Ostensibly, the vote was against pay cuts for doctors. But it was really about “creeping privatization of Medicare,” writes left-wing columnist Paul Krugman.

Krugman blames Medicare deficits on the Medicare Modernization Act. Not Part D, but Medicare Advantage private fee-for-service plans. He asserts that these rapidly growing plans cost the government 17% more per beneficiary, while threatening to “undermine Medicare’s universality.” Insurance companies “cherry-pick healthier and more affluent older Americans, leaving the sicker and poorer behind”—in the wonderful “traditional” Medicare system that leftists want all Americans to have.

Krugman notes, correctly, that previously payments to doctors were maintained through “bipartisan fudging.” That is, “politicians from both parties got together to waive the rules. In effect, Congress kept Medicare functioning by expanding the federal budget deficit” (NY Times 7/11/08).

President Bush vetoed the bill preventing a 10.6% cut in Medicare fees because it was attached to payment cuts to Medicare Advantage plans. In addition, in his veto message he stated: “[The bill] would imperil the long-term fiscal soundness of Medicare by using short-term budgetary gimmicks that do not solve the problem; the result would be a steep and unrealistic payment cut for physicians—roughly 20% in 2010—likely leading to another expensive temporary fix” (Iglehart JK, N Engl J Med 10.1056/NEJMp0805760).

Krugman is exultant because the Democrats’ ability to stop a filibuster and override a veto make “the odds of achieving universal health care, soon,…look a lot higher than they did just a couple weeks ago.”

The AMA also celebrated, calling the legislation a significant victory. Through paid advertisements, the AMA exerted intense pressure on Republican senators initially opposed to the measure, Iglehart noted. The bill also staves off the scheduled 2009 cut.

“Good job, AMA leadership,” writes Dr. Thomas LaGrelius, president of the Society for Innovative Medical Practice Design (SIMPD). “You made the enemy very happy.”

The bill also killed competitive bidding for new equipment, which reportedly would have saved the program billions of dollars. For example, copayments for an oxygen concentrator for Medicare beneficiaries now total $1,428 over 36 months—more than double the purchase price. Medicare rents it for $198.40/mon, and the copayment is 20%. Medical equipment suppliers lobbied fiercely against this provision (Consumer Power Report #136, 7/18/08, citing Michael Leavitt, “Will Congress Continue a Medicare Scam?” Wall St J 7/9/08). (DME suppliers posted numerous comments in response to this article, regarding the value of the follow-up services they provide, and the Medicare rules and regulations.)

Additional information:

• “About the Money,” AAPS News, August 2008.
• “Medicare Fee Cut Threatened; AMA to Fight for Balance Billing,” AAPS News of the Day 12/20/07.
• “Doctors Oppose AMA Effort to Halt Pay Cut: It’s Not about the Money,” AAPS Press Release 9/13/06.

Nothing probably shows the potential of health savings accounts (HSAs) better than their enemies’ attempts to wreck them. An attempt to load on costly administrative requirements passed the House of Representatives but not the Senate. President Bush had threatened to veto it. Expect it to come back.

H.R. 5719 would have required every HSA transaction to be reviewed and verified as a legitimate medical expense. Currently, such expenditures are subject to an IRS tax audit, and many are made with a debit card that is only useful at a facility providing medical supplies or services.

A Wall Street Journal editorial called it “Health Savings Sabotage,” with a key player being Rep. Pete Stark (D-CA), who views HSAs as a “weapon of mass destruction.” While Democrats, including Barack Obama and Hillary Clinton, decry the high cost of medical care, including insurance overhead, “Mr. Stark and his friends want to impose the same bureaucratic overhead even on spending that consumers do with their own money” (Wall St J 4/19/08).

Cheating is a nonproblem, the editorial stated: “In any case if people cheat on their HSAs, they are only cheating themselves.”

Lobbying for the provision was EvolutionBenefits, which makes software used for “substantiation” of expenses in employer-owned Flexible Spending Accounts. H.R. 5719 would have enabled EvolutionBenefits to charge twice as much for administering HSAs.

“This is a near perfect example of the corruption of Washington,” writes Greg Scandlen. “A powerful member of Congress using his authority to benefit a single company at the expense of millions of consumers and taxpayers” (Consumer Power Report #123, 4/23/08),

“The message is clear,” writes Dan Perrin of the HSA Coalition, “we (the Democrats) think you cannot make your own decisions, so we are going to force you to pay a company to review your decisions and then we will give you access to your own money but only after we decide whether you made the right choice in the first place.”

Since HSAs were created in December 2003, 3.2 million accounts have been opened, covering 4.5 million Americans, one-third of whom were previously uninsured and bought coverage on their own. Thirty-three percent of new users are small businesses that previously had not offered coverage to their employees.

Consulting firm Watson Wyatt found that average health-insurance costs in the last two years rose 3.6% for employers who offered high-deductible accounts, versus 7% for employers who did not (Wall St J 5/1/08).

According to the U.S. Government Accountability Office (GAO), the number of tax filers reporting an HSA tripled between 2004 and 2007 (GAO-08-474R).

“The take-up rate is the fastest of any benefits innovation of our lifetimes, states Greg Scandlen. “Faster than IRAs, 401(k)s, and far faster than HMOs. The only thing that rivals it may be the conversion of HMOs into PPOs in the mid to late 1990s.”

“Which is probably one of the main factors in pushing H.R. 5719,” writes Frank Timmins. “HSAs are a threat to the SP [single payer] crowd. They need to slowly poison this baby before it grows to maturity.”

Additional information:

• “HSAs Have Dramatic Growth Spurt,” AAPS News of the Day 3/23/06.
• “Frequently Asked Questions (FAQs) on Consumer-Driven Medical Care.”
• “Tax-Advantaged Medical Coverage,” by Madeline Pelner Cosman, J.D., Ph.D.