Volume 53, No. 9 September 1997


In the budget reconciliation package, Congress at last made it clear that Medicare is indeed a voluntary program, at least for physicians and patients if not for workers. Moreover, physicians do not need to exclude all Medicare-eligible patients from their practice in order to avoid dealing with the Health Care Financing Administration (HCFA). As the late Robert Jaggard, M.D., past AAPS President, frequently declared: ``Freedom is available.''

However, freedom has a price. Sometimes, that price is the ultimate sacrifice, as made by so many Americans throughout our history. The price of freedom from Medicare harassment, restrictions, threats, and penalties is not yet that high-and many more physicians may be willing to pay it now that the Kyl private-contracting amendment has passed.

The federal government has no constitutional authority to interfere with the practice of medicine. Medicare regulations, such as price controls and claims filing and coding requirements, are lawful, in our view, only because physicians accept them in order to collect Medicare payment. No one is legally obligated to accept payments from the federal Treasury.

The federal government has stated unambiguously its intention to enforce the regulations in every instance of medical service reimbursed by Medicare, even if payment is made to the patient, and whether or not the patient ever pays the doctor. In other words, the ``nonparticipating'' physician actually is considered to participate in some sense each time one of his patients applies for a Medicare benefit.

But what if the patient decides, for whatever reason, to forego Medicare payment for a particular episode of care? Does the patient not have the right to contract privately with the physician of his choice on mutually agreeable terms?

Since Judge Nicholas Politan handed down his opinion in 1992 in the case of Stewart v. Sullivan, stating that he could find no clearly articulated policy to prevent patients from doing just that, a number of physicians have entered such contracts, although HCFA bureaucrats and Medicare carriers assert that they are either ``illegal'' or ``not recognized'' by the government. Since 1994, the risk has been higher because Medicare Technical Amendments arguably extended Medicare regulations to any Medicare-eligible person (rather than just to services for which a claim was made under Part B).

Senator Jon Kyl (R-AZ), believing that this amendment did not truly reflect the intention of Congress, has been fighting for a legislative correction since 1995. His original short and simple bill would have guaranteed the right to contract on a case-by-case basis, and without price controls.

This concept has the support of a broad coalition, including Seniors Coalition, 60 Plus Association, Americans for Tax Reform, the Christian Coalition, Eagle Forum, the Family Research Council, and the National Right to Life Committee, who recognize that Medicare restrictions and price controls constitute de facto rationing, inevitably causing premature deaths. At its 1997 annual meeting, the AMA passed the following resolution: ``Resolved, That the AMA aggressively encourage HCFA to affirm the patient's and physician's constitutional right to privately contract for medical services.''

Socialism inevitably tends to demand ``universal coverage'' -to allow no one to escape from an increasingly oppressive bureaucratic regime. Given the current Congressional leadership and the adamant opposition of the Executive Branch, it proved impossible to attach Senator Kyl's original 26-line bill to the budget Act. Lest self-reliant seniors benefit personally from a lifetime of hard work and frugality, the price of freedom had to be raised. Even so, some Senators tried to kill the provision under the Byrd Rule (which is designed to prevent the addition of irrelevant or pork-barreling provisions to budget bills).

Ultimately, the provision passed with some problematic last- minute additions that were unknown to advocates until the enacted version appeared in the Congressional Record. (When influential politicians cannot stop a bill, they often win the battle by forcing changes, at the last minute and behind closed doors, that blunt or completely reverse its effect.)

Briefly, Section 4507 provides that physicians are not prohibited from entering private contracts with Medicare beneficiaries if:

  • No Medicare reimbursement of any kind (including capitation payments) is received for the service;
  • A written contract with a number of prescribed statements is signed by the beneficiary; and
  • The physician has filed an affidavit with the Secretary of HHS promising not to receive any reimbursement from Medicare for two years (a last-minute surprise).

    Balance billing restrictions specifically do not apply to services rendered under such contracts.

    Physicians may not ask patients to sign contracts when the patient is facing an urgent medical situation.

    The enforcement section provides that if a physician knowingly submits claims in violation of his promise, no claims shall be paid, and 4507 no longer applies to him.

    The law goes into effect on January 1, 1998.

    We are aware of no law that does specifically prohibit physicians, or Medicare beneficiaries, from entering private contracts on a service-by-service basis. The status of such activities remains unchanged: risky, especially if a patient or a potential heir decides to demand his entitlement after all.

    For physicians who already refuse to accept government money, this law is very good news. Others, who fear they cannot survive without Medicare payments, may start to count more carefully the costs and liabilities of Medicare slavery.


    A 55-year-old man, who has been on Medicare, Medicaid, and Social Security disability for many years, was recently seen in consultation by a neurologist, Lawrence Huntoon, M.D., Ph.D., of Jamestown, NY.

    Although the man had no neurologic problem, Dr. Huntoon was able to arrive at an accurate diagnosis. The problem is to determine the correct ICD-9 code. Dr. Huntoon has written to his personal bureaucrat, Mr. Preston Lowen:

    ``Knowing of your bureaucracy's demand for accurate coding, I want your advice on this case. I am confident that the fifth digit should be `1' to signify that this is a continuous problem. But after perusing the ICD-9-CM book at length, I have no clue about the other four digits.

    ``The accurate diagnosis is Government Dependency Illness. The government has determined that this gentleman is `disabled' because of chronic alcoholism and has sent him a check every month for years to pay for this addiction. These government checks have allowed him to purchase a pint of good quality whiskey every day or two.

    ``After a long counseling session, this gentleman has agreed to give up alcohol, but is reluctant to enter an alcohol rehab program because of his other more powerful addiction. He is afraid that if he goes to a rehab program, the government won't send him his monthly checks.

    ``Knowing that HCFA guidelines require physicians to code to the highest degree of specificity, I have determined that this gentleman's main problem is not dependency on alcohol (he is willing to give that up), but rather dependency on Big Government. I have determined that Big Government has made this patient sick, and has actually paid to make him sick.

    ``Since I do not wish to run afoul of any of HCFA's many guidelines, rules, regulations, secret screens, etc., I would appreciate it if you would get back to me at your earliest convenience with the code I should use for Government Dependency Illness.''


    The Budget Reconciliation Act, H.R. 2015, in its 264 single- spaced pages (1.12 megabytes) concerning Medicare, Medicaid, and Children's Health, has some unusual wording.

    In setting up a Prospective Payment (global budgeting, price controls, rationing) System, the act contains no fewer than six occurrences of the phrase ``There shall be no administrative or judicial review'' of bureaucratically determined case-mix groups, per-diem rates, area wage adjustments, payment units, classification systems, etc., applying to rehabilitation facilities, skilled nursing facilities, home health services, ``religious nonmedical health care institutional services,'' or ambulance services.

    We are aware of only one precedent for the denial of any type of appeal for government wage and price controls in any industry: the establishment of the Medicare Resource-Based Relative Value Scale. A challenge to this prohibition was threatened when HCFA summarily eliminated payment to physicians for hyperbaric oxygen treatments; HCFA immediately backed down (see AAPS News, April and May 1992).

    Congress does not generally use its constitutional authority to curb judicial dictatorship by limiting jurisdiction of the federal courts. (For example, one activist judge can force thousands of school children to spend hours riding on buses.)

    Now, Congress is also attempting to prevent any checks and balances on economic dictatorship by an executive agency.

    As Congress purports to ``save'' the Medicare program by increasingly stringent price controls, premature deaths and much preventable suffering will result.

    A gastroenterologist writes that proposed cuts in allowed fees for endoscopy would reduce to $30 his take-home pay for attending a bleeding patient for hours in the middle of the night. Few physicians would be willing to provide this service.

    The only explicit relief valve for patients contained in this Act is to consult a physician who has filed an affidavit with the Secretary of HHS promising to renounce all Medicare payments for his services for at least two years. Although AAPS was told by Congressional Republicans two years ago that Medical Savings Accounts would permit free-market billing, the Act contains no language to assure this even for the highly limited MSA experiment. Provisions on ``private fee-for service plans'' state that the law does not prohibit plans from paying ``some or all of the balance billing amounts permitted consistent with section 1852(K).'' In other words, the allowed payment may be higher, but price controls are still in effect.

    AAPS will consider the feasibility of a court challenge to various aspects of this Act.


    On August 13, Jacob Lapp may go to jail for contempt of court. The Lapps have been ordered to meet with IRS agent Douglas Stelmach. He refuses to meet with them in a public setting, and they refuse to meet with him privately.

    The IRS demands that the Lapps sign forms saying that they owe the government $27,470 for employee Social Security and Medicare taxes. The Lapps say they cannot possibly owe that much, as they never paid even a fraction of the wages assumed by the IRS. The Lapps refuse to complete government forms because they say it is impossible to do so accurately and honestly (see AAPS News, August 1997).

    New AAPS Web Site

    By the time this newsletter is delivered, the new AAPS website (http://www.aapsonline.org) should be ready. The Medicare-related portions of the budget reconciliation bill can be downloaded. Be sure to check out our interactive forums.


    Eventual escape from dependence on government and other third parties for payment of medical expenses requires personal savings. The biggest barrier to savings is the confiscatory tax rate. However, huge sums are now wasted in paying third parties to ``manage'' small medical expenses and ration care. AAPS members may be able to do better: if you have not yet called Maginnis-KVI for a price on medical insurance that is not cancelled at retirement, call (800)621-3008, ext. 284. For an information packet on Medical Savings Accounts, call SEPP at (412)929-5711.

    AAPS Calendar

    Sept. 17-20, 54th annual meeting, Chicago, IL.
    Oct. 8-10, 1998, 55th annual meeting, Raleigh, NC.

    Opting Out

    I don't know of any way of opting out of the Social Security system if by that you mean to stop paying.

    But I have determined that I will opt out in the following way: The government has stolen my money from me, paycheck by paycheck....I will not absolve them of their crime. I will not condone their actions by saying, ``Oh thank you for taking care of me in my old age''....I am not a slave. I am a free man, whatever my age or health. I choose to live that way, regardless of cost, and regardless of any hardship it may cause me. I cannot stop the federal government from stealing my money. They have the police, the courts, the laws, and a 2-million man military to enforce their power to do so. So be it. But what they do not have the power to do is to make me take it back. They do not rule any man or woman to that extent. They cannot make me apply for Social Security benefits, they cannot make me cash the checks, and they cannot make me spend the tainted money....

    I am planning for my retirement and my old age as if Social Security did not exist. (For me, it does not.) And if that should prove to be insufficient, then I trust in the goodness and mercy of My Lord to sustain me.

    --Carl D. Alexander [Grapevine Publications Network, July 1997, PO 45057, Boise, Idaho 83711.]

    Tape Recordings

    Prudent physicians may want to record telephone conversations with potentially hostile persons as a protection against later misrepresentations of what was said. (If a government agent is on the other end of the line, you should assume that he is recording the conversation.)

    Unless the caller and the called party are in the same state (in which case only the laws of that state apply), the interstate call implicates three bodies of law (federal law and the law of both states), each of which must be obeyed.

    The federal statute covering the interception and disclosure of wire communications is codified at 18 U.S.C. 2511(d). It is the blueprint for many of the state statutes. It requires one-party consent and states it is not unlawful ``for a person not acting under color of state law to intercept a wire, oral, or electronic communication where such person is a party to the communication or where one of the parties to the communication has given prior consent to such interception unless such communication is intercepted for the purpose of committing any criminal or tortious act in violation of the Constitution or laws of the United States or of any state.''

    Some states require two-party consent. These are: California, Connecticut, Delaware, Florida, Maryland, Massachusetts, Nevada, New Hampshire, Pennsylvania, Vermont, and Washington.

    [A summary of state laws (which could constitute $15,000 worth of legal research) is available at the AAPS web site, http:www//aapsonline.org. For a hard copy, send a self-addressed 9-by-12 envelope with $0.55 postage.]

    Prosecutorial Tactics

    After looking up the actual Medicare rules and definitions concerning the use of codes, the government realized that the only way to get the jury to believe I fraudulently used the wrong codes was to let disgruntled ex-employees testify to the wrong definitions. Then, in recent depositions, these same key government witnesses testified that they did not know how to use the codes. I now have about 200 pages of documentation of perjured testimony against me.

    If the government had a true and honest case against me, then why NOT produce the Medicare billing rules as they stood at the time that I used them? Why did they NOT call the Medicare billing expert that I relied on, after they subpoenaed his records? Why did the government NOT ALLOW my personal memos to my administrator, stating that I was relying on him to make sure that the entire office staff followed all Medicare rules, to be introduced as evidence?

    The defendant is supposed to be allowed the protection of the law when he follows the advice of others in good faith; but the government hid the true definitions and true good-faith advice of my consultants. The government told the jury constantly that I abused the BAT (brightness acuity test), using only the high setting, which, the prosecutor writes, ``simulates the brightness that a lifeguard would experience on a bright sunny day on a white sand beach.'' The BAT manual specifically states that the medium setting simulates an overcast day. I asked a camera store to check the light brightness outside with a light meter; it was much greater than the equivalent footcandles of light put out by the BAT on high, according to the BAT manual....Furthermore, all three witnesses testified that they checked patients on low, medium, and high settings, and none testified that they failed to give patients time to adjust to the light.

    I have enclosed the testimony from the government's own witnesses during my trial and the government's pleadings in the most recent civil case against me, in which they flatly ignore the testimony of their own witnesses.

    I hope this letter will help you understand my case better.

    Jeffrey Jay Rutgard, M.D., LaTuna FPC, NM

    What Is ``Assaultative Behavior''?

    Edgardo Perez-DeLeon, a former office manager, was returned to the Ingham County Jail for violating his probation, imposed after conviction for Medicaid fraud (see AAPS News Aug 1997). Mr. Perez claimed that the Attorney General wanted him jailed because of his frequent Freedom of Information Act requests and similar vexing behavior. The pretexts were failure to pay restitution (rebutted with cancelled checks); perjury about his financial situation (dismissed for lack of evidence); and finally, ``assaultative behavior.''

    After a court hearing, Mr. Perez returned a borrowed law book to Assistant Attorney General Quasarano, who accused him of having stolen the book. Later, the AAG complained that Mr. Perez's ``assaultative behavior'' in the hallway caused him to feel afraid of being struck. Mr. Perez argued that the charge was not credible. He was carrying a heavy briefcase and an exhibit panel and incapable of flailing his arms as alleged. The court officer who would have been the one to restrain him as alleged had no recollection of the incident, and no report had been filed. Nevertheless, Judge Carolyn Stell sent Mr. Perez back to jail, stating that no corroboration of the AAG's testimony was necessary.

    Mr. Perez had informed Mr. Quasarano of an intention to take him to the Attorney Grievance Commission for lack of candor in the courtroom.

    Mr. Perez admits that informing the AAG that he was ``making a big grave to bury his license to practice law'' could be construed as a threat, but this was not the behavior at issue.

    Members' Page

    Our National Symbol. When our forefathers chose the Bald Eagle to symbolize our great nation, they probably had no idea how appropriate that choice would become. As Benjamin Franklin pointed out at the time, the Bald Eagle is ``a bird of bad moral character; he does not get his living honestly; you may have seen him perch'd on some dead Tree, near the River where, too lazy to fish for himself, he watches the Labour of the Fishing-Hawk; and when that diligent Bird has at length taken a Fish, and is bearing it to his nest for the support of his Mate and young ones, the Bald Eagle pursues him, and takes it from him. With all this injustice he is never in good Case; but, like all men who live by Sharping and Robbing, he is generally poor, and often very lousy. Besides, he is a rank coward; the little Kingbird, not bigger than a Sparrow, attacks him boldly and drives him out of the District. He is therefore by no means a proper emblem for the brave and honest Cincinnati of America.'' How aptly Franklin's description of the Bald Eagle portrays our present federal government.
    Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


    A Voice from the Past. AAPS President John Dwyer, M.D., found this note on a prescription blank from Robert Jaggard, M.D., who died March 4, 1993:

    Friends: Government agencies and insurance companies do not bother me, because they do not pay me.

    I deal directly with the patient, and only with the patient.

    The patient gets service from me, and I get payment from the patient. I am not bothered by insurance company and government agency problems, because I do not deal with those people. I let the patient take all that guff and do all that hassle. I just practice medicine.

    Freedom is available.
    Robert S. Jaggard, M.D.


    The Good Old Days. The worst that the malpractice laws could do was to inflict paper (including paper money) penalties on you for bodily injury; now you can suffer bodily injury (imprisonment) for paper-work injuries. This makes million dollar malpractice judgments look like the Good Old Days!
    Robert Cihak, M.D., Aberdeen, IA


    Seniors Demand Freedom. From letters to Congress:

    I urge you to support the Senate Amendment by Senator Jon Kyl, which permits Medicare-eligible patients to contract privately for medical services without filing claims with HCFA.

    Many seniors have difficulty getting care simply because doctors have thrown in the towel and limit how much they want to bother, not with the older patients but with the hassles of Medicare. It's simply not worth it!

    The level of excellence achieved in American medicine is based on standards accomplished prior to the meddling, tinkering, dictatorial federal bureaucracy. What's next? Deciding on uniforms for the office staff, hours that the office should be open, the language spoken by the medical staff?

    Please stop this idiocy. If Medicare won't pay for my choice of care, fine! I want the choice; I will pay for the decision.
    Kathleen A. Millett, El Paso, TX


    I am adamantly opposed to the government deciding how and where I may spend my money. As a senior citizen and a voter, I have the same rights as all other Americans to choose my medical care and my doctor-without the interference of government bureaucrats.
    Wallace J. Cochran, El Paso, TX


    Dreamers Will Prevail. Almost 15 years ago, I decided to leave my country Mexico to come to the USA, bastion of liberty, free markets, and the rule of law..., which had showed the world the meaning of liberty and prosperity, until 50 years ago the USA started, with the New Deal and the Great Society, down the route that Mexico had taken to the extremes. Now Mexico is struggling to become a free-enterprise country. It will become a nation of laws, not privileges, with low taxes and high returns....The dreamers are taking over in Mexico....He who cherishes a beautiful vision, a lofty ideal in his heart, will one day realize it.
    Ricardo Valenzuela, Intermex Corp., Tucson, AZ


    What If Physicians Sent This Letter to Their Medicare Patients? Please picture this: You are working on your income tax. It is a complicated return. And you know that every mistake, even an honest mistake, can cost you up to $25,000 in fines and as much as a year in prison. Even if that mistake is only for $10.

    Does this sound frightening? Well, physicians all over the country are being subjected to this very scenario, with Medicare....The auditors have a favorite trick. They audit 50 charts and declare that they have found a mistake in 10%. Then they extrapolate that percentage to all Medicare patients seen in the past two years. The end result can total millions of dollars in fines....The agencies get much of their funding from the fines they collect. Rather like a traffic cop getting paid on the basis of the tickets he writes....

    What does this mean? With such huge penalties possible, many physicians will be afraid to take care of Medicare patients, resulting in a shortage of medical services....
    Paul B. Jones, M.D., Grand Junction, CO

    The Health Policy of the Budget Deal.

    The big deed is done. Ignore the giddy rounds of back slapping and the gaseous self congratulation from the politicians. The current Washington crowd is giving old-fashioned hyperbole a bad name. The President calls it the ``achievement of a generation.'' House Minority Whip David Bonior says that it was the product of ``tough choices.'' Congressman John Kasich, the ebullient and photogenic Ohio Republican who chairs the House Budget Committee calls it ``a dream come true.'' Sure, if one is sleeping through reality. The reality is mixed. Dreams. And nightmares. And hot air.

    The reality is that there is, thankfully, some sound tax policy in the Budget Bill. Not enough, but some. However, serious workfare requirements for the welfare system were gutted. And the Congressional health policy performance is a confusion of free- market rhetoric and Clinton-style regulation.

    The KidCare Program.

    The reality is that the Clinton Administration and its liberal allies on Capitol Hill are still driving the broad outlines of health-care policy, quickly recovering from the disastrous defeat inflicted on the Administration with the collapse of its gargantuan health care plan in 1994.

    The most significant evidence of the Administration's resurrection was the emergence of the temporarily shelved KidCare program. What started out as a $16 billion budget agreement ended up as a $24 billion program.

    States will run the KidCare insurance program. They will have three options: they could use Medicaid, state health insurance programs, or a direct services program. The states will be responsible for developing the benefits packages for children. But the Congress is limiting them to five benefit options: the Blue Cross/Blue Shield plan now used for the FEHBP (which, by the way, provides health benefits for a workforce that averages 43 years of age, along with retirees who make up 40% of the entire pool); state HMOs; state employee health plans; a state plan approved by the Secretary of HHS; or an ``actuarially equivalent'' plan of their choosing.

    E.J. Dionne, a crack political columnist for The Washington Post (August 1, 1997 edition) spells it out nicely: ``It is the largest expansion of health coverage since Medicaid and Medicare. The final deal-thanks to tough negotiating by Clinton and Senators Orrin Hatch (R-UT) and Ted Kennedy (D-MA)-requires states to use the new money to insure more kids, not toss it into the health pork barrel. If anything in this bill is historic, it's the KidCare program.''

    Thanks also goes to politically ineffective Congressional Republicans who could not offer a superior policy guaranteeing families with children control over their own money through a genuine system of consumer choice and competition.

    Conservatives got little bits and pieces of things they wanted, but overall, this year's budget deal was a victory for liberal Democratic health policy. In terms of the general regulatory trends, the Republican Congress thus continues the anti-free market pattern it set for itself in the Kennedy/ Kassebaum bill.

    Miserable Medicare Performance

    By the numbers, the Medicare program will see a net savings of $115 billion over the next five years, and $385 billion over the next ten years. According to Congressional estimates, this agreement will keep the Medicare hospitalization trust fund solvent for the next ten years. So, by the numbers, this is a stop-gap measure. Only serious and comprehensive structural reform could possibly rescue Medicare, and the Budget agreement stops far short of that.

    The taxpayers, including low-income working families, will continue to subsidize 75% of the Medicare Part B premiums for seniors, even for those seniors who are are millionaires. Medicare's standardized benefits package is expanded: annual mammography screening, diabetes self management, prostate and colorectal cancer screening-an addition of $4 billion worth of new preventive benefits. This is a new chapter in the principles of government: when entitlement programs are facing serious financial trouble, the Congressional response is to expand them.

    The Medicare payment methodology for managed-care programs has been changed. In many areas of the country, managed care has been more expensive than fee-for-service medicine. The reason: the stupid administrative pricing mechanism. What the conferees propose: a new method of administrative pricing. Under the new policy, managed-care plans will receive a ``blended'' payment of local and national costs with ``certain price adjustments.'' A minimum monthly payment floor of $367 will be indexed to the overall fee-for-service ``cost growth.'' Let's watch.

    Some Positive Notes Expanded Choice of Plans. Any expansion of personal freedom in the fraud-ridden Medicare program is in principle a good thing. Unfortunately, the final product is burdened with artificial limitations and regulations that curb both consumer choice and competition. The agreement creates a limited choice of five options--mostly managed care- which permit seniors to return to the traditional Medicare program if they wish.

    The choices are: ``Provider'' Sponsored Organizations (PSOs), which are basically managed-care companies run by doctors, hospitals and other medical ``providers''; ``Preferred Provider'' Organizations, which are basically HMOs with a broader choice of doctors and medical services outside of the thing called The Network; HMOs (Republican advocates hope that ``the agreement will spur additional growth in health plan membership''-say from the current 12% to 23% by 2002); private fee-for-service options; and Medical Savings Accounts.

    Under the Budget agreement, seniors will be allowed to pay their own money to purchase a private indemnity plan which offers benefits in addition to those offered by the standard Medicare plan. Of course, the private plans will have to comply with the new set of HCFA regulations. Plus, like the Clinton ``fee-for- service'' option, this option will be ``private'' in name only, because doctors in these plans will be still be subject to price controls in the form of government limits on balance billing.

    Medical Savings Accounts. The House bill originally proposed to allow 500,000 medical savings accounts. The Senate bill restricted the number of persons who could go into MSAs to 100,000. The compromise: 390,000. In other words, approximately 1% of the Medicare population will be able to take advantage of it. Under this option, HHS will make tax-free annual contributions into a Medicare MSA that is personally owned and may be used to pay for ``qualified medical expenses''-whatever that means. As is standard with MSA options, the tax-free account will be coupled with high-deductible catastrophic health insurance policy. The MSA option is being billed as a ``pilot project.'' Because HHS-a huge fountain of government regulation-will be making the deposits, it remains to be seen how much personal freedom patients will actually have to pay physicians from these accounts for the specific medical services they want or need. Needless to say, taxpayers have reason to be skeptical, especially after the poor performance of Congress last year in loading down the limited number of MSAs with bureaucratic conditions in the Kennedy/Kassebaum bill.

    A Full Page of Sour Notes

    Private Contracting. In House/Senate negotiations, the Clinton Administration and its allies in Congress won big time. Senator Jon Kyl offered-and the Senate backed-an amendment designed to stop HCFA's interference with the right of consenting adults over the age of 65 to enter into private contracts with their physicians without losing their Medicare Part B benefits or incurring arrogant threats from HCFA bureaucrats. The amendment would have enabled doctors and patients to contract privately and not submit their claims to HCFA. Nothing is more absurd or more restrictive of personal freedom than the government telling patients that they cannot spend their own money and interact freely with the physician of their choice, simply because they are over age 65.

    The House conferees gutted the Senate amendment and this is what emerged out of the House-Senate Conference: a doctor can privately contract under this provision if [and only if?] he agrees that no Medicare reimbursements will be made for his services for two years. This is apparently intended to destroy private contracting in the Medicare program.

    Imposing Government Standardized Health Benefits. Under the Clinton Plan of 1994 and the frequent variations of the Clinton Plan redrafted for application to Medicare, a key ingredient has been the government standardization of benefit packages for private insurance plans. The idea is to force all patients to have the same benefits, procedures, or treatments, regardless of their personal needs or wishes. Under the Republican ``reform'' provisions, all ``private'' plans must offer the current set of Medicare benefits, which is based on political, as well as medical, decisions over the past three decades. It is hard to imagine how a private market in any other sector of the economy would work if the government mandated that a set of goods and services established over 30 years must-as a matter of law-be offered with any new set of goods and services, regardless of consumer demand. Of course, the idea is absurd and a prescription for automatic cost increases.

    Killing Medicare Means Testing. In the House/Senate negotiations over Medicare policy, conservative Senate initiatives lost. The proposal to raise the Medicare premiums for wealthy couples making more than $75,000 per year was dropped, a second setback for means testing Part B benefits after the Senate retreated from the even more reasonable policy of raising the deductible for this same class of beneficiaries. The first Senate retreat did not appease the senior citizens lobbies that scare House Republicans-who seem to have a terminal case of jitters-with the same force that Halloween goblins terrify toddlers. The result: the Budget Agreement ratifies the social policy that lower-income working people, who can hardly make ends meet or pay their own bills, will continue to subsidize upper- income retirees. That's why God made taxpayers, right?

    Killing a Medicare Home Health Care Deductible. The Budget negotiators agreed to transfer Medicare Part A to Medicare Part B to make the Part A Trust Fund look better-a Clinton Administration move that Senator Phil Gramm of Texas and other Republicans denounced as a shell game. The Senate also proposed a modest $5 deductible for the high cost, fraud-ridden Medicare home health program. Senator Ted Kennedy and the seniors lobbies opposed it. House Republicans followed suit. A modest deductible for the fastest growing component of the Medicare program? Forget about it. The taxpayers will pick up the extra tab.

    Killing an Age Adjustment. The Senate proposed raising the Medicare age of eligibility from 65 to 67, very gradually over a 30-year period, matching Social Security eligibility. Instead, Congress decided to pretend that the demographic and health status profiles for 1935 and 1965 are applicable to the 21st century.

    Killing the FEHBP Demonstration Project. This program would have allowed seniors in 13 areas of the country to try out the same range of plans that are now available to Members of Congress and Congressional staff. Once again, key Republican staff and allies in HCFA managed to destroy the program in conference.

    Building on the Kassebaum/Kennedy Fines, Penalties and Jail Terms. Under the budget bill, the Secretary of HHS can throw any ``provider'' out of Medicare or Medicaid on conviction for any felony. Any ``provider'' found guilty of defrauding ``any federal health care program'' can be banished from the program for ten years, and three offenses trigger a lifetime banishment plus civil and criminal penalties.

    In related provisions, the budget bill toughens the penalties on the anti-kickback law; requires certain ``providers'' of certain facilities, like the home health care agencies, to post a $50,000 surety bond to show that they are legitimate businesses; and requires the government to give physicians binding advisory opinions to help them make ``legally permissible'' referrals of patients to facilities in which they may have an ``ownership'' interest.

    Medicare is undoubtedly plagued with fraud, and in some areas, the program is downright rotten. The $20 billion Medicare home health care program is a disaster. Federal authorities estimate that as much as 40% of these expenditures alone are lost to fraud and waste. Nevertheless, the Clinton Administration and the Congress do little but think up more ways to expand the police powers of the government, refusing to accept the fact that the very structure of the current Medicare system invites and rewards fraud.

    So why not change the structure? That would be too reasonable.