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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 54, No. 11 November 1998
"QUALITY" = COMPLIANCE
State-of-the art "Quality Resource Management" involves
having all the monitored care episodes within "control bars."
The "outlier" physician can then be targeted for intervention.
Less sophisticated tools used by government agencies (such
as Medicare PROs) involve making bar graphs of the percentage
compliance with the use of "proven" remedies in eligible patients
(such as aspirin, beta blockers, and angiotensin converting
enzyme inhibitors in patients with myocardial infarction). The
idea is for all institutions to be at the same level. Hospital
administrators will admit that the agency is "statistically
challenged"-if a member of the Medical Executive Committee points
out that big percentage differences can be caused by one or two
patients in a small group-but the charts are displayed
nonetheless ("we have to do this").
Often the quantities measured-in pursuit of Quality- relate
to cost issues: such as time required to do a colonoscopy, length
of stay, or cost per discharge. The bottom line for the choice of
research topics on Quality generally seems to be the bottom line-
of persons other than the patient. In fact, the Value of health
care services is defined as the "health benefit [to Society] per
dollar spent" (Chassin, Galvin, and the National Roundtable on
Health Care Quality: "The Urgent Need to Improve Health Care
Quality," JAMA 280:1000-1005, 1998).
Quality is also about Justice: "If concern for justice
should inform the choice of research topics, then the greater
relative needs of the young [as opposed to the elderly] in the
United States should receive increased attention in the design of
research studies" (Starfield, "Quality-of-Care Research: Internal
Elegance and External Relevance," JAMA 280:1006-9,
To assess Quality of Care, we need tools to assess Quality
of Life, but even this is not enough, according to Starfield.
There is a need for "increased inclusion of social variables in
research design" in order to represent the "composition and needs
of the population" (ibid.)
This requires more data, and higher quality data: "The
imperative to develop standards for the electronic medical
record, through the Health Insurance Portability and
Accountability Act of 1996, provides an excellent opportunity to
rethink the nature of clinical and clinically relevant data and
how new approaches to recording it could overcome the current
problems with incomplete and inaccurate data" (ibid.)
The medical informatics industry is here to help implement
the millennial Vision, through a public-private partnership. One
of the global action items in a strategic beginning is to
"support the convergence on standards and coding schemes by
accelerating current initiatives" (JAMIA 5:395-400,
The "radically new ways...to deliver health care services
and...assess and improve their quality" would focus on the Big
Picture: not on methods of fighting disease, but on overuse,
underuse, and misuse of health services (Chassin,
Underuse includes missing a vaccination; undetected and
untreated hypertension or depression; or failure to use thromb-
olytics, beta-blockers, or ACE inhibitors.
Note that a new, "broad" view defines "health care
rationing" as "anything that allows patients to go
without beneficial medical services." This will "emphasize the
ubiquity of tragic choices in health care and highlight the need
to decide what types of medical care we want
everyone to receive" [emphasis added], writes Robert
Wood Johnson Foundation scholar Peter Ubel (Arch Intern
Med 158;209-214, 1998).
Underlying the Quality campaign are radical objectives:
- A change from patient-based (Hippocratic) to
population-based ethics. The "apparent conflict" between the
two necessitates an "adaptation process [that] will disconcert
the transition generation of physicians" (Greenberg, "American
Medicine Is on the Right Track," JAMA 279:426-428,
1998). The new medical education will be expanded to include a
set of "one-to-n" physician obligations (Greenlick, "Educating
Physicians for Population-Based Clinical Practice," JAMA
267:1645-1648, 1992). Quality, after all, "is not identical to
positive outcomes" (Chassin, op cit.).
- Redistribution of resources from the sick to the
healthy, from caregivers to administrators and overseers.
More profits will go to manufacturers of vaccines and approved,
required drugs; physicians who decline to prescribe "recommended"
therapy will be accused of "poor quality." Other clear
beneficiaries will be those who set the standards and implement
the data collection requirements: such as signatories to a Sept.
28 letter strongly supporting the Digital Millennium Copyright
Act, which would provide strong financial incentives to collect
huge health databases. Signatories included the AMA and the
Information Industry Association.
- Increased pressure on independent physicians.
Chassin et al state that "no health care professional can deliver
high quality alone. Increasingly, health care professionals
practice within groups and systems of care."
- The destruction of the private sphere. All
individuals, in all settings of care, including private homes,
are to be included in "quality assessments."
Backing up the Quality regime is the federal government,
whose awesome powers are explained in an AMA book entitled
Federal Law Enforcement: Physician Compliance. The
government may impose "sanctions" (up to five years in prison) if
it finds fault with a single claim, ranging from an inadvertent
mistake to outright fraud.
Quality will be the claim to legitimacy for the new Popery
in medicine. Fear not: Your AMA promises to hold the Keys,
functioning like the Pardoner in Chaucer's Canterbury
Tales, with Compliance Plans, seminars, and influence in
Is a new Reformation at hand?
Approved, Effective, Required Therapy
According to an April 5 report in the Buffalo News,
some 4,500 people-twice as many as previously reported-were
lobotomized in Sweden between 1944 to 1963: without charge, and
many without the consent of a relative. These included children
as young as 7 years of age. Additionally, benevolent Swedish
socialists sterilized some 60,000 nonconsenting persons between
1935 and 1976. The question of compensation for victims of these
methods is being debated (Lakartidningen 94:3935-3938,
Antonio Egas Moniz received the Nobel Prize for Medicine in
1949 for the discovery of prefrontal lobotomy. Initially intended
as a treatment for certain psychoses, psychosurgery was advocated
by a small group of American doctors in the 1960s as a way of
dealing with the "public health problem" of racial unrest and
More recently, the health promotion movement shows signs of
becoming ever more coercive and intrusive, "headed on a collision
course with basic democratic processes and individual freedoms."
Whereas Americans have been exhorted, in warfare, to sacrifice
health, life, and limb for freedom, "[n]ow some would have us
sacrifice that very freedom for health" (Kilwein: "Medicine as an
agency of social control: part four," J Clin Pharm
Therapeutics 20:49-53, 1995).
Once freedom is gone, other unthinkable consequences, from
lobotomy to soylent green, can follow.
Unapproved, Unnecessary, or Forbidden Therapy
Areas of increasing concern to the hierarchy of organized
medicine, the self-anointed Quality priesthood, is "Alternative
Medicine-the Risks of Untested and Unregulated Remedies" (Angell
& Kassirer, N Engl J Med 339:839-841, 1998) and
"Marginal Medicine" (Lamm, JAMA 280:931-933).
It is reported that 34% of adults in the U.S. use at least
one unconventional form of health care each year, defined as
practices "neither taught widely in U.S. medical schools nor
generally available in U.S. hospitals." The estimated 425 million
visits to "alternative health care providers" in 1990 exceeded
the number of visits to allopathic primary care physicians during
that same period. Moreover, patients generally paid out of pocket
for such services.
Three hypotheses were proposed to account for the popularity
of alternative medicine: dissatisfaction with conventional
medicine, need for personal control, and "philosophical
congruence." Patient characteristics correlated with use of
alternative medicine included more education, poorer health
status, and a cluster of tendencies defined as "culture creative"
(Astin, JAMA 279:1548-1553, 1998).
The defining feature of alternative medicine, in the view of
Angell and Kassirer, is the lack of rigorous testing for safety
and efficacy by the FDA and the lack of publication of research
reports in the "best peer-reviewed medical journals." They do
concede that many treatments used in conventional medicine have
not been rigorously tested either, but "the scientific community
acknowledges that this is a failing that needs to be remedied."
With notable exceptions, such as those reported in the Sept.
17 issue of the New England Journal of Medicine (which
were due to adulterated herbal remedies), the chief hazard of
alternative medicine is said to be a "harmful delay in getting
treatment that has been proved effective." (This, of course, is
also a hazard of managed care and socialized medicine.) One may
speculate that the diversion of "resources" from approved therapy
is also a major concern.
Expanding the powers of the FDA is one way to suppress
Another method is to deny physicians the right to collect
payment from anyone for unapproved therapies. For
example, Pennsylvania Blue Shield determined, "[t]hrough a recent
re-evaluation, ... that chelation therapy is not medically
necessary for the treatment of conditions other than heavy metal
poisoning." Therefore, they not only denied insurance coverage
for this procedure (which is surely within their rights), but
also dictated that, as of October 6, 1997, "a participating or
preferred health care professional may not bill the
patient for these services."
Insurance carriers are not stopping at therapy that lacks
general acceptance. Regence BlueShield of Washington State is
implementing draconian measures to suppress therapy that is not
approved by them as being "medically necessary" in a
particular instance. They do not simply deny reimbursement:
The Practitioner who collects an amount from the
Patient in violation of the agreement is a Class C
And to check for compliance with the agreement, the company
may audit any group of records, any time, with as little as 24
Richard D. Lamm has given an eloquent explanation of how the
physician who provides care that helps a patient may truly be a
The best medicine for an individual is not
always the best health policy for society. Government's
goal is health and the physicians' definition of health
care is not always the best or most efficient way to
deliver health. By not crawling out of the trenches of
our professions and looking at the total battlefield,
we fail to maximize our contribution to the larger
battle for a decent and productive society (Lamm,
While it lobbies for a "Patients' Bill of Rights," the
Quality priesthood has no principled objection to
governmental or third-party barriers to medical care. Its own
writings are in complete accord with the collectivist ethic, as
long as it is implemented through a public-private partnership in
which the priesthood holds the reins of power.
A New York internist noticed that the lab, with which he
contracted, upcoded claims and billed for unordered tests. He
wrote a letter to the lab asking it to stop, but he didn't keep a
copy of the letter and filed no report. The doctor was
convicted of filing false claims, ordered to repay $612,855, and
serve 46 months in jail....Medicare Compliance Alert
gives you 4 practice-proven steps to protect yourself...[Send
44. Because, by a work of charity, charity increases
and the man becomes better; while, by means of pardons, he does
not become better, but only freer from punishment.
45. Christians should be taught that he who sees any one in
need, and passing him by, gives money for pardons, is not
purchasing for himself the indulgences of the Pope, but the anger
Martin Luther, The Ninety-Five Theses, 1517
Battle on Sunbeam Blackout Continues
In its vigorous fight against an AAPS motion to lift the
Protective Order in the case of Sunbeam Products v. AMA,
the AMA took the unusual action of filing a Surreply on Oct 2.
The AMA states that it produced more than 26,000 pages of
documents pertaining to its "potential and actual commercial
relationships with other companies, including business plans,
internal financial analyses, and confidential contractual
arrangements." Without the Protective Order, it would have
refused to produce many of these materials.
The AMA states: "[T]he discovery that the AMA produced in
the Sunbeam litigation did not concern the HCFA agreement," which
it describes as a "royalty-free license to use the AMA's work of
medical nomenclature, Current Procedural Terminology, in
connection with federal health care programs such as Medicare."
The AMA's brief gives no estimate of the amount of revenue that
the AMA derives from royalties or book sales to physicians who
are required to use the codes.
The AMA argues that "AAPS cannot rescind the protective
order merely because some of its members are also members of the
AMA." The AMA claims that it "has been extraordinarily open in
discussing the Sunbeam transaction with its members" and that
"AMA members who want more information about this case have
recourse through the procedures of the AMA's House of Delegates."
AAPS responded that the "AMA did not, and cannot, provide
any justification for the protective order." While the
AMA "emphasized in its Answer that its `mission is to serve as
the voice of the American medical profession,'" the AMA trustees
"obtained a protective order here that conceals their wrongdoing
from the very profession they purport to represent." Had the AMA
taken the case to trial and given depositions, "we would then
find out whether the board or some members of the board actually
knew about" the deal with Sunbeam, stated former AMA Trustee
Raymond Scalettar, MD.
Judge Harry D. Leinenweber is expected to rule soon on
whether to lift the protective order and require the AMA to
preserve documents. All AAPS and AMA briefs can be downloaded
Database Protection by Stealth
In a letter to all U.S. Senators, AAPS objected to the
portion of the Digital Millennium Copyright Act that would create
a new federal right to collect, maintain, and harvest highly
personal medical information.
This title was slipped into the bill and passed by voice
vote as part of the consent agenda, "a serious abuse of this
mechanism, which is supposed to be used only for noncontroversial
measures such as the naming of Post Offices." AAPS stated that
"[a]side from groups who would profit from this legislation
(including the AMA, despite its `nonprofit' status), there is
nearly unanimous opposition."
This Act seems to be designed to circumvent public outrage
by allowing private entities to build the data base, rather than
the government. A central health data bank is one of the key
objectives of the Clinton Administration.
An Old Public-Private Partnership
The Reign of Fear introduced in 1480 by the Spanish monarchs
Ferdinand and Isabella was designed to contain a popular
movement: preachers making wild accusations against persons whose
grandfathers had converted from Judaism under duress. The
Inquisition enabled the crown to control inquiries into
allegations of secret Judaism, according to The Spanish
Inquisition by Henry Kamen (Wall St J 4/16/98).
Between 1481 and 1530, about 2,000 persons were executed. In
the whole of the 16th and 17th century, fewer than three persons
per year were executed. Some 2,200 persons were prosecuted for
"Judaizing" between the 1660s and the 1720s, of whom about 3%
were burned at the stake.
Despite the small number of executions (by 20th century
standards), the Inquisition had a "profoundly negative effect on
Spanish life for a very long time." The Holy Office destroyed the
highly effective Spanish Jewish community and prevented the
development of intellectual curiosity in all.
The son of an Inquisitor-General wrote in 1533 that no one
in Spain could "possess any culture without being accused of
heresy, error, and judaism."
Private Partners Pack Heat
To "protect the safety" of Inspectors-General and their
private deputies, HCFA is asking Congress to give its
investigators blanket permission to carry weapons as well as to
issue search warrants and make arrests.
The AMA has stated that proposed regulations for private
contractors in the Medicare Integrity Program "fell short on
several measures," including failure to ensure that conflicts of
interest were "properly mitigated."
AAPS commented (see www.aapsonline.com) that
the proposed rule "affirmatively conceals the conflicts of
interest of the private auditors" and that certain benefits
permitted to auditors-financial compensation by a competitor of
the physician being audited-are tantamount to bribery and should
be strictly prohibited. (Also see AAPS
News July 1998).
The Altar of Truth
Once the gold standard of quality assurance, the autopsy is
under attack. According to Dennis O'Leary, President of JCAHO,
"Health care organizations are no longer just being held
accountable for doing their job well; they also have to make the
most efficient deployment of resources in a resource-limited
environment" (BNA's Health Care Policy Report 12/21/96).
Requiring a certain percentage of autopsies is a very expensive
exercise "that "I could not keep a straight face and justify to
anybody," O'Leary said.
Stealth and Dissimulation
"Official regulations against Jews and political dissidents
were heightened in a deliberately measured fashion, always
leaving time for the public to adapt to one step before the next
was taken. This gradual escalation eventually led to a degree of
suppression and violence that had been unimaginable just a few
years earlier. Furthermore, the worst episodes of violence were
hidden from the public."
After some physicians and others forced a stop to euthanasia
killings in 1941, Hitler gave only oral orders. This consummate
politician changed his behavior to suit the audience, presenting
himself as a fanatical stormtrooper one day and a moderate
statesman the next (W. Weyers, Death of Medicine in Nazi
Germany, Lippincott-Raven, 1998).
Hospital Tracking. Though I haven't heard anything from
HCFA on my FOIA request for any information relating to a
suspected government computer data base containing economic
credentialing information on physicians, our hospital's computers
have been tracking the length of stay (LOS) for each physician,
by diagnosis code and cost/discharge. The implication is that
those with "low" LOS and cost/discharge ratios are the "good"
physicians. "Averages" are calculated on sample sizes as low as
one (1), but are no doubt impressive to the statistically
challenged. There is no mention of intensity of illness or
Now that hospitals are getting hurt by market disconnect,
they are looking for ways to share their pain. Or, as our
hospital CEO puts it, he wants to see an "economic realignment of
hospitals and physicians," as part of his vision of "integrated
delivery." There is a big push to adopt "clinical pathways" for
every DRG thing done in the hospital. The CEO feels that
physicians need to be encouraged and "coerced" (interesting
choice or slip of words) to follow these pathways so that we can
"streamline" and "standardize" quality of care throughout the
Shortly after the LOS and cost data were handed out
[identifying physicians by name], we began seeing large LOS
stickers on the front of every chart. Maybe we will even see a
real time electronic board in the doctors' lounge like a stock
market ticker, showing ongoing LOS numbers and cost/discharge.
Yesterday, I found an LOS sticker that said "2.04": that's 2
days, 57 minutes, and 36 seconds to Discharge.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY
Newthink. Where were the professors of medicine when
the new regulations were enacted? I clearly remember when the
Chairman of the Dept. of Medicine at Ford Hospital in Detroit
told me to stop writing so much and to communicate in the chart
in a telegraphic fashion. That meant to be focused and concise,
and to write notes reflecting an integrated understanding of the
patient's illness. Regulatory agencies now want a computer-
generated history and physical and diagnostic coding that
restricts the capacity for independent thinking and for
integrating complex medical problems, while forcing physicians to
waste time documenting nonsense. America is losing its best
physicians to a bunch of bureaucrats and thieves.
James Durand, M.D., Mt. Vernon, IL
One Complaint per Visit. From a letter to colleagues:
After attending a seminar presented by Inga Ellzey, I have done a
lot of thinking. I have decided to advise my patients that I will
not be able to take care of multiple problems at a single visit.
I will also not provide treatment that is not clearly medically
necessary.... As a consequence of my decision, I suspect that I
will anger many people and lose some of my patients....I regret
that medical practice has reached this level.
Rebecca L. Bushong, M.D., Anderson, IN
Oct. 12-16, 1999. 56th annual meeting, Coeur D'Alene, ID
Legislative AlertThe HMO Debate
With Congress pondering the second possible Presidential
impeachment of this century, a flood of unfinished appropriations
bills, and the mounting pressures to adjourn in time for election
campaigning, it does not appear that any major action will take
place on the much vaunted "Patients' Bill of Rights" legislation
in the House and Senate. But it ll be back.
The organized medical profession is largely favorable to
enactment of such measures, the business community is largely
opposed, and the debate has pitted normal political allies
against one another in this heated controversy-the major sticking
point being the right and ability of patients to sue insurance or
managed care companies for damages.
Naturally, the Republican Congressional leadership has been
put in the proverbial political crossfire-torn between two lovers
and acting like folks who find themselves outmaneuvered for the
zillionth time on health care policy by the White House and its
liberal Congressional allies.
It s getting boring. The liberal Congressional playbook on
health policy has gotten so dog-eared and smudgy that no
surprises are left, no razzle dazzle; everybody on Capitol Hill
knows what positions they are to play. And for Congressional
leadership team that role is defense. Defense, without sacks, of
course, is what they do on health policy, to the resounding
cheers of the staff on the sidelines who yell to their supporters
in the stands the inspiring fight song: It Could Have Been Worse.
They do hand stands and go wild with delight, not at the deep
pass or swift offensive sweep-they don t play offense, remember-
but at the fact that the White House failed to score this time
just like they did last time (Kidcare, Section 4507, etc.) and
that time is running out. OK, sports fans, let s hear it for the
Congressional conservatives, naturally sickened at the
thought of having to swallow yet another excuse for caving in to
the apparently endless and seamless pattern of federal paperwork
proposals to do something about managed care, have a
respite, and can hope for better days and a better game in 1999.
But to do that, they better get in shape, hit the weight room and
train smart as well as train hard. That means knowing what it is
that they want to do to solve the very real problems of the
health care system.
The politics of the HMO debate would seemingly favor the
White House and its allies on Capitol Hill. But that would be a
superficial reading of what s really going on out there in the
minds and hearts of the most sensible citizenry in the world.
Sure, the polls say that Congress should do something about the
HMO abuses. And, if the conflict is between doctors and insurance
companies, doctors win with the public every time. According to
the October 1998 edition of Roper s Public Pulse,
Americans, when pressed about whom they can "strongly trust,"
express trust in their doctor by a margin of 57% compared to
insurers with 35%. According to the September 1998 Kaiser-Harvard
survey, 65% of Americans want the government to intervene and do
something about managed care abuses, and more and more Americans
see managed care plans as doing a bad job in serving health care
consumers and think that the managed care titans care more about
their profits than delivering quality care to employees and their
families. Moreover, on the question as to whether consumers
should have the right to sue the employer s health plan, the
support is strong-73% support that idea, up from 64% as
registered in December 1997.
The importance of the debate should not be underestimated,
but it should not be overestimated either. And it is not
abundantly clear that there is an overwhelming partisan flavor to
the issue-one way or another. Republicans, Democrats and
Independents are all equally supportive of managed care
legislation, and both Republicans and Democrats in Congress are
the lead sponsors of managed care reform bills. If such
legislation fails to pass, 35% are more likely to hold the
Congressional Republicans responsible, 20% are more likely to
hold the Democrats responsible, and 17% would blame both parties
In ranking of importance as an issue on the 1998 elections,
education, taxes, and Social Security rank higher than the
regulation of managed care. Interestingly, managed care is
important, but more important than what? According to the survey,
regulation of managed care is more important than tobacco
legislation or campaign finance reform, two big-ticket items on
the liberal Congressional agenda.
According to the Kaiser survey, 33% of Americans say
that they are "very worried" that their health plan is more
interested in "saving money" than getting them the best treatment
available if they are sick. Naturally, the worry index rises
inversely with the patient choice. We really should put all of
this in a formula and test it regularly: Patient choice equals
more satisfaction and less anxiety: For persons enrolled in the
most restrictive managed care plans, 43% say they are "very
worried." But as the Kaiser/Harvard survey makes clear, robust
support for government regulation is dampened when the trade-offs
between cost and regulation are made transparent. For
example, support for comprehensive consumer protection
legislation drops from 78 to 40% when people are told that the
legislation could increase the cost of a "typical" health plan by
$200 per year. That kind of drop makes even liberal
politicians dizzy. And that kind of tradeoff is, incidentally, as
the Kaiser/Harvard surveyors note, roughly the same cost estimate
made by the Congressional Budget Office (CBO) for one of the
leading "Patients' Bill of Rights" now before the Congress.
The pollsters also note that the support for such
legislation also drops "substantially" when the public is
presented with standard conservative criticisms that such
measures will start to involve the government too intrusively in
the health care system, increase the cost of plans, or cause
people to lose coverage. The CBO has estimated that the bills on
Capitol Hill would increase insurance premiums by about 4%, and
the resulting premium increases would cause about 800,000 more
people to lose their health insurance.
The liberals' problem is, if pressed, almost always the
same: yes, people want the federal government to do something
about health care, but no, they don t want the federal government
involved with health care. This is not as weird as it sounds. The
public gets pretty sober about such complicated questions when
they are presented with the real tradeoffs presented by nice-
sounding legislation guaranteed to expand access or improve
quality care, or guarantee free care for all, or at least for the
Kids, or the retirees. Or the early retirees.
States Assault HMOs
While Congress is running out of time and seems confused
about how to go about "reforming" the managed care business,
largely by adding more rules and regulations on the system, state
legislators are not waiting around. According to the National
Conference of State Legislatures, ten states have already passed
"Patients' Bill of Rights" laws this year. A total of 17 states
adopted similar measures in 1997. So, the states are already
doing what Congress and the White House say they want to do, even
in terms of opening up the managed care organizations to patient
suits. Texas and Missouri have already enacted laws giving
patients the right to sue managed care plans. And 29 states are
considering similar legislation. For members of Congress, it
might be a good idea to take a deep breath, pause, and find out
how things are actually working out in the "laboratories of
democracy." That way, stupid mistakes can be avoided, instead of
simply compounded. Moreover, it might be a good idea for Congress
and state legislators to start to hold federal and state agencies
directly accountable for their cost projections. After all,
industry is saying that lawsuits could add a substantial burden
to the cost of health premiums, but federal and state officials
say otherwise. CBO projects that lawsuits will add a mere 1.2% to
the average cost of a health insurance premium. CBO and HCFA and
state bureaucracies have said similar types of things in the past
on mandates and regulations. Sometimes they are right, but too
often they have been wrong. One modest proposal: If
workers and their families get hurt because of rosy scenarios or
"low balling" the legislative handiwork, then any mis-estimate,
over and above the projected increase, can be proportionally tied
to a reduction in salaries and expenses budget accounts of state
government agencies making the incorrect estimates.
That ll get 'em working hard on those estimates, and discourage
rosy scenarios in the process.
A Coming Cost Explosion?
The Health Care Financing Administration (HCFA) has recently
completed a study which says that the nation s health care
spending will more than double over the next 9 years. Costs will
zoom from over $1 trillion in 1996 dollars to $2.1 trillion in
2007, the year that the Medicare Trust Fund is now scheduled to
go bust. The HCFA study is published in the October issue of
Between 1993 and 1996, the average annual growth rate in
health care spending was 5%. But the recent moderation in cost
increases is expected to end in 1998, and will start to climb to
an average annual rate of 6.5% between 1998 and 2001. Strong
increases in per capita income should fuel growth in the private
sector of the health care economy, and consumers can expect to
see a substantial portion of these increases attributable to the
rise in prescription drugs.
Watson Wyatt Worldwide, a major benefits consulting firm,
expects double digit-cost increases, with prescription drug
benefits leading the way, with increases running between 15 and
22%; indemnity plans, though shrinking as a part of the employer-
based market, are also expected to hit double digits, running
between 12 and 15%; and PPOs should see increases of between 9
and 11%. According to the Watson Wyatt analysts, the reason for
the increases is that the managed care/HMO revolution has
"saturated" the employer-based market; there are not too many
employees and their families left to cover. Indeed, The New
York Times recently reported that 85% of all Americans with
employer-based insurance are enrolled in managed care plans. In
the meantime, the population is aging, increasing the pressure
for health care services, and the advance in technology and the
introduction of new and expensive pharmaceuticals can be expected
to add further pressure for cost increases. Nothing surprising
about any of this; but it does put an end to all of the earlier
policy wonk talk about the HMO revolution being some sort of
magic bullet for health care costs.
And speaking of HMOs, they are not only in political
trouble-being assaulted by everybody from Senator Ted Kennedy and
Representative Charlie Norwood (R-GA) to Academy Award winning
actress Helen Hunt, the HMO-bashing heroine of the hit film
As Good As It Gets-they are also in serious economic
trouble. A report by Weiss Ratings reveals that a majority,
57%, lost money in 1997. This was the third consecutive losing
year. In a separate report, the Morgan Stanley Index of HMO
stocks showed a decline of 38% from 1997. Yes, Virginia, they
really are in Big Trouble.
And Rising Uninsurance
This month also saw some more bad news from the Census
Bureau. The economy is reportedly better than ever, unemployment
is low, and Congress put in place all sorts of regulatory
gadgets-and yet the number of uninsured Americans continues to
climb. Now, according to the Bureau, the figure is at 43.4
million Americans, or 16% of the US population. This is a snap-
shot, of course, of the uninsured population; the figures do not
mean that 43.4 million are permanently uninsured; most of them
are in and out of insurance -which is, of course, job-related in
the United States. That is so because those in charge of federal
tax policy insist on health insurance being job-related to
qualify for exclusion from payroll and income taxes. Thus far,
Members of Congress and the Clinton Administration simply refuse
to do anything about it. In any case, one of the interesting bits
of information to come out of the Bureau s report is that about
50% of the increase in uninsurance in the past year comes from
households with annual incomes above $75,000 per year. According
to the latest statistics, about 8.1% of them are uninsured,
compared to 7.6% in 1996. The most likely reason that they are
uninsured, noted the Bureau, is that they are self employed or
work for small firms that do not offer health insurance.
A Glimmer of Bipartisan Common Sense
The September 25th Update from the Democratic
Leadership Council (DLC) contains this gem: "This year s
preoccupation with addressing abuses by managed care plans has
sidetracked a broader debate about the future shape of our health
care system. Now that it's reasonably clear that neither party s
version of patients rights legislation is going to be enacted
in this Congress, it s time to get back to the broader debate. In
fact, there is a major new reform that is beginning to draw
support from both political parties: moving away from the current
employer-based system of health insurance to one that empowers
individuals with the choice and the resources to buy their own
Robert Moffit is a prominent Washington health policy
analyst and Director of Domestic Policy at the Heritage