Volume 52, No. 9 September
Republicans boast of enacting in a few months what the Democrats (including Hillary Rodham Clinton) were unable to do in 30 years-back when the Republicans were against socialized medicine. The final action was achieved with such lightning speed that the Members of Congress did not even have a copy of the conference report before they voted.
The only two persons in the entire Congress voting against the bill were Democrats: Reps. Pete Stark of California and Pat Williams of Montana. Rep. Sam Gibbons (D-FL) raised the most interesting question: is it constitutional to dole out tax deductions to similarly situated Americans as if by lottery? But Sen. Kennedy can still take credit for ``protecting'' Americans for guarding the morals of physicians and insurers. In a July 25 press release, he stated: ``There will be a fair test of the controversial idea of medical savings accounts, with a cap of 750,000 active policies, in order to ensure that it's a true test, not a full-blown program. There will also be significant consumer protections in the MSA policies to prevent gouging of purchasers by the insurance industry.''
The AMA sent out a triumphant FAX on Aug. 2: ``The AMA is proud to support this historic piece of legislation and extends to all who joined our efforts to have it enacted a heart-felt `thank you'.'' After receiving nearly 8,000 calls to its legislative hotline in the wake of a May 30 Wall Street Journal op-ed piece entitled ``Health Bill Would Shackle Doctors-Literally'' by AAPS Executive Director Jane Orient, M.D., the AMA activated its grassroots network to push for changes in the draconian fraud-and-abuse provisions.
The outcome: the insertion of the words ``knowingly and willfully'' to characterize acts for which physicians can be criminally prosecuted, and the words ``knowingly'' or ``with reckless disregard for'' or ``deliberate disregard'' for truth as a requirement for imposing civil monetary penalties. Thereby, according to the AMA, ``the bill strikes a delicate balance of affording government agencies the tools they need to catch fraudulent health care providers, while ensuring that providers who make innocent...billing errors will not be punished.''
The other concerns raised by AAPS in its FAX alerts and newsletters (see AAPS News, June 1996) were addressed only in ``Good Intentions'' comments in the Conference Report. As evidence of legislative intent, these might be useful to physicians having to defend themselves against abusive prosecutions. (Copies of the report are available from BNA Plus, 1231 25th St. NW, Washington, DC 20037, (800)452-7773, for $27 if you can't get one from your Congressman. An IBM- compatible text file of the law as passed can be obtained from AAPS for $10 or downloaded here or at The Library of Congress, Thomas Service.)
AAPS fought the bill uncompromisingly until the very end, with FAXes to media and members of Congress, calls to Congress, and radio talk shows. The points we raised in our Action Alerts will be the basis for changes to demand in the next Congress, and AAPS legal counsel will evaluate possible constitutional issues to raise in litigation.
Public concern is building, although too late to stop this bill, especially over the privacy issues raised by ``administrative simplification.'' In an Aug. 8 article entitled ``Eyes on Your Files,'' the Washington Post tells of ``additional, troubling cargo'': provisions to ``require the creation of a national network for sharing and storing patients' medical information in standardized form.''
A year after enactment, the Secretary of HHS is supposed to make recommendations on standards respecting the privacy of individually identifiable health information, and if Congress doesn't enact standards within 36 months, HHS will promul gate them within 42 months (264). As the Post points out, a lot can happen in a few months, given the ``lightning speed with which data...may move through just one unauthorized loophole and wind up in literally millions of electronic mailboxes.'' As in Maryland (see AAPS News, March 1996),it's data requirements first, safeguards later. Unlike in Maryland, practitioners are not yet mandated to submit data on every encounter, but this could follow swiftly.
To pass this momentous legislation, we suspect that many deals were cut behind the scenes. Proponents of MSAs were desperate to get a nose under the tent, in the hope that a later Congress can expand eligibility. Single-payer advocates were willing to take a small risk with crippled MSAs; the ultimate outcome will probably advance their agenda. Electoral politics played a major role. As for the AMA, just coincidentally it ``wants to take over accreditation of doctors,'' possibly to boost its sagging membership (now about 44% of the nation's physicians), according to USA Today, June 26.
Are MSAs a cause for jubilee, or at least a silver lining? According to the Council for Affordable Health Insurance (CAHI), the limitations on contributions alone could be a ``catalyst for failure'' (see p. 2). The best-case scenario is that millions of people will rush to establish an MSA before April 30, breaking the cap and building pressure to revisit the restrictions, possibly as a ``technical correction.''
The losers from this legislation include those who become uninsured because of premium increases or vanishing policies. Estimated numbers range from 840,000 to 8.4 million more uninsured. Each 1% increase in premiums leads about 280,000 people to drop coverage. The American Academy of Actuaries estimates a 3 to 5% increase in premiums, and HIAA estimates a 10 to 30% increase (Investors Business Daily 8/5/96).
But all Americans will lose liberty and privacy.
Enclosed with this newsletter is a Phyllis Schlafly Report called ``We Need Medical Savings Accounts Now.'' This is a useful summary of MSAs, what's wrong with HMOs, the portability issue, and the Health Care Crimes section of the Kassebaum-Kennedy bill. This report would be a good hand- out to give your patients and friends. Additional copies can be purchased at $10 per 100. You may also wish to subscribe to the Phyllis Schlafly Report, now starting its 30th year of monthly publication; eight issues criticized the Clinton Health Care bill. The price is $20 per year from Eagle Trust Fund, P.O. Box 618, Alton, IL 62002.
A family could realize substantially greater savings, especially if the employer makes the MSA contribution. (Contributions made by individuals are deductible; those by employers are excluded from income and thus also free of FICA and Medicare taxes.) Taking the maximum deductible, and attributing the entire payroll tax to the employee, a family could save ($4000)(0.75)(0.28+0.15) or $1290 on its tax bill.
The actual savings or cost depend on a variety of other factors, including the premium for the beneficiary's current insurance policy and the out-of-pocket exposure.
Some might be better off with a non-tax-favored MSA. For example, an individual might opt for a policy with a $10,000 deductible, saving perhaps $3,000 on premiums. The government would take some $1,200 of the savings in taxes, leaving only $2,800, so that it would take 3.6 good years to stash away enough to cover the deductible. The savings would also be available to use for non-medical emergencies, without paying the extra 15% penalty imposed on non-approved withdrawals from a tax-favored MSA. One would also gain in privacy and freedom from compliance costs.
An alternative to consider: abolish all $84 billion worth of federal tax preferences for medical or insurance expenditures and cut the tax rates of all Americans by a corresponding amount. Instead of weighing ``options'' of giving to the insurance company versus giving to the IRS, Americans could decide how best to allocate their own resources to meet their own needs.
The federal tax code is the primary force in distorting the medical marketplace.
Republicans were ``tripping over themselves to claim credit for a Democratic health care bill...[Democrats] practically had to halt all legislative business to make these bills happen.'' --House Minority Leader Richard Gephardt (D-MO)
The initiative is opposed by the Oregon Medical Association, but supported by many physicians, including Dr. Gordon Miller, a Salem ophthalmologist. For information, call Thomas Mann, MBM Strategies, (503)370-2318. [Greg Scandlen's Patient Power Report, 7/23/96, PO Box 2095, Alexandria, VA 22301.]
Doctors have been required to return to the government one-third of their gross income over C$251,000 (US $183,700), two-thirds of their gross income over C$276,000, and three- fourths of their gross income over C$301,000. Net income after expenses but before taxes is 40 to 50% less than their gross.
As a result of the bill, Ontario physicians have become civil servants, but without unemployment insurance or pensions, writes AAPS member Jerome Arnett, M.D., in the Wall Street Journal 7/12/96. The minister of health can unilaterally close hospitals, set physicians' fees, tell them where they may work and what services they may provide, and remove at will their right to practice in the province. Government inspectors can seize medical records without reason, warrant, or patient consent. They can review doctors' billing patterns and rescind payment after the fact for services deemed ``unnecessary.'' Rationing of care to the elderly is widespread, and previously covered services are often ``delist- ed.'' Epidural anesthesia for childbirth, for example, is now available only in larger cities.
In July, Ontario announced an intention to capitate all 11 million residents and sign them up with a primary care doctor.
In essence, the government has taken over the practice of medicine. ``They have canceled all previous agreements and kept only what they felt was in their favor,'' said Lorne Finkelstein, a cardiologist (Physician's Management July 1996).
In 1994, even before the Act passed, 350 physicians left Ontario. In 1995, 30 of the 95 graduates in family medicine from the University of Toronto moved to the U.S. In 1996, 80 of the 95 said they would move to the U.S. if the act passed.
When he asked a Canadian colleague, several years ago, how physicians were coping with government cutbacks, Dr. Huntoon was told that increasing numbers of Canadian physicians were ``selling AmWay'' (soaps, lotions, etc.).
Dr. Steinberg sent us a copy of the appropriate page, which led to other questions on our part. There are only two types of ``diathesis'': allergic and spasmophilic, a.k.a. tetany, but no bleeding diathesis. There are only three kinds of ``difficulty'' (feeding, swallowing, and walking); two types of ``discomfort'' (chest and visual); and one type of ``discolor ation'' (nails). It's enough to give one diaphragmalgia (786.52).
Then there's a question submitted by Robert J. Casanas, M.D., of Mariposa, CA. Medicare denied payment for an office visit (E & M) because, after 45 minutes of his time, he determined that a patient had a bona fide medical problem that required additional services. Dr. Casanas requested a written answer on March 5, 1995, so that he could determine whether or not a basic evaluation of a new patient was or was not covered separately under Medicare. We still don't know.
Some commentary in the press: ``The tenor of discussions in the plans' boardrooms has changed...Market share is still an issue...but so are questions of how far the plans should intrude into people's private lives'' (Pioneer Press 5/19/96).
``Dr. Therese Zink, who worked with the task force, said she might ask children at routine checkups if there are unlocked guns at home, or ask parents if they spank their children'' (Star Tribune 1/11/96). ``The whole question of whether society will accept more `intrusion' from health care is something that has to be explored (Mark Christenson, executive director, Allina Foundation, Star Tribune 1/11/96). [For more information, write Citizens for Choice in Health Care, P.O. Box 40065, St. Paul, MN 55104, tel. (612)646-8935.]
The HMOs have also brought a curious trend of returning to treatments used in the distant past. I suspect that Gatekeep ers are consulting old textbooks that were current when they were in medical school to determine treatment for Parkinson's disease. It's amazing the good results one can obtain simply by discontinuing side-effect prone medication that doesn't do any good. Some of the patients being treated for Parkinson's disease don't even have it; apparently, some Gatekeepers think anything that shakes must be Parkinson's.
The HMOs are also creating a lucrative market for cheap
imitation drugs illegally smuggled into the country, such as
counterfeit Eldepryl. As a result, the makers of Eldepryl have
changed the way they package the drug to avoid confusion.
The legitimate form now comes in a capsule, which is terrible
for patients because the drug must be started at low dose and
gradually increased, and patients can no longer split the pill in
half. With the spread of the HMO malignancy, we must
contend with an ever-expanding ripple effect.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY
Comments on Kassebaum-Kennedy. AAPS is right on with
the anti-Kennedy bill messages. It would be most interesting to
follow the money trail from the managed-care industry.
Bert Loftman, M.D., Atlanta, G/A
The next step is to figure out which state to evacuate to
redesign as a camp to house all those new-found felons.
Harv Randecker, Health Care Rescue Network, Wheaton, IL
A former Medicare fraud investigator wrote that since
Medicare rules are so complex he could find a violation by any
physician in the U.S. if he looked closely enough.
Paul B. Jones, M.D., Grand Junction, CO
The intention of the fraud-and-abuse provisions is totally
irrelevant; all that counts is the final text that is signed into
law. Kassebaum says she wants to give law enforcers ``more
precise tools'' to prosecute fraud, an endeavor in which they
have more than 2,000 years of experience. New laws need to be
scrutinized as to whether they constitute improvements, or
include a secondary agenda. The tools are not precise at all, but
could be used to prosecute physicians falsely and arbitrarily.
Dr. Heinrich K. Brucker, Edina, MN
I would say we are in Phase 3 of the Final Solution to the
Doctor Problem: confiscation of wealth and property. (Phase
1: affix blame on doctors for national problems and control
public opinion. Phase 2: gain control, and divide and conquer.
If I were to guess, Phase 4 would be to terrorize and subdue....
Gary K. Keats, M.D., Clearwater, FL 34630
It appears that we who practice technical professions
(engineering, chemistry, etc.) are about to lose our exclusive
status as the only professionals who can be jailed for errors and
omissions-we may now be eligible for sharing a cell with our
physician. Unlike engineering schools, I presume that medical
schools will start requiring students to give informed consent.
Tom D. Denchfield, P.E., Wichita, KS
The vagueness of the supposed infractions and the lack of
scale to the offense when compared with many criminal and
even violent acts is totally unacceptable, particularly when the
insurance and federal bureaucracies are so contorted, confused,
and computer driven that no one can understand them.
L. Christian Mogelvang, M.D.
Bait and Switch. In our June, 1996, newsletter, we described how an indemnity insurer became a pseudo-indemnity insurer (PPO), then was bought by Intergroup of Utah, owned 60% by Foundation Health (a take-no-prisoners, for-profit HMO) and 40% by Columbia/HCA. Suddenly, all patients had to travel out of town for treatment or be stiffed by the insurer. This should be viewed as abandonment. There are not many alternatives, and they require a new round of applications, invasive personal questions, and underwriting.
Two days after we sent an alert, we were subpoenaed to appear in court for defamation and causing economic distress to this company. We were forced to write to our newsletter recipients to tell them of this ``misunderstanding,'' and the insurer placed a large ad in the local newspaper.
We were surprised that an insurance company paid so
much attention to our little rural community newsletter!
Jeanne R. Martin, Manager, Eastern Utah Health Plan
The House-Senate conferees finished up their work quickly on the bill, after Senator Kennedy held up their appointment for more than two months, a record. From the text of the Medical Savings Account (MSA) provisions, it appears Kennedy had the Republicans for lunch. The Clinton Administration signalled its willingness to go along with the gutted MSAs. The House of Representatives passed the bill by 421 to 2 on August 1, and the Senate by 98 to 0 on August 2.
For patients and physicians, the full impact of the bill will not be known for some time. At any given time, there are an estimated 41 million uninsured Americans, largely because of job-related conditions. Because of the favorable tax treatment of employer-provided medical insurance, this is the only realistic option for most middle-class families. Practically speaking, employers, not workers, own medical insurance policies. Kassebaum-Kennedy does nothing to change these dynamics; it simply substitutes regulatory changes for serious changes in the federal tax treatment of medical insurance. It does increase the deductibility for the self-employed from 30 to 80%-by the year 2006. Many experts, particularly conserva tive economists, think that the bill's extensive federal regulation of both the private individual and group insurance markets, particularly the guaranteed-issue provisions, will drive up costs and make medical insurance less available.
Under intense pressure from Senator Kennedy and the White House, Republicans jettisoned medical liability reform, dumped the best features of small group market reform (which would have allowed multiple employer welfare associations to contract with businesses to escape stupid and costly state mandates), and crippled the MSA provisions.
Federal Regulatory Changes
Today, the individual medical insurance market is regulated almost entirely by the states. Indeed, many of the reforms mandated by Kassebaum-Kennedy are already law in many states. In the group market, Kassebaum-Kennedy establishes new standards ``guaranteeing portability'' of medical insurance plans and limiting exclusions based on pre-existing conditions or genetic information. The conferees did not, however, specify or impose any particular set of benefits that a plan must offer as the Clinton plan did. States may require insurers to issue, sell, or renew coverage to meet the requirements of the bill; if a state fails to meet the requirements, the Secretary of HHS may step in and enforce the provisions. An insurer or employer who fails to comply with federal provisions may be subjected to civil monetary penalties. Insurers in the small group market must accept every small employer (defined as groups of between 2 and 50 employees) and cannot bar any individual working for the company from coverage on the basis of health status. For the individual market, similar new federal rules also apply.
There being some uncertainty about how all this new federal regulation will turn out, the law orders the Secretary of HHS, ``in consultation with the Secretary of Labor, represen- tatives of state officials, consumers, and other representatives of individuals and entities that have expertise in health insurance and employee benefits'' to conduct studies. Think about it: Secretary Shalala of HHS and Secretary Reich of Labor, with the usual gaggle of state bureaucrats, health care ``experts'' (certified by the Robert Wood Johnson Foundation), and consumers groups (translation: professional liberal interest groups) will figure out how all this is working (not very well) and whether we need even more intrusive and detailed government regulation (of course, what else?) to make the federal regulatory system work ``better,'' aggravating the already existing distortions in the market. (Well, now that you tried to make the ``free market'' work with a ``Republican bill,'' you see where we ended up, you dummies!) The low road to Canada is being paved with the best of intentions and guaranteed by the chain of unintended consequences.
The first of these unbiased studies conducted by Secretaries Shalala and Reich and their unbiased friends would be on the ``effectiveness of state and federal reforms'' in making available ``reasonably priced'' health insurance policies on the individual and group market. The second study would examine choice and access, whether plans and ``network plans'' (a managed care/HMO-dominated market is obviously all that is envisioned in the narrow little philosophy of the Republicans who crafted this stuff) meet patient needs, including the needs for medical specialists. The unbiased study will also examine the problem of ``cost'' (bet that it is too high), ``cost effectiveness (bet that it isn't), and the impact of all of this on the ``quality'' of patient care.
Conservative and libertarian economists fear that the new rules on guaranteed issue and renewability, and the elimination or limitation of exclusions for pre-existing conditions, will drive up medical insurance premiums. The only way to forestall such a development is to change the federal tax code rather dramatically to open up the health insurance and health care markets. No such luck. While the conferees make it clear that they are not interested in imposing any price controls on premiums or premium caps (like the Clinton Plan), they are leaving any decision to do so in the hands of state authorities: ``Premiums that an insurer may charge an individual for individual health insurance coverage are not restricted by the conference agreement but must comply with state law.'' So the states will no longer have the exclusive right to regulate the medical insurance market, but they will be left the authority to adopt premium caps and price controls to compensate for the mess that any federal regulations make. Regulation begets regulation.
Fraud and Abuse
Under Title II of the conference report, House and Senate negotiators agreed to set up a federal fraud and abuse control program and a Health Care Fraud and Abuse Control Account within the Federal Hospital Insurance (HI) Trust Fund-the one that's going broke by 2001 according to the Medicare Trustees. They also set up the Medicare Integrity Program, with provisos to hire private dicks to root out fraud and abuse in Medicare and agreed in conference that those getting the contracts should meet conflict-of-interest rules. At the same time, the Secretary of HHS is authorized to issue written advisory opinions as to what does or does not constitute fraud and abuse, which, all things being equal, is a good idea. The conferees adopted language detailing fines and penalties for violations of provisions governing ``federal health programs,'' (including mandatory and permissible exclusions); exceptions to anti-kickback penalties; and new penalties for individuals (and presumably family accomplices) who plot to defraud Medicaid by ``knowingly and willfully transferring old folks' assets so they become eligible for Medicaid. (Yuppies, beware: you will get your inheritance the old-fashioned way by taking care of Mom and Dad.)
On Medicare fraud, the conferees agreed to raise the fines for reimbursement gaming from $2,000 to $10,000, with six paragraphs of explanations trying to spell out what they do and do not intend. In short, they do not intend to establish a new standard for a Medicare claim, or penalize doctors for their medical judgment, or discourage ``alternative'' medicine, or anything else ``unreasonable.'' The level of intent established for liability is that the doctor had to ``knowingly'' present a claim that he knows or should know falls into one of the ``prohibited categories.'' Penalties are to be assessed only on persons who have ``actual knowledge of the fraudulent nature of the claim, acted in deliberate ignorance, or acted in reckless disregard for the truth or falsity of the information.'' As for the new provisions governing private sector health care fraud, the standard of intent is ``knowing and willful.'' This is an mprovement over the original language; Congressional Republicans say they have ``fixed'' the excesses in the fraud- and-abuse penalties. Whether all of these statements of good intentions are enough remains to be seen.
The final bill contains a great deal of scary Clintonesque data collection requirements. Failure to comply with those requirements entails up to $25,000 per year in annual fines, with provisos that none of this is supposed to violate anybody's privacy (another Good Intentions clause) and that before they are fined for not complying with the ``adminis- trative simplification'' provisions, people should at least know that they are to comply. The quality of mercy is not strained.
Messing Up Medical Savings Accounts
Economists like MSAs because they promote direct payment for medical services and thus control costs. Patients who want to escape corporate managed-care arrangements also like them because they gain control over medical decisions. But after two months of grunting and laboring mightily, the Congressional Elephant gave birth to a niggardly gnat. Trustees and beneficiaries of MSAs must abide by dozens of requirements, including the following:
To be sure that no more than 750,000 Americans open an MSA, the IRS will keep careful tabs. If more than 375,000 MSA policies have been established by April 30, the IRS would, by September 1, publish ``guidance'' providing that ``only active MSA participants or employees of participating employers would be eligible for an MSA contribution for the 1998 tax year and thereafter.'' If there are no more than 375,000 policies reported by April 30, 1997, then the IRS must make another determination of the total number of plans by June 30, 1997. There are similar reporting rules and require ments too intricate to enumerate for years 1998, 1999, and 2000. The Department of the Treasury will have the task of evaluating the reduction in tax revenues attributable to MSAs.
The GAO is tasked with contracting out a study regarding the effects of MSAs in the small group market of employers ready and willing to cope with all of the rules and reporting requirements (just the job for the Robert Wood Johnson Foundation). The conferees intend that the study be broad in scope (how could it be?) and adequately funded.
So when do you open your MSA?
And what insurers and employers will be scrambling to offer these policies?