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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 51, No. 10 October 1995
IS GOVERNMENT ACCOUNTABLE?
Congressional hearings on Waco and Ruby Ridge, and
physicians' experiences when investigated by the FDA or the fraud
squad, lead to this question: When suspected of violating a
federal law or regulation, are some more equal than others?
Once in a federal agency's sights, an ordinary citizen fears
eventual ruin, even if exonerated, from legal bills if nothing
else. He must take great care to avoid any action that could be
construed as obstructing an investigation, tampering with
evidence, or making a false or misleading statement.
But what if the shoe is on the other foot? What happens if
the government's own agents are suspected of wrongdoing?
In December, 1994, Judge Royce Lamberth asked the U.S.
Attorney's office to investigate whether Ira Magaziner, a senior
advisor to President Clinton, committed perjury or contempt of
court in connection with a sworn affidavit in the case of
AAPS v. Clinton. (This case, which charged that the
President's secret Task Force on Health Care Reform and its
Interdepartmental Working Group violated the Federal Advisory
Committee Act, was dismissed on grounds of mootness when the
White House, after nearly two years of litigation, released a
number of documents.)
Attorney General Janet Reno refused a request from the House
Judiciary Committee to appoint an independent counsel, counting
on the Executive Branch to do a thorough and impartial job of
On August 3, U.S. Attorney Eric Holder issued a 19-page
letter, concluding that there was no evidence of criminal intent
on Magaziner's part. Rather, he had apparently relied upon the
advice of White House attorneys. (It is said that the late
Vincent Foster might have actually written the declaration
asserting that all Task Force members were federal employees.)
Holder reasoned that the definition of ``employee'' was so
fluid and confusing that one could not prove the truth or falsity
of a statement that an individual was or was not employed by the
government. Similarly, ``membership'' in the Task Force was not
really a ``meaningful'' concept. In any event, the government
did not ``expressly'' rely ``solely'' on the ``all-employee''
argument, even before it explicitly shifted litigation strategy
to pursue the theory that the Task Force was exempt from FACA
because of being a ``horde'' rather than a committee.
Furthermore, the Court did not really rely on the all-
employee argument in dismissing the case against the IWG.
Holder did refer to the government's ``missteps,''
``mistakes,'' and failure to correct Magaziner's declaration when
circumstances had changed.
On August 11, AAPS and the Department of Justice again
appeared in Judge Lamberth's court for a hearing on the issue of
sanctions against the government for its conduct of the case (as
in impeding discovery). Judge Lamberth ordered the DoJ to
address a number of ``troubling'' questions in writing.
One concern was ``the fact that members of Mr. Magaziner's
own private consulting firm were participants in the working
groups, whom he should certainly have known about, and the U.S.
Attorney doesn't address that at all.''
Lamberth quotes Holder's comment that ``the declaration can
be misleading if relied upon as a historical description of the
entire working group process.'' Holder said there was no
evidence that Magaziner intended to mislead the Court, but he
``does not address whether there is evidence as to whether the
White House or Department of Justice attorneys intended to
mislead the court.''
Lamberth stated he had difficulty recognizing the
distinction between attorneys telling him that ``those
are the facts'' and arguing the point based on the
Just before the Labor Day weekend (when, coincidentally,
press would be unavailable), Holder took the remarkable step of
writing to Judge Lamberth to say he did not mean to imply that
the investigation ``found a willful or deliberate attempt to
mislead the Court on the part of the government or the government
``That's outrageous,'' stated AAPS Counsel Thomas Spencer.
``Holder is supposed to be investigating the government
attorneys, not rowing the boat for them.''
More briefings will follow. The Court should reach a
decision about sanctions before the end of 1995. Any payments
will be made by the taxpayers, not by individuals.
AAPS has conferred with several members of Congress, who may
wish to undertake a congressional investigation.
``There's a double standard,'' said a staffer, off the
record. ``If a private citizen did any of these things, the DoJ
would really come down on him hard.''
``This case shows how difficult it is to hold the government
accountable,'' stated AAPS Executive Director Jane Orient, M.D.
``There's an inherent conflict of interest in an agency
FACA itself is a weak mechanism. If the government violates
it, the secret committee can probably finish its work before the
case is adjudicated. Even then, there are no real sanctions
against the responsible individuals.
AAPS is conferring with members of Congress on potential
legislative remedies. Some suggestions are to apply the Freedom
of Information Act to the White House; to establish a fast-track
procedure for handling alleged violations of FACA (such as
expedited hearings and discovery); to find a way to sanction the
individual federal agent instead of the taxpayer; and to develop
a better mechanism for agency oversight.
``A large and growing percentage of Americans distrust and
fear the federal government,'' stated Dr. Orient. ``There's a
reason for that.''
Medicare: the Opening Wedge
The fundamental flaws in Medicare, though apparently opaque
to many of today's politicians, were obvious to its designers.
BNA's Medicare Report (7/25/95) reviews some history
while commemorating the program's 30th anniversary.
According to HCFA Administrator Bruce Vladeck, President
Johnson ``knew they were overpaying,'' but they wanted ``a
political buy-in from the providers.'' Joshua Weiner, senior
fellow at the Brookings Institution, likened the strategy to the
one that quelled British physicians' opposition to socialized
medicine. The father of the British system said ``I will quiet
them by filling their mouths with gold.''
Johnson really wanted a nationalized medical system,
according to Robert M. Ball, Social Security commissioner during
the Johnson Administration. Medicare was a ``fallback''
position; the ``whole object was to try to get something passed''
that would eventually lead to a national system.
A huge increase in utilization was expected. Johnson
ordered the military to stand by to take patients at military
hospitals if necessary, according to Vladeck.
Medicare had a number of effects that have not been well
publicized. It led to a huge increase in hospital capacity and
ended the use of open wards. It created a whole new industry,
skilled nursing facilities, which came into existence in the
1960s because of Medicare hospital stay policies. It generated
private fortunes for numerous individuals, including Ross Perot,
who started a business to process Medicare claims (Electronic
Data Systems or EDS).
Vladeck may ask the Smithsonian Museum to help with a
Medicare exhibit to educate the public. ``He does not envision
it will be a permanent exhibit recalling a program that no longer
exists''-but perhaps he should.
A Liberal Tells It Like It Is
In the Sept. 4, 1995, issue of Time, Michael
- ``The `trust fund'...is an accounting myth.'' It is
an unacknowledged part of the national debt.
- ``There is simply no way that the current system can
- ``Medicare is a program that takes money from working
Americans...and pays it to retirees....All are getting a far
better deal from Medicare than current workers will get when they
- ``Medicare covers only about 45% of the health-care
spending of the elderly...Seniors today spend more, in real
terms, on health care annually than they did before Medicare
started in 1965.''
- ``There is irony in Republicans' and conservative groups'
pushing managed competition as the free-market solution to
Medicare, since it is more or less exactly what President Clinton
proposed last year....''
- ``Beware of the word choice. It can mean two different
things. One is freedom to choose your own doctor and services.
The other is freedom to choose among different medical plans.''
Where the Money Goes
Aggregating Part A and Part B expenditures, the average
total of Medicare claims for a year is $120 for 16% of
beneficiaries; $520 for 26% of beneficiaries; and $1096 for 19%
of beneficiaries (CAHI, August 1995). There are about 35 million
beneficiaries. Thus, around $13 billion in Medicare expenditures
are for costs that would fall within a deductible of around $1500
and at least $6 billion that would fall within a combined
deductible of $816. The cost of processing a small claim is not
much different from the cost of processing a large claim.
Consider the paperwork generated by a Medicare carrier for a $30
claim. Can it be done for less than the value of the claim? We
hypothesize that at least $13 billion is spent processing claims
that would not need to be filed at all if Medicare Part
A and Part B deductibles were combined and if the government
repealed the law forcing physicians to submit all claims, even
for beneficiaries who had not met the deductible. There would be
still more savings if many seniors could elect a combined
catastrophic insurance/Medical Savings Account, which eliminated
the majority of claims.
Claims processing has supported a multi-billion-dollar
industry. Is it surprising that...
BC/BS Says MSAs Would ``Destroy the System''
Blue Cross/Blue Shield of Ohio warns that Medical Savings
Accounts would ``derail the American Healthcare Revolution.'' The
problem: with MSAs, 68% of Americans would save money, and they
might take their savings out of the ``health care system'' and
use it for other needs. BCBSO does want to reduce costs-but by
targeting the ``top 10 percent of users'' (i.e. the sick and the
``Since MSAs will entice employees back into traditional
fee-for-service arrangements with providers, the gains made under
managed care would most likely unravel,'' stated BCBSO (in
booklet Z3486 5/95, obtained from BCBSO at 2060 E. 9th St.,
Cleveland, OH 44115-1355).
John Burry, Jr., Chairman and CEO of BCBSO, is spearheading
a campaign against MSAs in Medicare. Interestingly, Blue
Cross/Blue Shield plans won the contracts for MSA/catastrophic
insurance plans for public employees in Ada County, ID, and
Jersey City, NJ.
Ohio Chapter Announced
Ohio joins Washington, Arizona, and California in
establishing a state chapter of AAPS. Officers are: President,
Dr. Dexter Blome, a plastic surgeon from Zanesville; Treasurer,
Dr. Samia Borchers, a dermatologist in Dayton; and Secretary, Dr.
Kenneth Christman, a plastic surgeon from Dayton.
A number of Ohio members have recently testified in Columbus
on state legislation to enable Medical Savings Accounts. This
legislation passed the House by a nearly unanimous vote and has
been sent to the Senate.
Please Let Us Know...
...if you hear one of our PSAs, now being broadcast
nationwide. (``Find out how you can protect your right to choose
your doctor and the medical care you receive...'' and ``Changes
in Medicare laws could limit your right to keep or choose your
...if your area code has changed. (Send or FAX your
telephone number and FAX number to 520-326-3529.)
...if you have contacted your Congressman and want us to
follow up. (Call 800-635-1196 and ask for Anne, or 202-371-0071
and leave a message for Chad Jackson.)
Dermatologists Sue over Secret Panels
On July 5, the American Society of Dermatology filed suit
against the Dept. of HHS, charging that the Medicare physician
fee schedule had been developed by secret advisory committees, in
violation of the Federal Advisory Committee Act, the Government
in the Sunshine Act, the Freedom of Information Act, and the
Administrative Procedure Act (American Society of Dermatology
v. Shalala, DC DC, No. 95-CVO-1263).
The plaintiffs argue that the panels responsible for
developing CPT codes and rates of Medicare reimbursement are
mostly made up of non-government employees, many of them
representing the AMA. HHS adopted ``wholesale'' the AMA's pre-
existing, copyrighted Current Procedural Terminology
(CPT) codes. The AMA derives ``windfall'' profits from
publishing about 800,000 copies of this document and annual
Plaintiffs are asking the court to permanently enjoin
further meetings of the panels or any use of their recommenda-
tions and to issue a declaratory judgment that the panels are
FACA committees, making meetings and all documents accessible to
the public (BNA's Medicare Report 7/21/95).
``This lawsuit is not about money,'' writes Chester
Danehower, M.D., ASD President, in the August, 1995, issue of
Front Line. ``It is a matter of principle. If any
governmental agency is allowed to break the law in implementing
its policies, then the freedom of every citizen in this country
is in danger....Since the government makes the laws, the leaders
of governmental agencies cannot plead ignorance of the law. They
must be held accountable.''
Danehower credited AAPS for being the first to take ``a
significant stand against out-of-control government in AAPS
Kentucky Court Holds that Reform Law Enacted Properly;
Health Policy Board and Universal Coverage Mandate Still Under
Franklin Circuit Court Judge Roger Crittenden ruled June 29
that the legislature adopted the Kentucky Health Care Reform Act,
including the provider tax, in a constitutional manner
(Yeoman v. Kentucky, KY CirCt, No. 94-CI-01663,
6/29/95). Other issues in the case brought by AAPS member Stuart
Yeoman, M.D., have not yet been decided.
Plaintiffs argue that the vast and uncircumscribed powers of
the Kentucky Health Policy Board violate the constitutional
separation of powers. They also allege that the act was promoted
by private interests, specifically the Robert Wood Johnson
Foundation, which hoped to make Kentucky part of a nationwide
system of mandated managed care (see AAPS News, Jan 1995).
Three insurance companies (Golden Rule, Time, and Fortis)
have recently asked to join the suit.
Eight insurance companies have filed related actions in
federal court, challenging the ``universal coverage'' insurance
mandate, which limits the types of policies insurers may sell
(Time Insurance v. Kentucky, DC EKY, No. 95-99). The
companies insure about 40,000 Kentuckians.
In a similar case, the court granted an injunction to keep
Golden Rule Insurance Company from having to comply with the law
until a decision is made (Golden Rule Insurance Co. v.
Kentucky, DC EKY, No. 94-125). (See BNA's Health Care
Policy Report 7/17/95.)
Dr. Stuart Yeoman is scheduled to speak at the 52nd annual
meeting of AAPS.
Patients May Withhold Permission to File Medicare
The Dept. of HHS has finally issued a letter affirming the
right to private contract, in response to inquiries from the
Coalition for Patient Rights (CPR).
According to a memorandum from Jim Pyles of CPR: ``These
findings recognize for the first time that psychotherapists can
provide psychiatric services privately to Medicare patients
without risk of violating the law. This is a change from the
Department's prior view of the law as evidenced by the statement
in the letter that a revision to the Medicare Carriers Manual
will be issued `in the near future' on this subject. Currently
the Carriers Manual at 3044 states that physicians can be
subjected to civil monetary penalties and exclusion from the
Medicare program if they fail to file a claim on a Medicare
beneficiary's behalf within one year. In fact, several cases in
which physicians are facing such sanctions will now be dropped as
a result of this ruling.''
The August 4, 1995, letter is signed by Thomas A. Ault,
Director of Policy Development, HCFA, 6325 Security Blvd.,
Baltimore, MD 21207. Mr. Ault states that ``in line with
insurance practice, Medicare regulations (42 CFR 424.36-424.40)
generally require a signed claims authorization by the
beneficiary (or his representative).''
Therefore, ``if the beneficiary chooses to withhold a claims
authorization for his own reasons, entirely free of any pressure
by the physician, the Medicare program recognizes that the
physician has no right or duty to submit a claim.''
However, ``this situation must be distinguished from the
situation in which the physician requires a beneficiary, as a
condition of treatment, to sign an agreement that no Medicare
claim be submitted. Such an agreement is invalid and
Mr. Ault notes that a beneficiary may change his mind and
require a physician to submit a claim at any time before the time
His letter also acknowledges that, if a claim is
ever filed, beneficiaries sacrifice the confidentiality
of their records-all their records: ``it is conceivable
that the medical records in connection with psychotherapy for
which no claim is filed may be needed in order for the
carrier to determine whether and in what amount Medicare payment
may be made for other psychotherapy services for which a claim
is filed.'' The statement signed by the beneficiary
authorizes such disclosure: ``I authorize the release of any
medical or other information needed to process this claim''
CPR states that ``for the time being, the limiting Medicare
fee remains in place, even if no claim is filed.''
A copy of the HCFA letter and the CPR memo is available on
request from AAPS.
Oct 12-14. 52nd annual meeting, Falls Church, VA.
Oct 21-25. American Society of Anesthesiologists meeting in
Atlanta. AAPS will have a display (F-40), and members will
present a panel on Alternatives to Managed Care.
Oct 10-12, 1996. 53rd annual meeting, La Jolla, CA.
The Emperor's New Disk. You have no doubt heard the
story of the Emperor's New Clothes. Well, the Blue Bunglers have
developed their own updated version of this classic story.
Recently, they sent us a computer disk that was supposed to
contain the NSF specifications, including information about
Medicare secondary payor fields....The disk was completely naked.
It had nothing on it. So while the HCFA bureaucrats, Vladeck,
Buto, Toby, et al. all sit marveling at how wonderful
their new technology is, the truth is there's not much to it.
I returned the naked disk. Now that it has been exposed, I
am sure we can count on HCFA to cover it up. I didn't ask for
another one; I've seen enough.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY
Managed Care and Organized Medicine. Medical
publications often speak of managed care as if it were a fait
accompli; yet it is far from certain that managed care will
survive and prosper. Not all physicians are ``living and working
under managed care.'' In some areas, physicians, instead of
cowering in fear, have united to keep the vandals out....
The reaction of most organized medicine in the past few
years has been essentially a passive strategy of
cooperation, negotiation, and appeasement that has been largely
ineffective. The ``appropriate'' thing is to cease negotiating
with those who are destroying our profession and subverting the
interests of our patients. Instead, we should resist them
vigorously on all fronts and advance alternatives that protect
our independence and our patients' welfare.
R. Wayne Porter, M.D., Coming, AL
Two Masters. Under managed care, a physician has
signed a contract to divide his loyalty between the insurance
broker and his patient. Keeping costs down is a noble pursuit
but would you trust an insurance company over your doctor in
making that choice?....I do not participate in managed-care
plans. I also do not invest in managed care companies, or the
tobacco industry. Both, unfortunately, have been very successful
James Austin Ball, M.D., Charleston, SC
Managed Care Will Fail. ``Managed'' care, in which the
individual sick patient is dehumanized and disenfranchised, will
self destruct without physician promotion, support, and
participation. Medical Savings Accounts need to be understood by
all physicians to counter the expedient, pragmatic, unprincipled,
short-term-financial-gain balderdash we are fed by social
planners abetted by ``organized medicine.''
Curtis Caine, M.D., Jackson, MS
Medicare Reform. We have asked our Congressman to
consider the following points on Medicare reform:
1. First and foremost, Medicare must not be mandatory or
coercive (e.g. unequal tax treatment to
nonparticipants). Liberty is the antithesis of
2. Freedom to contract with the physician and agency (e.g.
insurance or investment firm) of one's choice is
paramount. Slavery is the compelled denial of the
right to contract. We oppose slavery.
3. Economic viability requires responsibility. Such
responsibility can exist only when citizens own their
own insurance plan.
4. Efficiency demands that the role of government be
strictly limited to enablement-allowing a free market
to evolve wherein patients, physicians, and firms are
allowed to benefit from their good decisions and to
confront and suffer the consequences of their bad
Based on experience with our own HMO, managed care is a
fraud. It contains cost by reducing patient interaction with
physicians and nurses by a factor of four and increasing
administrative expenses by the same factor.
Lee and Marjorie Hustead, Norristown, PA
A Doctor's Definition of ``Test''. I stated openly in
1992, in the Journal of the Florida Med Assoc and
Med Tribune, that I intend to continue examining my
patients, CLIA notwithstanding, and I exhort all my colleagues to
do the same.
I am NOT performing ``laboratory tests.'' These ``tests''
have been so classified because some of them (not all of them)
are sometimes done in labs. I am doing ``tests'' which are part
of, and an extension of, my examination of my patients.
Anyone and everyone I speak to agrees with me, but is too
afraid to do as I do. Thus we have patients denied the expertise
of the dermatologist who won't look at skin scrapings in the
office because it's not worth it to get a CLIA number, and he
thinks it's ``against the law''....The nation's patients are
denied the increased learning and accuracy in diagnosis that
young doctors achieve when they are encouraged to become
knowledgeable in microscopy, correlating the findings with the
clinical presentation and the outcome of the illness.
I have not gone out of my way to flaunt this practice, but I
refuse to creep around acting as if it is wrong when I know it's
much more right than what is going on all over the country. I
believe others are doing it too. You can't take care of patients
Even if the freedom and autonomy issues for physicians were
not involved, CLIA regulation of physicians' offices is wrong
because-far from protecting patients-it damages them by denying
them adequate, timely care.
Pepi Granat, M.D., South Miami, FL
Legislative AlertThe Medicare Battle
The Medicare debate is well underway and will intensify
this month. Thus far, Congress has had 38 public hearings on the
Medicare mess and there are many more to be scheduled this fall.
Gingrich and Dole can be expected to finalize the plans for
Medicare reform in September.
Medicare reform will probably be included in the Omnibus
Budget Reconciliation Act (OBRA), the central federal budget
bill, that is to go to the President's desk by the start of the
new fiscal year October 1st. Capitol Hill observers expect an
exceptionally bitter floor debate.
The issues will be tough. It is one thing to vote in
principle for a Budget Resolution that balances the budget; it is
quite another to take up the knives, scalpels, and axes to
actually do the cutting and slicing necessary to get there. The
screaming from special interests who have been feeding at the
federal trough for years will reach decibels never even imagined
before. One senior Congressional staffer says that those members
who have been talking tough will ``really have the opportunity to
show that they don't faint at the sight of blood.''
Capitol Hill observers think it is safe to bet the farm on
the Gingrich promise, as part of the Contract, to pass a bill
that will balance the budget, with deep cuts in federal spending.
Less certain is the Senate, which has shown itself to be more
squeamish around budget axes. But smart money is betting, with a
few hedges and qualifiers, that Dole will deliver.
Then comes the showdown. Clinton is expected to veto the
bill and to have enough votes to sustain his veto. The
Republicans will have two choices. They can compromise. Or they
can stand firm and fund the government with a series of
continuing resolutions, which will keep the federal government
operating at current levels. This is, in effect, a freeze on
federal spending. The freeze would remain until either the
President or Congress relents in the stand-off. In the meantime,
the federal government is likely to be shut down.
The Shape of the Debate
August town hall meetings around the country have shown that
Medicare reform is a tough sell for Congressional Republicans on
the stump. High school auditoriums, fire halls, and Bingo
parlors have been the scene of some tough and unpleasant and
sometimes thoughtful exchanges between members of Congress and
constituents. Congressional leaders have assembled task forces
to hone the message for the voters. Speaker Gingrich is directing
the House effort himself with the assistance of Rep. Dan Miller
(R-FL). Senator Bill Frist is chairing the Senate Republican
Medicare Working Group.
One way to gauge the progress of the debate is to scour the
pages of the liberal Establishment's oracular outlets on matters
of high policy. In a lead editorial of the August 20th New
York Times, New York's most prestigious newspaper opines
that, whatever you think of the Congressional Republicans and
their ``Contract With America,'' they have reversed the terms of
the political debate on nearly every issue.
``Before November, Congress debated how much more it would
spend to put welfare enrollees to work. Now it debates how much
less it will spend. Before November, politicians debated whether
to cut off public services to illegal aliens. Now they debate
whether to cut off legal immigrants as well. Congress used to
debate which technology and national service plans to create. Now
liberals declare victory if they keep existing programs alive.
The Republican camp vision of limited government has won, for
now... Nevertheless the Republicans deserve some credit,
especially for tackling problems from which Democrats cowered.
They have adopted a plan to balance the budget-too quickly for
this page's tastes-and will deliver a proposal next month to slow
the growth of Medicare. This takes real political courage.
Medicare's popularity among the elderly makes it an uninviting
target. But the program is headed for bankruptcy,'' stated the
The Congressional leadership is hammering away at several
themes, the most important of which is that the Medicare system
just next year, for the first time in its 30-year history, will
be spending more than it takes in for hospitalization services,
and that the HI trust fund will be bankrupt in seven short years.
The troubled financial condition of Medicare is dawning on more
and more senior citizens and taxpayers. But the problem of the
seniors' sense of entitlement lingers. Most still believe that
they paid for their Medicare benefits. Or that they financed the
Hospital Trust Fund. They didn't and they won't. This is even
true of the newly retired who have been working for the past
thirty years. According to the Senate Republican Task Force, the
average two-earner 65-year-old couple retiring in 1995 will
consume $117,000 more in Medicare benefits than they paid into
the Trust Fund during their working lives.
The Minority leadership in the House seems to have settled
on the Congressmen Pete Stark/Sam Gibbons strategy that says, in
effect, that yes, Medicare has problems, we have known about
these problems for years, and we did nothing very much about it,
and anyway, these problems are still a long way off, and besides,
they are really not that bad.
Not surprisingly, part of the difficulty that Gingrich and
Company have in selling the bankruptcy idea is that too many
senior citizens just don't believe it. They think the government
can simply borrow to pay for the HI benefits: just print Medicare
money. After all, that is what government does in just about
every other category. But HCFA cannot borrow; if the Trust Fund
goes south, no hospital bills can legally be paid!
The second problem that the Congressional leadership has
been struggling with is the perception that they are cutting
Medicare by $270 billion over the next seven years, and forcing
seniors to pay at least $1000 more for Medicare services, in
order to give a $245 billion worth of ``tax breaks'' primarily to
Liberal rhetoric is getting hot. Congressman Maloney (D-NY),
for example, says that the elderly ``may have to compromise food
and shelter to pay more for health care.'' And Congresswoman Pat
Schroeder (D-CO), never at a loss for a creative interpretation
of data, thinks that the entire Congressional Budget Resolution
is bonkers: ``If you had a report saying there would be a
shortfall in the year 2002, would you run out then and take
another $270 billion out of this account? It is not going to have
a surplus. It is going to have a shortfall. If you take $270
billion out of it, boy, oh, boy, is it going to have a shortfall
in the year 2002 because that is exactly what the other side of
the aisle is trying to do.''
Congresswoman Sheila Jackson Lee (D-TX) is not about to put
up with this ``slow the growth'' talk: ``They want to cut $270
billion out of Medicare with the false premise that we're slowing
growth. What does slowing growth mean? It means that those who
are diabetic who have been able to be under maintenance, and
survive, and be healthy will no longer have any care. It means
people with blood pressure will wind up in hospitals with
strokes, without adequate health maintenance to keep their blood
pressure down.'' Rep Gene Green (D-TX) deserves an award for the
best line of the House debate: ``The Republicans are not trying
to save the Medicare system any more than Hugh Grant was asking
But good political rhetoric does nothing about the
relentless numbers problem. Right now, Medicare is growing at the
rate of 10.5% per year, or over three times the rate of inflation
and roughly twice the rate of private-sector medical spending.
Under the 1995 Budget Resolution, the average annual growth of
Medicare is going to be 6.4%, or roughly twice the rate of
inflation. On a per-capita basis, spending on Medicare enrollees
will grow from $4800 to $6700, an increase of $1900 from 1995 to
2002, a 40% increase in per-capita spending. Under the Budget
Resolution, total Medicare spending will grow from $181 billion
today to $276 billion in 2002, an overall increase of 52%. Total
Medicare spending projected by the Budget Resolution will be $1.6
trillion over the next seven years. Interestingly enough, total
Medicare spending projected by the Clinton Administration, under
its version of Medicare reform, would be $1.7 trillion over seven
years. Thus, the actual differences between the Clinton plan for
Medicare and the Congressional Plan are in reality quite small.
By jumping onto the popular Congressional ``balanced
budget'' bandwagon and conceding that the financial situation in
Medicare is serious, the Clinton Administration has succeeded in
driving Congressional liberals nuts. It's hard to make the case
that Gingrich is a brute, ready to dump old folks out of their
hospital beds and onto the streets, when the President is saying,
at least in the unalterable language of mathematics, the same
The Clinton Administration, for rhetorical purposes, is
saying that its plan for Medicare reform will save only $128
billion over the next seven years, while the Congressional
Republicans want to savage Medicare with ``cuts'' to the tune of
$270 billion. But the White House is relying on an OMB
``baseline'' for calculating the savings, while the Congressional
leadership is using, as expected, the Congressional Budget Office
(CBO) baseline. Not surprising, with different baselines, you get
different results. But, as the Heritage Foundation recently
showed, when you use the same baseline (the CBO figures) for both
plans, the White House savings rise to $192 billion, not $128
billion, over the same time period, which is $78 billion (not
$142 billion) less than the Republicans' 7-year savings. Look
even more closely. Under the Clinton budget proposal, the
Medicare spending for 1996 is $171 billion, compared with $172
billion in the Congressional Republican plan. Costing out the
increases in spending over the next seven years, the Clinton Plan
differs from the Congressional plan by an average of just $11
billion per year. With a national debt of almost $5 trillion and
annual deficits running at approximately $200 billion, $11
billion is not much of a margin to fight a major political war.
And Congressional liberals know this.
Enter Ross The Boss
Congressional leaders are getting some help in their
Medicare battle from an irrepressible source. Ross Perot has put
in his say at a major hearing before the Senate Finance Committee
on August 30. His major recommendation: Don't do anything
radical to Medicare without testing the prototype first. The rest
was Pure Perot. His entry into the debate is nonetheless
politically significant. Harper and Row has just published his
book on the subject: Intensive Care: We Must Save Medicare
and Medicaid Now. Perot's book puts Medicare in the context
of the national debate that made him a household word, the
broader debate over the federal budget. He noted that, under
current projections, Medicare and Medicaid spending are going to
increase by 158% over the 10-year period. At the same time,
federal revenues will increase only 62%. This is a recipe, in
other words, for huge and disastrous federal deficits. By 2012,
according to Perot's projections, the federal government will
have obligated itself to spend on Social Security, Medicare,
Medicaid, and interest on the debt, a total amount that will
exceed all of its revenues. Nothing left for national defense,
for example. Perot is long on analysis of the problem, but a bit
short on the details of reform. Still, Senate Finance Committee
Republicans were impressed with the Perot testimony, which
contributed to the general feeling that Congress must ``do
something'' on Medicare.
Crafting Medical Savings Accounts
House Republicans are certainly going to include some
sort of a Medisave option in the Medicare reform bill. There is
increasing support for this idea from conservative groups. The
Christian Coalition, the Family Research Council, the American
Family Association, Eagle Forum, Concerned Women for America, and
the Traditional Values Coalition-groups normally engaged in hot-
button social issues and not health-care policy-are lining up to
back the Archer-Jacobs Family Medical Savings and Investment Act
(HR 1818). In coming together to support the bill, they have
formed a coalition called the ``Families for Medical Expense
Reform.'' Managed-care lobbyists are not happy.
But while there has been widespread support for the concept,
drafting a specific measure has been tough. One concern is how
to set the deductible and the catastrophic limit. Currently,
spending per capita in Medicare is $4800. If a deductible is set
too low, say $2500 or $3000, there may be an powerful incentive
for seniors to reach it and run wild in utilizing medical
services once they reach the catastrophic limit where insurance
pays 100% of the coverage, and thus increase, rather than
decrease, overall Medicare spending.