Delegation of Power
One of the most important cases before this session of the
U.S. Supreme Court will help decide whether the Constitutional
principle of nondelegation still has meaning (Carol M.
Browner, Administrator of the Environmental Protection Agency v.
American Trucking Associations (99-1257)).
Erik Jaffe writes in an
amicus curiae brief for AAPS: "Central to the interests of
AAPS are the enforcement of constitutional limits on the exercise
of government power in general and on the administrative state in
particular. Sweeping delegations of authority in the areas of
health and medicine are extremely prone to abuse and difficult to
police. AAPS has extensive experience challenging the regulatory
edicts of an unresponsive federal health bureaucracy and knows
first-hand the nature of administrative abuse that comes from
lack of adequate legislative direction and control. AAPS thus
views a revitalized nondelegation doctrine as essential to a
limited government respectful of free markets and free citizens."
At issue is whether 42 U.S.C. §7409, the Clean Air Act
provision directing the EPA to set national ambient air quality
standards (NAAQS), is an unconstitutional delegation of
legislative authority in that it provides no intelligible
principle for setting the standards and allows the EPA to make
the inevitable competing value choices and trade-offs.
This fundamental constitutional doctrine is oft-stated but
rarely enforced. "Unfortunately, the history of the nondelegation
doctrine can seem a history filled with excuses for not applying
it." Yet it is only the clear assignment of power to one branch
of government that makes it answerable to citizens.
The EPA's authority to "prevent unknown harms" is becoming
so broad that "it is difficult to imagine any health
effect that could not be used to justify EPA regulation."
Moreover, the EPA's process is arbitrary by definition.
The EPA itself delegates authority to hand-picked groups of
private scientists, whose interests may be adverse to the
interests of the parties being regulated. Their analysis was
severely criticized by EPA scientists, who put their own careers
on the line to protest. An EPA draft document details numerous
difficulties with the data used in setting the standards,
including covariates and confounders, misclassifications of
health outcomes, and errors in exposure measurements (CD
Perspectives, Sept 2000,
In another amicus brief filed by the Lincoln Institute for
Research and Education and others, Herb Titus compares current
U.S. administrative law to the Court of Star Chamber, which
reigned supreme in England during the Middle Ages, exercising
broad and undefined executive, legislative, and judicial power.
"Only after the Star Chamber was abolished by Parliament in 1648
was `due process of law as established by Magna Carta' restored
in England.... Only by ruling that Section 109 of the CAA effects
an unconstitutional delegation of legislative powers will this
Court...take a similar step towards restoration of the rule of
law in America."
The AAPS brief was
funded by the American Health Legal Foundation, 1601 N. Tucson
Blvd #9, Tucson, AZ 85716.
Robert Gervais, M.D., applied for relicensure of his
federally delicensed ambulatory surgery facility (see AAPS News, Jan 2000). The government
came to inspect but left immediately because it cannot survey a
facility that is not "fully operational." The physician must
perform surgery, without facility fee, on one "batch" of
patients, and if that is satisfactory, on a second batch. A batch
that is "too small" will be rejected, and the entire process is
back to Square One. There is, of course, no retrospective billing
for the facility fee.
A guilty plea constitutes a conviction that cannot be
appealed and may have unexpected consequences, as Caroline
Haggard Flores, operator of a Texas home health agency,
discovered. After being led to believe that she would receive
only the statutory minimum exclusion of 5 years, she pled guilty
to "conspiracy to defraud" to avoid the potential of a much
harsher sentence that could be imposed if she were convicted at
trial. When she received a 20-year exclusion, she argued that she
did not commit the acts of which she had been accused, but the
state court refused to allow her to withdraw her plea (Civil
Money Penalties Reporter, summer 2000).
Facing the prospect of mandatory minimum federal prison
sentences of 20 years or more, which were intended for gangsters,
some physicians plead guilty even when they believe they are
innocent. A guilty verdict on 1 of 33 counts has the same effect
as being convicted of all 33.
Health Freedom Bill Passed in Ohio
Signed into law in July, H.B. 90 amends §4731.227 to
"An individual authorized to practice medicine and surgery
or osteopathic medicine and surgery may use alternative medical
treatments if the individual has provided the information
necessary to obtain informed consent from the patient and the
treatment meets the standards enforced by the State Medical Board
pursuant to section 4731.22 of the Revised Code and any rules
adopted by the board.
"As used in this section, `alternative medical treatment'
means care that is complementary to or different from
conventional medical care but is reasonable when the benefits and
risks of the alternative medical treatment and the conventional
medical care are compared."
See www.healthlobby.com or
www.forhealthfreedom.org. At the latter site, the
Institute for Health Freedom provides links to government
information in each state.
A patient consent form suggested by the Texas State Board of
Medical Examiners in its guidelines for integrative and
complementary medicine is found in AM News 9/18/00.
Teen Sues Over Lack of ABC Warning
This July, 19-year-old Stephanie Carter of Hatboro, PA,
filed suit against abortionist Charles Benjamin of Philadelphia,
alleging that Dr. Benjamin failed to inform her of any of the
physical or emotional risks of the procedure, notably including
an increased risk of breast cancer.
Because the abortion was actually performed in Cherry Hill,
NJ, to circumvent the Pennsylvania parental notification law, the
case may be tried either under PA or NJ law at the Court's
discretion. In PA, the performance of any surgical procedure
without proper informed consent is actionable as a battery. In
NJ, damages may be assessed for the cost of additional monitoring
as well as for the emotional stress of having been placed at
risk. This is the first case of its kind concerning the ABC link
(ABC Quarterly, summer 2000).
Trick Question. Medicare seems to be stepping up its
attacks on emergency room visits. This is the second time in
about a week that Upstate Medicare has suspended an emergency
visit claim, requesting further information before they will
process it. The question they require you to answer so that they
can have another pretext for not paying the claim: which version
of the E&M guidelines did you use to code the visit? The 1995
version is less stringent than 1997, but it has no guidelines for
single system examinations (like neurology). If I respond "1995,"
they will tell me it doesn't meet criteria, automatically deny
the claim, and demand that I refund the full payment.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY
Newspeak. An article detailing the facts of
the blatantly stupid attempt to regulate the medical market in
Kentucky is published in The Actuary under the rubric of
"opinion." But when actuaries make criminally irresponsible
projections, as for Medicare prescription drugs, promising low-
cost, high-quality medical care for everyone, these hopelessly
misguided opinions are assumed to be facts. Apparently, in
Actuary Speak, fact is opinion, opinion is fact, war is peace,
slavery is freedom, and ignorance is strength.
Gerry Smedinghoff, Recovering Ex-Actuary, Wheaton, IL
Medicare Shouldn't Pay. A clinic visit costs about as
much as an oil change or a brake job, which are not covered by
Mechanicare. The government should stop intruding into the
physician-patient relationship and should get out of the business
of paying for physician visits. The overhead of processing claims
or haggling when claims are denied is a substantial part of both
government and clinic costs.
Robert Berry, M.D., Greenville, TN
Cognitive Dissonance. I rarely see a discussion of the
dichotomy between government's heartwarming concern for the
uninsured and its policies that make insurance prohibitively
expensive even for healthy middle-class families. And, without
debating the legitimacy of the tax system, why isn't individual
insurance a deductible expense? Apparently, the goal is to have
the government manage "health care" for all, accomplished by
making costs impossible and politicians indispensable-even though
Medicare is barely solvent despite, in effect, forced funding,
participation, and labor.
AAPS is the only organization with principle and backbone
enough to contest foolish government policies. As a discontented
past or present member of the AMA and AAFP, I happily pay my dues
Stephen DeGray, M.D., Bluefield, VA
A Mystery. It never ceases to amaze me how many people
will accept what an insurer decrees-even if they have the
financial means to purchase what is needed.
Gary Mirkin, M.D., Great Neck, NY
Oct. 25-28, 2000. 57th annual meeting, St. Louis, MO.
Oct. 24-27, 2001. 58th annual meeting, Cincinnati, OH.
Legislative AlertMore Presidential Prescriptions
Last month the Republican Presidential candidate
unveiled his Medicare reform proposal in detail. This month Vice
President Gore has just released the details of his own Medicare
prescription drug program. It is, in many respects, a variant of
the original Clinton Medicare Plan. While OMB has estimated the
cost of the Gore Plan at $253 billion over 10 years, the
Congressional Budget Office now estimates that the Gore
prescription drug program alone would cost $338 billion over the
same time period. Regardless of the merits of the particular
provisions, taxpayers should get ready for sticker shock.
Considering the fact that the total cost of Medicare today is
$220 billion, without drug coverage, this is a formidable
increase in the cost of the program. The key features:
1. Premium-Based Federal Subsidy. Costs
would be shared between the taxpayers and the seniors. Beginning
in 2002, senior citizens would pay a premium of $25 per month.
Seniors with incomes below 135% of poverty would be fully
subsidized, and those between 135% and 150% of poverty would
receive sliding-scale subsidies. Half of drug costs would be paid
up to a cap of $5,000: first-dollar coverage, no deductible.
2. Catastrophic Limit for Drug Costs. There
would be a $4,000 annual catastrophic limit, beginning in 2002,
with no cost sharing for low-income seniors.
3. PBM Administration. The drug benefit
would be administered through Pharmaceutical Benefit Managers
(PBM) as are currently in use in corporate medicine. Medicare
would contract with PBMs in geographic regions. The PBMs would
assume no risk; they would act as current Medicare carriers; they
would manage the benefit, using the standard cost- containment
measures that are used today in employer-based health insurance
contracts, such as drug utilization programs. According to the
Gore campaign, "Regardless of their plan choice, all Medicare
beneficiaries enrolled in the prescription drug option would have
access to all medically necessary prescriptions, even if not on
the plan s formulary." The Gore plan provides for government
purchasing of drugs at discounted prices; campaign officials
insist that the plan would not rely on price controls, and that
such controls would be statutorily prohibited. A PBM contract
would be awarded on the basis of a competitive bid, and there
would be one PBM per region.
4. Employer Subsidies. In order to encourage
employers to offer or to retain coverage of prescription drugs
for retirees, Medicare would contribute 67% of its premium
subsidy for the Medicare benefit to employers. According to
campaign officials, this is "less than what it would pay if the
beneficiary enrolled in the Medicare program, but more than what
the employer receives today. Retirees would not have to do
anything to keep their current coverage." Employers would apply
for the incentive program, and they would have to show that their
drug benefit is at least as good as Medicare's. If an employer
were to drop coverage or offer a drug benefit of lesser value
than that set by Medicare, retirees would be able to enroll in
the government Medicare prescription drug program.
The Gore plan is little more than a campaign document, but
the Clinton Plan, which it resembles, is laid out in fine detail
in the March 20th legislative language, the Medicare
Modernization Act of 2000. Dr. James Tozzi, a veteran career
civil servant who served in five presidential Administrations,
most notably at the OMB, and a senior researcher with
Multinational Business Services, a Washington consulting firm,
recently completed a regulatory analysis of the Clinton Medicare
Plan and found that the Clinton Plan contains 412 new
mandates, 182 related to Medicare prescription drugs.
For example, under 201 of the Medicare Modernization Act,
HCFA would have broad regulatory authority to determine which
drugs are to be approved. Should Medicare cover drugs to treat
impotence or male pattern baldness? What about the drugs that
treat only a tiny portion of the population? Should the
government mandate these expensive drugs, or should they look
toward less costly, possibly less effective substitutes? What
about drugs that are very costly, but whose effectiveness is
limited? Should the government push the seniors into generic
drugs whenever possible?
The government would also have to establish the 15
geographic service areas to be managed by the PBMs, a tricky
little item because of geographic cost differentials; establish
conflict-of-interest rules; regulate the quality of pharmacy
services; develop guidelines under which benefit managers would
share in any savings; establish a grievance procedure to resolve
consumer complaints against benefit managers and participating
pharmacies, a poor but sometimes necessary substitute for
consumer choice in a geographically based monopoly; and establish
rules for evaluating PBM s effectiveness in containing costs
through "price incentives and utilization management." There are
many, many other such items. The thing is mind-numbing.
If some version of the Clinton-Gore prescription drug
program is enacted, it will mean yet another massive expansion of
the regulatory power of HCFA. The Administration is starting to
get sensitive on this point. Already the Tozzi report has drawn
fire from Administration supporters, primarily because Tozzi did
the study on behalf of the Pharmaceutical Research and
Manufacturers Association of America. But thus far the Clinton-
Gore Administration hasn t said what is wrong with his analysis,
or even addressed his central message. Tozzi s analysis is an
open book and its truth is readily available to all honest
observers. A copy can be obtained from the Multinational Business
Services, 11 Dupont Circle NW, Suite 700, Washington D.C. 20036,
or the Center for Regulatory Effectiveness at www.thecre.com.
Big Trouble at HCFA
The regulatory responsibilities of HCFA are not, of
course, self-imposed; they are created by Congress. That is why
so much of the understandable anger directed at HCFA is so often
either futile or misplaced. It is the untamed Administration and
Congressional passion for regulation and control that has
resulted in such a top-heavy administrative burden. Yet both
Congress and the White House, in their zeal to add benefits and
expand eligibility, seem intent on ignoring HCFA s growing
management problems. In 1999, 14 of the nation s top health care
policy experts, including three former directors of HCFA,
published an open letter to Congress and the White House in the
winter issue of Health Affairs warning of an impending
management crisis for HCFA. While they differed on what was to be
done about it, and approached Medicare reform from different
perspectives, they were all agreed on one point: HCFA is in big
HCFA already has enormous problems in handling Medicare
Parts A and B. In 1999, the House Ways and Means Committee
revealed that in appealing claims denied by HCFA or its
contractors, the adjudication process took 310 days for
hospital claims and 524 days for physician claims. Based on
the last two years of experience with Medicare Part C, the so-
called Medicare+Choice program, a devastating combination of
inflexibility in payment plus a level of detailed regulation that
former HCFA official Bruce Fried and others have described as
literally mammoth in scope, restricting the operations of plans
in excruciating detail, has precipitated a crisis in that
program. Now 900,000 seniors have lost their privately chosen
coverage: Congress has known about the impending crisis since
June and has done nothing, absolutely nothing.
This past year several different committees, including the
Senate Finance Committee, the Senate Select Committee on Aging,
the House Budget Committee Task for on Health, and the House
Commerce Committee, have held hearings on the governance problems
and regulatory problems at HCFA.
The addition of a prescription drug benefit to the current
structure will dramatically add to the managerial burdens. There
is absolutely no reason to believe that HCFA s problems in
processing or overseeing the processing of 900 million claims for
drugs will be any better than its oversight over the processing
of claims for hospital and physicians services.
On Medicare, the central debate is not prescription drugs,
but about whether Americans want to add a prescription drug
benefit to Medicare without reforming the old Medicare
structure itself. If we do so, it must be with the full
knowledge that Medicare s growing managerial problems, described
as critical by a broad range of experts, regardless of their
political views, have not been addressed. Public officials
should be held accountable for the inevitable consequences.
Big Tax Hikes to Keep Medicare Afloat
While the dueling Medicare drug plans are cruising over
the airwaves, a bipartisan group of Medicare mavens at the
National Academy of Social Insurance (NASI) has just completed a
major study on what kind of tax hikes will be necessary to keep
Medicare afloat for the next generation of retirees (Financing
Medicare s Future, see www.nasi.org).
Brace yourself. It ain t pretty. Some of the Key Findings:
Future Budget Surpluses Won t Cut It. Says
Marilyn Moon, senior fellow at the Urban Institute and chairman
of the NASI study group on Medicare s financial future: "While a
robust economy and new cost containment measures have
substantially improved Medicare s financial outlook, Medicare
will still require significant additional revenues if we are to
offer the baby boomers the type of coverage enjoyed by current
beneficiaries." Current beneficiaries-taxpayers take note-do not
get outpatient prescription drug coverage. Moon, a widely
regarded liberal health policy analyst, goes on to note that
reliance on surpluses in the end is ultimately a reliance on
future taxpayers to bail out the program: "When a surplus is
earmarked for a government program, it's like giving the program
a `promise to pay' from the rest of the government, redeemable at
some future date. But in a decade when Medicare s costs begin to
exceed annual receipts and Medicare turns to its surplus, the
government will either have to raise taxes, cut spending, or
issue new debt to the public in order to redeem Medicare s
securities. The panel agreed, however, that paying down the
federal debt would improve the overall economy and make future
changes less onerous."
Here Come Big Taxes. According to the NASI
report, Medicare will require more than twice as much in taxpayer
revenues-an increase of 111%-in 2030 as it did in 1998. If you
add a Medicare prescription drug benefit, the tax take
skyrockets. What NASI did was model the effect of a benefit with
a $200 deductible, 20% coinsurance, and a $2,000 limit on out-of-
pocket expenses. (Bush allows for a variety of deductibles in a
competitive insurance program, and Gore keeps the old Medicare
structure and proudly advertises none). The result: the program
will need 171% more revenues in 2030 than in 1998. Sheila Burke,
former health care policy staffer for former Senate Majority
leader Robert Dole (R-KS) and Moon s fellow panelist, insisted:
"Continued growth in the economy, more efficient use of health
care and new contributions from beneficiaries are not likely to
be enough." Even the Breaux-Thomas proposal, which would include
prescription drug coverage and rely upon consumer choice and
competition to control costs, would still result in a tax
increase of 81% over the next three decades. No Medicare
proposal now on the table will spare future taxpayers significant
tax increases, simply because of the size and demographic
pressures exerted by the Baby Boomers. Moon and Burke might not
agree on much; but it appears that they got this right.
New Tax Options. The NASI outlined, in
delicious detail, the kind of tax hikes that would be required to
sustain the Medicare system at current levels, and ventured to
make some projections. A variety of old revenue enhancers were
examined, including an increase in federal excise taxes, taxing
the Medicare benefits of upper-income retirees (AARP, call the
office!), and taxing the value of employer-based health insurance
(just tax 'em, and don t give 'em any tax credits in return-real
popular, especially with the corporate types and the unions!) Of
course, none of these calculations tell us how these tax
increases would impact the general economy, economic growth,
employment and capital, or investment spending. But that isn t
NASI s job. This is what NASI did outline as major potential
Option 1: Raise the payroll tax from 2.9% to 4.84%. As NASI
points out, this would mean that a worker making $35,000 a year
would pay $847 per year, as opposed to $508 per year. That
worker s employer would be subject to an identical increase under
Option 2: Add an 8.43% surcharge onto the current income
tax. A family with an income of $34,900 (just below the national
median) with an average tax liability could see their taxes rise
from $1,710 to $1,852.
Option 3: A federal tax of 2.02% on the purchase of goods
and services, with the exception of housing, financial services,
and certain labor categories. The NASI report says that this
would mean that a family with $25,000 in taxable expenses would
If one were to exclude the purchases of food, medical care,
new housing, and related items, the national tax would have to be
3.29% to close the gap and keep Medicare afloat under the current
benefit levels. Under that scenario, a family with $15,000 in
taxable expenses would pay $494. Imagine Congress debating these
kinds of taxes, what should and should not be excluded, what s to
be tax favored and what not to be tax favored, and then there s
the enforcement by the IRS.
Should be fun.
Robert Moffit is a prominent Washington health policy
analyst and Director of Domestic Policy at the Heritage