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Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
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Volume 58, No. 11 November 2002


Oregonians have the opportunity to offer themselves, by ballot initiative this November, as guinea pigs for the first state-wide "single-payer health plan." It's called Measure 23, the Oregon Comprehensive Health Care Finance Act of 2002.

"But they might as well call it the revolution," writes Shelley Herochik (The Business Journal, Portland 9/9/02).

"If the Oregon measure passes, it's just the beginning," stated Dr. Ida Hellender, executive director of Physicians for a National Health Program (PNHP). And if it loses, "we'll keep at it," promised co-chief petitioner Phil Dreyer.

The Cleveland-based Universal Health Care Action Network sees the Oregon effort as taking up where Hillary Clinton left off a decade ago. Her plan was "dead in the water from the beginning"-purportedly because of opposition from the "health care industry"-thus, "this is going to have to happen at the state level first," declared spokeswoman Rachel DeGolia (www.salon.com 10/8/02).

While Oregon is the only state voting on a single-payer initiative this November, its supporters are working constantly to find openings in any possibly receptive State. California defeated the first such initiative in 1994. Maine has a Health Security Board created by legislation in 2001 to develop a Universal Single Payer Health Care System for that State. Vermont is also a "leading contender to be number one," according to PNHP cofounder Dr. Quentin Young. Washington is planning an initiative drive for 2004.

In Illinois, large majorities in three counties and 27 municipalities and townships-83% in Cook County-have passed the Bernardin Amendment, a nonbinding referendum named for the late Chicago archbishop: "Health care is an essential safeguard of human life and dignity, and there is an obligation for the State of Illinois to ensure that every resident is able to realize this fundamental right. On or before May 31, 2002, the General Assembly by law shall enact a plan for the universal health care coverage that permits everyone in Illinois to obtain decent health care on a regular basis."

This measure faces a tough fight in the General Assembly, as constitutional amendments require a three-fifths majority before being submitted to the voters. The strategy is to keep building momentum until it eventually passes.

The project has by no means been abandoned on the national level. Former Presidents Gerald Ford and Jimmy Carter have been enlisted by the Robert Wood Johnson Foundation to launch a national effort to focus attention on the uninsured. "Congress must face health-care crisis" and "stand up for those who can't insure themselves," writes the Peoria Journal Star (10/05/02).

"Single payer" needs only one victory to institute a system that will wreck private medicine for decades if not forever. Private medicine has to win every single battle.

The "ambitious and audacious" Oregon plan would provide "the richest benefit package known to man" to every resident of the State, including seriously ill new arrivals who express an intention to remain. There would be no copayments or deductibles, and coverage would include every "medically necessary" item, such as long-term care, mental health services, preventive services, hearing aids, acupuncture, massage therapy, medically related transportation, and language interpretation.

Residents would not be required to drop their private insurance, but most would probably do so because they would be paying for the system anyway, according to Mark Lindgren, spokesman for the Health Care for All Oregon campaign.

Financing would be through a progressive payroll tax up to 11.5%, plus an increase in personal income taxes, with the top rate rising from 9% to 17%. Persons with incomes less than 150% of the federal poverty would be exempt from the additional income tax, but not the payroll tax. The maximum State tax bite for this program would be $25,000 for any individual (assuming any eligible individuals remain in Oregon).

More than one-third of the cost is supposed to be defrayed by shifting funds from all other federal and State health programs, including Medicare and Medicaid-assuming that the U.S. Dept. of HHS grants the necessary waivers.

Unlimited borrowing through revenue bonds-at the discretion of the Finance Board-would cover shortfalls.

Proponents admit to a cost of $19 billion per year, more than the current total State budget of $16 billion-while asserting that people should be asking "what will we do with the money we save?" Administrative costs are supposed to plummet from 25% to 5%, despite new tasks of monitoring utilization and quality, implementing price controls, establishing rules and "guidelines," and guarding against "discrimination" (some patients getting better care than others).

The Act reads that "each health care practitioner will decide what diagnostic and therapeutic procedures are necessary for participants under his/her care according to his/her legally defined scope of practice." However, a 15-member board- which shall have at least one "health service provider" and one "alternative health care provider"-shall establish a "global budget" for a hospital, group practice, or physician.

Up to $380 million is to be set aside to retrain health services workers displaced by implementing the Plan.

In press conferences announcing an AAPS media campaign about Measure 23, AAPS members Thomas Saddoris, M.D., an internist/allergist in Portland, and Robert DuPriest, Jr., M.D., a vascular surgeon in Eugene, warned of damage to the patient-physician relationship, compromised privacy due to bureaucratic monitoring, and a worsening shortage of physicians, particularly specialists. Both called on their colleagues to shake off their apathy and become politically active.

Outcomes Data: the Single-Payer Experiment

Canada on the Edge. According to an Angus-Reid poll, 8 out of 10 Canadians consider their system to be "in crisis." The percentage of Canadians giving the system a "very good" or "excellent" rating fell from more than 50% in 1991 to less than 25% in 2001. Quality is declining in the view of 67% of physician specialists. Neither the "spendthrifts," who call for more tax money, nor the "magicians," who call for better government management, have been able to end "hallway medicine" (Gratzer D, Human Events 3/19/01).

Involuntary Servitude in Quebec. In response to severe physician shortages in remote ERs, health boards may dispatch a bailiff to awaken a doctor in the middle of the night and serve him with an order to relocate as far as 500 km away on 15 hours notice. Any physician who has worked in an ER in the past 4 years may be subject to this conscription. Refusal to obey can result in a fine of $5,000 per day. When Bill 114 expires in a year, the provincial government plans to replace it with a requirement that physicians sign contracts allowing bureaucrats to dictate where they may practice. Bill 114 also forbids anyone to "encourage" or "advise" any physician to disobey the law-medical federations could be fined up to $125,000. Nevertheless, economist and author Pierre Lemieux is doing just that: "Civil disobedience may be the only language that the state understands" ( www.pierrele- mieux.org 9/14/02).

Four years ago, the government encouraged the early retirement of 1,000 physicians and reduced admissions to medical schools (National Post 7/26/02).

NHS Errors. The British Medical Journal estimated that if the error rate in the UK was equivalent to that attributed to New York hospitals by the Institute of Medicine, some 300,000 patients (4% of admissions) experienced an error each year, and some 45,000 died partly because of it. An actual study found an "adverse event" in 11.7% of patients admitted. Such errors contributed to some 70,000 deaths per year. "Mistakes were inevitable because there were too few medical staff, who were forced to work too quickly to cope with intense demand," writes Prof. Sir G. Alberti (BMJ 2001;322:501-502,517- 519).

Orwell Lives. Embarrassing reports about care in the British National Health Service were followed by Clause 59 of the Health and Social Care bill, which imposes fines of up to 5,000 for breaking the rules on reporting. The government will control the statistics; patient and consumer groups will not be able to check on doctors' workloads, hospital conditions, or waiting times. Community Health Councils are being replaced with weaker Patients' Advocates, and the Patients' Charter with "Your Guide to the NHS." Instead of "rights," the latter concerns expectations and responsibilities, such as keeping appointments, treating staff with respect, and prompt payment of any charges (Guardian Unlimited 1/28/01, 2/25/01).

Administrative Cost Hikes. In the U.S. single-payer system for the poor (Medicaid), expenditures for "administrative activities" increased fivefold between 1995 to 1998 in the 10 states for which the Government Accounting Office (GAO) could obtain data. "These are, not surprisingly, states which have a history of Robert Wood Johnson Foundation grant activity-school- based health care is a long-time RWJF project," writes Linda Gorman of the Denver-based Independence Institute.


AAPS High-Tech Media

To coincide with the ER television episode portray- ing a possible smallpox outbreak, and a smallpox vaccine policy announcement from the Bush Administration, AAPS public relations counsel Kathryn Serkes did our first satellite feed, reaching more than 200 television stations.

Radio spots on Measure 23 will be airing in a number of towns in Oregon. They are available to download from www.aapsonline.org, along with additional analysis of the proposal, and the statement on smallpox.

If you are not receiving periodic alerts, we do not have your e-mail address. Don't miss our government affairs reports in the waning days of the 107th Congress: send your address to [email protected].


Another AAPS Member Runs for Congress

An ophthalmologist and AAPS member since the mid 1990s, Marilyn F. O'Grady, M.D., of Garden City, NY, is the Republican and Conservative candidate for the 4th congres-sional district, facing incumbent liberal Democrat Carolyn McCarthy. Her campaign web site is ogrady2002.com.

Dr. O'Grady supports decreasing Medicare's bureaucracy, allowing physicians to opt out of Medicare without patients losing coverage, altering the tax code to allow individuals to deduct insurance premiums, and reducing mandates on insurance to make a greater variety of products available.


Dr. Faria Appointed to CDC Committee

Miguel A. Faria, Jr., M.D., editor-in-chief of The Medical Sentinel, has been appointed to the Injury Research Grant Review Committee of the Centers for Disease Control and Prevention. In 1996, Dr. Faria was one of three physicians to testify before the House Appropriations Subcommittee for Labor, Health, and Human Services against the agency's use of biased data to support a gun-control agenda.

A retired neurosurgeon, Dr. Faria is the author of Vandals at the Gate of Medicine, Medical Warrior, and Cuba in Revolution: Escape from a Lost Paradise (www.haciendapub.com) , and more than 90 articles.


90% Non-Compliance to Date

By late September, fewer than 10% of the 2 million entities that CMS thinks are subject to HIPAA had filed for an extension for compliance with the electronic transmission standards. The deadline is Oct. 15. CMS help-line staff finds that many physicians who call can't figure out how to fill in the form on- line-simplicity itself compared with the standards. Those who can't afford $100,000 for a consultant need to see the "country doctor escape" at aapsonline.org.

AAPS Supports Dr. Sell's Petition for Cert

On Oct. 7, AAPS filed an amicus curiae brief before the U.S. Supreme Court in support of Dr. Charles Sell's Petition for Writ of Certiorari, appealing the Eighth Circuit's decision that he could be forcibly drugged with antipsychotics (see AAPS News Nov 2001, April and May 2002).

AAPS argues: "By fiat, the Eighth Circuit has granted the federal government an extraordinary means to punish without satisfying the burden of proof. Never before has an American court authorized a prison doctor to administer, in his sole discretion, any quantity and type of antipsychotic medication over the objections of a peaceful, pretrial prisoner.... Govern- ment must not have the power to drug defendants simply by claiming it beneficial to do so, which Justice Brandeis expressly warned against: `experience should teach us to be most on our guard to protect liberty when the government's purposes are beneficent' (Olmstead v. United States....)"

Charles Thomas Sell, D.D.S., is accused of a regulatory violation in billing Medicaid and has already been incarcerated for longer than the maximum sentence if convicted.

Drugs are purportedly justified "to dispel Dr. Sell's allegedly delusional views of government. But this court-ordered drugging is self-defeating with respect to that stated purpose," concludes the brief. (See www.aapsonline.org; click on "Prosecutions.")


Privacy Rule Appeals Filed

On September 10, AAPS, Congressman Ron Paul, et al., filed an appeal of the district court's dismissal of their constitutional challenge to the HIPAA Privacy Rule.

"The Privacy Rule injects the federal government into the very local and personal domain of medical records, past and future. It impacts everything from patient employability to insurability, and its casualty is true patient privacy," argue the plaintiffs in AAPS, et al., v. U.S. Dept. of HHS, et al.

Controlling precedent for standing and ripeness is Whalen v. Roe, which concerned whether the State of New York could build a database of patients receiving specific drugs that are often illegally used. The statute challenged there made the government privy only to records created in the future; patients at least had notice and retained the option of avoiding disclosure by not seeing a New York physician. Relying on facts brought out in discovery, which showed numerous safeguards for the data, the court upheld the statute.

The Privacy Rule, on the other hand, has no such safeguards. "Particularly objectionable is the laundry list of permitted disclosures without patient consent.... One of the enumerated items allows virtually any disclosure to any public official: `activities necessary for appropriate oversight of ... [t]he health care system'.... Once disclosed to a noncovered entity, repeated disclosures are then unlimited."

The lower court "misread the plaintiffs' action, which is not based on enforcement of the Privacy Rule"-that hasn't begun yet. "Rather, plaintiffs complain about compliance with the Rule"-which deprives patients of the right to speak confidentially to their physician [emphasis added].

The South Carolina Medical Association and others are also appealing the dismissal of their lawsuit against HIPAA. R. Duren Johnson, Jr., M.D., SCMA President, called HIPAA "another big bureaucratic morass,... another unfunded mandate" (AM News 9/23,30/02; www.healthdatamanagement.com).

Tip of the Month: Are peer review proceedings still privileged? Increasingly, the answer is no. On August 21st, a federal district court in Michigan admitted as trial evidence privileged peer review records sought by federal prosecutors. United States v. United Mem. Hosp., 2002 U.S. Dist. LEXIS 15657 (W.D. Mich. 2002). "The evidence tends to prove that Dr. Askanazi, through influence with the Hospital, manipulated the peer review process for his own benefit and that persons in charge of the process had an untoward relationship with Dr. Askanazi." That allowed admission of peer review records about doctors possibly victimized by the process. Id. at *20. Claims based on the Americans with Disabilities Act (ADA) and racial discrimination also pierce the peer review privilege. "Nearly all of the cases that have weighed the state-law medical peer review privilege against the interests advanced by the federal anti-discrimination laws have concluded that the privilege does not preclude discovery of peer review materials." Mattice v. Mem'l Hosp. of S. Bend, 203 F.R.D. 381, 385 (2001) (ADA claim) (citing Virmani v. Novant Health Inc., 259 F.3d 284, 293 (4th Cir. 2001) (race discrimination); Marshall v Spectrum Med. Group, 198 F.R.D. 1, 5 (D. Me 2000) (ADA); Johnson v. Nyack Hosp., 169 F.R.D. 550, 561 (S.D.N.Y. 1996) (race discrimination); Robertson v. Neuromedical Ctr., 169 F.R.D. 80, 83-84 (M.D. La. 1996) (ADA)).


Notes on Opting Out of Medicare

  • Do Not "Fail to Maintain Opt-Out." Remember to re- file your affidavit every two years. Otherwise, the opt-out will be nullified and all of the private contracts during that period deemed null and void. The physician may then have to file Medicare claims for services provided under voided contracts (63 FR 58814, 11/2/98; 42 C.F.R. §405.435).

  • Opted-Out Physicians Can Engage in Certain Self Referrals. "[A] physician who opts out of the Medicare program and is not receiving any payments from the Medicare program is not bound by the limitations in section 1877 of the Act and, therefore, can refer to entities with which he or she has a financial relationship" (66 FR 856, 1/4/01). But check your plans with an attorney before engaging in such referrals.

  • Physicians in Group Practice May Opt Out Individ- ually. "[W]hen a group physician has opted out, it does not affect the ability of the rest of the group members to furnish and bill for services they furnish to Medicare beneficiaries.... [H]owever, ... when a group physician has opted out, the group may not bill in its own name for services provided by the opt-out physician under a private contract...." (66 FR 856, 1/4/01).

  • Opted-Out Physicians May Order Medicare-Covered Services for Beneficiaries. "The physician or practitioner who has not been excluded under sections 1128, 1156, or 1892 of the Social Security Act may order, certify the need for, or refer a beneficiary for Medicare-covered items and services, provided the physician...is not paid, directly or indirectly, for such services (except as provided in §405.440 [regarding emergency and urgent care services])" (63 FR 58903-04, 11/2/98).

Detailed instructions for opting out are found on the AAPS web site, and legal consultation is available to members.

A Definition: William Braithwaite ("Dr. HIPAA"), director of the national HIPAA practice at PriceWaterhouseCoopers, told the audience at the Health Care Compliance Association's HIPAA Forum in Boston, June 13-15, that "reasonableness" is a term that will be sorted out in court. Juries will have the last say.


A Patient's Worth. My wife took our dog Porscha to the vet today. Porscha is a senior citizen among dogs and has elevated liver enzymes for an unknown reason-probably untreatable. The vet performed an ultrasound, which took about 30 minutes of his time. The cost was $240, which I gladly paid.

When I perform a carotid ultrasound on a human being, which takes about 30 minutes of my time, Medicare "allows" me to charge $30.23. On the RDVS (Relative Dog Value Scale), a Medicare patient is worth one-eighth as much as a dog.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


CMS Re-confirms "Country Doctor" Exemption. I called CMS, which correctly stated that physicians can be exempt from HIPAA and sent a confirming FAX taken from the Q&A at http://cms.hhs.gov/hipaa. Q: "If I am a provider who doesn't not [sic.] submit electronic transactions, do I need to file for an ASCA compliance extension?" A: ..."If you do not transmit [health information] in electronic form, you are not a covered entity and HIPAA does not apply to you...."

Please note that in Medicare language, physicians are "suppliers," not "providers," so the definition of "small" for the purpose of exemption from the Administrative Simplification Compliance Act (ASCA) requirement to transmit Medicare claims electronically is fewer than 10 FTEs.
Laurence Marsteller, M.D., Tucson, AZ


Boycott HIPAA. HIPAA regulations are an outrageous deprivation of free speech in that physicians are not allowed to use electronic transmission technology without being subject to 3,000 pages of legal control and consequences. It will be cheaper to shift from electronic technology to paper than to hire all the lawyers and staff needed to solve the maze of 200,000 government- imposed codes. Physicians must rebel against HIPAA. Passive acceptance means our status is nil.
Samuel Nigro, M.D., Cleveland Heights, OH


To an Opted-Out Physician. In response to your letter of resignation from the Medicare program, I would appreciate your keeping me on your list of patients, as in private practice.

Soon after I entered practice, Medicare was embraced by many physicians, largely because of the promise of payment for the care of indigent and other fee-resisting patients. I was one of the very few who opposed it on the grounds that universal third- party involvement had serious defects, moral as well as economic. I never participated and continued in private practice sans third-party involvement. Nevertheless, I remained a member of the local medical society, the OMA, and the AMA, but only to have a weak voice in protest to the direction medicine would be taking. When a protesting splinter (AAPS) broke away from the AMA, I joined it and have supported it since. I strongly suggest that you also join AAPS.

From the first, there was no doubt in my mind that Medicare was seriously flawed, that it was uneconomic because of its cumbersome administrative burden, and that it contributed seriously to corruption of both patients and physicians. It also brought the physician into an extremely vulnerable state of dependency on a third party, an intrusion by an ill-identified administrator dictating the practice of medicine.
S. Berthelsdorf, M.D., Portland, OR


Real Costs in Canada. Although my mother recently did obtain adequate emergency care in Canada, my brother-in-law went to Buffalo, NY, for care of his cancer, as did my sister for her possible cancer, and my niece for a potentially serious brain ailment. Is a 75% failure rate acceptable?

In touting the supposed low cost of the Canadian system, the Minister of Health fails to include the cost (to the patient) of queuing; the cost of lawyers and lobbyists striving to obtain additional funding, or ways to circumvent the taxes needed to pay for "free" care; the cost of the huge government bureaucracies that regulate medicine and determine how much care to provide; and the devaluation of the Canadian currency.

The Minister states that Canadians are pleased with their system, but how can she know what system they would choose when in fact they have no choice?
Robert P. Gervais, M.D., Mesa, AZ


To ACP/ASIM: As I retire after 40 years of practicing internal medicine, I feel compelled to comment on the ACP's 7- year plan for achieving universal coverage:... It is like attempting to douse a fire with kerosene.... The astronomical - cost is driven by the engine of perceived immunity to price by patient, doctor, and hospital alike.... Measures to return the husbandry of the [medical] dollar to the person who earned it hold...the only real hope. And do you now wish Congress to "enact legislation to make affordable coverage available to all people with incomes up to 200% of the Federal poverty level..."? That is $32,000, almost the norm for the average head of household (and pretty much what several prominent and busy Atlanta internists are now netting). Where is the premium, which they now can't seem to afford, coming from? Does laundering the funds through the federal government and/or the insurance industry somehow magnify the money? Or does it cause the currency to evaporate? And you wish to "discourage individuals from voluntarily opting out of insurance coverage"? As in the strictures of the German Sickness Fund or the Canadian formula, which vigorously funnel doctors to other countries?
William C. Waters III, M.D., Atlanta, GA

Legislative Alert

House Passes Medical Liability Reform

The House of Representatives, with the backing of the Bush Administration, passed the Health Act of 2002 (H.R. 4600), a major medical liability reform bill. The bill would limit non- economic damages, pain and suffering, to $250,000, and would impose limits on attorneys fees' and punitive damages. On September 26, the bill passed by a margin of 217 to 203, with most Republicans voting for the bill and most Democrats voting against it. Most observers think that the measure is unlikely to survive in the Senate.

Doctors' Medicare Pay is Stalled in the Senate

When the House passed its Medicare prescription drug bill last June, it included roughly $30 billion in Medicare increases for doctors, hospitals, and other medical professionals over the next ten years. Senate Finance Committee leaders Max Baucus (D-MT) and Charles Grassley (R-IA) have agreed to a package totaling $41 billion (over ten years) that would also reverse the cuts in fees for doctors, hospitals, and nursing homes. However, this measure may become another vehicle for the bitterly debated drug plans that are taking new shape. No Senate floor action on the measure has been scheduled.

The FEHBP Breakthrough on Health Care Accounts

Give the Hon. Kay Cole James a big hand. Never heard of her? Well, if you are a doctor, she should be a household name. She is the bright and aggressive new Director of the U.S. Office of Personnel Management (OPM). OPM, you may recall, is the federal agency that runs the Federal Employee Health Benefits Program (FEHBP), the largest group health insurance program in the world. Hundreds of plans compete for the dollars of Members of Congress and federal workers and retirees. While OPM announced that premiums are likely to increase an average of 11% next year, other insurance premiums are expected to jump between 15 and 20%.

James has just struck a huge blow in favor of patient freedom. FEHBP enrollees can now choose a plan with a special health reimbursement account. This year OPM has accepted a proposal from the American Postal Workers Union (APWU), one of the largest of the postal workers' unions, to offer a new standard option through Definity Health, a prominent company that markets consumer-driven medical care. This includes a health care spending account worth $1,000 per person or $2,000 per family, which can be used to pay for doctor's office visits, dental and vision care, lab tests, and prescription drugs. If the entire allotment is used in a given year, out-of-pocket payment of a portion of expenses up to $600 per person and $1,200 per family is required, and thereafter the plan will cover all medical expenses. Funds left at the end of the year can be rolled over tax free.

In related matters, James has ordered OPM staff to review OPM regulations and put them into plain English, opened a new dialogue with private insurance carriers asking them to expand their coverage, and undertaken an independent review and analysis of the large number of mandates that the Clinton Administration and its allies in Congress imposed on the program over the past several years. Meanwhile, she has provided patients with access to new information technology that gives individuals and families greater capacity to compare plans on the basis of quality, benefit, and service. What a difference. This is not Clinton's OPM.


The number of Americans without medical insurance coverage has climbed to 41.2 million, an increase of 1.4 million, according to Census Bureau figures. The reporting has tightened from previous years, so the figure is arguably more accurate. The caveats are well known: about 25% of the uninsured have access to employer-based coverage, but don't take it-some because they think they are immortal; others because they would rather spend limited disposable income on something else; and others because they cannot afford it.

With the rise in medical costs and the impact of the recession, it is remarkable that the figure is not higher; but next year it probably will be. The greatest increase in the uninsured was among minorities and employees of small businesses.

In small businesses, the problems of employer-based medical insurance are always the most severe. If there is coverage, workers often have no choice in the matter at all. According to an April 2002 survey by the Kaiser Family Foundation, 71% of small businesses who offer medical insurance to their employees offer only one plan. And 28% of all firms say they have switched coverage in the past two years. This business decision may not be good for the continuity of care of patients. For many, switching plans may also mean switching doctors. But, as a matter of government policy, the patient is not the key decision-maker.

With the increase in the number of Americans without coverage, Bush Administration officials are pressing for action. The problem is greatest for low-wage workers, particularly those in small business. According to a separate Labor Department analysis, only 24% of small businesses with low-wage workers offer health insurance, compared to 88% of large businesses with a similar workforce. Labor Secretary Elaine Chao is pressing Congress to adopt legislation providing for association health plans. The proposed legislation would give small businesses the same purchasing power and federal regulatory regime that governs large corporate plans and large union plans, called Taft-Hartley plans. By allowing small businesses to pool their resources under the same legal playing field, the Labor Department estimates that the savings of such an arrangement could be as much as 13%.

Treasury Secretary Paul O'Neill has issued a renewed call for the Congress to adopt the president's program of tax credits for the uninsured, which would provide $1,000 per person and up to $3,000 per family. O'Neill also observed that the Trade Adjustment Act (TAA) provided for a tax credit for displaced workers of 65% of the cost of a premium; the TAA credit, however, is limited to workers who have lost coverage as a result of adverse trade impacts on their jobs, and workers between the ages of 55 and 64 who have pension plans administered by the Pension Benefit Guaranty Corporation. For his part, Secretary O'Neil noted that the Treasury Department and the IRS made a favorable ruling last June on the Health Reimbursement Accounts, which enable employers to set up these health accounts tax free and allows the funds in those accounts to be rolled over from year to year. This is, as noted, what OPM has promoted in the federal employees system.

Punishing Progress

Meanwhile, in the Senate, no good deed goes unpunished.

HHS has a waiver process through which states can get relief from federal rules and regulations. During the 1990s, one of the most energetic governors in using this process was none other than Tommy Thompson of Wisconsin, who used it to impose work requirements on welfare recipients. The waiver process also applies to Medicaid. The Bush Administration has developed an initiative to expand coverage under the Health Insurance Flexibility and Accountability (HIFA) demonstration project, a new and expedited waiver process. This was created to give states the flexibility to use unexpended funds from the State Children's Health Insurance Program (SCHIP) and Medicaid to cover adults through private insurance. New Mexico, as noted last month, has won approval to cover 40,000 persons.

Needless to say, liberals don't like it one teensy bit. Last July, the General Accounting Office (GAO) issued a critical report that said the Bush HIFA initiative raised "legal and policy concerns" and that SCHIP funds were not intended for adults. Senators Max Baucus (D-MT) and Charles Grassley (R-IA) of the Senate Finance Committee, in the very same bill that they have proposed to increase payments to doctors and hospitals, have now included a provision that would prohibit the Bush Administration from using SCHIP funds to cover childless adults. The Baucus-Grassley provision would also set up a detailed procedure to ensure "public participation" in the state waiver process, require HHS to publish a report each month in the Federal Register of all the proposed waivers and amendments to waivers using Medicaid and SCHIP funds, and impose restrictions on HHS ability to waive certain benefit requirements. In other words, the Senate wants to slow the fast track on waivers for private coverage expansion. The effect would be to send unexpended funds back to the federal treasury.

Question for those who follow the big picture: Would there be the same sort of angst about the HHS fast-track waiver process if the Bush proposal were somehow to have the effect of expanding Medicaid coverage rather than personally chosen private sector coverage?

The Left understands that the debate is about power. Too many in the "health care industry"-a weird phrase-still don't get it. They still think it is about micromanaging their competitive position, using federal and state legislatures to secure the goals of their short-term business plan.

Policy folks know different. At the center of this debate is a profound difference: should medical care in America be transformed into a public utility, financed and managed by government officials, or into a patient-centered, consumer-driven system? That is why every single debate on Capitol Hill is tantamount to a proxy battle over national health insurance. This is evident in the debate over the uninsured, the stimulus package, the patients' bill of rights legislation, the trade bill, Medicaid expansions, Medicare prescription drugs, and the reform of Medicare itself. The resolution of each of these is inevitably a triumph of government or patient control. And that includes the current debate about the HHS waivers.

Can the States Tame Adverse Selection?

If the Bush Administration is successful in promoting tax credits or premium subsidies for private insurance, or some innovative states decide to promote consumer-based voluntary purchasing arrangements for health insurance, using waivers, how does one guard against adverse selection, or risk segmentation? How does one prevent the bad risks from congregating in a few plans, driving up the insurance rates, driving out low-risk individuals, and causing an uncontrollable cost spiral? Fair questions.

Critics of choice in medical care often say that the adverse selection problem is insoluble; therefore, patient autonomy and consumer choice of plans should be abolished. Not so fast, say advocates of choice.

Ed Haislmaier, the President of Strategic Policy Management, a Washington-based consulting firm, and a former policy analyst at the Heritage Foundation and Pfizer Corporation, has developed a reinsurance pooling arrangement for state officials. In short, they would charter a non-profit corporation, administered and financed by medical insurance carriers, to which all carriers operating in the state would belong. The organization would set rates, and member plans would pay a premium to a risk pool for each risk ceded to the pool. Most importantly, there should be no taxpayer subsidy to the reinsurance pool, to prevent "gaming" the system and promoting adverse selection against the taxpayer. Competing health plans would thus have a structure to encourage efficient coverage over the broadest possible pool of individuals and families, and could be made whole if they incurred any substantial additional costs from the subscription of high-risk enrollees.

Universal Coverage-British Style

While roughly 1.3 million British citizens are waiting for hospitalization, the British National Health Service is once again demonstrating that it is getting its priorities in order. Her Majesty's Government is pleased to announce that it will subsidize "sex toys" for British women who suffer sexual problems-as nearly half of them do, according to Dr. David Goldmeier, a consultant at London's St. Mary's Hospital (Sunday Observer 9/29/02). Meanwhile, up in Scotland, elderly patients in Aberdeen Royal Infirmary are told that they must get up, if they are able, carry their own bedpans to a sluice area, and dump them. The stench was terrific, according to the report, and made it difficult for patients who were trying to eat (Evening Express 9/18/02). Well, that the price you pay when health care is "free."

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