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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 58, No. 3 March 2002
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,
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,
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
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
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
Call AAPS if you would like to attend a hearing in your area,
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
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
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
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
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...."
for full testimony.
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
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 AlertThe State of The Union
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
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
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