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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 49, No. 3 March 1993
``HEALTH CARE REFORM'' UNDER
``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,
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
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
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
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
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
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
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,
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
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
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
``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).
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,
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
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).
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 AlertHillary'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
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
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
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
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