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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 55, No. 6 June 1999
CLINTON CARE MARCHES ON
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 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
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
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
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
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
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
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).
In October, 1998, the
House of Delegates of the
Louisiana State Medical
Society adopted a
resolution not to
implement the American
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.
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
[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).]
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
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).
May 21-23. AAPS Board Meeting, Chicago.
Oct. 13-16. 56th annual meeting, Coeur D'Alene, ID.
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
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 AlertTax 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
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
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
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
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
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
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
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