1601 N. Tucson Blvd. Suite 9
Tucson, AZ 85716-3450
Phone: (800) 635-1196
Hotline: (800) 419-4777
Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 52, No. 3 March 1996


As of July, all Maryland physicians will face a stark choice under House Bill 1359, passed in 1993: violate the Oath of Hippocrates, become an outlaw in the eyes of the State, or stop practicing medicine.

Like all attacks on individual rights, this one has a pretext: the ``need'' of the state for information-computerized, personally identifiable information about every encounter of any person with any type of health professional. Every session with a marriage counselor, every headache, every HIV test, every sore throat is made a concern of the State.

This bill achieves a key objective of the designers of the Clinton Plan: the information system needed to give the State total knowledge and control of all medical practice.

The centralized, computerized Maryland Medical Care Data Base will demand 34 pieces of information on every visit, including demographic information, principal diagnosis, procedures performed, date and location for each procedure, charges, the practitioner's universal identification number, and information on prescription drugs.

The Commissioner, in consultation with the Insurance Commissioner, payors, and others ``may adopt by regulation standards for the electronic submission of data and submission and transfer of uniform claims forms.''

The data bank cannot be expected to improve patient care. ``This information will be scientifically useless,'' stated AAPS member James Kelly, D.O., a psychiatrist in Easton, MD. Dr. Kelly stated that at a recent meeting of the Health Care Access and Cost Commission (HCACC), insurance representatives estimated the error rate for this type of data entry to be about 20%. However, citizens will not have access to their own files in order to check them for accuracy.

The data files are very valuable to HMOs. In June, 1995, the Baltimore Sun reported that 16 Maryland HMO salesmen and eight Maryland government employees were charged with bribery and the selling of thousands of confidential patient records to competing HMOs. ``These breaches of confidentiality that the State says will not occur are already occurring.''

``Maryland will become the first state in history where confidentiality is criminalized and privacy is no longer an option. Currently, many people choose to file no insurance claim, to protect their confidentiality. The HCACC stated that there will be no exceptions to this data collection,'' writes Dr. Kelly, in an informational article for his patients. ``Not even if doctors treat patients without charge.''

Today, insured patients must relinquish information needed for insurers to process their claims. Under H.B. 1359, all patients would have to relinquish comprehensive information to the State and secondarily perhaps to many other persons unknown to them.

Senator Paula Hollinger and others have proposed a small loophole for patients who subsidize insurers by paying all costs out of pocket even if they have purchased coverage. This exemption, acceptable to HCACC, could blunt opposition without significantly impeding the purpose of the law.

Is the Maryland act constitutional? The U.S. Constitution recognizes no explicit right to privacy, although one might be construed as emanating from the Ninth and Tenth Amendments. In any case, the Act would appear to be inconsistent with the 1973 decision in Roe v. Wade, which stated that abortion was part of a woman's right to privacy and the state had the right to intervene only if it had a ``compelling interest.'' If the state has no compelling interest in preserving the life of a viable but unborn infant, is its interest in learning the price of treating an ingrown toenail still more compelling?

Other Constitutional problems include a violation of Article I, Section 10: States are prohibited from the exercise of certain powers, including the passage of a ``Law impairing the obligations of Contract.'' H.B. 1359 forbids doctors to abide by an agreement to preserve confidentiality.

Additionally, the First Amendment invalidates laws ``prohibiting the free exercise'' of religion. Keeping one's word, (as in abiding by the Oath sworn by physicians for seven centuries) is certainly a commandment in most if not all religions or ethical codes.

In an effort to mitigate the damages of H.B. 1359, more than 27 Delegates are cosponsoring House Bill 557, introduced by James Kelly (whose name is coincidentally the same as Dr. Kelly's), which prohibits transmission of data unless the patient gives informed consent. (At this time in the legislature, it is said to be impractical to introduce a bill actually repealing H.B. 1359 and abolishing the HCACC.) Sen. Thomas Bromwell has introduced a companion bill in the Senate.

Dr. Kelly believes that most fully informed patients would choose to maintain their privacy. But despite a patient's permission (or request) to do otherwise, a physician is morally obligated to act according to the best of his knowledge and judgment and to do no harm. Should the State not have to try to compel the patient to submit the data on his own behalf, instead of conscripting the physician to act as the agent of compulsion?

According to the AAPS Patients' Bill of Rights, patients have the ``right to be treated confidentially, with access to their records limited to those involved in their care or designated by the patient.'' Once records are in a government data base, the State will be the one to authorize access.

AAPS will distribute a copy of the Patients' Bill of Rights to all office-based Maryland physicians-as well as to all AAPS members. Physicians should refuse to comply with immoral laws. The State will have no power to enforce such laws -unless physicians bow down.

The Uses of Information

A survey of 120 hospital, HMO, and insurance executives showed that their highest priority was information technology, beating medical technology 77% to 1%. The industry spent $8.5 billion on automated information systems in 1994.

Information technology has great potential for spreading news about medical advances (as to consumers wondering what their HMO has denied them). But the heaviest demand is from managed care organizations: ``This system is ideal for managed care systems that limit access to specialists,'' stated Ian Rawson, administrative manager of the project receiving the largest ($21 million) Department of Commerce grant, headquartered at Allegheny General Hospital (AM News 11/27/95).

But there is also the ``disaster dimension.'' Data retrieval is key for economic credentialing. Now that payments for medical care are considered ``losses,'' which rob corporate owners of profit, managed-care plans need to know the ``cost ratios'' of various doctors. A desirable cost ratio might mean efficiency. Or it might mean case selection and care denial.

With information, managers can have much more influence over clinical decisions. For example, doctors in San Jose were told that costs due to using coronary stents would be deducted from their income.

``It behooves...doctors and patients alike, to learn how the health insurance industry works. Otherwise, we risk being red- lined out of whatever health care coverage we believe we may still have'' (Robert Weinmann, M.D., S.F. Examiner, 1/12/96).

(Information on data collection in MN is available on a temporary web site; call AAPS for the address, 800-635-1196.)

Doctors Veto Unsafe NHS Computer

British physicians have been advised to boycott a proposed National Health Service computer network which will link all hospitals and GPs' offices. Dr. Stuart Horner, chairman of the British Medical Association's ethics committee, said that the network as planned would make it easy for one million NHS employees to obtain details on patients who had had abortions or had ``AIDS, syphilis, or other intimate conditions.'' Computers are being offered free to GPs in return for allowing them to be networked.

``The threat in the NHS is not an external hacker-the threat comes from within,'' Dr. Horner said. ``This incompetent Government believes that in the largest workforce in Europe there is not one single dishonest employee-not one single employee who would sell information for more than they could make in a career lifetime.''

The Government wants the network in place within 12 months, carrying the name, age, address of patients, and the diagnosis and treatment of their condition.

``This is not science fiction. We are talking about what is going to happen unless we have the courage to stop it, Horner said. ``You must not allow your computers to be networked or place personal health information on computers you do not control'' (Guardian Newspapers 7/7/95).

The Genesis of a PHO

After reading the Jan. 1995 AAPS News, a colleague and I were alarmed. He vaguely recalled that the Robert Wood Johnson Foundation had a presence in our hospital. We decided to investigate. In an out-of-the-way spot, he located an office bearing the name, Robert Wood Johnson Foundation. It was locked. When he pushed a little white button, a voice came over an intercom. After he identified himself as a staff physician, an electronic lock buzzed and he was allowed to enter. No other office in the hospital has such precautions.

He was informed that the office was a national program office of the RWJF and was handed a brochure, from which he learned of a program called ``Building Health Systems for People with Chronic Illnesses,'' which was headed by the hospital's chief of medicine. This person had no clinical practice and no recent academic publications to his credit.

Some months later, alarm rang out in the ranks of specialty physicians. A group of primary-care physicians were about to finalize a Physician-Hospital Organization (PHO) to position themselves to compete for capitated MCO contracts.

It was discovered that a secret committee had been meeting for months. The president of the medical staff had repeatedly been denied information, but all meetings were attended by a new hospital "director of strategic planning and development." Its ``bible'' was The Grand Alliance published by the Governance Committee of the Advisory Board Company of Washington, D.C. [A manifesto called To the Greater Good by the same committee was recently distributed at a meeting of physicians in a town about 2000 mi. away.] A reinvestigation of the RWJF office at the hospital showed that it was empty. A visit to the Foundation Library revealed that RWJF had sent millions of dollars to our town between 1992 and 1993; a grant to our hospital had subsequently been cancelled.

We discovered that the two largest ``competing'' hospitals in our community are in business with a company called Continuing Care Network or CCN, which fronts for RWJF. This tiny unnoticed corporation is now the leading player in the all-out drive toward managed care.

Recently, an ``educational committee'' of our hospital voted to ``empower'' itself to implement a PO that others would be given an ``opportunity'' to join. There has been no need for the medical staff to vote on anything.

Interestingly, the newspaper tells me they do not know how to contact a young reporter who wrote a diatribe on managed care, and no further work of his has appeared....

There are only two ways to stop the total elimination of independent medical practice in our community: for the physicians to refuse to go along or for an overwhelming public outcry against it. I have no hope for the former and I pray for the latter. Author's Name Withheld

Managed Care Holding in Idaho-at 4%

Week after week, for years, AAPS Director Bud Goltry, M.D., has been putting pamphlets and clippings in doctors' mailboxes, warning of corporate socialism and other threats to the medical profession. ``I just want you to be educated,'' he said. ``I want you to sign those contracts with your eyes open.'' The next invasion of managed care might still succeed.

Dr. Goltry says physicians have a choice: ``Sit on the runway and get strafed before you have even started your engines, or put on your helmet, and your goggles, and your white scarf, and swear to go down in flames with your finger frozen on the trigger.''

MSA and Managed Care Information. SEPP, the Pittsburgh-based Society for the Education of Patients and Physicians, has set up a toll-free line at 800-546-7070.

Law of the Land

``All laws which are repugnant to the Constitution are null and void.''
Marbury v. Madison 5 US (2 Cranch)137,174,176,(1803)

``Where rights secured by the Constitution are involved, there can be no rule making or legislation which would abrogate them.''
Miranda v. Arizona, 386 US 436 p. 491

``An unconstitutional act is not law; it confers no rights; it imposes no duties; affords no protection; it creates no office; it is legal contemplation, as inoperative as though it had never been passed.''
Norton vs Shelby County 118 US 425 p. 442

``No one is bound to obey an unconstitutional law and no courts are bound to enforce it.''
16 Am Jur 2n, Sec 177 late 2n, Sec 256

Consent for Lobotomy?

Consent form requested from parents of minor students in the Central Dauphin School District, Harrisburg, PA:

``By executing this document, the undersigned...intends to grant full authority to the physicians and/or other professional employees of the Hospital [Community General Osteopathic Hospital, which operates and staffs medical clinics in the schools of the district] to perform all examinations, treatments, therapies, medical care and diagnostic procedures which may, from time to time, be deemed advisable or necessary by the student's examining or attending physicians and/or other professional employees of the Hospital. The undersigne...agrees that...this consent and authorization shall extend to all medical care and treatment rendered to the student during the course of the school year, whenever and as often as the student is presented at or visits the clinic for examination or treatment and whether on an emergency basis or as part of routine examination or continuing care.''

``Notification'' (silence taken to mean consent) form from the ACCESS Procedures Manual for Pennsylvania:

``[W]e are able to provide your child with the special education related services that he or she needs under your child's Individual Education Plan (IEP). We...can access federal dollars through the Medical Assistance Program (MA) to help us meet the increasing cost of providing therapeutic services to our students'' (also see AAPS News, Jan. 1996).

The parents could be giving permission for applying a Band- aid, or psychoanalysis, or prefrontal lobotomy, or vasectomy, or abortion, or who-knows-what. Unlike on the standard surgical consent form, there is no mention of potential adverse effects.

Lawsuits Against Managed Care

The Suburban Maryland Psychiatric Society and the Washington Psychiatric Society are endorsing a class-action lawsuit against the Prudential Health Insurance Company on behalf of patients denied mental-health benefits even though their contracts entitle them to those benefits.

In New York, a subscriber has filed suit to try to stop her health plan from adopting a capitation arrangement (Maltz v. Aetna Health Plans CV 95 5226 US District Ct Eastern District NY). She said this arrangement is forcing her doctor to leave the plan and will limit the medical services available to her children, who suffer from Crohn's disease. The physician, Dr. Marvin Sussman, stated that the $5 to $6 monthly fee did not even cover his overhead.

Plaintiff's attorney Whitney North Seymour, Jr., stated that this complaint was the first attempt to block capitation arrangements on grounds that they violate the Employee Retirement Income Security Act of 1974 (ERISA).

Seymour, whose clients include the League of Physicians and Surgeons, also filed suit in 1995 claiming that Aetna violated antitrust laws by pressuring some Long Island physicians to join its plan (NY Times News Service).

The complaint will soon be available on the AAPS web site. Address: http://www.misnet.com/aaps/

Allow Private Contracting-or Forbid Care

HCFA has recently decided to deny payment for ``medically unnecessary'' blood tests-such as the ones that ride along on automated (less expensive) chemistry profiles, or ones done as part of a ``check-up.''

HCFA has also determined, after allowing payments for it for three years, that ``lung reduction'' surgery for emphysema has become ``experimental.'' Patients who have just completed six weeks of arduous preparation are out of luck.

We are aware of no legal barriers to self payment for diagnostic and therapeutic procedures, once officially declared ``unnecessary'' or ``experimental.'' There are only financial barriers, for which medical savings accounts plus catastrophic insurance would be a remedy. Savings should be seen as a form of insurance against ``redefinition'' (abrogation) of promises (erroneously perceived as contracts) by third parties.

These actions by HCFA highlight the urgent need for a private safety net-the clarification of the right to privately contract for medical services (even if both ``covered'' and ``necessary''). The Kyl bill (S. 1289) is still alive but not being pursued as a high priority.

Psychologist Ruined by Accepting CHAMPUS

James Bond Johnson, Ph.D., a clinical psychologist, has been ordered to pay more than $2.6 million in fines for allegedly defrauding CHAMPUS. Already, $52,000 has been garnished from his military retirement pay, more than he ever received from the program. An internal audit of his billings showed that CHAMPUS actually owed him $5,000.

The sole testimony against Dr. Johnson was by a federal investigator, who stated under oath that Dr. Johnson had never been an authorized provider under the CHAMPUS program. In fact, Dr. Johnson had been properly authorized since 1967 and had been providing clinical psychology services to Navy families at the invitation of his commanding officer since 1981. Nevertheless, the court somehow found that Dr. Johnson ``knew'' he was not authorized to bill CHAMPUS.

Despite the perjured testimony, the judgment was upheld by the US Court of Appeals for the 9th Circuit; one of the judges had served as US attorney against Johnson in an earlier proceeding (which the government lost) but refused to recuse himself. Attorney William E. Casselman has appealed to Congress for extraordinary relief, there being no other avenues open to Dr. Johnson.

Members' Page

A Rejected Lesson from the Past. From time to time, I have sent my thoughts on managed care to American Medical News. This contribution of less than 100 words doesn't seem to fit:

When they came for MEDICAID patients and forced them into Managed Care, I didn't stand up and speak out because I wasn't a Medicaid patient.

Then they came for MEDICARE patients and forced them into Managed Care, and I didn't stand up and speak out because I wasn't a Medicare patient.

Then they came for COMPANY EMPLOYEES and forced them into Managed Care, and I didn't stand up and speak out because I wasn't a company employee.

By the time they came for ME, there wasn't anyone left to stand up and speak out.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


Repeal McCarran-Ferguson. On December 8, I spoke before about 200 professional collision repairers from 28 states [and]... presented the concept of forming a national coalition....It would benefit both of our industries tremendously if the McCarran-Ferguson Act of 1946 was repealed. One of the greatest advantages that insurers have is their antitrust exemption that this unjust legislation has allowed. In my research, I have found that a number of groups [including AAPS] have independendently attempted to repeal the Act over the years....With a unified effort, we can succeed.
Michael Melfi, President, Automotive Service Assoc. of IL


Breaking Point. From a letter to Provider Relations, Prudential Insurance Company of America: The late economist Adam Smith stated that a good business deal in a free market was one in which both sides were satisfied. What PruNet is proposing in its latest fee schedule is quite the opposite. It is nothing but the big guy kicking the little one because he thinks he can. I can think of no reason why I or any other doctor should subsidize your company....To be quite frank, I can't live at 33% of my fees. Can any of you live at 33% of your present salary?....If your object was to push the envelope until you reached the breaking point, you just found it. I shall advise all my colleagues, and everyone I encounter, to avoid all sealings with all branches of Prudential Insurance.
Frank R. Di Fiore, M.D., Costa Mesa, CA


Terror Campaign Exposed. With my correspondence about Methodist Healthcare System and their participation in the ``Terrorize the Seniors'' [about Medicare reform] campaign, I may have won to some extent. I harped on the errors they made and suggested that the honorable thing to do was to send out a letter of apology to the Seniors. They did make another mailing....not exactly a letter of apology, but it does give a modified, non- terroristic explanation which rather ignores effects on seniors but still claims that it would be nice if hospitals got more money from taxpayers. I also learned that one of the local talk radio shows got hold of this and stirred things up about Methodist Healthcare lying to the Seniors.

Apparently, the terror program was organized by Columbia/HCA, which owns part of this system, and has extensively promoted the terror campaign at its many hospitals.
Charles W. Johnson, M.D., San Antonio, TX


Can a Person Relinquish Unalienable Rights? At the annual AAPS meeting, Sen. Phil Gramm indicated that he had no problem with managed care. To paraphrase, he said he had no problem with people voluntarily giving up choices in order to obtain more affordable health care. My question is this: other than who (which doctor), what (pharmaceuticals, procedures), where (which hospital), when (how significant a delay), how (laparascopically, open), and why (because the patient wants/needs it or because they say they'll allow it), what relinquished choices was the Senator referring to?
G. Keith Smith, M.D., Oklahoma City, OK


Managed Care Is...not free enterprise. It is Corporatism that would make Mussolini's advisor Fausto Pitigliani proud. It is the aggregation of billions of dollars into the hands of a relatively small number of companies. This money, which once went directly to pay for medical care of patients, is now parsimoniously doled out for minimal rationed care, while the bulk of the money remains in corporate treasuries....This is why WellPoint Health Network, Inc. (a Blue Cross of California subsidiary) and Health Systems International can afford to offer to set aside three billion dollars in cash into ``Foundations'' in order to satisfy nonprofit conversion considerations and go ``for profit.'' The foundations (which would be larger than the Rockefeller and Mellon Foundations!) will do ``good works'' in the health care field-all contracted back through their creators, of course....
Stephen R. Katz, M.D., Fairfield, CT


AAPS Calendar

April 13. Freedom in Medicine meeting, Holiday Inn, Trevose

(near Philadelphia): MSAs and Empowering Patients. Call (215)938-8999 for reservations. Business meeting of new Pennsylvania AAPS chapter to follow.

June 1. Board of Directors, Airport Marriott, St. Louis.

Oct 10-12. 53rd annual meeting, La Jolla, CA.

Legislative Alert

State of the Union

Bill Clinton, in his January 23rd address to the Congress and the nation, made it official: The Era of Big Government is ``over.'' Sure could have fooled us: This is the same fellow, echoing a keening chorus of wonks, who just last year bemoaned the defeat of his 1342-page intrusion into every nook and cranny of American medicine, and whose budget submission a short 13 months ago would have assured annual federal deficits of $200 billion per year-indefinitely.

For sheer bravado, Clinton is sui generis. To this very day, the President and his White House team repeat, like the mantra of a long dead faith, that he's always been a balanced budgeteer and his health plan was not a government takeover of the health care system. Only mean-spirited and narrow-minded people like House Majority Leader Richard Armey of Texas deliberately misrepresented the big batch of free-market initiatives tucked into that big bill by the ever-beleaguered Hillary, now fending off rude questions about the sudden appearance of her missing Whitewater billing records in the exclusive family quarters.

The Changed National Debate

Nonetheless, Clinton's declaration of the end of big government is an admission of historical importance. It means that, at least on one level, the conservatives have won the national political debate. Business Week reported November 20th: ``Still, while Gingrich will never get all he wants, he has already brought the days of 1960s-style Big Government to an end....The Clinton Administration's willingness to accept the direction-if not the scope-of this assault makes fundamental change that much more likely. No longer do Washington insiders ask if these changes will come. They only question how many and how soon.'' In speaking of the entitlements debate, Will Marshall of the Progressive Policy Institute, a moderate Democratic think tank, told Business Week: ``The politics of entitlement is unsustainable-ethically, morally and financially.''

So, whatever degree of sincerity one wants to attach to it, Clinton's declaration is, in a sense, an admission of a simple fact. There's no money for new big government programs. The bigger question is whether we can contain the cost and size of the big government programs that we already have. And in that sense, the era of big government may not be over at all, but may be just beginning. Even the Congressional reforms, so loudly denounced by liberals in Congress and the White House, fail to cut outlays for the elderly at all, and as Business Week (Nov. 20) points out, between 1995 and 2002 the share of federal spending on the elderly will jump from 34 to 41%.

Political Themes

The President's ``State of the Union'' themes represent one half of the stump speech Americans will be hearing for the rest of the year: Don't cut Medicare and give tax cuts to the rich; don't hurt our children; and protect Medicare, Medicaid, education, and the environment. (Protecting Medicaid, for example, means keeping its entitlement status, rather turning it into a bloc grant for the beleaguered states.) Dick Morris, the President's chief political guru, a hired gun who has worked for a lot of folks, including Senator Jesse Helms of North Carolina, has apparently found the formula for political and public relations success. Appear to move to the ``center''; copy conservative themes and rhetoric; try to hold the liberals in line but keep them at a safe distance; vigorously paint the conservative Congressional leadership, ever bogged down in the details of governing, as ``extremists''; and appeal to something out in TV land called the great American ``middle.'' These are the perpetually frustrated folks who find genuine philosophical differences distasteful; don't want entitlements touched (particularly Medicare); think we are spending too much on government waste, fraud, abuse and foreign aid; and want a balanced budget yesterday. But these folks are not likely to be confused forever.

The Court of Public Opinion

Politically, Clinton's budget strategy has worked. Gingrich and Company have been trounced. According to a January 17th USA Today/CNN poll, when asked who acted ``more responsibly'' in negotiations over the federal budget, Clinton scored 45% and Congressional Republicans 38%, with the other 17% undecided or not responding or throwing a pox on both houses. House Speaker Gingrich himself has seen his approval ratings drop like a rock.

Internally, the Congressional team has been at odds. Conservatives on Capitol Hill have been critical of both Dole and Gingrich for their handling of the budget issue. Gingrich, in turn, did not attend fundraisers for freshman Congressmen who voted against re-opening the federal government. Dole took a public slap at the House of Representatives. House conservatives have contained themselves, and agreed internally not to return fire on Dole. There is festering frustration in the House at the failure of the Senate to act expeditiously; many of the key items, most of them overwhelmingly popular with the public, passed months ago in the House of Representatives and are lying dormant in the Senate. In the meantime, the meetings between Leon Panetta, Clinton's chief of staff, and House Budget Committee John Kasich have been utterly unproductive. The decision to go with a Continuing Resolution strategy to keep the government open has prevailed, for the time being.

Public priorities are not the same as the Congress's. A January, 1996, study conducted by Gallup for CNN and USA Today showed that the top priorities are the poor quality of public education and the rate of violent crime. Health care ranks fifth, the deficit seventh, and Medicare policy tenth.

As noted last month, Medicare is at the bottom of the list of favored candidates for cuts. Nonetheless, there has been a growing recognition that the Medicare system somehow needs to be fixed. In June of 1995, the Kaiser Family Foundation and the Harvard University School of Public Health conducted a survey about the question of the causes and the cures for Medicare's maladies. One option presented to the public was the complete privatization of the Medicare system (``turning the whole Medicare program over to private insurance companies''). Overall, 35% respondents favored this option, with the strongest support among young people, aged 18 to 29 (39%) and the weakest among those over 65 (26%). (Why should the elderly spend more of their own money, when they can simply spend more of everybody else's money? C. Eugene Stuerle, senior fellow at the Urban Institute, estimates that a couple turning 65 in 1995 will collect $460,000 in Social Security and Medicare benefits before their death.) However, nobody in Congress, certainly neither Gingrich nor Dole, has proposed anything close to total privatization of Medicare.

Debate Over Medicare's Future

On October 19th, heading up to the big November showdown and the short-term agreement between Congress and the White House to balance the budget in seven years using the Congressional Budget Office assumptions, the President accused the Congressional leadership of destroying Medicare: ``I will not let you destroy Medicare...'' This rhetorical extremism is, by now, standard stuff. But the numbers show that the Congressional leadership plan, wildly inadequate on several fronts, is indeed preserving Medicare; in point of fact, it has put the brakes on market forces that would seriously and quickly transform the system into something far more efficient.

The arguments of the Administration and its Capitol Hill allies are remarkable. Vice President Gore, who is enrolled himself in a private insurance plan offered through the popular Federal Employees Health Benefits Program (FEHBP), complains on national television that the Congressional leadership wants to consign the Medicare population to an ``inferior'' private health care system. The tacit premise is that private health insurance options are ``inferior'' for the elderly, but not for Vice Presidents. House Minority Leader Richard Gephardt, who incorporated Medical Savings Accounts into his own health care reform bill in 1994, now complains that MSAs are bad health policy, draining healthier folks out of traditional Medicare where, presumably, they should stay put. The tacit premise is that HCFA knows best and can manage the money of old folks better than they themselves can.

In Gephardt's case the value of MSAs is transparently political: MSAs were a positive contribution in 1994 when they were being used to advance ``liberal'' health-care reform, but they are a mischievous invention in 1995 when they are being used to advance ``conservative'' Medicare reform.

CBO, of course, says that MSAs are not potentially as attractive as the free marketeers think and that only 3% of the elderly would opt for them if given the chance. But, of course, one of the virtues of the market is that it responds quickly and efficiently-avoiding the vices of HCFA-style central planning and opening up options that are today undreamt of in the little philosophies of small-minded men, options that HCFA officials would either study to death, with reams of reports and months of computer runs, or simply foreclose with inadequate and obnoxious explanations. If one attempted five years ago to draft a model of the computer market, positing rational assumptions and running the numbers, doubtless one could have created an elegant model. Of course, it would have been utterly meaningless.

Interestingly enough, the same political dynamics are at play in the most recent discussions on managed care. Yesterday, managed care was the silver bullet of cost containment. Today, managed care is taking a veritable beating in the popular media. ABC News, Time magazine, and the New York Times are carrying stories highly critical of managed care arrangements. After making a presentation critical of US Healthcare at a conference, Dr. David Himmelstein, Harvard's champion of Canadian-style health care system, was ``released,'' to put it nicely, from his US Health Care contract. The pro- Canadian caucus is hammering home a simple message: In a Canadian system , the taxpayers finance health care, but the patient can pick his physician.

In 1993, the Clinton Administration and its allies on Capitol Hill devised a system that would literally throw most Americans into managed-care networks, just as corporations are trying to do today. HHS Secretary Donna Shalala says that senior citizens are moving into managed care at about the rate of 15 to 20% per year, and she fears that the plan outlined by the Congressional Leadership will overwhelm the system. She frets about the ability of managed-care companies, now making an absolute fortune, to absorb so many new elderly and disabled enrollees. Poor corporate giants. Perhaps they're just not big enough to handle the job-at least without friendly help from the nozzle adjusters at HCFA. Then, like the now fashionable doubts about MSAs, there is the bugaboo of adverse selection. The Associated Press of January 18th, noting the evolution of the arguments on Capitol Hill, reports that ``Democrats have argued that the incentives for managed care would drain Medicare of the healthiest and wealthiest seniors, leaving a group that is poorer and sicker and more costly for the government to insure.'' You could stop the problem, of course, by simply eliminating any meaningful personal choice at all-which, of course, is the real agenda of that class of politicians who misuse the label ``liberal.'' Under the Congressional leadership plan, as Robert Samuelson and others point out, nobody is forced to join a managed- care plan. And indeed, as Samuelson notes, the CBO projects no big movement to managed care, even under the Republican plan, saying that only about 24% of the elderly (compared with 10% now) would be likely to choose such options.

The Growth of Medical Alternatives

Managed care, and conventional insurance in general, is facing yet another challenge: the growth of alternative medicine. According to a recent study on ``The Medical Monopoly,'' conducted by Sue Blevins of the Cato Institute, a libertarian think tank, there is a growing market for non-traditional medical alternatives, and this consumer demand is being backed up with consumer cash on the barrel (Policy Analysis #246, $4 from Cato, 1000 Massachusetts Ave NW, Washington, DC 20001, (202)842-0200).

Researchers at Cato previously noted that approximately 56% of all graduate medical education in the United States is funded by the taxpayers, and conventional graduate medical education often ignores the use of therapies that are neither widely taught in medical schools or available in American hospitals.

Citing a recent Harvard Medical School study reported in the New England Journal of Medicine, Cato notes that in 1990, 22 million Americans sought providers of ``unconventional care,'' and made more personal visits to these practitioners than to primary care physicians-425 million visits compared to 388 million visits. Says Blevins: ``There is a great willingness to pay out of pocket for providers who offer unconventional health services. The Harvard researchers found that total projected expenditures on providers of unconventional care amounted to $11.7 billion in 1990. Nearly 70%-$8.2 billion-of that amount was paid by the consumer, rather than insurers or the government. In contrast, only 17% of the bill for all physician services was paid out of pocket in 1990.''

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