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Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 55, No. 3 March 1999


Physicians are frequently exhorted to have "the courage to change." Or they are told that "change" is inevitable and they will be forced to accept it. But what does "change" mean?

Change in this context is not a force of nature but rather is that which "change agents" are trained to bring about.

In an AAPS brief supporting a motion for summary judgment in the case against the illegal secret activities of the Clinton Health Care Task Force (AAPS v. Clinton), it was stated that: "large, well-heeled non-profit foundations invented this bureaucratic yet secretive means of achieving `change' in [American medicine] by directly influencing the government decision-making processes from the inside to achieve their goal of promoting their own well-planned agendas, a goal which they unsuccessfully attempted to achieve from the outside."

While state legislatures as well as a Republican-controlled Congress continue to implement pieces of the Clinton Health Security Act of 1993, and hospitals and managed-care organizations continue to infringe on the practice of private medicine, it may be useful to examine the "process" as well as the "outcome" (to borrow some terms) of "change."

If you have attended meetings of a Robert Wood Johnson Foundation Turning Point project, or public or staff meetings at which you are invited to give "your input" (perhaps concerning a "proposed" Physician-Hospital Organization), you will probably recognize the elements of the process.

The methodology resembles that worked out under contract with the United States Office of Education in the 1960s and 1970s and described in a book entitled The Change Agent's Guide to Innovation in Education. The second edition, with the broader title The Change Agent's Guide by Ronald G. Havelock with Steve Zlotolow, published by Educational Technology Publications, Englewood Cliffs, NJ, 1995, is available from amazon.com for about $40.

Note that many of the innovations in health care involve school-based clinics and expanding cooperation between public school and public health officials.

The foreword to the Guide states: "[N]ot until the late 1940's, when American behavioral scientists began exploring and developing the ideas of the emigre psychologist Kurt Lewin, did we really have anything like a systematic science and practical craft of planned change in the kinds of social systems that matter most-families, small groups, organizations, communities." For the first edition, Havelock reviewed 3,931 studies on how planned change proceeds most effectively.

One of the "marvelous extra bonuses" touted in the foreword is a small paragraph on p. 20, headlined: "If you are a defender (intending to block a change, slow it, blunt it, or transform it into something more benign)." The Guide helps you "know better what the promoters of the change are up to and ... how you can challenge them effectively."

Although the Guide is concerned with the "how" of change, it will not surprise the reader to see that the authors propose that systems are changing for the better as they grow larger, more integrated, and more differentiated.

One of the prototype examples, a model of successful change, was "Mike's" story of introducing sex education into a community in which "involvement with SIECUS is like holding a lighted firecracker." He started with a pilot project in his own secondary science course, described as an effort to "aid the students in developing their ability to use logical reasoning to make responsible value judgments about social issues which affect them personally."

The outcome, shown by before-and-after attitude testing: "students had become more permissive in their thinking on the issues of sex and drugs and ... their value judgments had a more humanistic foundation." The next step: expansion of the program into all levels K-12. Vocal community opposition, sparked by the "puzzling finding" that students had a more favorable attitude toward marijuana, was muted by a newly organized citizens' group. These collaborators paved the way to acceptance with newspaper ads and public meetings, "quell[ing] the irrational doubts and fears which the extremist groups had been able to exploit."

The basic modus operandi of the change agent is to (1) unfreeze the system by catalyzing recognition of a need for change; (2) move toward change, by tolerable, incremental steps; (3) refreeze the system after change becomes integral.

Useful methods: a partnership of insiders and outsiders; starting with a small, doable if seemingly unimportant change that will have a "multiplier effect"; knowing the "influentials"; cultivating the "gatekeepers" such as the boss's secretary; building relationships with ethnic communities, church groups, etc., as by helping to meet their needs; "managing initial encounters" with "friendliness, familiarity, rewardingness, and responsiveness"; developing "`trust,' in the literal sense of knowing where the other person stands"; finding and neutralizing "resistors"; and eroding existing bonds.

There are probably change agents at your hospital, who have recruited respected insiders to help promote their agenda. The ultimate goal may be seen only in foggiest outline, and the immediate goal may be quite limited and difficult to oppose. The process moves from "item change" to "system change": redoing the organizational chart and changing the rules.

Change agents believe that there is a "crying need for change everywhere in our society." The changes are radical: "We are interfering with ongoing linkages and arrangements that may have been in place for centuries....[How] do we know we are not tearing down a bearing wall that will threaten the collapse of the structure?"

They don't, and they make no promise to "do no harm."

New AAPS Forum

To read or post a message on our new Internet forum, go to http://forums.aaps.entrewave.com or click on "forums" at the AAPS home page, www.aapsonline.org. Special features include a search engine and a spelling checker.

New threads this month: tax credit proposals, socialism as a universal acid, and physician unity.

Rules of civil discourse are posted on the forum. All messages must be accompanied by a valid e-mail address.

The Changing Role of Physicians

Physicians do still have a critical role in accountable health care organizations, according to the AMA. To contribute to the AMA's effort to "clarify and support the appropriate role of physicians in health care delivery," the AMA sought the "outstanding contribution" of Alice Gosfield, JD, Chairman of the Board of the National Committee for Quality Assurance (NCQA). The 25-page white paper can be downloaded from www.ama- assn.org/mem-data/special/omss/omssadv/98dec17a.htm.

Forces to be accounted for include: (1) changed financial incentives; (2) changing platforms from which services are provided; (3) anti-managed care laws that "confront perceived inequities and dangers"; and (4) increasing demands for data about performance. There is also a changing concept of quality, with the added connotation of "overall outcomes for populations assigned to a care system or paid for by a specific payor." Especially in federal programs, "fraud and abuse laws are increasingly used to punish quality failures."

In describing how physicians differ from "other actors," Gosfield quotes James Reinertsen, MD: "[Physicians] transform information into meaningful explanations of the present, predictions of the future, and changed futures, mainly for individual patients and sometimes for whole populations."

Gosfield attributes the unspoken bond among physicians to their awesome power "to prolong life or to end it."

She identifies the "core physician values" to be "account- ability and liability" and "evidence-based" teachings.

Physicians come in two types: those who are leaders (who must be the "right physicians," who have demonstrated their dedication to the greater good) and those who are led. Physicians who seek to "sit at the table" must be willing to be held accountable for their roles: this means "taking the heat when difficult decisions are made" and colleagues are "threatened by the organizations' chosen strategic goals."

There is a continuum of "potential physician involvement [in the evolving health care system]." It is "imperative" for physicians to participate in the "on-going monitoring and evaluation of actual performance of the selected pool of clinicians over time." Physician values must be brought to bear on the "selection and development of both clinical practice guidelines [to standardize care and move away from unexplained variation in clinical treatment] and the medical review criteria to be drawn from them." For one thing, the "visibility of physician engagement ... enhances the credibility of the process."

Axiomatic in Ms. Gosfield's view is that there will be radical change: "integration and transformation of the health care delivery system." Physicians are to form institutionalized relationships of "mutual interdependence" with systems. They will lose their autonomy, and those who "cannot meet the ever changing performance standard" or who deviate from established guidelines will be terminated from involvement in the system. "The physician value on due process and equitable procedures requires a formal mechanism...." However, Gosfield notes that "due process, even in constitutional terms, requires only that process which is due, given the nature of the determination to be made." In other words, no specifics are to be demanded, such as a right to be notified of charges, to have discovery, to be protected against jury tampering by hospital counsel, to have witnesses heard, etc.

Some AMA delegates are convinced that "the AMA has changed." And is the AMA also an agent of change? In helping to facilitate change, does it utilize techniques such as responsiveness and incrementalism? To what extent are the AMA and other organizations affected by outside change agents, including foundations that fund some of their programs?

Outreach to AMA Delegates

According to a 1996 survey, about 40% of AAPS members also belong to the AMA. (The AMA claims that 40% of all U.S. physicians are AMA members.) Yet, few AMA delegates are also members of AAPS. Thus, your delegates may not be well-informed about some issues important to us. For example, some AMA delegates believe that a court order is keeping them from reviewing the depositions of AMA officials taken in the case of Sunbeam v. AMA, when in fact that protective order has been lifted as a result of the AAPS intervention.

In order that your delegates and alternate delegates can represent you better, we will extend to each of them a one-year gift membership. A special gift card is enclosed; photocopies are also accepted. Your state association or specialty society should be able to tell you who your representatives are; or call AAPS, (800) 635-1196.

2001: Welcome, Hal!

AAPS continues to attend discussions at the National Committee on Vital and Health Statistics ( http://aspe.os.dhhs.gov/ncvhs), which is charged with implementing "administrative simplification" portions of the Kennedy-Kassebaum Act. (See our testimony posted on the AAPS Internet site.) A model presented for consideration is the National Health Information Knowledgebase developed in Australia (see http://www.aihw.gov.au). Data to be collected on a "party" (which is often a person) include: group role; accommodation characteristic (type of housing); demographic characteristic; cultural characteristic; lifestyle characteristic; and state of health and well-being, encompassing cultural, economic, mental, physical, social, and spiritual well-being. Events are also tracked; for example, "request for service event," "surveillance / monitoring event," or "community event." The last includes "actions or decisions by a community to undertake or not undertake a course of action on such subjects as curfews, right to life, use of alcohol and sex education. Extreme examples include protests, demonstrations, and riots."

Members of the NCVHS are very concerned about privacy, as long as it does not interfere with the availability of information to "meet the needs of society."

AAPS Calendar

Feb. 20, 1999. Board of Directors meeting, Dallas.
Oct. 12-16, 1999. 56th annual meeting, Coeur D'Alene, ID

On Heavy-Handed Enforcement

At a Feb 1 meeting of the American Hospital Association (AHA), Deputy Attorney General Eric Holder commented:

"I am proud of the Department's accomplishment in the health care fraud area. Over the past two years, our civil and criminal caseload has increased, and we have achieved a record number of criminal convictions and civil settlements. In 1997, we returned almost $1 billion to the Medicare Trust Fund from criminal fines and civil settlements and judgments....

"Money does not tell the whole story....Fraudulent conduct involves denial of medically necessary services....[or providing] medically unnecessary services, including surgery, that threaten the health and safety of people....

"While I am proud of our efforts, I recognize that at times our approach has been perceived to be heavy-handed. While the Attorney General and I expect our prosecutors to be aggressive, we must at all times be fair and even-handed. This is a bedrock principle for us, and where we fall short, we will take appropriate corrective action.

"Let me make this very, very, very clear. The False Claims Act does not address, and we should never use it to pursue, honest billing mistakes."

Physicians are asked to bring documentation of unjust, heavy-handed enforcement actions, in which DoJ corrective action might be warranted, to the attention of AAPS so that we may present it to Mr. Holder.

The "Provider Squeeze"

Also at the AHA meeting, Rep. Bill Thomas (R-CA) commented that of the groups involved in Medicare, "the group with the least leverage, frankly, is providers."

Dr. George V. Frankhouser of Santa Maria, CA, suggests presenting a clinical scenario (in layman's terms) to 100 people and asking them to write down the fee for the service rendered. He described a venous cutdown for which the surgeon was called to the hospital at 2:00 a.m. Total time: about 1.5 hours. Of 300 responses, the expected fee ranged from $50 (by a truck driver) to $10,000 (by a patient's relative). A jeweler in San Diego guessed $7,000, and six respondents said $5,000. Five attorneys suggested $2,500 to $3,000. There were 20 responses of greater than $1,000 and only two were less than $100. The mean was $325 and the mode $150.

The Medicare allowed payment was $15 in 1989. This was upheld on appeal, as 75% of Santa Barbara surgeons were said to be happy with that amount.

Ruling on The Christian Brotherhood Newsletter

The State of New Jersey Department of Banking and Insurance, Enforcement/Consumer Protection, wrote as follows in August, 1998:

"Based on our review of the materials you and your client have provided to us, along with your client's representations that it would recommend to its participating ministries the use in promotional and descriptive materials of the language discussed ..., the Department has determined that no administrative action is warranted at this time in connection with the dissemination and operation of the Christian Brotherhood Newsletter ("CBN") by the ministries listed in your letter.

"We note particularly that the CBN's publications and subscription forms do not contain any express guarantees of payment of health benefits, and further, that they state clearly that the CBN neither assumes any risk nor promises to indemnify any of its subscribers.

"Please be advised, however, that our determination not to take action at this time should not be interpreted as a final decision..., nor as an opinion on any civil liability CBN may have for expenses incurred by one of its subscribers...."

CBN is a cooperative way of helping subscribers pay medical bills without the involvement of an insurance company. It emphasizes individual responsibility, thrift, and a commitment to help others. (For further information, see AAPS News Oct 1997 or write Dr. Alieta Eck at 2062 Amwell Rd., Somerset, NJ 08873, [email protected])

Update on Medicare Opting-Out

Physicians who are opted out of Medicare and contracting privately with Medicare-eligible patients should use new forms that meet recently issued HCFA instructions. These can be downloaded from www.aapsonline.org.

What Surplus?

At the Feb 1 AHA meeting, Leon Panetta stated that the budget surplus is "the most dangerous temptation in the city." Congress, in his view, should not look to the surplus to fund spending, but should use it to reduce debt. Most of the surplus is, in fact, from Social Security dollars that formerly were kept in a separate fund.

Former Congressman Warren Rudman stated: "You can call it a surplus if you want, but if the head of Hilton hotels called it a surplus, he'd be in jail."

Fiat Money

According to Economic Education Bulletin 38 (12), 1998, published by the American Institute for Economic Research, Great Barrington, MA 01230, the American dollar has lost 91% of its value since 1940, based on consumer price indexes. Nor is this a relic of times past. Between 1990 and 1998, the dollar lost 20% of its value. Moreover, this depreciation does not take into consideration the diminished quality of some goods and services, or the fact that taxation has essentially confiscated the productivity gains due to science and technology (see Access to Energy, Feb 1998, PO Box 1250, Cave Junction, OR 97523).

Since the eighth century in China, hundreds of fiat monetary systems have been attempted, and 100% of them have failed, stated Lawrence Parks of the Foundation for the Advancement of Monetary Education (FAME) (Vital Speeches of the Day LXV (1):12- 16, 10/15/98). Mr. Parks reports that fiat money is melting down in many places, so that workers and their families, after a lifetime of hard work, are eating bark from trees and boiling grass soup. (See www.fame.org).

Immunization Registries

A survey of state immunization registry legislation, including mandated reporting, sharing of healthcare information, the type of consent (required versus implied), is posted at http://www.cdc.gov/nip/registry/legsurvey.htm . Nine states have implied consent with no provisions to opt out or limit access. Immunization registries may provide the infrastructure for comprehensive medical records data bases.

Member's Page

The Evil of Socialism. I am unfortunately quite trapped in my role as a non-participating physician. If I were to opt out of Medicare altogether, I would save tons of money, time, and stress but would have no income. I already take care of a large number of patients without pay because they simply refuse to pay. Many tell me: "accept assignment, or you'll get nothing."

This entitlement quicksand is a very evil thing indeed. Unfortunately, many physicians today either don't see it or are content with being fed well as they sink further into it. Frederic Bastiat got it absolutely right when he said that "the state is the great fiction by which everyone tries to live at the expense of everybody else." In the present world of government entitlements, everyone attempts to plunder everyone, everyone is competing with and against everyone else, and animus and envy rule the day. Mutual respect for one another and respect for an honest day's pay for an honest day's work are destroyed. Even those of us who refuse to participate in Medicare are trapped in the swirling current of the massive number of "beneficiaries and providers" around us. Inescapably, legalized plunder degenerates into something worse when it reaches the point when resources are exhausted and there is no one left to plunder. What better way to destroy an entire society than to manipulate its members into destroying one another?
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


"Informed Consent." From a letter to Transamerica Occidental: You state that "box 12" on the HCFA claim form says that the patient consents to record release. Yes, every doctor knows about that box. But since Medicare does not allow patients to send in the bills themselves, they never see that box, much less understand it. So though you are technically correct, in practicality that box is meaningless. Patients do not think their records should be sent to Transamerica to become part of a permanent medical record, and now I have to tell them that the record is to be kept even after they die!
Linda W. Wilson, M.D., Culver City, CA


Nondiscrimination. At a symposium there were lectures on "How I treat a patient with acne" and "How I treat a referred patient with acne." It is no longer sufficient to know how to treat a disease; one apparently must provide differential treatment according to the patient's route to your office!
Joseph M. Scherzer, M.D., Scottsdale, AZ


Private Medicine Lives. When I left a physician- hospital organization in July, 1997, I felt a big ethical burden lifted from my shoulders. By not pushing paper, hiring extra staff, and wasting valuable time, I am able to lower my fees by 20 to 50%. My patients reap the benefit, not the insurers....

If physicians in this country do not take the lead in the fight to restore patients' rights, they had better not complain when Uncle Sam steps in with his version of "Health Care America 2001-A Government Odyssey."
Pasquale D. Baratta, M.D., South Charlotte, NC


Selfish Compassion. From listening to the empty heads on the Sunday morning news shows, it is clear that selfish compassion (satisfying one's need to be compassionate by taking other people's money) has won. Both parties are debating only the degree, not the morality. Orwell and Ayn Rand were right.
Craig Cantoni, Scottsdale, AZ


The Role of Organized Medicine. Doctors and patients might be better off if organized medicine ceased to exist. Then doctors locally could defend themselves without organized medicine constantly supporting the enemy....

With today's technology, the Medical Titanic has a safety feature called the word processor, e-mail, or FAX. If organized medicine used it, the ship might not sink. Congress needs to hear: "NO," "We won't do it," "We will not comply,"....
Gary K. Keats, M.D., Clearwater, FL


"Your Papers, Please." On December 23, a police officer, who was driving by my home while I was shoveling snow, demanded to see my ID and arrested me without showing a warrant [which did exist]. I was taken to the Ingham County Jail and kept there incommunicado after I was disconnected in my conversation with my attorney. Filing a writ of habeas corpus is apparently almost impossible in Michigan when the AG is the prosecutor, but my wife and a friend went to Lansing, after consulting a few judges for advice, with little hope of getting me out of jail....Judge Brown said that my arrest was a "terrible mistake." The bench warrant mentioned failure to attend a hearing that had been cancelled. At the habeas corpus hearing, charges were dropped conditional to payment of $3,339 and my signing a handwritten statement: "I agree to withdraw my claim of appeal in People v. Edgardo L. Perez DeLeon currently in the Michigan Court of Appeals, docket # 205102."

I believe this agreement should be void because I was coerced by the circumstances under peril of losing my freedom. Therefore, I refuse to comply with it.

My probation is over, and I complied with every condition, including those illegally imposed by Judge Brown in September, 1998.
Edgardo Perez DeLeon, Detroit, MI


Legislative Alert

A Major Medicare Reform Proposal

On Jan 26, Senator John Breaux (D-LA), Co-Chairman of the National Bipartisan Commission on The Future of Medicare, unveiled his reform proposal to a standing-room-only crowd in the old Cannon House Office Building. His basic idea is to transform Medicare from the current single-payer system into a pluralistic, consumer-driven system of competing private plans, resembling the Federal Employees Health Benefits Program, which now covers Members of Congress, their staff, and 9 million federal workers, retirees, and dependents.

Senator Breaux explained that this proposal was his own and was not co-authored by any other member of the Commission, including his Co-Chairman Congressman Bill Thomas (R-CA), who also chairs the House Ways and Means Subcommittee on Health. The framework is as follows:

The Establishment of a Medicare Board to Negotiate With Private Plans. Under the FEHBP, the United States Office of Personnel Management (OPM) today negotiates rates and benefits with insurers and enforces the basic ground rules of competition. The Medicare Board would do basically the same thing. It would have the authority to define standards for quality and financial solvency, negotiate premiums and benefit packages, protect against adverse selection, and compute a government payment to the plans, including a computation of risk and geographic adjustment, and provide consumer information. HCFA would have no role in the private plans.

The Requirement of a Core Benefits Package for Private Plans. To qualify, a plan would have to offer a core benefits package. This, again, follows the practice long established in the FEHBP, in which the law only identifies categories of benefits to be included without standardizing the level or duration of benefits in any detail. Details are left to year-to-year negotiations between the government and insurers. Under the Breaux plan, insurers would have flexibility in benefit design, including the level of cost sharing or co-payment. Moreover, insurers would be able to offer supplemental benefits. But the Medicare Board would have final approval of the benefit package. Under the Breaux proposal, private plans would be required to offer core benefits at least equivalent to that offered by the traditional Medicare package.

The Establishment of a Premium Support System for Financing. Under the Breaux proposal, the taxpayers' "contribution" to the premiums to be paid to insurers would be based on a national schedule, "similar to that used in the FEHBP system." The costs of the plans would be assessed by the board, based directly on their bids and the outcome of negotiation process. The taxpayers' assessment would be based on a percentage of the "national weighted average premium" up to a certain dollar amount: "Based on the cost of the benefits package, the government s contribution will be capped at some point so that beneficiaries pay the incremental costs of choosing more expensive plans." As Breaux explains, the taxpayers' burden would be adjusted for beneficiary health risk and other factors. Moreover, the amount that beneficiaries would actually pay in premiums would also be adjusted for income. Under the Breaux formula, low-income beneficiaries, those who qualified for Medicaid support, would pay nothing; otherwise actual premium payments by beneficiaries would range from 12 to 25% of the total cost of the premium. Under current law, Medicare beneficiaries are required to pay 25% of the total cost of the Medicare Part B premium, but normally have to supplement this payment with an additional $2000 in payments for supplemental insurance coverage or direct payment for medical expenses. Breaux argues that in a competitive market, even with his proposed adjustments for income, high-income beneficiaries would do better under his premium support model than beneficiaries do under the cumbersome Medicare/Medigap arrangements that currently exist. It is perhaps worth noting that the Breaux approach to government financing of health plans differs from that currently governing the FEHBP, in which there is no variation in the taxpayers' share for either risk or income.

Retain the Traditional Medicare Plan as an Option. The traditional Medicare program would be retained as an option, but with some significant changes. Deductibles for parts A and B would be combined into a single Medicare deductible of $350, with a 20% coinsurance for every benefit except hospital and preventive care. Under the Breaux proposal, there would be a 10% coinsurance for home health care services. The key change is that traditional Medicare would be forced to compete with private plans and would no longer enjoy monopoly status in providing health care services to retirees. In forcing traditional Medicare to compete, Breaux proposes that Congress give HCFA the authority to be flexible, and modify its payment rates to doctors and hospitals. Among other things, HCFA would be allowed to have a flexible purchasing policy, enter into competitive bidding for services, and negotiate prices.

The thought of forcing HCFA into competition is simply delicious. If HCFA s advocates in Congress, who ve done such a great job over the years in protecting the agency from serious Congressional oversight, think that the old Medicare program is a superior system, as they have so often said in countless floor speeches and debates with reformers, then they should have no objection to allowing HCFA officials to mix it up with private plans on a level playing field.

Unfinished Business. Senator Breaux himself is the first to admit that there are a lot of details to be filled in and a lot of questions to be resolved. Foremost among these issues is the role of prescription drugs. In his State of the Union message, President Clinton strongly advocated the inclusion of a prescription drug benefit in Medicare.

There is ample room for caution here: the prescription drug benefit is hugely expensive. Members of Congress should take a look at past experience in the Medicare program with this issue. Back in 1988, when Congress enacted the Medicare Catastrophic Coverage Act and included a prescription drug benefit, two big things happened. First, government experts had underestimated the true cost of the additional benefit by a wide margin, and the real cost turned out to be much larger than its Congressional champions had predicted. Naturally, the official estimates of the government actuaries were mostly wrong. Second, when confronted with the cost of the prescription drug benefit, along with the additional cost of the Catastrophic bill, seniors got sticker shock and started a revolt against Washington, leading to the repeal of the Medicare catastrophic bill one year later.

Deborah Steelman, a Commission member, notes that 65% of seniors already have prescription drug coverage, largely through supplemental insurance. The arrangements of the current Medigap market may not be ideal. But it does not make too much sense to displace the existing private market purchase for prescription drug coverage with public purchasing at an expense to the taxpayer. In the FEHBP, prescription drug coverage in competing private plans has emerged as a natural result of consumer demand, and the cost and the level of prescription drug coverage varies from plan to plan.

Another issue is how to determine the annual cost and taxpayers' "contribution." Breaux has proposed a national bidding system conceptually similar, with important qualifications, to the formula-based estimates now in use by the FEHBP. But, recognizing the dramatic regional differences in medical spending and cost, Breaux says that members of the Commission may wish to look at the idea of regional bidding.

The adjustments to the benefits packages of private plans envisioned in the Breaux proposal involve annual adjustments based on annual negotiation and consumer demand. This feature of the proposal can be expected to be a hot topic of debate. Expect liberals on the Commission and Congress to fight for a mandatory, comprehensive, detailed standardized benefit package, with the government making all sorts of intricate adjustments, as Medicare does today. Anything short of that, they will argue, takes away a legal entitlement from senior citizens. Conservatives, on the other hand, can be expected to fight any standardized government benefits package written in legislative stone. Fights are already breaking out over this issue, both on and off the Commission.

Money Matters

The Commission is charged with addressing the programs growing financial instability and the threatened insolvency of the Part A hospital trust fund. The 2.9% payroll tax is the major source of this $121.1 billion fund. The Part B trust Fund is financed by a combination of beneficiary premiums (25%) and general revenues (75%). In 1997, according to Senator Breaux, about 63% of Medicare spending could be accounted for by a combination of premiums and payroll taxes. Under current projections, the existing combination of premiums and payroll taxes can be expected to fund only 31 to 35% of Medicare spending by 2030. Under current projections, Medicare is expected to grow from 12% to 28% of the federal budget in 2030-and that is the optimistic projection. Medicare s Hospital Insurance trust fund, funded primarily with payroll taxes, is expected to go broke in 2008.

The money matters are crucial. But they are not the entire story. The more important issues, Sen. Breaux insisted, have to do with how the next generation of senior citizens will be able to get the care they need from the doctors they want. He argues that the Medicare benefits package is frozen in political time, and does not reflect the dynamism of the private market. Moreover, says Breaux, Medicare s system of "administered prices causes inefficiencies in the way health care services are delivered to seniors and providers have little incentive to provide the most cost effective care." He further notes that the program is plagued with inequities.

The Medicare money issues, which helped spur reform efforts, could also kill them. Just before Breaux unveiled his Medicare reform plan, President Clinton in his State of the Union address proposed carving out 15% of the projected budget surplus. Conservatives in Congress and elsewhere expressed the concern that an infusion of cash would kill any serious reform of the program, and allow Congress to punt on the tough questions and just use taxpayers' funds to pump up an overly bureaucratic system without any serious change. In his prepared remarks, Senator Breaux stated, "Using a portion of any budget surplus that materializes to shore up Medicare can help, but it won t solve the problem. Premium or tax increases should not be considered until the Commission addresses the government s ability to meet its commitment to fund Medicare s current benefit package." As he told Congress Daily, " We can t just keep putting more gas in an old car. It s still a 65 [1865?] model and its going to run like one."

Initial Reactions

On the broad outlines of the Breaux proposal the battle lines are starting to form.

Senator Phil Gramm (R-TX) congratulated Breaux on his effort, and said that the "premium support" model must be a key element in the overall reform of the Medicare system. A cornerstone, affirmed Gramm, is the provision of health insurance through private plans. Most Commission members, including Senator Robert Kerrey (D-NE), echoed Gramm s sentiments. However, Gramm also noted that Congress should recognize that the unfunded liabilities of the Medicare system are still huge, and nothing that either the President or Congress has yet proposed, including a diversion of the budget surplus, will fill the gap between the expectations and costs well into the next century. In a special study of the problem conducted for the National Center for Policy Analysis, Professor Thomas Saving of Texas A&M University estimates that the unfunded liability of Medicare, projected out over the next 75 years, is a stunning $8.9 trillion dollars, an amount bigger than the country s current output of goods and services and twice the size of the national debt.

Bruce Vladeck, former HCFA Administrator, sounded the most prominent negative note. He warned that Breaux s idea could undermine the entitlement status of Medicare. In separate comments to reporters, Vladeck is warning of an impending round of "HCFA Bashing" in Congress organized by senior Congressional Republicans. In a similar vein, dozens of liberal interest groups and organizations, from the California Federation of Teachers to the Physicians for a National Health Plan, are already lining up against Breaux s "premium support" idea. The most prominent, the National Campaign to Protect, Improve and Expand Medicare, says that Breaux and his conservative allies on the Commission are "impeaching Medicare" without a "fair trial." This could get rough.

Robert Moffit is a prominent Washington health policy analyst and Director of Domestic Policy at the Heritage Foundation.

The final goal: for "society to inscribe on its banners: from each according to his ability, to each according to his needs."

Karl Marx, Critique of the Gotha Programme

Steps along the way: "despotic inroads on the rights of property and on the conditions of bourgeois production," including a "heavy progressive or graduated income tax."

Karl Marx and Friedrich Engels

The Communist Manifesto, 1848