Volume 58, No. 3 March 2002

PUBLIC MEDICINE

The Surgeon General, head of the U.S. Public Health Service, wears a military uniform for a reason. Public health is a national security issue and inherently involves compulsion. Its ethic is the antithesis of private medicine.

AAPS insists on an explicit distinction between "the practice of private medicine" and "private practice" because the latter can mean for-profit practice-under nominal private ownership-of public (government) medicine.

In a January 1999 article in The Columbia Law Review, Lawrence O. Gostin of Georgetown University Law Center, also author of the Model State Emergency Health Powers Act (MEHPA)-now on a fast track to passage in many states- outlines his vision of the law and the public's health. This vision is becoming the norm in the halls of government, academic medicine, and the AMA Federation.

The crucial role of law, Gostin writes, is to define the "power and jurisdiction of health agencies," and "to influenc[e] the social norms that shape individual behavior." Previously concerned with communicable diseases, public health should now "support a set of modern disease control measures that address contemporary health problems such as AIDS, cancer, and heart disease, and incorporate due process safeguards."

Due process, of course, is what the government must go through before forcibly depriving a person of life, liberty, or property. A notable omission from Gostin's list of due process rights is a trial by jury. Administrative law is assumed.

The basis of Gostin's program is "our frankly utilitarian premise" that "public health law ought to ... create the conditions necessary for health." The distinction between communicable diseases and noncommunicable conditions should be replaced by the "ecological model," which seeks the cause of disease in "the way society organizes itself, produces and distributes wealth, and interacts with the natural environment." This model "unavoidably" identifies "poverty, racism, and severe income inequality" as disease causes and "implicates our collective responsibility for unhealthy behavior."

The achievement of these noble goals is hampered because public health agencies now lack jurisdiction over private behavior, such as eating a high-fat diet. Public health measures may be "perceived" to exceed the bounds of proper government action; officials are hampered by public distrust of government. "The single greatest defect" is that public health statutes "predate modern scientific and constitutional developments (emphasis added)." Health officials need a wider range of "flexible [arbitrary--Ed.] powers."

Gaining citizens' support may be difficult because "the measures that will provide the most societal benefit often provide little or no discernible benefit to any one person." Gostin's vision means inevitable conflict between private and collective benefits: especially since he sees redistribution of wealth as essential and rationing as a "moral imperative ... in the face of scarce resources." Zero-sum economics is a given.

While very concerned about the "social stigma" attached to some diseases (notably AIDS), Gostin doesn't mind penalizing such socially irresponsible behavior as eating fat, smoking, or failure to use a seatbelt. After all, public health is a "social reform movement." As such, it mandates government "`interference'" with the "Panglossian machine of the market."

Freedom of conscience is an obstacle to the public health vision. Justice Jackson's famous peroration in West Virginia State Board of Education v. Barnette-"if there is any fixed star in our constitutional constellation, it is that no official ... can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion or force citizens to confess by word or act their faith therein"-is "as eloquent as it is false." Public health practice proves it, Gostin declares.

While public health officials must project an image of professional neutrality to preserve their public credibility, they must be "willing to embrace and excel in the political process." They must persuade the public to comply voluntarily- because "there are not enough policemen" to enforce the myriad of rules necessary to preserve public health. Nevertheless, "coercive reactive control measures" form the "deepest layer of American disease control law," which, while often invisible, "still shapes the structure of the statutory landscape."

Gostin observes that "public perception of a public health crisis [may be] necessary to rally society to reinvest in the public health infrastructure." The anthrax scare is the needed opportunity; model legislation was ready for immediate introduction to catch the wave of public concern.

As officials warn of the menace of smallpox as justification for unbridled authority, people fail to notice that these same officials constantly point with pride to the "extinction" of smallpox when defending vaccine mandates. The World Health Organization destroyed 200 million doses of smallpox vaccine in 1991, when natural immunity had mostly disappeared, and American public health officials agitated for the destruction of what were declared to be the last remaining virus cultures in research freezers (CDP Jan 2000, www.oism.org/cdp).

Gostin is clearly disappointed by "the failure of national health care reform"-he was a member of the single-payer group of the Clinton Task Force on Health Care Reform. Nonetheless, "a major restructuring of health care delivery is underway." And of the Constitution and medical ethics also.

The tools include pervasive surveillance, unremitting "education," constant political pressure to expand agency powers, and ultimately "nothing less drastic than the threat of commitment to influence individuals posing a risk to public health." As Mao Zedong wrote, "political power grows out of the barrel of a gun." And the authorities want all the guns.

Public Medicine Updates

Spend More, Wait Less? Fraser Institute data refute the myth that waiting lists simply reflect underfunding of Canadian medicare. Provinces with higher per capita spending don't have shorter waiting lists; they perform fewer major surgeries and total procedures. Added funding increased waiting for cancer treatment and cardiovascular surgery. Where does the money go? It's not clear; accountability is poor (Med Post 9/5/00).

Equipment Fails Third-World Standards. Half of all Canadian radiological services could be shut down because of outmoded or dangerous equipment. A Cambodian refugee camp refused a donated ultrasound machine. A veterinarian returned another: it was so "dreadful" he couldn't use it for horses, though it had been used to monitor human pregnancies. Frequent breakdowns in angiography equipment in Victoria put patients at risk of stroke or hemorrhage (National Post 10/12/00).

New Equipment Verboten. Dr. Robert Mitchell of Calgary has been barred from performing laser-enhanced cataract surgery with state-of-the-art equipment he recently purchased for his private clinic. He sought permission from Alberta Health and Wellness (AHW) to classify these procedures as "enhanced medical services" or "non-medically necessary services" so that he could charge patients for them. Instead of an answer to his question, he got a memorandum forbidding the use of his $250,000 device. "We're not going to allow people to bring in new stuff because they feel like it," stated AHW spokesman David Bray (Medical Post 12/5/00).

Albertans Grossly Underestimate Doctors' Fees. An Angus Reid survey showed that 90% of patients think that doctors are paid much more than they actually are. For a simple office visit, the average estimate was $112, while the actual fee is $22.60. Patients apparently assume that doctors' fees are in step with those of lawyers and dentists (JAMC 2/6/01).

Canadian PBOR. The British Columbia Medical Association is drafting a "patients' bill of rights" to permit patients to seek timely treatment in a private facility when public waiting lists are too long. Some members are concerned that the association is debating an illegal activity (Medical Post 8/8/00).

The Flat Earth Health Care Debate. "Our politicians think Canadians still believe the world is flat," writes columnist Michael Bliss, "[and] believe the pious clich�s...that socialized medicine in Canada means equal access...for everyone...and special privileges for no one." The truth is, he states, that Canadians know the world is round, the health system in Canada is crumbling, and there never was a single-tier system (National Post 11/15/00). In fact, Canada has a "no tier" system ("no tiers left to shed"), writes Mark Steyn: "universal lack of access." Fidel Castro's Cuba has a doctor:p- atient ratio almost twice as high as Canada's. "We have achieved...all the coerciveness of the Cuban system, with none of the efficiency" (National Post 11/16/00): Except for abortions, performed by the thousands in private clinics, which are considered necessary for timely access (Edmonton J 11/16/00). It is a "right, not a privilege" to buy an abortion or to spend more on cigarettes than on medical taxes-as many Canadians do (Calgary Herald 10/27/00)-and a crime (neither a right, a privilege, nor a responsibility) to pay for necessary medical services.

Seeds of Health Tyranny

The Arizona Emergency Powers bill, S.B. 1400, would empower the public health director to inspect or detain any person or property on "reasonable cause to believe that there exists a violation of any health law or rule": no need for a real health threat or for a court-issued warrant for arrest or search. A whiff of cigarette smoke in a restroom, in a jurisdiction in which all smoking in restaurants was outlawed, might suffice.

"Enhanced surveillance" with required reporting and tracking could be triggered by the occurrence of "a public event that could reasonably be the object of a bioterrorism event." Could that be a high school football game?

During a public health emergency, the governor could "mandate treatment or vaccination of persons," including those "who may reasonably be expected to be exposed"-no exemptions, even for medical contraindications, and no options such as isolation at home.

The emergency rules would apply not only to communicable, but to any preventable diseases.

The department of health services is specifically exempted from the ordinary rulemaking requirements.

To neutralize one source of opposition, the rules specifi- cally would not apply to any infection caused by the human immunodeficiency virus-apparently not even to deliberate attempts to disseminate a genetically engineered strain of exceptional virulence or transmissibility.

Advisory Committee on Regulatory Reform

This committee, appointed by HHS Secretary Tommy Thompson, will be holding public hearings on ways to reduce regulatory burdens and costs. Proposed dates: Feb. 25-26 in Miami; March 20- 21 in Phoenix; April 17-18 in Pittsburgh; May 15-16 in Denver; June 10-11 in Minneapolis. Comments may be submitted electronically until 5 p.m. March 5: see www.regreform.hhs.gov. Call AAPS if you would like to attend a hearing in your area, (800) 635-1196.

AAPS Calendar

May 17. Board of Directors meeting, Las Vegas, NV.

May 18. Spring meeting, Las Vegas, NV.

Sept. 18-21. 59th annual meeting, Tucson, AZ.

Sept. 24-27, 2003. 60th annual mtg, Point Clear, AL.

Courts Impotent, Administration Argues

In a reply memorandum supporting its Motion to Dismiss the AAPS challenge to the HIPAA "Privacy Rule" (AAPS v. HHS), the Department of Justice essentially argues that the third branch of government has powers much too narrow to interfere with the Department of HHS in its sweeping attack on the patient-physician relationship and the information practices of one-seventh of the American economy.

Citizens have a period of one or more months to submit comments during the rulemaking process-as AAPS did. If the agency, however, chooses to disregard the comments, its decision is final. "It is a fundamental principle of administrative law," defendants write, "that in a legal challenge to an agency's rulemaking authority (or to an agency action under the Administrative Procedure Act), plaintiffs are not entitled to go behind the public rulemaking record absent a credible allegation of bad faith"-which carries a nearly insurmountable burden of proof. Thus, discovery of exactly what the Dept. of HHS did (or didn't do) to comply with statutes such as the Regulatory Flexibility Act would be "inappropriate."

Congressional failure to exercise its oversight function is to be taken as irrefutable evidence of its deliberate approval of agency policy-especially if it has managed to pass a law dealing with a small part of the policy. Congress delayed implementation of transaction code sets required by HIPAA, but explicitly refused to delay the Privacy Rule.

A Rule's potential for abuse is not subject to Court restriction, DoJ argues, because the agency might not, after all, choose to exercise its vast authority to the detriment of one particular citizen. Instead of engaging in electronic data- mining, as made possible by HIPAA, "HHS may elect to use admini- strative subpoenas, it may elect to review only a covered entity's policies and procedures, or it may elect to inspect a covered entity's records that do not contain individually identifiable health information." Or again, it may not.

Message from HHS to Americans: "L'�tat c'est moi."

The Court is reviewing the briefs.

This litigation is supported by the American Health Legal Foundation.

Delegating Liability

As States consider Emergency Powers Acts that give Governors the power to force vaccinations on everyone, not just the children, the issue of liability for adverse reactions comes to the forefront. Of special interest is Allison v. Merck, Supreme Court of Nevada, No. 19888, 110 Nev. 762; 878 P.2d 948; 1994 Nev. LEXIS 112; CCH Prod. Liab. Rep. P13,963, July 26, 1994. This concerned a 17-month-old child who was given MMR II by the Health District, after which he contracted encephalitis resulting in blindness, deafness, mental retardation, and spastic contractures. This occurred four years before passage of the National Child Vaccine Injury Act.

The Court noted that Mrs. Allison faced a Hobson's choice regarding the vaccine: accept it, or be denied the "privilege of sending her son to private or public school." The latter would subject her to criminal penalties unless she had the means to educate the child at home.

Merck argued that having to compensate Thomas Allison for his injuries would inhibit the development and marketing of vaccines that are helpful to many and "unfortunately" devastating to others. The Court found evidence that Merck underestimated the incidence of serious central nervous system reactions caused by or "temporally associated with" the vaccine as one rather than four per million, and did not admit that the reactions could be disastrous. Moreover, the "Important Information" (not a "warning") distributed by the Health District contained a "much less dissuading statement." Parents were told of the possibility of a rash, a sore throat, or "inflammation of the brain"-but not of the possibility of permanent blindness, deafness, and retardation.

Merck argued that the responsibility for warning of potential adverse effects had been delegated to the federal government. It asked "whether it was negligent for Merck to rely on the Center for Disease Control (sic.)-the foremost authority in the world." An affidavit of a retired CDC physician offered by Merck stated that the CDC had a policy of offering to prepare the vaccine information sheets because it feared that "vaccine manufacturers would overwarn potential vaccinees and thus discourage the use of vaccines."

The Court reversed the summary judgment in favor of Merck on the strict-liability and failure-to-warn issues and remanded the case for trial on the issue of whether the vaccine had caused the plaintiff's injury.

Tip of the Month: If the DEA comes to your office and demands that you surrender your license to prescribe controlled substances, don't give it up. You will not get it back without serious difficulty and a long delay. The agents do not have the authority to put you in jail or have your medical license revoked. You are entitled to a due process hearing called "a rule to show cause." Very often, the agency will not bother to go through that process and may just drop the demand.

Abusive Licensure Actions

On January 31, AAPS General Counsel Andrew Schlafly testified before a New York State Assembly committee concerning actions taken by the licensure board:

"We have many physician members in New York who feel pressured...to protect their license by altering their care to patients. They are faced with the choice between avoiding the wrath of insurance companies and delivering the best possible care to their patients....

"Physicians feel threatened because they have fewer rights than almost anyone else in a judicial proceeding.... [A] physician enjoys greater rights in contesting a...speeding ticket than in a disciplinary hearing threatening his livelihood....

"Physicians should have the right to request a public hearing to obtain the benefits of public scrutiny.... Physicians should have the right to full cross-examination of the witnesses...-the best defense against perjury....

"The burden of proof in a disciplinary proceeding to revoke a physician's license is shockingly low...: the lowest `preponderance of evidence' test, which simply requires that something be considered more likely than not.... In one case, revocation of a physician's license was imposed even though the factfinder admitted that there was a substantial chance [`49%'] that the physician had acted properly....

"The government should not be permitted to shop around for experts until it finds someone willing to testify against the physician. Rather, [they] should be selected from an objective group of physicians, as juries are. If the government expert feels there is no case,... that should dispose of the matter...."

Click here for full testimony.

Correspondence

Electronic Billing Mandate. The HIPAA provision that goes into effect in October-unless you submit a compliance plan detailing why you can't comply right away-will require physicians to submit Medicare claims electronically. I have vigorously fought against HCFA/CMS's highly one-sided EDI contract for six years and refused to sign it. Therefore, HCFA/CMS "revoked" my ability to submit claims electronically. Although my office will be exempt from the new requirement because we are "small" (fewer than 10 FTEs), there may be other physicians who have refused to sign the contract for the same reasons. Will the government force them to sign an "agreement" with which they do not agree? Is such a contract [a contract of adhesion] enforceable?
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

Tricked into Violating the Law. For 11 years, I have been treating malignancies with interferon: an off-label use of an approved drug. I have not been able to get the Texas carrier to reimburse the patient for drugs that could only be injected by the physician, although Medicare is required to pay for physician-administered drugs. Previously, interferon was not covered; now, it is, although Medicare never published this change in policy. On September 4, 2001, I received a letter from Rep. Max Sandlin, with an enclosed Aug. 17 letter from Arthur Pagan of HHS. It stated that "under Section 114 of the Benefits Improvement and Protection Act of 2000 (BIPA), payment for any drug or biological covered under Part B of Medicare may only be made on an assignment-related basis."

We went back through all of our Medicare newsletters to see whether we had been forewarned of this new law, which became effective in Feb. 2001. It was mentioned only once, in a March newsletter, under the unintelligible title "Implementation of ... [BIPA] Requirements for Drugs and Biologicals Covered by Medicare." Who could guess that this meant "New Mandatory Assignment for Drugs Injected by Physician"? I found out about it because I void checks sent to me by Medicare (patients have already paid me) and return them to the government through the GAO or a Congressman.
Richard Swint, M.D., Paris, TX

Profound Denial. The Canada Health Act forbids people to buy from the private sector anything that is covered by the public sector. Opposing even mild reform, Health Minister Allan Rock stated: "I'm determined to maintain the current public system ... because I believe profoundly that it is the best from the social perspective...." An editorialist disagrees: "It is flat wrong to make it illegal for sick, worried people to seek immediate, potentially life-saving medical diagnosis and treatment" ("A Hard Place and Rock," National Post 10/14/00).

The National Post is the largest Canadian national newspaper. These reports/editorials are daily events across Canada. You can retrieve them at www.onlinenewspapers.com. How can the critics AAPS encounters deny that the Canadian system is dysfunctional? Saskatoon will be losing all four of its neurosurgeons and one- fourth of its anaesthetists.
Martin Levant, M.D., Calgary, Alberta

A New "Leader." At a newspaper editorial board meeting, California Governor Gray Davis said that the role of the legislature was to "implement my vision." In a conversation with Washington-based reporters, he said that the judges he appointed should consider resigning if they rule in some way contrary to his views. "They are not there to be independent agents" (Orange County Register 3/10/00). The view that the other branches of government should defer to the Leader's personal agenda may be a given to the politically astute but has never before, to my knowledge, been admitted publicly by any politician. Even Hitler claimed to be driven by the desires of the people. It is unnerving to hear politicians, courting money and votes, cry "para los ni�os!" [for the children].
Pat David, Rideout Way, CA

Just Doing Their Job. I asked an attorney who had just won a case, "Are you able to sleep after you have ruined an individual?" He replied, as I recall, "That is my job. In every lawsuit, I have to destroy the opposing party. I do that job well. It makes me successful, and therefore I sleep soundly."
Del Meyer, M.D., Carmichael, CA

Government Drives Out Charity. A few years ago, New Jersey made malpractice coverage mandatory. This removed every healthy, golfing, retired physician from the potential pool of volunteers to staff a free clinic or inner city ER. For who can afford malpractice insurance without income?
Alieta Eck, M.D., Somerset, NJ

Insurance Is Too Expensive. In 2002, a $20,000- deductible insurance plan for my family will cost $1,100, in contrast to the $10,000 our old comprehensive plan would have cost. We will save the cost of the deductible in only 30 months. Those who cannot absorb the risk of a $20,000 expense can save for several years with a $2,000 to $5,000 deductible plan.
Michael Harris, M.D., Traverse City, MI

We Did It! Our medical staff bylaws were changed to eliminate the "regulations" described earlier (see AAPS News 12/01). Several meetings were required, but we got the job done.
Linda W. Wilson, M.D., Culver City, CA

Legislative Alert

President Bush is basking in approval ratings surpassing those of any other chief Executive. Moreover, the overwhelming majority of Americans say, according to the most recent polls, that they favor not only the way he is handling his job, but also his domestic policy agenda, including health policy.

In sharp contrast, doubtless reflecting a backlash from his performance in blocking the $110 billion economic stimulus package, Senate Majority Leader Thomas Daschle (D-SD) is not doing very well in public opinion surveys. The charge that Sen. Daschle and his friends have become obstructionists at the expense of people who really need help has stuck like glue. At a post-Christmas meeting of Senate Democrats, Daschle spokesmen reportedly stated that the Senate Majority Leader blocked a vote on the bipartisan stimulus package because of deep disagreements with the Bush Administration's tax policy, and not the medical insurance provisions. In other words, now the party line is that the leading national newspapers, including the Washington Post, simply got it all wrong in their reporting. One is expected, of course, to accept this with a straight face.

Curiously, Senator Daschle has just reintroduced his own version of a stimulus package-with the conspicuous absence of a serious medical assistance provision.

So, the President and his allies in Congress are playing offense on health policy. Seeing this is akin to waking up and watching the sun rise in the West. But believe it; these are strange and interesting times. Noting that a person's economic security can vanish in an instant without medical insurance, Bush has called for direct assistance to the unemployed who are uninsured. Moreover, the President is expected to outline a comprehensive medical tax credit, going beyond the unemployed, in his Budget submission to Congress. This is expected to amount to $71.5 billion over ten years, and be worth at least $1,000 per person up to a dollar cap for family coverage. (The Armey Lipinski tax credit, the main House option, provides for family assistance up to $3,000 per year.)

The White House is also expected to throw in a few public program expansions, namely a $114 million increase in community health centers and an additional $350 million in Medicaid spending for families that have recently left welfare. HHS Secretary Thompson is arguing that Medicaid expansion serves the interest of welfare reform, making sure that "work" pays. However, it would be much better to give these families direct assistance, just as Bush and Breaux proposed for the unemployed, and to allow them to enroll in private insurance plans of their choice. The objective should be to get people out of Medicaid, not to expand it in Rockefeller-Daschle fashion.

Why The Dynamics Shifted

The Medicaid provisions, however, are minor and tied to a sound welfare reform policy. The big news is that Bush's leadership has clearly energized House Republicans. They are prepared to battle again.

House Republicans know the political attractiveness of the Bush tax-credit proposal for the unemployed. In scope and reach, it proved superior in almost every respect to the Senate Democrats' proposal. The Bush program would cover all workers eligible for unemployment compensation, regardless of whether or not they had employer-based medical coverage through the Consolidated Omnibus Reconciliation Act of 1986 (COBRA). Under current law, COBRA applies only to firms with 20 or more employees. A recent Kaiser Family Foundation study estimated the typical COBRA premium to be $600 per month. Nonetheless, the Senate proposal restricted federal assistance to COBRA-eligible individuals, thus missing a lot of unemployed workers and their families. Moreover, the Bush credit would promote patient choice. The credit would be available to offset any individually purchased private insurance, including policies far more affordable than COBRA coverage.

Another attractive feature of the Bush proposal was its relative administrative simplicity and its precise targeting. Its administration would rely on systems already in place. The insurance company would be reimbursed directly by the U.S. Treasury, and enrollment and eligibility would be handled by the unemployment compensation offices in every State. Everyone eligible for unemployment compensation would be automatically eligible for the tax credit. The tax credit for the unemployed could form the basic tier for comprehensive tax relief for the uninsured.

The 2002 Medicare Agenda

While doctors are reeling from a 5.4% cut in Medicare payments, perhaps the depth of the HCFA/CMS administrative pricing mess will spur serious efforts to change the Medicare system entirely. Medicare starts to face a cash flow problem in 2016, and will require a doubling of beneficiary premiums, as well as drawdowns on the Treasury, over the next ten years. In his State of the Union address, the President reaffirmed his commitment to reform Medicare. His proposal is an updated version of the original Breaux-Thomas proposal that emerged from the now defunct National Bipartisan Commission on the Future of Medicare.

In his forthcoming budget submission to Congress, the President will ask for funds to help States implement a comprehensive drug benefit for low-income Medicare beneficiaries. Roughly 10 million seniors and persons with disabilities have no drug coverage. Under the Bush proposal, the government would pay 90% of the costs of coverage for seniors with incomes between 100 and 150% of poverty. Look for Bush to press again for his Drug Discount card, the creation of a structure of pooling and purchasing that would result in drug discounts of between 10 and 25%. Bush is also proposing a $4 billion increase to plans in the Medicare Plus Choice program. While Medicare Plus Choice plans have been getting by with a 2% increase or so, medical cost increases have been soaring into double digits. Also likely are "give-backs" for doctors, hospitals, and other providers in 2002.

Mental Health Parity Mandate Implodes

A notable casualty of the pre-Christmas Congressional rush to adjournment was the mental health parity proposal authored by Senators Pete Domenici (R-NM) and Paul Wellstone (D- MN). The failed proposal was being considered as part of the HHS appropriations bill; the amendment was dropped in the House and Senate conference on the Labor-HHS measure.

Opposition even included the left-leaning Washington press corps. Editorialists wrote: "If Congress gets into the giddy business of conferring additional benefits without having to pay, or pay much attention to, the cumulative cost, the danger is that even more people will end up with no insurance at all" (Wash Post 12/4/01). Exactly.

Physicians and other "providers" often complain that their services are insufficiently available through the employer-based third-party payment system. And precisely because the employer- based system is so easily regulated, they prevail upon the state legislatures to force private insurance companies to cover these services. As a result, states have imposed 1,403 specific benefit mandates on private medical insurance, requiring insurers to cover and patients to pay for a wide variety of specific conditions, services, or medical procedures, whether patients want them or not. Maryland, for example, has been in the "giddy business" for many years, and the costs have contributed to higher premiums and reduced coverage for untold thousands of Maryland families. If you are a Maryland resident, and you want to buy insurance outside the confines of ERISA for major medical expenses or to protect yourself and your loved ones from the devastation of catastrophic illness, you are simply not permitted to do so. Instead, you must buy a policy that covers all sorts of things that the medical experts in the Maryland state legislature think that you and your family must have, including alcoholic treatment, bone density screening, clinical trials, contraceptives, chiropractic services, drug-abuse treatments, licensed health professionals, home health services, hospice care, in vitro fertilization, infertility services, mental health parity, minimum maternity stays, nurse midwives, nurse anesthetists, nurse practitioners, psychiatric nurses, occupational therapists, optometrists, physical therapists, physician assistants, podiatrists, professional counselors, psychologists, social workers and speech and hearing therapists. Maryland has, altogether, 50 such mandates. Only California, with 42 mandates, comes close.

The incredible thing is that Members of Congress are seriously contemplating getting into this "giddy business." Domenici and Wellstone, and their many allies in the House and Senate, will surely be back again. Count on it.

A New Regulatory Agenda in 2002?

The medical insurance market is one of the most highly regulated sectors of the American economy. This means that the new Administration can make regulatory changes which can have serious implications for the direction of public policy.

Any doubts about this? Well, here's a question: Is prenatal care now politically incorrect? Consider the fevered reaction to the Bush Administration's proposed regulations permitting states to include coverage for children "from conception to age 19" under the State Children's Health Insurance Program (SCHIP). This would allow states to use the substantial pool of funding already available under SCHIP for prenatal care for low-income women. The abortion lobby is having a proverbial cow, although the rule is not a requirement.

Only a change in law can undo the regulatory mess made of the Medical Savings Accounts option in the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The refusal to create an effective MSA-a deliberate refusal -has thus contributed to the persistent problems of portability of coverage and the routine direct purchase of affordable medical services. The tax-favored employment-based system continues to compromise access to coverage outside the place of work, aggravates cost increases, and restricts the supply and availability of different plans. MSA options are limited to plans with annual deductibles between $1,500 and $2,500 for individuals and $3,000 to $4,500 for families.

The Bush Administration, even in the absence of cooperation from Congress, could make some significant regulatory changes in the insurance market.

1. Change the HHS rules governing individual health insurance plans. The Secretary of HHS can and should reverse the Clinton Administration's policies governing employer participation in the purchase of private medical insurance in the individual market. Let us assume Congress were to enact a tax credit for the purchase of individual insurance. If a person were to use a tax credit for the purchase of an individual policy and wanted the employer to contribute, that person has a problem- created by HCFA/CMS. In the final days of the Clinton Administration, HCFA issued a memorandum that holds that if an employer makes any financial contribution at all, the policy will be deemed a "group plan" for the purposes of federal regulation. This is absurd on the face of it. But it has the effect of restricting access to products in the individual market. Carriers in the individual market would have an incentive to reject applications for coverage, undermining employers' efforts to help employees get private coverage.

2. Change the Treasury Department rules governing Flexible Spending Accounts (FSAs). Right now, employees can put aside funds for medical expenses "tax free" under Section 125 of the Internal Revenue Code in what is called a flexible spending account (FSA). However, they cannot carry the money over from year to year tax free: the "use or lose it" rule. This is bad tax policy and worse health policy, for it encourages unnecessary year-end spending, and inhibits wise spending and saving for future expenses. This policy is not based clearly on statute, but on an IRS interpretation issued on May 7, 1984. In 1989, the IRS further clarified its position that a carryover of funds within a FSA was prohibited. This interpretation was disputed by employers in 1984, and is still disputed by legal experts with the Employers Council on Flexible Compensation today. According to a recent brief on the subject by the Employer's Council on Flexible Compensation (2001), " .nothing in Congress's original pronouncements on the deferred compensation rule, nor in the longstanding section 105 regulations, nor in the Deficit Reduction Act of 1984 (DEFRA) transition relief provides an impediment to Treasury and IRS permitting FSA carryovers for future health benefits by altering their proposed regulations. This issue remains one that could be resolved solely by administrative action. The will to act will be needed, but the opportunity to do so is not lacking" (emphasis added). Right.

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