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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 50, No. 7 July 1994
ARE YOU GUILTY OF A CODING
Many health-care reform proposals now before the Congress-
including the Rowland-Bilirakis ``consensus bill''- would extend
broad federal authority to prosecute ``fraud and abuse'' into the
private sector. All physicians thus need to examine their
practices carefully even if they never accept funds from the
Medicare or Medicaid program. Those who do take federal money
may need to investigate the ``voluntary compliance program'' for
``health care companies'' under development by the Departments of
Justice and of HHS.
This program would enable companies that discover a fraud
and abuse problem to ``come in and disclose it and get that
concern resolved'' stated D. McCarty Thornton, associate general
counsel to the Department of HHS Office of the Inspector General.
However, it would not be an amnesty program in which ``if you
'fess up, all is forgiven, and you go scot-free'' (BNA's
Health Care Policy Report 4/25/94).
Fraud and abuse includes routine waiver of deductibles and
copayments, upcoding, and unbundling of charges.
At an April 14 speech at a conference sponsored by the
Healthcare Financial Management Association, Mr. Thornton
outlined some fraud-and-abuse provisions of Clinton's Health
Security Act, which were included in the reform bill passed by
the House Ways and Means Subcommittee on Health. Offenders
convicted under the Act would be unable to bill any
payer during a mandatory period of exclusion.
``It would put the provider out of business for a while,''
A program attendee raised the question of possible ``witch
hunts'' because enforcement would be funded from criminal fines,
penalties, and forfeitures. Thornton said that ``it would be
foolhardy for any agency to bring trumped up cases'' because of
the checks and balances in the criminal justice system. In his
experience, ``there is no record of any significant misconduct by
law enforcement agencies'' in the fight against health-care
fraud, and it would be irrational to expect it (BNA's
Medicare Report 4/22/94).
As an example of how the enforcement program might work,
physicians should consider the case of Edgardo Perez-DeLeon,
former office manager for his wife's internal medicine practice,
now prisoner #59320 in the Ingham County Jail. Mr. Perez was
convicted on about 13 felony counts of Medicaid False Claims and
Health Care False Claims Offenses. He had coded some services
that did not involve a physical examination as an ``office
visit'' of varying levels (e.g. 90060).
In November, 1993, Mr. Perez wrote a letter to Mr. James
Groen, Medical Services Administration; Dr. S. Adelson, Blue
Cross Blue Shield of Michigan; and Mr. Patrice Helwig, Medicare
Policy Dept of BCBS of Michigan. The letter gives a number of
specific clinical examples and asks these administrators to write
down the code they felt was appropriate. It also states:
``Please indicate whether or not an office visit can be billed
without one of the three Evaluation and Management components of
history, physical examination, and decision-making and if these
components can be disregarded when time consideration goes as the
only component into services related to counseling or
coordination of care. Please indicate if your guidelines for E&M
coding are consistent with CPT/HCPC guidelines and the
This unanswered letter figured importantly in the Judge's
decision to sentence Mr. Perez to one year in jail. While his
attorney argued that the letters showed Mr. Perez was trying to
conform his conduct to the law, the prosecution asserted that the
letters were an attempt to ``more or less cover himself for what
he intends to continue to do in the future. In that respect, I
think that this shows little potential for reformation. [He was]
aware...that there is a hot line number that you call. That's
the way if you have real legitimate questions.''
Because of the ``mind set of Mr. Perez,'' who ``still wants
to argue some of these same issues that were decided by a jury,''
the prosecutor said, ``I still don't think he has yet gotten the
message.'' Additionally, the prosecutor argued that reading
about Mr. Perez's jail sentence would be a ``deterrent'' to other
Mr. Perez risked an additional four years in jail by
dictating a deterrent letter over the telephone from jail. This
letter was typed on a piece of his wife's stationery and
addressed to Dr. Jane Orient, Executive Director of AAPS. It was
a warning to all physicians, entitled ``CPT AND HCPCS CODES
ARE NOT ALIKE.''
``Our concern is [that]...not being aware of differences
that you should have known, regardless of your intent, might land
you in jail.... While the Medicare program has HCFA's HCPCS
codes, all members of the BCBSM National Association late in 1991
adhered to the AMA's copyrighted CPT codes....The HCPCS codes and
the CPT codes, although they are numerically and narratively
described alike, are not alike with regard to payment
Mr. Perez's attorney, in a letter that also threatens to
foreclose on property that Mr. Perez has not yet been able to
sell to pay his legal fees, writes as follows: ``It is hard to
fathom what possessed you to write a letter to Dr. Orient on
[your wife's] stationery....The letter itself makes reference to
`our' concern. Clearly, your making reference to the word `our'
would indicate to any reader that the letter was not
just written in your behalf but on behalf of [your wife's]
office. This is clearly in violation of your probation.''
According to Robert J. Madden, PhD, MD, an attorney who
reviewed this case, it is a ``sad illustration of what happens
when a physician practices medicine by the numbers-as all
physicians do now in the USA.''
The Doctor as Law-Enforcement Target
The Health Police are already here. Are they visiting your
office, looking for health-care fraud and abuse?
If so, they have probably read a few tips in a US Justice
Department manual for investigators. They will have been advised
to observe the names of support personnel for later
investigations or charges and the location of files for later
search warrants or subpoenas. Quite possibly, they will not be
wearing a uniform:
``One tape-recorded, undercover visit can make an entire
case....Closely supervise each undercover visit...to maximize
inculpatory conversations...You want to prove a pattern so that
you can use RICO forfeiture to financially dismantle the fraud''
(Medicare Compliance Alert, 3/28/94).
Physicians and medical facilities need to protect themselves
before they become aware of an investigation. A
compliance plan can lessen fines by up to 95 percent. (In the
absence of a plan, fines can reach more than $70 million.)
According to Federal Sentencing Guidelines, a minimum of seven
elements are required. These include: (1) standards and
procedures for employees that are capable of reducing the
likelihood of wrongdoing; (2) assignment of oversight
responsibility to a specific high-level individual; (3)
provisions for employee training; (4) a program to monitor and
audit employees; (5) a plan for enforcement and discipline; and
(6) guidelines for response and prevention.
Not having a plan subjects a hospital, group practice, or
clinic directors to a possible shareholder audit. Plans are tax-
deductible; criminal fines are not (Medicare Compliance
Note that federal investigators are not the only threat.
Private citizens, including employees, can bring a qui
tam action for civil enforcement of the False Claims Act.
Every employee is thus a potential Inspector General. In 1991,
an average of 10 such cases were brought every month. The
potential financial reward is up to 25 percent of what the
organization is required to pay the government; one whistle-
blowing employee was awarded $16.5 million (ibid.)
Physicians must be very careful of the company they keep. If
they hold a position in an enterprise engaged in illegal
activities (the clinic involved in U.S. v Sims-Robertson
was swapping drugs for blood donations), they are presumed to
have agreed to promote the activities, and circumstantial
evidence is sufficient to convict them of a RICO offense
(Medicare Compliance Alert 2/28/94).
Physicians who discover they are under investigation are
advised to fight aggressively before indictment. Once
indictments come down, somebody is going to be convicted of
something, according to attorney Tom Baker of Atlanta's
Kilpatrick and Cody (ibid.)
Physicians are advised not to settle with just one agency
but to be sure that everybody is at the table at the same time-
the IG's representative, the assistant US attorney, the region
HHS representative, the Department of Justice, and the defense
Note that a ``no contest'' plea is the equivalent of a
conviction within the meaning of mandatory exclusion provisions
of Medicare and Medicaid, and that the law does not distinguish
between misdemeanors and felonies, according to an administrative
ruling in the Matter of Patricia McClendon (Docket No.
C-93-038, Decision No. CR-264, 5/21/93). The Administrative Law
Judge in that case also held that the exclusion law's failure to
define what constitutes a crime or misdemeanor does not deprive
the accused of due process (Civil Money Penalties
``D'' Is For Drowsing Near Dragons
Proposed new criminal laws, among many other terrifying
elements of the Clinton Plan, are explained for the layman in a
richly illustrated essay by Madeleine Pelner Cosman, PhD, a law
professor who spoke about the Crime of Referral at recent AAPS
meetings. ``The ABCs of the Clinton Medical World: an
Alliterative Alphabet of Admirable Animals'' was published in the
Cardozo Omnibus Journal, April 1994, eliciting cries of
dismay from Senate Majority Leader George Mitchell (D-ME).
In a letter to the Dean of the Benjamin N. Cardozo School of
Law, Dr. Cosman states:
``I only learned by having met Law Forum editor
Mark Treitel in the elevator that there was a complaint to
Cardozo for having published [my article] and some meeting with
Professor Farrell and others to discuss `errors'....
``If Senator Mitchell or anyone else finds errors, I would
greatly appreciate immediate information and specific reference
to them. If I have made an error, gladly will I correct it....In
fact, I will gladly make a gift of the short version of the
Health Security Act as published by Times Books to any lawyer,
law student, or Cardozo professor in return for the invaluable
consideration of his or her promise to read it.''
A copy of this elegant article-which has a predator on every
page-is available from AAPS for a self-addressed 9 x 12 envelope
with $0.54 postage.
Do You Owe Them $486,000?
A patient complained to Medicare that she had been billed
for a ``prosthesis,'' although she had no artificial limbs or
even a dental plate. There was no wrongdoing because in Medicare
terminology, a ``prosthesis'' is a sterile surgical tray.
However, Medicare audited 60 of the physicians' charts and
determined that she had ``unnecessarily'' treated conditions such
as psoriasis and acute vesicular tinea pedis. Extrapolating back
to the first day she had seen a Medicare patient, they calculated
that the doctor owed Medicare $486,000.
The physician who testified on her behalf is now being
audited himself (The Schoch Letter, 1/94).
Waiving Your Freedom of Speech
In a letter to Senator Daniel Patrick Moynihan, Lawrence R.
Huntoon, MD, of Jamestown, NY, writes:
I am enclosing a response that I just received from Upstate
Medicare regarding a ``take it or leave it'' contract the
government wants to force me to sign (Electronic Data Interchange
or EDI agreement-see p. 4)....They tell me how sorry they are
that the agreement is so unreasonable toward physicians and how
sorry they are that the agreement would infringe on my First
Amendment rights, and how this really ``wasn't their
intent''....[They state that] ``this agreement has been imple-
mented as directed by the HCFA and verbiage cannot be changed by
our office.'' Interpretation: ``we are just a bunch of little
Nazis following orders.''
One of the effects of the EDI contract is that I will be
forbidden to complain about botched Medicare claims to medical
societies and congressmen...
Clinton Case Poised for a Decision
AAPS filed its final memorandum in the case against the
Clinton Task Force on Health Care Reform on June 3, 1994. Oral
argument will likely be scheduled in mid or late June.
The AAPS Motion for Summary Judgment asks the Court to
declare that the Interdepartmental Working Group and its 15
Cluster Groups, 43 Working Groups, and four Subgroups were all
advisory committees for purposes of the Federal Advisory
Committee Act and the Government in the Sunshine Act. AAPS
contends that the records turned over to counsel as a result of a
November, 1993, court order show that Working Groups were not
composed wholly of full-time officers or employees of the federal
government, contradicting sworn testimony by Ira Magaziner in
AAPS moved the Court to enter a rule for contempt against
Ira Magaziner. In addition, AAPS has requested reimbursement for
all attorneys' fees because AAPS has had to prosecute the action
to prove what Mr. Magaziner knew to be the truth 15 months ago
but withheld from AAPS and the Court. Further, AAPS is seeking
the maximum level of penalties, and the striking of all evidence
introduced by the White House, because the third affidavit of Ira
Magaziner reveals records and documents that AAPS had requested,
but that the White House never ``identified''-much less turned
over to counsel-in spite of the November court order.
The White House has responded-almost shamelessly-that Ira
Magaziner should not be held in contempt because he did not
violate any court order. They seem to believe that he needs a
court order to tell the truth! Of course, false swearing has
always been deemed an obstruction of justice and a matter handled
by the contempt powers of the court. The White House now tries
to assert that AAPS sought only to have records ``identified,''
Mr. Magaziner has never attempted to introduce any testimony
explaining or refuting his false statements of March, 1993. In
effect, the White House has conceded the most critical issue-the
make-up of the Working groups, which included hundreds of
individuals from private special interests, all of which stand in
position to gain financially from the Clinton Health Care Reform
The Role of Private Foundations
Among the private interests heavily represented on the task
force were tax-exempt foundations. For further evidence of ``the
growing activism of private foundations in promoting reform
through grants''-for example the $100 million over the past five
years spent by the Robert Wood Johnson Foundation to ``help
states plan, develop, and implement health care reform'', see
N Engl J Med 330:75-79, 1994.
Is the False Claims Act Constitutional?
In 1991, a Michigan dentist was convicted of three felony
counts of violating the Michigan Health Care False Claims Act,
which became effective in March, 1985. He had billed Blue
Cross/Blue Shield for a total of $176 for amalgams, when in fact
the service provided was the application of sealants to the teeth
of children (a noncovered service at that time).
The actual coding was done by a dental assistant, who
testified that the codes were ``confusing.'' The dentist had
signed the claims forms hurriedly, along with a large stack of
Charles H. Noble of Flat Rock, MI, the dentist's attorney,
filed a Brief on Appeal, arguing that the False Claims Act is
unconstitutional on grounds that it is impermissibly vague and
creates a presumption of guilt.
The brief states that under the Act's broad definitions of
the terms ``deceptive,'' ``false,'' and ``knowing,'' a person can
be charged with a felony carrying a four-year prison term for a
staff member's simple mistake, without any proof of intent
whatsoever, MCL 752.1002 (b)(c); MSA 28.547 (102)(b)(c). The
Michigan Act creates a rebuttable presumption that a person
``knowingly'' made a claim even if his signature is stamped or
Noble cites People v. Howell [396 Mich 16,20
``a statute may be challenged for vagueness on
three grounds: (1) It does not provide fair notice of
the conduct proscribed. (2) It confers on the trier
of fact unstructured and unlimited discretion to
determine whether an offense has been committed. (3)
Its coverage is overbroad and impinges on First
During the trial, the prosecution offered no testimony to
show that the defendant knew that the billing was anything other
than a mistake. Neither witness ever told him that sealants were
being billed as amalgams, nor did they testify that they thought,
in 1989, that there was anything wrong with the billing
procedure. The witness for Blue Cross and the People
acknowledged that there had never been a notice in the monthly
bulletin advising dentists that sealants were not covered; in
fact, she herself bills Blue Cross for sealants.
If the prosecution no longer bears the burden of proof
beyond a reasonable doubt, ``this truly is a new dimension to
criminal responsibility,'' concludes Mr. Noble.
``It is very tragic, but I am unaware of any organized
effort by any medical or dental association to challenge this
law,'' he stated.
Edgardo Perez-DeLeon (see p. 1) also raised the issue of
unconstitutional vagueness. Previous litigation has established
that ``no one may be required, at the peril of life, liberty, or
property, to speculate as to the meaning of penal statutes.''
Mr. Perez stated that the common-sense notion of guilty knowledge
was overturned by the False Claims Act. There is no definition of
what triggers a duty to know, such as notice in the provider
manual. In fact, the absence of a code may impose a
presumption that a provider ``should have known'' that a service
was not billable, by ``negative implication,'' according to a
witness representing Blue Cross.
According to Mr. Perez's attorney as quoted in the Judgments
of Sentence, the government's position as reflected in the
instructions to the jury was that the prosecution did not
have to prove that the defendant intentionally and knowingly
obtained money that he was not entitled to. Rather, he was
convicted only of the ``general intent'' to submit claims for
reimbursement and to obtain the money that was actually paid.
Judge Peter D. Houk denied Mr. Perez's motion to hold the
False Claims Act unconstitutional.
Electronic Data Interchange Agreement
Date of memo to provider: March 17, 1994
Effective date: February 25, 1994
Each new electronic biller must sign the agreement
before submitting the first claim; existing EMC billers
must sign it within two years of the effective date.
``The provider agrees:
1. That it shall be liable for any and all breaches of
this agreement that may be committed by any partner, director,
officer, employee, servant, agent, or subcontractor of the
provider...including billing or data transmission services....
2. Not to disclose any information concerning a
Medicare patient to any other person or organization,
except HCFA and/or its contractor, without the express
written consent of the Medicare patient...
12. That the Medicare-assigned provider number constitutes
the provider's legal signature and constitutes assurance
by the provider that services were performed as billed....
15. To acknowledge...that anyone who misrepresents or
falsifies...any record or other information relating to that
...may, upon conviction, be subject to a fine and/or imprison-
ment under applicable Federal law....
18. To research and correct any and all claim discrepancies
and to hold the contractor and HCFA harmless from any claims,
cost or damages incurred as a result of such discrepancies [even
if they are the carriers' fault].''
For its part, HCFA agrees to six items, which include
keeping the provider informed of rules and transmitting an
acknowledgment of claims receipt. No penalties are prescribed.
[Contract sent to Dr. Huntoon (see p. 2) by Upstate Medicare
Division-emphasis and bracketed comments added.]
Managed Care Also Manages Speech
The agreement between Healthmark Health Plan and the Primary
Care Physician requires the ``voluntary'' renunciation of freedom
of speech: ``Physician agrees not to disparage Plan or its
processes, programs or policies to any persons, including Members
or other Participating Providers. Disparagement of Plan will be
treated as an administrative compliance failure.''
Letters to the Editor
The current politically correct assumption that we can cure
the expensive ills of our medical system by fostering more
generalists and fewer specialists is the medical manpower
equivalent of the economic argument that our nation can be made
more competitive by decreasing the skill level of the workforce.
If we denigrate our schools to the point where graduates are only
semi-literate (which may actually be occurring), they will be
able to work only in low-paying assembly-line jobs. We will thus
be able to provide the world with a large force of cheap
The very politicians, consultants, and geniuses who tell us
that it is important to upgrade the skill level of our workforce
in order to compete economically in the future are telling us
that the problems of our medical system can be solved in
precisely the opposite way.
D. Randall Wolfe, MD, Corvallis, OR
If the Medical Society of the State of New York has indeed
become a proactive arm of New York's medical practitioners,...I
will consider rejoining. To date we have seen little but
appeasement and reconciliation....
We are not merely ``providers'' and we do not simply do
procedures (CPT codes)....We must marshall our forces and
strengths in order to prevent further infringements on our
freedom and our ability to earn a living...The days of fearing
that not dotting the ``i's'' or crossing the ``t's'' would result
(at best) in nonpayment or (at worst) criminal prosecution should
Richard W. Most, MD, Lake Success, NY
In spite of multiple stumbling blocks placed by the Clinical
Laboratory Destruction Act, I now have at least verbal permission
from CLIA-OSHA to continue looking through the microscope at
stool specimens for pus cells, as I have been doing for 22 years.
This is probably going to be allowed as a ``physician performed
microscopy'' so that my minimal lab does not have to be a
``moderate complexity'' lab like Roche and Merrell, Dow, Corning.
It has taken roughly 1« years, many letters, and much stress and
tribulation to hopefully convince them that this is a ``labile''
substance that cannot be wrapped in a bullet-proof package then a
water-proof atomic bomb-proof container and transferred by
armored car to the lab, where they charge 3 to 5 times as much as
I do and delay results for seven days until they are unusable in
treating the patient being seen for colitis or bacterial
Frank F. Martin, MD, Charleston, SC
Aug. 27-28. 12th annual meeting of Doctors for Disaster
Preparedness, Tucson, AZ. AAPS members Howard Maccabee,
PhD, MD, and Joseph Scherzer, MD, will speak. For
information, call (602)325-2680.
Oct. 12-15. 51st annual meeting, Atlanta, GA.
Senator Diane Feinstein (D-CA) has quietly removed herself
from sponsorship of the Clinton Plan, causing a bit of a stir on
Capitol Hill. Publicly, the California Senator, an ardent
liberal, is stating that she stands with the President on the
need to reform the health care system, but there are other ways
to do it, etc. Hillary, we are sure, will understand.
Dan Rostenkowski's indictment on 17 counts of fraud and
corruption ends his Chairmanship of the House Ways and Means
Committee, the central forum in the House of Representatives for
health-care reform. While the White House is saying publicly that
Rostenkowski's fall is not all that significant and that the
cause of health care reform is bigger than one man, veteran
Capitol Hill insiders know better. In truth, all men are
not equal. Rostenkowski, like him or not, is a giant
among men and had powers of persuasion among House Democrats that
can only be described as awesome.
The new boss of the Committee, Sam Gibbons of Florida, while
a Southern Democrat, is hardly a conservative. Gibbons is a
``single payer'' (government monopsony) advocate. At least in
the short term, he favors expansion of Medicare to cover the
uninsured, and he has already committed to use the Stark bill as
the ``Chairman's mark,'' the draft bill for work in the full Ways
and Means Committee mark-up.
This is a clear change of signals. Rostenkowski, seeing the
Stark Bill pass by a vote of 6 to 5 out of the Ways and Means
Subcommittee, recognized that it was going nowhere and promised
the business community that they would get a ``more conservative
bill.'' Now, Gibbons is saying, ``Forget it.''
The tough item in the Stark bill is not simply the Medicare
changes, but the financing. It proposes to fund part of the
health-care reform package by eliminating the indexation of
federal income tax rates. The result: millions of middle class
Americans would be faced with yet another tax increase. And it
would be a big one.
Indexing was one of the key tax reforms successfully
initiated by the Reagan Administration. It meant that the levels
of a family's taxable income at which higher tax rates would take
effect are adjusted annually to keep pace with inflation. Since
1985, indexing has saved taxpayers over $100 billion dollars.
According to a study conducted by the Congressional Budget Office
(CBO), the abolition of indexation would raise $132.2 billion in
extra taxes over the next five years. This is based on the
assumption that the rate of inflation would average about 3
percent. Most experts do not expect the inflation rate to hover
at such low levels for five years.
A study of the financing of the Stark bill produced by
economist Daniel Mitchell of the Heritage Foundation estimated
that the tax increase on a single, middle income taxpayer would
be nearly $3,132 rather than $2,214 calculated by using the CBO
If the Stark bill does become the central vehicle for health
care reform, most observers on Capitol Hill expect it to go down
to a crushing defeat on the House floor. Labor is warning
Congress that changes in the tax code mean Armageddon.
The Changing Legislative Landscape
Rosty's personal problems are yet the latest in a series of
headaches for the White House, not the least of which is the
steady flow of bad news from back home. Once again, the more
folks hear of the details of the Clinton Plan, the less they like
it. This is frustrating to Members of Congress most strongly
committed to the White House Plan, prompting Senator Jay
Rockefeller (D-WV) to make the bold statement to the effect that
popular opinion should be subordinated to Congressional
determination to pass sweeping reform.
The key players on Capitol Hill are trying desperately to
salvage bits and pieces of the Clinton Plan, repackaging them as
``compromise'' legislation, with neon signs proclaiming that this
latest version of health care reform is not the infamous
Clinton Plan; it is something else. However, this is one issue
on which the details drive the politics and not the politics the
details. It is the components of the Clinton Plan, not just its
general impression, that are causing Members of Congress the
political trouble. For example:
1. Mandates on Employers. The political attractiveness
of the mandate on employers is that it continues to perpetuate
the illusion among ordinary working Americans that the employer-
somebody else-is really paying for their health insurance. This
is economic nonsense. The major revelation of the current debate
is that households, not employers, really pay for 100 percent
(not 20 percent) of their employer-provided health insurance
benefits package. Health benefits, like wages, are compensation.
Every dollar increase in health benefits amounts to a dollar
decrease in wages. Besides the loss of 850,000 to 1.3 million
jobs (according to a CONSAD study), 23 million workers would see
their wages drop by about $1,200 (see Legislative Alert, June
Of course, if small businesses receive no federal subsidies,
the unemployment rates and wage reductions would be far worse.
(And according to the CONSAD study, the hardest hit firms would
be those employing fewer than 100 workers.) But subsidies are,
under any scenario, likely to mean broad-based taxes, precisely
what Clinton ruled out. (Broad-based taxes are precisely what
the departing Rosty said would be necessary to finance a
2. Individual Mandates. While the decline of an
employer mandate has given new impetus to the individual mandate,
Members of the House and Senate, including those who had
previously supported an individual mandate to combat the ``free-
loader problem,'' are back-pedaling. Senator Don Nickles (R-OK),
the author of the leading Republican alternative to the Clinton
Plan, scrapped a requirement for individuals to buy even a
catastrophic package as a component of a consumer choice reform
package (S. 1743), and Senator Robert Dole of Kansas has
signalled a growing lack of support among his Senate colleagues
for an individual mandate.
3. Alliances. In the Clinton Plan, the major legal
requirement is that everybody in America would have to buy their
health insurance from the regional alliance, a large government-
sponsored ``cooperative'' (collective). It would be
illegal for Americans to buy insurance outside of these
regional alliances. While advocates of the Clinton Plan and
proponents of ``managed competition'' have attempted to portray
the alliances as user friendly, the public is not buying it. In
the minds of increasingly nervous Members of Congress, the
regional alliances are slowly transforming themselves into the
equivalent of the Department of Motor Vehicles.
4. The Standardized Benefits Package. If the federal
government can set forth what Americans will or will not have in
terms of treatments, procedures, and benefits, then the
government will in effect ``control the whole thing''-the
ambition expressed by Bill Clinton during the campaign.
The problem is that when the promised Cadillac in every
driveway is priced out, the price is invariably too high.
Moreover, independent economists have universally found double-
digit mistakes in the Administration's price estimates.
Members of Congress are also coming to realize that once
they set forth a standardized comprehensive benefits package,
everybody will try to be in it, setting off a costly feeding
frenzy in the subcommittees and full committees. It's already
happening. In the House Subcommittee on Labor and Management
Relations, a panel of the House Education and labor Committee,
Congressman George Miller (D-CA) added big expansions to both the
mental health and the dental benefit packages. When pressed on
the problems of cost, Miller told his colleagues that cost was a
problem that they should worry about it sometime in the future-
the kind of response that one expects from an irresponsible
teenager with a credit card. The Committee approved the big
benefit expansions by voice vote.
Another Congressional trick in dealing with high-priced
benefits is to vote for them, and then transfer to an unelected
government commission (say the National Health Board) the tough
decisions to raise future prices or cut benefits or medical
services. This is the also the prescription offered by the
``managed competition'' school and embodied in Clinton Lite, the
plan offered by Congressman Jim Cooper of Tennessee. Recently,
the Senate Labor and Human Resources Committee passed an
amendment offered by Senator Jeff Bingaman (D-NM), which would
give the National Health Board the authority to raise out-of-
pocket costs for consumers or to cut services to meet cost-
containment objectives. The Republicans on the Committee,
surprisingly, did not say a word. Under this arrangement, the
Board would make the tough choices and they would go into effect
automatically if Congress didn't do anything to stop them within
45 days. In other words, all Congress has to do under the
Bingaman amendment is nothing. Congress, of course, is very
good at doing nothing.
The lure of a standardized benefits plan is hard to break.
It is a central feature of the Chafee Plan and is even a
component of the Rowland-Bilirakis ``incremental reform''
approach, packed with heavy insurance regulation, which has oddly
attracted the support of several conservatives. In a draft
circulating among senior Senate Republicans, allegedly crafted by
Sheila Burke, Senator Robert Dole's chief health policy advisor,
there is also a standardized benefits package requirement, with a
qualifier that the health plan must have an actuarial value of at
at least 75 percent of the value of the standard plan in the
popular Federal Employees Health Benefits Program (FEHBP).
There's just one catch: In the FEHBP, there is no standardized
benefits requirement at all.
Disguises and Triggers
While the Clinton Plan is proclaimed to be ``Dead on
Arrival,'' Capitol Hill observers expect that liberals in
Congress will attempt to take its vital parts and rearrange them
in such a way as to make the Plan itself somehow more appealing.
In the rush of legislative deliberations, amidst the confusion of
details, with deadlines pressing and an election around the
corner, this is not an unreasonable scenario.
Look for two possible strategies from the Clinton Admini-
stration's allies on Capitol Hill. The first is to draft a
``lean'' version of the Clinton Plan and get the basic federal
regulatory infrastructure in place. All that would be necessary
is to make sure that the regulatory regime is broad enough and
encompassing enough to allow the ``lean'' version of the Clinton
Plan to grow over time. This could take years, or be only a
matter of months. Special interests, of course, like the
regulatory approach, familiar as they are with the senior
Congressional staff and the health care bureaucracy in HCFA and
elsewhere who will actually make the future policy. This is
especially attractive to liberals in Congress because they do not
have to actually do anything but set the regulatory clock in
motion, and the bureaucracy will take care of the rest. If there
is a glitch, or if some regulatory provision should prove
unpopular, then there is the political opportunity to hold highly
publicized congressional hearings, lambaste the career
bureaucrats for doing things wrong (they don't care, of course,
as they are not going to get fired; it's all part of the game),
and enact some ``fix'' to make things right again.
The second way is to enact a ``trigger mechanism.'' Under
this approach, the stripped-down version of the Clinton Plan or
the ``compromise'' plan would contain no politically offensive
elements, such as price controls or global budgets or employer
mandates. Instead, the bill would contain a provision that would
spell out a condition or set of conditions, under a goal or
timetable, that would automatically make the offensive
or politically troublesome provisions become law. If, for
example, by a certain date, the level of uninsured people is not
what the drafters of the bill say it should be, regardless of any
other conditions that may obtain in the private market at the
time, an employer mandate would go into effect. Or if, by a
certain date, the level of health care spending in the economy is
not what the drafters of the bill think it should be, once again
regardless of the conditions of the market, then global budgets,
price caps, premiums caps or fee schedules on doctors and
hospitals would automatically be activated.
Once the elements of the Clinton infrastructure are in
place, all Congressional staff have to do is to make sure that
the legislative language is written in such a way as to guarantee
a trigger: a hopeless goal or timetable will do just fine.
``Triggers'' are the in thing right now, but the legislative
situation is both fluid and confused. The big interest groups
are making new noises. The AMA has changed its position yet
again, and now supports employer mandates for all firms except
those with fewer than 100 employees. Editors of JAMA
rank the Stark bill, with its regulatory apparatus and new
middle-class tax increases, as the best all-round alternative. No
surprise. Just another chapter in the voluminous record of
While Dole scribbles and Moynihan ponders, the Clintons'
allies are getting desperate. Precious time is slipping away. The
deed must be done this year. Members of the House and Senate,
getting the clear and unmistakable message of the special
elections and the persistent unpopularity of the President in the
hinterlands, smell defeat in 1994 elections. With defeat goes a
working liberal majority in Congress to pass big-time reform.
They've got to move. It's showtime!