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Volume 55, No. 6 June 1999


As Ira Magaziner predicted in 1993, the Clinton concept of health care reform would be "pronounced dead many times" -before its ultimate triumph.

The Clinton Health Security Act of 1993 was but one vehicle. Clinton is still Commander-in-Chief, wielding veto power over alternatives and relentlessly seizing territory. His march toward the sea may leave in its wake the wreckage of independent institutions, as an integrated union is perfected.

The structure of Clinton Care is the Public-Private Partnership (also see AAPS News, May 1998). Both sectors were well represented at the first-ever Wall Street Journal Health Care Summit 99: Medicine, Business, and Public Policy, held May 5-6 at the Ronald Reagan Building, International Trade Center, Washington, DC. Two prominent leaders of the Interdepartmental Working Group of the Clinton Task Force on Health Care Reform, Uwe Reinhardt of Princeton and Stuart Altman of Brandeis, gave keynote addresses.

The head representatives of the public sector seem rather well pleased with the terrain. Donna Shalala, who has served longer as Secretary of Health and Human Services than any of her 17 predecessors, pointed to the monumental achievement of KidCare or the Children's Health Insurance Program (CHIP): "CHIP is not incremental. It is the largest step we have taken since Medicare and Medicaid."

Shalala opposes increasing the age of eligibility for Medicare from 65 to 67, as it would "increase the number of uninsured without saving enough money." Medicare is fundamentally different from Social Security, she observed: "With Medicare, there is no alternative."

When the interviewer inquired how the nation could afford a $25 billion prescription drug benefit in Medicare, the Secretary pointed to savings anticipated from efficiencies, the right tools, evidence-based studies leading to reduced variations in medical practice, and drugs that substitute for procedures.

The Administration would not be willing to forego a federal right for patients to sue HMOs in order to pass a patients' "bill of rights," Shalala stated. It is not fair to treat the health care industry differently than others, she said, "whether you like to get sued or not," noting that she herself is named in 11,000 lawsuits every year.

Evidently believing that the future is in organized managed care, she said it was time to settle down the backlash and develop an integrated system with understandable rules.

Asked why she did not resign when Clinton admitted to lying under oath, her exhortations on moral leadership notwithstanding, she cited "patriotism," loyalty, a sense of responsibility to the job, the huge sacrifice of getting into government, and the fact that she is "beginning to see the fruits of our labor in our ability to manage medicine."

Nancy-Ann Min DeParle, Administrator of the Health Care Financing Administration, "the most deeply entrenched public- private partnership," was also upbeat about progress. After all, in 1997 people would have called the CHIP program, which covers 5 million children for $24 billion [$4,800 per child], "nuts." She stated that Medicare revenues were currently outpacing expenditures due to "economies," yet HCFA has found no evidence of problems with access to care.

If some economies [cuts] are too deep, then Congress is to blame: the Balanced Budget Act was highly prescriptive.

DeParle looks forward to taking Medicare "beyond the wonderful program that it already is." The program has been shaped by history, such as section [180]1 of the Social Security Act, which promised no federal interference in the practice of medicine (see AAPS News, July 1997). In a "grand compromise," the section was interpreted to mean that coverage decisions are to be made locally, and there was "no real process for national level decisions." Now that HCFA has an open, accountable process for technologic assessment, modeled on the FDA, the way is clear for big changes.

There have been problems, DeParle acknowledged, with one of the two demonstration projects for competitive bidding. Phoenix has the Not-In-My-Back-Yard (NIMBY) response [the usual reaction to incinerators and sewage treatment plants].

Much of the conference was centered on what Uwe Reinhardt called the "Long March to Accountability," in which we are now at mile 187 of 1,000. Reinhardt says the march will continue despite the "Great American Health Care Kvetch." The culprits: employee benefits managers ("professional pickpockets") and "Disneyland Health Insurance," along with massive underinvestment in information technology. If doctors and hospitals have trouble managing risk, Reinhardt says, they must "get used to it: shift happens."

The only comment about Medical Savings Accounts was by Stuart Altman, who called them "a load of hooey." A change in the tax code will not happen. If it did, the result, he predicted, would be 80 to 90 million uninsured and a single- payer system. "I believe in markets," Altman stated, if they are "constrained and regulated for the good of the system."

Several speakers emphasized the need for "outcomes" measurement, defined as measures of provider performance (a controllable variable), with [re]education of "outliers."

Can private medicine survive in a system governed by the belief that "individual doctors don't produce outcomes; groups do"? Or one which demands seamlessness, uniformity, and a "focus on what society wants"? Thomas Reardon, President-Elect of the AMA had a provisional answer: "Yes, if the doctor is willing to work harder." His view of practice-doing it "in a way that we as a society can afford and that makes society healthier and that delivers health, not medical care"-does suggest a Long March, based on the ideals of Mao Zedong.

MSAs: Key Issue in Rocker Campaign

Angel Joy Rocker, the first African-American woman to seek the Republican nomination for President, announced that Medical Savings Accounts, school choice, and equal justice will be her three campaign planks.

Mrs. Rocker states that Republican policy cannot represent all Americans when issues such as "empowerment of low-income families and medical savings accounts...must be avoided so that the exclusive status quo is protected."

Black churches will be one focus of her educational efforts to show how MSAs enable low-income workers to take back control of their medical care, while helping black physicians maintain private practices in the community.

She hopes to register millions of minority voters and break the Democratic monopoly of influence over African-Americans (see www.angelrocker.com).

Federal Grantees Fight Data Access

Alarmed at the prospect that independent scientists might gain access to data obtained at taxpayer expense, the National Academy of Sciences, the National Institutes of Health, the American Association for the Advancement of Science, and others are rallying behind a bill by George E. Brown, Jr., (D-CA) to repeal the Shelby provision of last year's budget bill (see AAPS News, May 1999). That provision does not allow armed invasions with seizures of all the records (like those experienced by all too many physicians), but simply requires making data available under the deliberate process of the Freedom of Information Act (FOIA), subject to exemptions that protect proprietary information and patient confidences.

A 1997 report by the National Research Council, entitled Bits of Power: Issues in Global Access to Scientific Data, concludes: "Governmental science agencies...should adopt as a fundamental operating principle the full and open exchange of scientific data." But despite the importance of increasing access to research data, there was no systematic government-wide policy to make federally funded information available.

There are a number of examples in which reanalysis of raw data has led to different conclusions, including school choice (contrary to initial claims of negative results, reanalysis showed significant increases in math and reading scores) and "endocrine disruptors" (a statement that mixtures of weak estrogens are much more powerful when combined could not be verified or replicated).

Data fabrication or falsification has occurred at many of the most prestigious institutions in this country. And the British Medical Journal recently retracted a widely acclaimed paper on the care of severely disabled adults that was very influential in setting policy. Broader access to data is important for protecting scientific integrity as well as correcting error.

Costly, intrusive government regulations have opponents. "Scientists fear that the new law will expose researchers in controversial areas-such as global warming or the epidemiological study of the effects of pollutants-to demands from interest groups who want to see all their notebooks, papers, and computer records" (Nature 2/11/99).

Proponents of access respond: "What really worries EPA and Rep. Brown is that junk science used to justify agency rulemaking they favor may not be able to withstand scrutiny. That would kill the rule. So it's better to keep junk science a secret....(Wash Times 2/11/99).

Louisiana Rejects AMAP

In October, 1998, the House of Delegates of the Louisiana State Medical Society adopted a resolution not to implement the American Medical Accreditation Program (AMAP) based on current understanding of the goals, objectives, and the organizational composition of the Governing Body.

Frederick J. White, III, M.D., of Shreveport writes: "Extensive publicity has been given to the States which have entered into agreements with the AMAP program. However, to my knowledge, there has been no national publicity on the action of LSMA. Louisiana may be the first State medical society to formally reject affiliation with the AMAP as a matter of policy established by its elected House of Delegates."

An Historic Pattern

"In 1847 the AMA was founded and this organization immediately committed itself to two propositions that were to lead to sharp restrictions upon the freedom of would-be doctors to enter the medical profession and the freedom of patients to choose doctors whom the AMA felt were not adequately qualified to practice medicine....The delegation by state legislatures to the AMA of the power to regulate the medical industry in the public interest is on a par with giving the American Iron and Steel Institute the power to determine the output of steel" (J Law and Economics, Oct, 1958).

"The American Medical Association had proclaimed as semi- official policy the goals of eliminating commercial schools and reducing the number of new physicians produced each year...In 1903, Frank Billings of Chicago, president-elect of the AMA, told the Association...that the profession was becoming grossly overcrowded and that, to correct the evil, `the ease and facility with which a medical degree may be secured in this country must be diminished' " (Carleton B. Chapman, The Flexner Report, Daedalus, 103(1):110, Winter, 1973).

What matters is to emphasize the fundamental idea in my party's economic program clearly-the idea of authority. I want the authority; I want everyone to keep the property he has acquired for himself according to the principle: benefit to the community precedes benefit to the individual. But the state should retain supervision and each property owner should consider himself appointed by the state. It is his duty not to use his property against the interest of others among his own people. This is the crucial matter. The Third Reich will always retain its right to control the owners of property.

Adolf Hitler

Dr. Velez-Ruiz Gets Judgment Against Blues

When Wanda Velez-Ruiz, M.D., of Detroit was arraigned in 1992 for alleged violations of the False Claims Act, Blue Cross Blue Shield of Michigan placed her in the Prepayment Utilization Review program and refused to pay claims totalling $305,967 for services rendered during the years 1990-1994. Dr. Velez-Ruiz accused BCBSM of violation of the provider participation agreement and several provisions of the Non-Profit Health Care Corporation Act. After being adjourned several times, the case went to trial in 1998, and the Blues defaulted. According to Mr. Edgardo Perez-DeLeon, former office manager for Dr. Velez-Ruiz, the reason for the default was to avoid facing the evidence.

On March 15, 1999, Administrative Law Judge Peter Marroso ruled: "I recommend that the Commissioner find that the Petitioner furnished covered services to BCBSM subscribers during calendar years 1990 through 1994 and order BCBSM to pay the Petitioner's claims for those services...."

Although the physician has as yet received no payment (months of proceedings are still required), Mr. Perez writes: "What we obtained is not only an important victory against the Blues and the Attorney General but a lesson to those who thought we had no other remedy than to bow our heads to the insurance companies."

[See the index to AAPS News on www.aapsonline.org for articles on the history of this case (look for Perez-DeLeon and Velez-Ruiz).]

Compliance Plans

At the Wall Street Journal Summit, PriceWaterhouseCoopers presented a press briefing on enforcement actions in alleged health care fraud.

Between 1993 and 1997, the number of dedicated agents has increased from 200 to 551; the number of criminal cases from 621 to 1,517; the number of civil cases from 500 to 4,010; and settlement/recoveries from $140 million to $990 million.

"Voluntary" compliance programs are recommended or arguably required. However, there is currently no industry-accepted standard "by which organizations and the government can clearly differentiate and measure positive behavior." Thus, the benefits of compliance programs remain theoretical.

Laughter was the audience and presenters' first response to a question by AAPS Executive Director Jane Orient, M.D.: "Some say that it is more profitable for a compliance officer to become a qui tam relator. Is this a real threat?"

Qui tam relators can recover up to 15% of a settlement if the government joins the case and up to 25% if the government does not join. "You can be the mastermind [of a fraudulent scheme] and still recover a portion," stated a panel member.

A code of ethics for compliance officers is under development. The means of enforcement: someone who brings a qui tam suit probably wouldn't be able to get another job as a compliance officer.

Another pitfall in compliance reviews is outlined by attorney Phyllis D. Thompson of Covington & Burling: "A health care provider's own compliance review documents could provide prosecutors or other third parties with a road map to any past transgressions" (Legal Times 3/22/99).

The common law self-critical analysis privilege is best described as "nascent," Thompson writes. It probably cannot be successfully invoked against the government. However, attorneys may advise clients to assert it so that documents can later be withheld from other third parties (shareholders, insurers, and patients), who might argue that an entity had waived the privilege by making disclosure to the government.

The best protection, in the view of AAPS, is to opt out of all government payment programs.

Public-Private Partnerships Target Children

In an attempt to reach the parents of 4 million children eligible for, but not enrolled in, State Children's Health Insurance Programs (CHIP), the Dept. of HHS will fund radio advertisements in 45 states and the District of Columbia. A number of corporations have agreed to disseminate CHIP information. These include K-Mart, McDonald's, General Motors, Blue Cross and Blue Shield Association, Pfizer, Wyeth Lederle Vaccines, and Schering-Plough (BNA's HCPR 3/1/99).

Robert Goldberg of the Ethics and Public Policy Center says that fewer than 500,000 have signed up because "the children KidCare seeks to help simply do not exist." Less than 4% of children under the age of 18, about 1.2 million, lack health insurance for more than one year. Moreover, a National Health Interview Survey showed that even among families with incomes under $10,000, 97% of children get all the care they need, and less than 2% cite lack of money or insurance as the reason for not getting care (Weekly Standard, 4/12/99).

There are, however, beneficiaries: public and private opportunists who are siphoning millions of dollars each year from Medicaid into the coffers of school districts and their consultants. "Revenue enhancement" is what the Illinois accounting firm Deloitte and Touche calls its Administrative Medicaid Outreach Program, which it offers to school districts in return for 17% of the take and the right to confidential documents. Medicaid reimbursement can be obtained when school personnel spend time to "locate, identify, and refer" students who are potentially "at risk."

"The beauty of it is," stated a representative of Deloitte and Touche, "you can go back to the same student time and time again, and even if you never actually find a problem, the school district has a chance to be financially reimbursed simply because...personnel spent time engaged in the activity."

Legislators don't know about this drain, according to a member of the governing board of the Prescott Unified School District in Arizona, because it is a "pass through."

In another public-private collaboration, Families for Kids in Arizona will speed adoption of foster children and termination of the rights of their parents. The state provides funds for expedited court hearings, and not-for-profit agencies are providing $2 million over the next five years.

"I like public-private partnerships," stated Arizona Governor Jane Dee Hull. "It brings the business community into the process" (Ariz Daily Star 4/2/99).

The CDC has also forged partnerships with 25 national organizations, especially major educational organizations, to develop curricula, "manage controversy," and create the infrastructure needed to make comprehensive health care through school districts a nation-wide reality (B.K. Eakman, Cloning of the American Mind, Huntington House, 1998).

AAPS Calendar

May 21-23. AAPS Board Meeting, Chicago.
Oct. 13-16. 56th annual meeting, Coeur D'Alene, ID.

Members' Page

On Certifying Medical Necessity. From a letter to the Director of Operations, WCA Services Corp.: I am no longer signing any Certificate of Medical Necessity Forms for patients in any government programs. It is far too risky. Physicians who sign these forms without meeting strict requirements can now end up in prison. As Edward Cox, M.D., Medical Director, Upstate Medicare, wrote: "Section 2120.2 of the Medicare Carriers Manual states that medical necessity for ambulance services is established when the patient's condition is such that any other method of transportation is contraindicated. In any case in which some means of transportation other than an ambulance could be utilized, whether or not such other transportation is actually available, no payment may be made for ambulance service."

I will continue to act as a strong advocate for my patients, but that does not include making myself a target for government prosecution or recoupment of funds.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


Why I Left America. I left the U.S.A. after 20 years as a physician because 1939 rings a bell....It was painful to see a naive America succumb to a huge bureaucracy managed by large economic interests, destroying the American dream of independent small businesses and a small government-in other words, freedom....Come to Peru.
Jaime Durand, M.D., Lima, Peru


A Nutty Idea? Here's an idea for one simple change that every voter would understand and that would turn the government upside down overnight: have people pay their income and payroll taxes, including the "employer's share," directly to the government quarterly, just as self-employed persons do. It is inherently fair, and would back the lefties into the corner.
Craig Cantoni, Scottsdale, AZ


Not Nutty, but... Is it practical? NO. Why not? Simple: entrenchment, cui bono, imbedded behaviors, cui bono, what so many are getting on the skim, cui bono.... Withholding, prepayment, "easy payment," all are designed to extract what the person does not realize and hence ignores. It's not much different from the days of employment under conditions requiring the employee to use only the company store. But maybe we can nibble at it: as by moving from prepayment to true insurance. We need to dream the impossible dream.
Steve Barchet, M.D., Issaquah, WA


The Pit and the Pendulum. Between the pit of bottomless debt and the pendulum of third-party micromanipulation, the well- meaning physician of today doesn't have much room to maneuver....To understand issues related to quality, accessibility, and cost (output), we need to look at the input variables, i.e. to follow the money.

The altered flow of financing (as in third-party payment and prospective payment) has profoundly affected the whole system. To restore solvency over the next 50 years requires the restoration of personal responsibility for spending decisions....
Mark D. Hiatt, MS IV, Winston-Salem, NC


If the Patient Were the Customer...Most of the problems we are having with third parties would not exist if the relationship between patient and physician were a direct payor to payee. That is the AAPS position, and I strongly support it.
Lee Balaklaw, M.D., Louisa, KY


Forced into an "Entitlement." Doctors were first dragooned into Social Security in 1965 in tandem with the Medicare bill. This was recommended by the Advisory Council on Social Security, with the elitist hubris: we understand the doctors don't want to be included, but we don't think the wishes of any particular group should carry any weight.

I always considered Social Security and Medicare to be middle-class welfare and avoided applying until 1989, when I decided to divert that "entitlement" (clever semantic deception) from the black hole of the Treasury to useful and productive ends (such as the American Health Legal Foundation). I never cash the checks, but endorse them over to the beneficiary.
Thayer Smith, M.D., Downey, CA


Opting Out. I have downloaded AAPS material on opting out of Medicare. It is very simple and I would opt out tomorrow except for the problem of an existing contractual relationship.

After all this Medicare hassle over twenty or thirty dollars in a coding differential, I can't wait to get out of practice. I am 48 years old and at the height of my clinical and surgical skills; 95% of my [ophthalmology] practice is Medicare. As soon as I can earn a meager salary from another source, I plan to close my office and be done with the jack-booted thugs.

I have also shared the opt-out information with other staff members and have had the audacity to suggest opting out at staff meetings, during which complaints about Medicare are becoming more outrageous and vociferous.

Everyone wonders how I could get by on a cash basis with Medicare patients who all expect someone else to pay for their service. I reply that I would rather work half as hard and be paid than to work twice as hard, not be paid, be called a crook, and have to fight Medicare on every claim. It did sink in for some of my colleagues.
Jeffrey C. Pitts, M.D., Ontario, CA


Legislative Alert

Tax Breaks for The Uninsured

Conservative economists have argued that the key to reforming the health insurance market is the reform of the tax code, ending the inequities between employer and non-employer based insurance.

A Congressional odd couple that is taking this advice to heart: Congressman Jim Rogan (R-CA), one of the House prosecutors in the impeachment trial, and Congressman Jim McDermott (D-WA), best known as a Congressional champion of Canadian-style national health insurance. McDermott and Rogan don t agree on much, but they put their broader differences aside to work together to help those who don t get medical insurance through the place of work. At a special April 27th announcement at the Heritage Foundation, McDermott and Rogan outlined the rationale behind their bill to provide a 30% tax credit for those Americans. They both conceded it is limited in scope and effect. But it is a good start to a national debate that will doubtless see both men part company.

Medicare: It Depends on How You Define "Reform"

The first part of Bill Clinton s proposal to "reform" Medicare by shoveling $700 billion into the program-a share of projected budget surpluses-does nothing to solve the program s underlying financial or structural problems. This is not a critique of Congressional conservatives, but the sober judgment of the nonpartisan General Accounting Office (GAO). David Walker, the Comptroller General of the United States, recently warned the Senate Finance Committee that the latest Clinton plan would serve only to postpone Medicare s day of reckoning, requiring even more drastic measures when the program s cash crunch hits in about 10 years.

In fact, the Clinton gambit makes matters worse: "The transfer of surplus resources to the [Medicare] trust fund would not constitute real Medicare reform because it does not modify the program s underlying commitments for the future. Moreover, the proposed transfer may very well make it more difficult to understand and support the hard choices necessary for the program s future viability." Second, it gives a false impression of reform, thus undermining the need for real changes: "The President s proposal to strengthen the program is more perceived than real. Specifically, while the [Medicare] trust fund will appear to have more resources as a result of the President s proposal, in reality nothing about the program has really changed."

To be fair, Clinton has not yet outlined a full set of Medicare reforms, and his staffers have indicated that he will have a set of more detailed proposals on their way to Capitol Hill in "weeks." Making the case for less, rather than more, reform of the financially troubled Medicare system is the recent report of the Medicare trustees that the program is not going to go broke until 2015. The earlier projection was 2008. The reason: a strong economy. With more Americans working, more payroll taxes are being collected, and more funds are flowing into the Medicare hospitalization trust fund. Moreover, the Clinton Administration is giving itself credit for being tough and cracking down on "waste, fraud, and abuse." These factors, along with the cuts in "provider" reimbursement enacted in the notorious Balanced Budget Act of 1997, are giving the White House the precious flexibility to do as little as possible in terms of meaningful reforms that would promote patient choice and market competition.

Keeping Perspective on Medicare

Taxpayers should realize that the fiscal debate over Medicare doesn t begin and end with the health of the trust funds. On this point, the liberals are right; the trust funds are always a cause for alarm and thus the constant references to their status is indeed somewhat tiresome. The hospitalization trust fund is periodically threatened by insolvency a few years away. Focusing on the trust fund obscures the real problem: the size and growth of Medicare spending. That spending spells huge tax increases or real cuts in benefits. The Bipartisan Commission, the GAO and the Congressional Budget Office (CBO)-the grown-ups' caucus-know that the problem is being ignored, and all have called for serious changes. The CBO has estimated that Medicare and Social Security together amount to 6% of the GDP. That will more than double sometime in mid century.

As Alan Murray writes, "If the relative size of government remains unchanged, all other functions of government -defense, law enforcement, education, etc.-will have to shrink from 13% of GDP to 5%. That s a prospect that ought to frighten liberals as well as conservatives" (Wall St J 3/29/99).

As Murray further notes, the Clinton Administration has already defined the terms of the budget debate, and Republicans in Congress have largely bought into the outlines of the shape of things to come. When the Congress adopted the Clinton proposal to sequester 62% of the so-called budget surplus for Social Security, they also bought into the correspondingly restrictive caps that such a commitment implies for discretionary federal spending. Says Murray, "The upshot: more money for maintaining the incomes of senior citizens; less money for investment in the future."

But there is another way of looking at it. President Ronald Reagan s former Director of the Office of Personnel Management, Donald Devine, argues that the restraints imposed by rapidly growing entitlements on federal discretionary spending are both an affirmation of, and the death of, traditional liberal government. If there s less and less discretionary money for liberal social programs, and the tax base is being pressured to maintain the well-entrenched entitlements for the rapidly growing cohort of elderly voters, then Clinton s model of poll-driven Big Government through a series of little social programs for every conceivable interest group (call them focus groups) runs out of fiscal gas. Every dollar is up for grabs in a struggle between discretionary spending and the big entitlements-Medicare, Medicaid, and government pensions.

Note that the biggest of the liberal seniors lobbies, the American Association of Retired Persons (AARP), well-heeled and well-staffed by aging liberal Baby Boomers, shows no interest in anything mildly resembling fiscal restraint. According to a recent report of the National Taxpayers Union Foundation, the AARP s current agenda for federal legislation would, if it were actually enacted into law, require a 50% increase in federal spending (amounting to at least $944 billion per annum) and require a tax hike of $7,801 per year per taxpayer. If the Baby Boomers buy what AARP is selling within the next decade, then the Treasury and Generation X are in for a very rough ride.

DOD-Style Contracting for Medicare?

White House health honcho Chris Jennings is saying that the Clinton proposal will incorporate the recent fiscal breaks given to the program, namely the greater longevity of the trust funds projected by the Medicare trustees. One should expect, according to leaks in the press, that the Clinton Medicare reforms will breathe the spirit of the original Clinton Health Security Act of 1993: large and bureaucratic organizational control, continued restrictions on patient choice, and new forms of political micromanagement of the financing and delivery of care. Indeed, according to an April 5th Associated Press story, the White House has under consideration a proposal for "modernizing" Medicare that would enable the program to "competitively bid out exclusive contracts for medical products or services." In other words, HCFA will go the way of the Pentagon, and taxpayers can look forward to Defense Department style contracts for medical services. Big government marries Big Business, and if the left is successful at unionizing doctors frustrated with managed care, the old triumvirate-Big Government, Big Labor and Big Business-will be complete. If DOD can give America $400 toilet seats, why shouldn t HCFA come up with $200 bed pans?

Look for the White House to press again for an expansion of the Medicare population, proposing to include people as young as 55 to "buy into" the program. That will not be a "money saver"-no matter what the White House says. But it will expand the number of Americans who get their medical coverage in and through a government program-which, at the end of the day, is the central idea.

But the big addition is likely to be a prescription drug benefit-with all sorts of strings, manacles, and shackles attached: formularies or price controls, or some other set of mandates. But, even so, it won t be cheap. The National Academy of Social Insurance, a bipartisan group of health policy experts, recently released a study of the subject that indicated that the addition of a prescription drug benefit for all Medicare beneficiaries would increase the Medicare program s cost anywhere between 7 and 13% over the next ten years. The big question is how such a prescription drug benefit for Medicare would be structured. Would the cost be borne primarily by the taxpayers, by the Medicare beneficiaries, or through some sort of "cost sharing" arrangement? (Cost sharing in Medicare invariably ends up with the taxpayers bearing the bulk of the costs). Robert Reischauer, former Director of the CBO, estimates that if the Medicare beneficiaries bore the full cost of the benefit, their premiums might double. That, of course, would not go down well with the liberal "seniors" lobbies. An iron rule: people will consume as many medical services as others will pay for.

So don t even think about the White House and its liberal allies coming up with a prescription drug program that does not include price controls. The two go together whenever politicians and economic illiterates gather under one roof. The central objective of price controls is, of course, not to control costs (they don t do that), but rather to shift costs. That they do very well. The way in which costs are shifted-as 4,000 years of experience with this idiocy conclusively demonstrates-is normally through a reduction in the quality and quantity of the controlled commodity. In the end, of course, the central function of price controls is to ensure scarcity. Nobody ever expects that there will be more of the controlled commodity or a higher quality. Once again, that s the central idea. But politicians promoting price controls never state their objective plainly. It is always portrayed as a consumer protection maneuver-what a joke-and the shortages and lower quality are always greeted as an "unintended consequence"-even though the grown-ups know better.

In any case, the Clinton Medicare reform agenda faces an uphill battle. The anger over the White House failure to back the efforts of Senator John Breaux (D-LA) is still palpable on both sides of the aisle. The Senate Republican Budget Resolution, setting forth fiscal targets for the coming year, already embodies an assumption of Medicare reform along the lines outlined by the National Bipartisan Commission on the Future of Medicare. Breaux s key argument that Medicare does not offer good value for money. From the standpoint of the taxpayer, that much is obvious. But the same is true, as Sen. Breaux insists, for the Medicare patient. Medicare today covers only 53% of seniors' medical costs, and seniors spend an average of $2,000 out of pocket every year to pay for services that Medicare does not cover. That includes a lot of services, especially when HCFA and its contractors get into the mysterious medical necessity mode, the black box of the Medicare coverage process. So the program is the worst of all possible worlds; it costs too much and covers too little.

The budgetary impact of the Breaux proposal, between 2000 and 2009, is to save approximately $100 billion.

The Senate Finance Committee, for its part, has already started hearings on Medicare reform, with a view toward marking up a detailed bill based on the Breaux-Thomas proposals. Senate Finance Committee staff are optimistic that they can get a bill out this year, even in the face of the likely "Mediscare" campaign from the White House.

Protecting Patients From HCFA

HCFA officials have been thrown on the defensive over their proposal to collect detailed and sensitive personal information from Medicare patients getting home health care services. This personal data is to be collected and transmitted to a federal data base, without patient knowledge and informed and voluntary consent. Thus far, however, Congress has not intervened to stop this invasion of patient privacy.

Meanwhile, Members of Congress are sending out a lot of press releases about how they will make private insurance plans toe the federal line on protecting patients.

But it might be worthwhile for members of Congress to first look into the Medicare program for which they, and nobody else, are directly responsible. "Medical necessity," increasingly the basis of claims denials in Medicare, is a mystery, and, in contrast to the prescriptions of liberal bills on Capitol Hill, rests with bureaucrats and HCFA, not the medical professionals. As frustrated doctors know, determinations are arbitrary, differing from locale to locale, from carrier to carrier. The Medicare appeals process is anything but expeditious. According to HCFA witness Mike Hash, Deputy Administrator, Part A claims take in excess of 300 days to process to conclusion; Part B claims take more than 500 days.

This was the best HCFA oversight hearing in memory. Maybe House and Senate members will hold more of them.

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