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Volume 57, No. 9 September 2001


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The "simplification" provisions (including the ones deceptively claiming to protect privacy) are not likely to be repealed anytime soon.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 8/6/01).

"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 at www.kaisernetwork.org.

Congress and HHS have done wrong; the wrong needs to be righted to protect our basic liberties.

Imaginative Solutions

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 imaginative ideas:

  • 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 4/01


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 mind."

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" ( capwiz.com).


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 (215) 947-1810.


AAPS Calendar

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 1997).

One use of medical information is for what Doctors Against Handgun Injury calls "upstream intervention" based on intrusive history taking (see AAPS News, June 2001).

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).


Fraud Updates

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 considered proprietary.

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 annually.

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 2000).


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 would change.
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 Alert

Down 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 coverage.

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 similar amendment.

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 working overtime.

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 office.

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 uninsured.

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 Foundation.