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Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 49, No. 3 March 1993


``You can't control only a part of this system; you've got to control the whole thing,'' declared Judith Feder, Director of Health Policy in the Presidential Transition Office. Controlling only the public sector, she said, is like squeezing one part of a balloon. Feder spoke on January 14 at a Washington, DC, conference sponsored by Health Care Reform Week.

``No one knows this better than President-Elect Bill Clinton,'' she reiterated, ``whom you all saw pounding on the table in Little Rock, saying `We've got to get control of this health care system. The whole thing'.''

The question now, she said, was how the Clinton proposal should be implemented, not whether to take that approach.

The answer to the question ``What is the Clinton proposal?'' was not available six days before the Inauguration.

The Transition Team was originally scheduled for a two-hour presentation at the conference. At the conclusion of her 12- minute remarks, Feder left abruptly, refusing to entertain a single question or comment from the overflow audience of more than 700. Atul Gawande, Clinton's spear-carrier for ``managed competition,'' simply failed to appear. The wine-and-cheese reception started half an hour early. Nevertheless, one physi- cian thought that the lone Administration spokesperson had said it all, however concisely.

``We have seen the Messiah,'' he remarked.

Conference attendance reflected the role that physicians are meant to play in health care reform: None of the speakers and less than 10% of the registrants were identified as physicians. Most of the attendees with M.D. degrees were academics or administrators of managed-care plans. Private medicine was represented by Francis Davis, MD, publisher of Private Practice; Ron Bronow, MD, President of Physicians Who Care; and AAPS members (including Dexter Blome, MD, a plastic and reconstructive surgeon from Zanesville, OH; Jane Orient, MD, an internist from Tucson, AZ; Bruce Schlafly, MD, a hand surgeon from St. Louis, MO; Michael Schlitt, MD, a neurosurgeon from Renton, WA; and James Weaver, MD, a vascular surgeon from Durham, NC.)

An informal conference-within-the conference was organized by Dr. Blome to give private physicians the opportunity to meet with representatives of other national organizations and think tanks concerned about insurance reform. These included the Competitive Enterprise Institute, Cato Institute, the Council for Affordable Health Insurance, and the National Center for Policy Analysis. Additional AAPS members who traveled to Washington, DC, for these discussions were Jerome Arnett, MD, a pulmonologist from Elkins, WV, and AAPS Director Lois Copeland, MD, an internist from Hillsdale, NJ.

AAPS physicians also conferred with lobbyists, held a strategic planning session, and fanned out on Capitol Hill to meet with congressional staffers. They called on the offices of Dick Armey (R-TX), Andy Jacobs (D-IN, the sponsor of legislation to establish Medi-Save accounts), John Boehner (R-OH), David Hobson (R-OH), Jim Cooper (D-TN), and Patty Murray (D-WA), among others.

The overall impression of AAPS members was that the nation's capital is in a state of chaos. It wasn't just the scaffolding and boxes stacked in the halls of Congress, or the frantic preparations for what the Washington Times described as a Coronation. There was a pervasive sense that nobody knows what is going on. The Administration doesn't know what its policy is going to be, or who the policymakers are going to be. The proposals put forth by congressional leaders are in fundamental conflict with each other as well as possibly with the Administra- tion. The proposals themselves are often crafted by 25-year-old staffers who don't know the difference between a premium and a deductible.

The situation may be the prelude to disaster, the establish- ment of an American Gosplan-or a window of opportunity. Much may depend on whether advocates of free enterprise offer a coherent alternative. And on whether private physicians choose to adopt a plantation mentality-or to declare independence.


Words of Wisdom from the Kings of the Hill

The keynote speaker, Senator Edward Kennedy, explained how he evaluated reform proposals: ``If page 1 says `universal coverage' and cost controls, I'm for it.'' He called health care reform the key, both to freeing federal funds for other uses and for deficit reduction. He offered hope to private physicians: ``Those who want to be outside the stadium will be there.'' He is pleased at chances for cooperation: ``Dr. Todd is very courageous. Before him, the AMA had flipped out.''

Congressman Pete Stark (D-CA) displayed his modesty: ``I come to this topic without much experience and without much knowledge, pleased to accept a leadership position based on my experience and knowledge.'' He proved his concern for upholding the Constitution, which does provide for medical care to one small group-prisoners. ``And what's good enough for Haldemann, Ehrlich, and Weinberger is good enough for me.'' Stark likes HMOs and thinks capitation is the only way to save money. (His wife belongs to an HMO though he himself subscribes to low-option Blue Cross.) However, he faces the ultimate threat: his mother will humiliate him by sleeping on a grate if he makes her leave her doctor. Stark dismissed Dr. Weaver's question about Medi- Save accounts, saying that patients were either ``invincible'' (if healthy) or ``absolutely irrational, brain dead, sniveling, begging, and fantasizing ills and pains'' (if sick) and thus not to be trusted with making their own medical decisions.

New CLIA Regulations Issued

Physician-performed microscopic tests were established as a new category under a ``Final Rule'' clarifying regulations published in February, 1992, to implement the Clinical Laboratory Improvement Act of 1988.

Certain microscopic tests are added to the ``waived'' category, but only if performed personally by a physician on his own patients (or patients of a group practice of which he is a member). The tests are: wet mounts; KOH preparations; pinworm examinations; fern tests; post-coital direct, qualitative examinations of vaginal or cervical mucus; and urine sediment examinations. Gram stains are not included.

A certificate for physician-performed microscopy is required; the biennial fee is $150. The procedures are exempt from routine inspections; however, inspections could be performed to investigate complaints or to determine that only authorized tests are being performed.

In the clarification, HCFA reiterated that they do not think Congress meant for them to regulate individuals as laboratories when self-administering tests in their own homes. However, this exclusion does not extend to persons residing in nursing or intermediate-care facilities.

With the strong urging of the AMA, the rule was published despite objections from a coalition of medical organizations, including AAPS, the American College of Obstetricians and Gynecologists, the American College of Emergency Physicians, the Medical Group Management Association, and a number of nurses' and public health groups.

The coalition pointed out that the ``rigidity and cost of the regulations as promulgated by the Dept. of HHS will impede the access of many patients to simple laboratory tests. The impact will be particularly hard felt by women and children in urban and rural areas who often depend on nonphysician providers for much of their primary care.''

The coalition noted that biotechnological advances have produced a number of simple and accurate tests. For example, grade school students were capable of accurately performing enzyme-linked immunosorbent assay (ELISA) screens for Group A Streptococcal antigen, after reading the instructions in the package insert. This is classified as a ``moderately complex test'' (JAMA 268:766-770).

By mandating specific credentials, the regulations could have a detrimental effect on quality by requiring that tests be done by those who have less experience in actually performing them. In some settings, nurses perform wet preps more often than physicians do.

Medicare carriers are likely to begin sending warning letters in early March to laboratory facilities that submit Medicare claims without a valid CLIA registration number.

HCFA reports having issued numbers to over 139,000 laboratories. According to some estimates, up to 40,000 other labs have not yet registered, and about 4,000 facilities said they are no longer a laboratory (BNA's Medicare Report 1/22/93). [More than 640,000 labs were sent registration forms.]

The new final rule is published in the Federal Register 1/19/93. Comments will be considered if submitted in writing before March 22. Mail an original and three copies to: HCFA, Dept. of HHS, Attn: HSQ-202-FC, PO Box 26676, Baltimore, MD 21207. Comments sent by FAX will not be accepted. In commenting, refer to file code HSQ-202-FC.

Specifically solicited are comments related to whether other professionals, such as nurse practitioners, should be allowed to perform the tests in the new category without meeting the requirements for labs that do moderately complex tests. Who usually performs the tests? What are the cost, access, and quality implications of providing this exception to a limited set of professionals?

For further information, contact Judy Yost, (410)597-5907.

For a copy of the Final Rule, send a self-addressed 9x12 envelope marked ``Priority Mail'' with $2.90 postage to: AAPS, 1601 N. Tucson Blvd. Suite 9, Tucson, AZ 85716.


Public Citizen Sues Over CLIA

The Consumer Federation of America and Public Citizen filed suit in federal court on Jan. 14 against the Dept of HHS, alleging that regulations issued in Feb., 1992, violate the Clinical Laboratory Improvement Amendments of 1988. The groups contend that personnel performing tests can now actually be less well-trained than before the Act was passed. CDF attorney Mark Cooper thought that the Jan. 19 rule may be ``even less legal.'' CDF also wants a public list of sanctioned laboratories (BNA's Medicare Report 1/22/93).


CLIA Could Increase Cancer Mortality

Using a computer simulation, scientists estimated that the benefit of a 10-point reduction in the false negative rate for Pap smears through CLIA regulations could be erased by a 50% increase in the price. They concluded that the chance that CLIA 88 would reduce the number of cancers was only 33%, and that on average CLIA would cause an additional 37 cancers per 100,000 women (Med Care Dec. 1992). [The actual increase in costs has been 200-300%, not 50%.]

The most important effect of CLIA to date is a significant economic pressure to change from a two-slide Pap smear to a one- slide method. (Federal legislation limits the number of slides per day that a cytotechnologist may review.) A review of more than 2000 cases showed that the two-slide method increased detection of neoplasia by 60%. Colposcopy and biopsy (a procedure that costs at least $300) doubled the detection of dysplasias for patients with ``reactive'' or ``atypical'' one-slide smears (Latham, Austin, Wilson, abstract presented to ACOG 1990).

According to R. Marshall Austin, MD, a pathologist in Charleston, SC, the costly bureaucratic quality assurance regulations in CLIA-88 will put a severe squeeze on traditional time-consuming cytology-histology correlation-based quality measures. In other words, ``pseudo-QA'' may supplant true quality control. Small, nonprofit hospitals will be under increased pressure to utilize high-volume, low-cost providers, severing the link between cytologic and follow-up biopsy materials in many hospitals.

Dr. Austin also predicts decreased access to screening. In Canada, every-third-year screening has replaced annual testing, and ``cytologic surveillance'' of ``low-grade'' lesions and ``benign atypia'' is recommended instead of colposcopy and biopsy, despite evidence that less aggressive follow-up delays diagnosis of invasive cervical cancer (invited editorial written for Diagnostic Cytopathology).

Dr. Austin predicts an increase in mortality due to cervical carcinoma. The effect will not become visible for at least 10 years after the implementation of CLIA in 1990.

Court Finds Physician Recruitment Agreement Unenforceable; HHS Increasing Investigation of Hospital-Physician Relationships; ``Safe Harbors'' to Be Issued

A US District Court in Texas has held a public hospital's physician recruitment agreement unenforceable because it violates 42 USC §1320b-7b(b), the Medicare Anti-Kickback Statute. The ruling is the first federal decision addressing the legality of physician recruitment agreements which, until very recently, were viewed as a routine and acceptable means of attracting physicians. The decision, entitled Polk County, Texas, v. Peters (CCH Medicare and Medicaid Guide, paragraph 40, 893 (1993)), illustrates that both hospitals and physicians must be cautious about entering such agreements.

The Peters case arose as follows: A Texas public hospital sued a physician for alleged breach of a recruitment agreement, after differences arose between them. The agreement conditioned the hospital's obligation to advance money to the physician on his developing a private practice, practicing in a certain location, and utilizing the hospital for his patients. The hospital brought suit to recover the money it had advanced. Importantly, in another related lawsuit over the revocation of the physician's staff privileges, the hospital originally stated that its reason for revoking the privileges was the physician's failure to utilize the hospital as his ``primary hospital.'' The relevant part of the Medicare Anti-Kickback Statute, on which the court relied, reads as follows:

Illegal remunerations. (1) Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind-(A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under title XVIII [42 USCS Sections 1395 et seq.] or a State health care program....[shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both]....

The court found that even though the case involved a hospital's recruitment of a physician and the physician's referral of surgical patients to the hospital-a situation that on its face seems innocuous-rather than an explicit kickback arrangement, the agreement fell within the coverage of the Medicare Anti-Kickback Statute. This holding was consistent with federal precedent, including the recent Hanlester Network joint venture case (see AAPS News, October 1992), in which the HHS Departmental Appeals Board found violations of the Anti- Kickback Statute even though no explicit referral agreement existed.

The court reasoned that since the hospital provided a benefit to the doctor that was directly or indirectly designed to induce the physician to refer patients to the hospital, the ``remuneration'' requirement of the statute was satisfied. The court indicated that while the hospital may have entered into the recruitment agreement motivated by a legitimate desire to make better medical services available in the community, there was no doubt that the benefits provided to the physician were, at least in part, an inducement for him to refer surgical patients to the hospital. The court concluded that, because the arrangement was illegal under federal law, the recruitment agreement was void on its face. Therefore, Texas law prohibited the hospital from recovering any sums from the physician under that agreement.

The Peters decision is just one part of a trend toward greater legal scrutiny of hospital-physician recruitment agreements. On January 8, 1993, the Bureau of National Affairs (BNA) reported that nine physician recruitment and retention agreements entered into by Kennestone Regional Health Care System in Atlanta, GA, are being investigated by the Office of the Inspector General for possible violations of the Anti-Kickback Statute (BNA's Medicare Report, 1/8/93). These agreements contain no explicit language regarding patient referrals. According to BNA, the OIG has a ``significant'' number of cases dealing with hospital-physician relationships under investigation.

Currently, no ``safe harbor'' regulation has been issued by HHS regarding physician recruitment and retention agreements. Obviously, a need for such a ``safe harbor'' exists. The federal bureaucracy and the courts have read the Medicare Anti-Kickback Statute very broadly, to cover what have been for years legitimate economic relationships. Neither have recognized the need for such agreements, especially in rural communities where physician shortages are a constant problem. Undoubtedly, the chilling effect of overzealous enforcement will be felt directly by the patients, especially those obligated to travel long distances to obtain care that is unavailable in rural areas. BNA has reported that the OIG plans to issue a ``safe harbor'' regulation some time in 1993.

Currently, the best means of examining the legitimacy of a physician recruitment or retention agreement is by comparing its terms with the ``Special Fraud Alert'' issued by the OIG in May, 1992, and retaining competent legal counsel. Copies of the Alert may be obtained from the AAPS Limited Legal Consultation Service, 1114 First National Building, 167 W. Main St., Lexington, KY 40507, (606)253-4868.


``Anti-Dumping'' Opinion Withdrawn

In the case of Johnson v. University of Chicago Hospitals, a patient sued under the ``anti-dumping'' provisions of COBRA because the University of Chicago diverted an ambulance to a more distant facility when their pediatric intensive care unit was full. After arriving at a second hospital, which did not have a pediatric ICU, the infant child was transferred to Cook County Hospital and died. The District Court dismissed the COBRA claim because the patient was never admitted to the UCH emergency room. On Oct. 7, 1992, the Seventh Circuit Court reversed on the grounds that a person can seek services via telemetry. After the hospital requested a rehearing en banc, the Seventh Circuit Court withdrew its initial opinion (BNA's Medicare Report 12/11/92).

Seven hospitals have been terminated from the Medicare program for violations of the ``Anti-Dumping Act.'' The law has been called ``terrifying'' because its ``fast-track'' enforcement proceedings can terminate a hospital in 23 days. The law applies to all patients (BNA 4/10/92).

New Members

AAPS welcomes Drs. Rush E. Akin of Panama City, FL; Gary Brauner of Fort Lee, NJ; Alice Chenault of Huntsville, AL; Robert M. Chouteau of Dallas, TX; Helen E. Daniells of Princeton, NJ; Peter Dayton of Stuart, FL; Neal P. Dunn of Panama City, FL; Francis J. Durgin of Fayetteville, NY; Martin Edelstein of Great Neck, NY; James F. Flowers of Port Angeles, WA; Michael Gainey of Reno, NV; Jules Geltzeiler of Long Branch, NJ; Eric Gewolb of Bayonne, NJ; Linda G. Gochfeld of Princeton, NJ; Arnold Grebler of Long Branch, NJ; L.G. Hardwicke of Abilene, TX; Stanley E. Harris of Seattle, WA; Peter M. Horan of New Bedford, MA; V. Patrick Hughes of Spokane, WA; Roger I. Humphrey of Vancouver, WA; Roger Jenkins of Lima, OH; David Johnson of Reno, NV; Gopichand Kapu of Anson, TX; Holly Fritch Kirby of Lee's Summit, MO; Doug Kopp of Plainview, TX; Paul D. Lidstrom of Littleton, NH; Joseph Matire of Timonium, MD; Robert K May of Columbus, OH; Michael Metry of Van Wert, OH; Roger Miller of Pueblo, CO; Ann Morey of Baytown, TX; F.D. Proano of Vancouver, WA; Randy D. Proffitt of Mobile, AL; Ingrid J. Rachesky of Panama City, FL; Scott Ramey of Panama City, FL; Sudhaker C. Reddy of Panama City, FL; Barbara Rockett of Brookline, MA; Terry Santerfeit of Palm Beach Gardens, FL; S. Lennart Schenck of Everett, WA; George E. Siegfried of Anchorage, AK; Frank Sisler of Portland, OR; Ron Smith of Reno, NV; Cedric M. Smith of Grand Island, NY; Merle P. Stringer of Panama City, FL; R. Stephen Taylor of Panama City, FL; Joseph Thro of Venice, FL; and Richard N.W. Wohns of Tacoma, WA.


Letter to the Editor: Physicians' Income

There is a flaw in Rashi Fein's comparison of physician's income data to bolster an argument that US doctors earn too much income and that a single-payer system is needed (``Health Care Reform,'' Scientific American, Nov. 1992). Physicians in the multipayer systems of the US and Germany (earning 5.12 and 4.28 times the average income, respectively) have high per-provider productivity and are notorious ``workaholics,'' with 100-hour work weeks not uncommon. It is incorrect to compare these doctors to salaried physicians in the single-payer systems of the UK, Sweden, and Finland (with incomes 2.39, 1.80, and 1.82 times the average income, respectively), who work 35-hour weeks, have six to eight weeks of paid vacation, liberal sick leave, and generous time off. This suggests that imposition of a single- payer system on US or German physicians would be associated with a marked decline in their outstanding productivity.
Edward R. Sodaro, Jr., MD, Amityville, NY


Letter from a Patient

Dr. Lois Copeland received this letter after her first experience in making a private contract with a new patient:

Dear Dr. Copeland:

I would like to thank you for your special concern on the evening of December 18.

I am deeply grateful that you came to my mother's home that evening to tend to her medical problem. You were so caring and concerned, and due to your diagnosis and prescription she responded well to the medication and within a day was on the road to recovery.

You are truly dedicated to your profession, and I cannot express my appreciation sufficiently for your kindness to come out that evening for someone who is not your regular patient.


News Briefs from Canada

Doctors Opt Out. It started in Namaimo, B.C., with seven physicians (see AAPS News Oct 1992). Now 25% of the physicians in Prince George plan to opt out, bringing the total to 45 in the province. That's less than 1% of the doctors in British Columbia, but the government is worried. They threaten to pass legislation if doctors start to charge higher fees. The patients pay opted-out physicians directly and are reimbursed by the government (Vancouver Sun 12/4/92).

Why Not Let Patients Pay? A Vancouver physician asked why patients at three Winnipeg hospitals were not allowed to purchase CT scans privately. The beneficiaries, he said, would be not only those who could pay, but others currently waiting up to 10 weeks for a scan on ``authorized'' equipment. Is it the socialist dogma, ``we will make you all equal and start by making you all poor''? (Globe and Mail 12/4/92).


AAPS Calendar

Feb. 3-5. Meetings on ``Managed Competition.'' Call our Washington DC office for information: (202)296-6010.

Feb. 3. Crockett Hospital, Lawrenceburg, TN.

Feb. 4. Cumberland Medical Center, Crossville, TN.

Feb. 5. Embassy Suites, Abilene, TX.

Feb. 6. Board of Directors meeting and dinner program, Dallas- Ft. Worth Airport Marriott.

Mar. 20. Freedom in Medicine Foundation, Dayton, OH. For information, contact Dr. Camardese, (419)668-8282. Speakers include Kent Masterson Brown, Lois Copeland, MD, Robert Moffit, PhD, and Edward Annis, MD.

Oct. 5-9. 50th annual meeting, San Antonio, TX.

Legislative Alert

Hillary's Health Care Plan?

The New Team. It started with a leak on January 20, just prior to President Clinton's inauguration. But official Washington is still reeling from the news: Hillary Rodham Clinton, the First Lady, is in charge of the Clinton Administra- tion's overhaul of America's $835 billion health-care system.

On January 25th, the President appointed and formally introduced his wife as the Administration's leader on this key domestic issue, saying, according to the New York Times, that ``she's better at organizing and leading people fom a complex beginning to a certain end than anybody I've ever worked with in my life.'' Because under law, the First Lady, or any relative for that matter, cannot be appointed by the President to a paid federal position, she will function as a sort of ``unpaid'' adviser. The Wall Street Journal called this role as ``unprecedented.''

The First Lady will be overseeing the work of a special interagency task force on health. The task force includes Treasury Secretary Lloyd Bentsen, former Texas Senator and Chairman of the powerful Senate Finance Committee; Secretary of Commerce Ron Brown; Secretary of Defense Les Aspin; Secretary for Veterans Affairs Jesse Brown; Secretary of Labor Robert Reich; and new HHS Secretary Donna Shalala. Other members of the new special White House team include Ira Magaziner, a Clinton economic adviser and senior White House aide who favors ``managed competition''; Leon Panetta, former Chairman of the House Budget Committee and new Director of the Office of Management and Budget (OMB); Judith Feder Ph.D., head of Clinton's health-care transition team; and Carol Rasco, another senior White House domestic policy adviser who worked for Clinton in Arkansas.

Except for Secretary Bentsen and Dr. Feder, none of the members of this special Presidential task force have extensive experience in the field of health-care policy.

Hillary Clinton's surprising involvement in the controversial issue seems to have been sparked by Clinton's apparent dissatisfaction with the work of his transition team. According to a January 21st Wall Street Journal account, Clinton was angry when Feder told him that his proposed plan would not save money. Press reports also indicated that the cost of the still undisclosed plan could be in the range of $70 to $90 billion a year, complicating the new President's well-publicized promise to combat the federal deficit.

More Taxes? Virtually all Capitol Hill observors think the deficit is sharply narrowing Clinton's options. Clinton backed away from the ``play-or-pay'' option of employer mandates largely because of the unattractiveness of new payroll taxes, particularly on small businesses during the recession.

The minute details of the transition team's ``options paper'' for financing ``universal access'' have been leaked to the National Journal and also reported by Spencer Rich and Dana Priest in the January 23rd Washington Post. The Post report is filled with unpleasant math.

In one option to achieve ``universal coverage'' by 1997, the cost would be an additional $270 billion over a five-year period if the government assumed the total responsibility to ensure coverage for the uninsured. Only $120 billion of this amount could be offset by the imposition of stringent price controls on doctors and hospitals, meaning that federal spending would have to increase by $150 billion. (In his campaign press kits, Clinton asserted that his controls on American medical spending would save $700 billion by the turn of the century.)

Naturally, increased taxes were considered. Taxing a portion of health-care benefits could yield $110 billion over five years. Imposing the Medicare tax on the entire salary of employees, not just the first $135,000, would yield $30 billion over five years. A 3% tax on hospital revenues would raise $70 billion over five years.

If the new Clinton team, under the leadership of Hillary, goes back to the drawing board and prepares a new set of options that require businesses to bear the burden of expanding access, then the policy wonks will have to figure out how much the effort will cost in jobs, productivity and growth. Not a pleasant prospect. We will wait for the figures to dribble out.

What Is the Plan? All that is definitively known is that the Clinton proposal will take shape around the concept of ``managed competition,'' and that his closest advisers are leaning toward some sort of global budget for both private and public health-care spending and a price-control system.

Hillary's Challenge. If there is confusion in the transition team about what to do on health care, Hillary Clinton, who is believed to be a genuine ``process'' person, a good bureaucratic infighter, may be just what the President needs to get his reform plan back on track. Bureaucrats do not drag their feet if their orders are coming from the President's wife, and the First Lady has the reputation of being smart and willful in her own right. Can Hillary meet the challenge? A failure to move quickly and effectively in this area carries potentially high political costs. In the fall of 1992, Clinton said that he would have a health-care reform package up on Capitol Hill during the first 100 days of his Administration. That goal, while still not impossible, is less likely. Two months of assiduous work by Democratic top guns in health policy-Stuart Altman and Judith Feder-didn't satisfy the new President. Those who lack such extensive background (Hillary and all the members of her task force except Bentsen and Feder) had better be quick studies.

The political fallout from the decision to involve Hillary has not yet settled. The future role of the First Lady was a divisive issue in the campaign, when Hillary said that if the voters chose Bill Clinton they would ``get me free.'' A bewildered Senator John Chafee (R-RI) asked rhetorically whether Mrs. Clinton might kindly brief members of the Senate on the complex issue of health-care reform. Will it be appropriate for the congressional committees with jurisdiction on health policy to ask her to testify as a representative of the Administration?

Regulators Are Favored

A top contender for Administrator of the Health Care Financing Administration (HCFA) is rumored to be Bruce Vladeck of New York, President of the United Hospital Fund. He will not be an enemy of tougher regulation.

During the campaign, George Bush was the target of Clinton attacks for overregulating American business. No one in the Bush Administration was more clearly identified with regulatory bias than David Kessler, Administrator of the Food and Drug Administration. Ironically, the Clinton team is now asking Kessler to stay on, at least temporarily. Clinton also wants to keep Bernadine Healey, Administrator of the National Institutes of Health (a stalwart on ``women's health issues'') and Robert Harmon of the Health Resources Administration.

Other contenders for high positions include: David Kindig, MD, Vice Chancellor of the University of Wisconsin, to replace Dr. James Mason as Assistant Secretary of Health; Marina Weiss to support Lloyd Bentsen on the interagency task force, especially on issues related to the tax code (good news for conservative Democrats); and Dr. David Ellwood of the John F. Kennedy School of Government to serve as Assistant Secretary of HHS for Planning and Evaluation.

Senate Confirms Donna Shalala

The Senate confirmed Donna Shalala as the new Secretary of HHS with only two dissenting votes: Jesse Helms (R-NC) and Robert Smith (R-NH). Shalala was once considered controversial because of the hiring and enrollment quotas she set while President of the University of Wisconsin. She also tried to impose ``speech codes'' that were declared unconstitutional in 1991. She sailed through the confirmation hearings without a scratch.

Hitting the Ground Stumbling?

The apparent disarray within the Clinton health-care team is in part a reflection of a broader political problem. Clinton officials had hoped to hit the ground running, with the confidence and purpose that characterized the regimes of Roosevelt and Reagan. Their fear is that they would get bogged down in the political mud, ending up with the often quirky and vaccilating styles of Carter and Bush. Notice that, defensively, Clinton spokesmen invariably compare their performance with Ronald Reagan's glittering first term, pleading with the press that they are doing just as well. But this has not been a Reagan- style transition. As David Gergen, a former White House Press aide, recently remarked, this has been one of the sloppiest transitions in memory.

With few exceptions (e.g.reversing the Reagan-Bush abortion policy), the Clinton Administration is suffering from an inflation of very specific promises that the President does not seem either able or willing to fulfill. Examples abound. After promising homosexuals quick action on lifting the ban on homosexuals in the armed forces, the President is now faced with serious internal opposition from General Colin Powell and the Joint Chiefs of Staff, as well as Senator Sam Nunn, Chairman of the Senate Armed Services Committee. The result: Clinton is stymied, and his only option is to either water down his public pledge to his homosexual supporters, thus undermining his credibility, or go to the wall and burn up his precious political capital in a bruising, and probably losing, fight with opponents in Congress on behalf of homosexuals.

On the economic front, the new President promised a comprehensive economic reform package on Congress' desk the day after his Inauguration. January 21st came and went; no bill. And the President appears to be backing off his pledge to halve the deficit in four years (new circumstances beyond his control); enacting a middle class family tax cut (ditto); cutting White House staff 25% (ditto).

No, this is not a Reagan-style start. Senator Daniel Patrick Moynihan (D-NY) , surveying the backpeddling among Clinton transition team advisers on various issues, claims to hear the ``clatter'' of broken campaign promises.

The Pressure Is On

Exacerbating Clinton's problems are high public expectations on health care. Surveys show that the public wants and expects something to be done about higher health-care costs. This is especially true among Clinton's strongest supporters. For example, Edward Cleary, President of the New York State AFL-CIO is clearly speaking for organized labor in the January 19th edition of the New York Times when he writes: ``Organized labor supports the evolving Clinton plan. Millions of working people voted for Bill Clinton because he promised to deal with the health-care crisis. But the plan must contain the following elements to be acceptable to working people: universal access to care; strong cost containment; preservation of health care benefits of the retired; and no taxation of employee health benefits.'' Translation: more of the same for everybody, plus price controls which will ensure less for everybody; but, whatever you do, don't touch the one feature that distorts the medical markets and drives relentless cost increases in employer- based insurance. (The deductibility of benefits is definitely one of the issues confronting the First Lady and her new task force.)

The ``evolving'' health plan is coming under attack from other directions as well. On the left, Democratic proponents of national health insurance-a la Canada or Medicare-are signaling little enthusiasm. Senator Edward Kennedy (D-MA), Chairman of the Senate Committee on Labor and Human Resources, has joined with organized labor in attacking the idea of changing the tax treatment of health benefits. And some Congressional liberals are showing impatience. For example, the Clinton transition team asked Congressional Democrats to refrain from introducing health- care reform bills until the Administration formally sends its package to Capitol Hill. But Congressman Fortney ``Pete'' Stark (D-CA), Chairman of the House Ways and Means Subcommittee on Health, has introduced his own bill, an expansion of Medicare. Stark, whose subcommittee will have direct jurisdiction over the Administration's proposal, is apparently not much in the honeymoon spirit. At the same time, the New England Journal of Medicine (see the January 14th issue), along with Senator Paul Wellstone (D-MN), the chief Congressional proponent of Canadian style national health insurance, are criticizing the ``managed competition'' approach as bad for access in rural America.

On the right, conservatives in Congress and elsewhere fear that the evolving Clinton health plan, a jerry-rigged attempt to combine a bureacratic apparatus of national boards, global budgets, and price controls with a market-oriented system based on consumer choice and competition, will evolve into a pure government-run health-care system, where doctors and hospitals and insurance companies will be reduced to public utilities.

While Clinton is being pressured in different directions by liberals and conservatives, the ``New Democrats'' and business leaders are appealing to him to hold the line against health-care price controls and global budgets. Moreover, Clinton and company do not appear to be marshalling the intellectual firepower of the original ``managed competition'' advocates on their behalf: the Jackson Hole Group. Some moderate and conservative Democrats fear that if Clinton's now mushy ``managed competition model,'' whatever it finally turns out to be, should fail politically, public frustration will intensify. And temptation will overcome Democrats in the House and Senate who will belly up to the old Canadian bar, and order some high priced, vintage national health insurance rotgut.