Tucson Blvd. Suite 9
Tucson, AZ 85716-3450
Phone: (800) 635-1196
Hotline: (800) 419-4777
of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 48, No. 6 June 1992
ARE DOCTORS LIKE DRUG DEALERS?
The ``health care industry'' differs from the illegal
drug industry in several respects. ``I can't stress this
enough,'' stated Barry Moehring, aide to Rep. Jim Kolbe (R-AZ).
There are ``different statutes, different standards, and a far
different class of people involved.''
Nevertheless, Kolbe's proposed legislation (HR 4930) to
provide for forfeiture of property involved in the commission of
Federal health care offenses is modeled on laws designed to fight
the Drug War.
The bill provides for both civil and criminal forfeiture of
real and personal property that is used in the commission of a
Federal health care offense or is derived from proceeds traceable
to the commission of the offense.
A Federal offense may be related to Medicare or Medicaid
claims. But other offenses become Federal if they involve mail
fraud, wire fraud, or a claim to an insurance company involved in
interstate commerce. Offenses include:
(A) fraudulent or false billing for a medical
product, service, or test; (2) inflated cost of a
service or procedure performed by a health care
provider; (3) unnecessary admission of a patient to a
health care facility; or (4) a kickback to a health
care provider on a sale of any medical product,
including durable medical equipment, or any medical
The terms in this list would be defined by regulations.
They illustrate another difference between drug trafficking and
medical care: We know what a narcotic is, but what is an
In a lengthy interview, Mr. Moehring discussed the bill with
Q: How is civil forfeiture different from criminal?
A: In criminal forfeiture, the defendant has to be proved
guilty before assets are seized. This means that if a criminal
knows he is under investigation, he can liquidate or disperse the
assets so that they can't be confiscated. Civil forfeitures can
take place much more quickly. The former owner has to file suit
and prove that the property was innocent (not used in a crime) in
order to get it back.
Q: Why is forfeiture being considered for health care
A: Health care fraud is a huge problem, costing more than
$30 billion per year. The Department of Justice feels that they
need this tool, which has worked very well in drug enforcement.
For one thing, it gives local law enforcement an incentive to
work with the FBI, because they receive a share of the seized
assets. Also the bill serves as a preventive measure. If a
doctor thinks the clinic might be seized, he might not commit the
Q: Is there any provision in the statute for making the
penalty proportional to the offense?
A: Not in the statute. If a doctor got a kickback on a
$15 box of syringes, I guess the whole hospital could conceivably
be seized. But that's up to the judge to decide.
Q: Do you see any constitutional problems with this
A: No. The Supreme Court has ruled on RICO. Both civil
and criminal forfeiture have been upheld.
Q: Do you think it is it constitutional to punish
a person before he has been proved guilty?
A: I'm not a constitutional lawyer. It's the Supreme
Court's opinion, not mine (U.S. v Sandini, see p. 2). Forfeiture
is constitutional. It's the property that's the defendant.
Q: How about eliminating the incentive for health care
fraud, by outlawing the assignment of benefits?
A: I don't think that's politically tenable.
Q: Is forfeiture for physicians more politically
A: Unfortunately, I don't think this bill will go anywhere
in this session. It will be back, if Mr. Kolbe is reelected.
Senator Biden (D-DE) is also drafting a bill, which is more
severe. His bill calls for 10-year prison terms for health care
fraud, extended to 20 if a patient is harmed as a result, or life
if a patient dies. It also extends the definition of mail fraud
to include Federal Express and provides for a $10,000 reward for
supplying information that leads to a conviction for health-care
Q: Wouldn't rewards for informers lead to an East German
type of state?
A: I have to say you're being a bit extreme.
Mr. Kolbe's aide did not have the answer to a number of
questions: (1) What has to be done to show ``probable cause''
before forfeiture occurs? (2) How long does it take for an
innocent physician to get his property back, and how does he pay
his lawyer if all his assets are frozen? (3) Does an innocent
party have any recourse for damages caused by a forfeiture, say
if it occurred without showing ``probable cause''? (4) How does a
clinic pay its creditors if its assets are frozen? Are they
being punished too?
This proposed legislation shows that physicians and other
``providers'' (such as nursing homes and suppliers of equipment)
really are like drug dealers in a number of important respects.
They provide a product that is desired by individuals but costly.
They accumulate assets that could be used to reward law enfor-
cers. And it is politically feasible to target those assets.
Most importantly, suspected drug dealers and physicians are
all American citizens, entitled to equal protection of the laws.
If one citizen can be deprived of property rights
without due process of law, then no citizen's property
rights are secure.
Incentives to Law Enforcers
As one Tucson attorney noted, some law enforcers are able to
ride around in expensive cars that had been used to transport
contraband, even though their former owner had been acquitted of
Civil forfeiture is an in rem proceeding. The
property is the defendant in the case, and the burden
of proof rests on the party alleging ownership. The
innocence of the owner is irrelevant-it is enough that
the property was involved in a violation to which
forfeiture attaches U.S. v Sandini (816 F.2d869, 3rd
It's Called ``Protection''
Regulations. Employers are responsible to warn
employees of potential cancer hazards in the workplace. They are
to develop a manual for this purpose....Not doing so implies that
the employer wants to harm his workers. [See Title 8, Article
110 of the California code of regulations 5194.] The penalties
for disobeying have just been raised by a factor of about ten.
Anomalies. The amended California regulations (which
are available if you ask to be on the mailing list of the
relevant bureaucracy) also threaten: ``For carcinogens, failure
to report ...'' Here come innuendo and confusion. The documents
refer to a section of the code [338(f)], which does not exist!
The government official whom your newsletter writer managed to
pin down...faxed another list of regulations and chemicals
(Section 330) ...Acetaldehyde came to my attention first. This
is a substance we use for preserving specimens; it should be
possible to remind the staff not to drink [it]...by preparing a
manual so advising them. Next on the list is acetic acid. This
is ordinary vinegar. How might I handle the situation if my
office staff brings in salad dressing for lunch? I decided to
gloss over this....Further down the list-acetone, [which] is
excreted by the human kidney as a byproduct of the metabolism of
fat. It is normal in the urine in the fasting state, and, of
course, occurs in the urine of uncontrolled diabetics. Acetone,
we are told, is a carcinogen and it is my responsibility to
ensure that my employees do not come in contact with it. No
problem. One can ensure the absence of the fasting state (you
must eat all the time on the job), but [what to do about] the
diabetic?...[The list continues] in 40 pages of small print....
Half of the natural substances [tested in maximally tolera-
ted concentrations in breeds of rodents naturally prone to
cancer] produce cancers....
Administrative Encirclement [is] a term coined by Dr.
John Gall in Systemantics. Here the innocent employer prepares a
manual for control of the supposed toxicity of these benign
substances as official policy in the workplace. You will note it
shall be registered with the authorities. Come a few years
of...the natural neglect that comes with familiarity, and after
all the regulations are nothing short of ridiculous, when
enforcement will arrive....The beauty of the self-prepared
manuals will be heard in the complaining tone of the enforcing
officers of a generation to come: You wrote it....
The dentists were hit first. It is they who use a number of
solvents, mixtures, amalgams and the like....The fact that most
of these substances are eventually placed in the mouths of their
customers seemingly does not detract from their risk as
carcinogens to the employees who are merely on the premises.
Logic, you will see, plays no role in enforcement.
``They could padlock me right now,'' said a dentist. ``But
I hope that if I make a genuine effort in true citizenship, they
won't be too hard on me.''
The Sergeant Major Syndrome. When I was in the
military, discipline was enforced by random punishment. The
victim had to be unprepared. In this state of fear and anxiety,
he is unstable and easily influenced and controlled....Impossibly
complex rules are the grist of tyranny.
KGB in America. ``Show me the man, and I will find his
crime'' was the motto of the now not-so-defunct Committee for
State Security (KGB to you and me). You might think the first
step in the American KGB plan is in place. Find me an employer,
and I will name his crime.
Regarding the new regulations, we are told: ``The purpose
of this [California] bill was to increase penalties for occupa-
tional safety and health violations in a manner consistent with
the Federal Omnibus Budget Reconciliation Act of 1990 which
increased maximum civil penalties by Fed/OSHA.'' This is what I
have called leveraged control.
Fear of Paranoia. Paranoia means an irrational fear.
Is this what your writer has been indulging in [here]? Take a
look around you; use your common sense. Of course, we've had
some pollution and...some accidents. The human species is mortal
and though our life expectancy has increased, some people die of
cancer. Are these matters so [fearsome] we should put our
collective heads in a collective noose?
Taking the long view of the history of humankind, tyranny
was the norm, republican freedom the exception....[America was
unique.] Fear of tyranny is therefore a rational fear.
Thomas A. Dorman, MD, San Luis Obispo, CA
excerpted from April, 1992, Practice Newsletter
In 1970, federal regulatory agencies employed 71,233
persons. The number increased to 121,670 in 1980, decreased to
101,963 in 1985, and has increased to 122,406 in 1992.
The administrative costs of federal regulatory activities
have increased steadily from $1.4 billion in 1970 to $13.0
billion in 1992. The annual cost to the economy was over $400
billion in 1991-more than $4,200 per household (Nation's
Business, May, 1992).
Businesses have been asked to submit documentation of
compliance costs, paperwork burdens, impact on operations and
customer relations, and other problems, to Nation's Business, US
Chamber of Commerce, 1615 H Street NW, Washington, DC 20062-2002.
Dr. Hansen Appointed to Advisory Council
AAPS member Kenneth D. Hansen, MD, who practices
ophthalmology in Arlington, VA, has been appointed to serve as a
charter member of the new Practicing Physicians Advisory Council.
The Council was established to decrease red tape and make
Medicare more efficient.
Government Files Response in AAPS/New Jersey
Litigation; Claims that Medicare is ``All-or-Nothing''
On April 24, 1992, a reply to the New Jersey lawsuit
challenging the prohibition against private contractual
relationships between Medicare beneficiaries and their physicians
was filed by Louis Sullivan, MD, Secretary of HHS and Medical
Service Association of Pennsylvania d/b/a Pennsylvania Blue
Shield. The lawsuit was filed by five patients and their
physician, Lois J. Copeland, MD, a member of the Board of
Directors of AAPS and a nonparticipating physician.
The defendants submitted a 44-page Memorandum in support of
a Motion to Dismiss.
First, the government contends that neither Dr. Copeland nor
any of her patients have standing to challenge the government
policy because they allegedly have suffered no injury
attributable to this policy. Therefore, the defendants state
that there is no case or controversy within the meaning of
Article III of the federal constitution. (Article III limits the
jurisdiction of the federal courts to cases or controversies and
forbids the federal courts from rendering advisory opinions.)
Yet in the same brief that contends Dr. Copeland has not been
threatened with a sanction, the government maintains that if she
does enter into private contractual relationships with the
patient plaintiff beneficiaries, she will be sanctioned by
As to the patient plaintiffs, the government argues that
they have no standing because any reluctance on the part of Dr.
Copeland to treat her patients cannot be attributed to the
Medicare policy that is being challenged. Also the government
maintains that the patient plaintiffs are not harmed by the
government forbidding them to have their personal physician treat
them on their own terms rather than the government's.
The second argument made by the defendants in order to avoid
the merits of the plaintiff's allegations is that neither Dr.
Copeland nor her patients have exhausted their administrative
remedies and that therefore the federal court lacks subject
matter jurisdiction. This contention, which is a standard
government reply in cases challenging Medicare policy, ignores
the fact that if no claim is submitted to Medicare, there
simply can be no administrative appeal to the Secretary of
Despite their claims that the court does not have
jurisdiction and should not consider the merits of the
plaintiffs' challenge, the government devotes the bulk of its
memorandum to arguing the merits of the case.
First, the government argues that Dr. Copeland's patients
cannot excuse her from compliance with the limiting charge and
claim-submission requirements of the Medicare Act under any
circumstances. The government argues that either the patient may
be enrolled in the Medicare Part B program in its entirety or
disenroll completely (thereby becoming uninsured for services
covered under Part B) and that there is no middle ground.
Further, the government maintains that 42 U.S.C. §1395w-4a
requires physicians to complete and submit claim forms to the
Medicare carrier even if the beneficiary does not want to have a
As a practical matter, the government's argument maintains
that Medicare policy is designed to paternalistically police the
physician-patient relationship when patients are age 65 or older
because these patients allegedly cannot defend their own
interests against the assumed chicanery of their personal
physicians. The government states:
[I]t is hardly open to argument that the
relationship of the elderly and disabled to their
physician is one of trust and vulnerability....Given
this relationship of trust, it almost adds insult to
injury to attach legal significance to an ``agreement''
by which the patient surrenders a valuable benefit-for
which his premiums have already been paid-solely to
assist the physician in escaping detection for
unlawfully overcharging the patient in the first place.
If the plaintiffs contend there truly exist some
subset of Part B enrollees who do not want to ``tax the
federal treasury each time they seek health care
services from the physician of their choice,''...those
enrollees can protect their interests simply by
donating the Medicare payment back to the Federal
Treasury. For Congress to take affirmative steps to
protect the physician's ability to pressure or beguile
the patient into such a self-damaging course of action,
however, would be a strange policy choice indeed.
In addition to assuming that Dr. Copeland and her patients
will reach contractual agreements that exceed Medicare limiting
charges, the government assumes that persons age 65 or older
require government supervision over every aspect of their medical
care. While the government attempts to belittle the plaintiffs'
argument that private contractual relationships are countenanced
by the letter and spirit of the Medicare Act as a whole, the
government argues that its own position is supported by the
letter and spirit of the Medicare Act, as interpreted by the
Secretary of HHS.
Finally, as to the plaintiffs' arguments that the Medicare
policy violates equal protection and the patient's right to
privacy, the government simply argues that there is a rational
basis for treating patients age 65 or older with alleged
paternalism and that the patients simply have no constitutional
right to privacy in their medical treatment by their personal
A response to the government's motion to dismiss will be
filed in late June.
Writ of Certiorari Denied in Caine v. Hardy
The U.S. Supreme Court has denied the petition for writ of
certiorari in the case of Caine v. Hardy, allowing the decision
of the Fifth Circuit to stand. Persons injured by an agent of
the government have no cause for bringing a civil rights action
(see AAPS News, Nov, 1991).
So far this term, the Court has agreed to hear only 71 of
the 3,928 appeals that have been filed. The April calendar bears
only eight cases in a schedule designed to accommodate 24-the
lightest docket in 21 years.
One suggested reason is that ``the lower federal
courts...are more pro-government than they were a decade ago,
producing fewer rules of the kind that this Supreme Court feels
obliged to review,'' according to a New York Times article.
A Letter To Senator Helms
Because of [the paperwork and unreasonable fee limitations
imposed by Medicare], I have not accepted any new Medicare
patients for the last year and a half. Virtually all the other
primary-care physicians in the area have closed their practices
to Medicare, as well. Our office is receiving five to ten calls
daily from Medicare patients who are desperate to find a
The reason for this pitiful situation is no mystery. The
Medicare Administration tells me that I can charge only $24.00
for what amounts to a 30-minute office visit by an ill elderly
patient with multiple complex problems. In addition to this, I
must do $5.00 in paperwork to file the claim. If I fail to abide
by either of these requirements, I am potentially liable for a
$2000 fine per violation. My office overhead...is $40 per hour
and climbing all the time....This means that when I see Medicare
patients in the office, I am actually working [without pay]. In
the interest of survival, I cannot continue to do this. Two
physicians in the community have already been forced to close
their practices because they were unable to make a living seeing
A number of patients have approached me with a proposal to
pay for their office visits at the same rate as non-Medicare
patients and simply not use their Medicare benefits in the
office. In turn, they expect me to accept Medicare as insurance
for hospital services, where charges can mount with protracted
hospitalization...The increased cost to each patient would
average only $150 per year, which most are willing to pay. The
advantages of this plan are:...(1) The problem of access to care
is reduced. (2) MEDICARE ACTUALLY SAVES MONEY. (3) Paperwork is
reduced for the physician and for the Medicare Administration.
(4) The physician-patient relationship is improved because
neither feels exploited by the other.
When proposed to me, this plan seemed fair and reasonable. I
reviewed the Medicare law with my attorney, and no prohibition to
such a plan was found. I went ahead with a trial of the plan,
and everyone was satisfied. In the meantime, however, I have
heard from the Medicare Administration; HCFA states this is not
permissible. They threaten legal sanctions if I allow Medicare
patients to purchase the care they want outside the Medicare
program. Neither the Medicare Administration nor HCFA will cite
the provisions of the Medicare law which prohibit this plan. I
believe there is no such prohibition. It would clearly be an
infringement of the Bill of Rights to prevent patients from using
their own money to buy whatever medical care they want....
In this time of budgeting crisis, it is hard to understand
why any federal agency would be so extremely resistant to a
money-saving plan, especially when this resistance is in viola-
tion of our constitutional rights....[This plan] would in no way
detract from the rights of those who choose standard care under
the Medicare program.
I would request that your office lend vigorous support to
this ``freedom of choice'' option for Medicare patients and
compel HCFA either to cite specific sections of the Medicare law
which might prohibit this or to acknowledge in writing that this
type of plan is permissible under law.
Charles C. Goodno, MD
Morehead City, NC
Bill Goodman to Speak in Great Falls, MT
``Canadian Health Insurance: Cure or Catastrophe?'' will be
the subject of Dr. William Goodman's presentation in Great Falls,
MT, on Saturday, June 20.
Dr. Goodman, an ENT surgeon and student of political science
and economics, has frequently testified about the results of the
Canadian experiment in ``universal access.'' He speaks from many
years of first-hand experience in Toronto, Ontario. He is the
author of two AAPS booklets, The Canadian Model: Would It Work
Here? and Canadian Medicine: a Road to Serfdom.
Dr. Goodman's presentation will highlight an AAPS seminar on
``Medicine and Freedom: the Doctor, the Government, and the
Law.'' Also speaking will be Kent Masterson Brown (AAPS Legal
Counsel), John H. Boyles, Jr., MD, (AAPS President), Lois
Copeland, MD, Paul Gorsuch, MD, and Jane Orient, MD.
The seminar will be held in the Lewis and Clark Room at
Columbus Hospital in Great Falls, MT. For information on
accommodations and a detailed program, call AAPS (800-635-1196).
June 13, 1992. Board of Directors meeting, Courtyard
Marriott, Lexington, KY.
June 20, 1992. Medicine and Freedom Seminar, Great Falls,
Montana (to register, call 800-635-1196).
August 16-20. 9th International Congress of Private and
Independent Medicine, Hotel Grand Marina, Helsinki, Finland.
Call IATROS, (319)283-3491.
October 15-17, 1992. Annual meeting, Seattle, WA, Airport
Radisson Hotel. Delta Air Lines is offering a special discount
on airfares (ask for Special Meeting Network File No. U48071 when
Legislative AlertAAPS Report from Washington
RVS Marches On and On and On...On April 8th, the House
Ways and Means Subcommittee on Health, chaired by Pete Stark (D-
CA), opened hearings on extending the Medicare payment schedules
to hospitals and doctors. Congressman Dan Rostenkowski (D-IL),
Chairman of the full Committee, has introduced H.R. 3626, the
``Health Insurance Reform and Cost Control Act of 1991,'' which
would extend the RVS into the private sector.
The Rostenkowski bill would establish ``optional payment
rates'' based on the new Medicare Fee Schedule, and establish the
same balance billing limits for physicians services that exist in
the Medicare program. Under the Rostenkowski bill, private
insurance purchasers could either opt to use the Medicare payment
system for practitioners, or use them not at all. But if the
private insurer decided not to use the Medicare payment system
for doctors for managed care programs, it could still use it for
traditional fee for service health insurance plans.
Applying the RVS Medicare payment scheme to the private
sector could result in substantial ``savings.'' According to the
Physician Payment Review Commission (PPRC), the Medicare payment
rates would be 35 percent less than private insurers' payment
rates (for both traditional fee-for-service plans and preferred
provider organizations) by 1994, when the Rostenkowski proposal
would take effect.
The Stark panel heard from the AMA, the American Society for
Internal Medicine, the American College of Emergency Physicians,
the Congressional Budget Office and a former Member of the Reagan
Administration's Council of Economic Advisors, Dr. William
Niskanen, now Chairman of the CATO Institute.
Predictably, the AMA reaffirmed its support for the concept
of the RBRVS and its implementation, but stated opposition to the
extension of the Medicare payment system into the private sector.
Speaking for the AMA, P. John Seward, MD, said the full impact of
the RVS in Medicare would not be known until ``late in this
``Refinement'' is the key code word for the RVS right now.
Unless the relative value units for medical procedures are
``refined,'' they will be wrong.
``From what physicians tell us on virtually a daily basis,''
said Seward, ``there are significant errors and inequities in
specific elements of the RBRVS. Although these may appear to be
relatively minor miscalculations of physician work and practice
cost values, such errors can make it impossible for physicians in
many locations to provide certain services.''
Nevertheless, Seward repeated the standard line that if it
is ``implemented correctly,'' the RVS can be a ``sound basis''
for paying doctors in the Medicare program, noting that budgetary
consideration have thus far interfered with its correct and
On the specific question of the application of the Medicare
payment system, including the balance billing restrictions, to
the private sector, Dr. Seward stated: ``This represents a
dramatic shift in the role of the federal government in health
care that is entirely inconsistent with how our economy deals
with other goods and services. Where such policies have been
attempted in other sectors of the economy, the results have been
disastrous. The effects of rent controls and gasoline price and
allocations are key examples. Controls such as these are
inconsistent with our market-based economy.''
Seward noted that full implementation of the RBRVS and its
application to the private sector would mean a decline of 38 in
``Practice costs of physicians are generally 50% of their
practice revenues, even higher for some practices. Moreover,
these expenses are generally fixed. Reductions of 25 to 38%, as
projected by the PPRC, could cut many physicians' incomes by 50
to 75%, leaving many physicians with too little income to make it
possible to provide care. Frankly, we are disturbed that the PPRC
report offers no estimation of the impact of such significant
The American Society for Internal Medicine (ASIM) likewise
opposes the direct application of Medicare rates to the private
sector, because it would lead to a reduction in primary care
services, even though ASIM still thinks that the RVS is better
than the previous system of customary reasonable and prevailing
charges. ASIM has proposed an alternative system, which would
include a new RVS system for the private sector, a national
``health care objectives'' board, national negotiations on
expenditure ``goals'' and on the conversion factor.
The outlook? ``Cost containment'' (price control) measures
like the Medicare RVS payment system will probably gain more
support, especially from Democrats frustrated with rising costs
and cost shifting. For doctors and professional organizations
who all along supported the RVS, their opposition to the extended
employment of this payment methodology will easily be
characterized as both contradictory and baldly self-interested.
Spokesmen for organized medicine are oblivious to the fact
that their enthusiastic support for a payment system that is
``fair and rational'' was pregnant with expansionary consequen-
ces. The public sector system is, after all, designed to be
``fair.'' Thus, the private sector insurance system, with its
inflationary discrepancies and cost shifting (price gouging?),
must of necessity be ``unfair.'' Moreover, if doctors, now
``astounded'' by the outcome of the Medicare fee schedule, should
decide to desert the public sector in order to charge higher
prices for their services in the private sector, then they should
also expect the advocates of the RVS to pursue them into the
private sector. After all, that is what advocates of the RVS on
and off Capitol Hill have been saying all along, including
Congressman Rostenkowski, Congressman Stark, and the Pepper
The Medicare RVS is not yet in its first year of implementa-
tion, and the Capitol Hill advocates of central planning cannot
wait to extend it into the private sector. Surprise, surprise,
So Does ``Prospective Payment'' (DRGs)...The
Prospective Payment System, establishing the DRGs for Medicare
hospitals, was established in 1983. In his report to the Ways and
Means Health Subcommittee, Stuart Altman, PhD, Chairman of the
Prospective Payment Commission (ProPAC), noted that the Medicare
hospital payment system could indeed be applied to all payers
(surprise, surprise!) The savings that would result from the
application would depend upon a number of factors, but could
range anywhere from 0 to $21 billion.
The ProPAC statement touched off a discussion about the
degree to which hospitals could absorb the new costs of this kind
of regulatory regime and still stay afloat financially.
Congresswoman Nancy Johnson (R-CT) argued that the hospitals in
Connecticut are already under a severe financial strain, and that
hospital spokesmen have told here that they could not stay open
for business if they had to operate on the level of reimbursement
provided by the Medicare program. Taking the opposite side of
this debate, Congressman Benjamin Cardin (D-MD) argued that
Maryland's hospitals are already reimbursed at rates less than
the Medicare payment rates and seem to be doing just fine.
Maryland already regulates hospital rates, and the ProPAC
spokesmen noted that Maryland ranks number one in the nation when
it comes to ``holding down'' medical cost increases.
``Malpractice'' Reform. The Bush Administration has
produced its medical malpractice reform package, which would
provide the states with incentives to initiate key tort reform
proposals. The Bush program includes the following key
- elimination of ``joint and several liability'' for
- limitation of noneconomic damages to ``a reasonable level,''
such as $250,000, adjusted for inflation;
- elimination of the ``collateral source rule'' that allows for
- provision for regular, structured payments of malpractice
awards, rather than ``lump sum'' payments;
- promotion of ``alternative dispute resolution,'' i.e.
mediation and pre-trial screening panels to encourage a
``reasonable'' resolution of malpractice claims.
States that go along with the Administration's reform
proposals would have access to a pool of funds to help them in
liability and quality-of-care reforms, financed by funding from
the Medicare and Medicaid programs. During a three-year
transition, the new funding pool would be created by using a
portion (2%) of the state Medicaid administrative expenses mate
rate and a portion (1%) of the Medicare prospective payments for
Already 32 states have enacted tort reform measures, but the
Administration obviously believes more direct action is
necessary. This conviction is shared by many on Capitol Hill,
including Arizona's Rep. Jon Kyl and Texas' Rep. Charles
Stenholm. The key argument is that the unfriendly legal climate
is encouraging the practice of ``defensive medicine,'' which is
driving up medical costs. In the OB field, for example, Ad-
ministration spokesmen cite figures of $20 billion annually.
Moreover, doctors are dropping out of the field of obstetrics and
gynecology. As Stuart Gerson, Assistant Attorney General for the
Civil Rights Division of the Department of Justice, recently
stated: ``It has become tougher to find an OB/GYN in the inner
cities or in rural areas. Not a single OB/GYN can be found in 67
counties of Georgia. Nor, can one find an OB/GYN in 28 counties
of Alabama or 19 counties of Colorado.''
Medical liability reform has a large and friendly
constituency on Capitol Hill, though the ways to resolve the
problem are diverse. Nevertheless, it is likely that liability
reform will move faster than any comprehensive reform of the
nation's medical system.
Canadian System Less Attractive. While proponents of
national health insurance along the Canadian model have been
trying to sell the idea that the folks can have ``free health
care'' with little administrative hassle, opponents of the
Canadian approach are making the case that adoption of the
Canadian system will mean levels of federal spending and federal
taxation unlike anything the voters have ever seen. With the
growing disgust with Washington's business-as-usual approach to
joblessness, crime, educational failure, and other problems, it
is becoming harder and harder to sell the idea that Washington
will do very much better in running America's medical system.
The Outlook on Reform. Although stronger than the
Canadian model, ``play-or-pay'' proposals are meeting significant
opposition also. Given the uncertainty and fear of repeating the
same mistake twice, such as the passage and repeal of the 1988
Medicare Catastrophic Act on an even grander scale, the Congress
appears to be settling into a gridlock on comprehensive reform.
Right now, the easiest thing to do is to take action on small
group insurance reform and claim to be ``doing something''
constructive on medical care.
Home Health Agencies Seek Ban on Claims Sampling. The
National Association of Home Care strongly supports legislation
introduced by Rep. Matthew Rinaldo (D-NJ) and Rep.Edward Roybal
(D-CA) (H.R. 2618) to prohibit fiscal intermediaries from
calculating Medicare overpayments on the basis of claims
``A single claim denial can result in tens of thousands of
dollars of payment disallowances,'' stated NAHC.
Because the intermediaries can insist on recoupment of funds
before permitting an appeal, some home health agencies have been
forced into bankruptcy.
Sampling has a ``chilling effect'' on agencies' willingness
to provide services that might be denied. Claims for such
services might turn up on an audit and result in recoupment of
payments for other services.
The US Court of Appeals for the DC Circuit upheld the use of
claims sampling in the case of Chavez County Home Health Services
Inc. v. HHS, and the US Supreme Court denied review.
Passage of legislation is unlikely this year. In the mean-
time, HCFA plans to implement an expanded sampling policy.
Better Enforcement Demanded for Charge Limits.
Claiming that elderly patients are being ``terrorized'' by
overcharges, senior advocacy groups demand more vigorous
enforcement of limits on balance billing. The Senate Special
Committee on Aging criticized HCFA for lax enforcement of
Medicare's new limits. Senators Cohen (R-ME) and Pryor (D-AR)
plan to introduce legislation clarifying the requirement to
refund excess payments. The senators also have requested that
HCFA review each claim submitted, rather than analyzing a random
sample of claims as was previously done to enforce the MAACs
(BNA's Medicare Report 4/10/92).
HCFA stated that 7,200 physicians (or 1.8% of nonpar-
ticipating physicians) had received warnings about exceeding the
balance billing limits during the last half of 1991. Seven have
been referred to the Inspector General and could be fined $2,000
One institution complained that its efforts to comply with
the law were stymied because it received the rates for 3,000
codes only two weeks ago. In at least one case, the carrier sent
out an incorrect list of fees. If a refund is required on a
large number of claims, an institution's billing department could
be forced to shut down all other operations.