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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 57, No. 9 September 2001
AAPS CHALLENGES HIPAA
At a July 31 conference at the Cato Institute on "Making a
Federal Case out of Health Care: Five Years of HIPAA," House
Majority Leader Dick Armey (R-TX) gave a speech quoting noted
philosopher Jimmy Buffett in the title: "Just Gotta Learn from
the Wrong Things You Done."
"Not only was I awake when HIPAA came up, but I voted for
it.... I cast a bad vote. I feel bad about it." Armey is on the
record as favoring its repeal.
After defeating Clinton Care with the help of Armey's chart
entitled "Simplicity Defined," Republicans enacted Installment I
in the so-called Health Insurance Portability and Accountability
Act or HIPAA. "It started out as a modest little bill, claiming
to make coverage portable from job to job. It grew.... It ... did
little to make insurance more affordable, but it did set a
dangerous precedent for federal regulation of health insurance.
And, it appears to have expanded bureaucrats' access to our
medical records without a search warrant."
The "simplification" provisions (including the ones
deceptively claiming to protect privacy) are not likely to be
repealed anytime soon. Thus, AAPS decided to file suit in federal
district court, announcing this intention in a press conference
during the Cato seminar. (The complaint will be posted at
www.aapsonline.org as soon as it is filed.)
AAPS argues that the "privacy" regulations require
physicians to facilitate violations of Fourth Amendment
prohibitions against unreasonable searches and seizures, even
while expressly reiterating the traditional expectation of
privacy in medical records. Although consent forms that patients
must sign as a condition of treatment may disclose the
possibility of governmental access without a warrant, this
consent is coercive and cannot constitute a valid Fourth
Amendment waiver. Once accessed by a governmental agency,
sensitive personal information may be further disseminated
pursuant to other laws.
This broad governmental access also violates the First
Amendment by chilling patient and physician speech.
Physician use of patient information in providing care is
usually a purely intrastate activity and thus beyond the scope of
federal power to regulate. In preempting state law concerning
intrastate activity (such as that guaranteeing patients immediate
access to their own records), the regulations violate the Tenth
Amendment. California specifically protects the confidentiality
of medical records in its Constitution and declares that waivers
unauthorized by its law are "deemed contrary to public policy and
shall be unenforceable and void."
In addition to the Constitutional grounds, AAPS argues that
the regulations violate the enabling statute in expanding the
rules to nonelectronic communications and missing the deadline by
more than a year. They also violate the Paperwork Reduction Act
(PRA), which requires the government to estimate the impact of
regulation on small businesses. The burden on small practices is
grossly underestimated, and there is no meaningful consideration
of cost-effective alternatives.
AAPS also supports litigation filed July 16 by the South
Carolina Medical (SCMA) together with the Louisiana State Medical
Society and two South Carolina physicians in the US District
Court for the District of South Carolina. The SCMA states that
Congress abdicated its lawmaking role in delegating authority to
draft the privacy rules to HHS. It also complains that the
failure to preempt state law if the state statute is "more
stringent" than the federal rule is "impermissibly vague."
AAPS decided to file a separate action in order to challenge
the constitutionality of regulations themselves, rather than just
the process of enacting them.
The SCMA took the lead after the AMA Board of Trustees
decided not to file litigation, stating that a constitutional
challenge would be "extremely difficult to win" (AM News
"Back in 1992, AMA counsel Michael Ile told me that the AMA
would not file suit against the Clinton Health Care Task Force
because it had so little chance of success," recalls AAPS
Executive Director Jane Orient.
At the Cato conference, Fred Cate, Professor of Law at the
University of Indiana School of Law, observed that HIPAA
represents a basic transformation of privacy law. Previously, the
focus was on preventing intrusions by government,
because only government has the power to compel disclosure of
information and to impose civil and criminal penalties, and only
the government collects and uses information free from market
competition and consumer preferences.
Past legislation concerned harm; the emphasis has
shifted to control of information. According to Cate,
HIPAA appears to "ignore everything we have learned about the
importance of using clear, narrow definitions to focus
restrictions only on those information flows that could
reasonably cause harm." Very expensive and onerous requirements
will preclude many uses of information beneficial to patients.
Yet, the requirement for government access is reduced from a
warrant to an administrative subpoena; consent is merely an
illusion. (Patients will have no choice but to consent
if they want treatment.) .
Washington attorney Jonathan Emord agreed that HIPAA turns
privacy law on its head. The "exceptions swallow the rule,"
making it "almost impossible to envision a circumstance in which
a patient to avoid disclosure of his/her private health
information to the government." Any physician regulated by HHS
would risk adverse actions including audits or investigations at
regulators' whim if he refused a demand for access.
Transcripts and tapes of the Cato conference are available
Congress and HHS have done wrong; the wrong needs to be
righted to protect our basic liberties.
When I share with other physicians, particularly
psychiatrists, the practice style I have chosen to adopt, they
are incredulous. Compared to a New Yorker friend [who works
constantly and frantically to maintain a three or four-doctor
office with 30 employees, and whose patients don't want to pay
even if affluent], my life is peaceful. I don't accept insurance
"assignment." I am not an insurance plan "provider." My patients
know that they are going to pay for my services when they come in
and that they are going to fight with their insurance
company. My staff and I do everything to help them get what they
are entitled to, but it's still their responsibility.
Most physicians have sold their souls to the third party and
relegated their once proud profession to something that is,
economically at least, a notch or two below ditch digging. Now
there is nothing wrong with any job, whatever status people
assign to it, as long as the bargain is an honest day's work for
an honest day's pay, and the worker is toiling at the limit of
his capability and getting something meaningful in return. These
days, for doctors the bargain often is an honest day's work for
whatever I can pitifully whine, grovel, and nag out of managed
care. And quality is suffering....
Doctors are fighting back, but not very creatively. I have
noticed with grim amusement the movement toward "unionization." A
union is something to which employed physicians -not independent
ones-can belong. It is not an imaginative solution. Here are some
- Guarantee that the doctor will see the patient within 20
minutes of the appointment time or the visit is free.
- If the pharmacist can't read the prescription, the patient
can bring it back for a $100 bill on the spot.
- Satisfaction guaranteed or you don't pay.
- Use samples and prescribe initial low doses so the patient
doesn't get stuck with a $100 bottle of medicine he can't take.
Satisfied patients pay. No waiting for insurance money.
No groveling. Service is rendered; payment is received. The old
elegant never-fail capitalist bargain.
Louis B. Cady, M.D., Evansville, IN, www.drcady.com
from "Shrink Rap: The Death of Medicine," TriState J
Lott Demands Review of AMA CPT Contract
In a letter to HHS Secretary Tommy Thompson, Senate Minority
Leader Trent Lott (R-MS) asks for a review of the AMA monopoly on
procedure codes, which results, he says, in $71 million in annual
royalties and book sales. "[I]ntellectual property rights in a
federally mandated billing system...ha[ve] a major impact on
public policy." Moreover, Lott said, "The AMA has been able to
impose on the entire nation the AMA's obviously self-interested
policy against consumers comparison shopping...by suing Web sites
and others to prohibit them from posting comparisons of doctor
and other medical fees on the Internet using CPT codes" (D Boyer,
Wash Times 8/7/01).
It is said that Republicans are angry that 67% of the AMA's
campaign contributions went to Democrats in 2001, compared with
19% in 1995-97 (Wall St J 8/8/01).
A new AMA catalogue offers a "coder's value package" for
$951.48, a 25% savings. The CPT-Assistant Archives 2000 Update is
$1,225 and requires the 1999-2000 update (another $1,650) to run.
The AMA is striving to assure that the forthcoming CPT-5 is
"unambiguously selected by...HHS as the standard for reporting
physicians' services under HIPAA."
When Will They Ever Learn?
After 5 years of HIPAA, "we feel the pain," said Conrad
Meier of the Heartland Institute at the Cato conference, but
where is the benefit? Originally, the GAO said that 25 million
Americans would benefit. The CBO scaled the estimate down to
150,000 per year during the debate. In the 20 states that track
HIPAA enrollment, only 6,500 people have so far enrolled in high-
risk pools as a result of the law. HIPAA is a classic example of
Congress trying to protect people from "one of those bad things
that could happen, but almost never does."
Any law passed to benefit one group invariably works to hurt
the interest of others, and the results follow Meier's Law of
Probable Dispersal: "whatever hits the fan will not be evenly
distributed." HIPAA's hundreds of new regulations push the
medical insurance industry toward guaranteed issue, higher
premiums, more cross subsidies, and less protection of medical
privacy: giant steps in the wrong direction, whose ramifications
are only now beginning to become apparent.
The Ganske-Dingell version of the PBOR (see S1-2), the next
installment in federal regulation of medical insurance, has
passed the House, slightly watered down by the Norwood Amendment.
"This is feeling more and more like HIPAA all over again," writes
Greg Scandlen of NCPA. "The only carriers that will be able to
comply (and defend their compliance) are giant, national managed
care organizations that get closely involved with patient care
and quality assurance. The bill will create an oligopoly of three
or four national health plans-just like what Clinton had in
The AMA strongly favored Ganske-Dingell (as it did HIPAA)
but considers the Norwood Amendment "fatally flawed" because "it
falls short on ensuring that HMOs are held accountable for
decisions that harm patients" (
MSA Tapes Available
The Pennsylvania chapter has audiotapes and videotapes of a
presentation explaining MSAs by Merrill Matthews, edited for
various audiences-physicians, patients, employers, and insurance
agents. For more information, contact Dr. James Pendleton, [email protected] or
Oct. 24-27. 58th annual meeting, Cincinnati, OH. (Hear
Jim Redden, author of Snitch Culture: How Citizens Are Turned
into Eyes and Ears of the State, just added.)
Nov. 17. AAPS, PA chapter, and SEPP. Healthcare Summit
2001, featuring Medical Savings Accounts, Pittsburgh, PA, call
(724) 929-5711 or see www.sepp.net.
Sept. 18-21, 2002. 59th annual meeting, Tucson, AZ.
Information Technology and Social Control
One of the darkest chapters in the history of the public-
private partnership is chronicled in a new book by Edwin Black,
IBM and the Holocaust: The Strategic Alliance Between Nazi
Germany and America's Most Powerful Corporation. The
government of Nazi Germany, IBM's second-largest customer, leased
thousands of punch-card machines, sorters, and tabulators custom-
designed for the client's needs: censuses to keep track of Jews.
At Auschwitz, the SS tattooed prisoners with a five-digit IBM
Hollerith-machine identification number. According to reviews in
The Washington Post (Guardian Weekly, Apr 19-
25, 2000) and Nature 2001;411:993-4, the book shows the
potential use of computerized information as a means of social
control. One source of data was the medical profession, a
collaborator of the Nazi regime; public health was one rationale
for cooperation (AAPS News, April
One use of medical information is for what Doctors Against
Handgun Injury calls "upstream intervention" based on intrusive
history taking (see AAPS News, June
More and more government surveillance is being done by
indirect means, especially through private entities, rather than
by direct search and seizure. More and more law enforcement
concerns paperwork offenses rather than real moral wrongs.
"Government is the one entity that wields enough unchecked power
for us to be concerned about its access to information" (S
Singleton, "Privacy in a Free Country: in Search of Reasonable
Principles," NCPA Policy Report #243, April 2001).
Why 10%? It is frequently asserted, as by a House Ways
and Means Committee report on HIPAA, that 10% of medical spending
is attributable to fraud and abuse. The source: a totally
unscientific survey of unidentified individuals. "Although the
figure of 10% was an effective political statistic, it has no
empirical foundation," stated David Hyman at Cato. He cited
Winston Churchill's definition of "political statistic": "When I
call for statistics about the rate of infant mortality, what I
want is proof that fewer babies died when I was Prime Minister
than when anyone else was Prime Minister."
Vargo Case Settled. Six years after the government
began its relentless, flawed prosecution of Montana family
physician Patsy Vargo, M.D., (see AAPS News, Aug 1997, and Medical Economics
7/23/01) the U.S. attorney in Billings, MT, resolved the case
with a no-fault agreement, on the eve of a civil trial. The
Justice Department will not prosecute Dr. Vargo any further under
the False Claims Act, and Dr. Vargo cannot sue the government for
false prosecution. The settlement terms are under a gag order. -
After the highly unusual action of withdrawing a criminal
indictment, the government continued to seek up to $36 million in
civil penalties-even though its own expert witness, Glenn
Littenberg, M.D., called the use of the FCA an "egregious abuse
of due process." Dr. Vargo was never notified of inappropriate
coding practices. At the time of the patient visits, prior to
1996, carriers refused to share coding guidelines, which were
Failure to Snitch Leads to Exclusion. For failure to
report that fraudulent payroll expenses were being submitted by
home health agencies that were franchisees of Staff Builders
Health Care Services, V.P. Andrew Anello pleaded guilty to
misprision of a felony. He was sentenced to a year's probation, a
$5,000 fine, and 150 hours of community service-and excluded from
Medicare for five years because management is "related" to the
delivery of a health care item. The fact that the improper acts
were isolated and unintentional was not considered a mitigating
factor (Civil Monetary Penalties Reporter, summer 2001).
UW Doctors Could Be Charged Criminally. A two-year
criminal investigation of physicians and administrators at the
University of Washington School of Medicine has finally made the
news (Seattle Times 7/8/01). The case is partly built on
audiotapes secretly recorded by a whistleblower, who could
possibly collect millions of dollars if fraud is proven. To date,
the University has spent $6.8 million on its defense. A UW
spokesman said "our people have made errors while struggling with
frighteningly complex regulations"-despite the fact that 20 years
ago UW became the first academic medical center to initiate a
billing compliance program, which now costs $2.5 million
Dean Paul B. Ramsey stated: "Those who seek reimbursement
under the existing, complex guidelines face the very real risks
of an honest mistake being cast by prosecutors as an intentional
act of criminal fraud. This risk is driving physicians across the
country...to retire early, refuse all insurance and accept only
direct payment from patients, or restrict the number of Medicare
and Medicaid patients they serve."
Nass Ordoubadi, M.D., now serving time in federal prison
camp, writes: "I understand that the prosecution team has relied
heavily on the outcome of my case to pursue the dozen or more
doctors [at UW]" (see AAPS News, Dec
Doctors Refusing Medicare
Although HCFA (now CMS) states that reports of doctors
refusing Medicare patients are not widespread, a recent survey
showed that only 15% of Colorado doctors accept new Medicare
patients, and that similar problems are emerging in cities such
as Atlanta, Austin, the Dallas/Ft. Worth Metroplex, and Spokane
(USA Today 2/19/01).
The AAPS 2001 Medicare survey showed that 25% of 264
respondents were not accepting new Medicare patients, about the
same percentage as in 1999, and 34% are restricting services to
Medicare patients. About 39% said they had experienced difficulty
finding a physician for a Medicare patient who needed a referral
(compared with 35% in 1999)-especially to a family physician,
psychiatrist, or neurologist.
Difficult procedures that physicians may decline to offer
Medicare patients include: major cancer surgery, aortic aneurysm
repair, parotidectomy, thyroidectomy, hysterectomy, corneal
transplants, and revision of total joint surgeries.
Elective procedures that may be restricted include
blepharoplasties, cervical epidurals, EMGs, Botox injections, or
"anything that might be deemed unnecessary."
Nearly 12% of respondents have opted out (cf. 7% in '99).
Since 1994, income has decreased for 60% of respondents and
increased for 30%.
Margaret Thatcher described consensus as "the process
of abandoning all beliefs, principles, values and policies in
search of something in which no one believes, but to which no one
objects; the process of avoiding the very issues that have to be
solved...." She asks, "What great cause would have been fought
and won under the banner `I stand for consensus'?"
What Is a Medical Record? In the "Notes from the
Medical Director" (Edward M. Cox, M.D.) in Upstate Medicare's
monthly bulletin, we see that Medicare is now defining what
constitutes a medical record-another step in the process of
turning it into a billing record. Things like birth dates, Health
Insurance Claim (HIC) numbers, and patient name are to be on
every page. According to Dr. Cox, "In copying records, if
page 2 of that sheet is without a name, it would not represent a
medical record." The medical record also requires a
legible signature. As if Medicare did not have enough
excuses not to pay, if Medicare personnel can't read your
signature, they won't pay the claim. But your signature is your
signature. How can they force you to print it or write it
differently? And if they did, would it still be your signature?
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY
Any Willing Paying Subscriber. I suggest this mandate
to improve medical insurance markets: Any willing paying
subscriber should be permitted to purchase a product from any
willing participating insurer in an open market with full public
disclosure of coverages and premiums.
Steve Barchet, M.D., Issaquah, WA
Who Needs CPT? CPT codes, developed jointly by the AMA
and HCFA, transmit information to insurers for billing purposes.
They set the stage for fraudulent fraud accusations by insurers
who complain that the "provider" is not doing what the insurer
deems appropriate or "medically necessary." Peer-reviewed journal
articles have criticized the CPT coding system as subjective and
expensive, adding nothing to patient care.
SimpleCare advocates the abandonment of questionable coding
systems like CPT and ICD-9-CM. To give an example, the ICD-9-CM
has 4,000 code choices to describe how you die. The ICD-10-CM has
more than 8,000! SimpleCare, in contrast, uses descriptive terms
chosen by the individual physician, such as S (short), M
(medium), and L (long) for office visits. S 99213, a 24-step
procedure including a study of code books and the generation of a
superbill by a $30,000 computer with a $2,000 per month
maintenance agreement. S = about five minutes of my time, all
spent helping the patient.
Vern Cherewatenko, M.D., Renton, WA
Protection Money. If a physician hopes to function in
the U.S., he must surround himself with a plethora of expensive
private agencies for compliance with seemingly innumerable, inde-
ciphererable, variable interpreted rules. Government inspectors
can then rest assured that their job has been done for them. They
can give their stamp of approval to the politically correct
manual. If an average citizen attempts to follow the rules
without the assistance of a private agency, the inspector can
confidently declare him to be out of compliance.
Robert Gervais, M.D., Mesa, AZ
Civil Noncompliance. The U.S. Constitution cannot be
changed by statute, rule, or regulation. The official who demands
access to patient records without a lawful warrant is committing
a crime, whether or not he has a badge. I consider that as an
American citizen and physician, I have a legal and moral duty to
protect the privacy of my patients. I have already decided what
my actions will be, should bureaucrats enforcing HIPAA come to my
office. I will resist by all means available. I expect this will
be a "Beau Geste," but if enough people in this country would
imitate Gandhi and simply refuse to cave in to this insanity, it
Paul Duvall, M.D., Brevard, NC
The Formula. Combine the IOM "medical errors" report
with the PBOR making malpractice remedies a federal concern,
throw in Stark rules and HIPAA privacy rules, and you have the
ingredients for a complete federal takeover of medicine.
Greg Scandlen, Frederick MD
Legislative AlertDown to The Wire on PBOR
As this piece goes to press, the House Rules Committee may
or may not have cleared the House floor for action on the
Patients' Bill of Rights legislation. By the time you read this,
the House debate may be over, and the House and Senate bills will
be headed for a conference after the August recess.
There are two competing House bills: the Fletcher-Peterson
Bill (HR 2315), backed by the Republican Congressional leadership
and the Bush Administration, and the Ganske-Norwood-Dingell bill
(HR 2563), backed by the House Democratic leadership. HR 2563 has
incorporated many of the changes made in the Senate debate on S
1052, sponsored by Senators Edward Kennedy (D-MA), John McCain
(R-AZ), and John Edwards (D-NC). During the last week of July,
the Bush Administration, including the President himself, worked
overtime trying to nail down an agreement, primarily with Rep.
Charlie Norwood (R-GA). For the White House, the big issue is the
nature and scope of litigation. The President has threatened to
veto the Senate version, and has repeatedly stated his desire to
get a bill out of Congress he can sign.
There are two points worth noting. First, as Rep. Bill
Thomas (R-CA) has stated, there is substantive agreement on 95%
of the items in the bills, such as access to medical specialists
and grievance and external review procedures. Both bills would
result in a massive expansion of federal regulatory authority.
Regulation, not litigation, is the primary issue.
Second, this entire debate, regardless of the rhetoric about
injured kids, is not about accommodating the national sentiment
expressed in Helen Hunt's silver-screen outbursts about abusive
HMOs in As Good As It Gets, nor the rightness of
lawsuits for injuries to victims of greedy insurance companies.
It's not about improving insurance.
Sen. Edward M. Kennedy (D-MA) and Rep. John Dingell (D-MI),
the lead Congressional sponsors of the PBOR, both strongly favor
the expansion of federal regulatory control, which is at the
heart of the bills. Their primary policy objective is not to
make the private insurance system work better; they want to
abolish it. Senator Kennedy, the real driving force, restated
his broader point on June 29: he favors a national "single-payer
health care system." He wants the thing we call the "American
health care system"-another misnomer-to be a wholly owned and
operated subsidiary of the federal government. On the big
systemic issues, Kennedy and Dingell count because they know what
they are about, and their every tactical decision fits into a
broader strategic pattern: an expansion of federal authority.
Recently, Rep. Dick Armey (R-TX) captured the essence of the
debate: like the HIPAA of 1996, the PBOR will expand federal
regulation. The result will be higher prices, more uninsured,
and the demand for a single-payer solution. Whatever the AMA,
the AHA, the HIAA, or the ATA-the alphabet soup of highly paid
lobbyists and lawyers fighting for their piece of the pie-thinks
is very much beside the point.
The Return of Clinton's Regional Alliances?
In the guts of these bills, as noted, there are some curious
regulatory pieces. Under Section 513 of HR 2563, for example, is
a tax credit for small businesses who offer "new" health plans
for employees. That means any health plan that did cover those
employees for two previous years and was available to at least
70% of the "qualified" employees of the firm. The tax credit
would be 30% if the employer bought the insurance from a
"qualified health benefit purchasing coalition," and 20%
otherwise. A "qualified health benefit purchasing coalition" is
defined as a "private not-for-profit" corporation, which meets
state licensure requirements and requirements set forth by the
federal government. The credit, available to employers of
"qualified" employees who earned more than $10,000 per annum,
would be subject to a dollar limit: $2,000 for self-only coverage
and $5,000 for family coverage. This idea is a component of the
Common Ground agenda, a scheme to increase government control
dreamed up by Families USA, famed backers of the Clinton Health
plan in 1993, and the Health Insurance Association of America
(HIAA), whose bottom line is best served by expanding Medicaid
If you follow the money, you can easily see where corporate
allies of big government secure their short-term interests. If
you look at the structure, you can easily grasp the agenda of the
Left. Where the Left fights tooth and nail over structural
changes, and worries about money later, the green-eyeshade
conservatives squabble over money, fret about balanced budgets,
and concede on structural issues they mistakenly view as
unimportant. Myopia. Think about it. State-based, federally
regulated, health insurance cooperatives, benefiting from
exclusively favorable federal tax treatment, are eerily
reminiscent of the "regional alliances" of the failed Clinton
Health Plan of 1993. Step by step.
What About Federal Government Health Programs?
Recall that Sen. Don Nickles (R-OK) successfully offered
an amendment to the Senate version of the PBOR that would apply
all its terms and conditions to federal government insurance
programs, including Medicare, Medicaid, and the Federal Employees
Health Benefit Programs. The number of additional persons thus
covered would be enormous. Medicare covers approximately 40
million; Medicaid, roughly 34 million; and the FEHBP, 9 million.
Rep. Thomas Tancredo (R-CO) stated his intention to offer a
Federal union leaders and their allies in Congress don't
like it one bit. It's a "not in our private backyard" situation.
Oh, you can be sure that they will moan privately that they would
do it if only they could, but it's just too "complicated" and
it's really "not necessary." Clinton already "did" it. In their
bill, Reps. Dingell, Norwood, and Ganske have a fig leaf that
tests your patience: a one-year GAO study of the issue, a non-
binding sense of the Congress that Congress should apply these
provisions to federal programs, and that the President should, to
the "extent feasible," do it himself by Executive Order.
Ignore all that. The opposition of federal union leaders,
federal plan representatives, and the whispering Congressional
staffers is all of a piece, and not terribly different from the
insurance companies and employers they routinely condemn: they
fear their premiums will go up; they don't want another layer of
bureaucracy that would be disruptive to their unique system; and
they fear their plans being sued in state courts for damages.
And, everything in their medical coverage is really fine with
them. Because they exercise a level of personal choice that
ordinary Americans can only imagine, they've got a point.
But this little issue also opens a window into official
Washington. You really see how the members of the federal
establishment really think. It goes something like this: "The
PBOR is OK for you boobs beyond the Washington beltway, you
bushel of grassy green rubes in `fly-over country' who don't know
any better and can't wait to unleash the ambulance chasers
bagging big time damages against plans, employers, or whomever.
But, unlike you poor schnooks out beyond the beltway with your
dippy HMOs, we've got a personal choice of plans, and they fight
each year to keep our business. And, we're doing just
fine, you see. And, unlike you poor schnooks, in our
real world of serious and solid and competing
health care plans-that's our plans and our
premiums-the very idea of the big, dumb, slow HHS
bureaucracy intruding into our domain; yeah, we know those GS-15
guys up at Security Boulevard in Baltimore. That thing-they even
had to change its name to hide its identity-runs that Medicare
mess, and we are supposed to let them dictate our annual business
arrangements with the private sector? The thought of that thing
getting its fat and clumsy mitts on our Federal employee plans,
well, that's just about too, too much. You can tell that story
walking, pal. It's OK for you poor dumb schnooks beyond the
Beltway, you need help and you're a dysfunctional bunch anyway,
but not us highly elevated congressional staffers and civil
servants. We make this place work, thank you very much. Who do
you think we are? You nuts or something?"
There is another dirty little secret. If you think managed
care is tightly managed, then the Mother of Managed Care is the
traditional Medicare "fee for service" program-a misnomer if
there ever was one-where the HHS-crats and their big
Contractors deny a Medicare claim for medical necessity or
appropriateness more often than anyone in the private sector.
The sluggish and bureaucratic Medicare or Medicaid systems would
be particularly vulnerable to lawsuits. We are talking some
serious trial attorney time.
And, then, there is a bigger systemic issue. How would
socialized medicine fare in court? If you can sue for denials and
injury and recover damages from Medicare and Medicaid and the
Veterans Administration under the very same terms as the private
sector under the PBOR, you have established a powerful precedent
in the federal law, one with major implications for a single-
payer system. If Canada and Britain are any indication of the
volume of denials Americans could expect, trial lawyers would be
House Members and the Congressional staffers who do their
bidding are very nervous about all of this, but they don't like
to talk about it, and don't exactly know how to deal with it
without looking like a bunch of rank hypocrites. The next thing
to watch is how a House Senate conference will handle the tricky
issue of how to quietly kill the Nickles Amendment and dump the
body without anybody noticing. Detective Columbo, call your
Big Lawyers Versus the Little Guys
The House of Representatives may have to deal with
another big issue-what to do about punitive damages in the PBOR.
The trial lawyers may yet have heartburn over this one. A lot of
politicians hope you never hear about it.
During the course of Senate debate, Sen. Rick Santorum (R-
PA) posed a simple question: If the real objective of the HMO
reform bill is to help people who are hurting, and not just line
the already overstuffed pockets of the big trial lawyers, then
why not take the big bucks in those punitive damages against the
nasty HMOs and use 75% of that money to help poor working
families buy health insurance? Charity is sweeter than revenge.
So, Santorum offered an amendment to use the money to help the
The reaction was hot. Senators Edwards (D-NC) and Durbin (D-
IL) called the Santorum amendment a "tax" on victims and
families. Senator Barbara Boxer (D-CA) said the proposal is
"cruel," particularly to the "children." Not to be outdone,
Senator Ted Kennedy (D-MA) impugned the Senator's motives for
even offering such a proposal. Nasty stuff. Santorum's amendment
failed 50 to 46.
The angry reaction to Santorum's idea is, to put it
charitably, instructive. In law, punitive damages are not the
same as compensatory damages, which cover "economic" losses, such
as medical bills and lost wages, or non-economic damages, such as
pain and suffering. The Senate bill doesn't limit that
compensation. Punitive damages, however, have a public purpose,
like criminal law. They are designed to punish wrongful action
and deter such wrongful action in the future. They are imposed
for injury to society. The Senate bill imposes a
limitation of $5 million in federal cases, but allows unlimited
punitive damages in state cases. As Senator John Breaux (D-LA),
who supported the Santorum amendment, observed, using funds from
punitive damages to help the uninsured is not only a novel idea,
but it doesn't take away compensation to an injured person.
Again, compensatory damages are unlimited.
Santorum's proposal is novel, but not exotic. The law in
eight states already allocates a percentage of punitive damages
in certain cases to various funds, for purposes ranging from
medical assistance to low-income persons or special compensation
funds for victims of criminal negligence to enhancing the state
treasury. In 1992, Rep. John Dingell (D-MI), hardly Senator
Santorum's ideological bedfellow, sponsored a bill which would
have redirected 50% of punitive damage awards in medical
malpractice claims to states that work to prevent medical
injuries. Nobody called Congressman Dingell's proposal a "cruel"
attack on children or a new "tax."
During the House debate on the PBOR, you will hear a lot of
melodramatic rhetoric about who cares most. What they say is not
important. Watch what they do. If you want to know what's really
driving the big boys on Capitol Hill, just remember what happened
to the Santorum Amendment. By just four votes.
Robert Moffit is a prominent Washington health policy
analyst and Director of Domestic Policy at the Heritage