The Alliance for Health
Care Reform, composed of business, insurance and medical concerns
certainly was active, stubborn, and vocal. The Democrats in the
House for whatever reason failed to solidify behind either the
Governor or the health care reform leader (Representative Dennis
Braddock) and those two individuals sparred publicly.
But the victory belongs to AAPS-and more importantly to
Our session started on January 13 with nearly continuous
discussion of two subjects-as on the national level, medical care
and balancing the budget. After a delay of approximately one
week, both the Governor's bill and Representative Braddock's bill
were discussed openly and after another week a testy compromise
between these two had been reached.
However, even by this early stage ``pay or play''-the Gover-
nor's proposal-appeared to be dying or dead. Why? Because the
AAPS members, using data developed by the Evergreen Freedom
Foundation, a local think tank, had shown that Hawaii's ``pay or
play'' plan had not really improved health care coverage despite
raising health care costs substantially. We had also shown that
Massachusetts' proposed plan had been rescinded by the Governor
due to concerns over loss of entry level jobs and total costs.
Finally, an editorial in a well circulated local newspaper had
pointed out that ``pay or play'' was merely a step-wise approach
to completely socialized health care. Nonetheless, it was felt
that the revised bill-which included an all powerful health care
commission-had a substantial chance of passage.
Then a surprise! The compromise bill failed to pass the
House on two successive votes. Substantially amended such that
the only immediate provision left was the formation of the
commission, the plan called for a vote on possible funding
mechanisms by statewide referendum 18 months in the future.
After considerable political arm twisting-AAPS's lobbyist
reported that dissenting Democrats were threatened with failure
of all their proposals-House Bill 2590 passed and was sent to the
In the Senate, similar lack of consensus had prevailed.
AAPS members testified on several occasions to Senate
subcommittees considering various aspects of health care reform.
We emphasized the tendency for government to bloat health care
costs and emphasized that simple insurance changes, such as high
deductibles and individual responsibility, would cause the
medical industry to function more like a true market economy.
These ideas fell on surprisingly receptive ears. On the advice
of an attorney interested in AAPS's cause, Mr. Michael Jonson, we
focused on simple economic facts that had been glossed over in
the rhetoric, emphasizing the effects on patients in the State,
rather than just the effects on physicians.
As the end of the session began to close in, the Senate
moved to ``do something'' on health care reform. However, just
as in the House, the legislators had learned enough to know that
broad based quick fixes were not necessarily in the people's best
interest. It took the Senate several tries to pass a diluted SB
6089, backed by the Republicans. The essence of SB 6089 was
enlargement of the uniform benefits package made available to
difficult-to-insure groups by the legislature several years
prior. On March 6, this was passed and sent to the House. The
House on the 10th of March stripped SB 6089 of all of its Senate
language and substituted the previously passed House Bill 2590
under the rubric SB 6089 and sent it back to the Senate. The
count down of the last few days of the legislative session began.
Washington State AAPS feared the possibility of a conference
committee; we knew the likely makeup of the committee and that it
would not be favorable. While the Senate spokesman had declared
that no bill with a cost control commission would be acceptable,
we doubted the depth of their resolve.
We therefore contacted the Libertarian Party of Washington.
When I recently lectured that group on my decision to leave
Medicare, they had voiced interest in helping to defeat the
proposed legislation. At AAPS's request, this group lent its
assistance at a crucial time.
The session ended without a conference committee and thus
far no serious attempt to organize a special session has
What can be done against ``universal'' (government-con-
trolled) medical care?
We discovered that: (1) personal testimony by individual
physicians carries tremendous weight; (2) debunking the typical
national health care myths can be done easily and very publicly
in legislative testimony; (3) focus is critical. We did not try
to reach every legislator except insofar as members were en-
couraged to call their own representatives and senators.
Instead, we focused on the Senate as we felt they were a more
Indispensable ingredients included timely information about
hearings; personal involvement by knowledgeable physicians;
frequent communications by a biweekly newsletter; an ad hoc
network with other interested groups, especially the Libertarian
Party and the Evergreen Freedom Foundation.
We doubt that the battle is over in Washington. However, we
are bolstered by our success and encourage members in other
states to take heart. Americans do not want government health
care. We can win.
Michael Schlitt, MD, Renton, WA
[Michael Jonson and Drs. Michael Schlitt and Robert Cihak will
speak at the annual meeting.]
OSHA Inspectors Are Subject to Fourth
Federal regulations recently promulgated by the federal
Occupational Safety and Health Administration for physicians'
offices will undoubtedly result in yet more federal regulators
being unleashed upon physicians in private practice. The new
rules, presumably designed to minimize physician and employee
exposure to bloodborne pathogens enlists still another federal
agency (besides HCFA) in what appears to be a methodical federal
takeover of physicians' offices.
Physicians' offices will now be subject to unannounced OSHA
inspections and potential fines for violations of the rules
(including those summarized in AAPS News, May and June,
1992). However, recent case law demonstrates that the US
Constitution places both substantive and procedural limits upon
the authority of OSHA inspectors.
In the seminal case of Marshall v. Barlow's, Inc. 436 U.S.
307 98 S.Ct. 1816 56 L.Fd.2d 305 (1978), the US Supreme Court
held that the federal Occupational Safety and Health Act, which
empowered the Secretary of Labor to search the work areas of any
employment facility within OSHA's jurisdiction for safety hazards
and violations, is unconstitutional insofar as it purports to
authorize inspections without a search warrant or its equivalent.
The case arose in the following manner: On September 11,
1975, an OSHA inspector arrived at Barlow's, an electrical and
plumbing installation business. After showing his credentials
(as required by the relevant statute), the OSHA inspector
informed the owner, Mr. Barlow, that he wished to conduct a
search of working areas of the business. The owner asked whether
OSHA had received any complaints about the company. The
inspector answered no, but told Mr. Barlow that his company had
simply turned up in the agency's selection process. After the
inspector again requested to enter the nonpublic areas of the
business, Mr. Barlow asked whether the inspector had a search
warrant. Because he did not, Mr. Barlow refused the inspector
entry to the employee areas of the premises, relying on his
rights as guaranteed by the Fourth Amendment to the US
Three months later, the Secretary of Labor petitioned the US
District Court for an order compelling Mr. Barlow to admit the
inspector. The requested order was granted, but Mr. Barlow again
refused admission and filed suit in federal court seeking an
injunction against the warrantless search assertedly authorized
by the OSHA statute. The lower court ruled in Mr. Barlow's
favor, holding that the Fourth Amendment required a warrant for
the requested search and that the statutory authorization for
warrantless inspections was unconstitutional. The US Supreme
Court agreed and affirmed.
The Supreme Court first held that the Warrant Clause of the
Fourth Amendment protects commercial buildings as well as private
homes. The Court then concluded that the fact that Mr. Barlow's
establishment was regulated by OSHA did not render it a
``pervasively regulated business'' so as to fall within an
exception to the Fourth Amendment's warrant requirement.
Finally, while the Court concluded that ``probable cause'' in the
criminal law sense was not required for the issuance of the
warrant, a warrant was nonetheless required to assure against
arbitrary unannounced inspections by OSHA field agents.
In cases that have followed Barlow's, the federal courts
have further required OSHA inspectors to obtain subpoenas or
warrants for the inspection of records required to be kept under
section 657(c) of the Occupational Safety and Health Act, 29
U.S.C. 657 (c). See, e.g. Brock v. Emerson Elec. Co.,
Electronic & Space Div., 834 F.2d 994 (11th Cir. 1987);
McLaughlin v. Kings Island 849 F.2d 990 (6th Cir. 1988).
Pursuant to the Freedom of Information Act, AAPS is
currently in the process of obtaining information from OSHA
regarding enforcement and compliance with the new ``bloodborne
pathogen'' rules, as well as rules governing the labeling and use
of chemicals. All such information will be made available on
request, as soon as it is received. The Legal Service will
closely follow the implementation and enforcement of the rules
and will keep the membership apprised of legal developments that
may affect physicians' rights under the new federal scheme.
What to Do If OSHA Knocks
Before OSHA knocks, you need to make a good-faith effort to
comply with the rules. First, you need to find out what the
rules are. Regulations for bloodborne pathogens are published in
the Federal Register, vol. 56, No. 235, Dec. 6, 1991, pp. 64175-
64182. Rules for chemical hazards are in vol. 52, No. 163,
August 24, 1987, pp. 31877-31886. Your state office of OSHA
might send you additional materials if you call.
The OSHA inspector will probably not have a search warrant.
It requires an effort to obtain one, and most physicians will let
him in without it. They feel they have nothing to hide, and they
fear that the inspector will be angered or suspicious if they
appear to be uncooperative. Although the government is not
supposed to punish people for exercising their rights, inspectors
have considerable discretion. Keep in mind though that if you
voluntarily waive your rights, you will not be able to raise a
Fourth Amendment claim later.
You do not have to give blanket consent to an inspection.
You may ask the inspector to specify exactly what he wishes to
look for. You may choose to allow him to look at the office but
ask that he come back with a subpoena if he wants to look at
confidential patient records. (Remember the possibility of
filing a motion to quash a subpoena.)
You have the right to accompany the inspector and to ask
that he schedule the visit at a time when you can do so. Better
still, have an employee come along also. If it comes to a
swearing contest, it is better to have two witnesses, and the
employees' testimony will carry more weight than yours. Take
detailed notes. Ask questions (e.g. ``Is everything okay in
here?'') Whether to ask permission to make a tape recording or
photographs is a judgment call. (State laws vary about the
permissibility of hidden tape recorders used by a party to a
conversation.) Ask permission to copy the inspector's report
``for my files'' if he prepares one during the visit, especially
if he says he has found no problem. If he finds a problem, fix
it immediately. (An employer was cited and fined $1,000 for a
can of soda in a refrigerator also used for blood specimens.
Because the can was still in the refrigerator as the inspector
was leaving, that was another $1,000.)
Call LLCS if you have a question (606-253-4868).
AAPS is pleased to welcome Drs. Bry Benjamin of New York,
NY; Leon Bush of Augusta, GA; Wendy Cohen of Englewood, NJ; John
J. Gapsis of Morton, IL; Jeffrey W. Hull of Decatur, AL; George
H. Jarden, Jr. of Las Cruces, NM; Michael L. Jenkins of Clayton,
NM; Jonathan Kahn of Chicago, IL; Mohammad Katebian of
Hackensack, NJ; Richard L. Klingler of Forsyth, MT; Lee A.
Klopfenstein of Van Wert, OH; Mike Lenker of Houston, TX; J.
Mervyn Lloyd of Westwood, NJ; Donald R. Mackay of Las Vegas, NV;
William A. Newsome of Gainesville, FL; Bruce A. Nitsche of Bain-
bridge Is., WA; Francis X. O'Brien of Collingswood, NJ; Dale G.
Rosin of Somerville, NJ; Joseph L. Sbarra of Kamuela, HI; Newton
D. Scherl of Fort Lee, NJ; Michele Martin Shoun of Grand Rapids,
MI; Theresa A. Smith of Kamuela, HI; John Sosbea of St.
Petersburg, FL; Jack Tidwell of Columbus, GA; Tonne of Pueblo,
CO; David L. Whitaker of Stuart, FL; and James W. Wiggs of
Janice L. Toth of Columbus, OH, is a new student member.
9.1 Million Jobs at Risk
According to a study by the Partnership on Health Care and
Employment, a group of about 200 employers, a pay-or-pay health
plan such as that proposed by Sen. George Mitchell (D-ME) could
lead to the loss of 9.1 million jobs. The heaviest impact would
fall on the poor; 83% of those at risk are workers earning less
than $5,000 per year, 74% are age 18 or younger, 16% are black
and 16% Hispanic. These are the very workers that the
legislation is supposed to benefit (BNA's Medicare Report
Are Physicians Professionals?
...If the physician is not trusted with insignificant
details such as insurance coding, the format of records, the
selection of medications, and the election about when and which
investigations to perform, how can he have confidence in his
ability to make life-and-death decisions?....
We have anti-kickback laws, anti-cartel laws, anti-corrup-
tion laws, anti-unnecessary operation regulations, coding laws,
anti-coding creep laws, anti-early discharge rules, reporting
laws, anti-reporting laws (AIDS)....Only a fool would stand up
and say these claims of abuse are bizarre. Anyone standing up is
automatically accused of cover-up. This is a dialectic
The reason doctors must be controlled is because of their
professional ethics. In the Hippocratic Oath, there is a
tradition of professional responsibility and dedication, of
individual responsibility. For socialist control to engulf North
America, the spark of independence and responsibility must be
Thomas A. Dorman, MD, Practice Newsletter
Are Professionals Interchangeable
The Primary Care Health Practitioner Incentive Act (HR
4963), introduced by Rep. Edolphus Towns (D-NY), would amend
Medicare to pay 97% of the amount reimbursed for physicians if
the same services are performed by physician assistants, nurse
practitioners, clinical nurse specialists, and nurse midwives.
Currently, these payment rates apply only if the service is
performed in a nursing facility or a rural area (Health
More Regulations Proposed
Some 30 million surgical procedures are annually performed
in physicians' offices, according to HHS, a 39% increase compared
with three years ago. Unlike hospitals and ambulatory surgery
facilities, the physician's office does not have to be licensed
or inspected. Rep. Ron Wyden (D-OR) has introduced a bill to
bridge this regulatory gap, because of anecdotal reports of
patients dying due to inadequate inspections. Ambulatory surgery
centers support the bill.
I went to the store the other day to buy a bolt for our
front door, for, as I told the storekeeper, the Governor was
coming here. ``Aye,'' said he, ``and the Legislature too.''
``Then I will take two bolts,'' said I. He said that there had
been a steady demand for bolts and locks of late, for our
protectors were coming.
Henry David Thoreau, Journal (Sept. 8, 1859)
June 20, 1992. Medicine and Freedom Seminar, Great Falls,
Montana (to register, call 800-635-1196).
August 16-20. 9th International Congress of Private and
Independent Medicine, Hotel Grand Marina, Helsinki, Finland.
Call IATROS, (319)283-3491.
September 12. Freedom in Medicine seminar, Columbus, OH.
October 15-17, 1992. Annual meeting, Seattle, WA, Airport
Legislative AlertLegislative Alert: AAPS Report from
Small Group Health Insurance Reform Stalled. Even the
minimalist approach is now running into some difficulties, as
members of Congress are privately saying that the small group
insurance reform option is raising more questions rather than
solving problems of access and cost.
The measures commonly discussed include: (1) provisions for
guaranteed issue of insurance, (2) an elimination of restrictions
on medical conditions, (3) the elimination of optional
renewability and experience rating in favor of community rating
or some form of ``modified community rating,'' which would allow
for premium variations on the basis of age, sex, or geography.
A large number of small group insurance reform initiatives
are being diligently pursued in the states already, another
factor complicating planning on Capitol Hill. Florida, for
example, has adopted a comprehensive insurance reform measure
that promotes pooling of small businesses into larger risk pools,
enabling insureds to write insurance for small business on much
more favorable terms. Governor Lawton Chiles of Florida is
issuing the insurance industry a challenge: get people signed up
within the framework of the private sector by 1995, or else the
next step is play or pay or a single payer system of health care
On May 14th, the House Subcommittee on Environment, chaired
by Rep. Henry Waxman (D-CA) held a major hearing on the subject.
Waxman called upon HHS Secretary Louis Sullivan to testify, but
neither Sullivan nor any other witness from the Administration
appeared. So the hearing focused on the insurance industry's
views. Blue Cross and Blue Shield claimed that the approach
would not necessarily contain costs.
More significantly, the General Accounting Office, the
fiscal investigative arm of the Congress, testified that small
group market insurance reforms at the state level did not lead to
a ``significant'' increase in the number of Americans insured. In
cases where small employers were offered substantial state
subsidies (up to 50% of the cost of insurance), a significant
number refused to cover their employees.
But the increasingly irritating policy question for Members
of Congress, who want to ``do something'' about the health care
crisis is this: Does it make sense for Congress to tighten up the
regulation of small group insurance, if that tightened regulation
will mean higher premium costs? Isn't the high cost of health
insurance one of the reasons for the ``health care crisis'' in
the first place? Doubts are surfacing now about small group
insurance reform, even though, at least publicly, everybody who's
anybody in the rarified realm of Capitol Hill health care
policymaking (Senate Republicans, Texas' Senate Finance Chairman
Lloyd Bentsen, Chairman Dan Rostenkowski of House Ways and Means,
President George Bush) is all for it. But how to control the
costs engendered by the regulation? More regulation? It may not
be enough to derail small group insurance reform, but the longer
the Capitol Hill folks think about it, the more problems they
Broader Reform Also Stalled. No signs yet they are in
a panic, but evidence is mounting that senior House and Senate
Democrats-at this late date in the political season-are not
really sure what they want to do with the big picture of ``health
care.'' This was supposed to be the Democratic issue. But
House and Senate Democrats, who have been talking very loud
and very tough about national health care reform, and criticizing
the Bush Administration for not putting up a realistic and
``comprehensive plan,'' apparently do not know how to make a
coherent case to the public.
Pennsylvania Senator Harris Wofford, who stunned America by
upsetting Republican favorite Richard Thornburgh, Bush's former
Attorney General, in a special Senate election last year, is
backing away from the Mitchell play-or-pay bill and working on
This past month, Senate Majority Leader George Mitchell has
been intensely lobbying Senate colleagues to find support for
either play or pay or some other broad health care reform bill. A
lingering question: How are they going to pay for it?
Mitchell's idea is being regularly battered by a growing
number of opponents, like Congressman Dick Armey (R-TX), using
ammunition from unlikely quarters, such as the liberal-leaning
Urban Institute. The prospect that 52 million private sector
workers would be dumped out of their private insurance into a
public health insurance plan continues to haunt pay-or-play
Is the Canadian System Dead? The Canadian system
seemed moribund, especially after its chief sponsor Congressman
Marty Russo (D-IL) bit the dust in the Illinois primary. With
Russo gone, Sen. Paul Wellstone of Minnesota is the leading Con-
gressional champion of national health insurance along the lines
of the Canadian model. A bright and aggressive champion of the
liberal causes in the Senate, Wellstone faces an uphill battle.
By now, the Canadian option may be dead. On May 26th, the
New York Times, America's most Politically Correct journal of
liberal opinion, issued its latest condemnation of the Canadian
style health care system: ``The Canadian health care system is
good, but not good enough to meet America's needs.''
The Times editorial pointed out that, after adjusting for
inflation, Canada's health care costs rose even faster than those
of the United States; that Canadians do not have the same kind
and degree of health care problems that are routinely handled by
the American system, making most comparisons between the US and
Canada faulty, or biased in favor of Canadian performance; too
many Canadians wait too long for surgery; and adopting the
Canadian system might undermine medical innovations. The Times
also showed that perfect equity has not been achieved:
[In Canada,] Infant mortality runs twice as high among
the poor as the rich...[and] rates of tuberculosis among
tribe members run 40 times the national average...
If liberalism's oracular journal is not enthusiastic about
national health insurance, House and Senate liberals are going to
have a tough time getting back the momentum they seem to have
The View from the Inside. No more than 7% of all
Congressional staff in a recent survey expect any health
insurance legislation will pass Congress before the November
The Employers Council on Flexible Compensation posed the
following question to America's Unelected Representatives: If
some version of health care legislation is passed in 1992, which
type do you think it will be? The largest number of staffers
(56.7%), not surprisingly, said that small group insurance reform
to help small business get access to health insurance would be
most likely. Only 18.4% thought that ``play or pay'' would have a
shot before the election. A Canadian style plan racked up 3.2%;
another version of national health insurance 3.0%; ``other/don't
know'' came in third with 14.6%; and Medicaid/Medicare reform or
other incremental reforms garnered 4.1%.
The Congressional staff survey also brought out what most
Capitol Hill observers have been thinking all along. Policy is
really being held hostage to the Presidential election. The
course will be determined not by the arguments circulating in
Congress now, on either side of the issue, but by who wins in
November. If a Democrat wins the White House, 60.8% of the
surveyed staff expect Congress to pass either a ``play or pay''
plan or some form of national health insurance.
Will RVS Advocates Seize More Territory? Quietly, ever
so quietly, RVS advocates are looking to extend their imperial
domain of price controls over physicians services. In the last
issue of Legislative Alert, we told you of the latest round of
hearings before the House Ways and Means Subcommittee on Health,
chaired by Congressman Pete Stark (D-CA), on Rostenkowski's
legislation to extend the Medicare payment system to the private
The latest foray of the RVS forces is into the relatively
free and unbridled market of the Federal Employees Health
Benefits Program (FEHBP), the medical insurance program that
serves over 9 million federal workers and retirees, including
members of Congress.
The FEHBP is, in fact, a kind of voucher system for federal
employees, in which every employee and retiree can pick and
choose from among a group of private carriers. The federal system
is radically unlike Medicare; there are no DRGs and nothing like
the RVS. Physicians are generally paid under the traditional
customary and prevailing rates. Federal employees can change
carriers and have the opportunity to switch their insurance
plans, usually in the late fall of every year. Among private
insurance carriers, the federal system is highly competitive.
In a special study prepared by a group of consultants for
the House Committee on Post Office and Civil Service, chaired by
William Clay (D-MO), Medicare-style fee setting has been proposed
as an ingredient in a comprehensive reform of the federal health
insurance system. Naturally, the comprehensive reform proposal
presented to the Committee would raise the government's
contribution to the cost of the federal employees insurance
premiums and would simultaneously eliminate much of the
competition in the system and transform the pluralistic FEHBP
into something that looks more like Medicare, a single major plan
with some geographically-based HMOs.
In the meantime, Drs. David Blumenthal and Arnold Epstein
On the whole, we think the introduction of the fee
schedule is likely to hamper access for Medicare
patients in certain areas and those seeking certain
services, just as controls on Medicaid fees in
obstetrics, for example, have created problems of
access for certain Medicaid patients. In addition,
other groups of payers, specifically those insured by
Medicaid and the uninsured, may suffer indirectly as
physicians, striving to maintain their incomes, become
less willing to provide care at reduced rates or for
free. (``Physician Payment Reform-Unfinished Business''
(New Engl J Med, 5/14/92).
Thus, the RVS marches on and on and on. Those in the medical
profession who assiduously assisted in the creation of this
monster, and are now so upset by the turn of events, have only
themselves to thank for this mess.
Cost Shifting and Rising Costs. While the government
continues to create distortions in the medical market, it is not
surprising that it is becoming increasingly preoccupied with the
inevitable effects of much of its own handiwork. On May 18, the
Senate Finance Subcommittee on Families and the Uninsured,
Chaired by Sen. Don Riegle (D-MI) held a hearing on health costs,
cost shifting, and its effect on the economy.
The most significant testimony was presented by Mr. Don
Moran, a former Reagan Administration official, who worked for
OMB Director David Stockman. His company, Lewin/ICF, is famous
for its sophisticated health care modelling, detailing the impact
of health care costs on businesses, government and consumers.
Moran reported Lewin's findings from a study done for the
National Association of Manufacturers. The Lewin study found that
uncompensated care, combined with current Medicare and Medicaid
rates, resulted in cost-shifting by hospitals of $21.7 billion in
1991. This amounted, in 1991 dollars, to 12.6% of all employer
health care costs, which totalled $171.1 billion.
Another critical area of cost-shifting identified by Moran
was the shifting of costs from small employers to large employ-
ers. The Lewin analysis concluded that in 1991, 17.3 million
workers, or 15% of the total workforce, were covered as
dependents in a health care plan sponsored by some employer other
than their own. The dollar value of this cost-shifting amounted
to $26.4 billion, or roughly 20% of all employer medical costs.
In terms of the hardest hit industries, manufacturers and
transportation companies together absorbed about 88% of all cost
Not surprisingly, union and business representatives both
came out in favor of strong federal action to contain costs, such
as a Health Care Cost Containment Board, in effect a price
control mechanism. The lesson is clear: distortions in the market
beget more distortions, and price controls beget more price
An interesting observation was made by Mr. David Brailer of
the Wharton School of Business. Brailer pointed out to the Senate
Finance Committee panel that health care cost increases and cost
shifting is not undercutting the competitiveness of American
firms. But it is affecting the standard of living of the American
people, as more and more resources are progressively shifted from
consumption of goods to the consumption of medical services.
Bush Plan: More Cost Shifting. On May 5, the Bush Ad-
ministration sent its first bill to implement ``health reform.''
The measure will increase the medical insurance tax deduction for
the self-employed from 25% to 100%. The expected $5 billion loss
in tax revenues would be ``funded'' by changing the Medicare
update to hospitals from a fiscal year to a calendar year basis,
thus delaying the increase by three months. In addition, the
Bush proposal would lower the Medicare payment cap for clinical
laboratory services from 88 to 76% of the national median.