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Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
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Volume 51, No. 11 November 1995


In a tape-recorded public meeting, an Ada County, ID, commissioner threatened to fire any employee in the personnel department who engaged in any promotion whatsoever of the County's new medical savings account option.

Nevertheless, nearly 170 Ada County employees, 20% of its work force, have decided to trade in their traditional health insurance for the new plan, which immediately saves the taxpayers $38,000 (Idaho Statesman, 10/4/95). Savings would mount to $87,000 if Congress passes the Archer bill excluding MSA deposits from federally taxable income.

The old plan costs the county $336 per month and the worker $158. The new $3000-deductible plan costs $194, of which the worker still pays $158. The county contributes $36 to the insurance company and $175 to the worker's MSA. The MSA can be used to pay medical bills up to the deductible, after which the insurance plan takes over. Funds left in the MSA at the end of the year can be rolled over for next year's medical expenses, used as a retirement account, or withdrawn (with penalty) for any purpose the worker chooses.

Ada County is the first county and only the second public employer to offer MSAs to its employees. Jersey City, NJ, also offers such a plan.

The expected result of MSAs: ``There is little doubt MSAs would be a financial windfall for the 70 percent of Americans who are relatively healthy and spend about $960 a year on healthcare. For these people, the vast majority of Americans, an annual $3,000 MSA paid by their employer would amount to a yearly $2,000 tax-free bonus,'' stated John Burry, Chairman and CEO of Blue Cross Blue Shield of Ohio, in a booklet entitled A Quick Fix That Could Destroy the American Healthcare System. Much of this money would be saved-to the tune of $120 billion annually- for ``unknown future purposes'' (no doubt frustrating the central planners).

Burry thinks these savings are to be deplored. The problem: the money is ``locked into personal accounts'' of the ``socially selfish and greedy'' 70% of Americans and thus no longer available to be redistributed by (and to) the managers.

Now that it looks as though MSAs will become a reality, more voices are joining Mr. Burry in warning against this ``peril'': including Bruce Vladeck of HCFA; the American College of Physicians; and Public Citizen.

The crux of the issue is control. ``Many members of the AMA say they prefer to negotiate fees and services with individual patients, rather than with powerful employers and managed care plans,'' Burry said, although ``it would be absolute chaos for doctors if they had to negotiate with so many individuals,''according to ACP President Cleveland.

Burry emphasizes the problem of ``adverse selection''-as if managed care were exempt from this phenomenon, in which the healthier patients allegedly gravitate toward the low-cost plan. Apparently, he assumes that comprehensive insurance plans will be forced to accept, without increased premiums, persons wishing to transfer from catastrophic plans when they get sick (guaranteed issue).

Actually, sick patients are better off with MSAs than with managed care. They can expect to spend all the funds in their MSA; but they would have spent the money anyway for insurance premiums. Their greatest concern should be the availability of excellent medical care, and the freedom to choose their physician and treatment. Burry explains why.

``The only real way to hold down healthcare costs over the long term is to reduce unnecessary costs among the top 10 percent of users, where most of the spending and waste take place.''

Burry calls his waste-trimming ``amputation.'' Each partner in the new vertically integrated systems must make sacrifices. And all must be partners, or else be decapitated. (When Scottsdale Memorial Hospital was forming a Physician Hospital Organization, physicians were warned that if they did not join they would be thrown off insurance plans that did.)

``Computer salvation'' is Burry's hope. And the computer is not the doctor's tool but rather the system's savior. ``There is little doubt that doctors will have to demonstrate, with the help of computers, that their work is appropriate as well as cost- efficient.'' (One Tucson hospital will devote 41% of its capital budget to computer systems for demonstrating cost-effective outcomes, in order to help compete for managed-care contracts. Never mind state-of-the-art operating rooms.)

Not coincidentally, electronic data processing firms were participants in the Clinton Health Care Task Force, including EDS, Ross Perot's former company, which made billions processing Medicare claims.

Russell Blaylock, M.D., points out the hypocrisy in Burry's allegation that insurers will make huge profits from adminis- tering MSAs (which can be self-administered).

``Are we to believe that the insurance industry is spending millions in an unprecedented blitz of advertising for `managed care' purely out of patriotic duty?'' Dr. Blaylock asks.

He believes that insurers ``want to dictate medical treatment, physician distribution, physician training, and medical care access to maximize profits at the expense of sick and suffering individuals.''

The most revealing feature of managed care is the one that immediately outrages the greatest number of average Americans when they learn of it, according to an informal poll by Harvey Randecker of the Health Care Rescue Network: the ``gag rule.'' Contracts often require Providers to ``portray [the organization] in a positive light to Beneficiaries and the public'' and to refrain from advising anyone not to participate.

It's the inverse of the rule about MSAs in Ada County, where one who voted for the plan fears to offend Blue Cross.

Managed Care Profits

The enormous profits of managed care recorded in 1994 have been achieved by three transfers: medical decisions to a managed care bureaucracy; financial risk to medical providers; and quality risk to patients....

Physician employment and remuneration are often related to management company profit. A significant number of physicians in these contract-type systems recognize this coercion, but for reasons of perceived economic survival are afraid to speak out....

Robert P. Nirschl, M.D., Orthopedics, Feb, 1995

PPOs Metastasize

AAPS Director Donald Quinlan, M.D., of Chicago set the theme of a national Preferred Provider Organization summit held by the Automotive Service Association of Illinois in Chicago on September 19, quoting the late Robert Jaggard, M.D.: ``There is no right way to do the wrong thing.''

Mike Melfi, ASA-IL President, explained how he built up a trusting relationship with his customers over many years of working 60 to 70 hour weeks. ``I have been able to do this because I control the repair process on my customer's cars.''

``Now, we are faced with a process that will wipe out years of hard work and render my business worthless with the exception of whatever real estate and equipment I might own. The concept of a PPO virtually eliminates your customer base. Any individual can establish a relationship with PPO insurance carriers and have an instant flow of discounted work.''

Melfi warned: ``As important as it may be that your attention is on the car you are delivering tonight, nothing is more important than fighting the concept of the PPO. If this concept isn't put to sleep now, every collision repairer will regret it later. Its acceptance will be the final concession on our part in totally surrendering the control of our industry to the insurance carriers. It will negatively affect all industries that serve the collision industry. Talk to your competitors, talk to your suppliers and dealers, and most importantly, talk to your loyal customers and educate them.''

Dissatisfaction with Managed Care

A telephone survey of 3,348 adults in Boston, Los Angeles, and Miami, conducted by Louis Harris and Assoc., showed that 15% of managed care members rated their medical care as fair or poor, compared with 6% of fee-for-service members. Managed care members were much more likely to rate their plans as fair to poor for access to services, including specialty care (23% vs. 8%); emergency care (12% vs. 5%); waiting time for a routine appointment (28% vs. 11%); and convenience of providers' location (17% vs. 4%). Managed care members were also far less satisfied with the ease of changing doctors (25% vs. 5%); choice of doctors (25% vs. 5%); and quality of doctors (17% vs. 4%). Managed care coverage was quite unstable; more than 53% had been in their current plan for less than three years, compared with 37% of those in fee-for-service plans. About 73% of adults surveyed had had to switch insurance plans within the previous three years, primarily because their employers changed plans (32%) or because they changed or lost their jobs (39%).

Group Health Association of America called the study ``flawed and misleading,'' citing another study showing that HMOs were rated better than fee-for-service plans (BNA's Health Care Policy Report 7/24/95).

Ten Years Experience with MSAs

In Singapore, citizens pay directly for many goods and services often paid for through government in the rest of the world. MSAs have been a feature of Singapore's savings program for 10 years. In that tiny nation, ``citizens have as much access to high technology as Americans and Europeans, but at a much lower cost,'' stated Merrill Matthews of the National Center for Policy Analysis. The hospital length of stay there is almost as low as achieved by American HMOs. ``The difference is that in American managed care systems, administrators make health care decisions for patients, while in Singapore patients make decisions for themselves.''

Blue Bunglers, or Blue Burglars?

As many as 100,000 current and former subscribers to Blue Cross and Blue Shield of Minnesota are expected to receive refunds totalling $3.9 million under settlement of a class-action suit. The lawsuit claimed that Blue Cross negotiates wholesale prices with doctors and hospitals, but subscribers are billed 20% of the retail price as their copayment. This is called the ``standard practice of the industry.''

Trigon Blue Cross Blue Shield had to pay a $5 million fine to the state of Virginia, as well as $23 million in restitution to individual policyholders, as a result of Virginia Attorney General James Gilmore's investigation of similar practices. Two Virginia cities, Lynchburg and Charlottesville, have filed suit against the insurer, and other lawsuits have been filed by employers against Blue Cross plans across the United States (AM News 9/18/95; WSJ 8/21/95; AAPS News Oct, 1993).

Managed Care Enrollment Suspended in NY

The New York City public hospital system suspended enrollment in its Metro Plus managed-care plan because many members were directed to wrong locations, denied access to treatment, or given insufficient information to use the services. A ``frenetic'' enrollment drive, which signed up 155,000 Medicaid beneficiaries in six months, was said to be marked by fraud, misrepresentation, and coercive practices.

HMO spokesmen said that problems were ``isolated,'' and that ``warts and all, Medicaid managed care is better'' (BNA's Health Care Policy Report 8/7/95).

Mississippi Chapter

A new state chapter has just been formed in Mississippi. At a recent chapter meeting, representatives of Golden Rule Insurance Company addressed about 40 physicians. The President is Russell Blaylock, M.D., of Ridgeland, a neurosurgeon; Vice President is Richard Boronow, M.D., of Jackson, a gynecologic oncologist; and Secretary is Patrick Barrett, M.D., also of Jackson, an orthopedic surgeon.

The chapter is placing newspaper ads to educate patients about the dangers of managed care.

``...Worlds I would destroy forever,

Since I can create no world;...''

``Feelings'' by Karl Marx

Will Private Medicine Be Decriminalized?

Two Canadian federal agencies, Industry Canada and the Federal Business Development Bank, bestowed the Unexpected Entrepreneur Award on Winnipeg businessman David Miller.

Miller's business is providing insured medical treatment in the United States for Canadians tired of the ``waiting game.''

``Talk about irony!'' stated David Summerville in an article in Overview. ``The government creates a problem and then rewards someone who profits from it.''

A better way, he stated, would be to ``decriminalize private basic health insurance and allow the establishment of private hospitals.''

Unlike Canadian medicare, the American Medicare system does not explicitly outlaw private medicine. However, intimidating notices from carriers, aimed at physicians who do not file claims, seem to be published with greater frequency. It could be that HCFA fears that more and more physicians will act on the statement that appears repeatedly in the Senate Finance Committee Chairman's Mark on Budget Reconciliation: ``Part B is a voluntary program.''

Senator Jon Kyl (R-AZ) has introduced a bill, the ``Senior Citizens Health Care Freedom to Contract Act'' (S. 1289), which would clarify the ambiguity. Cosponsors so far include Senators Sam Nunn (D-GA), Lauch Faircloth (R-NC), Jesse Helms (R-NC), Dirk Kempthorne (R-ID), and Larry Craig (R-ID). A copy of the bill and the Dear Colleague letter are available from the AAPS FAX-on- demand service, (703)716-3404. You can also receive a copy of the AAPS Medicare Reform Proposal from that number.

Call your Senator and ask if he has signed on yet. The Capitol Hill switchboard is (202)224-3121.

Is It Free Speech?

Another question for Thomas Ault (also see p. 4) from L.R. Huntoon, M.D., Ph.D., of Jamestown, NY:

Are physicians allowed to speak freely (as in 1st amendment rights) with patients to advise them that when they authorize the release of any medical or other information needed to process their Medicare claim, they are giving government bureaucrats carte blanche access to all of their confidential medical information? In other words, does HCFA consider such free speech with patients to represent ``pressure'' or a ``condition of treatment'' by physicians such that the patient's free choice would be considered ``invalid'' or ``ineffective''?

Is It Slavery?

AMENDMENT XIII: Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.

In July, 1995, the State of New York passed a law that prohibits physicians from directly billing the Medicaid system for services provided to Medicaid patients in hospital emergency rooms or out-patient clinics. Under federal law (COBRA), physicians are compelled to care for such patients, under pain of a $50,000 fine. The responsibility for paying physician staff members is supposed to rest with the hospital; Dr. Huntoon reports that the CEO of his hospital ``didn't waste any time telling us that it was his intention to pay physicians nothing for serving Medicaid patients in the emergency room.''

At the recommendation of the Medical Society of the State of New York (MSSNY), some physicians attached a ``Reservation of Rights'' statement to Medicaid claims, so they could file claims at a later date if the law changed. The claims were sent back because they had an ``unauthorized attachment.'' Dr. Huntoon reports that Ron Bass of the Department of Social Services (518- 473-6049) assured him that ``if we would resubmit the ER Medicaid claims, they would enter their processing system and all would be promptly denied for payment.'' Dr. Huntoon surmised that ``it is not illegal for physicians to submit ER Medicaid claims, it is just illegal for the State to pay them.''

New York law allows only 120 days to file challenges in court (deadline is Oct. 30). As of September 12, Governor Pataki was ``in the process of reviewing this budget bill's language with the goal of rectifying the situation''; the Senate Deputy Majority Leader was intending to ``closely monitor this review process''; and MSSNY was seeking a regulatory solution, warning that the law could increase costs by $165 million by increasing inpatient admissions (News of NY 9/95).

``When someone makes you a slave, you don't go quietly negotiating with the slave owner to see if he won't change his mind,'' commented Dr. Huntoon.

Dr. Huntoon predicts that hospital CEOs will use the Medicaid law to their advantage to leverage a takeover of medical care. The agenda for establishing an ``Integrated Delivery System'' (funded by the Robert Wood Johnson Foundation) includes a computerized system of sharing data so that the hospital has complete access to patient data in doctors' offices. Doctors who cooperate could be given remuneration (kickbacks?) in the form of a managed care fee for treating ER patients; those who don't could be punished by nonpayment. Further, a proposed new bylaw would provide for the removal from the medical staff of physicians displaying behavior ``disruptive to the ongoing operations of the hospital.''

``The vandals are truly at the gate of medicine,'' concludes Dr. Huntoon.

Did the Government Err?

In opposing the AAPS motion for sanctions against the conduct of the Dept. of Justice in the case of AAPS v. Clinton, a brief filed October 5 asserts that it was the U.S. Court of Appeals that erred in stating that ``the government claims that all of the members of the [Clinton Health Care Task Force] working groups are full-time officers or employees.'' The DoJ only agreed with this claim on one subsequent occasion, when lead counsel was out of the country. DoJ did not correct the error, though they now wish they had. ``If defendant's litigation posture displayed any ambiguity here, it was the result of a natural reluctance to abandon prematurely a potentially viable defense'' [which it says it never made, at least not affirmatively, because proof would be too onerous, even if the proposition were true, and they are not conceding that it isn't, and anyway the concept ``member'' has no meaning].

DoJ denies that their attempt to settle the case, followed by the release of documents, means that AAPS prevailed.

AAPS has asked to recover a portion of its attorneys' fees under the Equal Access to Justice Act. Additional briefings will occur this month.

Members' Page

A HCFA Fantasy (an imaginary response to the Aug. 4 letter from HCFA to Mr. Pyles on forgoing Medicare benefits, see AAPS News, Oct 1995)

Dear Mr. Ault:

....I remain confused. You write: ``...the benefi- ciary...entirely free of any pressure from the physician....'' How can I possibly meet this criterion? Would a sworn and witnessed statement, or even a complete videotape of every single meeting be adequate? Can only HCFA be the judge?

You also write that a ``beneficiary...may, of course, change his mind....'' I do not understand how it can be a matter ``of course'' that an agreement can be broken or modified unilaterally....Of course, once the patient has contracted with me for treatment outside the purview of an army of bureaucrats, I might suffer a windfall privacy profit. My expenses for filling out your forms, my anti-ulcer medications, and my personal psychiatric therapy would decrease significantly. I would be bound by my conscience to offer my service at a lower fee-but only if the contract was a contract, i.e. not subject to unilateral revocation. The possibility of lower expenses and of experiencing the joy of freedom would be destroyed if such a sword of Damocles were to be hanging over my neck, held up only by the thin thread of the mood of my psychically unstable patients.
Robert Cihak, M.D., Aberdeen, WA


To a Patient Who Misunderstood. I must not have made myself clear at the time of performing your injection. I can no longer accept money from the federal government in the form of Medicare payments....The money that you have paid in the system is long since gone. The money that is sent to physicians to care for today's elderly represents IOUs for which my children will be responsible. By accepting a Medicare check, I become the recipient of stolen property, property that youngsters of today have yet to earn. I cannot in good conscience mortgage the future of my children. I prefer to provide services to Medicare patients gratis....I am prepared to accept donations, but not those collected under duress or coercive circumstances.

Please take no offense at my returning the checks to you. I am honored to have been selected to care for you, and I hope you are feeling well. Should you need further care, I would be happy to see you again.
G. Keith Smith, M.D., Edmond, OK


MSAs Will Not Make Medicare Patients ``Run Wild.'' The October Legislative Supplement stated that Medicare spending might increase with Medical Savings Accounts if the deductible is set too low, providing a ``powerful incentive'' for seniors to reach it and ``run wild'' in utilizing medical services. Today, almost every nonindigent Medicare patient has zero-deductible Medigap insurance. About 42% purchase it directly, and another 33% receive it from past or present employers. Thus, almost no cost sharing at the time of consumption exists. MSAs can only help this situation.
Gerald Musgrave, Ph.D., Economics America


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AAPS Calendar

Oct 10-12, 1996. 53rd annual meeting, La Jolla, CA.

Legislative Alert

Congressional Leadership Medicare Plan

The House Congressional leadership has unveiled the outlines of ``The Medicare Preservation Act of 1995.'' From the standpoint of physicians in private practice, it is a ``fair'' start, but only ``fair.'' From the standpoint of serious market-based reform, the result is disappointing. Some observers say it shows the influence of the corporate insurance groupies well entrenched on K Street who, like their left wing counterparts, are skeptical of any health insurance market reform that would guarantee real consumer choice and competition. As many economists have long ago realized, the biggest opponent of the free market is often the business interests who wish the government to regulate it to their profit.

There are four key elements:

1. Preservation of Traditional Medicare. Average per capita spending will grow from $4,800 in 1996 to $6,700 in 2002. There will be no change in copayments or deductibles; in other words, virtually all of the perverse incentives that stimulate unlimited demand for medical services in Part B are being left in place. As the House Republicans say, there is not much difference between their proposal and that of the President on the issue of payment: about $7 per month.

2. The Medicare Plus Program-Private Choice. Senior citizens would also be able to choose government-certified private sector plans. All plans must agree to take all Medicare beneficiaries, regardless of health status. This is a guaranteed issue requirement. Many conservatives on Capitol Hill agree with limited underwriting rules for insurance. And even if they don't like guaranteed issue or modified community rating in principle, this is still a government program; it is not a reform of private sector insurance. The problem is the mandated benefits. Beneficiaries will be able to choose only plans that have Medicare's politically defined set of standardized benefits as they have evolved through the Congressional and bureaucratic process over the past 30 years.

The result: Medicare consumers will probably have the choice of a dozen kinds of vanilla. This is, in principle, a surrender to the concept of the comprehensive, standardized government benefit package that characterized the Clinton Plan last year. There is no other way they can color it.

The basic options are coordinated care, medical savings accounts, and provider networks.

``Coordinated care'' (the new term for managed care) allows seniors to choose more benefits (such as prescription drugs and eyeglasses) than traditional Medicare in return for limiting their choice of doctor.

Alternately, seniors could choose high-deductible insurance along with cash deposit to cover ``a significant portion'' of the deductible. Under the Republican rules, a high-deductible policy could have no copayments. This is designed to assure the elderly they would have a limit on their out-of-pocket costs. Whatever its political attractiveness, this is, of course, yet another restriction on the market.

Seniors could use funds in their MSA for medical care or long-term care insurance. They could also use the funds for ``non-health related purposes,'' as long as they maintain a ``minimum balance of 60% of their catastrophic insurance deductible.'' Such funds would be taxed as income. All interest earnings on the fund would be considered taxable income.

A third option is ``Provider Service Networks,'' which would permit doctors and hospitals to offer Medicare benefits, without an insurance or managed-care company serving as middle man. The networks would have to meet fiscal solvency and ``marketing'' requirements. From the outline of the bill, it is not clear what these requirements might be.

3. Anti-Fraud Provisions. GAO reports rampant fraud and abuse, which have been plaguing the program for years. The Congressional GOP plan gives HHS the power to financially reward beneficiaries who uncover waste, fraud, and abuse. The bill would also require posting of fees and billing up front, so beneficiaries will know what the true costs are.

The Chairman's Mark from the Senate Finance Committee adds ``incorrect coding'' and ``medically unnecessary services'' to the ``prohibited practices'' for which civil monetary penalties can be assessed. These penalties are increased from $2,000- $5,000 to $10,000 for a number of infractions.

4. Standby Global Budgets and Price Controls. The Congressional Republican bill includes a ``fail-safe'' fiscal solvency or budget mechanism. Within traditional Medicare, the HHS will set spending growth targets for providers. The Secretary will have the authority to determine whether the level of services exceeds the growth targets. If so, the Secretary can change, or reduce, payment updates to doctors and hospitals. This in effect means that the Secretary can tighten up on the complex DRG and RBRVS formulas-using the same methods that have failed for the past thirty years.

The Democratic Response

But which Democrats? Before entering office, Bill Clinton wrote in the New England Journal of Medicine that the dramatic increases in Medicare were unacceptable, and that spending had to be controlled. In an October 3, 1993, speech to AARP, Clinton said that Medicare was going up at three times the rate of inflation, and that he was proposing that it go up by only twice the rate of inflation. In defense of this position he uttered a memorable line: ``That is not a Medicare cut. So only in Washington do people believe that no one can get by on twice the rate of inflation. So when you hear all this business about cuts, let me caution you that is not what is going on.'' The early 1995 White House position (from the State of the Union message) was that Medicare was untouchable. But as Rep. Dave Obey (D-WI) remarks, if you don't like the White House position, just stick around, it'll change. If you want details of the White House Plan, there are none.

Please note: The Congressional Budget Office (CBO) estimate of the GOP Plan is that Medicare will go up by 6.4%, and inflation would average 3.26% over the same period.

As for Minority Leader Gephardt and Congressional liberals, their plan for Medicare is simple: Scare senior citizens and criticize the Republican plan. A June 22 memo stated: ``We must make sure that senior citizens and their families understand that the Medicare cuts will result in an increase in copayments, deductibles, and premiums and will jeopardize their right to choose their own doctors. Furthermore, the Republican Medicaid cuts could force some families to remove elderly family members from nursing homes and care for them at home.'' (The last sentence is worth pondering.)

This is too much even for the Washington Post: ``There's a legitimate debate to be had about what ought to be the future of Medicare and federal aid to the elderly in general. But that's not what the Democrats are engaged in. They're engaged in demagoguery, big time'' (9/15/95).

Moderate and conservative Democrats are singing a different tune. Senators Lieberman (D-CT) and Breaux (D-LA) are criticizing the Republican plans for Medicare as not being market-oriented enough. And they plan to introduce a reform plan based on the proposals of the Progressive Policy Institute (PPI), the think tank associated with the Democratic Leadership Council.

In a September 22 policy report, David Kendall, chief health policy analyst for PPI, says: ``If anything, Republican proposals would actually increase Medicare's reliance on bureaucratic fiat to manage costs. Their effort to wring huge savings from providers and beneficiaries under the current inefficient system, instead of reforming it, is a high risk strategy that will either fail or lead to genuinely drastic cuts in provider payments or benefits in the future.''

PPI spokesmen are clearly trying to run to the ``right'' of Gingrich and company on their adherence to ``free market'' purity. You really need a playbook to follow this contact sport.

Thermonuclear Reactions

While the politics of the Medicare debate are explosive, the economics are even more so. Medicare cannot be separated from the drive to balance the federal budget. And a failure to balance the federal budget is a guarantee of higher interest payments on the federal debt and a reduction of everybody's standard of living.

If Congress should get cold feet and fail to restructure the Medicare program in a significant way, the tax burden on working families will dwarf anything that Americans have seen in memory. The Washington-based Heritage Foundation, using the official Medicare trustees' assessments of an intermediate solution, with a 3.5% hike in the payroll tax to bail out the Hospitalization Trust Fund, estimates that the first-year tax increase would amount to $123 billion. This would mount to $711 billion over five years, or almost triple the Clinton Administration's 1993 tax hike ($263 billion over five years), the largest single tax increase in American history.

But this is only the beginning. The problem is not simply Part A, the Hospitalization Trust Fund. The costs in Part B are exploding. Taxpayers pick up 75% of this cost. According to the CBO, projected taxpayer obligations over the next five years, assuming no change in the law, will reach $370 billion. That CBO number is probably an underestimate.

Using both the Medicare Trustees' intermediate Trust Fund payroll assumptions and the current CBO projections, the taxpayers could be hit with a Medicare-related tax increase of over $1 trillion in five years. This is insanity. And most Americans, unless they are following the debate very closely, are oblivious to what is in store for them.

Members of Congress are worried about the reactions of the elderly to Medicare reform. They had better start thinking, and fast, about the reactions of middle-income wage earners, the 77 million Baby Boomers in particular, when they get the bill for a Medicare program run on Washington's ``business as usual'' principles of deception, delay, and delusion. With the huge tax hikes coming down the pike, official Washington will be lucky if its escapes a twenty-first century version of the French Revolution. Forget old-fashioned class warfare. Intergenerational warfare, fighting over the inevitably diminishing spoils of a bankrupt welfare state, could be even more ugly. We are talking thermonuclear politics.

Bug Spray?

On both sides of the aisle, the Congressional leadership really understands this. This explains, in part, the hysteria that appears to have gripped Liberals in Congress over the Republican plans to revamp Medicare. There is also another reason why Congressional liberals are really losing it, jumping around like bugs that just got a whiff of insecticide. If the Congressional leadership succeeds in establishing a consumer choice system in Medicare, relying on the competition of private plans to deliver higher quality care with better benefits, the long-term goal of a government-run national health insurance is dead. For years, with untrammeled majorities in the House of Representatives, Congressmen Henry Waxman and John Dingell and liberals on the House Ways and Means Committee have been constructing piece by piece the components of federal control, with Medicare as the model.

Witness the RBRVS nonsense. On the face of it, it is a silly proposition to argue that a class of professionals should be reimbursed on the basis of a social science measurement of their labor value; even Communists gave up on that idea before the Communists themselves gave up on Communism. Liberals in Congress always favored price controls, but the Harvard hatched RBRVS scheme was something far more than a Medicare price control; it was the theoretical and practical model of a federal physician fee schedule for a future system of national health insurance, along the Canadian or British model. Liberals in Congress always understood this, even if less perceptive Republicans, barely understanding the stuff in the first place, went along for the regulatory ride.

But if the elderly get the option of taking a government contribution and spending it on their own insurance and medical care options, they henceforth have a stake, a private and personal stake in how they obtain care, and nobody will ever be able to take it away. That, in effect, is precisely what happened with the establishment of private medical plan options in the Federal Employees Health Benefits Program. Members of Congress can't even begin to interfere with the private plan choice of federal employees and retirees, as the Clinton Administration discovered to their continuing embarrassment.

An even better example is the public housing policy of former British Prime Minister Margaret Thatcher. Lower income Britons were often consigned to public housing. Thatcher privatized public housing, and the British Laborites were reduced to pathetic appeals to their working class constituencies to resist the British Conservative initiatives, with the less-than- convincing argument that private ownership for low-income people is somehow an undesirable thing. It's hard to keep the folks down on the Collective Farm after they've spent some time on the old private homestead. The real argument is that privatization brings with it the loss of central control; that, in the end, is always the real issue. It is a political, not an economic, issue. So it is with Medicare. If the Congressional leadership succeeds in reforming Medicare, there's more at stake than Medicare. Moreover, if the elderly actually come to like the new system, which they undoubtedly will, and the federal budget is balanced to boot, Gingrich and Company will have pulled off the equivalent of a political miracle. Liberals in Congress understand this very well. Hence, the scaremongering, the apocalyptic rhetoric, the hysteria surrounding Medicare. It is not unfair to say the future of the country is riding on this big fight.