Volume 51, No. 7 July 1995

MEDICARE AT AGE 30: TIME FOR A NEW DECLARATION?

On July 30, 1965, after its whirlwind passage through Congress, President Lyndon Baines Johnson signed Medicare into law, establishing the centerpiece of the ``Great Society.'' The first year's cost was projected to be $900 million, and the tenth year's cost $1.7 billion.

In testimony before the Health Subcommittee of the Ways and Means Committee in 1975, former AAPS President Donald Quinlan, M.D., noted that the cost was $10.9 billion, six times the initial estimate. In 1995, it will be about $200 billion.

The Medicare Trustees Report for 1995 shows that Medicare is in far worse condition than the authors admit. The Trustees focus on exhaustion of the Trust Fund by 2002. This is a mass delusion.

``Everyone wants to believe that the apparent $150 billion positive balance in the trust funds is equivalent to a stock of canned goods in a cupboard, accumulated as a result of past annual surpluses,'' wrote Lawrence J. White, Professor of Economics at New York University (Knight-Ridder Financial News 6/8/95).

But it isn't. There is no $150 billion cushion that will last for seven years. ``The Medicare cupboard is bare,'' said White.

The surplus moneys were ``invested'' in military bases, interstate highways, national parks, subsidies, and bureaucrats' salaries. Most of these ``assets'' can hardly be repossessed or liquidated to redeem the IOUs in the Trust Fund.

The asset that the federal government is counting on is its ability to tax and to borrow. The Trust Fund will simply be added onto the deficit, which is added onto the national debt.

And that's before the baby boomers start to retire. At that point, the Trustees Report resorts to sleight of hand.

In 1965, the federal government spent $0.03 of every tax dollar on health care. This year, the government will spend $0.23 of every dollar on health care. If current trends continue, and if federal revenue continues to represent about 18.5% of the GDP, we will spend every penny of federal money on Medicare and Medicaid by the time the last baby boomer reaches age 65 in the year 2030.

As one government actuary observed, ``since the current trend can't continue, we assume it won't.''

The actuaries conveniently assumed that the rate of increase in Medicare spending will fall by half between 2010 and 2030, at the very time when the number of persons over the age of 65 will be doubling. Under these remarkable assumptions, Medicare would still absorb 42% of federal taxes in 2035.

Both Republicans and Democrats are in a state of denial.

Simply cutting the rate of Medicare growth (proposed by Congress and opposed by Bill Clinton) will not fix the problem. However, in a recent White Paper, AAPS makes several modest suggestions for a move in the right direction:

• Repeal laws and regulations that increase the cost of delivering services (CLIA and OSHA rules for a start).

• Repeal laws that increase administrative overhead, such as the requirement that physicians file all claims. (About 7% of claims filed are for $0. We have received copies of several checks for the sum of $0.01.)

• Repeal laws and regulations that restrict innovation (e.g. FDA device regulations, see AAPS News, May 1995).

• Repeal laws that create incentives for fraud and abuse, especially those that provide for assignment of benefits (payment to providers rather than beneficiaries).

• Repeal market-distorting price controls (DRGs and RBRVS) that result in rationing, cost shifting, and possibly in increased expenditures through stimulating demand.

AAPS also supports measures such as medical savings accounts that would permit seniors to benefit from prudent management of their own care. These should be offered on terms that permit fair competition with managed care. This concept was presented by former Delaware Governor Pete DuPont at a June 8 meeting of the National Policy Forum.

By far the most important immediate step in reforming Medicare is to open the safety valve: private contracting.

Since the inception of Medicare, a few AAPS physicians have followed the AAPS Non-Participation Policy of refusing to accept government money.

The right to contract privately outside the Medicare system, guaranteed in the law that established Medicare, was asserted in federal district court in 1992 by AAPS President Lois Copeland, M.D., and five of her Medicare patients (see AAPS News, Dec. 1992). Because he could find no law, no regulation, and no ``clearly articulated policy'' against private contracting, Judge Nicholas Politan concluded that physicians are not at risk of sanctions if they engage in it.

The decision in Stewart v. Sullivan notwithstanding, Tom Ault, Director of HCFA's Bureau of Policy Development, stated that ``for doctors to implement such contracts is strictly illegal.'' And Medicare Technical Amendments in 1994 muddied the situation further (see AAPS News, Mar. 1995, for four legal opinions).

While AAPS believes it is lawful to treat Medicare-eligible persons as private patients, the majority of physicians are fearful, and with good reason. Defense against HCFA sanctions would be extremely expensive, even if ultimately successful. Therefore, AAPS is promoting legislation that would unambiguously establish the right to private contract.

The 30th anniversary of Medicare, when the program is for the first time under serious review, is an historic window of opportunity. AAPS proposes to declare July 31 ``Medicare Patient Freedom Day.'' See the enclosed flyer, watch your mail, and send us your ideas.

I Remember 1965

And then there was Medicare....

I had just begun my medical school training at Cornell University Medical College when President Johnson brought the Great Society into being, laying the first cornerstone for the socialization of medicine in the United States. As the sons of Americans were sent to their demise in Vietnam, Johnson arranged for the future medical care of their parents and grandparents in an initially generous, taxpayer-funded program that wove a web of rising costs and infinite demand.

Medicare inflated costs at its very inception. The day before Medicare, the cost of an emergency room or clinic visit for the poor was $5.00 at The New York Hospital in New York City. The day after, the government assessed the worth of these services at $15.00. Thus, the poor elderly beneficiary, having personal responsibility for the $45 deductible, could obtain only three visits for the same amount of money that would have bought nine visits before Medicare's birth. Because it became illegal for any individual to be charged less than the charge to Medicare, the younger poor saw their costs triple overnight.

And then there were walls. Now forbidden were the efficient open wards of the past, where a small number of nurses and aides could manage a ward of 20 or more patients, all of whom were within sight and hearing of a skilled professional. Mandated were walls enclosing two patients in each room, hidden from watchful eyes. Andy Warhol took his last breaths while his private duty nurse read or slept behind his walls. One wonders if he would have survived in an open ward, visible to the nursing staff of the floor.

Then there were limited partnerships in which private hospitals changed hands, with ever-rising purchase prices driving the per-diem reimbursement up ever farther. The taxpayers paid more with each profitable sale and every wall.

Labor costs also rose as it became necessary to employ many more nurses and aides to make frequent rounds on distant patients hidden from view.

As costs rose, bureaucrats multiplied, with regulations proliferating to control these costs, adding further to the overhead of the program, which spun out of control.

As bureaucracies blossomed, physicians were the convenient scapegoats for the fruit of the miscalculations of government and its representative's ignorance of human behavior.

Following the initial largesse have come the inevitable shackles, binding both physician and patient as compulsion proceeds and freedom recedes.

Yes, I remember 1965, when the Dream of the Great Society gave birth to the Nightmare of Bondage in 1995.
Lois J. Copeland, MD, Hillsdale, NJ

President, AAPS

HMO Problems Pervasive

An April report by the HHS Inspector General's office showed widespread problems in Medicare HMOs. Problems include violations of federal regulations that forbid asking potential enrollees about their health. Beneficiaries also reported being subjected to a physical examination upon application. Nearly a quarter of 4,132 beneficiaries reported failure to receive primary care, specialist referral, or coverage of needed emergency care. Many had difficulty making appointments, and frequently gave up because of consistently busy telephone lines (BNA's Medicare Report 4/28/95). A copy of the report, Medicare Risk HMOs: Beneficiary Enrollment and Service Access Problems (OEI-06-91-00731) is available from HHS, IG, 330 Independence Ave SW, Washington, DC 20201; (202)619-1142.

In response to a recent FAX alert, a number of AAPS members have prepared reports on problems their patients have experienced with HMOs. A summary will be prepared for Congressmen.

CBO Director June O'Neill stated that the Medicare program could not save money by increasing managed-care enrollment under the current system of paying 95% of the area's fee-for-service average per beneficiary (BNA 5/5/95).

An AAPS survey on the impact of Medicare is enclosed. Some of the same questions were asked in 1991 and 1993. We continue to receive requests for those results. We need to know if things have changed in 1995. Please mail or FAX your reply by June 30 to (520)326-3529 or (703)716-3400.

Public Support for Government Medicine Wanes

A 1994 survey by Widener-Burrows & Associates showed that 59% of Americans believed that giving government a bigger role in medicine would be a costly mistake. Only 37% of respondents were willing to pay more taxes to finance universal health care, down from 54% (BNA 5/1/95).

Stark Bill Under Attack

Ways and Means Health Subcommittee Chairman Bill Thomas (R- CA) is considering major changes in the Stark II Self-Referral Law, stating that ``the new law goes beyond the original concern with abusive joint ventures by adding detailed regulation of the internal workings of physician group practices, hospitals, medical schools, and entities that employ or contract with practicing physicians.''

Prepaid health plans under Medicare are exempted from the law. Kathleen Buto of HCFA stated that ``we do not see these provisions as an impediment to the development of legitimate managed care arrangements.'' The law was developed in the context of ``fee for service'' practice (third-party payment), where ``there are no incentives for providers to control utilization.'' However, AHA Board of Trustees Chairman Gail Warden stated that the law may severely impede the formation of physician-hospital networks.

Meanwhile, HCFA has not yet issued final regulations for Stark I, which was passed in 1989. No proposed regulations have been published for Stark II, which went into effect in January, 1995 (BNA's Health Care Policy Report 5/8/95).

AAPS Calendar

Oct 12-14. 52nd annual meeting, Falls Church, VA.

Oct 21-25. American Society of Anesthesiologists meeting in Atlanta. AAPS will have a display (F-40), and AAPS members (Drs. Nahrwold, Schlitt, and Orient) will present a panel on Alternatives to Managed Care.

Oct 10-12, 1996. 53rd annual meeting, La Jolla, CA.

Correspondence with the LLCS

An Exchange on Medicare Exclusion

The May 15, 1995 issue of Part B News carried an article headlined ``Excluded doctors can see Medicare patients, just don't file claims.'' If a patient filed a claim later, an official from the Inspector General's office said that ``it would be seen as a false claim and denied.''

``Unfortunately, many physicians don't see being kicked out of Medicare as a punishment,'' the official noted.

From a May 15 letter to HCFA, citing that article:

Dear Comrade Vladeck:

I am quite interested in finding out more about this concept of ``being excluded from the Medicare program''....I estimate that I spend approximately 30 to 40 percent of my professional time trying to straighten out messes created by your bureaucracy or our bumbling local carrier....Is it true that if excluded from the program, we could continue to see Medicare patients at reasonable fees without ever having to interact with HCFA again? Imagine, a doctor being able to focus on just practicing medicine again! As a law-abiding citizen, is there any way one could achieve this paradise? Surely you wouldn't just provide this reward to those who break the law. Is there something one could do to qualify? Maybe something like implying that the director is a Communist? Something that would carry only a small fine...no prison time, please. What if I treated a patient that HCFA declared dead prematurely in your computers (a true story)? I am eagerly awaiting your reply.
L. R. Huntoon, M.D., Ph.D., Jamestown, NY

A comment from the Limited Legal Consultation Service: Dr. Huntoon's letter to ``Comrade Vladeck'' is interesting indeed. He may well be right that once excluded, a private physician may be free from HHS harassment. In theory, the State could still criminalize ``overcharging,'' but it would be difficult for HHS to sanction a physician who has already been excluded, as a practical matter.

Accordingly, the HHS is likely only to use fines as sanctions. Do we know of anyone who has actually been excluded?
Andrew Schlafly

To be excluded, a physician must be convicted of a ``flagrant violation'' or ``patient abuse.'' More often, the IG imposes sanctions; sanctioned physicians are still part of the program and ``fines can just keep building and building,'' according to the May 15 article in Part B News. However, HCFA announced on April 7 that it was beginning a ``major enforcement initiative'' and would drop physicians from Medicare for repeatedly overcharging (BNA's Medicare Report 4/14/95).

Additionally, HCFA has formed an ``entry group'' to advise on how to keep ``bad providers'' out of the system, ``on the theory that if we don't let you in, you can't steal from us,'' explained senior advisor Judy Berek. ``The history of the program is such that there was a time when we were worried that there would not be enough providers in the system to serve our beneficiaries. That time has passed'' (BNA's Health Care Policy Report 5/15/95).

Medicare as Secondary Payer

An office manager asked whether a physician may charge according to his normal billing schedule for a patient who is primarily insured under Blue Cross/Blue Shield and secondarily insured under Medicare.

The answer is No.

In 1994, in House Resolution 5252, Congress enacted a provision that ``no person'' is liable for excess payments. It appears that Congress intended to apply this to private insurance companies, although HCFA has not yet formulated an official policy. According to Phyllis Morical in the HCFA national office, HCFA will disseminate this policy to insurance carriers once it is developed.
Timothy M. Schellberg and Thomas F. Gallagher

Fabrication by HCFA Not Fraudulent

Dr. Huntoon writes that ``the Medicare carrier actually used to make up fictitious claim numbers in their correspondence with me regarding claims processing errors. I always thought that making up claim numbers was fraudulent.''

HCFA disagreed, writing: ``Dear Dr. Huntoon: This is in response to your fifteen letters since October 22. Your Oct. 22 letter concerns the fabricated claims number...Regardless of the need to use a fabricated claim number the point is that the Carrier staff felt that it was necessary to control incoming correspondence. There was no intent to mislead or confuse you....Sincerely yours, Preston Lowen, Medicare Contractor.''

Do we have your FAX number? If you have not received recent Action Alerts (the latest was about the Archer-Jacobs Medical Savings Account bill), you are probably not on our FAX network. Please FAX your number to (520)326-3529.

AAPS Communications and Government Affairs

Capitol Hill. AAPS testimony has been included in the record for hearings on health care fraud, physician payment review, and FDA reform. Dr. Jane Orient testified before the Health Subcommittee of House Ways and Means and met with Chairman Bill Thomas.

National Policy Forum. AAPS President-Elect Don Printz, M.D., was a featured speaker at the June 8 megaconference on health care, chaired by Haley Barbour. Representatives of Congress, AHA, HIAA, Blue Cross, and Golden Rule also spoke. At another NPC forum on the Bankruptcy of Medicare, AAPS was the sole voice on the record against managed care and price controls.

Press. A news release and letter to HHS Secretary Donna Shalala condemning an HHS probe of approved medical devices as a ``fishing expedition'' was distributed to the press at the American Enterprise Institute's forum on FDA reform. A news release and op-ed article on the elimination of the office of Surgeon General prompted inquiries from Rush Limbaugh and Rep. Bob Dornan. Physician's Weekly featured a counterpoint between Dr. Orient and former Surgeon General C. Everett Koop. AAPS has appeared in the Wall Street Journal five times since October, most recently with Dr. Orient's article ``A Medicare Prescription.''

Members' Page

On FDA Reform. It was good to see that the May 1995 issue of AAPS News focused on the FDA excesses in devices ....Another example of Kesslerian policy is the fact that the FDA will not allow distribution of any of the ten or so articles that I and my colleagues published on the issue of Tacrine in Alzheimer's disease. These articles appeared in such shabby places as the New England Journal of Medicine, Lancet, European Neurology, etc. What is allowed is distribution of highly technical protocols designed in part by FDA pundits. Clinically, these protocols are confusing and impractical. For example, the FDA-approved method takes up to six months to find a proper dose and the method of testing improvement requires a Ph.D. psychologist with special training to administer the psychometric tests. In contrast, our protocols took seven to ten days and used tests that family members could easily learn to administer.

This FDA restriction is largely responsible for Tacrine being used in a minimal number of the four million victims of Alzheimer's disease.

A piece of pseudo-reform legislation has been sponsored by Ron Wyden (D-OR). The words are soothing, but details reveal that Mr. Wyden trusts Mr. Kessler to do the right thing. The rumor mill states that this bill was actually the idea of Mr. Kessler, who has recently consulted the firm of Burson Marteller to improve his image-the idea being that the best defense is a good offense....
William K. Summers, MD, Albuquerque, NM

The Managed-Care/Free-Market Oxymoron. In an interview with David Frost, Speaker Newt Gingrich supported the managed- care concept of Medicare. Yet he claims to support the free marketplace. The ideas are not compatible.

Health insurance is theoretically to help you when you become ill. Managed care is a system that discriminates and works against you when you become ill. Managed care has no incentives to preserve the life of an ill patient, who is perceived as a costly drain on the system-which is run by one of Hayek's coercive tyrants. Managed care has had an unfair advantage since the employer mandate in the HMO Act of 1973, and the free marketplace has been damaged as a result.

The freedom-preserving, long-term solution is the Medical Savings account combined with a catastrophic, individually (family) owned insurance plan....Americans voted down managed care in the November, 1994, elections. If Republicans impose managed care on seniors and the poor, they could get voted out of office.
Holly Fritch Kirby, MD [a former HMO physician] Leawood, KS

New Electronic Data Submission System. Although HCFA is always telling us how fast electronic claims processing is, we note that we probably could have walked to Binghamton with paper claims faster than our last electronic claims were processed. Nevertheless, we decided to try to submit another batch today. As the entire office staff huddled around the main office computer, we listened intently to the modem dialing the Blue Bungler number. To our total amazement, the Blue Bunglers had the computer plugged into the phone lines, and they answered our call! We are used to dead air, busy signals, and ``please hang up and try your call again.'' Shortly after entering my FIRST NAME and then my LAST NAME, the screen became filled with cryptic messages transmitted at lightning speed: “‡êŽ ˆ and  ....We wondered if it was a code intelligible only to aliens outside our solar system. Then we remembered Upstate Medicare's recent ``Migration Article,'' which demoted us from Providers to Ducks (``we ask that you make every effort to comply with your scheduled migration date''), and we decided the code was obviously in Duck.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

What Is the Doctor's Job? A report in Ob-Gyn News advised: ``Physicians need to group together to achieve maximum leverage from capitation, but they must make sure the group has more primary care physicians than specialists....Specialists attract the sick, not the healthy.''

I guess my age is showing, but I always thought that a doctor's primary job was to take care of the sick people.

At a recent symposium, I was amazed to hear one young primary-care physician, who considers himself a prime mover in the formation of a new medical group ``that will succeed in the new medical environment,'' explain that ``for economic reasons we are requiring primary care physicians in the new group to take a colposcopy course so that they can handle abnormal Pap smears without referring them until we finalize our decision on which Ob-Gyns to include in the group.'' He readily and quite comfortably admitted that care would deteriorate under such a system.

There is nothing new about what is occurring in medicine today. It is called ``Corporatism.'' In a bygone era, it would have been called fascism, but that term has become so associated with racial/ethnic hatred that people forget that the underlying concepts of fascism were first and foremost economic. It is the ``other socialism.''

If this is allowed to continue, American physicians will be called upon to determine which conditions-and thus which patients-are ``worthy of treatment, given our limited economic resources.''
Stephen R. Katz, M.D., Fairfield, CT

Legislative Alert

Subcommittee on Health, Committee on Ways and Means

Opening Statement by the Honorable Bill Thomas

May 25, 1995

Welcome to our hearing on the potential role for employers, unions, and medical savings accounts in the Medicare program. As I said yesterday, this Committee is going to undertake a major effort to make Medicare a better program, both to improve its solvency and to provide better choices for beneficiaries. Today, we will examine how we might provide options through former employers and through medical savings accounts.

Last week we heard from a series of employers about their successful efforts to control their health care costs and improve quality in the coverage they provide for their workers and families. For instance, we heard from the Pacific Business Group on Health about their successful efforts in negotiating a nearly 10% reduction in HMO premiums for their members in 1995.

I would like this Committee to explore how we can tap into that kind of creative energy by employers on behalf of Medicare beneficiaries and the Medicare program. I believe we must find a way to allow employers to play a more defined role in Medicare coverage so that beneficiaries can stay with the plan they had as workers if they like it and it is cost-effective for the program.

Clearly, this kind of change would raise many questions. What would be the payment rate from Medicare? How would we define an employers' retirees? What would we do about retirees who want to stay in the Medicare fee-for-service program?

I am very pleased that we have a distinguished series of witnesses on our first two panels who will address the concept of an employer role in Medicare and address some of these issues for us.

I am also very pleased that our last panel will address an equally exciting concept: medical savings accounts for Medicare beneficiaries.

Clearly, one very promising approach to cost control and quality health care is medical savings accounts. With MSAs, a person has the protection of a very high deductible for significant health expenses. But they also have the freedom to make wise choices with their money in the MSA-because it is their money.

This option is apparently working very well already for one company-the RCI Corporation of Michigan. We will hear from that company's director of benefits about how they have successfully instituted an MSA program for their workers.

We need to explore how we might make an MSA option available to Medicare beneficiaries too. But, again, there are some serious questions that must be answered before we proceed.

What is likely to be the premium for high deductible coverage for an average beneficiary? How much would that leave in an account for medical expenses each year?

Who would sponsor MSA accounts and high deductible insurance, and who would regulate them? Should all Medicare beneficiaries be given this option, or just those beneficiaries aging into the program? Should this be a one-time option for beneficiaries? Or should they be allowed to disenroll at some point from the MSA and reenter traditional Medicare?

I look forward to hearing from our distinguished witnesses about the MSA concept for Medicare and how we might answer some of these questions.

Testimony presented by Jane M. Orient, M.D., AAPS Executive Director

The Association of American Physicians and Surgeons thanks you for the invitation to participate in this discussion. We will not claim to have a plan to save Medicare because we understand it is a serious offense to lie to Congress.

The fact is that the handwriting is on the wall. You can read it for yourselves in the 1995 report of the Medicare Trustees. Medicare has been weighed in the balance and found wanting. Next year, it will be wanting around $30 billion. The gap between income and expenditures will increase progressively, and the trust fund will be exhausted long before the baby boomers retire.

In 1967, Frederick B. Exner, M.D., a former Secretary of the Association of American Physicians and Surgeons wrote: ``Medicare can never be sound...The projected tax increases when the plan was adopted should be enough to scare us even though they failed to scare the Congress; but actually they will provide only a fraction of what the expenses are sure to be.'' [In 1966, the maximum Medicare HI tax was only $46.20 per year.]

The truth is that Medicare was built on an unsound foundation and straddles a major fault. The foundation is crumbling, and the building is about to be hit by a major earthquake, the demographic dislocation of baby boomer retirement.

The structure cannot be fixed by remodeling the executive suite and hiring a new management team. If all Medicare patients were forced into HMOs, the structure would still collapse, and the private sector would be blamed. Medicare HMOs would also help to destroy the rest of the medical system. In the appendix to our written testimony, physician's assistant Jim Morris, from his position as an insider selling HMO products, describes the deception and rationing forced on employers, patients, and physicians.

Medicare is a pyramid scheme founded on deceit. Seniors think they have paid for their benefits. In reality, current workers are paying for them and in addition must bear the brunt of the cost shifting and price inflation caused by Medicare.

It is time to admit that we cannot repair the Medicare building and to shift our attention to the people trapped inside. Medicare traps patients and those who care for them into government dependency.

We must immediately allow people who are able to do so to escape from Medicare. This will help to unload the stresses on the system.

To unstop the safety valve provided by the private market, we should: (1) Encourage private contracting outside the system. For such services, no Medicare claim is filed. (2) Repeal price controls and allow balance billing so that the marketplace can compensate when Medicare reimbursements do not cover costs.

The long-term solution is to phase out taxpayer-financed medical insurance for retirees. This requires fixing the problem in the rest of the medical system.

What Congress must do, and can do without cost to the Treasury, is to reform the basic inequity in the federal tax code.

The tax code should not punish Americans for paying for medical care at the time of service or for buying individually owned, portable insurance. Because of the tax code, most Americans prepay for medical care through tax-favored, employer- owned arrangements. Such coverage cannot even be transferred to a different job, much less into retirement. It diverts a large fraction of the medical dollar to the pockets of middlemen and leads to inflated prices and overutilization.

Medical savings accounts and individually owned catastrophic insurance should receive the same tax treatment as employer-owned comprehensive coverage, which is really a tax-free substitute for a wage increase.

Medical savings accounts allow patients to benefit from cost-saving decisions. Because patients are spending their own money, they consider costs in their decisions. This market pressure tends to drive down the price paid per service rendered. Companies that have tried medical savings accounts have found that their medical costs have actually decreased.

In contrast, ``managed care'' can at best claim to ``contain'' expenditures by reducing the quality and quantity of services. The patient bears the costs of rationing (inconvenience, poorer care, and loss of choice) but receives none of benefits of saving.

Patients own their medical savings accounts. Managed care companies own patients.

Medicare is socialized medicine. We must replace socialism with free enterprise. Because free enterprise works, all Congress needs to do is to remove the impediments. The most important impediment is that Americans have to earn about twice as many dollars, after taxes, to wrest control of their medical care away from employers and third parties.

The long-term cure for American medicine, including Medicare, is ``tax equity.''

The short-term symptomatic treatment for Medicare is: ``let people go.''

The Medicare experiment provides one more demonstration that socialism doesn't work. We have no choice but to replace this failed and unjust system. If we act promptly, we can ease the transition to free enterprise and minimize the pain for those who are trapped in this misguided social engineering project.

You have heard much about the financial foundations of Medicare. I'd like to say a word about its moral foundations. It is true that free enterprise works and socialism does not. More importantly, free enterprise is morally right, and socialism is morally wrong. Money given as Medicare benefits is first taken from someone who earned it. That money, in the words of former Congressman David Crockett, is not yours to give.

Restoring the Patient-Physician Relationship in Medicare: Statement by Don Printz, M.D., AAPS President Elect, to the Seniors Coalition

The Seniors Coalition has challenged me to talk about the effect of the presence of Medicare and other third parties upon the patient-physician relationship and my ability to practice good medicine.

We in AAPS are dedicated to the principle that the best medicine is practiced when the patient is in charge, with the physician acting as his ally. And nothing empowers the patient more than being able to direct the money that is being spent for his own medical care. Patients need to know the cost, but also they should profit, from both a personal and economic standpoint, by being an intelligent consumer.

Any time a third party is interposed between physician and patient, there is not only loss of privacy but loss of your control as the patient.

In Medicare, the interference has so far been marginal. You still have your free choice of physician. We did have a rather substantial change in the way physicians are paid under Part B in the mid to the late 1980s. The way Medicare now pays me may not have any relationship to the cost of performing a service. In other words, Medicare has interfered with the pricing mechanism. For example, HCFA has claimed that it cannot directly determine what my office overhead should be. Therefore, they calculate it based on what a 1200-square-foot apartment would cost in Atlanta. People who get a notice from Medicare saying that their doctor has exceeded the limiting charge don't realize the arcane way in which the charge was derived.

A second method of interfering with the patient-physician relationship is the notice that Medicare used to send out to patients whose physicians did not accept assignment. It said that if your physician had accepted assignment, the cost of your visit would have been ``X.'' They enclosed a list of physicians who accept assignment.

Many patients don't realize that ``accepting assignment'' simply means having HCFA send the physician the check directly. Some of us consider this to be almost immoral. It completely divorces our patients from any knowledge of what their medical care costs.

One reform that could be accomplished immediately is to stop the system of assignment. Then the check would always come to you as a patient, and you would then pay the physician. I am not worried about my patient's honesty. I might lose a little, but if HCFA would send me an explanation of benefits when they send a check to you, that would put the relationship where it should be. You are my boss, and I am your ally, and we work together on medical care.

The patient is even further removed from control under managed care. Think about who is doing the managing. And who profits from it? The largest managed care organization keeps 23.5% of its revenues from your premiums as profits and administrative expenses. Worse, the gatekeeper (primary physician) may profit from withholding laboratory tests and specialty referrals. Under these circumstances, the doctor no longer has the patient's best interests at heart.

In the extreme case, the veterinary ethic replaces the Oath of Hippocrates. The payer decides whether the patient is worth spending the money. In Britain, the Chancellor of the Exchequer decided that patients over the age of 55 were not worth dialyzing, and 1800 people died within the year.

How do we restore the patient-physician relationship? One way is to allow you to put aside, in pretax dollars, the funds to pay everyday expenses, and to restore insurance as a protection against unlikely catastrophes. One suggestion is to eliminate capital gains tax on funds placed in medical savings accounts by senior citizens.

The most important thing is to make sure that you stay in charge of your medical care and that your physician not try to serve two masters.