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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 57, No. 6 June 2001
Americans are not quite ready for airport x-rays capable of
checking for contraband in their underwear. But what about an
indelible virtual record that enables remote bureaucrats, years
in the future, to inspect what is (or was) in their nightstand?
Or what attitudes and thoughts are in their minds?
The lessons from the last century of murderous utopias
should sensitize Americans to the vital importance of our
Constitutional protections against unreasonable searches and
forced self-incrimination. Medical records contain much
information of potential use to blackmailers or law enforcers-
and may soon contain much more, as we shall show (see p. 2).
Giving lip service to public concerns, politicians often
declare their dedication to protecting privacy. So does President
Bush, as he implements the Clinton Administration's medical
records "privacy" regulations on schedule-despite a brief
reprieve (see AAPS News April
2001). In 30 days, more than 24,000 written comments were
received. (HHS counted the 13,535 names and addresses on the
Liberty Committee's petition as one comment; the 27,000
signatories to a NewsMax.com petition were also not included in the tally.)
Industry groups were shocked by the President's decision.
Scott Serota, president of the Blue Cross and Blue Shield
Association called the rules an "operational nightmare," and two
years far too short a time to reach compliance (Wall St
J 4/13/01). BCBSA also argued that HHS grossly
underestimated costs and inflated projected savings (BNA's
HCPR 4/23/01). Senior editor John Perry states that the tab
is $18 billion (the HHS estimate for 10 years) for a value of
precisely $0 (NewsMax.com 4/18/01).
Others estimate $40 billion in 5 years.
Secretary Thompson promised to make "common sense"
alterations to the rules, so that patient care might continue.
For example, he does not intend to let consent requirements
interfere with the ability of friends or relatives to pick up
prescriptions for a sick patient.
Reportedly, President Bush acted under pressure to avoid a
lawsuit threatened by the American Civil Liberties Union (ACLU)
and Public Citizen. The ACLU acknowledges that the rule allows
"virtually unfettered access to medical records by law
enforcement agencies" and that "government data systems are
notoriously susceptible to expansion and abuse." In its March 30
comments, the ACLU stated: "Officials may collect data for
entirely benign goals, but once the data are collated and stored
there is a temptation for the information to be used for invasive
and illegitimate purposes" (search the archives at www.aclu.org/congress). Nevertheless, the ACLU has an overriding concern
that, in the absence of the rule, parents may have access to data
about their minor children's abortions, substance abuse, or
mental health. This is, ironically, an aspect of the rule that
the Administration has promised to change, in response to the
objections of advocates for familial rights.
On May 2, House Majority Leader Dick Armey (R-TX) wrote a
second letter to HHS Secretary Tommy Thompson, urging major
changes to provisions that give the government unprecedented
access to sensitive medical records (
"This startling provision grants federal agents the power to
look into citizens' medical records without a warrant, `at any
time and without notice'," Armey wrote. "Americans' medical
records should be protected from all bureaucrats, not just
corporate ones." He noted that federal agencies have a terrible
record for protecting sensitive information: HHS received an "F"
last year on computer security from the House Government Reform
and Oversight Committee on Management and Information. A survey
by the General Accounting Office (GAO) showed that 97% of all
federal web sites failed to meet the privacy standards that
Congress wants to impose on everyone else.
Congressman Ron Paul, M.D., has introduced House Joint
Resolution 38, which would use the Congressional Review Act to
repeal the rules. "Many things in Washington are misnamed;
however, this regulation may be the most blatant case of false
advertising I have come across in all my years in Congress," he
writes in the April issue of Ron Paul's Freedom Report.
"The only fail-safe privacy protection is for the government not
to collect and store...personal information."
While killing the rules outright may not be feasible, there
may be a chance to make the ban on the unique individual health
identifier permanent and to delay implementation.
The response by the AMA and the Federation has been
pathetically weak and focused solely on the administrative burden
and the uncompensated cost of compliance. The AMA's advice to
physicians: "Get used to details" (AM News 5/7/01). AMA
Trustee Donald Palmisano, M.D., J.D., suggests getting a package
price for a compliance plan, including the security component. It
may be necessary to lock up the FAX machine and avoid placing
print-outs of lab results on a desk, where they might be viewed
(NY Times 3/1/01).
It is possible that the AMA actually favors expanded
government access to medical records. This would enable its
public partner to help enforce the Federation's public health
agenda, which parallels the HHS Health People 2010 "leading
health indicators." These include immunization; injury and
violence; mental health; substance abuse; tobacco use;
"responsible sexual behavior"; and access to health care. (Does
your practice have a correct mix, and do you treat all your
patients equitably, with due regard to the priorities of
Those who object to total exposure may be asked, "What do
you have to hide?" Today, perhaps nothing. But what might happen
a few years from now, if vices and dissent become crimes, and
everything that isn't forbidden is required?
An essential tool of the totalitarian state is the
collection of a dossier on anyone who might pose a threat to its
power. In the pre-computer age, the Stasi (the East German secret
police) used cross-indexed card files. After the Berlin wall
fell, journalist Timothy Garton Ash was able to open his own
Stasi file and interview the watchers. His observations are
recorded in a remarkable autobiographical history, The File:
a Personal History (New York, Random House, 1997).
The proportions of the Stasi and its "unofficial
collaborators" dwarfed even the Gestapo. About one in every fifty
East Germans had a direct connection with the secret police:
"Wherever two or three are gathered together, there suspicion
will be." Perhaps the most frightening aspect to Garton Ash was
that, in all of his searching, he met not a single clearly evil
person. "They were all just weak, shaped by circumstance, self-
deceiving; human, all too human. Yet the sum of all their actions
was a very great evil." He describes the "textbook example of the
petty bureaucratic executor of evil....Proud of his correctness,
loyalty, hard work, decency-...`secondary virtues' ... identified
as a key to collaboration with Nazism."
The key to betrayal, Garton Ash concludes, is trust. Only a
trusted person can carry out a good Absch”pfung, defined
in a 1985 Stasi dictionary as "systematic conduct of
conversations for the targeted exploitation of the knowledge,
information and possibilities of other persons for gaining
Doctors as Public Health Police
California S.B. 765 would require pediatricians to perform
health screens for "violence-related risk factors" in all
children in the state's low-income program. This would codify
into law recommendations by the American Academy of Pediatrics
(AAP) to evaluate factors such as "disciplinary attitudes and
practices"; degree of exposure to media violence (e.g. wrestling
matches); and "access to firearms, especially handguns, in their
or a neighbor's home." The AAP supports model legislation under
which possession of a handgun could result in a one-year prison
term: "Only the prohibition of the manufacture, sale, and
possession of handguns will remove handguns from the homes and
streets of the State" (WorldNetDaily 5/1/01).
Skillful Absch”pfung of children, together with the
new "privacy" rules, will help locate any noncompliant parents.
AMA President-Elect Richard F. Corlin believes that firearms
injuries are a "public health epidemic," like polio, tobacco, and
AIDS (NewsMax.com 5/1/01). In a June 11, 1999, letter to
House Speaker Dennis Hastert, AMA Executive Vice President E.
Ratcliffe Anderson, M.D., wrote: "The AMA believes that the
uncontrolled ownership and use of firearms, especially handguns,
are serious threats to the public's health." If smokers and
gunowners are Typhoid Marys, requiring physicians to turn
informant is a logical next step.
In Minnesota, S.F. 1208 would have required medical
professionals to report injured patients to police when there was
any indication of use of alcohol or a controlled substance. The
MN Med Assn was absent from hearings but helped draft and
supported the bill. Sen. Betzold asked whether doctors had to
read patients their rights when serving as surrogates for law
enforcement officers. The bill died in committee in the Senate.
Rep. Richard Mulder, M.D., an AAPS member, helped get the
provision deleted in the House, saying it would cause a
deterioration in the practice of medicine (CCHC-MN).
Sample Resolution on Privacy
[A similar resolution will be submitted to the Arizona
Medical Association by AAPS Executive Director Jane M. Orient,
WHEREAS: (1) Keeping patient records confidential is an
ethical duty of all physicians; (2) Patient care is compromised
if patients withhold information due to fear that confidentiality
will be breached; (3) It is technically impossible to guarantee
the confidentiality of information once it is entered into a
networked electronic data base; (4) The Fourth Amendment to the
U.S. Constitution states that "The right of the people to be
secure in their persons, houses, papers, and effects, against
unreasonable searches and seizures, shall not be violated"; (5)
The American people strenuously object to the assignment of a
unique individual health identifier and to unconsented access to
their private medical records by government agencies and their
BE IT THEREFORE RESOLVED THAT: The State Medical Association
demand that (1) the AMA inform the President that the HIPAA
"privacy" regulations as currently written are unacceptable; (2)
that the AMA lobby Congress aggressively to permanently repeal
the unique individual health identifier and to require voluntary
patient consent or a court order for government access to medical
records; and (2) that the AMA inform its members of their ethical
duties of noncompliance with data requirements that violate
AMA Pleads Poverty
The AMA, absent for years from the American Legislative
Exchange Council (an association of thousands of state
legislators), hurriedly cut a check for $5,000 so it could insist
on testifying against a resolution allowing for patient direct
access to a physical therapist without physician referral.
"I apologize for not getting into this debate sooner, but we
haven't been able to participate because of budgetary
constraints," stated the spokesperson, before reading the AMA's
position that "a physician has no economic interest in continuing
The AMA managed to corral only one vote against the
resolution, reported Kathryn Serkes, AAPS representative to
ALEC's Health Care Task Force. AAPS voted in favor.
June 1. Board of Directors meeting, Chicago
June 2. Spring Private Doctors' program, Chicago.
Oct. 24-27. 58th annual meeting, Cincinnati, OH.
Sept. 18-21, 2002. 59th annual meeting, Tucson, AZ.
AAPS Leaders Featured in Internet News
As the mainstream press often has a blind spot for
politically incorrect news and views, Americans are increasingly
turning to the Internet for balance. AAPS is well represented on
the two premier electronic news services, and many members are
daily readers of WorldNetDaily.com
and NewsMax.com. For
coverage related to privacy, these organizations are in the
AAPS President Robert J. Cihak, M.D., in collaboration with
Michael Glueck, M.D., writes a weekly column for WorldNetD-
aily.com. See, for example,
"Big Doctor's new `privacy' regulations," March 2.
WorldNetDaily also featured Dr. Faria's column entitled
"Tossing Medical Privacy Out the Window" on April 16. Miguel A.
Faria, Jr., M.D., editor of the AAPS official peer-reviewed
journal, The Medical Sentinel, appears regularly in
NewsMax.com. See, for example,
Doctors to Spy on Patients' Gun Ownership," March 26, 2001.
Data Base Coercion in Colorado
The average citizen might wonder, "Who cares if the
government has a list of everyone who got a diphtheria vaccine?"
So why the sneaky tactics to attach a vaccine tracking registry,
killed twice already, to another piece of legislation, and why
are the provisions misrepresented?
The public is reassured that parents have the right to opt
out of the state reporting system-but the bill states that only
parents who consent to an immunization may opt to
exclude that information. Those who claim an exemption will be
included, like it or not. Moreover, the opt-out provision only
applies to vaccine-related information, not to an entire record
nor to the lifestyle-related "epidemiological" information,
including whether anyone in the family smokes, drinks alcohol,
owns guns, or has multiple sexual partners. The new bill permits
such information to be collected from students, schools, and many
other sources, and to be retained permanently (D Kopel, Rocky
Mountain News 5/6/01).
The "infant immunization registry" is being turned into a
dossier on every person in Colorado. By 2003, all "health care
providers" will be required to keep standardized electronic
records on all patients (Independence Institute Backgrounder
2001-E, 4/17/01, isi.org/SuptDocs/Backgrounders/2001/Vac
A key proponent of vaccine registries is the All Kids Count
program of the Robert Wood Johnson Foundation. Through its
Turning Point project (see AAPS News,
March 1999), RWJF seeks fundamental reforms in public health,
based on a "consensus" of all "stakeholders." Linda Gorman,
author of the Backgrounder referenced above, was asked to leave
the Colorado project because she did not "share the shared vision
of public health" and was "disruptive" (meaning "articulate" and
"vocal," in the words of a program official). (The current
Executive Director of the Colorado Dept. of Public Health and
Environment, Jane Norton, offered to make them keep her.)
Ms. Gorman writes: "I was stunned by how little those
participating knew about the academic literature on health
systems organization.... It was clear that the agenda was already
set.... I imagine if these people have their way I will be
legally required to ... eat only foods approved by the public
health authorities, ... and to limit risky activities such as
driving my car. I will be allowed to work myself into an early
grave to pay the sky-high taxes required by the systems they
spawn.... Should I get really sick, they would provide me with a
nurse who is well versed in human energy fields and touch
therapy. Access to new drugs and specialists would be in doubt...
as long as children anywhere on earth lack basic preventive
Sovereign Immunity and Trusting Government
"As its health care role expands, does government's legal
immunity undermine its accountability?" asks John L. Akula
(Health Affairs Nov/Dec 2000).
Although most bars to legal liability, such as charitable
immunity, have recently fared poorly in plaintiff-friendly U.S.
courts, sovereign immunity remains strong. The scope of federal
immunity is set forth in the Federal Tort Claims Act (FTCA),
which amends the old doctrine that "the King can do no wrong" to
"the King can do only little wrongs." In other words, the
government is liable if one of its drivers turns into oncoming
traffic (there being no possible policy reason for doing so), but
the postal service can sell thousands of surplus vehicles known
to have a propensity to overturn at highway speeds to the general
public with no warning.
Government accountability could be broadened by statutes and
regulations that reduce agency discretion. However, agencies
recognize the risk of being specific. For example, the Dept. of
Biological Services licensed a polio vaccine that did not meet
its detailed and mandatory regulations. The vaccine caused some
illness ("as vaccines usually do"), and the government was
successfully sued for violating its own rules.
In the private sector, individuals are almost always liable
for their own lapses, but all government employees typically
enjoy "official immunity" for action taken in the course of
employment. Even in cases in which the government is liable for
medical malpractice, the individual doctor is not. As the sole
defendant, the government can more easily stonewall.
The government is never subject to strict liability. Thus,
while private manufacturers were found liable for the harms of
asbestos (the question of when the harms became known was
irrelevant under strict liability), a major user of asbestos-
government shipyards-escaped all accountability.
Patients' rights statutes that appear on their face to apply
to government are typically toothless in application. An EMTALA
case brought against an Indian Health Service hospital was
dismissed under sovereign immunity.
The government is most clearly immune when its role is
primarily informational, as under reform proposals for government
tracking of medical errors or government "report cards" for
providers or carriers. "The agencies involved would not be
legally accountable for the timeliness, accuracy, or honesty of
In the private sector, recklessness or purposefully
inflicted harm may constitute an "intentional tort," carrying
harsher sanctions. Except for violations of constitutional or
civil rights, the government enjoys immunity from such special
forms of liability. The federal government can never be subject
to punitive damages. "The rationale is that the government must
function as society's policeman and would be too timid if it
operated under the shadow of liability for bruising methods."
Public/private division of responsibility (as under "single
payer") is an effort to protect patients against the pressures on
government programs to provide a lower standard of care. The
private partner can be held accountable. Akula notes that "[w]e
have not yet seen the aggressive use of devices such as the
extension of government immunity to private parties."
The Author of HMOs. From a letter to the American
Academy of Neurology: I was totally appalled to see Ted Kennedy's
picture staring out at me in the February issue of
AANews. I can't believe the AAN would stoop so low as to
give this man an award for his proposal to establish government-
designated treatment centers for acute stroke. Such proposals
please advocates of Big Government and socialized medicine; it is
easier for government to ration and control medical care by
confining the treatment of certain conditions to designated
As for Ted Kennedy's "leadership" in promoting a "Patients'
Bill of Rights" to rein in the unethical and harmful practices of
HMOs, perhaps people forget that it was Ted Kennedy who led the
way in bringing us HMOs in the first place. In 1971, Kennedy held
hearings to promote HMOs. In his view, HMOs represented a
"comprehensive system of health-care delivery which would
guarantee a sufficient volume of high quality medical care,
distributed equitably across the country and available at
reasonable cost to every American." The next year, Congress
passed a $5.2 billion bill to establish HMOs. Ted Kennedy, in
fact, was the author of the HMO Act. To rely on Kennedy to save
us from those horrible managed-care plans is like depending on an
arsonist to put out the fire that he started.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY
The Ruin of Medicine. I have practiced general internal
medicine for 30 years. Over this time, I have honed my diagnostic
skills. Recently, I diagnosed an embolus to the spleen from the
atria of a 70-year-old woman by talking to her and watching her
facial expression and the way she moved her arms. I have
developed valuable skills just by being in practice for so long,
not because I am somebody special.
The U.S. Congress has trashed our profession. HCFA/ Medicare
has done the worst damage to primary care, which may become
obsolete. Physician assistants and nurse practitioners will be
the "family doctors" of the future, at increased cost because
they lack diagnostic expertise.
Congress has added 40 hours to my work week. I now work 110
hours per week, every week, earn $137,000 per year, and find
myself forced to think about how to stay out of trouble with the
U.S. government every time I see a patient.
I was once a patriot and served in the U.S. Army during the
Vietnam War. I had great respect for America and her
institutions. I now see America as an oligarchy, and I am afraid.
I am not alone, believe me.
In good conscience, I am no longer able to advise any young
person to enter the profession. I still love my patients and will
continue to care for them as long as I am able. But the grief,
fear, and pain for a 2001-USA-doctor is much greater than any
reward, even the joy of helping one's fellow man.
John M.R. Kuhn, M.D., Weston, WI
Muda. During a break in insurance licensing class, a
claims adjustor was heard laughing and describing his daily
routine as the 3-Ds: Delay, Deny, Don't Pay. The 3-Ds involve six
of the seven categories of Muda (see pamphlet #1082), including:
Rework of re-reviewing the claim to verify that it will
not be paid after it is resubmitted; overproduction of
claims processing when the health plan pretends it will pay for
certain claims, knowing in advance that it will not; and poor
design in a health plan that encourages treatments it wants
As William Edwards Deming states in Out of the
Crisis: "Defects are not free. Somebody makes them, and gets
paid for making them."
Gerry Smedinghoff, Recovering Actuary, Wheaton, IL
Famous Last Words. In 1987, James Vitali, CEO of
Thomas-Davis Medical Centers, complained of my letter to Arizona
physicians warning about managed care: "I can't believe that a
professional would send out such garbage in the U.S. mail." He
said my statement that "doctors must obey the boss, the insurance
company, or be fired" was absurd. He called my review of how HMOs
work "ridiculous" and said any intelligent reader would have some
real doubts about me. He claimed that InterGroup, "totally owned"
by Arizona doctors, "will grow in staff and facilities to meet
the medical needs of growing populations wherever we serve.
However,...we will not compromise quality of care for the
patients or quality of life for the people who work within our
When the latest corporate owner of InterGroup decided it
wasn't profitable enough, all patients and doctors were summarily
dumped on short notice.
Robert P. Gervais, M.D., Mesa, AZ
Sign-In Sheets Out. The Atlantic Regional Osteopathic
Convention (AROC), April 17, 2001, featured a lecture sponsored
by Medical Inter-Insurance Exchange (MIIX) of Lawrenceville, NJ.
The lecturer, a podiatrist, said that sign-in sheets were illegal
because they exposed patients' identities to others who were
signing in and thus violated confidentiality. She also said that
waiting rooms and nurses' stations should be separated by doors
and windows. Patients should sign the doctor's notes, she
suggested. When the doctors said that was impractical, she
suggested having patients sign a sticker to be affixed to the
notes. The whole thing is madness. I wonder whether patients
should wear masks in the waiting room?
Lawrence Nessman, D.O., Wayne, NJ
Legislative AlertThrow MAMA from the Train
The Health Care Financing Administration, the powerful
regulatory agency that runs the huge federal Medicare and
Medicaid programs, has a little public relations problem. The
people who have to deal with it on a regular basis (doctors,
nurses, hospital officials, etc.) don't like it very much-and the
new Secretary of Health and Human Services (HHS), Tommy Thompson,
wants to do something about it. So he is proposing to help set
things right-can't we all just get along?-and pondering a change
in its name with the ugly-sounding acronym HCFA to the Medicare
and Medicaid Administration, or MAMA. No joke.
According to Congress Daily, Secretary Thompson, in
a recent speech to the American Hospital Association, noted the
need to change the agency's attitude, and to find a way for it to
become user-friendly, and to be able to say "yes." The choice of
the AHA audience was propitious. On May 1, the association
released a report of a study conducted by the prestigious firm of
PricewatershouseCoopers, which found that hospital staff spend
a minimum of 30 minutes, on average, on paperwork for each hour
caring for Medicare patients. The report (Patients or
Paperwork? The Regulatory Burden Facing America's
Hospitals), went on to note that for certain services to
Medicare patients, such as emergency room care, hospital staff
spend an hour of paperwork for an hour of patient care. AHA's
President Dick Davidson told reports that from two-thirds to
three-quarters of Medicare paperwork is not related to patient
care. This is madness. Still, leftists in Congress and
elsewhere insist that there is nothing structurally wrong with
Medicare that the addition of hundreds of billions of dollars in
additional prescription drug benefits can't fix.
To help things along, Secretary Thompson also indicated that
he is going to spend some time in Baltimore personally managing
the agency, and that he will move decision-making for waivers
from rules governing the enforcement of the horribly complex
Health Insurance Portability and Accountability Act (HIPAA) of
1996-the Kassebaum Kennedy bill- to the office of the Secretary.
This will presumably mean more "yeses" than "nos" from the HHS
bureaucratic empire. The Secretary also noted that HCFA needs the
right amount of funding to do the job that Congress has given it,
and continues to give it, every blessed budget cycle,
reconciliation or not. Here we come, world without endless
Secretary Thompson's heart is surely in the right place, and
maybe a week in Baltimore, working later in the evening on
Security Boulevard, will help the Secretary get a clearer
understanding of the awesome managerial task HCFA has in trying
to micromanage such a large portion of the medical sector of
America's economy. The job is not inspiring. It involves, for
example, making sure that the Resource Based Relative Value
Scale's (RBRVS) equations are perfectly balanced and its
application is scientifically precise in its calculation of the
practice and work "values" to increase the pain and suffering of
anesthesiologists in Buffalo Breath, Montana. And if everything
doesn't work out all right in the big bad, mean old world of
serving patients, well, one can always run to MAMA for a little
tender loving care. Surely the medical policy world needs a
little more sweet love. It also needs a strong dose of common
sense and free-market thinking.
Getting it Right
HCFA's problems, perceived and real, are not solely
attributable to a lack of staff, a lack of funding, the
proliferation of doctors with attitudes, the wrong computer
software, or an indisputably ugly acronym.
Remarkably, the politically astute former President Bill
Clinton understood HCFA's lack of appeal. But, of course, he
proposed making the situation worse by universalizing government
control. In his 1992 book, Putting People First, Clinton
said: "We will scrap the Health Care Financing Administration and
replace it with a health standards board- made up of consumers,
providers, business, labor, and government-that will establish
annual health budget targets and outline a core benefits
package." Thankfully, Clinton's National Health Board died-
temporarily-with the Clinton Health Plan in 1994.
As doctors know, you cannot resolve the problem unless you
correctly diagnose it. HCFA is designed to carry out a program of
central planning and price regulation. If you don't like central
planning and price regulation, then you don't want more efficient
price regulation or central planning.
The point is not to reform HCFA and make it a more effective
bureaucratic engine of central planning or a sterner price
controller. The Bush Administration and Congress will not earn
the everlasting gratitude of millions of future retirees, or the
thanks of millions of taxpayers yet unborn, because it "reformed"
something called HCFA. Reforming HCFA is not, repeat, not the
point; the point is to reform Medicare itself. It is the
structure of Medicare itself that requires HCFA to do what it
does. Retaining the structure requires retaining the governance
and the regulatory responsibilities for setting benefits,
administering prices, enforcing rules, tightening oversight, and
generating reams and reams of paperwork. Changing the structure,
substituting market forces for government regulation, would turn
HCFA into an historical footnote in a chapter in the big book of
mankind's long and failed experiment with central planning,
massive and wasteful paperwork, and inefficient government price-
fixing. As a mental exercise, think MAMA with every paperwork
exercise you do for HCFA, and see if it makes you feel any
The Bush Agenda and American Medicine
Now that the President has compromised with senior House and
Senate Republicans and Democrats and has agreed to a $1.35
trillion tax cut over the next ten years (down from his original
mark of $1.6 trillion), the policy focus of the Administration
has shifted to saving its embattled education reform plan. The
Senate bill has largely gutted the Bush education agenda, and, as
this goes to press, the House Committee on Education is doing the
same. But after the education reform fight is over, and now that
the Bush Social Security reform proposal for developing a system
of personal retirement accounts is in the hands of a bipartisan
Presidential commission, with former New York Senator Daniel
Patrick Moynihan playing a high-profile role, many Capitol Hill
players think that the already emerging "health care" battle will
begin in earnest this summer.
Bush is proposing, of course, a major reform of Medicare,
and is also proposing a more modest system of refundable tax
credits to assist those who are uninsured. The Bush plan will be
debated, as will other proposals, including the Armey plan. The
Left is already staking out opposition to tax changes that would
promote choice, and indeed one can spot recent seminars and
conferences on the subject around the country on the "limits of
choice" or whether persons can really make those kinds of
Tax and Medical Insurance Policy
Economists don't particularly like the mix of tax policy
with "health care" policy, particularly when it calls for junking
up the tax code with even more credits, or exceptions, including
refundable credits. The problem: how do you establish a system of
consumer choice for millions of Americans who don't have it-and
won't have it without significant policy changes? The growing
consensus, best exemplified in the recent work of Milton
Friedman, is that consumer choice and market competition is
impossible without reform of the medical insurance market, and
that is impossible without reforming the tax treatment of health
insurance. Ergo, "health care reform" is really tax
Following the lead of the Health Insurance Association of
America (HIAA) and Families USA, some members of Congress are
talking about giving tax credits to employers instead of
individuals and families. But, as Heritage Foundation Vice
President Stuart Butler argues in a recent Heritage paper on the
subject, giving tax credits to employers wouldn't eliminate the
"hassle factor" of attempting to pick a plan that fits the needs
of all their employees. And it wouldn't reduce the high costs
small-business owners face because they can't "pool" insurance
risks to negotiate lower premiums the way large-business owners
can. There is another practical problem: How does one make sure
the credits subsidize only the insurance of needy workers? If the
government simply provides a subsidy to small businesses, it ends
up subsidizing the insurance of highly paid workers such as
doctors, lawyers, and computer engineers. If it puts income
restrictions on the credits, employers would have to get full
income information on their workers and others in their
households-a requirement that raises privacy concerns, invites
fraud, and places an undue burden on employers. No such problems
arise if tax credits go to individuals and families. Butler
argues that, for the sake of convenience, tax credits could be
provided through employers but without the employer having to
arrange the insurance. Employers do something similar right now
through the withholding system for income and payroll taxes.
Employers could do likewise with medical insurance by using tax
credits to pay the premiums on plans selected by their employees.
Such a reform could provide coverage offered through churches,
unions, professional and trade organizations, and even large
corporations. Large companies such as General Motors and John
Deere, notes Butler, which commonly take products developed as
internal services and offer them to the public, could open up
their huge health plans to non-employees. (The Heritage paper is
Learning from D.C.'s Medicaid Experience
As noted previously in these pages, health insurance
executives, represented by HIAA and Families USA, a left-wing
grassroots organization that seeks greater government control
over medicine, have entered into a Faustian bargain to expand
Medicaid in return for further tax breaks for employers, in the
form of employer tax credits for signing up uninsured workers for
insurance. It is not likely that employers will cooperate with
this agenda; in fact, there is solid survey research evidence
that they simply won't do it. The Left, of course, doesn't really
care about that: the goal is a Medicaid expansion, another
significant step toward the final solution-a "single payer
system," or a Canadian-style government monopsony.
If Medicaid were a truly desirable alternative for the
uninsured, the corporate advocates of the Common Ground proposal
should be able to point to its success. But consider the District
of Columbia, where Medicaid penetration is greatest.
Thanks to a recent state-by-state analysis compiled by the
American Association of Retired Persons (AARP), policymakers have
a wealth of data on the utilization of services under Medicaid.
The District population is poor; it ranks forty- eighth in the
nation in median family income; third in the nation in family
incomes below the national median, and is second only to New
Mexico in the poverty rate. (Curiously, the uninsured constitute
18.2% of the under-65 population, and 18% of the minority
population-not good, but only slightly more than the national
figure.) Given its income and demographic composition, it is not
surprising that the District leads the nation in terms of
Medicaid coverage, 17.5% of the under-65 population. The District
ranks second in Medicaid payments per adult and child, while a
total of 60% of Medicaid beneficiaries are enrolled in managed-
If Medicaid is such a good program, then it should have a
measurable positive impact on the population, particularly the
impoverished women and children, it is designed to serve.
However, the District ranks seventh in the nation in black infant
mortality rates; first in black low-birth-weight babies; fifth in
cardiac mortality; first in cancer mortality; seventh in stroke
mortality; and second in diabetes mortality. None of this is
because of lack of medical resources. Indeed, the District ranks
first in the nation in the number of physicians in residency;
first in the number of specialists; first in the number of
registered nurses; first in the number of hospital beds; and
second in the number of physician assistants.
Of course, a lot of residents of the District of Columbia
have little difficulty accessing this rich reservoir of medical
talent. Most of the District residents under age 65 (57.1%) have
private, employer-based coverage, and another 5.3% have other
types of private coverage. Who are they? Surprise! Federal
employees and their families. The test: how many persons eligible
for the Federal Employees Health Benefits Program would trade it
Robert Moffit is a prominent Washington health policy
analyst and Director of Domestic Policy at the Heritage