Tucson Blvd. Suite 9
Tucson, AZ 85716-3450
Phone: (800) 635-1196
Hotline: (800) 419-4777
of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 57, No. 11 November 2001
FREEDOM UNDER ATTACK
President Bush called the September 11 attacks on the
Pentagon and the World Trade Center an attack on freedom. The
World Trade Center was surely a fitting target for the enemies of
freedom, in both a practical and a symbolic sense. Private
property rights and the freedom to engage in peaceful trade are
the essential foundations of political freedom.
President Bush pledged that freedom would be defended. But
in war, freedom itself can be the first casualty.
Other casualties include innocent civilians and soldiers
killed by "friendly fire." Identifying the enemy is critical-and
problematic. Can the world be clearly divided into two camps:
those who are with us, and those who are with the terrorists?
Who are the terrorists?
One of the declared enemies-Osama bin Laden, the most likely
mastermind of the September 11 assaults-issued a declaration of
jihad or holy war in August, 1996. He called the June 1995 truck
bomb in Dhahran, Saudi Arabia, the "beginning of the war between
Muslims and the United States." There have been other episodes,
and some suspect bin Laden's involvement in the Oklahoma City
bombing-an allegation that might never be put to rest, partly
because of the execution of Timothy McVeigh and the razing of the
Most Muslims, of course, are not enemies, and only a few
will heed bin Laden's televised Oct. 7 message: "These events
have divided the world into two sides: the side of believers and
the side of infidels.... Every Muslim has to rush to make his
And most enemies of freedom are neither Muslims nor
terrorists. Some are recognized governments. Others are sappers,
gnawing away at the foundations of our civilization from within.
Unless we are vigilant, the war could provide a golden
opportunity for such foes.
Almost the moment that the airplane struck the first tower,
the mass media began to drum in the message: we must trade our
liberty for the promise of better security.
Tony Blankley, styling himself a former "crypto-anarcho-
Libertarian," called on all Americans to "discard everything they
thought they believed about civil liberties. He spoke admiringly
of Old Abe, who, at a time of "unlimited danger... didn't
hesitate to take unlimited power." The result: "thousands of
American citizens were arrested and incarcerated indefinitely
without benefit of due process. Not only dangerous actions, but
seditious words were sufficient grounds for such arrests. The
Union was preserved..."-and while the writ of habeas corpus was
restored, the power of centralized government was greatly and
permanently increased (Washington Times 9/26/01).
Lincoln suppressed all political dissent and obliterated
constitutional checks and balances. Perhaps more than 20,000
political opponents were jailed, including the Mayor of
Baltimore, its Chief of Police, a congressman, and 31 state
legislators. More than 300 newspapers were shut down-for
disagreeing with the assessment of "unlimited danger" or
proposing an alternative to invading the South. The result of
Lincoln's policies: 23,000 American casualties at Antietam, Sept.
16-18, 1862. The war cost the Union 3.2% of its male population,
the Confederacy 9.7% of its (white) male population. The
equivalent loss today would be 6.5 million men, most in their
teens or early 20s (
www.lewrockwell.com/orig2/miller1.html). Charles Adams,
in his book When in the Course of Human Events, suggests
that a far better outcome would have been achieved using
Constitutional methods rather than the seizure of unlimited
A bill purported to protect Americans against terrorism was
brought to Congress very quickly after the attack-just as it was
after the Oklahoma City bombing-providing for vast expansions of
power that agencies have sought for a long time. A coalition from
across the political spectrum, including AAPS, has called for
prudent caution (join the discussion at aaps.commentary.forums.net
The most dangerous feature of the proposal is the very broad
and vague definition of "terrorism." It includes "injury of
Government property or contracts," or "acts dangerous to human
life that are a violation of criminal laws of the United States
or any State and that appear to be intended to influence
the policy of a government by intimidation or coercion." Such
"terrorist" crimes have no statute of limitations and are
punishable by life imprisonment. Are we unduly worried?
On Sept. 12, a prosecutor told a jury that the events they
had just seen on television showed the importance of protecting
Government institutions from the likes of Dr. Robert Mitrione,
accused and convicted of using the wrong code to bill for
psychiatric services rendered by his employees.
Senator Clinton (D-NY) told The New Yorker that she
empathizes with her constituents, having herself been the victim
of "murderous rage"-in Seattle in 1994, when demonstrators led by
AAPS members peacefully greeted her bus tour with chants of
"Hillary, go home."
As to property rights, the proposal gives the President the
power to seize property, with no due process at all.
Will such provisions give the government greater ability to
protect our lives than it had on Sept. 11? Or can we save our
nation only by allowing citizens greater freedom?
Terrorists cannot destroy freedom, because freedom doesn't
reside in the World Trade Center or in the Pentagon or at 1600
Pennsylvania Ave. Nor can a Superpower destroy evil-which doesn't
live in a cave in Afghanistan.
Freedom, however, can be surrendered, and terrorists can
destroy thousands of human lives. Government can punish; but only
free men can defend freedom-and save thousands of their
countrymen, as they did on September 11.
AAPS Members Respond to 9/11
AAPS Public Relations Counsel Kathryn Serkes, after being
evacuated from Reagan Airport on Sept. 11, volunteered for search
and rescue efforts at the Pentagon, with her dog. She coordinated
Operation Resolve, including the God Bless America sing across
the country from the NY Stock Exchange to baseball games, to
encourage Americans to display unity and strength. She personally
gave away 500 American flags in D.C.
Congressman Ron Paul, M.D. (R-TX), a life AAPS member,
introduced H.R. 2896, which would clarify that the federal
government will never place a prohibition on pilots being armed.
His weekly column of Sept. 25 explains how we must defend our
nation without the "sacrifice [of] our liberties at the hand of
an irrational urgency." He recommends consideration of the
constitutional method provided for dealing with piracy-one of
only three federal crimes named in the Constitution-Letters of
Marque and Reprisal, Article 1, Section 8 (www.house.gov/paul).
AAPS President Robert J. Cihak, M.D., provided practical
self-help information for the public in the Medicine Men columns
in WorldNetDaily, Sept. 14 and 24.
AAPS Executive Director Jane Orient, M.D., traveled to Miami
to discuss defense against weapons of mass destruction (WMD) with
the Univision Network. She helped a Cuban-American family
demonstrate preparation of a sealed room, televised by the
Spanish-language news magazine AquĦ y Ahora. Directions
for this method of protection against chemical or biological
attack, from the Israel Defense Forces, is posted at
other information on WMD.
Undermining the Infrastructure
An article entitled "Terrorists 1,000 and Enviros 5,000?"
quotes a 1970s prophecy about the World Trade Center by Herbert
Levine: "If a fire breaks out above the 64th floor, that
building will fall down." The steel girders were designed to
resist fire for at least four hours, during which time the
building could be evacuated and the fire fought. Tower One lasted
1 hour and 40 minutes; Tower Two, 56 minutes.
The design, which was intended to resist the crash of a
Boeing 707, specified fireproofing composed of asbestos and
mineral wool. This material, invented by Levine in the 1940s,
permitted the construction of large steel-framed buildings. (The
Empire State Building is insulated with concrete, which is
expensive and difficult to use.) In 1971, New York City banned
the use of asbestos, so a substitute, inferior insulation had to
be used above the 64th floor.
Like that of the Twin Towers, the infrastructure of America
has been weakened by many forces, including junk science,
opportunistic litigation, and political corruption.
"Still, there is enormous good and strength in our country.
Let us hope and pray that it will be sufficient" (Access to
Energy, Sept 2001, PO Box 1250, Cave Junction OR 97523).
Public uber Private
Opponents of private medicine are trying to turn the attack
on freedom into an opportunity to mandate universal coverage.
Arthur Caplan, Director of the Univ. of Pennsylvania's Center for
Bioethics, states: "Every American is a veteran" ("Terrorist
Attacks Show Need for Universal Health Plan, Caplan Says,"
Kaiser Daily Health Policy Report 10/1/01).
Individuals More Capable than Government
Greg Scandlen sees a different connection between the
terrorist attacks and insurance reform than Dr. Caplan: "The
police, firefighters, and construction workers of New York City
have proven to be more competent than the CIA and FAA. Who would
dare say they are incapable of choosing their own health care
coverage anymore? Who would suggest that the federal government
should take care of it for them?"
A survey by the Minnesota Chamber of Commerce showed that
Americans are confident of their own abilities: 77% employers and
78% of employees favor the idea of workers customizing their own
benefits; 75% of employers and 71% of employees favor financially
rewarding workers for controlling their use of benefits; and 52%
of workers like the idea of "choosing their own coverage with
only financial assistance from their employer."
Oregon Town Chooses SimpleCare
The McMinnville [Oregon] Physicians Organization (MPO)
brought in David MacDonald, D.O., and Vern Cherewatenko, M.D., of
Renton, WA, cofounders of SimpleCare, to speak to major employers
in the town of 95,000. Of the 65 physicians in town, 62 joined
SimpleCare. A $50/month major medical/hospital only insurance
policy has been made available. Dr. MacDonald told physicians
that they could make more money and provide better service by
charging patients directly, even at fees 20 to 50% less than the
fee encumbered by insurance overhead. It is expected that
physicians will back away from all of their insurance contracts.
Though the program probably has the strongest appeal to
uninsured patients, MPO Executive Director Anne Hamilton said the
organization believes that many insured patients will choose to
switch. "I don't want a plan to tell me who I can and can't go
see, and I don't mind paying out of pocket for a better system,"
she told the News-Register on Sept. 25.
Ms. Hamilton estimated that about 30% of business overhead
goes to cover employee benefits. Offering catastrophic benefits
while letting employees pay for routine care themselves through
SimpleCare would relieve the burden. "Ultimately, those savings
can go back into the employees' pockets in the form of raises,"
Oct. 24-27. 58th annual meeting, Cincinnati, OH.
Nov. 17. AAPS, PA chapter, and SEPP. Healthcare Summit
2001, Pittsburgh, PA, call (724) 929-5711 or see www.se-
Sept. 18-21, 2002. 59th annual meeting, Tucson, AZ.
"The natural progress of things is for liberty to yield
and government to gain ground." Thomas Jefferson
AAPS Opposes Forcible Drugging
On October 4, AAPS filed a motion for leave to file a brief
amicus curiae in the case of Charles Thomas Sell, D.D.S, in the
U.S. Circuit Court of Appeals for the 8th Circuit, supporting
reversal of a lower court order to forcibly administer
psychotropic drugs to the defendant for the stated purpose of
rendering him competent to stand trial.
Since his arrest on a charge of Medicaid fraud, Dr. Sell has
been imprisoned without trial, mostly in solitary confinement,
for nearly four years. The government claims that Dr. Sell is
delusional, largely based on his conspiratorial thinking and
harsh criticism of government actions as in Waco. He has been
determined not to be a danger to himself or others.
AAPS argues that state authority to force prisoners to take
mind-altering drugs is highly vulnerable to abuse; the precedent
could not be limited to the unusual facts in this case. "It is
easy for a state to declare its adversaries to be insane; an
expansive interpretation of the decision [of the lower court]
would allow the state to forcibly drug its adversaries in the
name of preparing for trial."
There is strong Supreme Court precedent against the use of
drugs as punishment. AAPS notes that the government portrays Dr.
Sell as an offensive individual; yet the more despicable the
individual, the more likely that forced drugging serves a
punitive rather than a salutary purpose.
AAPS also argues that the patient's right of informed
consent is essential to the integrity of medicine. Moreover, the
district court decision could enable the experimental use of
drugs, contrary to principles established at Nuremburg.
A hearing is scheduled for October 15.
Psychiatry and Dissent
Between 1955 and 1970, Western enthusiasts for social
theories of behavior used the Soviet system as a model when
advocating centralized, government-run health systems.
"The Russian experiment, by way of contrast [to fragmented
medical care in the Western world], has established a national
health service through which medical care is provided free of
charge to all citizens" (Am J Psychiatry 1968;125:656-
In 1967, the KGB's annual report included a letter to the
Ministry of Health by Academician Sakharov: "Fainberg and
Borisov, political prisoners in the Leningrad psychiatric prison,
have announced a hunger strike against compulsory therapeutic
treatment with medications injurious to mental activity. I ask
you urgently to intervene to preserve the health and dignity of
prisoners in the psychiatric prison. Promote the removal of even
the possibility of violations of human rights and medical ethics
in the running of psychiatric institutions...."
Admirers found it more difficult to avert their eyes from
abuses after 1969, when a New York Times article about
the psychiatric hospitalization of Major General Pyotr
Grigorenko, who had been arrested for criticizing the Soviet
regime, noted that using "mental incompetence" to control
political dissent was not unusual in the Soviet Union. However,
only in 1977 did the World Psychiatric Association condemn such
In 1974, psychiatrists in the West had become curious about
reports of a high prevalence of schizophrenia in the Soviet
Union-5 to 7 per 1,000 population compared with 3 to 4 per 1,000
in the UK. Soviet psychiatrists had "discovered" a unique form of
mental disease called "sluggish schizophrenia" that fit the
profile of political dissidents (
Mark Field suggested that it was "at least conceivable that
the average Soviet psychiatrist, brought up within the context of
Soviet culture and values, will assess the very idea of
opposition to the regime ... as prima facie evidence of some kind
of deep disturbance (Ann NY Acad Med 1977;285:687-697).
The author of a recent review warns against "exaggerated
cultural relativism" and concludes that "the Soviet experience
continues to instruct inquiry in psychiatry for the West" (GS
Belkin, Perspectives in Biology and Medicine
Fraud Fighting: a Growth Industry
Prosecutors do not see fraud problems dwindling, certainly
not in the light of terrorist activities. In fact, according to
attorney Marc Goldstone, some think that people may take
advantage of the tragedy to commit abuses. Attorney Mark Allen
Kleinman stated: "I would hope that this administration, which
has now had to take $40 billion out of the Social Security Trust
Fund, will have renewed respect for aggressive fraud-fighting
efforts, which have returned billions of dollars to the treasury
in recent years" (BNA's HCFR 9/19/01).
According to a study by New Directions for Policy, the
federal government has "recovered" $8 for every dollar spent
fighting fraud and abuse with the False Claims Act, bringing in
$8.6 billion since 1986. The law is considered likely to generate
billions more in savings through its "deterrent effect."
The report also notes that despite physicians' complaints of
overzealous enforcement, the General Accounting Office agrees
with prosecutors that they have used FCA in a "judicious and
uniform" manner, and federal law prohibits prosecutions for
honest mistakes (BNA's HCFR 10/3/01).
On the other hand, the Ninth Circuit Court overturned a
$729,453 judgment against physical therapist Peter Mackby, who
indisputably submitted false claims, remanding the case to
district court to determine whether the punishment violated the
Eighth Amendment's protection against excessive fines. The
average claim was for $37, and the fine for each, $5,000. (The
OIG has since increased the maximum fine to $10,000 per claim.)
This ruling could make it harder for the government to prod
providers into settlements.
The FCA has a grossly disproportionate effect on medical
practitioners, compared with other industries. The maximum
penalty for a single false claim for $100,000 by a defense
contractor would be treble damages plus $10,000, or $310,000. The
maximum penalty for the same harm to government from 500 false
medical claims would be a staggering $5,300,000. Mackby's
attorney Patric Hooper stated that the government can pursue huge
fines even when there are no damages to the government
(Medicare Compliance Alert 10/1/01).
There are new opportunities for ensnaring doctors in the new
National Correct Coding Initiative, which prohibits 3,105 more
code combinations, bringing the total number of forbidden
combinations to 115,000. For only $299 + $29.95 s&h, you can buy
software to reduce audit-triggering errors.
When the government errs, incidentally, there are no
penalties. In Florida, Medicare and Medicaid were enjoined in a
class action suit and ordered to pay $90 million to 23,000
physicians. Dr. Owen McCarthy will receive about $7,200 in three
annual installments, which he estimates to be about 1/20 of the
amount the government fraudulently withheld from him. Not a word
about the settlement appeared in the press.
Is Charity Unlawful? We are seeing more and more
letters notifying us that professional courtesy will no longer be
extended lest it "invite scrutiny from the OIG." Another
professional tradition is being systematically eliminated by
government. First, it demotes us by calling us "providers." Then
it destroys patient-physician relationships, substitutes itself
as parent, and sets patients against us with "guilty until proved
innocent" fraud initiatives. Now it is trying to eradicate any
vestige of the professionalism that distinguishes physicians from
members of other professions or trades.
Government has no right to tell physicians to whom they may
donate their skills and labor. If I don't bill either the
government or the patient, where is the crime? I know not what
others may do, but as for me I will continue to provide
professional courtesy to whomever I wish, whenever I wish. If
government agents wish to prosecute me for being a professional
and committing kindness, I say let them come.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY
Democrats Not the Party of Jefferson. For the record, I
respectfully disagree with Dr. Orient regarding the assertions
that Jefferson founded the Democrat Party and that he was a
Jacobin. Thomas Jefferson, James Madison, and other Virginians
founded the Democratic-Republican Party, opposing the Federalists
led by Alexander Hamilton, John Adams, and other patriots... The
modern Democratic Party was established with the election of
Andrew Jackson (Jacksonian Democracy) in 1828, which brought
together an alliance among farmers in the south and west,
entrepreneurs in different states, and urban workers throughout
the country. By that time both Thomas Jefferson and John Adams
had died on the same day, July 4, 1826... Moreover, Jefferson
might have attended meetings at the Jacobin Club, but I really
doubt that he was a dues-paying member of the club (dues were
exorbitant). Early on during the French Revolution (until 1791),
even constitutional monarchists, i.e., like the Feuillants,
attended meetings there. By the time of the Reign of Terror (June
1793 to July 1794), Jefferson had broken his brief love affair
with the ideals of the French Revolution and rejected the
authoritarian and collectivist path the revolution had taken.
Referring to Jefferson as a Jacobin was also incorrect; not even
Thomas Paine (who almost lost his head to the Guillotine)
deserves that appellation... [Excerpted from letter posted at
Miguel A. Faria, Jr., M.D., Macon, GA
Pleased with MSA. I recently signed up for an MSA
account through the Mutual Insurance Group in West Palm Beach,
FL. The account allows me to save $3,800/year in a tax-deferred
IRA account for my family and roll any money over to the next
year that we don't spend on medical care. Hospitalization and
surgical claims are paid at 100% of customary by Beach Street
Insurance. When we go to a doctor, we negotiate the cost of the
examination and treatment, and usually realize a substantial
savings. Money from the MSA account can be used for
prescriptions, well care, cosmetic surgery, or dental work. I
recommend that AAPS members contact their own insurance agent or
Mutual Insurance Group. [Also see www.aapsonline. org under "Links" if
looking for an MSA product -- Ed.]
Harry A. Hamburger, M.D., Miami, FL
Just Ask. Patients should ask physicians whether they
have a prompt-payment discount [fair price] policy. Physicians
are willing to do this-and if they haven't done it yet, all they
need is a tiny push in the right direction. One patient request
may be enough; two or three ought to do the trick.
Donna Kinney, HealthBenefitsReform listserv
Cognitive-behavior modification theory applies here. People
act to get rewards and avoid pain.... Money is a universal
reward. "I'm paying cash," and "Can you tell me who else offers
this service in this area?" should sink into the cognition.
James Pendleton, M.D., Bryn Athyn, PA
Legislative Alert The world changed on September 11,
2001. With almost 6,500 American dead, the highest one-day death
rate in American history since the September 17, 1862, clash at
Antietam, Maryland, during the War Between the States, nothing
will be the same in either the foreign or the domestic policy of
the United States.
With direct, massive attacks on tens of thousands of
American civilians in the heart of New York and Washington,
nothing can be taken for granted-not military protection of the
world's only Superpower, not a vibrant economy, not even your own
personal safety and security, or that of the ones you love. The
national complacency, the seemingly endless summer of prosperity
and financial security-all of that is in the past. So is the
culture of the Nineties, the callous indifference to religious
belief and the dismissal of that simple and humble patriotism
that characterized an earlier time.
The President of the United States today is heading to an
approval rating that may yet be the highest rating of any
President in American history, based both on his conduct in
office and his public performances, first, at the National
Cathedral, and subsequently in his addresses to both the Congress
and the American people. The plaudits keep coming in, noticeably
from former Vice President Al Gore. It appears that the President
himself has been transformed by these terrible events and has
touched the spirit of his fellow Americans in a way that is rare
for Presidents, except those ranked among the very greatest of
our chief executives.
At no time, with the possible exception of those somber days
immediately following December 7, 1941, has there been such a
palpable unity of mind and spirit on the part of the American
people. The contagion of good will has spread to Congress, which
is, at least temporarily, enjoying the warmest spirit of
bipartisanship in memory.
At no time has there been such a broad and direct empathy
with the victims of barbaric violence. So many of us know someone
who died, or someone with a family member or a neighbor who had
perished, or simply identified with a familiar and popular
personality, such as the beautiful and brilliant Barbara Olson, a
At no time has there been such a graphic display of heroism
and sacrifice, of charity and selflessness, on the part of
ordinary people who were, in an explosive instant, thrust into an
extraordinary historical circumstance.
And at no time has there been a more clear recognition of
why police officers and firemen, the best and bravest of our
public servants, are so important to us, and why, if we should be
lucky enough to have one as a family member, we should be so
personally proud of that honorable connection.
Domestic Policy Impact
The impact on the course of domestic policy has already been
profound. Virtually every major legislative initiative likely to
be before the Congress for the rest of the term is related in
some way, directly or indirectly, to the terrorist attacks and
the new war effort. It is likely that work on the 13 major
appropriation bills will be transformed into work on a Continuing
Resolution, which would fund the government at current levels.
The Homeland Security agency, to be run by Pennsylvania Governor
Thomas Ridge, is another top item on the agenda. It also appears
that work will continue on the education reform bill, a version
of which has passed both Houses of Congress.
Among the casualties of the Sept. 11 attacks:
The Sanctity of the Social Security and Medicare Trust
Funds. Remember the so-called Lock Box, celebrated by Al
Gore and Republicans alike? Members of Congress were saying,
before Sept. 11, that even if we had to trim the Defense
Department budget, it was out sacred duty to preserve, protect,
and defend the Social Security Trust Fund-which, as Clinton's
former Labor Secretary Robert Reich admitted days before the
Sept. 11 attacks, is, was, and forever more will be nothing more
than an accounting fiction. It is not a real trust fund, but a
depository of government IOUs, which can only be redeemed by
increasing debt or raising taxes. Nonetheless, that fiction was
one that neither party in Congress was ready to challenge- until
Sept 11. Since then, Congress has enacted $40 billion to rebuild
New York City and fund the military, as well as an additional $15
billion in relief for the airlines. So much for keeping the Lock
As for Social Security reform, the report of the President's
Social Security Reform Commission, due this fall, will probably
be put off until spring, according to former Senator Daniel
Patrick Moynihan, now Commission Chairman.
Medicare and Medicare Prescription Drug
Coverage. There is deep division between liberals and
conservatives in Congress on this issue, and it is not easy to
find common ground.
The Patients' Bill of Rights. While bills have
passed the House and Senate, conferees have not met, and the
differences between the House and Senate bills are enough to
prevent an early resolution. Senate Majority Leader Thomas
Daschle (D-SD) has said the Bush White House would have to get
House Republicans to give ground in any such conference, but the
White House has not been very responsive to these appeals.
Moreover, the Senate bill would apply the PBOR to all government
plans, while the House bill would not.
Beyond the litigation provisions of the House and the Senate
bills, both would establish broad new regulatory powers to the
federal government to oversee, in highly prescriptive detail, the
operations of private medical insurance plans. Regulation
characterizes Congressional health care policy. Hostility to
enacting free-market alternatives in Congress is, and has been,
the norm, regardless of the rhetoric one hears from Republicans.
Economic Stimulus Plans
Look for Congress and the White House to push through a
program intended to boost economic growth. This means significant
tax reform. The outlines of that program will be determined by
bipartisan negotiation, but conservatives are pretty clear about
what they want:
First, allow companies to fully deduct the expense of
investments in new plants and equipment. The current
depreciation rules would be replaced by rules permitting
immediate expensing of these outlays. Such a change would boost
capital formation, and thus help the economy.
Second, accelerate the Bush tax rate
reductions. Many of the components of the tax cut will
not take place until 2004, 2006, and 2010. The idea is to make
all tax rate reductions, IRA expansions, and repeal of the
inheritance tax (the death tax), effective as of September 11,
Third, reduce the capital gains tax rate.
Ideally, the capital gains tax should be repealed; it is a form
of double taxation that penalizes risk and entrepreneurial
efforts by business leaders and investors, and, of course, it
discourages reinvestment. A big reduction in capital gains
taxation would stimulate new investment and economic growth. Any
such reduction should be permanent.
Medical Insurance for Dislocated Workers
Senator Edward M. Kennedy (D-MA), once again beating the
hapless Republican Congressional leaders to the punch on the
issue of displaced workers, is preparing a comprehensive worker
relief package worth between $21 and $31 billion. It would
include an expansion of unemployment insurance and job training;
federal payment for COBRA coverage; Medicaid expansions; and
possibly expansion of the State Children's Health Insurance
Needless to say, Senator Kennedy, the driving force behind
Congressional health-care policy, thinks that the dislocation of
thousands of workers in the airlines and related industries could
be excellent candidates to enroll in SCHIP or Medicaid. Medicaid
is having difficulty getting folks enrolled, because of the
stigma of welfare and the bureaucratic structure. Not many
middle-class Americans would choose to give up their private
insurance to enroll in Medicaid, but Medicaid fits the health
policy objectives of the Left: more government control.
Congressional Republicans don't like Kennedy's health-care
fixation. But, as of this writing, Kennedy has a strategy and
they don't. Some Congressional Republicans are sure that the
conservative economists are right about the flawed structure and
dynamics of the medical marketplace. This is a chance to make
solid changes to promote consumer choice in the purchase of
private medical insurance and medical services. Two major
proposals are circulating on Capitol Hill:
Extend tax credits for COBRA coverage. Under
current law, based on changes made through the Consolidated
Omnibus Budget Reconciliation Act, employees who are separated
can have access to their group medical insurance for 18 months,
but they have to pay the full premium for coverage. For many
families, that can be a financial hardship. There is a lot to
recommend the COBRA arrangement as the vehicle for individual tax
credits for medical insurance. The tax credit could be designed
in such a way that it could help offset the cost of the
employer's plan, or it could be used for a plan independent of
the employer. Some have suggested that it could even be used to
enable persons to buy into one of the competing plans
participating in the Federal Employees Health Benefits Program or
FEHBP. (If some in Congress insist on using government programs
to expand coverage, it is hard to imagine why they would object
to using the FEHBP.)
The design of the tax credit would have to be carefully
drawn. For those without any income coming in, the tax credit
could be refundable. Lynn Etheredge, a health policy analyst at
George Washington University, suggests that the tax credit could
be applied to the families of firemen and police officers who
have been killed in the terrorist attacks. For persons not
covered by COBRA, a complementary program, says Etheredge, would
be a system of vouchers available through unemployment insurance
offices or other public agencies.
Allow employees to keep and roll over funds in flexible
spending accounts tax free to pay for medical services.
Employees of US Airways and United Airlines, among many other
corporations, have flexible spending accounts, tax-free accounts
from which they can pay routine medical expenses. However, under
current law, their employees either must use the funds in these
accounts or lose them. It is a profoundly stupid quirk in the
federal tax code. Congress can and should simply fix it. Perhaps
the best option is to allow employees to carry over $2,000
annually, which would enable those funds to accumulate for
meeting family medical crises or eventually to help offset
retiree health care costs.
At present, roughly half of the uninsured are only
temporarily lacking medical insurance because of a job loss or a
change in employment. While COBRA coverage is available to former
employees, as noted, many of them cannot take advantage of it
because they cannot pay the full premiums. But by allowing
workers to save and roll over funds in their FSAs, they could pay
for COBRA and other health-related expenses. This should have
been done years ago, but members of Congress don't seem to
understand how such a change would help millions of Americans and
create the foundation of the equivalent of medical savings
accounts (MSAs) within the framework of employer-based insurance.
Medical Costs and Insurance Coverage
Because of a more accurate accounting, the Census
Bureau reports that 38.7 million Americans are without coverage,
down from roughly 43 million a couple of years ago. But analysts
expect the number to rise again following the impact of the
layoffs and the economic slump. Meanwhile, the Center for
Studying Health System Change says that overall medical costs
rose 7.2% last year, driven primarily by an increase in hospital
spending, which accounted for 47% of all increases last year).
Look for insurance premium increases to go back up to double
digits. One solid indication of what is ahead is the release of
the projected figures for the FEHBP, which is projecting a
premium increase of 13.3%. Historically, because the competitive
FEHBP has had a better record of containing cost than traditional
employer-based insurance, analysts see this big jump as ominous.
Robert Moffit is a prominent Washington health policy
analyst and Director of Domestic Policy at the Heritage