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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 48, No. 3 March 1992
PATIENTS SUE MEDICARE
In the view of the US Dept. of Health and Human Services,
all Americans become wards of the government upon reaching the
age of 65. Although it may come as a surprise to HCFA
Administrator Gail Wilensky, not all patients are pleased with
this status. Five patients are suing HHS for a declaration of
their right to contract with a private physician, just as they
did at age 64 (Stewart et al. v. Sullivan, see p. 3).
Physicians lost the 1975 case of AAPS v. Weinberger, which
established that the government had the right to regulate medical
services if it paid any portion of the bill. This case asks
whether the government may control even that which it does not
Physicians are required by law to file claims for all
``reasonable'' and ``necessary'' medical services that are
supposed to be ``covered'' under Medicare, even if Medicare
decides not to pay for them.
Furthermore, physicians are subject to all Medicare regula-
tions, even if a claim is not filed, including the ones that are
a secret. (AAPS Legal Counsel had to file a request under the
Freedom of Information Act in order to obtain a copy of the
Medicare carrier claims manual.) Should Medicare choose to make
an example of someone, a physician could face a draconian penalty
for an inadvertent, technical violation of the rules.
Regulations have become so onerous that many physicians are
restricting their Medicare practice or contemplating retirement.
Lois J. Copeland, MD, physician for the five patient
plaintiffs, decided not to give up her beloved profession without
a fight. She is the sixth plaintiff in the lawsuit.
There is no law forbidding a patient to pay a private
physician with the understanding that no Medicare claim is to be
submitted. Patients might wish to do this for many reasons. By
filing a Medicare claim, they relinquish their right to privacy;
their signature on the chart gives permission for Medicare to
review whatever information is deemed necessary to process the
claim. Some patients may wish to receive services that Medicare
is likely to disallow-such as frequent home visits. They realize
that physicians may be deterred from providing such services if
forced to deal with denials, demands, and threats from Medicare
bureaucrats. Still, patients may not wish to disenroll
completely from Part B because alternate coverage is generally
unavailable and because they cannot re-enroll without financial
Some Medicare carriers have acknowledged that patients may
waive certain Medicare benefits. But they view any patient's
agreement to this effect as nonbinding and revocable at any time.
If a patient or a family member later decides to try to collect
government money, the physician could be fined $2,000 for failure
to file the claim, $2,000 for each service that exceeded a
limiting charge, etc. Thus, Medicare turns a friendly face
toward beneficiaries (voters) while controlling them by means of
threats to their physicians. At the same time, physicians are
made to look like the patient's adversary.
Although there is no statute to this effect, there is impor-
tant case law suggesting the impossibility of legal private
contracts between physicians and Medicare beneficiaries. In New
York State Ophthalmological Society v. Bowen, the US Court of
Appeals ruled that a patient could not pay privately for a second
surgeon at cataract surgery (see AAPS News, March 1990).
To establish jurisdiction, the plaintiffs stipulated (and the
government agreed) that:
[B]ecause there is no such thing as service-
specific partial enrollment in Medicare Part
B, the patient can protect his physician from
sanctions only by ``disenrolling'' from
Judge Mikva accepted the stipulation, without citing any
statute: ``[U]nless a patient relinquishes all Part B benefits
by disenrolling from Medicare, he is not free to purchase this
needed service.'' (This is dictum, a judge's statement of
opinion on a legal point other than the principal issue of the
case. The point has not actually been litigated to date.)
Freedom of choice is the issue brought by the plaintiffs-not
increased Medicare spending or increased fees. Medicare would
save money if patients chose to obtain services outside the
program. And physician fees might actually be less. Of 91 early
respondents to a recent AAPS survey, 75% said they could reduce
all fees by an average of about 20% if they did not file
insurance claims or send bills.
Freedom may also be the issue for the government. According
to Paul A. Hein, Jr., MD, the government has not failed to
achieve its objectives, as the public believes. Rather, the
objectives are not what they seem. The ostensible purpose of
Medicare is to pay senior citizens' medical bills. But if the
bills were the true concern, the government would just pay them.
``Medicare is designed to control the physician, under the guise
of assisting the oldsters with their bills....The ultimate
purpose of Medicare is to destroy the private (i.e. not govern-
ment-involved) practice of medicine'' (Iatrofon, Jan, 1992).
Can patients win against the awesome power of HHS? R.S.
Jaggard, MD, AAPS President in 1972-73, states that he retains
his optimism, ``remembering that, on one occasion, a destroyer
(weighing 2,100 tons and having five guns of 5-inch caliber)
attacked four battleships, including Yamato (65,000 tons, nine
guns of 18.1 inch caliber and six guns of 5-inch caliber on each
side), and they were the ones who turned tail and called off the
On Bureaucratic Management
From an interview with Rita Klimova, Czechoslovakian
Ambassador to the United States:
Q: A paper published by the Institute of Hygiene and
Epidemiology in Prague states that ``the unfavorable downward
trends in the parameters of public health...reflecting the ever
decreasing quality of the environment [are principally caused] by
a centralized and administratively complicated system of
institutions...resulting in loss of responsibility,'' Do you
share this view?
A: Yes! Because every government bureaucrat has wanted to
complete his tenure. What comes after doesn't interest him.
These nonelected government officials have a very short attention
span. Their only interest is in making life easy for themselves.
National Wilderness Institute
25655 Georgetown Station, Washington, DC, 20007
The GP and British National Health Insurance
In 1935, Donal Sheehan, a British practitioner wrote to Dr.
Harvey Cushing about his experiences with the British health
insurance act. His father had a busy general practice, largely
among the poor, which was taken over by his elder brother.
``On account of the state insurance scheme, there is a much
greater financial security than in my father's time. The work
is, however, no longer one of medical attendance, but is chiefly
clerical, filling out certificates and keeping records.''
The system caused ``an enormous increase in semi-malinge-
ring,...which is of course pandered to by the doctor. There is
in addition a fabulous expenditure and waste on medicines, as
every patient demands and gets a bottle of `something' for the
most trivial of ailments...All the druggists are therefore
wholeheartedly behind the scheme.''
Dr. Sheehan stated that funds were grossly mismanaged, and
that ``having made the assumption that all doctors must be
thieves, the state has had to pay for hosts of other thieves to
Harvey Cushing: A Biography, originally published 1946
The Classics of Surgery Library
Cooperating With Your Enemy
Private Doctors of Australia states that: ``Medical
practice is a private contract between patient and doctor and no
business of the government or the RACGP [Royal Australian College
of General Practice] which is not the elected voice of general
practice but properly an educational body.''
PDA notes that the RACGP is heavily subsidized by the
government and that ``subsidy usually comes with conditions
favorable to government.''
PDA was opposed to ``bulk-billing'' (billing the government
rather than the patient) from the start. The Australian Medical
Association (AMA) spoke of the need to abolish bulk billing only
when doctors became dissatisfied with the remuneration allowed by
the fee schedule. The PDA would remain opposed, even if payment
were substantially increased, because ``any direct payment by the
government means direct control by the government.''
Australian Private Doctor,
In ruling against Dr. Albert Fisher, who challenged the
constitutionality of mandatory assessments of physicians for the
Wisconsin Patient Compensation Fund (see AAPS News, Dec.
1991), the Wisconsin Court of Appeals stated, in an unpublished
Dec. 11, 1991, decision:
It is well established in the law that all
legislative acts are presumed constitutional, that a
heavy burden is placed on the party challenging a
statute's constitutionality, and that if any doubt
exists it must be resolved in favor of
constitutionality [emphasis added].
On citizens' rights to equal treatment under the law, the
The Fourteenth Amendment permits states to enact
laws which affect some groups of citizens differently
than others and is offended only if the classification
rests on grounds wholly irrelevant to the achievement
of the state's objective. State legislatures are
presumed to have acted within their constitutional
power despite the fact that, in practice, their laws
result in some inequality....The public policy involved
is for the legislature, not the courts, to determine.
Myths on ``National Health Insurance''
Twenty myths about medicine in nations with socialized
medicine are exploded in a new report by John Goodman and Gerald
On cost control: Real increases in medical spending
per capita have been virtually the same in US and Canada over a
20-year period. The method of cost control used by socialist
administrators is the denial of services.
On access: On waiting lists for surgery, there are
25,000 patients in New Zealand, 250,000 in Canada, and more than
1 million in Britain.
On equity: People in Britain's highest social class
received 40% more medical care in relation to their need for it
than did people in the lowest social class. Across the health
regions of British Columbia, spending on specialists' services
varies by as much as 35 to 1.
NCPA Policy Report number 128, which contains 88 pages and
numerous references and graphs, can be obtained from the National
Center for Policy Analysis, 12655 N. Central Expy, Suite 720,
Dallas, TX 75243, (214)386-6272.
Socialized medicine is often proposed as a way to improve
infant mortality rates. Yet in England, infant mortality in the
lowest socioeconomic class is double the rate in the highest
class, just as it was before the introduction of the NHS in the
late 1940s (Victor Fuchs, Health Affairs, winter 1991).
Medical intervention is most important in the survival of
low-birthweight infants. At any given high-risk birthweight,
perinatal survival in the 1980s was substantially better in the
US than in Norway or Japan, which have the lowest overall infant
mortality rates (Nicholas Eberstadt, Wall St J 1/20/92).
To order audiotapes of ``Medicine and Freedom: the Doctor,
the Government, and the Law,'' call 1-800-635-1196.
Medicare Patients Challenge Prohibition
on Private Medical Care
On January 31, 1992, five patients and their private
physician filed suit in the US District Court in Newark, NJ,
against Louis Sullivan, Secretary of the US Dept. of Health and
Human Services (HHS) and Medical Service Association of
Pennsylvania d/b/a Pennsylvania Blue Shield, the Medicare
carrier, challenging the defendants' prohibition against private
contractual relationships between patients over the age of 65 and
The suit is the first of its kind in the United States in
seeking to establish the right of Medicare beneficiaries to
contract and pay for medical services privately, on a case-by-
case basis, without having to disenroll completely from Medicare
Plaintiffs in the suit are James Stewart, Joan Kennedy
Taylor, Trudy Drucker, Warren Kose, and Connie Streich, all
patients over the age of 65 enrolled in the Medicare program, and
their private physician Lois J. Copeland, MD, an internist. (Dr.
Copeland serves as a Director of AAPS.)
The impetus for the lawsuit came from numerous patients and
physicians throughout the US, who asked the Legal Service whether
the lack of privacy and confidentiality, the paperwork, the
hassles, and the fears associated with the Medicare program could
be selectively avoided by privately contracting for services
outside the program and simply not submitting a bill to the
The Legal Service's investigation determined that HHS has
promulgated a ``policy'' requiring patients age 65 or over
to tax the government by having their physicians submit a claim
every time ``covered'' medical services are rendered. The
Medicare carriers have issued bulletins to physicians that openly
state that Medicare is an ``all or nothing'' program for patients
over the age of 65. One such bulletin reads as follows:
INQUIRIES REGARDING DISSOCIATION FROM MEDICARE:
According to Medicare law, physicians
and suppliers cannot voluntarily dissociate
themselves from the Medicare program if they
continue to provide covered services to
Some physicians have contacted Medicare and
requested that they be removed from the program. As
long as covered services are provided, however, a
provider must abide by all Medicare rules and
regulations pertaining to those services.
The law cannot be bypassed by having patients sign
a disclaimer stating that services provided to them
should not be billed to Medicare.
The following are the only ways a physician can
dissociate himself/herself from the Medicare program:
(1) Discontinue providing covered Medicare
(2) Surrender his/her license or certificate
in those instances where such a document is
required to practice.
We at Medicare realize that it is a challenge to
keep up to date on the ever-changing rules and
regulations regarding Medicare. To ensure effective
dissemination of information, Medicare continuously
produces newsletters to keep its providers abreast of
the latest changes in the program. We encourage you to
read your newsletter carefully and contact us if you
have any questions.
The lawsuit seeks a declaration of rights that such a
``policy'' of the US Dept of HHS and its Medicare carriers is
void and of no force and effect. Further, it seeks an injunction
prohibiting HHS from sanctioning physicians who privately
contract with their patients or from forcing patients age 65 or
over to disenroll from Medicare in order to enter into such
private arrangements on a case-by-case basis.
The complaint alleges that the ``policy'' of HHS conflicts
with the Medicare Act 42 U.S.C. §1395a et seq., as amended,
and that therefore the Secretary lacks the statutory authority to
enforce such a ``policy.'' Specifically, the statute provides
that individual patients age 65 or over ``may obtain health
services from any institution, agency, or person qualified to
participate [under the Medicare Act] if such institution, agency,
or person undertakes to provide [them] such services'' and that
Title 42 U.S.C. §1395b provides that ``[n]othing contained
in [42 U.S.C. §§1395 et seq.] shall be construed to
preclude any State from providing, or any individual from
purchasing or otherwise securing, protection against the cost of
any health services....''
Essentially, the complaint alleges that these statutory
provisions guarantee the rights of patients to ``self-insure''
for medical services to the extent that they choose, without
being totally stripped of all Medicare benefits, effectively
Furthermore, the complaint asserts that the ``policy'' of
the Secretary violates the Administrative Procedure Act, Title 5
U.S.C. §§ 551 et seq., in that no rule-making,
including the filing of notice in the Federal Register and
permitting public comment, has ever been initiated or
accomplished by the Secretary. No rule or regulation respecting
the ``policy'' has ever been published by the Secretary.
Finally, the complaint alleges that even if the Secretary's
``policy'' does not violate the guarantees embodied in the
Medicare Act and the Administrative Procedure Act, it violates
Article 1, Section 1, of the US Constitution in that such a
``policy'' represents legislation, which is the province only of
the elected representatives in Congress. Additionally, the
lawsuit asserts that the ``policy'' denies Medicare beneficiaries
their rights to privacy and confidentiality in their medical
treatment, in violation of the First, Fourth, and Ninth
Amendments to the US Constitution, and deprives Medicare patients
of the equal protection of the laws, in violation of the Fifth
and Fourteenth Amendments.
HHS has 60 days to file an answer or otherwise respond to
Litigation is being supported by the American Health Legal
Foundation through its Freedom of Choice fund. Contributions may
be addressed to AHLF, 1601 N. Tucson Blvd. Suite 9, Tucson, AZ
85716. Further information about the complaint is available from
AAPS is pleased to welcome Drs. Ronald E. Alley of Des
Moines, IA; R.O. Anya of Imo State, Nigeria; Roland Beverly of
Fontana, CA; James F. Black of Marshalltown, IA; Robert P. Blume
of Pittsburgh, PA; Myron E. Bodnar of Medina, OH; W. Sanford
Brechbuhler of Ashland, OH; Ann Bullington of Phoenix, AZ; Jimmie
H. Carpenter of Seneca, SC; J. Stanley Conner of Houston, TX;
Harry W. Depew of San Diego, CA; Matthew Dodds of Casper, WY;
Dennis Easter of Downey, CA; Charles Kelman of New York, NY;
Steven Lacher of Towson, MD; John Clifford Lasnetske of
Bremerton, WA; Charles Moss of Emerson, NJ; John F. Perry of
Avis, PA; R. Wayne Porter of Corning, AR; Dirk Robertson of
Atlanta, GA; Robert K. Scott, II of Lewisburg, WV; Paul M.
Slaughter of Pearsall, TX; and Ira D. Thompson of Huntsville, AL.
New student members are: Yiu-Chung Chan of Columbus, OH; P.
Conti of Columbus, OH; Stephanie Falbo of Columbus, OH; Tadd R.
Ferguson of Columbus, OH; Douglas Kohler of Columbus, OH;
Lancaster Lo of New York, NY; Skye McDonald of Phoenix, AZ;
Tamara I. Parker of Westerville, OH; Bhairavi Patel of
Beavercreek, OH; Luis F. Porrata of Syracuse, NY; Alexander J.
Rim of Columbus, OH; Donald Seidler of Columbus, OH; Todd T.
Trier of Tucson, AZ; and H. David Wu of Tucson, AZ.
Letters to the Editor
To the Research Division, AAPS [concerning questionnaire about
third-party imposed costs]:
I believe all these questions are an exercise in futility.
I don't see how we can prevail if we take their money.
I perform almost no third-party work. I have never done any
Medicare or Medicaid. I don't make a lot of money, but my life
is simple and clean.
I do offer my patients more information than is necessary
for their use in order for them to contend with their insurance
companies. I sometimes charge for this information in proportion
to the effort required to compile and transmit it.
We must remember that the people who would socialize America
do not care about better medicine or worse medicine or even the
costs that they are forcing on medical care. Their aim is to
rule by force and to control everything of value. They are the
enemy and a contumacious attitude is the best in dealing with
James H. Peoples, MD, Kinston, NC
It is time to sound the alarm! Physicians have lost more
freedom in the past year than in the past quarter century. In
the past year we have seen: (1) the phase-in of the RBRVS system
of payment, which removes the last vestige of freedom that
physicians had to decide what their time and effort was worth;
(2) the establishment of the National Practitioner Data Bank, a
central computerized clearing house, which will maintain dossiers
on physicians; and (3) the Clinical Laboratory Improvement Act,
the implementation of which was carried out using tactics
borrowed from negotiators of the now-defunct Soviet Union, first
proposing draconian regulations and then enacting milder ones so
it would seem to physicians that they had actually gained
something by their protests, when in fact they had lost
Our leading professional organization[s]...now resemble
nothing so much as professional organizations in the former
Soviet Union, subservient to and managed by the State in order to
maintain control over their members.
It is time we put our patients' welfare and our professional
freedom ahead of financial gain and stop cooperating with the
Government in the destruction of our profession....
R. Wayne Porter, MD, Corning, AR
Politicians control medicine in two basic forms. In the
Marxist model, government regulates medical care through public
ownership of existing medical facilities. In the social fascist
model, the State regulates every aspect of medical practice-
without actual ownership of the medical hardware- through
licensure of doctors, price control of medical procedures, and
prior approval of medical products....
Whenever politicians and civil servants are entrusted with
health care, they inevitably want to mold medicine to the
objectives of the State. Bismarck constructed the first model
social security scheme; [his goal was] a strong and united
Germany capable of efficient production of iron and blood.... The
framework [that Hitler inherited] from Bismarck endowed him with
a well-oiled medical tool, ready for any task.
L. Alphonse Crespo, MD
The Voluntaryist, Feb., 1992 PO Box 1275, Gramling, SC
Aug. 16-18, 1992, Ninth Congress of IATROS (the internation
voice of private doctors, Hotel Grand Marina, Helsinki, Finland.
For further information contact R.S. Jaggard, MD, (319)283-4985.
Oct. 15-17, 1992. Annual Meeting, Seattle, WA.
Legislative Alert AAPS Report from Washington
Numerous proposals are on the table as the debate over
``health care'' reform heats up.
The White House Proposal. Although the White House
initiative has not been officially released at the time of this
writing, the broad outlines have been leaking out. So far, it
appears that the plan will include:
- A refundable tax credit to help uninsured Americans pur-
chase a basic package of insurance. (A minimum level of $1000 to
$1200 a year for those below the official poverty line has been
mentioned in the press. Given the political challenge facing the
President on this issue, the credit may be larger.)
- Incentives or requirements for states to enroll Medicaid
patients in prepaid HMOs.
- A cap or tax on the value of employer-provided insurance for
families making $100,000 per year or more. (The tax would
probably begin at benefit packages worth $4000 a year or more.)
- An increase in Medicare premiums for families making $100,000
per year or more. (Means testing would be a huge policy change
The Congressional Democratic Offensive: ``Town Hall'' Meet-
ings. Democratic Congressmen fanned out all over the country
in January to recite the obvious litany of problems. These
``town hall'' meetings were a mixed curse for many members of
Congress. Some generated more questions than Members of Congress
can satisfactorily answer. People are starting to compare their
current situation with the likely outcome of proposed reforms,
and they are becoming alarmed. Employees are beginning to worry
about being dumped into a public plan. At two such
meetings, when Congressmen asked whether the US should adopt some
sort of national health insurance, the majority of hands went up.
But very few indicated willingness to support such a reform with
heavy new taxes. Some battle-scarred veterans of the
Congressional health wars are even starting to sniff the
repulsive odor of the dead Medicare Catastrophic Coverage Act of
1988, which Congress had to repeal when the costs became known.
In suburban Maryland, a 74-year-old Medicare recipient
confronted Congressman Tom McMillen with a handful of confusing
bills, and demanded to know if Medicare was supposed to be the
model of an administratively simple, single-payer system.
McMillen emphasized the need for cost control, but when pressed,
had to admit that that means cutbacks in services.
A number of AAPS members (or their wives) took advantage of
the opportunity to present free-market ideas to meeting attendees
as well as their Congressmen.
Democratic reform proposals are of two general types:
national health insurance and mandatory insurance for business
(``play or pay''). There are several variants in administration
The Russo Bill (HR 1300), with 46 cosponsors, is the
main vehicle for national health insurance in the House of Repre-
sentatives. Marty Russo (D-IL) proposes:
- ``Universal coverage'' for all Americans, with benefits to
include hospital care, physicians services, prescription drugs,
preventive care benefits, and long-term care.
- A single payer (the federal government).
- A ``global budget'' set by HHS. (The scope of HHS authority
would be enormous, covering the level of spending for every
state. Much as in Canada, hospitals would be reimbursed on a set
budget, and physicians paid on a set fee schedule.)
- No cost-sharing by beneficiaries.
- Financing through corporate income taxes, personal income
taxes, new employer payroll taxes, and premiums for long-term
Canadian-Style Administration. HR 8, sponsored by Mary
Rose Oakar (D-OH) with 22 cosponsors, would also establish a
national system of universal coverage, but it would be run almost
entirely by state governments. (Canadian provinces actually run
the Canadian health care system). These state-run systems,
however, would not be independent of the federal government.
Under this plan:
- The federal government would establish minimal standards
for health benefits provided on the state level, including
hospital services, physician services, and diagnostic, preventive
and mental health care. HR 8 also provides long-term care
- Private insurers would have a minimal role. States could
authorize them to sponsor plans meeting the minimum benefit
levels required by the federal government, but the number of such
private plans, including HMOs or PPOs, would ultimately be
determined by the state governments.
- Each state would be responsible for setting a health care
budget based upon its projections of hospital costs and the costs
of physicians services within the state. Physicians would be paid
on a fee schedule, as under Medicare.
- Financing would be a responsibility of the state, but each
would receive a federal contribution.
The Stark Expanded Medicare System. HR 650, introduced
by Rep. Fortney ``Pete'' Stark (D-CA), with six cosponsors, would
simply expand the current, single-payer Medicare system, now
serving 34 million elderly Americans, to cover all 250 million
- Benefits would be broader than Medicare, including
maternity and pediatric care, but long-term care would be covered
under a separate program (HR 651).
- Medicare ``cost controls'' would be extended to the entire
population: DRGs, the RBRVS, and ``volume performance
- Financing would be by joint payment of premiums by employers
and employees, plus extra an extra 2% tax on all gross incomes
that are at least 200% above the federal poverty line (now
officially defined as $13,350 for a family of four).
A similar plan, HR 1777, has been introduced by Sam Gibbons
(D-FL). Extra benefits would be added to cover persons over the
age of 65. The Medicare payroll tax would be increased.
John Dingell (D-MI), Chairman of the House Committee on
Energy and Commerce, has also introduced a single-payer plan, HR
16, with comprehensive benefits for all Americans. HHS would
have the authority to delegate administration to local
authorities. The National Health Care Trust Fund would be
``partially financed'' by a value-added tax (VAT).
Health USA Program. The most important Senate measure
establishing national health insurance is a centerpiece of the
presidential campaign of its author, Bob Kerrey (D-NE).
Important features include:
- ``Universal coverage'' with a full range of hospital and
physician service benefits plus prescription drugs and long-term
- State responsibility for controlling costs through
``negotiated fee schedules'' and ``expenditure caps.''
- Competition among ``approved,'' ``private'' plans that would
receive a fixed capitation payment from the state for each
enrollee. (Competition on the basis of price would be
- No billing of patients except for copayments allowed by
- Joint financing by federal and state governments through
payroll taxes, corporate taxes, increased personal income taxes,
and excise taxes.
Under this system, ``physicians would have the market
freedom to choose approved plans with which they contract'' and
to negotiate over the conversion factor and the expenditure
targets (JAMA 267:552-558, 1992). No other freedoms are
``Play or Pay'' or Mandatory Health Insurance. Under
this concept, the federal government would guarantee universal
coverage by requiring all employers either to: a) ``play,'' by
providing private health insurance for their employees directly;
or (b) pay into a public fund to finance a new public insurance
system. Among Congressional Democrats, this approach clearly has
the inside track. House Speaker Tom Foley (D-WA) told reporters
last week that if ``play or pay'' legislation were brought to the
House floor, it would pass.
The principal bill is S1227, introduced by Senator George
Mitchell (D-ME) and backed by Sen. Edward M. Kennedy (D-MA). The
bill was reported out of the Labor and Human Resources Committee
on Jan. 22. Secretary Louis Sullivan of HHS vows implacable
opposition to the measure.
The new ``Americare'' program would replace Medicaid. The
Mitchell bill would create a Federal Health Expenditure Board to
set expenditure targets and oversee negotiations between doctors
and hospitals representatives and payers. The Mitchell bill also
provides for the states to develop cost control and quality
assurance plans, including the creation of ``quality improve-
Pepper Commission Recommendations. S1177/HR 2535,
introduced, respectively, by Sen. Jay Rockefeller (D-WV) and Rep.
Henry Waxman (D-CA) implement the Pepper Commission
recommendations for reform. They are sure to appeal to those who
like Medicare rules. Key features:
- ``Play or pay'' provisions;
- Minimum benefits requirements for both private and public
- Tax credits for small business;
- Insurance market reforms, especially substituting community-
based rating for experience ratings;
- Financing through employer and employee ``contributions'' and
a corporate and personal income surtax (HR 2535).
Calculating the Costs
Even as Senate Democrats, led by Sen. Edward Kennedy, are
moving rapidly on the Mitchell bill, new data outlining the
dramatic impact of the ``play-or-pay'' approach is having an
explosive effect on the debate.
This month the Department of Labor released a comprehensive
study by the Urban Institute, a prestigious Washington think
tank, on the choices different employers would make if they were
confronted with ``play-or-pay'' alternatives. The Urban Institute
study was funded by the Department of Labor's Pension and Welfare
Using employers' insurance premium and payroll data, and
assuming that the standard benefit package would include a $200
deductible for single persons ($500 for families), plus a 20%
copayment and such ``cost control'' requirements as preadmission
certification for hospitalization, the Urban Institute results
showed that American workers would be dramatically affected by
the implementation of national ``play-or-pay'' insurance reform.
Assuming a 7% payroll tax, the Urban Institute Study found
- Over 111 million people, or 52% of the population under the
age of 65, would be added to the public plan.
- About 51.7 million individuals who are now enrolled in
private, employer-based insurance would be shifted into the
- The vast majority of those currently uninsured (78.2%) would
not be insured by private insurance, but would end up being in
the public plan.
- The vast majority of employees of small businesses would end
up in the public plan-81.5% of the employees of firms with less
than 25 employees, according to the projections of the Urban
On the subject of costs, the study also released some
explosive data. Employers would face an average increase of 223%
in the cost of providing medical benefits. The cost to taxpayers
would be $36.4 billion. The reason for these higher costs,
according to the study, is that the larger public plan would cost
billions more than the revenue it would produce.
Current programs for the nonelderly, such as Medicaid,
Medicare for the disabled, and Champus cost $28 billion per year.
Adding the new plan would result in a 131% increase over these
expenditures. Looking specifically at the effect on
- Employers would incur an increase of $29.7 billion in the
cost of providing health benefits.
- Costs of the new program for firms with fewer than 25
employees would increase by 71%. The main reason is that these
firms do not now provide health insurance. It is understandable
why small businesses are the most hostile to this approach.
- Medium-sized firms would experience a 21% increase, and even
large firms would experience an overall increase in medical
insurance costs amounting to 13% in the first year.
- The Urban Institute study is a genuine milestone in the
debate on health care reform. This no-nonsense dollars-and-sense
analysis focuses on the real consequences of federal regulation
of the health care system.
Will millions of working Americans accept being dumped into
a middle-class version of Medicaid?