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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 50, No. 3 March 1994
On the State-of-the-Union Show, Bill Clinton blasted 12
years of ``trickle-down economics,'' then flourished Ronald
Reagan's veto pen (not yet used this term), with which Clinton
will veto any ``health-care reforms'' that don't go all the way.
Clinton intends to make history by guaranteeing ``health security
that can never be taken away.''
For 60 years, he stated, Presidents have tried to give
Americans this boon, only to be defeated by powerful special
``Not this time,'' he pledged. He is ``drawing a line in
The best summary of the structure of Health Security is the
enclosed diagram, drawn by a Clinton supporter (an aide to
Senator Arlen Specter [R-PA]) who was trying to understand the
flow of authority.
At the bottom of the structure, in a tiny, inconspicuous
box, are individuals and families; just above them are
``providers.'' At the top is the National Health Board.
The flow of revenue is not so easily diagrammed. The source
of revenue to the system includes ``premiums'' paid by employers
and individuals; taxes on tobacco products; subsidies for welfare
beneficiaries; assessments of 1% of payroll for all employees who
are covered through a corporate alliance; and civil monetary
The penalties are substantial. For example:
§ 1345, Collections, (d), ``Assistance: The Secretary of
Labor shall provide regional alliances with such technical and
other assistance as may promote the efficient collection of all
amounts owed such alliances under this Act by employers. Such
assistance may include the assessment of civil monetary
penalties, not to exceed $5,000 or three times the amount
of the liability owed, whichever is greater, in the case
of repeated failure to pay.''
Families may be assessed the same penalty for failure to pay
their 20% share.
Families may claim a discount based on low income. To do
so, they must file a reconciliation of income statement. Any
individual making a misrepresentation of fact ``shall be liable
to the State in which the alliance is located for $2,000 or, if
greater, three times the excess payments [made by the alliance]
based on such misrepresentation.''
Health plans are also subject to civil monetary penalties,
5206 (a) Denial or Delay in Payment or Provision of Benefits:
For ``unreasonable'' denial or delay in the payment or provision
of benefits, the U.S. Secretary of Labor may assess up to $75,000
per violation, plus an additional $1,000,000 if there is a
``pattern'' of violations.
Providers are subject to civil monetary penalties for a
number of offenses, including failure to comply with information
standards. (Criminal fines were discussed in the AAPS Legal
Supplement, January, 1994.)
The incoming revenue stream goes to several levels of the
system: health alliances, State governments, and various agencies
of the federal government. (Health alliances may be a nonprofit
organization or a State agency, but basically are creatures of
the State government.)
Disbursement of funds may be from the federal government to
the States in grants for certain activities, e.g. ``comprehensive
health education.'' But individuals will receive medical care
through their ``health plan.'' All payments to physicians (except
for nominal patient copayments) will come from the plan, which
will in turn receive its funding through the alliance.
The health alliance does not simply transmit premiums for
individuals or families directly to their plan. Rather, it first
takes a percentage (2.5%) to cover its own administrative costs
and then pays 1.5% of the premiums to the federal government for
the support of academic health centers and graduate medical
education. Then, it allocates payments to all the certified
plans based on the number of enrollees and a complicated formula,
developed by the National Health Board, to adjust for risk of
illness and nonpayment or underpayment.
Provider payments will be based either on capitation or a
fee schedule (probably the Medicare RBRVS). Balance billing is
forbidden. The fee schedule is established by negotiation, a
procedure that is considered state action; therefore, collective
negotiations will be considered efforts to influence governmental
action, and providers will not be permitted to threaten or
engage in a boycott.
In the event that plan spending will cause an alliance to
exceed its budget, the plan must reduce expenditures through a
withhold or delay in payments to physicians and other
``providers.'' In the case of failure of one or more health
plans, the State may require each solvent health plan to pay an
assessment of 2% of premiums to the State to establish a guaranty
fund. This fund will make those payments to providers that are
required; providers will have no right to seek payment from plan
enrollees beyond the copayments. Furthermore, the providers must
continue caring for eligible individuals until they are enrolled
in a new plan.
As Charles Jannings III, M.D., of Billings, MT, points out,
the plan imposes 1,233 directives on everyone from accountants
and anthropologists to underwriters and warehouse workers. It
shunts funding to planners, decision-makers, reviewers, and
enforcers. There is no mandate, however, to pay a physician a
remunerative fee for medical services.
While economic controls choke off the slightest trickle of
economic reward from the patient to the physician, torrents of
funds will be diverted into politically controlled channels.
How much medicine can we expect to trickle down?
For More Information....
Call CompuServe and type GO DEMOCRATS to download files that
summarize the Clinton Plan. Although somewhat more readable than
the Plan itself, these files are sanitized. Prison terms are
deleted, as are the amounts of civil monetary penalties.
``No Exit: Are You Really Ready for the Clinton
Health Care Plan?'' by Elizabeth McCaughey, The New
Republic, 2/7/94, pp. 21-25 (see discussion, p. S1).
Socialized medicine, here and abroad: articles by William
Goodman, PhD, John Goodman, PhD, and AAPS members Michael
Schlitt, MD, Carol Brown, MD, Thomas Price, MD, Jack Tidwell, MD,
Robert Sade, MD, and Miguel Faria, MD, in the Journal of the
Medical Association of Georgia, Dec., 1993.
``A Billion Dollars a Day: The Financing Shortfall in
President Clinton's Health Care Proposal'': write to the
Republican Staff of the Joint Economic Committee, 805 Hart Senate
Office Building, Washington, D.C. 20510, or call Nita Morgan at
(202)224-0374. The analysis uses both the Administration's
assumptions and more plausible estimates.
Don Devine, ``Understanding Clinton's Health Plan: The
Alternatives and What Needs to Be Done,'' American Conservative
Union, 38 Ivy St. NW, Washington, DC 20003, (202)546-6555.
Gramm Proposes Private Medicare Alternative
Under a proposal by Sen. Phil Gramm (R-TX), seniors could
choose to stay in Medicare or take the amount the federal
government expects to pay per individual and buy private
insurance. Individuals could keep half of any savings. Through
fiscal 1999, the proposal is estimated to save $61.5 billion
(BNA's Medicare Report, 1/14/94).
TennCare Relies on Phantom Doctors
The first few days of the Tennessee experiment in expanded
managed care resulted in ``an enrollee stampede and hospital
chaos'' (Health Care Reform Week 1/10/94).
No one knows how many physicians are actually participating
in the experiment. Some complain that they are inaccurately
listed because their receptionists were misled into signing
participation letters of intent, which they thought were simply a
delivery receipt for promotional material. Many physicians have
resigned from Blue Cross/Blue Shield because of the ``cram down''
provision that requires physicians to accept TennCare patients if
they wish to continue treating their Blue Cross/Blue Shield
patients of many years. The number of primary care physicians in
Knoxville accepting Blue Cross/Blue Shield has dropped from 72 to
18 (and of the latter, at least one has retired and two are not
accepting new patient, according to the News Sentinel).
Several large employers are reevaluating their insurance plans
(P.D.A.-Link Health Care News Summary, 1/27/94 and 1/28/94).
Insurance Coverage of Abortion
Currently, the vast majority of abortions are paid for by
individuals with personal funds. Some group health insurance
policies pay for abortion on demand, but many others do not. In
some states, such coverage is quite uncommon.
According to B.J. Isaacson-Jones, president of Reproductive
Health Services, Missouri's largest abortion clinic, ``the
insurers that cover abortion are few and far between'' (St.
Louis Post-Dispatch 9/24/93). Similar statements are
reported from abortion clinic administrators in Kansas and
A new HCFA directive threatens states with loss of federal
funds if they do not expand Medicaid coverage to abortions for
rape or incest by March 31. Ten states have a law that forbids
the use of public funds to cover abortions except to save the
life of the mother. Governor Robert Casey (D) said that
Pennsylvania would not comply because to do so would violate a
state law that permits public funding only in cases of rape or
incest that were properly reported to a law enforcement agency.
He argued that the directive amounts to an interpretive ruling,
not a regulation with the force of law, because it was issued
without notice or comment. The issue ``involves a serious
question concerning the limits of federal power over the states
and the process that is utilized to exercise such power,'' Casey
said (BNA's Health Care Policy Report 1/31/94).
Government Collects $122.7 Million in Penalties
Between April 1, 1993, and Sept. 30, 1993, the federal
government recouped close to $122.7 million through civil
monetary penalty and False Claims Act civil settlements related
to Medicare and Medicaid fraud. During that period, 576
sanctions were imposed (BNA's Medicare Report 1/7/94).
A bill introduced by Rep. Charles Schumer (D-NY), HR 3093,
would provide $200 million for FBI enforcement and to set up a
national data base on health insurance fraud (BNA's Medicare
Letter to the Editor
Doctors have a tremendous audience in their offices every
day, eager to know more about how the politicians will affect
their medical care. I decided that I should communicate directly
with my patients myself, instead of relying on others to inform
them....When one of my staff puts a patient in an examining room,
she tells them that the doctor will be there in about five to
twenty minutes and hands them something to read (e.g. the piece
by Phyllis Schlafly or an editorial from the Wall Street
Journal). She tells them that when I see them I would like
to know what they think.
After I have taken care of their medical problems, I ask
them what they thought of the articles and whether they have any
questions. Since this is done in a very courteous and friendly
manner, no one has ever made any objection and almost everyone
thanks me for the information and wants copies to take to their
family, friends, company, etc. I also give a copy of Patient
Power to those who show special interest. I never tell the
patients what to think; I only suggest that they inform others
(especially their elected representatives) of their feelings.
Robert Bullington, MD, Phoenix, AZ
Mar. 19. The Society for Education of Physicians and Patients
will sponsor a seminar in conjunction with the Medical
Action Committee for Education at the Holiday Inn,
Greentree, in Pittsburgh. Call Dr. Robert Urban, (412)929-
5711 for information.
Oct. 12-15, 51st annual meeting, Atlanta, GA.
Physicians Move for Recusal of Special Justices in
After AAPS member Stuart G. Yeoman, MD, and his fellow
physicians won their case against the constitutionality of the
Kentucky provider tax and the Health Care Data commission,
unprecedented events took place. The case was appealed to the
Kentucky Court of Appeals by the State. On the State's Motion
(with which Yeoman, et al. agreed), the case was
transferred to the Supreme Court of Kentucky, a seven-justice
tribunal which is the highest appellate court in the Commonwealth
Immediately after the Order was entered, three justices on
the Supreme Court recused themselves from sitting on the case,
citing conflicts of interest. Then, in an unprecedented move,
the Chief Justice certified the recusals to the Governor,
Brereton C. Jones, and the Governor thereupon appointed three
Special Justices to sit in the place of those who recused
themselves. The Chief Justice, in making the certification, and
the Governor, in appointing the Special Justices, relied upon
Section 110(3) of the Kentucky Constitution, which would allow
the Governor to make the appointments when ``as many as two''
justices recuse themselves.
Of the three Special Justices, one appears to have serious
conflicts; i.e. he is an executive officer of the corporation
that administers the health insurance program for all state
employees, and which has close political ties to the Governor.
More than actual conflicts, what concerns Dr. Yeoman and his
fellow physicians is the fact that the Governor made the
appointments. The act which was declared unconstitutional (House
Bill 1) was drafted by the Governor, and the Governor called a
Second Extraordinary Session of the Legislature to pass it. The
Governor lobbied for its passage and has publicly made the act
the cornerstone of his administration. He even commented in the
newspapers about one of the Plaintiffs after the suit was filed
and reiterated his demand for the provider tax in his State of
the Commonwealth address in mid January, after making the
Dr. Yeoman and his fellow physicians are not taking the
matter lightly. In a nearly 200-page filling, they have moved
the Court for the recusal of the three Special Justices. They
cite the fact that Section 110(3) of the Kentucky Constitution
does not allow the Governor to appoint Special Justices when more
than two regular justices recuse themselves. The words ``as many
as two'' limit gubernatorial involvement to the situation in
which only ``two'' justices recuse themselves, not ``one'' or
``more than two.''
Moreover, Dr. Yeoman and his fellow physicians claim that
for the Governor-a party in interest in the case-to appoint
Special Justices denies them due process of law in violation of
the Federal and Kentucky Constitutions. Because of the
Governor's action, the Supreme Court has lost its independence,
and an appearance of unfairness has insinuated itself into the
judicial process. Such a lack of judicial independence (from the
other coordinate branches of government) was addressed by the
framers of the Federal and State Constitutions. It was even
addressed in the Declaration of Independence, states Yeoman's
motion, when that document complained of King George III making
``judges dependent on his will alone...'' Indeed, Daniel Webster
stated the proposition well when he remarked: ``In a government
like ours, entirely popular, care should be taken in every part
of the system, not only to do right, but to satisfy the community
that right is done.''
The US Supreme Court has addressed the issue, although not
on facts as egregious as those in the Yeoman case. ``Justice,''
the Court has stated, ``must satisfy the appearance of justice.''
Dr. Yeoman and his colleagues contend that the ``appearance of
justice'' is not only unsatisfied, but subverted. They ask the
Court to remove the three Special Justices in order to satisfy
their rights to the process of law under the Fifth and Fourteenth
Amendments to the US Constitution.
The issue directly affects the very integrity of the
judicial branch of government.
Court Rules that Itemization of Provider Tax Is
Protected Free Speech
The US District Court for the District of Minnesota enjoined
the State from enforcing a prohibition against itemizing a 2%
provider tax on patient bills (Bloom v. O'Brien, DC
Minn, No. CIV-4-93-1202, 12/30/93).
The Minnesota tax will be used to subsidize health insurance
for the uninsured. The law states that the tax can be passed on
to consumers but may not be itemized on bills. The State argued
that itemization could be misleading because it could appear to
be a sales tax, whereas it is actually a revenue tax. Criminal
penalties were prescribed.
The court ruled that the prohibition would have had a
chilling effect on the exercise of First Amendment rights.
Further, it stated that the public had an interest in obtaining
full and accurate information regarding the economic impact of a
tax, outweighing any potential harm to the state from itemization
(e.g. frustrating its exercise of sovereignty).
Physicians did not challenge the constitutionality of the
tax itself (BNA's Health Care Policy Report, 1/24/94).
PRO Not Liable for Damages When Failing to
Follow the Rules
The US Court of Appeals for the Seventh Circuit affirmed the
dismissal of a lawsuit brought by a physician seeking damages
from his Peer Review Organization for allegedly failing to follow
proper statutory and regulatory procedures when it found he
violated certain requirements (Assar v. Crescent Counties
Foundation for Medical Care, CA 7, No. 92-3678, 12/29/93).
The PRO did not provide the physician with written notice as
required by 42 CFR 1004.50 and did not submit a report to the OIG
as required by 42 CFR 1004.70. The plaintiff asserted a Fifth
Amendment due process claim. The court ruled that there is no
statutory provision authorizing damages against PROs (BNA's
Medicare Report 1/7/94).
``The best kept secret in America is that Medicare works.''--Uwe Reinhardt, PhD
According to John R. Lott, Jr., of the Wharton School,
University of Pennsylvania, at least 30% of medical costs are due
to regulations in Medicare and Medicaid programs (BNA's
Health Care Policy Report, 1/24/94).
AAPS welcomes Muncie Otolaryngolic Associates of Muncie, IN
and Drs. Luis M. Albuerne of Houston, TX; Brent Allan of
Scottsdale, AZ; Eric Anderson of Great Falls, MT; Stephen W.
Asher of Boise, ID; Ralph Austin, Jr. of Macon, GA; Burton Baker
of Concord, CA; Steve Barchet of Issaquah, WA; Gunther R. Bauer
of Long Beach, CA; Patricia Bell of Atlanta , GA; Brain and Mary
Ann Bertha of Great Falls, MT; Louise H. Bethea of Houston, TX;
Charles Betz of Rome, GA; John R. Blake of Princeton, NJ; J.W.
Bloemendaal of Great Falls, MT; Donald G. Bluh of Ithaca, NY;
Christi Bourne of Phoenix, AZ; Stephen Boyce of Knoxville, TN;
Loyd Brannon of Birmingham, AL; J. David Brayton of Pomona, CA;
Darrell Brett of Portland, OR; S. Kent Brown of Scottsdale, AZ;
J. A. Buder of Sandusky, OH; Randy Burks of Margate, FL; Richard
D. Burns of Paradise Valley, AZ; Michael J. Burrell of Muncie,
IN; John V. Butler of Shelton, WA; Ronald Cardoso of Livingston,
NJ; Trent Carroll of Springfield, OH; Robert R. Casey of Oak
Ridge, TN; Ted Cash of Chickamauga, GA; Timothy Castro of
Spring, TX; Cheng Chao Tarng of Bridgewater, NJ; L. Terry
Chappell of Bluffton, OH; Lawrence A. Churchville, III of
Townsend, MA; Neil C. Clements of Tucson, AZ; Rich and Virginia
Clemmer of Wilmington, DE; Peter Crist of Belle Mead, NJ; Ben
Crocker of South Pasadena, CA; William V. Cuthrell of Boise, ID;
Stuart H. Danovitch of Washington, D.C.; Chad Davis of
Indianapolis, IN; David N. Drucker of Seattle , WA; Ardean J.
Ediger of Boise, ID; Weldon T. Egan of Indianapolis, IN; Robert
G. England of Carlinville, IL; Bradley D. Evans of Tucson, AZ;
Leo Figgs of Yakima, WA; Jerry M. Fioramonti of Phoenix, AZ;
Keith Fisher of Fort Worth, TX; James Fogarty of Barron, WI;
James P. Fogarty of Barron, WI; Gregg M. Gaylord of Indianapolis,
IN; Pierre C. Gilles of Scottsdale, AZ; Steven M. Gitt of
Phoenix, AZ; Steven A. Glyman of Las Vegas, NV; Theodore
Goldberg of Westwood, NJ; Richard Good of Munster, IN; David A.
Goodman of Elkins Park, PA; George Goodman of Sewickley, PA;
Harry Gordon of Scottsdale, AZ; James P. Gould of Des Moines, IA;
R. Randall Grace of Phoenix, AZ; Thomas R. Graves, Jr. of
Bradenton, FL; Michael R. Green of E-Town, KY; Thomas G. Griffith
of Tacoma, WA; Albert T. Gros of Austin, TX; Shannon Grubb of
Georgetown, OH; Howard E. Hagglund of Norman, OK; James L. Hamby
of Boone, NC; John Harris of Lexington, KY; T. L. Henley of Troy,
OH; Cleve Henriques of Pasco, WA; Avi J. Hettena of San
Francisco, CA; Howard C. Hines of Salisbury, MD; Scott Holtz of
Scottsdale, AZ; Stella Horton of Orange Park, FL; Oris B. Houglum
of Tacoma, WA; Don Hubbard of Renton, WA; R. J. Hudson of Waco,
TX; Lillianm Hunt of Fairfax, VA; Craig A. Hutchens of Reno, NV;
Jose V. Iglesias of Houston, TX; Gregory Inda of Scottsdale, AZ;
Bill Irwin of Hot Springs, AR; George Isajiw of Upper Darby, PA;
Floyd G. Johnson of Boise, ID; Gary L. Johnson of Fairbanks, AK;
J.E.B. Johnson of Lake Jackson, TX; Mark L. Johnson of Nashville,
TN; Terry M. Jones of Bryan, TX; Robert R. Kester of Lewiston,
ME; C. J. Kienzle of Scottsdale, AZ; John A. Kinard,Jr. of
Watterboro, SC; James F. Knight of West Columbia, SC; Keith R.
Koepke of Brooklyn, OH; Kathleen T. Kowal of Manville, NJ; Joh K.
Lattimer of Kealakekua, HI; Alice R. Laule of Harrison, AR;
Andrew R. Levette, Jr. of Rydal, PA; Dale P. Lewis of Spokane,
WA; Richard Linchitz of Carle Place, NY; Donald H. Lindeman of
Colville, WA; Franklin Long of Sacramento, CA; Steven J. Love of
Boise, ID; Robert Lowery of Charleston, SC; P. Robert Maddox of
Monroe, LA; Michael D. Magee of Irving, TX; Sam Marathe of St.
Augustine, FL; Anthony Mars of Marinette, WI; Christa Johnson
Mars of Fort Worth, TX; William M. Marsh of Scottsdale, AZ;
William Michael Marsh of Scottsdale, AZ; David M. Martin of East
Point, GA; Mark R. Mathews of Scottsdale , AZ; Robert G. McCall
of Sun City West, AZ; Sean McCue of Macon, GA; J. Kenneth
McDonald of Charleston, SC; William L. McGavran III of Midland,
TX; James R. Meador, Jr. of Phoenix, AZ; William L. Mok of
Amarillo, TX; Geoffrey B. Monsour of Greensburg, PA; John Murphy
of Spokane, WA; Robert Narvaez of San Antonio, TX; Gary W. Nickel
of Tacoma, WA; Anton Nielsen of Houston, TX; Gordon L. Nitz of
Reno, NV; Kenneth R. Noel; Dana Nottingham of Columbus, OH;
Joseph Painter of Houston, TX; Asit P. Patel of Laflin, PA; John
H. Payne of Las Vegas, NV; Michael N. Payne of Carmel, IN;
Marshall Pedersen of Crystal Lake, IL; Jack W. Pennington of
Houston, TX; Francis S. Perrone of New York, NY; Steven D. Podnos
of Rockledge, FL; John A. Pumphrey of Fort Worth, TX; Charles W.
Rance of Tacoma, WA; Mike Redmond of Milton, FL; Robert
Reichstein of New York, NY; Sandra Reilley of Tacoma, WA; Stuart
Reynolds of Harve, MT; John P. Ries of Coos Bay, OR; Jonathan
Ritson of Tacoma, WA; Robert C. Rosser of Birmingham, AL; Vincent
J. Russo of Scottsdale, AZ; George Rusyniak of Rome, GA; Akim
Sadaki of Columbus, OH; Steve Salisbury of Logan, UT; Newton A.F.
Sampaio of Glendale, AZ; Joseph Sample of Dallas, TX; Joel Saper
of Ann Arbor, MI; Mahmood Sarram of Tacoma, WA; John B. Sawyer of
Sierra Vista, AZ; H.S. Schell of Trenton, NJ; George Schimmel of
Brandon, MS; Bernie Schupbach of Yorkville, IL; Roger Schwartz of
San Antonio, TX; C. Jane Scott of Sheridan, WY; Stephen R. Sears
of Spokane, WA; Robert Settipane of Providence, RI; Gerald J.
Shealy of Charleston, SC; Jerome Siegel of New York, NY; Paul E.
Smith of Salem, OR; Wally Sneddon of Longmont, CO; David J. Sobba
of Tacoma, WA; Gerard A. Sova of Stamford, CT; Guenter Spanknabel
of Worcester, MA; Gerald E. Staab of Kansas City, MO; Jeffrey
Steier of Scottsdale, AZ; Charles R. Steinberg of New York, NY;
Darryl R. Stern of Tempe, AZ; Charles S. Stevens of San Antonio,
TX; Steven Strober of Tucson, AZ; Nancy K. Stukan of Kealakekua,
HI; Paul Teirstein of La Jolla, CA; Jeffrey S. Tennant of Alsip,
IL; Elton Thayer of Paradise Valley, AZ; Greg Thompson of San
Antonio, TX; Steven B. Tollison of Natrona Hts., PA; Thomas C.
Trevorrow of Indiana, PA; William K. Trzcinski of Pasco, WA;
Charles E. Umhey, Jr. of Bellvale, NY; Luther Vance of Perry, GA;
Van E. Wahlgren of North Platte, NE; Larry Walker of Paris, TX;
Mike Wentzell of Billings, MT; Linda J. Werner of Marinette, WI;
Giles F. Whalen of Farmington, CT; E. Sidney White of Paris, TX;
William V. Whitman of Seattle, WA; Brad Williams of Phoenix, AZ;
Paul I. Wills of Fort Smith, AR; and Albert Zilkha of Old
New Associate Members are: David Duperrault of Valrico, FL;
Sandie Frailing of Scottsdale, AZ; John Goode of San Pedro, CA;
Duane A. Graham of Phoenix, AZ; J.D. Hayworth of Scottsdale, AZ;
J.V. Horner of Eagle River, AK; J. Walter Larkin of Phoenix, AZ;
Louise Rogers of Sun City, AZ; Susan J. Ruehle of Brodheadsville,
PA; and H. Staley of Decatur, IL. New Student Members are: J.
Davidson of Los Angeles, CA and Steven B. Porter of Wheatridge,
Legislative AlertSenator Gramm Introduces Medisave
On January 27, Sen. Phil Gramm (R-TX) dropped his long-
awaited Medisave bill (S.1807), with ten Senate cosponsors. The
chief feature is the provision of tax-free medical savings
accounts (MSAs), enabling employers or employees to contribute up
to $3000 to the tax-free account. Part of this money could be
used to purchase a catastrophic health insurance policy.
Other elements of the Gramm Bill include provisions
promoting insurance portability, equal tax treatment for those
who are either uninsured or self-employed, the pooling of small
business to increase their market power in the purchase of
insurance, assistance to low-income workers, medical malpractice
reform, and the removal of certain anti-trust barriers for
doctors and hospitals. Financing is effected through savings
generated in Medicare and Medicaid and by a reduction in tax
deductions for insurance.
The President's State of the Union address, replete with
veto threat, was designed to jump start his health-care reform
plan-for the third time. It's not happening.
If the Clinton health-care bill were to be brought up to the
House or Senate floor today for an up-or-down vote, most Capitol
Hill observers think it would go down to a decisive defeat.
Nevertheless, Congressman John Dingell (D-MI), Chairman of the
House Energy and Commerce Committee, and perhaps the Clinton
Administration's strongest ally on Capitol Hill, wants his
Committee to be completely finished with the Clinton bill by
March 4th, putting the mammoth legislation on a fast track for
House floor action.
Nevertheless, Capitol Hill observers also notice a distinct
change in the mood on the Hill over the past several weeks.
Members of Congress are no longer fawning over Hillary's enormous
knowledge of the health-care problem. The Whitewater Savings and
Loan mess is not helping her.
The White House is playing defense and losing ground. One
reason is that this is not a political campaign, where clever
positioning and broad political objectives drive the details of
an issue. Rather, the intricate details are driving the
politics. Witness how the White House sweats blood over pending
econometric studies: how much people are going to pay, how many
winners and losers, which specific tradeoffs in one area
compromise the quantity or quality of the system in another area.
Increasing public knowledge of the details of the Clinton Plan
does not generate higher levels of popular support-the opposite
is true. This means that the longer the debate continues, the
less likely that the President will be able to get his way.
The Clinton camp is showing signs of strain. At the National
Press Club in Washington recently, Rep. Richard Gephardt, the
House Majority Leader, unleashed an emotional attack against the
critics of the Clinton Health Plan. Aides on Capitol Hill say
that the performance was not characteristic of Gephardt. This
episode follows the recent outbursts of White House aide Ira
Magaziner, who has been calling critics of the Clinton health
plan ``liars.'' Singled out for Magaziner's wrath are the Health
Insurance Association of America (HIAA), led ably by former
Congressman Bill Gradison of Ohio, and policy analyst Elizabeth
McCaughey of the Manhattan Institute of New York, a conservative
think tank. HIAA has been airing the very effective ``Harry and
Louise'' ads, highlighting the bureaucracy of the Clinton health
plan, while McCaughey published a devastating piece, ``No Exit:
What The Clinton Plan Will Do For You,'' in the prestigious
New Republic (2/7/94), once the flagship of
sophisticated liberal political opinion. The White House press
office took the unusual step of publishing a multi-page point-by-
point rebuttal. McCaughey, in turn, is said to be preparing a
counter-rebuttal. The New Republic (1/24/94) also
published a piece by Jacob Weisberg, an unflattering portrait of
Ira Magaziner as another brainy Sixties Kid-typical of Clinton
appointees-turned superconfident central planner, in love with
bureaucratic complexities and incapable of grasping the
It's been a tough two weeks for the White House.
Senator Daniel Patrick Moynihan is now backpedalling from
his January television performance, in which he stated that there
is no health crisis, but there is a welfare crisis. A meeting
with the White House appears to have changed his mind; there are
now two crises. However, the damage was already done.
Moynihan's remarks made William Kristol's position that there is
no crisis both respectable and bipartisan. The result is that
``incrementalism'' is now in the air, even though Sen. Jay
Rockefeller (D-WV) says that the idea is dead due to Clinton's
The Business Round Table, the corporate giants' D.C.
perennial pow-wow, voted down support for Clinton's health plan
as too bureaucratic, in spite of intense White House lobbying.
Instead, the big boys voted support for the managed- competition
bill of Congressman Jim Cooper of Tennessee. The Clinton
Administration tried buying big business with billions of dollars
of taxpayer subsidies for their early retirees' health care. But
even that shameless giveaway didn't work. The Business Round
Table's action was followed shortly thereafter by a similar
decision by the National Association of Manufacturers (NAM).
While it was not surprising that the business leaders would back
away from Clinton with the bureaucratic details of his gargantuan
health reform bill sinking into the national consciousness, the
danger it poses to the White House is the political domino
effect. If Big Business groups go, who's next?
Big labor is expected to stick with Clinton. They really
want a single-payer system and see the Clinton Plan as the way to
Hillary's 500 bureaucrats, liberal congressional staffers,
and consultants are no match for the 500 professional economists,
including several Nobel Prize winners, who recently blasted the
Clinton Plan's reliance on spending caps and price controls. The
Clintons' response: First, the economists were only talking
about ``part'' of the plan, not the whole thing. Second,
``premium caps are not price controls.'' Third, the price
constraints in the Clinton Plan are not much different from the
Medicare and Medicaid controls (RBRVS and DRGs) imposed during
the Dark Decade of the 1980s. Got that?
New York Governor Mario Cuomo called the Clinton Plan a
``House of Cards'' and told state employees that the Plan would
be a bad deal for them. For public employees, the bottom line is
the bottom line, and these remarks are likely to trigger intense
reviews by other state employee groups. Secretary of Labor
Robert Reich refused to comment when reporters asked him to
defend the (``temporary'') exemption for workers now enrolled in
the Federal Employee Health Benefit Program (FEHBP). Now, White
House spokesmen say that the Clinton Plan is really just like the
FEHBP (it isn't), but they are committed to abolishing FEHBP (but
not just yet), which is the newly found model for their plan (the
latest after Hawaii). Is that clear?
During the Christmas recess, House Democrats got an earful
of complaints from their bosses, the taxpayers, about what they
have been reading and hearing about the Clinton health plan. At
Piney Point Maryland, where House Democrats recently gathered at
a retreat, moderate and conservative Democrats told the
leadership that they can't sell the Clinton Plan back home. The
reason: it's too bureaucratic.
Bad News on the Numbers
The Wyatt Company, a respected financial consulting firm,
says that the cost of the benefits package under Clinton's Plan
is 18% higher than that which was projected by the
Administration. The true cost would be $5,155 for family coverage
and $2,285 for single coverage. The White House estimate is
$4,360 for family coverage and $1,932 for single coverage.
(However, the glossy flyers prepared by the Democratic National
Committee and distributed at ``public forums'' estimate that the
monthly premium for families would be $73, which comes
to $876 per year!)
The reason for the difference, Wyatt explained, is that
there would be higher utilization of medical services than
projected by the Administration, affecting the cost of the
package. It is worth noting that the Wyatt findings are
consistent with those of Lewin VHI, which projected a 17%
difference between the Clinton estimate and their own. Both
estimates are well below another assessment by the Health
Insurance Association of America (HIAA), which estimated a 30%
difference. But HIAA's numbers are also closer to another
independent study conducted by Hewitt Associates.
More potential trouble looms ahead in the area of financing
and accounting. How the Congressional Budget Office (CBO) scores
the mandated premiums will be a key issue. If CBO scores the
premiums as a tax, then the funding will be on-budget and the
Administration will be dealing with the public perception of a
huge tax increase. If CBO says the mandated premiums are not a
tax, then the Administration will be spared the budget accounting
problem. But neither the CBO nor the Administration will be off
the hook. House Budget Committee members Wayne Allard (R-CO) and
Tim Penny (D-MN) along with 124 House members have introduced a
resolution requiring that any health plan with federal mandates
be considered as on-budget and that any mandated premiums be
considered taxes. In any case, Allard and Penny say they will
force a floor vote if the CBO declares the mandates off-budget.
But What About Bob?
Senate Minority Leader Robert Dole of Kansas needs a
steering wheel. And perhaps a road map.
Dole's televised use of the complicated chart devised by the
staff of Sen. Arlen Specter of Pennsylvania (see reverse side) in
his response to the President's State of the Union address was
masterful. Specter's office has been flooded with calls from
taxpayers around the country, asking for his big chart. But
where all of this is taking the Senate and the rest of the
country is yet unclear to Dole's colleagues. And, worse, it might
still be unclear to Dole himself. If he has a master plan to deal
with the health-care debate, it is not evident.
Consider Dole's track record thus far. First, for much of
1993, he encouraged in every possible manner the efforts of
Senator John Chafee of Rhode Island, who is committed to both
``managed competition'' and working with Hillary to find a
bipartisan ``solution'' to the ``health-care crisis.'' The result
of any such compromise would surely be an even more highly
regulated government-managed system.
Next, after the President's September 22nd address to the
nation outlining his complicated plan, Dole made noises about the
need to work with the White House to resolve the nation's health-
Next, after Senators Nickles of Oklahoma, Hatch of Utah,
Mack of Florida, and other House and Senate conservatives
outlined a ``comprehensive consumer choice'' bill (S. 1743)-
sharply different from Chafee's-restructuring the federal tax
code to provide Americans with tax credits and medical savings
accounts, Dole signed on.
Next, Bill Kristol, Dan Quayle's former Chief of Staff,
said there is no health-care crisis and no need for such far
reaching reforms-including fundamental reforms like medical
savings accounts and tax credits, which ``remain open for the
future.'' He is pressing for a series of incremental reforms.
This sentiment spread quickly among House and Senate Republicans,
and spilled over onto the Democratic side of the aisle.
Congressman Michael Bilirakis (R-FL) and Congressman Roy Rowland
(D-GA) drafted a consensus bill including a whole series of
reforms upon which all players in the debate are alleged to be in
agreement: insurance reforms to promote portability, malpractice
liability reform, preventive care promotion, administrative
simplification and anti-trust reform, and increased tax
deductions for health insurance for the self-employed. These
various provisions are taken from several competing bills,
including the Cooper-Grandy and Breaux managed-competition bills
and Action Now (HR 3080), the Michel bill, sometimes refereed to
as the House Republican Leadership reform bill. Not to be
outdone, Senator Phil Gramm of Texas introduced the Consensus
Interim Health Reform Act (S. 1796), which provides for insurance
portability, purchasing cooperatives for small business,
paperwork reduction, and anti-trust reforms. Dole says he likes
incremental reforms, too, and that Senate Republican strategy is
building around that approach. But Chafee says that Dole is still
very much in the Chafee camp, which might also be true, depending
upon whether you think Chafee's bill is ``incremental'' too,
whatever the term may mean at the moment.
While Dole would like to bring Chafee and Nickles and Gramm
together and unite Senate Republicans, it's not happening. The
ideological gap may be too big.
With the White House stalled and Congressional Republicans
confused, Congressman Cooper has emerged as the man of the hour
with his ``Clinton Lite.'' He may include MSAs in his bill and is
courting Ross Perot's United We Stand members, who could play a
pivotal role in this very fluid debate. Cooper may have gotten a
free ride with all of the critical focus on the Clinton Plan,
although the basic infrastructure of his ``managed competition''
proposal will pave the way for an even heavier hand of government