Volume 53, No. 3 March 1997


When Americans are asked who should be in charge of medical care, their answer is: patients.

Focus groups conducted by the American Hospital Association showed that if a ``system'' is perceived to be operating at all, it seems designed to block access, reduce quality, and limit spending at the expense of patients. (The study is available at http://www.amhpi.com/eyeonpatients).

Such a system is not unprecedented. In the December, 1996, issue of the St. Louis Lawyer, Ken Vuylsteke referred to an article in the Dec 11, 1937, issue of the Journal of the American Medical Association, concerning developments in sickness insurance in Berlin:

``Under the old regulations, the insurance patient was permitted (with certain limits) a free choice of physician....At the party congress in Nuremberg, the national fuhrer of physicians, Dr. Wagner, delineated contemplated restrictive measures on the patient's free choice of physician....''

A new form of payment was also introduced: ``the insurance doctor will be paid a certain sum for the care of the insured....Consequently,... it is to his advantage that his patients remain in health, as illness now means only additional work for him without extra compensation.''

The Berlin correspondent recognized the danger: ``a doctor motivated by the desire to see naught but health may relax his careful observation of insurance patients or, quite unconsciously, become loath to recognize true disease.''

Under American plans adopting similar methods, complaints about such effects abound. In a recent survey of physicians in Tucson, Arizona, 72% stated that managed care had a negative impact on the quality of care, and 82% that it had a negative effect on patient-physician relationships (Arizona Daily Star 1/10/97).

Obviously, ``managed-care plans involve an inherent conflict of interest,'' as ``most doctors are now double agents'' (Angell, M and Kassirer, JP, N Engl J Med 1996;335:883-5).

The proposed remedy is ``quality assurance'' or ``continuous quality improvement.'' This may be compared (ibid.) to the man with the shovel who follows the circus elephants.

The ``laudable'' goal, to be inculcated in residents, is ``epidemiologic accountability,'' although ``in a society that highly values concern for the individual person, US physicians have difficulty reconciling their obligation to the individual patient with the concept of preserving medical resources for the entire population'' (Mayo Clin Proc 1996; 71:201- 204).

The problems have been well described: ``Most of what passes for quality improvement can justifiably be viewed as thinly veiled cost containment or marketing.'' Further, there is a ``paucity of evidence that...previous quality-assurance programs actually did anything to improve outcomes for patients (Chassin, N Engl J Med 1996;335:1061-1062). For one thing, ``deficiencies in the care of sick patients...could easily be overlooked or swamped by minor (and inexpensive) successes among the healthy (Angell and Kassirer, op cit.)

But if we object to having managed-care companies take charge, what is the alternative?

``Although I'm hardly a communist, I think sometimes that managed care and the for-profit motive in health care is inevitably turning me into one,'' stated editor Lawrence Faltz, M.D. (NySSIM News Fall/Winter 1996)

. ``Conservatives,'' opposed to outright socialization, nonetheless often promote increased government intervention as the remedy-even if a 30-fold increase in the number of laws since our great-grandparents' generation has not necessarily made us better off. For example, the most egregious features of some managed-care contracts, such as the ``gag rule,'' might be outlawed. The enforcement costs, however, were estimated by the Congressional Budget Office to be more than $90 million in 6 years, just to investigate 0.25 to 0.5% of the more than 345,562,800 contracts between physicians and HMOs.

If we reject the corporate executives, and a fhrer with an M.D. degree, and the HCFA bureaucracy as candidates to take charge of medical care, we're left with what Americans want: power to the patients, as with Medical Savings Accounts.

This idea has aroused strong opposition from surprising sources: Gail Shearer, health policy director for Consumers Union, is concerned that money that used to be spent on health care might be diverted to other things, if medical savings accounts were without oversight. She is also troubled with potential loopholes in the 750,000 cap, say by overcounting the previously uninsured. (Persons who have been without insurance for at least six months are not counted in the limit.) Consumers Union will attempt to thwart efforts to expand MSAs to Medicare and Medicaid in the context of balanced budget initiatives (BNA's HCPR 12/9/96).

Some physician organizations see MSAs as a ``potential waste of ever-more-precious Medicare moneys.'' What if patients remain healthy (isn't that the idea of HMOs?) and use the money for something else (The Doctor's Office, Nov 1996)?

Patients might even choose not to have a mammogram at age 40. Flying in the face of advice from the AMA and the American Cancer Society, a panel convened by the National Institutes of Health said that women under the age of 50 should decide the value of a mammogram for themselves. Clearly, a slippery slope. People might next ask why we need the FDA and OSHA (John Goodman, Wall St J 2/3/97).

Who knows what would happen if patients were in charge? In other areas of the economy, giving power to consumers (- deregulation) has led to great leaps in innovation, improved quality, and better access due to lower costs (say 25 to 50% lower). Isn't that what we want in medicine?

On Credentialing

At the AMA interim meeting, the Oklahoma delegation introduced a resolution stating that ``Whereas the movement in America is toward states' rights and individuals taking the responsibility for their own destinies,'' the AMA should work with and promote credentialing services by local organizations that met or exceeded AMA requirements. A stronger resolution was presented by the Oklahoma Centralized Verification Organization: ``Resolved that the AMA through AMAP, or any other program, will not compete with'' services already in existence or under consideration in Oklahoma and further that ``the AMA cease promotion and marketing of their Physician Masterfile in Oklahoma.''

The Pima County Medical Society requested the Arizona Medical Association to support this resolution. However, Arizona delegates were assured that the AMA would ``work with'' local services and did not press the issue. The Resolutions failed. Instead, the House approved continuation of the program. The Reference Committee heard testimony stressing the need ``to proceed without delay because of the pressing need of physicians for a consolidated effort in credentialing and physician office site review'' (lest commercial vendors and HMOs develop their own programs).

Stated goals include the evaluation of ``personal qualifica- tions'' (agreement to adhere to the AMA code of ethics, peer review, and CME); ``clinical performance (comparison of physicians' activities with national averages and benchmarks); and ``patient care results'' (examination of clinical outcomes per unit cost and satisfaction surveys).

There is a widespread separation of authority from the uncredentialed to the credentialed....That is how a class society is created. The ancient mandarins ruled China for a thousand years on the basis of passing certain literary examinations.

Otto Scott's Compass, Oct 1, 1996

The Black Ball

One physician tells us that his credentials are under a shadow that caused him to lose at least one good position. A complaint was filed with the National Practitioner Data Bank when he refused to commit Medicare fraud by pre-dating prescriptions. No problems were found with his practice during a ten-month investigation by the state licensing board, but there is no way to remove a black mark unless the complainant withdraws it. He received the following letter:

``With regards to our telephone conversation...I am prepared to rescind my complaint with the National Practitioners Data Bank. As we discussed, my fee for such services will be $1 million. As a physician, I'm sure you have these funds available to you. I would be pleased to accept 40% down provided you signed a promissory note and agreed to pay the rest off at an interest rate of prime plus 5%. I have no interest in negotiation, and this offer will expire 1 week from today.''

Australian Doctors Say NO

An honor roll of physicians' names were published in the March 20, 1996, issue of The Australian, under the following headline: ``2000 Doctors Say NO to Managed Health Care.'' The subtitle stated: ``These doctors don't want you to become the next set of victims of US style `Managed Health Care.' That's why they won't sign contracts with health funds or private hospitals.'' The ad was sponsored by the Australian Doctors' Fund.

Action Plan for the Month

Ask your Medicare carrier to give written confirmation of the correct fees for the codes that you use, and to answer any questions you have about the codes. Send a copy to your Congressmen, with a cover letter asking them to obtain an official reply from HCFA. Remind them of the draconian penalties for errors (that they voted for), and emphasize the importance of a prompt and specific answer.

Editor's note: the sample letter on Kassebaum-Kennedy, subject of the Feb. Action Plan, is enclosed. If you did not receive it by FAX, you are probably not on our FAX network: Send us your FAX number if you wish to be added.

AAPS Survey on Pro Bono Treatment

The majority of the 244 members responding to our December, 1996, survey said they would rather treat patients pro bono than file small claims with Medicaid or Medicare, if they could deduct the allowed fees from their income taxes.

For Medicaid, 76% would prefer to treat pro bono if the claim was for less than $120; 58% if the claim ranged from $120 to $499; and 48% even if the claim was for more than $500. For Medicare, the corresponding figures were 56%, 38%, and 28%. The average cost of filing a Medicaid claim was estimated to be $15.20. An average of $42,107 in Medicaid billings was submitted annually. The average cost of filing a Medicare claim was estimated to be $25.19, and an average of $146,352 in billings was submitted annually.

HMO Error Rates

According to a Nov 7 report released by the Inspector General of the Department of HHS, the federal government overpaid about $15 million to risk-based HMOs because they inaccurately reported the Medicaid-eligibility status of Medicare beneficiaries. The audit found that of a random sample of 100 HMO-submitted status reports indicating dually eligible beneficiaries, 90 payments were made for persons ineligible for Medicaid. HMOs gained significant financial benefits from the incorrect submissions. The IG recommended that HCFA identify and recover overpayments and implement systems changes to prevent future errors. No jail terms or $10,000 fines were imposed (BNA's Medicare Report 11/22/96).

AAPS Calendar

Feb. 22. An MSA Summit in Pittsburgh, 8 a.m.-noon, Sheraton at Station Square: Society for the Education of Physicians and Patients, (412)929-5711.
May 31. AAPS Board of Directors, Chicago, Marriott.
Sept. 17-20, 54th annual meeting, Chicago, IL.
Oct. 8-10, 1998, 55th annual meeting, Raleigh, NC.

More Prosecutions in Michigan

by Andrew Schlafly, Esq.

The prosecutors in Michigan have convicted yet another medical professional, this time through use of the mail fraud statute. We have already described in this newsletter the overzealous prosecutions in Michigan of Dr. Wanda Velez-Ruiz and her husband, Edgardo Perez-DeLeon. When we attempted to obtain some clarification from the Michigan Board of Medicine regarding the rules which Wanda and Edgardo supposedly violated, the Board refused. With only one dissenter (who is now running for Governor), the Board failed to remove the ambiguity from its rules under which physicians are being prosecuted there.

Then came the prosecution of Nicholas Bartz, D.O., an AAPS member who ultimately obtained full legal vindication. In the process, however, he suffered enormous injury to his practice due to the incessant harassment by the government investigators and prosecutors, which included use of ``undercover'' (i.e., phony) patients.

Now this: the Sixth Circuit recently affirmed the conviction of an endodontist, David Dolan, in an unpublished decision dated October 17, 1996. United States v. Dolan, 1996 U.S. App. LEXIS 27354 (6th Cir. Oct. 17, 1996).

On February 18, 1993, FBI agents appeared at Dolan's office and summarily seized about 5,000 patient charts. The government then simply turned these charts over to Blue Cross/Blue Shield of Michigan (BCBSM). The government effectively permitted BCBSM to control and direct the prosecution of Dolan. Out of 5,000 patient charts, BCBSM identified 15 disputed claims; this handful of disputed claims then formed the basis for Dolan's subsequent indictment on 38 counts of mail fraud, pursuant to the general mail fraud statute. 18 U.S.C.  1341.

Use of the mail fraud statute against physicians is the trendy-and frightening-prosecutorial strategy for obtaining convictions. The mail fraud statute was designed to combat fraudulent Ponzi-like schemes which utilized the postal mails. When applied against physicians, prosecutors argue that these defendants are pursuing a scheme of defrauding insurance carriers, and practice medicine only as a means for achieving that fraudulent end.

The real abuse arises from the unfettered authority given to insurance carriers by federal and state prosecutors. In no other industry is a powerful corporation allowed, in essence, to prosecute its creditors and competitors. Here, BCBSM apparently (i) initiated the investigation, (ii) obtained immediate access to files seized from its victim, (iii) employed the ``expert'' witness who testified at trial to convict the defendant, and (iv) invoked statistically absurd sampling techniques to ensure conviction. In every other business the proper response to an incorrect or fraudulent bill is to refuse to pay it; for physicians who dare to stand up to insurance carriers, the response of the carriers is to throw the physician in jail. Nowhere else is a corporation able to imprison someone merely for alleged overcharging.

And yet the Sixth Circuit agreed with the insurance carrier. Based on a BCBSM-controlled prosecution and billing samples never shown to be representative of Dolan's practice, he was sentenced to 24 months of imprisonment and two years of supervised release. The trial court also imposed a $86,715.41 fine and a special assessment of $1,900, and required that restitution be made to the insurers in the amount of $6,263.60. While not as severe as Dr. Rutgard's sentence (which was 11 years in prison and $16 million in damages), the ruling in Michigan was equally flawed and will unfortunately promote more prosecutions by insurance carriers in the future.

Can 3 in 1000 Equal 100%?

In Dolan's case, a hand-picked set of 0.3% of seized patient records was used to convict, just as a similar small sample was used to assert that Dr. Rutgard's practice was ``permeated'' with fraud. In a supplementary briefing filed in the Ninth Circuit Court Dec. 20, 1996, attorney Charles Sevilla argues that while the government can prove the ``permeation'' theory by having an expert pick a statistically significant random sample and proving fraud in all cases (U.S. v. McCutcheon, 992 F.2d 22, 989 (3d Cir. 1993)), in the Rutgard case even the hand- picked patients had some legitimate surgery and billings. Medicare billing expert Rose testified that every office he reviewed was making significant billing errors.

In one case, the prosecution did not challenge the necessity of some of Rutgard's surgeries (the patient stopped driving due to inability to see the yellow line in the road), but opined that the patient was given a free radial keratotomy (RK) at the same time that her cataract surgery was done.

``So what?'' asks Sevilla. ``RK is not Medicare billable, and it is not a crime (yet) to perform free surgery. Also, the government's assumption is unproven since the patient did not remember whether she paid out of pocket for the RK surgery. In any event, not billing for surgery cannot possible constitute billing fraud.''

Sevilla argues that under the theory used in the Rutgard case, prosecutors of a mail fraud case could make a massive ``loss'' determination by including money that many investors made from a large investment scheme if a few mail fraud ``losses'' to different investors could be proved.

Prison Survival

Soviet political prisoners were warned by fellow zeks not to eat the salted herring on transport trains because they would be given nothing to drink and would be very thirsty.

Dr. Rutgard reports that it took 12 hours to transport him from the New Jersey federal prison to the Oklahoma federal prison, in leg shackles with handcuffs chained to his waist. ``We were only given the little orange crackers with peanut butter inside to eat, for breakfast, lunch, and dinner....We had to wait hours before being given any water....Try the experiment of eating a package of those crackers, without drinking anything for four hours.''

   ``I conclude the necessity of declaring and stating [the laws], so as all the people may know them, for I have ever held it unjust to require of men the obedience of any law which they may not (by common intendment) take notice of.''

``[Punishment] must be an affliction, yet not a destruction except in capital or other heinous crimes: but in the prescript penalties, authority shoots at adventure; if the same penalty hits a rich man, it pains him not, it is no affliction to him; but if it lights upon a poor man, it breaks his back.''

John Winthrop, Deputy Governor of Massachusetts Arbitrary Government Described and the Government of the Massachusetts Vindicated from that Aspersion, 1644

Members' Page

Government Accountability. From letters to members of the New York congressional delegation, which included details about the Perez, Krizek, and Rutgard cases:

The point here is not the guilt or innocence in each of the above cases. The point is that there is no ``Equal Protection'' under the laws. As I have demonstrated to you many times, when HCFA or a Medicare carrier makes a so-called ``error,'' it is simply passed off by the government as an ``oops'' [even if errors are so frequent that they might seem to constitute a ``pattern'' of abuse]. When a physician makes an ``error'' in coding or has a legitimate difference of opinion about medical necessity, the government considers that ``fraud'' and sets out to destroy that physician. Bureaucracies like HCFA have become so powerful that they can apparently get away with doing that sort of thing. They can only be stopped through the intervention and oversight of our legislators....

Given the clear trend toward the criminalization of American medicine, we are asking our Congressmen to sign the ``Affirmation of Citizens Rights'' or explain why they won't sign. There is nothing unusual or ``extreme'' in this Affirmation; the provisions are embodied in our Constitution and come directly from the Magna Carta.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

A Contract Binds Two Parties. To the State of Ohio Bureau of Worker's Compensation, which now requires physicians to be contracted with a managed-care plan and disallows any modifications in the contract:

Item III-D states that I have a duty to exercise independent judgment and that you are not dictating care. This appears to be in direct contradiction to item III-B, which requires me to use certified MCOs or QHPs for all referrals; to item III-H, which states that I ``must cooperate fully with case management''; and to III-D, which requires me to comply with all of your utilization review and determination of medical necessity procedures. Whenever there is a conflict between III-D and other provisions, I will assume that my responsibility to my patient takes precedence, as acknowledged by III-D, and thus is not in violation of the terms of the contract.

I also wish to clarify item IV-F. I agree to reimburse you for any overpayments. However, if you retroactively disallow and demand reimbursement for services that I provided in good faith with the understanding that they are reimbursable, based on my previous and ongoing experience with you, and I had no reason to expect that you would make such a determination, I will interpret that as an attempt to retroactively modify the terms of our contract and will not feel obligated to comply.
Harold J. Kornylak, D.O., Virginia Beach, VA

An Anonymous Question and Answer. From Texas: ``Do you know of any way in which a physician can earn an honest living?'' From Connecticut, in response to an AAPS membership mailing: ``I am building a huge Amway business, which is replacing my income as a neurosurgeon. Get off the sinking boat!''

The Final Straw. The straw that broke the camel's back is even more sinister than the law of unintended consequences. Studies show that the number of uninsured is increasing annually and carriers marketing major medical insurance have been declining for years. The common thread is too many administrative requirements. Government requirements, no matter how trivial, accumulate. As costs spiral, the predictable result is a cry for government control of the whole system.
E.J. White,
http://home.aol.com/ejw92 [Monitoring service on ``health care reform'' for small business.]

Unlimited Demand. Employees of the State of Alaska pay less than 10% of the cost of the medical services they receive. Aetna is swamped by claims: 884,000 claims in 1995, for 45,000 beneficiaries, or 19.6 claims per person. With the same number of participants in the plan in 1985, 339,000 claims were processed. No one seems to know why the number of claims has tripled in the last ten years. When there is essentially free medical service, demand is unlimited.
William A. Barnes, Sr., Anchorage, AK

Who Is Responsible? If I lived next to you and put a pit viper in your house, who would be at fault if your wife got bitten? The snake is just being itself. Might you just possibly blame me? For the same reason, while I despise HMOs, I cannot blame them for being what they are. The real culprit is Congress, which legislated them into being. Do HMO advocates also think that slavery was free enterprise because slaves were owned by private landowners?....?
Gary K. Keats, M.D., Clearwater, FL

Back to the Plantation. The original gatekeeper was the plantation owner, one of whom was responsible, around 1955, for a death when he denied medical care to a boy with a stomach ache who had a ruptured appendix.

Sharecroppers on the plantation were paid with credits at the commissary store. Prices were three times as high as downtown, but one had to pay cash downtown. Sometimes workers were paid in a kind of token, which amounted to privately coined money, which was good only at the company store. (Remember Tennessee Ernie Ford's song 16 Tons?) Paying workers with HMO ``coverage'' is just like that.
Claud Boyd, M.D., Augusta, GA

Clinton's Medicare Reform

Even before the President's budget request was sent to Capitol Hill, the White House released, with some fanfare, its long-awaited Medicare reform package. Initially, Rep. John Kasich, chairman of the House Budget Committee and Rep. Bill Archer, chairman of the House Ways and Means Committee, seemed to fall all over themselves in a gushing display of bipartisan cooperation, singing the praises of the White House, saying that this was a-no-foolin'-good sign and that the President was meeting them-no kiddin'-halfway, and perhaps a dozen other Washington Beltway clich‚s.

Meanwhile, the Senate Budget Committee has held its first hearing on the Clinton Medicare reform proposal. The chummy atmosphere of the new bipartisanship dissipated when Senator Nickles (R-OK), a Senate expert on health care policy, and Senator Phil Gramm (R-TX) started clearing away the temporary delusional bipartisan mistiness. Beyond his Budget Committee duties, Gramm also sits on the strategic Senate Finance Committee and has direct jurisdiction over the Medicare program. He doesn't play games with the numbers. And he doesn't gush.

Senator Gramm, the most ferocious critic of the Clinton Plan, is in no mood to compliment the latest attempt by the White House numbers crunchers to pull yet another a fast one. He's let the White House know that the Medicare proposal is a dud on arrival. He noted that in five or six years the Medicare deficits could reach between $500 and $600 billion, and that the failure to put a realistic plan on the table will mean huge tax burdens for the Americans people, who, he notes, should simply be told the raw truth. What first set Kasich and Archer's tails prematurely wagging, Gramm denounced as a sham.

The White House Medicare package does not propose anything close to what the Congressional Republicans were talking about last year. It makes no serious structural reforms in the system, but simply tinkers with the ``providers''-that's doctors and hospitals to those who still respect the English language-to make short-term ``savings.'' This is really small change. Congressional conservatives should have learned enough from their dealings with this White House to refrain from unseemly public displays of high expectation.

In short, the Clinton Plan call for savings of approximately $100 billion over 5 years; or $138 billion over six years. The Medicare hospitalization trust fund-the one going bankrupt as early as 2001-would be ``solvent'' until the year 2006.

The Clinton proposal extends the current law and sets Part B premiums at 25%, assuring that taxpayers will continue to pay 75% of Part B costs. Working American families, including those who cannot to buy their own insurance and get no tax relief for the purchase of individual insurance policies, and who pay the bulk of Medicare bills, should therefore be grateful.

New Benefits

Incredibly, the Clinton Administration is expanding benefits in a program that is facing bankruptcy: for example, a new Alzheimer's respite benefit to begin in 1998. No cost estimate was given; it's irrelevant. Alzheimer's Disease is a terrible affliction, and no member of Congress is going to vote against assisting families with elderly relatives who have it.

The Clinton Administration is also proposing to ``buy down excessive outpatient copayments to the traditional 20%.'' Because of a flaw in reimbursement methodology, beneficiaries now in effect contribute a 50% copayment.

The Administration is also proposing to ``invest in preventive health care.'' Who will vote against that? When the Clinton administration uses the word ``invest,'' it means increased spending of taxpayers dollars. ``The plan covers colorectal screening, diabetics management, and annual mammograms.'' And these are to be available ``without copayment.'' Additionally, the plan increases reimbursement rates ``for certain immunizations'' (pneumonia, influenza and hepatitis), a tacit admission that the current price setting for these immunizations is too low. However, there is again no estimate on the projected costs.

Cutting Doctors and Hospitals-Again

About one third of the ``savings'' in Medicare over the next five years comes through cuts in payments to hospitals. The White House thinks that the best way to cut high costs is by imposing another regulation and making them illegal. What this means is that hospitals will have another set of incentives to shift costs to working individuals and their families through increased costs in their private insurance; the $33 (or $45) billion in costs is not going to disappear into the atmosphere; somebody-the taxpayer as private consumer-will pay the bill. Hospitals will also be allowed to set up their own ``provider service networks'' (PSNs), meaning that hospitals (and ``other providers'') will be able to set up managed care plans to compete with existing managed care plans. The Clinton Medicare Plan does not, notably, allow ``providers'' to give consumers a real choice and sponsor a medical savings account option to compete with Medicare HMOs-perhaps because that would be ``unfair competition.''

One of the odder components of the Clinton Medicare Plan is the proposal to finance academic medical centers with a ``new pool of funding''--$11 billion over 5 years and $14 billion over six years. The money is to come from eliminating medical education and DSH payments from the HMO reimbursement formula. Although money is simply switched from one category to another, it is counted among the $34 million in savings supposed to come from reducing payments to Medicare managed-care plans.

Clinton proposes to reduce Medicare HMO payment rates from the current level of 95% to 90% of the existing fee-for-service rate. The rationale: ``A number of recent studies have validated earlier evidence that Medicare significantly overcompensated HMOs. This reduction does not start until 2000 and it accounts for a relatively modest $6 billion in savings over 5 years (about $8 billion over 6 years).'' Managed care costs will also go down to the extent that the Administration is successful in cutting the fee-for-service portion, to which managed care payment is linked.

Physician Fees

Compared to hospitals and managed care, doctors take a smaller cut in the Clinton Plan. Through ``a modification of physician updates,'' the proposed reductions in physician reimbursements will be saving $7 billion over 5 years, or $10 billion over 6 years. The rationale: ``This reduction is relatively small because Medicare has been relatively effective in constraining growth in reimbursement to physicians.'' For the record: None of this cranking down on physician reimbursement has done much good at controlling the soaring costs in Medicare Part B, which has been growing at 12% or more per year. The smaller reductions in physician reimbursement will be complemented, however, by getting even tougher than the Kennedy-Kassebaum crowd in cracking down on fraud and abuse in Medicare. Clinton is planning to get about $9 billion through a set of unspecified actions against Medicare fraud and abuse, such as in the area of home health care, over the next five years. The Administration is proposing to repeal ``provisions Congress enacted last year that weaken fraud and abuse enforcement.'' The Clinton Administration clearly wants all of its original Clinton Health Plan language, and not the slightly milder stuff that Congressional conservatives imposed last year.

Shell Game

The Clinton Plan proposes to save about $15 billion over 5 years, or $20 billion over six years, by moving some of the fast-growing home health care costs from Part A of the Medicare program to Part B. The first 100 days of home health care coverage, following a 3-day spell of hospitalization, would be covered under Part A, and thus financed out of the Medicare Hospitalization Trust Fund, which is maintained by the current payroll tax on workers. The rest of home health care costs would be covered under Part B, and thus funded by taxpayers out of general revenues of the Treasury. There will be no impact on the Beneficiaries, according to the Administration, meaning it will affect neither their premiums nor their copayments. This switch of the program from one part of Medicare to the other will extend the solvency of the Part A trust fund for a few short years. It does nothing, of course, to slow the real spending in the Medicare program, which is the real problem in the first place.

Clinton Vision of a Future Medicare System

During the unforgettable debate of 1993, the Clinton Administration outlined a plan of highly regulated managed competition which would, in effect, force most Americans into managed care plans rigidly ruled by a combination of federal authorities and state-based regional alliances, or government sponsored networks, armed with broad regulatory authority, a global budget and premium caps, plus ugly, old-fashioned Medicare-style fee schedules on doctors and hospitals.

The Administration has lost none of its gray, gloomy vision of a bureaucratic future for Americans. The ``structural reform'' outlined for Congress this past month calls for ``private'' options that are nothing more than managed care options, PPOs and PSNs. In effect, the elderly would be given a ``choice'' of managed care plans only.

The Clinton program also features the ``use of market oriented purchasing for Medicare.'' This does not mean free-market pricing or purchasing, that's for sure. It means ``... new prospective payment systems for home health care, nursing home care, and outpatient services, as well as competitive bidding authority and the use of centers of excellence to improve quality and cut back on costs.'' In other words, take the Medicare DRG/PPS system used so effectively to shift costs from Medicare Part A to Medicare Part B, and then into the private sector, and expand it. It is not clear what ``competitive bidding authority'' means here-probably a Dept. of Defense type purchasing arrangement.

Of course, none of this is inevitable, any more than the discredited Clinton Health Plan itself, accompanied by roaring applause for Hillary in her first 1993 Capitol Hill appearances on behalf of that monstrosity, was inevitable. At the Senate Budget Committee, Senator Phil Gramm of Texas has already fired a loud and clear shot over the Administration's bow on Medicare. The next one will hit below the waterline.

The Next Step in Government Mandates

If a firm is not controlled by consumer choice, that does not mean it will not be controlled. It will be controlled by the government, and the rationale for doing so will be protection of the consumer. That is what is happening in the continuing evolution of managed care. The latest development is the announcement by a number of Senators that they will require private insurance to expand coverage for women undergoing mastectomies. Senator Alphonse D'Amato (R-NY) is joining Senator Dianne Feinstein (D-CA) on this mandate. Insurance companies will also be mandated by the Senate legislation to cover the second opinion of medical specialists on cancer diagnoses and breast reconstruction or mastectomies. Of course, it will be almost impossible for any Senator or Member of Congress to vote against cancer patients. Like federal mandates on mental health and the 48-hour rule on maternity stays, the mastectomy coverage rules will likely be supported by most physicians, who, justly frustrated with the behavior of managed care plans and other manifestations of employer-based insurance supported by the federal tax code, see government regulations as an answer to government regulation.

In the meantime, this relentless strategy will assure that, brick by brick, mandate by mandate, step by regulatory step, the Clinton-style health care system that many physicians pledged to fight until their dying breath will be slowly be reconstructed. With the enactment of the Kassebaum-Kennedy bill-with its fines, penalties, and jail terms, its data collection apparatus, and its unprecedented level of federal regulation over the private health insurance market-the federal regulatory foundation has been well laid. It's like drying concrete. By July 1997, unless Congress reverses or substantially modifies its own handiwork in Kennedy-Kassebaum, the federalizing concrete will be dry and hard. And if Congress refuses to liberalize the tax treatment for alternatives to employer-based insurance, consumers will still have only the choices that corporations and regulators give them, and thus no way of escape.

Members of the Clinton team are learning from their mistakes and plan to build on the Kennedy-Kassebaum foundation, reconstructing from the 1994 political rubble the vast regulatory system that they outlined in their huge health plan in 1993. Comprehensive government benefit setting is one key component. But they don't have to do it all at once. With each little victory, federalizing each disease condition and treatment, the Clinton Administration moves closer to its key objective of dictating what medical treatments Americans can receive under their ``private'' plans-with the collaboration of Congressional Republicans and shortsighted medical professionals. The federal benefit guarantee today can be the federal benefit restriction tomorrow. For all their good intentions, physicians may be accomplices in the destruction of the private insurance market, and eventually of private medicine itself.