Tucson Blvd. Suite 9
Tucson, AZ 85716-3450
Phone: (800) 635-1196
Hotline: (800) 419-4777
of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 52, No. 3 March 1996
TIME TO TAKE A STAND
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
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
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
``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,
(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
``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
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
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
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
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
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
Marbury v. Madison 5 US (2
``Where rights secured by the Constitution are involved,
there can be no rule making or legislation which would abrogate
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
``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.
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
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
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
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.,
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.
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
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 AlertState 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
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%.
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
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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