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Volume 57, No. 6 June 2001

VIRTUAL EXPOSURE

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 ( www.freedom.gov/library/technology/medpriv2.asp).

"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 society?)

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?


The File

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 information."

 

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, M.D.]

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 designees....

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 patients' rights.

 

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 physical therapy."

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.

 

AAPS Calendar

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 forefront.

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 cineRegistry.htm.)

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 services."

 

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 such efforts."

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."


 

Members' Page

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 centers.

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 to discourage.

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 organization."

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 Alert

Throw 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 spending, Amen.

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 better.

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 choices, etc.

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 reform.

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 available at: www.heritage.org/library/backgrounder/bg1420.html.)

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- care plans.

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 for Medicaid?

Robert Moffit is a prominent Washington health policy analyst and Director of Domestic Policy at the Heritage Foundation.