Volume 61, No. 11 November 2005
Hurricane Katrina not only devastated the Gulf Coast, but
could be used to batter down still more of the American economy
and Americans' civil liberties if the wrong "lessons" are
learned. Or, by exposing stark realities, it could sweep away
some cherished misconceptions and the policies based on them.
Consider the private and the public responses:
Home Depot mobilized four days before the storm hit,
bringing generators and hundreds of extra workers to nearby
areas. Within a day, all but 10 of the 33 stores in the Katrina
area were open, and within a week, all but four of the nine in
metropolitan New Orleans were open.
Wal-Mart's relief supplies arrived days before FEMA's did.
Local employees fended off looters and gave shoes, food, water,
medicines, and other supplies to the needy. Ill-equipped National
Guardsmen got holsters and ammunition from Wal-Mart. Its
emergency call center aided not only displaced employees but
nonemployees who couldn't get timely help from government. All
but 14 of the 126 stores shut down by the hurricane were reopened
by Sept 18.
FedEx not only staged more than 500 tons of relief supplies
so they could be delivered quickly after the storm passed; its
workers salvaged a FedEx radio antenna so that the 82nd Airborne
and other rescuers had communications.
While Washington Parish waited for help from FEMA (which was
only beginning to set up assistance offices 18 days after the
storm), Nature's Way Purewater of Pennsylvania sent in trucks,
and Temple-Inland got the water system back up. A Southern
Baptist Convention team from Illinois served more than 14,000
meals a day (see Fortune 10/2/05).
The enduring symbol of government help will be the
Superdome, a hellhole of misery and chaos, where people were
forced to go while local government deliberately decided there
was to be no food or water, lest people be "encouraged" to show
up. Meanwhile, help that was not "coordinated" by government
agencies was repeatedly turned away.
Dr. Mark N. Perlmutter, a Pennsylvania orthopedic surgeon,
said he was ordered off the tarmac of the New Orleans airport,
for lack of FEMA credentials, though he was the only doctor there
and patients were dying. He was able to get them to accept the
insulin and morphine he had brought the pharmacy was totally
out of insulin (2theadvocate.com).
Up to 500 airboat pilots, who had spent thousands of dollars
of their own money on supplies, were threatened with arrest if
they tried to rescue drowning people in New Orleans. They were
told it wasn't safe and after seeing people shooting at their
would-be saviors on the news, some came to that conclusion on
their own (Sun-Sentinel S. Fl. 9/2/05).
Because it brought four armed police officers for
protection, the Phoenix Fire Department's Urban Search and Rescue
team credited with rescuing 400 Katrina survivors from rooftops
and flooded freeway overpasses has been suspended by FEMA
(Ariz Daily Star 10/5/05).
Victims of Katrina lost not only their homes but their civil
rights. Lest people defend themselves against marauders, law
enforcement officials arbitrarily confiscated private firearms.
New Orleans Police Chief Edwin Compass declared that only police
would be allowed to have guns. A federal court enjoined further
seizures after the Second Amendment Foundation and the NRA filed
suit (AAPS News of the Day 10/5/05).
Government's contribution to the cause of the flooding also
needs scrutiny. Construction of a barrier that might have
protected New Orleans was stopped by a federal judge in 1977,
when Save Our Wetlands filed suit claiming the environmental
impact statement was deficient. The Mississippi River Gulf
Outlet, constructed by the Army Corps of Engineers, and the
Corps's shoddy maintenance of floodwalls, are partly responsible
for the disaster. And federal flood insurance encourages
construction in flood plains (Wall St J 9/26/05).
In the aftermath, there are the usual cries to expand the
power and scope of government, redesigning not only New Orleans
but all of American medicine.
Organization charts are to be redrawn again: should FEMA be
elevated back to Cabinet level? Local authorities couldn't
maintain order, and people didn't follow evacuation orders
(though buses could've helped): is it a good time to empower the
military to enforce a bird flu quarantine, or to repeal the Posse
Comitatus Act? Patients don't know what medicines they take:
should we put them all on the internet or in a central data bank?
Medical care is disrupted on the Gulf Coast: should we "grab the
chance to fix health care," as single-payer advocate Nicholas
Almost anything is a pretext to advocate for digitizing and
centralizing medical records these days. Some paper records were
destroyed, and some hospital patients got transferred without
their records. But at Ochsner Hospital, the doctors went back to
paper and pen. As Dr. David Stern of Torrance, CA, notes, "the
least important consumer of power in the hospital was deemed to
be the electronic medical record system." Besides, the
temperature inside critical computer and network equipment topped
150øF (Network World 9/15/05).
As Americans come to rely more and more on the federal
government, they should remember the words of New Orleans Mayor
C. Ray Nagin, who blamed his city's breakdown on Washington, DC:
"They kept promising and saying things would happen. I was
getting excited and telling people that. They kept making
promises and promises" (NY Times 9/5/05).
"A federal government that maimed a great city must not have
the conceit to think that it can micromanage its future," writes
David Schoenbrod (Wall St J, op. cit.).
Ditto for the rest of the nation.
False Claims Act (FCA). Despite a tacit promise to go
easy on providers who couldn't comply with Medicare regulations
during Hurricane Katrina, the Office of Inspector General will
use all the tools at its disposal, including the FCA, in investi-
gations of possible neglect and abuse of hospital or nursing home
patients during the disaster. OIG will look both at providers who
did not evacuate patients (such as the owners of St.
Rita's nursing home who face 34 counts of negligent homicide) and
at those who did. Providers need to document thoroughly
the decision-making process that prevented evacuation, and the
backup plan in case buses didn't show up. "They need to be
prepared to be scrutinized" (MCA 10/3/05).
EMTALA. HHS Secretary Leavitt gave personnel in over-
whelmed emergency rooms in Alabama, Florida, Louisiana,
Mississippi, and Texas permission to redirect patients without
first screening or stabilizing them. The waiver was later
extended to cover facilities in Arkansas, Colorado, Georgia,
North Carolina, Oklahoma, Tennessee, West Virginia, and Ohio. The
waiver is not a grant of immunity, but just some "flexibility" to
show that the Secretary understands that under some circumstances
a patient might be better off elsewhere [perhaps where running
water and electricity are available]. Nevertheless, compliance
officers are advised to fill in documentation gaps to cover
future investigations or lawsuits.
"It is unlikely that HHS or a judge would enforce many
EMTALA issues related to the hurricane, but private suits should
still be taken seriously... especially since the waiver only
suspended EMTALA obligations for the first 72 hours after a
hospital initiated its emergency protocols."
The message: "When disaster strikes, compliance and
documentation are still necessary" (MCA 9/19/05).
HIPAA. Secretary Leavitt relaxed some Privacy Rule
requirements to allow disaster care in hurricane-ravaged areas.
New patients could be seen even if they hadn't gotten a notice of
privacy practices, and doctors could speak with family or friends
without first getting a patient's permission. The hurricane also
swept away HIPAA compliant and noncompliant data protection
measures without distinction. To avoid future Security Rule
violations, physicians with electronic records are advised to
have remote off-site backups and emergency generators (HIPAA
Compliance Alert 9/12/05).
In the age of Information Technology, a great city and parts
of the Gulf Coast suddenly dropped off voice, data, and video
communications. Nothing much had changed since Sept 11, 2001, to
correct the inability of first responders, civilian authorities,
and the National Guard to communicate with each other. Human
couriers were needed to carry messages. Few satellite phones were
available; more than 30% of cell sites were disabled; 37 of 41
radio stations were lost.
In 2005, the U.S. couldn't match the standard set in the
1906 San Francisco earthquake. Soldiers were on the streets
within 20 minutes, and the first relief train arrived from Los
Angeles within 18 hours. By the next morning, Teddy Roosevelt's
Secretary of War had ordered supply trains from across the
country to head toward San Francisco (John Wohlstetter,
Bandwidth, September 2005, www.discovery.org).
In an oft-cited article, Malcolm Gladwell calls the "moral
hazard myth" the "bad idea behind our failed health-care system"
(New Yorker 8/29/05). The lack of enthusiasm for
national health insurance and the "thicket of co-payments and
deductibles and utilization reviews" are based on the belief that
insurance can produce risky and wasteful behavior. Gladwell fears
that if people are allowed to save money by forgoing care and
uninsured people spend an average of $934 per year on medical
care while the privately insured consume $2,347 worth they will
cut back on useful as well as frivolous care. And look at tragic
results of omitting dental care!
Gladwell believes in social insurance: young, healthy people
should be delighted to spend thousands of extra dollars to
subsidize others, in return for a sense of security. Putting more
burden on the consumer (at the time of service rather than while
paying premiums or taxes) "reduce[s] the social redistributive
element of insurance."
Is it right that people who have rotting teeth should have
to pay more than those who don't? The goal of social insurance is
not just redistribution of income, but the redistribution of the
burden of illness. Utopia is equal pain.
[For insights on socialized dentistry, search UK news sites
on terms like "dentist," "queue," or "pulled his own teeth."]
The moral hazard of the welfare state the creation of an
underclass with an entitlement mentality is now widely displayed
in the aftermath of Katrina. A physician who went to help at the
Houston Convention Center reports:
Volunteers had created a medical center, a cafeteria,
showers, and comfortable sleeping places, setting out mountains
of good quality donated items. But only 20% of the people were
appreciative, 10% were without comment, and 70% were rude or
abusive. They complained about being served Jason's Deli instead
of pizza and beer or about being asked to help women carry their
mattresses. People evacuated free by American Airlines trashed
the flight academy hotel.
"Now these same people who cursed me, refused my city's
generosity, who refuse to help themselves, are demanding
handouts on their own terms!"
Oct 22, 2005. SEPP meeting in Pittsburgh, www.sepp.net.
Feb 11, 2006. Board of Directors meeting.
Sept 13-16, 2006. 63rd annual meeting, Phoenix, AZ.
"The word no liberal uses is `enough.' There is no such
thing as too much government. There is no point at which, say,
Ted Kennedy will ever sigh with satisfaction and say, `Well, at
last we've made it.... At long last we have all the government we
need.... Even one more law or regulation, in fact, might be
HIT the Key to Curbing Fraud
While health information technology is touted as a way to
improve medical outcomes and reduce costs, it also promises
innovative ways to reduce fraud and abuse in federal health
programs, says HHS Inspector General Daniel Levinson.
The OIG's goal is to make data more accessible to law
enforcement agencies. Health IT "provides transparency that makes
fraud difficult," Levinson said (BNA's HCFR 9/28/05).
Katrina Destroys Court Data
All over Louisiana, people are in prisons with no paperwork
or computer record and no way to adjudicate their cases. None of
the parish court systems were linked to a centralized system for
backup or disaster recovery; some data from tapes may be
salvageable. It is estimated that 80% of court IT infrastructure
in New Orleans will have to be replaced (Network World
Computer systems and media can be destroyed by fire or flood
as effectively as paper can, observed AAPS Executive Director
Jane Orient, M.D. Recovery may depend on remote backup. But there
is an additional computer vulnerability not tested by Katrina:
shutdown of the electric power grid and destruction of computer
circuitry by EMP (electromagnetic pulse) from a high-altitude
nuclear explosion possibly the gravest existing threat to
A single SCUD missile carrying a nuclear warhead could wipe
out electrical systems across much of the continental U.S. for
months or years, writes Sen. Jon Kyl (R-AZ), Chairman of the
Senate Judiciary Subcommittee on Terrorism, Technology, and
Homeland Security. Transformers for regional substations take
more than a year to build and are no longer manufactured in the
U.S. According to recent testimony, functional degradation could
have "irreversible effects on the country's ability to support
any large fraction of the present human population." Hardening
key infrastructure and storing vital backup equipment is vital
(J Civil Defense
A paperless medical record system could be wiped out
instantly by an EMP. But the loss of medical records would cause
a tiny number of casualties compared with those resulting from
the loss of safe water, refrigeration, transportation, and other
essentials for a post-1880s society.
IBC Sued for Interfering with Private Contracts
While Medicare carriers assert that patients are not allowed
to contract privately for "covered" services unless they see an
opted-out physician, private insurance is not supposed
to limit a patient's right to seek care outside the system.
But a deceased patient, Sandra S. Lobb, who was insured by
Independence Blue Cross (IBC), was repeatedly denied treatment
for alcohol dependency although her private physician prescribed
it and her family desired to pay for it.
In a lawsuit in the U.S. District Court, Eastern District of
Pennsylvania, Mrs. Lobb's family asks whether insurers may
"overrule the medical judgment of properly licensed physicians
and psychologists and alone determine whether...care...is
medically necessary and medically appropriate" (McDermott v
State-approved contracts between IBC and providers contain
state-mandated language prohibiting acceptance of payment for any
otherwise covered services that IBC determined to be medically
unnecessary. Moreover, the contracts contain a "confidentiality
clause" that prohibits both doctors and hospitals from disclosing
the terms of the contract to subscribers. Facilities asserted
that they had to discharge Mrs. Lobb to "custodial
care/confinement" despite her numerous medical complications. Her
physician stopped treating her because the provider contract
obliges the physician to "participate in, cooperate, and comply
with all decisions rendered in connection with Independence's
Utilization Management Program."
Had Mrs. Lobb been uninsured, these constraints would not
have been placed on her care.
IBC is not licensed to practice medicine, notes attorney
Lawrence Otter in the Second Amended Complaint. Otter is former
Senior Deputy Attorney General of Pennsylvania.
Otter also argues that the actions of defendants rise to the
level of state action that impairs their right of contract under
Article 1 Section 10 of the U.S. Constitution.
The complaint is posted at
TeenScreen Under Legal Attack
In September, Rutherford Institute attorneys filed suit over
the school-based mental health screening program called
TeenScreen on behalf of Michael and Teresa Rhoades and their
minor daughter Chelsea, in the U.S. District Court for the
Northern District of Indiana, South Bend Division (Rhoades v.
Penn-Harris-Madison School Corporation et al.)
In December 2004, Chelsea had been diagnosed with obsessive
compulsive disorder and social anxiety disorder on the basis of a
computerized questionnaire that took about 10 minutes to
complete. Though she appeared to be a normal, happy, high-
achieving teenager, the "test" revealed that she enjoyed cleaning
house and didn't like to party very much. The majority of other
students who took the test, she said, were also found to suffer
from some type of mental or social "disorder." Students had to
take the test unless they had a parental opt-out form; Chelsea's
parents said they had not received the form and didn't know about
the test in advance.
Students were presented with an "assent form" to sign, but
Chelsea "did not have the legal capacity to consent and she was
not aware of the purpose of the assent, the nature of the
test..., or the purpose for which the test was being given."
The complaint alleges that plaintiffs were, under color of
state law, deprived of their fundamental rights to the custody
and care of their daughter as well as their privacy rights.
Defendants allegedly breached their duties to obtain consent and
to exercise due care in making or communicating any diagnosis,
and caused severe emotional distress (see
TeenScreen is funded by federal tax dollars funneled through
state governments and promoted by educational grants from
pharmaceutical companies. Medicaid then buys drugs, including the
most expensive new antipsychotics, for the new customers "found"
by the screening programs. After receiving grants of around
$250,000, Medicaid programs may end up spending $250,000,000 on
the company's drugs (Evelyn Pringle, Scoop 6/13/05,
Parents fear that they will be pressured or even coerced to
have their children drugged.
Hurricane Aftermath. Katrina has temporarily blown away
the implementation of the government's "pay for performance" scam
(Part B News 9/12/05). Owing to the recovery costs,
plans to implement P4P and plans to address the flawed "Sustained
Growth Rate" (SGR) payment formula have both been submerged. The
hopes of the AMA and specialty societies that Congress would
reverse Medicare pay cuts scheduled to be a minimum of 26% over
the next 6 years are sinking fast. Meanwhile, Part B premiums
will be increased by 13.2% in 2006. CMS complains that greedy
physicians are working harder to try to maintain their income.
How dare they!
No one has heard of any 26% cuts in salaries of HHS
bureaucrats or payments to carriers for processing claims.
Opting out is sounding better and better.
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY
Disaster Pending. Medicare and Social Security are
impending disasters, but not for the U.S. government. It is under
no obligation to pay amounts currently promised. Unless "the
people" get their act together, the most likely resolution is
that the government will continue wasting huge sums on the pet
projects of the governing elites, draining the private sector and
damaging the economy while making its books balance by cutting
actual services to zero.
Linda Gorman, Independence Institute, Englewood, CO
Trust in Government. When I spent a summer in Brazil, a
friend told me she had been saving up and almost had enough money
to buy a car. One day the government suddenly froze all bank
assets and devalued the currency. When she once again had access
to her assets, she had only enough to buy a set of tires. Maybe
it couldn't happen in America. But what if there's a crisis used
to justify a "one-time tax," as on retirement funds?
Robert S. Berry, M.D., Greeneville, TN
HSAs, HRAs Only. Starting with MSAs in 1997, our
experience has been so positive that my agency decided two years
ago to do only high-deductible insurance with HSAs or HRAs. We
prefer the former, but some employers have control issues. If a
potential client does not want to go that route, we walk away. As
my wife says, "We require our clients to be smart enough to do
business with us." We realize 45% less in commissions per case on
average, but it's the right thing to do. By adding other
retirement plans such as 401(k)s to our product mix, we have
doubled total agency revenue in 4 years. Our clients are
beginning to regard us as consultants, rather than salespersons.
We hope others will emulate us.
Edward Dee Hinds, Paso Robles, CA
Paying the Deductible. How could an employee pay
qualified expenses from an HSA if incurred before the HSA is
fully funded? I have several suggestions: (1) Arrange for time
payments. This used to be commonplace with childbirth: go home
with a new baby and a coupon book. (2) Put it on your credit
card. (3) Arrange for a short-term loan with a financial
institution (some HSA administrators are doing this automat-
ically). (4) Arrange for the employer to pre-fund the HSA or
advance funds under these circumstances. (5) Let the bills pile
up and delay paying until the money is in hand.
Greg Scandlen, Consumers for Health Care Choices
Mandates. The best way to make medical insurance less
affordable, to make medical costs higher, and to make care less
available is to mandate insurance. Just look at the Medicare and
Medicaid programs fine examples of what not to do.
Joseph Lee Pugh, Diamondhead, MS
Collision Course. Irrationality must eventually come
face to face with reality and come to an end. Pure Communism can
last only a few years. Its close cousin, an extremely regimented
market as in the Soviet Union, survived some 70 years. A somewhat
less regimented system toward which the U.S. has been moving
inexorably since 1943 will also fail.
Most American doctors are dependent on the state, which has
created an artificial Boom. They know that a Bust must occur, but
they hope to avoid it as long as possible by going along to get
along. We can continue along the road to failure or reverse
course by pushing for free-market reforms.
Robert P. Gervais, M.D., Mesa, AZ
Sanity. Insurance premiums reflect little in actual
patient care, but much in paper pushing or actual obstruction of
access to care that patients feel entitled to. There is no way we
can return to sanity until that third-party role is minimized.
Alieta Eck, M.D., Somerset, NJ
Hog Slop for Accountants.
The idea behind Health Savings Accounts is good, but the
regulations are so complex that they shift educated people and
other valuable resources from competitive enterprise to producing
red tape that can't be sold on world markets. What we need is a
High Savings Act that would allow
Americans to save as much of their income as they want on a tax-
Craig Cantoni, Scottsdale, AZ
Even the Chicoms Get It. About 30 countries have
replaced pay-as-you-go entitlements with personal retirement
accounts: Britain, Chile, and many others have no unfunded
Frank Timmins, HealthBenefitsReform Group
Legislative AlertDelay the Medicare Drug
That's what Senator John McCain (R-AZ), Rep. Jeff Flake (R-
AZ), Rep. Jim Cooper (D-TN), and several other courageous House
and Senate members are telling their colleagues and the
taxpayers. Not only should Congress delay the drug benefit, it
should reset the nation's spending priorities while financing
assistance to the victims of Hurricanes Katrina and Rita, a
genuine national emergency.
The spending explosion of the Medicare drug entitlement is
set to go off on January 1, 2006, and will be mostly funded by
general revenues. Over the next ten years, Medicare drug
benefits will cost roughly $850 billion. According to the
March 2005 Congressional Budget Office (CBO) estimates, the first
year (2006) cost of the program would amount to $32.8 billion. In
2007, it jumps to $55 billion; in 2008, $63.9 billion; in 2009,
$70.3 billion; in 2010, $78.4 billion. Previous estimates were
that the Hurricane relief and recovery efforts were going to
exceed $200 billion. Based on the CBO numbers, a four-year
delay in the drug entitlement alone would yield roughly $222
billion in savings.
Official estimates of the cost of the program have varied,
but members of Congress have been expressing deep concern about
the mounting costs, which will add almost $9 trillion to the
unfunded liabilities of the Medicare program.
How Unfunded Liabilities Affect the Economy
As this goes to press, two staff alumni of the Congressional
Budget Office (CBO), Joseph Antos of the American Enterprise
Institute and Tracy Foertsch of the Heritage Foundation's Center
for Data Analysis, have just completed an econometric analysis of
Medicare and its unfunded costs. They conclude that if
Congress decided to pay all the unpaid bills of Medicare simply
by raising the existing Medicare payroll tax, the result would be
an increase from the current 2.9 to 13.4% of the taxable earnings
of workers. Just for Medicare. This kind of a tax hike would have
a profound effect on the functioning of the economy. Tax
increases reduce disposable income, and thus both consumption and
investment. Reduced investment would reduce productivity and job
opportunities. Antos and Foertsch estimate that under this tax
regime the Gross Domestic Product (GDP) would fall by $90 billion
annually, and each year the American economy would lose almost
While Sen. McCain and others, especially Rep. Mike Pence (R-
IN) and the House Republican Study Committee, are warning of the
future economic impact of entitlement spending, both the Bush
Administration and the Republican Congressional leadership have
dismissed the Medicare delay as a non-starter. Former House
Majority Leader Tom DeLay (R-TX), who helped to muscle the
Medicare bill through the house during an infamous three-hour
vote, is opposed to the idea. The White House says that seniors
expect it and will depend on the drug entitlement staying on
course, while House leaders are loathe to open a debate on
legislation that they worked so hard to enact.
Spending Like Crazy
The Louisiana congressional delegation has come up with
a new set of relief proposals totaling a whopping $250 billion.
Congress has already passed two Katrina-related emergency
spending bills, one for $10.5 billion and another for $51.8
billion. The size of the task, given the sheer physical
devastation of the Gulf Region, plus the displacement of hundreds
of thousands of Americans, is likely to exceed official
While Katrina and Rita costs pile up, the routine
congressional spending is no longer routine; it has been revved
up and ramped up and stuck on Nutso. The federal budget is at
$2.6 trillion, chock full of pork projects and earmarks. The
farm subsidies are at $30 billion. Even more grotesque, the
recently enacted highway bill costs $286 billion and includes
6,400 earmarked projects worth $25 billion. Curiously, House
Minority Leader Nancy Pelosi (D-CA) offered to give up big chunks
of "pork" going to San Francisco, a move yet to be matched by
anyone in the Republican Congressional leadership. It is an odd
development when Republicans can be outflanked on the fiscal
responsibility issue by Democrats like Pelosi. But you are going
to have to believe your own eyes and ears and not follow the
standard partisan playbooks.
Consider some of the recent comments by former House
Majority Leader Tom DeLay (R-TX). He recently made the stunning
assertion that the Republicans in Congress had already cut the
fat in the budget. He added: "Wasteful spending can be found and
should be cut like the $89 billion that never made it into the
$286 billion (formerly $375 billion) highway bill that the
President signed last month and as conservatives and
Republicans, we should never let down our guard on this issue"
(Washington Times 9/26/05).
You've got to admit it: This is a fresh approach. The House
Republican leadership has been "fiscally conservative" because
the final highway bill was $286 billion rather than the $375
billion monstrosity that might have been introduced,
though it was not, and so DeLay claims seriously, folks that the
Republican majority thus cut $89 billion in waste from the bill.
President Bush, incidentally, threatened to veto the bill if its
cost exceeded $256 billion. Of course, President Bush holds the
undisputed Presidential record for vetoes: 0.
Whatever one thinks of the drug entitlement of Title I
of the Medicare Modernization Act, the Medicare Advantage
program, the new system of private plans under Title II of the
law, looks promising. The preliminary information looks good. The
private plans offer a full range of benefits at affordable
premiums. The danger is that Medicare Advantage could still fall
victim, if not this year then maybe next year, to the same
problems that beset the ill fated "Medicare Plus Choice." The
latter was undermined by the congressional funding rules (2% cap
on reimbursements, while cost increases were going into the
double digits) plus a level of regulation that discouraged
innovation and flexibility in caring for the elderly. "Medicare
Plus Choice" was governed by 900 pages of rules and regulations.
We are cautiously optimistic. But the future of the program will
rest in maintaining the funding for private plans (the
congressional Left doesn't like private health plans in Medicare
or any other places) and making sure that the regulatory system
allows maximum flexibility. The proof will be in the performance
in 2006 and beyond.
The Medicare Advantage program could also be another vehicle
for innovative health plans, including association plans, ethical
health plans, or plans sponsored by faith-based or religious
organizations. Ethical health plans could be an attractive option
for the aged. In the FEHBP for the very first time last year, the
Sisters of the Order of St. Francis offered a health plan in
Illinois, though the very idea of it was scandalous to the Left
because it did not provide for abortion or contraception. Given
the growing concerns among the elderly and others about the
quality of end-of-life care, it would make sense for the
government to allow them to choose options that respect their
deepest convictions. Now more than ever, patients need to be
aware of the governing values of those who provide and pay for
their care, such as whether physicians adhere to the
traditional Oath of Hippocrates, which explicitly forbids
euthanasia. With the increasing financial pressure of costly
Medicare and Medicaid entitlements, patients have every right to
be frightened at the prospect of being "cared for" by white-
coated champions of the "quality of life."
The Post-Katrina Health Policy Fight
Congressional Democrats are pretty clear on what to do
about medical care for the displaced individuals and families.
Expand Medicaid massively. Former Clinton Administration HHS
Secretary Donna Shalala called for a huge Medicaid expansion,
regardless of the previous Medicaid eligibility of the displaced
persons. A more modest variant of the Lefty proposal is the
Grassley-Baucus approach. Increasingly, Senator Charles Grassley,
the champion of the Senate version of the Medicare Modernization
Act's drug entitlement expansion, is to take a basic Senate
Democratic position and tweak it into a less expensive version of
the real thing.
We have been down this road before. In the aftermath of the
9/11 attacks in New York and Washington in 2001, we also had to
cope with a seriously damaged economy and the displacement of
millions of workers. The immediate and unsurprising response of
the House and Senate Democrats was to push for a radical
expansion of Medicaid to persons with incomes 400% of poverty
levels, reaching into middle and even upper-middle-income
families. The Left is big on Medicaid expansion, which
accomplishes two goals at once: it locks people who are not
normally eligible for welfare into a welfare program, and also
pours another layer of fiscal concrete on the foundation of a
national health insurance program.
While many Democrats are largely in favor of another push to
expand Medicaid, House and Senate Republicans have not fleshed
out all of the details of their own proposals. For them, believe
it or not, there is a strong and positive precedent. In the
aftermath of the 9/11 attacks, conservatives in Congress worked
closely with moderates in the Senate and came up with an
alternative to Medicaid expansion. Ways and Means Committee
Chairman Bill Thomas (R-CA) and Senator John Breaux (D-LA), with
the support of the Bush Administration (Mark McCLellan was at the
National Economic Council then) promoted a major refundable tax
credit initiative for about 4 million displaced workers. That
approach was adopted by the House leadership as a package of
refundable tax credits of 65% for any private plan. The subsidies
and the menu of plans would have been accessed through
unemployment compensation offices: one-stop shopping. Valued
between $12 and $15 billion, the package was enacted twice in the
House and blocked in the Senate by the then Senate Minority
Leader Tom Daschle, who was fighting instead for the Medicaid
expansions. The significance of this fight in the winter months
of 2001 and 2002 should not be forgotten. It was a rare and
precious moment. It was the first time that the congressional
Republicans were on offense that is with their own agenda and
not the Democrats' agenda in a health policy debate in recent
Now, fast forward to Fall 2005. The same dynamic is playing
out in the Katrina debate. We have massive physical destruction.
Job-based health insurance has literally washed away with the job
sites in a large swath of the Gulf Region. Many of these folks
previously had private health insurance; many still have it. Many
would like to keep it.
The right response is, of course, not the expansion of
Medicaid enrollment in a substandard welfare program but rather
allowing and helping people to keep their private medical
insurance if they wish to do so, or helping them to purchase a
different medical plan of their choice. The insurance industry
has already signaled its intentions to do everything possible to
allow people to keep their coverage, including a loosening of
insurance rules, and a grace period for premium payment. Those
private sector efforts should not be directly undermined by the
That should be the policy goal. The debate should be on the
best way to do this. Alternatives include a voucher program, a
temporary emergency medical account system, or a system of
refundable tax credits. It is no more necessary to enroll
displaced Gulf residents in Medicaid than there is to buy
thousands of trailers and force them into government trailer
parks. Nor does Congress have to foist a FEMA-style debit card on
the taxpayer, available for everything from Louis Vuitton
shopping sprees to nights out at the hottest clubs outside of The
Big Easy. Here a coded smart card, where the card can only be
used for medical services (like many medical reimbursement cards
today), makes eminent sense.
The Tax Reform Commission's proposals for comprehensive
tax reform may be out by now. There is one area where
conservatives and libertarians are strongly united, and where big
labor and big business are equally united: the tax policy that -
ties medical insurance to the workplace. Freed from the
restrictive tax code and superfluous government regulations, and
the constraints of an artificial market dominated by employers
and insurance companies, individuals could regain personal
control over their own medical decisions.
Any reform proposal that does not address the tax issue
is not to be taken seriously.
Robert Moffit is Director, the Center for Health
Policy Studies at the Heritage Foundation, Washington,