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Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 48, No. 10 October 1992


Could you, within the next 30 days, write a check to the government that might be larger than your quarterly estimated tax payment-or even larger than your gross income?

Physicians have learned to cope with tax payments. Taxes are predictable, and they are somewhat mitigated by the political difficulty of legislating a tax increase.

Physicians now need to learn about new, unpredictable, unfunded, nontax liabilities-and about the methods the government may use to collect them.

Medicare Recoupment

Physicians who think that Medicare owes them money may soon discover that the opposite is the case. Medicare may have ``overpaid'' in up to 50% of claims for evaluation and management services. The physician may have selected the wrong code or failed to document the reasons for his choice, or he may be ``overutilizing'' certain procedures.

In a July, 1992, addendum to the Medicare carrier's manual, Medicare reviewers are told that physicians usually offer refunds after being presented with ``a factual picture of the overutilization issue.'' Reviewers are to ``verify the validity of the extent of overutilization by the physician by studying a statistical sample of claims. Compare claims of physicians in similar practices in the locality to determine the extent that the physician's services exceeded the services of those similar physicians.''

If the physician doesn't ``offer'' a refund of the proper amount, Medicare will collect it anyway. The reviewers are to ``accept compromise offers only in exceptional circumstances.''

Overpayments are normally to be repaid within 30 days of the first demand letter. ``However, if a lump sum refund would cause a severe financial hardship,'' the carrier may allow two months to recoup overpayments of $5,000 or less, four months to recoup between $25,000 and $100,000, and six months to recoup overpay- ments of more than $100,000.

A debtor's request for extended repayment must be accompanied by documentation, including an income statement, a balance sheet, a projected cash flow statement, and a list of investments with their current market value. Requests for extended payment of 12 months or more must include ``at least two letters from separate financial institutions denying the debtor's loan request for the amount of the overpayment'' and a copy of the loan application.

The addendum to the carrier's manual comes in the wake of the US Supreme Court's decision to deny review of Chavez County Home Health Services Inc. v. HHS. In this case, the US Court of Appeals for the District of Columbia affirmed HCFA's use of statistical sampling to calculate Medicare overpayments to home health groups. However, Sen. David Pryor (D-AR) has introduced legislation (S. 1838) that would prohibit the use of statistical sampling for post-payment audits except in cases of known fraud or abuse.


Another government agency that is gearing up to collect money from physicians is OSHA. In the next five years, OSHA expects to generate $900,000,000 in revenue from enforcement of the ``Bloodborne Pathogens Standards'' (also see p. 2).

According to OSHA Instruction CPL 2.45B CH-3, which AAPS obtained through a Freedom of Information Act Request, ``penalties are not designed as punishment for violations nor as a source of income for the Agency.'' However, large penalties ``serve the public purpose intended under the Act.'' For example, failure to comply with posting requirements carries a civil penalty up to $7,000 for each violation and a like penalty may be assessed for record-keeping violations. Proposed penalties may be reduced up to 60% due to size of business, and up to 25% for good faith. For repeated violations, ``gravity-based penalty factors'' shall be doubled for the second citation and quintupled after that, for ``smaller'' employers (defined as having fewer than 250 employees), unless the Regional Administrator determines that the penalty must be multiplied by 10 in order to achieve the necessary deterrent effect.

After 22 pages of instructions for assessing penalties, OSHA provides eight pages of instructions for collecting the debts, delinquent charges, interest, and administrative expenses. In bankruptcy cases, the agency may file as a creditor under the Bankruptcy Act. With permission of the Department of Justice, the agency might compromise or suspend collection action for debts over $100,000.

Anti-Kickback Statutes

In a special fraud alert, the Office of the Inspector General published a list of ``suspect'' arrangements between physicians and hospitals. These include significantly discounted billing, nursing or other staff services; free training for physicians' office staff in CPT coding; or payment for continuing medical education courses. At the present time, no one knows what is acceptable and what is not. Penalties to both physician and hospital include exclusion from Medicare, up to five years in prison, and penalties up to $25,000 (Med Staff Briefing 8/92).

The OIG does not have the staff to investigate every hospital, so it has set up a hotline to receive tips. The most valuable tips are coming from competing hospitals.

OSHA Update

``If an employer chooses to ignore risk in the workplace, he had better have his house on wheels.''

``Days of freedom from the regulatory community for the medical industry are gone forever; the cavalier attitude of physicians will change!''

``Bloodborne pathogens violations are of a serious nature and maximum fines will be assessed.''

``OSHA has only civil and criminal penalties, but attorneys who monitor inspections are contacting employees for possible lawsuits.''

These quotations were compiled from telephone interviews with compliance officers in 22 state offices of OSHA by Brian Youngs of Microtek Medical Marketing, PO Box 36166, Phoenix, AZ 85067, telephone 800-258-7257.

Microtek has compiled an ``OSHA Compliance Test,'' available from the above address. Any score less than 100% can lead to a disastrous fine. The 60 items include:

``Each employee has received an explanation, and a copy of the Exposure Control Plan and the means by which the employee can receive additional copies.''

``Employees working on or around energized electrical equipment or lines are fully instructed in cardio-pulmonary (CPR) methods.''

``Sterilizers are monitored with biological monitors on a weekly basis.''

``Emergency phone numbers are posted on all phones.''

``All exposure incidents are detailed on OSHA form 101 and properly summarized on report form 200 and retained for five years.'' [Note that a form 200 must be completed by the end of the calendar year even if no recordable injuries or illnesses occurred during the year, and that the unadjusted penalty is $1000 for each year that the OSHA-200 is not maintained.]

Any facility using or storing hazardous chemicals must have a ``written site specific Hazard Communication Plan which describes thoroughly how this employer is complying with the requirements of the Hazard Communication Standard....''

In response to our Freedom of Information Act Request for a list of regulated chemicals, AAPS was informed that ``OSHA does not maintain lists of hazardous chemicals.'' However, from the detailed instructions, we gleaned that physicians had better request a Manufacturers Safety Data Sheet (MSDS) for any product that mentions a hazard on its label. Since OSHA considers saw- mills and grain elevators to be ``chemical manufacturers,'' it seems apparent that anything might be considered a hazardous chemical. Toner for the copying machine is specifically included (OSHA Instruction CPL 2-2.38C), though an employee who does not operate the copier on a full-time basis may occasionally change the toner cartridge without being covered by the provisions of the Hazard Communications Standard.

AAPS has received a copy of OSHA's Guide to Procedures, which may be of assistance to physicians who wish to appeal an OSHA fine. We have not been able to obtain any information about the adjudication of specific cases, probably because no decisions have been rendered yet. If you know of specific cases, please bring them to our attention.

You may wish to request a copy of the following official publications from OSHA Publications Office, 200 Constitution Ave. NW, Washington, DC 20210, telephone 202-523-9667: OSHA Instruction CPL 2-2.44 C, CPL 2-2.3 8C, and CPL 2.45B CH-3.


British Columbia Doctors Revolt

Faced with an insupportable public debt, British Columbia has taken drastic action to curb medical expenditures. The recent Professional Retirement Savings Extinguishment Act declares that the province's agreement with physicians on a retirement plan never existed. The Act also provides that even if a court declares that the plan existed, no benefits will accrue from it, and physicians may not sue the government to collect them. Several legal opinions concur that the government does indeed have the power to flush a contract down the Memory Hole, although there is no precedent for such an action.

Additionally, the province has unilaterally placed a ``hard'' cap on expenditures for physicians' fees. The allowed increase does not even cover the increase in population, much less the aging of the population, increases in operating costs, or other factors. If physicians provide services in excess of the cap, the province will recapture the excess by decreasing payment rates for services rendered near the end of the year.

Physicians have responded by closing offices on a rotating basis. More significantly, all seven internists in the town of Nanaimo have decided to sever their connection with the government health system and will bill all patients directly. Physicians in a northern town (so inaccessible that the govern- ment could not fly physicians in to take their place) may follow suit. The province will have serious political problems if it starts reimbursing patients less for services received later in the year.

At present, 70% of the public supports the physicians, although Canadians do not like to take sides against their government.

British Columbia is unique in that it allows ``opted-out'' physicians to charge more than the fee paid by the government. (This policy could be easily changed.) In other provinces, balance billing is forbidden. Thus, physicians may ``opt out'' completely but can derive no advantage from doing so. The disadvantages make the ``option'' totally impractical. In Ontario, there is no debt between a physician and a patient until the government reimburses the patient; no interest may be charged even though payments may be delayed for months. In Quebec, patients receive no reimbursement at all for services obtained from an ``opted-out'' physician.

Although the present crisis is more apparent in British Columbia, the medicare system is in danger nationwide. The federal government is already paying one third of its revenue to service the debt. The remaining revenues are inadequate to cover commitments, so debt continues to increase.

So far, only one part of the investment community has become concerned about the implications of the British Columbia government disavowing a contractual obligation: Hong Kong investors who have been parking large amounts of capital in Vancouver, in anticipation of the imminent Chinese Communist takeover.

According to Dr. Norm Finleyson, Executive Director of the British Columbia Medical Association, Americans should learn two lessons from the Canadian experience:

1. Do not allow first-dollar coverage in public insurance programs.

2. Do not allow the government to pay doctors directly.

Administrative Proceedings in First Anti-Kickback Case Draw to a Close; Appeal to Federal Court Expected

On July 24, 1992, the Department of Health and Human Service's Departmental Appeals Board, Appellate Division, rendered its decision in the first sanction proceeding under the Medicare anti-kickback statute 42 U.S.C. 1320a-7b(b), which prohibits the knowing and willful solicitation or receipt of any remuneration in return for referring persons or arranging for the acquisition of goods or services under the Medicare program. The decision, styled Inspector General v. Hanlester Network, HHS Appeals Board, Appellate Div., Docket No. C-448, Decision No. 1347 (7/24/92), represents the last administrative proceeding in a closely watched administrative battle that will undoubtedly affect the reach of the anti-kickback statute to medical joint ventures and other partnership arrangements.

The Departmental Appeals Board concluded that all nine of the defendants in the case violated the statute and should be excluded from participation in the Medicare program for up to two years (3 BNA's Medicare Report 933). The attorney for the defendants will appeal to federal court for review.

In the first stage of the administrative proceedings, HHS Administrative Law Judge (ALJ) Steven T. Kessel found that the HHS Inspector General did not prove that the majority of the defendants had violated the anti-kickback statute, but that four of the defendants were in violation because their agent had offered remuneration for referrals of Medicare program-related business (1 BNA's Medicare Report 1013). However, the ALJ found that the agent's conduct was contrary to the four defendants' intent and policy. Therefore, he did not impose exclusionary sanctions. Importantly, the ALJ interpreted the statute to require that the Inspector General show that ``whatever payment is solicited or received by the referring party'' was ``intentionally solicited or received by that party as a condition for that party agreeing to refer program-related business.'' Specifically, the ALJ concluded that ``[i]t will not suffice to establish a violation to show that payments were offered or made in the hope that a provider would be encouraged to refer program-related business.''

On the first appeal to the HHS Departmental Appeals Board, the decision of the ALJ was reversed, and the case was remanded to the ALJ for further findings. The Appeals Board found that the ALJ had ``misread'' the anti-kickback statute and that his interpretation of the statutory term ``remuneration'' was too narrow (BNA's Medicare Report 933). On remand, the ALJ imposed exclusionary sanctions on some of the defendants but refused to exclude others. The recent Departmental Appeals Board decision is the result of the appeal of the ALJ's opinion on remand.

In a vaguely worded opinion, the Departmental Appeals Board concluded that it was ``the totality of circumstances surrounding the partnerships'' which proves that the unlawful conduct was ``knowingly and willfully offering and paying financial inducement to physicians to obtain referrals of Medicare business.'' It also concluded that any profit or loss as a result of the arrangement is irrelevant. Importantly, the Appeals Board concluded that the ALJ erred in refusing to impose exclusionary sanctions against three of the defendants because these defendants knew they ``were operating in an area of legal risk.''

In the appeal, the attorney for the defendants plans to challenge the validity and constitutionality of the Medicare anti-kickback statute.


Lithotripsy Rate Setting Remanded

The American Lithotripsy Society prevailed in the US District Court for the District of Columbia in its challenge to HCFA's rate setting for extra-corporeal shock-wave lithotripsy.

HCFA decided that ESWL was to be classified as a surgical procedure that could be safely performed in an ambulatory surgical facility and therefore set a prospective rate of payment. The rate that it set was less than half the market value, according to the majority of commenters.

HCFA decided that the cost information submitted in public comments was incomplete or otherwise insufficient and therefore undertook its own study. HCFA consulted a number of people and organizations; however, the agency did not make that data, as well as some of the basic assumptions used in its calculations, available for comment. As Judge Gesell pointed out, ``even as late as the time of the hearing on the preliminary injunction, defense counsel stated that the agency had still been unable to locate or compile all the information it had gathered pursuant to the agency's private investigation.''

One of HCFA's assumptions was that the utilization rate for lithotripsy machines would be almost twice the current rate. Despite this radical departure from historical use rates, HCFA provided no opportunity for adversarial comment related to such questions as the distribution and availability of machines.

Judge Gesell ruled that ``one of the primary reasons for having a comment period is to provide an opportunity for `adversarial discussion among the parties'.'' Providing the reviewing court with the information is not adequate. The court lacks the expertise to draw a conclusion without the benefit of the adversarial discussion in the rulemaking record.

The Court reached no conclusion about the adequacy of the rate, but slapped HCFA for failing to comply with the Administrative Procedure Act. HCFA chose not to appeal.

Other medical organizations might wish to follow the lead of the American Lithotripsy Society and carefully scrutinize all bureaucratic policymaking to be sure that the government has complied with its own laws.


Supreme Court Refuses to Review PRO Immunity

On June 22, 1992, the US Supreme Court denied a petition to review a decision of the Seventh Circuit Court of Appeals (Freeman v. Wood, CA 7, No. 89-C5080, 10/26/91), thereby affirming the absolute immunity of Peer Review Organizations and their physician members from liability in recommending sanctions against physicians (see AAPS News, Jan. 1992). The question posed by a Missouri physician acting pro se was this: ``May the judiciary give absolute immunity to Fifth Amendment due process violators when Congress specifically states in the controlling statute...that immunity is contingent on due care being exercised?'' (BNA's Medicare Report 6/19/92).

Letter from the President

Government Medicine-Medical Care for Second-Class Citizens by Second-Class Doctors

The term ``free-market economy'' is constantly used to describe the struggles of the former communist countries to repair their economies. Communism is just another word for government controlled regimented economies, which since the dawn of economic history have never worked. Only a free market can guarantee quality and reduce costs. American medicine has undergone unprecedented persecution and tyrannical controls in the past two years. Such controls have never been inflicted on any other social group in our nation's history. Patients and physicians have given up more of their freedom in the last two years than they have in the last 50, yet organized medicine does nothing to resist this outrageous destruction of our constitu- tional rights and privileges.

Whenever any economic system undergoes market failure, governmental controls or unsound tax policies are always the cause. The tax law that allows deductions for medical care by both employer and employee are the root cause of the breakdown of the medical marketplace. Repeal of this law must be accomplished if we are to repair the damage done by unsound tax policies during the past 50 years.

Economic history unequivocally shows that wage and price controls have never worked, yet medicine has helped the government establish a fee schedule (RBRVS). Internal medicine convinced organized medicine that this ridiculous scheme would take from the pocket of the surgeon and put into the pocket of the primary-care physician; however, the government used this fee schedule to penalize all physicians. The inequalities between cognitive and noncognitive specialists should have been solved by the marketplace and not by governmental controls.

Unfortunately, organized medicine did not learn anything from its disastrous mistake. Now it is helping the government establish practice guidelines (cookbook medicine), which will stifle innovation and lead to an enormous waste of time and resources, arguing over which diagnostic technique or which treatment plan is most efficacious. Since modern medicine is an ever changing field, establishment of practice guidelines is an endless task fraught with unsolvable problems. This has been well demonstrated in other socialized systems in other countries that attempted to develop such guidelines.

Finally, we are undergoing constant harassment by a multitude of government bureaucracies, along with threats of horrendous monetary penalties. Most physicians and citizens have no idea of the source of these agencies' powers: administrative law. They do not know that a second legal system exists in the United States for adjudicating disputes between citizens and government bureaus. This law system denies the most fundamental of constitutional rights. Through this system, government has the power to destroy any citizen. This power is now being used against doctors.

The proposed resolutions, printed in the enclosed flyer, concern the issues of market failure in medicine and the abuses of administrative law. I urge you to see that these issues are on the agenda of any medical meetings that you attend.

If we are unsuccessful in repealing the bad laws that have caused these problems, then medicine will become little more than a public utility totally controlled by bureaucratic edict. Practice guidelines will ration diagnostic tests, and treatments will be hooked to a fee schedule regardless of complexity or technological advancement. If a physician deviates from the fee schedule or the guidelines, then he will lose his license through administrative law.

If we fail to restore the economics of medicine to sound and fair free-market principles, our patients will totally lose any control over the cost and quality of medical care. They will have no choice but to accept whatever the bureaucrats give them.

It is past time for organized medicine, doctors, and patients to wake up. The end of private medicine may soon be here.

As Winston Churchill said in 1935 during the rise of Nazi Germany: ``Want of foresight and willingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self-preservation strikes its jarring gong, these are the features which constitute the endless repetition of History.''

John H. Boyles, Jr., MD, Centerville, OH


AAPS Member Runs for US Senate

John F. Perry, MD, an orthopedist practicing in Avis, PA, will be the Libertarian candidate on the ballot for a Pennsylvania Senate seat. His address is PO Box 728, Avis, PA 17721.


AAPS Calendar

October 14, 1992. Board of Directors meeting, Seattle, WA.

October 15-17, 1992. Annual meeting, Seattle, WA.

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, Menger Hotel, San Antonio, TX.

Legislative Alert

The Presidential Campaign Heats Up. Coming out of the GOP Convention as underdogs, President Bush is opening up a two-front counterattack on both the Democratic Presidential ticket and Congress itself.

As Robert Pear, writing in the August 12th edition of the New York Times notes, no disagreement between George Bush and Bill Clinton is ``more profound'' than their differences on medical care. Faced with the fact that costs have risen 32% since 1989, Clinton is attacking Bush for ignoring them. The Arkansas Governor describes the skyrocketing costs as akin to the rising temperature on a ``patient's fever chart.'' Paraphrasing a comment from former HHS Deputy Secretary Constance Horner on national health insurance, Bush is characterizing Clinton's health care reform as a proposal that has all of the efficiency of the House Post Office combined with the ``compassion of the KGB.'' Clinton, in turn, is chastising Bush for misrepresenting his position on the right of Americans to choose their doctors.

The Clinton plan is basically a ``play or pay'' option, the kind of approach supported by the Democratic leadership in the Congress, including Senator Mitchell of Maine, Senator Kennedy of Massachusetts and Congressman Rostenkowski of Illinois. According to Pear's New York Times report, Clinton's advisers were ``vague'' about the details of the reform proposal, including its financing. Some form of new business payroll tax is likely.

In any case, through either mandatory public insurance coverage or private insurance coverage, all Americans would be guaranteed ``universal coverage'' under the Clinton plan, including prescription drug and mental health coverage. Clinton also wants to expand coverage of longterm care. These are expensive items. To control rising health care costs, Clinton would impose a national limit on health care spending and allow states to set prices for doctors and hospitals and curb price increases by pharmaceutical companies. This ``global budget'' provision is remarkably similar to the Stark-Gephardt proposal now circulating in the House of Representatives (see September Legislative Alert).

The Bush ``Comprehensive Health Care Plan'' was unveiled last February 6th, and bits and pieces of the proposal have been sent to the Hill and included in Congressional Republican Health Care Reform Proposals (see September Legislative Alert). But benefits are only half of the equation. The costs are the other half. The Bush plan calls for federal spending, largely for tax credits and vouchers, at a level of approximately $100 billion over the next five years. While there are surely cost savings attached to such items as medical malpractice reform and administrative simplicity, Bush's plan does not link the cost of tax credits or vouchers to any specific financing mechanism.

How Many Americans Are Uninsured? On Capitol Hill, one of the main reasons advanced for comprehensive health care reform is the large number of uninsured Americans, which, in any case, is in the millions. But, how many, really? Are there

35 million? 37 million? 40 million? Alan Reynolds, the Direc- tor of Economic Research at the Hudson Institute, says that the actual number, at any given time, is probably more like 10 million, derived from Census Bureau data. Economist Reynolds argues that the figure of 37 million, cited by so many authorities on both sides of the health care debate, is drawn from a ``snapshot'' survey, recording millions who have lost insurance for a ``brief period of time,'' but who often regain it.

Capitol Hill Paralysis Continues. Virtually every faction in Congress now has a health care reform plan. The Congressional menu is big enough. But the more Members stare at it, the less appetizing the various reform proposals become. Just thinking about the huge $800 billion subject seems to sap them of energy and enthusiasm. As of this writing, House Majority Leader Richard Gephardt's shuttle diplomacy between House Democratic health leaders and the conservative Democrats has amounted to nothing. Congressmen Cooper of Tennessee and Andrews of Texas obviously see no need to try to marry up their ``competitive model'' with House liberals' price controls.

The Senate Majority Leader, George Mitchell of Maine, has developed the most comprehensive play or pay bills in the upper chamber. Mitchell's chief New England ally, Senator Ted Kennedy of Massachusetts has reported the Mitchell bill, S. 1227, out of the Senate Committee on Labor and Human Resources. Floor action is next. But there is no floor action scheduled, and with time rapidly running out there is not likely to be any. The numbers tell a clear story. Though he has been marketing it for four months, Sen. Mitchell's bill, S. 1227, has only ten cosponsors.

Could it be that Senate liberals are holding out instead for a more radical reform of the health care system based on the Canadian model? If they are, they are clearly keeping it a secret from Sen. Paul Wellstone (D-MN), the Senate's chief sponsor of the Canadian-style system. In the House, the enthusiasm of Congressional liberals for Canadian style national health insurance resulted in 71 cosponsors for Congressman Marty Russo's bill, HR 1300. But Senator Wellstone's bill, S. 2320, has 2 cosponsors, Senators Metzenbaum of Ohio and Simon of Illinois. If it is true that a big majority of Americans support national health insurance, 69% according to a Wall Street Journal survey, this enthusiasm is not spilling over into a Senate passion for national health insurance in any concrete legislative way.

Public Opinion. The lack of consensus in the Senate mirrors the apparent lack of consensus in the nation as a whole. Perhaps the best assessment of the public sentiment is this: We don't know what we want, and we want it now.

Senators know that the shelf-life of a proposal, its ability to survive extended public discussion and debate, is key: Folks say they are for ``national health insurance,'' which loosely translates into ``free care for all.'' And so they are... as long as they do not have to accept some of its limitations or pay for the new benefits of ``free care.''

Rising health care costs are the main source of popular discontent. In 1950, long before Medicare and Medicaid, medical care accounted for about 5% of Americans' personal spending. In 1989, medical care ranked third as the object of Americans personal spending, accounting for 14%, or $483.5 billion of the estimated $3.45 trillion. Food ranked first at 18.5%, and housing second at 15.5%.

The Canadian Solution. If health care costs are the central concern of Americans who complain about the health care system, Canada doesn't solve that problem; costs are merely shifted to the public sector in the form of higher taxes or delayed care. As former Canadian physician Ian Munro writes in the September issue of Readers Digest, ``The average Canadian already pays 46% of his income in taxes. But Canada's health care spending is growing faster than inflation, faster than its population and faster than the country's gross national product. Today, the United States has the costliest health care system in the world. But Canada's is second, and both countries' per person costs have been rising at the same rate for years.''

Congressional advocates of a Canadian-style system can bemoan America's plethora of medical technology, but what does it mean to say, in concrete terms, that technology should be cut back? It means, as Munro notes, that Tennessee, with 4.9 million people has more MRI scanners than all of Canada, with 26.6 million people. Likewise, Canadians seeking vital medical technology are coming to the United States. Munro cites the fact that in 1990, for example, 602 lithotripsies for the treatment of kidney and gall stones, or half of the lithotripsies performed at the Buffalo General Hospital in New York, were performed on Canadians. That same year, 8,263 Canadian doctors were practicing in the United States. These developments are not likely to be ignored in any full scale Congressional debate.

Effect on Unemployment. Senate Republicans, led by Sen. John Chafee of Rhode Island and Senate Minority Leader Robert Dole of Kansas, are battering the Senate Democrats' ``play or pay'' proposal as being incompatible with economic growth. The increased cost to employers will cost jobs. According to an Office of Management and Budget (OMB) study, the addition of a 7% payroll tax would result in the loss of as many as 700,000 jobs nationwide. Hardest hit will be small businesses, which are already struggling in a recession. The politics of the debate are interesting, as there is a deep split between big business and small business. Lobbyists and spokesmen for big businesses favoring the ``play or pay'' option are telling the small busi- ness community that they have to pitch in and pay higher taxes.

Faced with a new payroll tax to cover the cost of a new public insurance plan, companies would respond by either reducing wages, or not hiring new people, or raising the prices of the goods or services produced, or a combination of these measures. But if companies decide to keep wages and prices at pre-tax levels or maintain the level of employment, the only other option is to reduce corporate profits. Billions, of course, would be lost. While their fellow Senate Republicans are turning up the heat, Chafee and Dole are challenging Senate Democrats to stop talking about health care reform and bring ``play or pay'' to the Senate floor for a debate and a vote.

A Consensus Bill? While challenging the Democrats to come out on the Senate floor and fight, Sen. Chafee is offering a alternative he says could move quickly because its main elements are already widely agreed upon by health care reformers in and out of Congress. Says Chafee, ``These are issues addressed by most reform bills introduced by members of both parties. They could easily serve as the basis for a health care reform initiative that could pass and be signed by the President today.'' The eleven areas of agreement Chafee posits as the basis for a 1992 health care reform bill are as follows:

  • Insurance market reform. This would ensure that large firms and small firms are treated equally and that current insurance practices include guaranteed renewability of policies, limitations on exclusions for pre-existing conditions and a change in the basis for setting premiums, moving toward community rating or modified community rating by setting premiums on the basis of age, sex, and geographical area.

  • Small Group Purchasing Organizations.

  • Expansion of community health centers and the National Health Service Corps.

  • Encouraging managed care by means of tax credits and the federal pre-emption of state anti-managed care laws.

  • Pre-emption of state-mandated benefits. Some Congressional proposals for federal preemption of state mandated benefits would apply to state laws affecting small businesses; others would apply the preemption to all business insurance.

  • Promotion of state experimentation by expediting the federal waiver process, particularly for experimental Medicaid program.

  • Medical liability reform. Virtually every major health care bill on both sides of the aisle addresses the problem of medical liability. A conservative estimate of the impact of medical liability problem on the health care system is $15 billion, roughly 15% of the total expenditures on physicians' services. While reform measures differ, there seems to be an agreement on promoting alternative dispute resolution programs.

  • Reduced administrative costs. There is widespread Con- gressional agreement on the need to introduce uniform claims forms and promote electronic billing.

  • Encouraging primary and preventive care, either through existing public health programs or the private sector or both.

  • Expanding outcomes research. With the authorization of $100 million to pursue a research agenda, the Public Health Service has taken the lead. The case for such an approach is based on the need to cut costs. The case against it (such as the dangers of ``cookbook'' medicine) has not yet been made by physicians.

While Sen. Chafee has posed this itemized list as this year's ``downpayment'' on health care reform, there is no sign that Senate Democrats are buying it.

The Congressional health care debate is being subsumed into the larger Presidential campaign, further reducing the likelihood that anything substantive will be passed before Congress adjourns.