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

Volume 51, No. 9 September 1995


On Medicare Patient Freedom Day, July 31, 1995, more than 300 physicians turned back the clock to pre-1965 days and treated all their Medicare-eligible patients as private patients. No government forms were filed. And so far, no participants have been threatened with sanctions.

A skeptical Seattle newspaper wrote: ``Brain surgery for $1? Well, not exactly. But if you're a Medicare patient who has an appointment tomorrow with Dr. Michael Schlitt, a Bellevue neurosurgeon, that's what you'll be charged.''

The reporter will be asked to print a correction. Dr. Schlitt, who is President of the Washington State Chapter, did a craniotomy on that day, and as advertised, the fee was $1.00.

Reporters who visited the office had some interesting conversations with patients, including the one who paid for Dr. Schlitt's surgery with a beautiful model boat.

``I traded something that was of value to me, the fruit of my labor, for something that was of value to Dr. Schlitt, the fruit of his labor,'' the patient explained, somewhat haltingly because of the effects of a stroke.

A few patients were fearful. Rather than cross HCFA, one patient preferred to pay $37.50 (for which somebody's grandchildren will involuntarily reimburse her $30) instead of $1. Another demurred when asked to be on television; an attorney friend had warned her not to antagonize the federal government. She did, however, visit her physician after the television crew departed, expressed her support, and paid $1.

Medicare Patient Freedom Day in Tucson got about as much time on the 6:00 news as a major accident on the Interstate and a raging forest fire. The camera honed in on the sign (``I am not a government doctor'') and the dollar bill. One patient told viewers that she was angry at not being allowed to spend her own money the way she wanted to.

HCFA Administrator Bruce Vladeck has not responded to a request from AAPS counsel to be informed of any planned enforcement action. Two HCFA officials gave an opinion to reporters. Nancy Dapper, regional administrator, told The Seattle Times that physicians were breaking the law by participating in the protest, but unless patients complain ``we'll never know about it.'' Tom Hoyer of HCFA told The Washington Times that ``a physician can't work outside Medicare.'' But he added, ``we're looking at our position very closely.''

The response from organized medicine was either silence or fear. Counsel for the Florida Medical Association sent a memorandum to county medical societies, which in turn warned their members of possible civil and criminal penalties. They referred to the action as a ``collective boycott'' and stated that ``both HCFA and the US Supreme Court have already ruled in Stewart v. Sullivan that physicians and Medicare eligible patients may not contract outside the Medicare system for Medicare covered services.''

Three attorneys consulted by AAPS assured the Board of Directors that the July 31 was not a ``boycott'' as defined by Webster or anybody else. It was rather an assertion of First Amendment rights.

``Antitrust is the red flag waved by organized medicine every time physicians voice the thought of defending their rights, no matter how implausible the connection with activities forbidden by the Sherman Act,'' stated AAPS Executive Director Jane M. Orient, M.D.

FMA officials have not responded to AAPS counsel, who pointed out that Stewart v. Sullivan was heard only in the US District Court in New Jersey. Furthermore, the Judge could find no law, no regulation, and no clearly articulated policy against private contracting. (Copies of the published opinion are available on request.) However, in a letter to a Florida physician, FMA Counsel John Thrasher wrote: ``I believe it goes without saying that the FMA has supported the activities of AAPS in the past and will continue to do so in the future to the extent possible.'' Thrasher also noted that the FMA supports changes in Medicare policy to allow for private contracting and takes the position that ``capricious, inefficient, and oppressive Medicare regulatory control has produced an increasing impediment to achieving quality medical care.''

Patients enthusiastically signed the Medicare Patient Freedom Resolution, either in their doctor's office or in response to AAPS ads in the New York Times and USA Today. Congressmen also received the Resolution, which has bipartisan support. Patsy Mink (D-HI) was the first Repre- sentative to sign. (For a copy by FAX on demand, call 703-716- 3404.) Signed Resolutions will be hand-carried to Congress by AAPS Washington, DC, staff.

Congress has also been informed by FAX of the reasons for the July 31 protest, including AAPS survey results showing that Medicare patients' access to care is threatened. More than half of 350 respondents restrict services to Medicare patients in some way, 73% citing hassles or threats from Medicare as one reason. The vast majority of respondents (80%) favor privatizing Medicare.

AAPS members are encouraged to visit with their congressional delegation during the August recess to explain private alternatives, such as vouchers for catastrophic insurance plus Medical Savings Accounts and incentives for opting out of the system altogether. Many congressmen are not even aware of HCFA's constraints on private contracting or of physicians' interest in it. According to the survey, 20% of respondents engage in private contracting and 60% would like to offer care outside the Medicare system but have not done so due to fear of government reprisals.

Medicare patients should have freedom every day.

Editor Causes ``Discomfort''; Pressured to Resign

Miguel Faria, M.D., author of Vandals at the Gate of Medicine, who brought the Journal of the Medical Association of Georgia to national prominence during his three years of editorship, was pressured into resigning, despite accolades from MAG members and delegates. The alternative was to accept censorship by the Executive Committee.

``You make too many doctors uncomfortable,'' he was told. Responsibility for that determination was taken by a committee, using the time-honored method described in a recent AAPS pamphlet, On That Day Began Lies.

The precipitating event appeared to be an editorial in the Atlanta Journal and Constitution, which blasted MAG for publishing articles supportive of Second Amendment rights. The Journal of the MAG has been highly critical of organized medicine for using misstatements of facts and flawed statistical reasoning to promote gun control.

On an even more sensitive issue, the Journal of the MAG has printed articles that may have angered physicians who have a vested interest in managed care.

Dr. Faria's fate illustrates the meaning of the term ``diversity'' in common parlance and supports the late Petr Beckmann's theory of First Amendment rights: ``You have the right to say whatever you want, as long as not very many people are listening.''

Observant readers may notice that Glen Griffin, M.D., is no longer the Editor-in-Chief of Postgraduate Medicine. The July issue carried a flowery testament to Dr. Griffin entitled ``The Mission Continues.'' The reader can judge for himself which mission-and can also speculate as to what happened to Dr. Griffin. One possibility is that he retired to the countryside to take up a new vocation, say farming or sheep- herding.

Some suspect that the mission of certain professional organizations, in collaboration with the federal government, is to transform outspoken physicians into non-ram lambs.

The AAPS Board of Directors will consider beginning a quarterly journal, if funding can be found.

An Interchange on Fee Splitting

To: Executive Director, Board of Medical Examiners

I find myself confused about the ethics of fee splitting. When I obtained my license to practice medicine in Oregon in 1977, I was required to take an oath swearing that I would not engage in fee splitting. However, in recent years it has become impossible to practice medicine without engaging in this discredited practice....(see AAPS News, Jan, 1995, p. 4).

Sometimes, the practice is partially hidden by demanding that a doctor discount his fee in exchange for a stream of referrals, but there is at least one major insurance company in Oregon which sends out bills at the end of the month demanding a certain percentage kickback based on the number of patients who have been referred....

May I split my fees with other doctors or anyone else I choose? May I hire other people besides insurers to refer patients to me? Or is it only politically powerful and financially bloated insurance companies that are exempt and which exempt me from the fee-splitting strictures?....
George F. Wittkopp, M.D., Beaverton, OR

There are no current laws or regulations of the Board of Medical Examiners governing ``fee-splitting.'' Nor has there been any recent complaint to the Board in which formal action has been taken....ORS 677.190 (2) states that: ``(2) Employing any person to solicit patients for the licensee'' is subject to disciplinary action. That provision could encompass certain fee- splitting scenarios. In addition, ORS 677.190 (1), ``unpro- fessional conduct'' is a general catch-all provision in which the Board, on a case-by-case basis decides what specific conduct may or may not constitute a violation....

I cannot say categorically that fee-splitting would be subject to disciplinary actions or not. I can only advise you at this time that if you are concerned about any specific fee- splitting arrangement, you may wish to confer with private counsel as to whether such arrangement may run afoul of the aforementioned statutes.
Kathleen Haley, J.D.

I very much appreciate your response. You say that I should consult independent counsel. But how is private counsel going to answer this question if you can't? The Board is the one that would impose disciplinary action. In effect, you seem to be saying to me, ``Whatever scheme you have in mind, go ahead and try it. If we don't like it, you'll hear from us.''

I understand that you are in a very difficult position. When the entire nation is engaging in unethical behavior, it would be difficult for you to take a stand against it.
George F. Wittkopp, M.D.

It was humorous to read the deliberately ambiguous letter from Kathleen Haley, ``J.D.'' Unfortunately, lawyers are trained to avoid making clear statements of the law, and often only know how to raise legal issues. Dr. Wittkopp does seem to be on track with his analysis and criticisms.
Andrew Schlafly, Esq.

How Much Does Medicare Cost?

Proponents of socialized medicine often point to alleged administrative savings resulting from a ``single payer'' system. Medicaid and Medicare are stated to have administrative costs of 5% and 2%, respectively, compared with 12% to 20% for private insurance.

The figures for government programs are understated by a factor of at least five, according to a study by the Council for Affordable Health Insurance (``Rhetoric vs Reality: Comparing Public and Private Health Care Administrative Costs,'' CAHI, 112 South West St., 4th Floor, Alexandria, VA 22314, (703)836-6200). In actuality, the government spends about 27 cents for every dollar of benefits, 66% more than private insurers, who spend about 16 cents. Government costs are mostly hidden in complex bureaucratic reporting systems. The cost of programs and activities benefiting Medicare and Medicaid are classified in a number of other budget categories, including Education and Training, Labor, and the National Institutes of Health. The legislative, executive, and judicial branches all devote time and money to the programs. Additionally, government incurs enormous costs in debt service (16 cents per dollar of benefits). Costs borne by beneficiaries and providers do not count.

Additionally, increases in the payroll tax between 1979 and 1990 cost at least 1.4 million jobs (Cato Policy Analysis #230, 1000 Massachusetts Ave NW, Washington DC 20001, (202)842-0200, $2)

When the flak gets heavy, you know you are over the target.

Correspondence from the LLCS

HMOs and Private Contracting

It is well recognized that if a non-Medicare patient is in a non-Medicare HMO, but wants to see a doctor outside of the HMO, the patient must pay for this treatment on his own. My question is this: What happens if a Medicare HMO patient comes to see me, and I am not in the HMO? The law says that physicians are required to submit claims for Medicare patients. However, if I am not in the Medicare HMO, there is nothing I can do to obtain payment from Medicare because the HMO patient is limited to seeing the HMO doctors.

Is a non-Medicare HMO physician allowed to contract privately with a Medicare HMO patient, and if so, can we contract at any price? Or is the non-Medicare HMO physician required to work free of charge for the Medicare HMO patient? Or are Medicare HMO patients permitted to go out of network to see any physician, who is then required to treat the HMO patient the same as any other Medicare patient? If so, what is the point of the HMO?

If I am permitted to contract privately with Medicare HMO patients, who pay nothing beyond the standard Part B premium, then perhaps we should encourage all Medicare patients to sign up with a Medicare HMO, and then come to non-HMO doctors for private contracting. However, something tells me this would not be allowed.
Bruce Schlafly, M.D., St. Louis, MO

The answers to the questions raised in Dr. Schlafly's letter vary, depending on the services and benefits provided by the Medicare HMO to the Medicare patient and on the type of Medicare HMO (``cost'' or ``risk'' HMO). To further convolute matters, some Medicare patients enrolled in ``risk'' HMOs are ``cost'' enrollees....

With either type of HMO, Medicare patients may opt and pay for supplemental benefits and, in the case of a ``risk'' HMO, may be required to accept and pay for additional services. The specifics of a particular patient's coverage and exclusions from coverage are in the HMOs written ``rules'' and explanation of benefits, which must be provided to the patient.

HMO Reimbursement: Even absent prior approval by the HMO, both types of HMO must reimburse for non-HMO ``emergency services'' and ``urgently needed services'' (provided to prevent deterioration of a patient's health from an unforeseen illness or injury when the patient is outside the HMO's geographic area). In these situations, the amount paid by the HMO for the non-HMO physician's services will be the same amount that would be payable by Medicare if the patient were not enrolled in a Medicare HMO, and all Medicare requirements and limitations would apply.

Aside from those situations, the general rule is that neither type of HMO is required to reimburse or pay for Medicare- covered services obtained from a non-HMO physician, except where it is determined, on appeal by the patient, that the patient was entitled to have the HMO furnish those services.

Medicare Reimbursement: For ``cost'' HMO patients, the statutory provisions and regulations imply that Medicare will reimburse or pay for covered services obtained from non-HMO physicians who have a participation contract with Medicare, although the HMO itself is not required to do so. All Medicare requirements and limitations would apply.

For services received by ``cost'' HMO patients from non-HMO physicians who do not have a participation contract with Medicare, the lack of clear or specific statutory or regulatory provisions impels the ``err-on-the-side-of-caution'' conclusion that claims can be submitted to and will be paid by Medicare, just as if the patient were not enrolled in the Medicare HMO. All Medicare rules would apply.

If, however, Medicare is not required to and will not pay for the non-HMO physician's services to a ``cost'' patient, a strong argument can be made that these services are specifically excluded from Medicare coverage and, therefore, from Medicare requirements and limitations.

In either case, the physician should inform the patient in writing, before performing the services, of the estimated charges and of the fact that the HMO will not and Medicare may not pay and obtain the patient's written agreement to pay in the event that Medicare will not.

For ``risk'' HMO patients, neither the HMO nor Medicare is required to, or will, pay for covered services obtained from a non-HMO physician. The HCFA regulations specifically state that such patients ``are liable for'' such services. Whether the non-HMO physician's charges are nevertheless subject to the limiting charge provisions of the Act is not clear. However, logic would dictate that these services are specifically excluded from Medicare coverage and hence from Medicare requirements and limitations. As a safeguard, however, the physician, before providing the services, should inform the patient in writing of the estimated charges and the fact that neither the HMO nor Medicare will pay, and obtain the patient's written agreement to pay those charges.

These comments reflect this attorney's interpretation of certain provisions of the Social Security Act and of the HCFA's regulations relating to HMOs. Be aware, therefore, that HCFA may not agree with this interpretation.
Catherine Miraglia Lecky, Esq.

This reply shows how confusing the whole situation is.

One can speculate about the overall direction: The government will eventually move all Medicare patients into HMOs so that the HMOs can do the rationing. The government won't ever have to address directly the question of private contracting, but it will be legalized de facto. The HMOs will make money. The wealthy will be able to use the Medicare HMO services when they are satisfactory and see a private doctor when they want, as long as they pay cash. Everyone will be content except for the elderly who can't afford to pay out of pocket. They can write their Congressmen, who will promise to get tough on the HMO but remind the complainer that the HMO is not the government.

The average person will not be able to figure out who is to be blamed for the problems. You have to give credit to the people who devised this method of socialized medicine.
Bruce Schlafly, M.D.

Nothing Wrong Here...

After seven months of investigation, U.S. attorney Eric Holder, Jr., wrote a letter on Aug. 3 to Judge Royce Lamberth concluding that ``we have found no credible evidence that Mr. Magaziner committed a federal offense'' [in filing an affidavit in the case of AAPS v. Clinton asserting that all Health Care Task Force working group members were federal employees]. We just received a copy as we go to press; analysis to follow.

Members' Page

Dog Days of Medicare. Dear Rep. Houghton: On this 30th anniversary of Medicare, a $3 billion-a-year program that swelled to a $195 billion-a-year boondoggle run by bungling, overpaid bureaucrats, I thought it would be appropriate to share this true experience.

Yesterday, I took one of our beloved family members to the doctor for apparent pain in a digit of her right upper extremity. We chose to drive 140 miles round trip to see her regular doctor....Although the fee was higher than the government- mandated fee for serving Medicare patients with this type of visit, we were only too happy to pay it....

A HCFA bureaucrat would be immediately concerned. First, although the government won't actually put it in writing, preferring to use threats and intimidation instead, privately contracting for medical care outside the government's system is verboten. Also, the doctor and I willfully violated the ``Balance Billing Limits,'' a transgression punishable by a $2,000 fine. Further, the doctor did not document all the things she was supposed to in order to be paid, nor did she file a claim. What's more, since there was actually nothing wrong with the patient (she stopped complaining as soon as she saw the doctor), the doctor provided a medically unnecessary service.

Now that there is a Hotline for reporting such disloyal behavior (and substantial cash rewards to be had), feel free to tell this story to the HCFA stormtrooper. But before he salivates himself into dehydration, you should know that our family member is a basenji named Porsha. Such dogs frequently imitate human behavior.

I am not complaining about the fact that I paid Porsha's doctor more than I am paid for providing comparable services to Medicare patients. But people should know that their government places a lower value on services provided to people than people place on services provided to their dogs.
Lawrence R. Huntoon, M.D., Jamestown, NY


Mismanaged Care. I sometimes see managed-care patients privately, when their plan will not refer them to its own dermatologist. One memorable patient came to my office with oozing, yellow-gold crusts on her face. Her diagnosis was acne, and the treatment was topical steroids (which make acne worse). She had been seen several times while continually worsening-and continually serving as a source of an epidemic infection that can cause kidney failure. The correct diagnosis was impetigo.
Joseph Scherzer, M.D., Scottsdale, AZ


Is Insurance the Solution, or the Problem? Medical insurance was just beginning (the ``Blue Plans'') when I started my practice. I will never forget hearing my older colleagues predict that this was the beginning of the end of good medicine in this country. I remember how my jaw dropped in disbelief. I thought my seniors had fallen out of their trees and onto their heads. Now, looking back over 40 years, I have to say that my elders were right....The only answer to today's crisis is to return to individual responsibility for medical care.
John B. Sawyer, M.D., Sierra Vista, AZ


Are We Criminals? From a letter to Ms. Rose Albert, Supervisor, Fraud Investigation Unit, Nationwide Mutual Insurance Co., PO Box 16781, Columbus, OH 43216: More than a month and a half has passed since my last letter to you, yet I have not received a reply. In the meantime, I have continued to contract privately with Medicare Part B covered patients.

It is a basic tenet of the rule of law that a citizen should be able to know whether a particular contemplated act is lawful or unlawful. I have gone to great lengths to determine that my acts are lawful. You have very casually accused me of violating a law and subjecting myself to a $2,000 fine for every office visit for which I fail to submit a Medicare claim.

I now repeat my demand that I receive a copy of whatever law, rule, or regulation you are citing to allege that my private contracts are unlawful. Alternately, I demand to receive a retraction of your assertion that what I am doing is unlawful. If you are unable to comply, then I demand that you give me the name and address of your superior or somebody else who has the knowledge and authority to resolve this matter. Finally, I demand to know the name and address of whatever entity to whom my case could be referred for imposition of sanctions and fines, whether or not you anticipate referring my case. I take your accusation that I committed a federal crime very seriously.

If I do not soon get a response to this demand, I will be contacting the US Attorney for Northern West Virginia to see where I can turn for resolution of this matter. Enclosed is a copy of the June 1995 AAPS News. Five thousand members of AAPS join me in awaiting your reply.
Richard S. Kerr, M.D., Morgantown, WV


The Mission of Organized Medicine. I believe we can still fight if there are still enough good men among us to do so....We refuse to admit that our members join HMOs because they see no one fighting. The 50% who have joined would like nothing more than to see a grass-roots fire begin and our leadership fight. How can we say that the battle is lost when we haven't even fired the first shot?
Richard L. Glatzer, M.D., Miami, Fl
Past President, Dade County Medical Society