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.
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
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
UNITED STATES POSTAL SERVICE, Statement of Ownership,
Management, and Circulation (Required by 39 U.S.C. 3685).
1. Publication Title: AAPS News. 2. Publication No.: 658-470.
3. Filing date: 9/25/95. 4. Issue Frequency: monthly. 5. No. of
Issues Published Annually: 12. 6. Annual subscription Price: $35.
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Mailing Address of Headquarters or General Business Office of
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Tucson Blvd. Suite 9, Tucson, AZ 85716-3450. Editor: Jane M.
Orient, M.D., 1601 N. Tucson Blvd. Suite 9, Tucson, AZ 85716-
3450. Managing Editor: Jane M. Orient, M.D., same address. 10.
Owner (if owned by a corporation, its name and address must
be stated and also immediately thereafter the names and addresses
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well as that of each individual must be given. If the publication
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must be stated.): Association of American Physicians and
Surgeons, Inc., (a not-for-profit corporation), 1601 N. Tucson
Blvd. Suite 9, Tucson, AZ 85716. 11. Known Bondholders,
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Circulation Data Below: October, 1995.
Oct 10-12, 1996. 53rd annual meeting, La Jolla, CA.
Legislative AlertCongressional Leadership Medicare
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.
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
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
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
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.