Volume 48, No. 11 November 1992

CASE FOR PRIVATE CONTRACTS ARGUED IN COURT

A person would have to be ``certifiably insane'' to turn down a Medicare check, said Judge Nicholas Politan during oral arguments in the US District Court in Newark, New Jersey, on September 14.

Sitting right before him were three patients who want to do just that. The other two patient plaintiffs in the case known as Stewart versus Sullivan are in a nursing home and could not be present. One is a quadriplegic.

The patients and their personal physician, Dr. Lois J. Copeland of Hillsdale, New Jersey, are suing the Department of Health and Human Services (HHS) for a declaration of the right of patients and physicians to contract privately, without disenrolling completely from Medicare Part B (see AAPS News, Mar. and Sept. 1992).

The Judge found it difficult to believe that any patient would ever want to pay a doctor more than the doctor was entitled to under Medicare's formula. He was also unwilling to believe that anything other than the size of the fee was of concern to the physician plaintiff, even though she has stated that she would gladly treat these patients privately for less than the scheduled fee or for no charge at all.

In fact, the Judge wondered why the case was in Court at all. No physician has, as yet, been sanctioned under the Medicare ``policy'' against private contracting (although the government's brief itself contains a threat to sanction Dr. Copeland if she violates the policy). Why shouldn't a physician, he asked, just wait to be sanctioned, then proceed through the chain of administrative appeals and finally to the US Court of Appeals if dissatisfied with the result? He seemed unconcerned about the cost (years, tens or hundreds of thousands of dollars in legal fees, and loss of most of the physician's practice).

The Judge didn't believe that Medicare regulations posed a Draconian threat. Specifically, he did not think it possible that the Department of HHS could drive Dr. Copeland out of business for traveling 30 miles to a nursing home, seeing a patient ``unnecessarily,'' and accepting ``$10'' from him.

``America is not structured that way,'' he declared.

The Judge asked the US attorney what could happen to physicians who attempted to contract privately. How would the Secretary of HHS enforce its ``policy''?

``We don't know. We'll have to wait and see,'' said US attorney Peter Robbins. ``The Secretary has not decided that a sanction will automatically be sought in every case.'' The issues involve discretion by both the Secretary and administrative law judges, and no guidelines have been developed.

The Judge inquired about statements from Medicare intermediaries that seemed to constitute a veiled threat.

``We don't know who issues those statements,'' said the US attorney.

There were some muted sounds of skepticism or indignation from the audience, perhaps from a physician who was contesting about $80,000 in civil monetary penalties from Medicare.

``Shut up!'' said the Judge, demanding decorum in his Courtroom.

The US attorney agreed that Medicare might determine a requested service to be ``unreasonable'' and/or ``unnecessary.'' To cover that eventuality, the patient could sign a waiver form agreeing to pay for the service himself if Medicare denied it. But if reimbursement was forthcoming after all, the patient would surely want the check-unless he was ``crazy.'' In that case, he could make a charitable donation, refund the check to the Treasury, or rip it up.

The US attorney was adamant about the requirement to file a claim in every instance. Congress did not write a special ``opt out'' provision in the statute requiring the physician to file all claims. Perhaps physicians could file anonymous claims if no reimbursement was desired, but the government had to have the statistics concerning what services were provided.

The Judge did not believe that claims filing could be burdensome. Physicians have a staff, and they have successfully engaged in the ``paper chase'' for years, he noted.

``Just look at the doctors' parking lot.''

As to the patients' concern about confidentiality, the Judge inquired: ``Is privacy a real right, or a lawyer-created right?'' Why should patients mind if a bureaucrat knew about their medical history, he asked.

Only one constitutional claim was explictly argued by plaintiffs' attorney Kent Masterson Brown: the denial of any review, judicial or administrative, of fees dictated under the Relative Value Scale. However, if the Medicare statute is now construed to deny the right of patients to contract for private medical care, then serious constitutional questions might arise.

Just what did the plaintiffs expect his ``lowly district court'' to do about it, the Judge wondered.

``You would have me stop the wheels of Medicare? Awesome. I only thought I could shut down Newark Airport.''

The Judge has not yet rendered a decision. An appeal to the Third Circuit is anticipated whenever the opinion is handed down.

``Do you think you are `certifiable'?'' one of the patient plaintiffs was asked after the hearing.

``I know when I have been insulted,'' she said. ``I didn't lose my ability to make my own decisions just because I have reached the age of 65.''

Physicians Want CLIA Repealed

Although organized medicine took a stand favoring the Clinical Laboratory Improvement Act of 1988 (at least in principle), 78% of physicians responding to a recent AAPS questionnaire favored outright repeal of the Act, and 87% favored either repeal or applying the Act to large commercial laboratories only. The response rate was about 11%. To our knowledge, this is the only membership survey obtained by a medical organization on this subject. All of the groups invited to participate in the recent meeting on CLIA called by the President's Council on Competitiveness (see AAPS News Sept. 1992) were asked for such data, and none could supply it.

As a result of CLIA regulations, 44% of physician respond- ents will restrict the testing that they do, and an additional 25% will discontinue laboratory testing altogether. Of physicians who will restrict or discontinue testing, 84% cited the cost of compliance as one of the reasons. The median annual cost was estimated to be about $1800. Of those who voiced an opinion on the cost of lab tests to patients, 92% said it would increase, in many cases by more than 100%.

Tucson family physician Abraham Byrd, MD, shows how his lab has become entangled in the web of CLIA regulations.

In response to an open-ended request, about 30% of physicians contributed a comment. Not a single one referred to a potential benefit to be expected from this legislation. A number believed the Act resulted from a desire of big laboratories to squash competition from physicians' office labs. Some other comments:

``The best solution is for physicians to take control of their own destinies: withhold services or break the law en masse. Remember the Boston Tea Party?''

``I'm quitting! I'm fed up! I'm only 50, but I'm getting out.''

``The greatest harm will be in small labs that switch to doing waived tests that are cruder and less accurate, e.g. for blood glucose.''

``Will they start regulating compasses and protractors for engineers?''

``CLIA will delay by diagnosis by 24 to 48 hours.''

``All regulators, inspectors, and behavior modifiers should be at least as qualified as those they inspect....''

Peer Review and Intellectual Conformity

How should a knowledgeable physician act if he is the first to suspect that standard practice is incorrect? Our doctor can be guided only by experience and intuition. He can cite no published work, nor can he ask his patient to return in 5 or 10 years, when physicians might know more....

The first physician who, in 1853, positively pointed to the mosquito as the spreader of yellow fever...was investigated by a commission, which found his views inadmissible and all but declared him insane. Semmelweis ordered his students to wash in chlorinated lime between the dissecting room and the maternity ward. A medical editor wrote that it was time to stop such nonsense.

In our own day George Crile, Jr., who departed from the traditional Halsted mastectomy, was reprimanded by the Cleveland Academy of Medicine. In 1934, a chest surgeon who urged 300 colleagues to support measures to curb smoking was laughed off the floor....

The peer review offence is deviation per se....

Robert Carlen, MD, Sayville, NY

[These ideas were rejected by JAMA and N Engl J Med before being published in The Lancet 338:823-4, Sept 28, 1991.]

What Is Poverty?

Because so many medical assistance programs are designed to tax the ``rich'' or the middle class to aid the ``poor,'' it is essential to know just how poverty is defined.

Virtually everyone uses a level of monetary income to define a poverty ``line.'' The resulting inconsistencies have recently been described by Robert Rector of the Heritage Foundation (see Wall St J 9/3/92) and by Christopher Sarlo of Nipissing University in Ontario (Fraser Forum, Aug, 1992, published by the Fraser Institute, 626 Bute St., Vancouver, BC V6E 3M1, telephone (604)688-0221.)

For example, Sarlo points out that to achieve the same standard of living as a ``poor'' nonworking family that receives social assistance of $18,500 plus other benefits, a nonpoor family with a single parent would have to earn $32,000, which is above the relative poverty line. Also, some members of households with a relatively high income might actually suffer deprivation if the head of the household chooses to purchase non- necessities (such as lottery tickets or alcohol) before meeting the family's basic needs.

After compiling vast quantities of statistical data, which are published in his book Poverty in Canada, Sarlo reaches a startling conclusion: ``It is impossible to determine the number of poor in Canada, even approximately.''

Sarlo and Rector agree that living standards of the ``poor'' are much higher than the figures would suggest, but that the ``war on poverty'' has been a dismal failure in terms of creating personal responsibility, incentives to work, and hope for the future.

Another Special Fraud Alert Issued by Office of the Inspector General

This time targeting a variety of incentive programs used by hospitals to compensate physicians, the Office of the Inspector General (OIG) has issued another ``Special Fraud Alert.'' The OIG believes that certain incentive programs could constitute remuneration to induce the referral of business paid for by medicare and Medicaid and thus violate the anti-kickback statute, 42 U.S.C. §1302a.

The ten programs that the OIG found to be questionable are:

1. Payment of any sort of incentive by the hospital each time a doctor refers a patient to the hospital;
2. Use of free or significantly discounted office space or equipment in facilities located close to the hospital;
3. Provision of free or significantly discounted billing, nursing, or other staff services;
4. Free training for a doctor's office staff in areas such as management techniques, CPT coding, and laboratory techniques;
5. Guarantees that the hospital will supplement a doctor's income up to a certain amount;
6. Low-interest or interest-free loans or loans that may be ``forgiven'' if referrals are made to the hospital;
7. Payment of the cost of a doctor's travel and expenses for conferences;
8. Payment for a doctor's continuing medical education courses;
9. Coverage under a group health insurance plan at a lower cost to the doctor; and
10. Payment for services in excess of their fair market value.

The list set forth in the ``Special Fraud Alert'' is by no means exhaustive. Rather, it is intended to illustrate areas where the OIG is showing special interest in the enforcement of the anti-kickback statute, 42 U.S.C. §1320a.

Although many of these incentives have been commonly employed by hospitals all across the country in recent years, they are now subject to criminal and stiff civil penalties. Although the OIG predicates his attack on these incentives by asserting that they ``interfere with the doctor's judgment of what is the most appropriate care and may inflate the costs to Medicare and Medicaid programs by causing doctors to inappropriately overutilize the services of a particular hospital,'' they are, in fact, another example of the growing exercise of control over medical care by the federal government through the use of threats, intimidation, sanctions, and even the criminal process.

Whereas we must all be wary of the actions of the OIG, we must also closely scrutinize the legitimacy of its actions. The LLCS will monitor developments closely.

Medicare Spending Up 7.4%

A 7.4% growth in Medicare spending from $109.7 billion in fiscal year 1990 to $117.8 billion in 1991 reflects a rising number of claims submitted. Although the number of Medicare beneficiaries grew only 1.9%, from 34.2 million to 34.9 million, the number of claims increased nearly 11% to reach 600 million (BNA's Medicare Report 9/18/92).

AAPS predicted an increase as a result of forcing physicians to file claims. But the connection has apparently not been noticed by Congress or HCFA.

Medicare Cost-Shifting and Invisible Rationing

In 1993, seven out of 10 US hospitals will lose money on Medicare inpatients, with an average loss per patient of $900, according to the American Hospital Association. The impact will be greatest in hospitals with 100 to 299 beds.

To make up for the shortfall, hospitals are believed to overcharge patients with private medical insurance by as much as 40% (BNA's Medicare Report 9/18/92).

Although the Medicare Handbook states that patients are theoretically entitled to up to 150 days of hospital care, the government won't actually pay for it. The average Medicare reimbursement to hospitals in 1989 was for 4.7 days, exactly half of the number billed. For the most complex and costly procedures, the average Medicare payment was for the equivalent of 10 to 12 days, also half the amount billed.

Hospital admission rates for the elderly fell by 16% from 1983 to 1987, and the average length of stay decreased from 10.37 days to 8.71 days. While regulators cite these figures as evidence of progress in cost containment, 63% of internists felt that they were under pressure to discharge patients prematurely. A Rand Corporation study reported that 23% of hip fracture patients were discharged too soon, compared with 12% before the advent of DRGs (NCPA, Executive Alert, Sept-Oct, 1992).

Older Physicians Just Say No

According to a survey by Merritt, Hawkins, and Associates, a national physician search firm based in Irving, TX, 50% of older physicians would retire immediately or accelerate retirement plans if medicine is nationalized.

The survey of 150 physicians aged 55 or older showed that physicians spend up to 10 times longer on government or insurer paperwork than when they entered practice. About 40% would not choose medicine as a career today, and 60% would not recommend a medical career for their children.

The impact on physician manpower could be devastating. The AMA reports that 29% of US physicians are 55 or older and that older physicians work longer hours and see more patients (Arizona Medicine, May, 1992).

Despite the persistence of...republican forms, [America is becoming] a mass democracy in which elected officials are more and more irrelevant and corrupt as their powers and duties are usurped by bureaucratic elites that cannot be removed. Despotism, masked in republican costume, is not yet enthroned, but already it whispers sweetly in the ears of those who sit in the consular chairs of the leviathan state.
Samuel Francis, Chronicles, Aug. 1991

New Members

AAPS welcomes Drs. Jake J. Allen of Great Falls, MT; Richard P. Ames of Ridgewood, NJ; Eric J. Anderson of Great Falls, MT; Gregory S. Birse of Palm Beach Gardens, FL; John G. Cametas of Richmond, VA; Philip M. Catalano of Bradenton, FL; Kyle W. Chapman of Seattle, WA; Alain de La Chapelle of New York, NY; John W. Demetree of Bradenton, FL; Robert Dennis of Neptune, NJ; Dennis Dietrich of Great Falls, MT; G. David Fain of Ocean Springs, MS; Wilbur Fine of Morgantown, WV; Donald M. Fraser of Lewiston, NY; David D. Fulghum of Bradenton, FL; James W. Harding of Greenbelt, MD; William P. Homan of White Plains, NY; Elizabeth W. Johnston of McLean, VA; Arthur Lerner of White Plains, NY; William R. Loomis of Spokane, WA; Michael P. MacLaverty of Mt. Prospect, IL; Van Megariotis of Clifton, NJ; J.S. Montgomery III of Houston, TX; William W. Moss of Bradenton, FL; Eric Mudafort of Bradenton, FL; Henry J. Palacios of McLean, VA; Steven P. Parker of Pensacola, FL; Robert C. Shuman of Marietta, GA; Lawrence C. Varner of Farmville, VA; Carl J. Viviano of Merrill, WI; Robert B. Wagner of Rockville, MD; Steven C. Watsky of Bradenton, FL; Carl Weber of White Plains, NY; Edward A. Zane of New Milford, CT; J. Fred Znider of Fountain Valley, CA; and the Nassau-Suffolk Physicians Guild, Inc., of East Meadow, NY.

New student members are: Yaser Abdelhamid, Charise R. Bowman, James P. Fulop, Char Glenn, Char Glenn, Angela Hairston, Eric P. Kuivinen, Travis Lee, Gina Love-Walker, Brian Mehling, Rahul Mehta, Mark Mueller, Lois Owings, R. Scott Russell, Lily R. Savage, Christopher J. Sesslar, Rakesh Sharma, Lori C. Vavul-Roediger, Michelle Witherspoon, and William Wong.

Letters to the Editor

Re: ``Nursing Home Invaded''

I am amused that the State finds fault with the private sector when state mental hospitals are poorly staffed, poorly equipped, and poorly ventilated. Of course, neuroleptic malignant syndrome/hyperthermia never arose as a result of the government's deficiencies. Would that the public sector were held to the same standards as the private sector.
Stanley Rossen, MD, Park Ridge, NJ

Most judges interpret American law by what I call the Soviet rule of law. Here is an example:

Question: Dear Judge, May I emigrate from the Soviet Union?

Answer: Yes, Bob, you may emigrate but without your wife and child.

Conclusion: Yes, I may emigrate ``on paper'' but ``in practice'' I must remain in the Soviet Union.

So it is with Medicare law. I can cease treating Medicare patients in theory but since the vast majority of ill patients are over 65 I am, for all practical purposes, a prisoner of the system.
Robert Gervais, MD, Mesa, AZ

AAPS Calendar

October 24, 1992. Freedom in Medicine seminar, Columbus, OH. (To register, call Herb Gillen at the Ohio State Medical Assoc., 614-486-3130.)

October 6-9, 1993. 50th Annual Meeting, San Antonio, TX.

Legislative Alert

With election day closing in, Arkansas Governor Bill Clinton has unveiled a more detailed version of his plan for national health care reform.

Clinton has dropped ``play or pay,'' the employer-mandated insurance proposal so popular among liberal leadership in Congress. But its replacement does not escape serious problems, the kind that have been dogging the employer mandates for several years.

The new plan is a curious mixture and represents a coalescing of some powerful political forces. The broad outlines of the Clinton proposal are congruent with the plan recently outlined by the American College of Physicians (ACP), with the support of the American Association of Retired Persons (AARP) and business and labor leaders who have been favoring the older ``play or pay'' regime that has been stalled in Congress.

If elected President, Governor Clinton promises to send his complex reform package to Capitol Hill to be enacted in the first hundred days of his Administration.

``Play or Else.'' The latest Clinton Plan is basically an expanded employer-based system, replacing the ``play or pay'' approach with a simple and straight mandate on employers.

The plan does not allow business to opt out of the system of private insurance by paying an additional payroll tax to finance a new public health insurance plan. The plan calls for phasing in the employer mandate, with small employers coming in at the end of the process.

The updated version of the Clinton program would give employers new tax subsidies, complementing the tax subsidies already allocated by the IRS for the companies that now provide health insurance. The new subsidies would be in the form of tax credits for small businesses that are deemed unable to afford insurance coverage.

Clinton and his advisers are also looking at extending private insurance, rather than creating a new public plan. The latest version of the Clinton Plan calls for the creation of health care purchasing groups to allow small businesses to take advantage of the economies of scale. In concept, this is not unlike the concept of Health Insurance Networks (HINS) found in the Bush Administration's proposal issued last February 6th. Likewise, it bears a striking resemblance to the establishment of Health Care Purchasing Cooperatives being proposed by Congressman Jim Cooper of Tennessee and the conservative Democrats in the House of Representatives.

While guaranteeing subsidies to small businesses to help them provide private insurance coverage, the Clinton plan is also guaranteeing ``universal access'' to health insurance. Under the plan, the federal government will buy or subsidize private insurance for Americans who are not working, depending on their needs. The Clinton plan will also end Medicaid, and simply buy private insurance for those now enrolled in the program through the new ``purchasing groups.'' In effect, Clinton is calling for a privatization of the Medicaid program.

A Global Budget. The Clinton plan calls for a national limitation on health care ``costs'' (expenditures), both public

and private. A national budget will be established by a ``na- tional health care board,'' comprised of representatives from business, ``health care providers,'' consumer groups, labor, and government.

As envisioned by Governor Clinton and his advisers, patients will have access to a variety of options, including managed care networks organized by doctors and hospitals and private insurers.

These managed care networks will receive a fixed amount of money for meeting the ``full needs of consumers.'' Each state will set an ``upper limit'' on fees-including those of practitioners and institutions outside the networks-to ensure that they fall within the national budget. This limitation on total spending is supposed to induce doctors and hospitals and insurers to be efficient, avoid waste, and ``eliminate duplicative technology.''

By limiting what Americans can spend on health care in both the public and private sectors, Clinton and his advisers expect this national budget to control costs. The idea is to make sure that costs rise no faster than wages, generating a savings of approximately $700 billion by the year 2000. Moreover, the plan calls for dedicating these savings to ``paying for expansions in coverage.''

Comprehensive Insurance Reform. The Clinton package includes: open enrollment, including the banning of all pre- existing medical condition exclusions found in contemporary insurance programs; community rating of insurance premiums; the requirement of a ``comprehensive benefits package,'' including preventive and primary care services, mammograms and routine health screening, physician and hospital care, coverage for prescription drugs and basic mental health care; and the establishment of ``publicly-sponsored'' purchasing groups, the pooling of businesses and individuals to buy private coverage at lower costs. Governor Clinton argues that health care networks will have to compete to win the business of these health care purchasing groups, thereby bringing medical costs down.

Other Features. The Clinton plan would: (1) increase the self-employed health insurance tax deduction from 25% to 100%; (2) place price ceilings on prescription drugs; (3) establish standard insurance claims forms, standardized billing codes and electronic claims processing; (4) ``crack down'' on fraud and abuse by providers and insurers; (5) institute liability reform through alternative dispute resolution mechanisms and the development of a clear set of medical practice guidelines.

Outlook. The newest reincarnation of employer mandates is an odd mixture. Politically, the Clinton plan is designed to break down the stout resistance of business, particularly small business.

But the key question remains: Where will the money come from to pay for new subsidies to medium sized or small businesses, to cover the typical cost of $3600 per year for family coverage? From a new employee payroll tax? A new sales or excise tax ? A VAT?

There are other unanswered questions. How will a global budget work? How would the government determine how much Americans should spend on medical services each year? What happens if the spending target is reached? And if there are ``savings,'' how will these be captured by the government, when the bulk of those savings will be realized by price controls on private health care services? (The Bush Plan faces the same problem.)

Waiting for Perot

The Bush and Clinton plans are models of infinite detail compared with that of Ross Perot. In his book United We Stand, Perot bemoans health care costs, praises preventive medicine, and says that the health care problems are ``struc- tural.'' Perot states that comprehensive reform should be based on a ``public-private partnership.'' and that there should be an independent federal agency to oversee cost containment. The details are maddeningly vague.

The Rise of Market-Based Reforms and Medical Savings Accounts

While Clinton and Bush are slugging it out in the several states, Congress is winding down with barely a whimper on health care reform.

The full Senate has been considering HR 11, a bill amending the Internal Revenue Code to provide tax incentives for enterprise zones, an urban policy strategy advanced by HUD Secretary Jack Kemp and the Bush Administration. On September 23rd, the Senate adopted an amendment (by voice vote) which incorporated the text of S 1872, the small group market reform package authored earlier this year by Senator Lloyd Bentsen (D- TX). Because of controversial tax provisions, the measure is unlikely to be passed this year.

In the House, about 60 conservative Democrats led by Congressman Jim Cooper of Tennessee thwarted attempts by their liberal Democratic colleagues to bring out a price control bill, based on the global budget/RVS/DRG model, HR 5506. The liberal Democratic paralysis in the House on health care reform thus turned into rigor mortis.

In the meantime, the growth of a large bloc of Democrats favorable to competition and a greater reliance on free market forces, and solidly opposed to Canadian style global budgets and price fixing, is a significant development in the Congress. It will surely have implications for Clinton and Company if the Arkansas Governor should win the Presidency in November. Already, the rise of the Conservative Democratic Forum (CDF) as a player in the Congressional health care debate has clearly had an influence on the Clinton camp, as is evident from the subtle and politically shrewd changes in Clinton's plan, particularly its movement away from public insurance to a private system, including the replacement of Medicaid by private insurance. If Clinton were to drop global budgets and price controls on doctors and hospitals, his plan would more closely resemble the ``managed competition'' proposal put forth by the CDF rather than anything surfaced by Congressmen Stark, Waxman, and Rostenkowski.

While House Democrats are debating among themselves the virtues of ``managed competition'' markets versus global budgets and price controls, their Republican counterparts are pushing legislation for more open markets, including consumer-based tax credits and medical savings accounts.

Opening Up the Federal Market. Perhaps the most interesting proposal to surface is that of Congressman Sam Johnson (R-TX), a GOP freshman. Johnson's bill, HR 5970, would mandate that all uninsured persons be given tax credits, based on need, and be enrolled in any plan of their choice. Any of the more than 300 or so private plans competing in the Federal Employees Health Benefits Program (FEHBP) nationwide would be certified as eligible to receive tax credits in partial payment of the premiums. As a government program, serving Members of Congress and federal employees, the FEHBP is considered unique in that it uses market forces of consumer choice.

In order to finance the tax credits to assist the uninsured in the purchase of health insurance, HR 5970 would cap the current tax exclusion on the value of employer provided insurance at $3600, meaning that no more than $3600 in employer provided health insurance benefits would be tax-free income. The revenues from the taxation of benefits above that cap would, according to the Congressional Budget Office, generate $30 billion a year. Thus, the tax-credit provisions would be budget neutral.

The proposal to open the FEHBP to the uninsured has a dramatic political appeal. It allows the constituents to share in the same benefits that are open to congressmen.

Rep. Johnson and his colleagues view the FEHBP as a way station to a more comprehensive market-based reform, resulting from a permanent change in the federal tax code.

Medical Savings Accounts. Other key provisions in HR 5970 would include the establishment of 100% deductibility of health benefits for self-employed persons and a permanent system of medical savings accounts. Individuals or companies would be allowed to deposit funds tax free into a special account, up to a limit of $4800 plus $600 for dependents. Funds in the account could only be used for the payment of medical expenses.

A similar measure, HR 5988, has been introduced by Congressman Bob McEwen of Ohio. Its most important effect would be to change the health insurance market from an employer-based to a consumer-based system, establishing portability in benefits and providing direct tax relief to individuals regardless of their place of work. The bill includes tax credits to help purchase coverage. Total deductibles could not exceed $1000 for individuals or $2000 for families. If a company no longer wished to offer health insurance to employees, the bill would require the company to turn the value of the health insurance package into wages.

As with several other Congressional reform initiatives, Mc- Ewen's bill would require guaranteed renewability and the elimination of exclusions from insurance based on pre-existing conditions.

Like the Johnson bill, the McEwen bill is budget neutral. That is, it will not, of itself, add or subtract from the total level of federal spending on private health insurance under current law. The tax credit provisions are financed simply by replacing the huge, tax subsidies for employer-based insurance with a national system of tax credits. The total revenues available for these subsidies amount to an estimated $88 billion.

McEwen argues that increased choice and competition in the health insurance industry (due to shifting tax breaks from employers to families), coupled with assistance in meeting out- of-pocket expenses (through a basic tax credit of $1100 plus 18% of other health care expenses), will both control health care costs and assure universal access to health care.