AAPS News – Aug 2004

Volume 60, No. 8 August 2004

WHY BE A DOCTOR?

In response to an AAPS letter regarding the professional
liability crisis, Benjamin Bennett, M.D., wrote: “You have
described the reason why I quit practice 8 years ago and am now
in nursing school so that I can serve the sick without the
harassment of lawyers. I suggest that more doctors do the same;
then maybe there will be some relief.”

The median pay for R.N.s in the U.S. is $20 per hour or
about $42,500 per year plus benefits. Their right to receive
their paycheck is never questioned, nor do they face the prospect
of a demand to refund the money, plus interest and penalties, to
their employer. There are no $50,000 EMTALA fines for declining
an unpaid night shift. Nor are nurses saddled with $100,000 in
student loans to repay.

An ophthalmologist suggested that he would be better off
financially as an optometrist. While doing refractions is hard
work, optometrists today can earn a large fee by making a
riskless, costless referral to a small cadre of surgeons capable
of doing the massive volume of cataract or refractive surgery
necessary to service an enormous overhead. Fee-splitting (up to
$600 per eye for LASIK), previously considered unethical, is a
given (Ocular Surgery News 5/01). Optometric “comanage-

ment,” in which an optometrist does all pre- and post-op care, is
very widespread (Arch Ophthalmol 2002;120:71-75).

Physicians report increasing financial distress. One surgeon
wrote that he is being forced to retire at age 61 because his pay
had dropped to $7 per hour, which was not enough to repay the
loan he had taken out to cover his professional liability
premiums. Another physician wrote that on his salary of $40,000,
he could not afford dues to professional societies.

Physicians’ past as well as future earnings are threatened,
and not just by federal programs. One publicly traded insurance
company recently reported in its quarterly earnings statement
that a significant portion of its profits is coming from
“refunds” obtained from providers (MSSNY’s News of New
York 2/04).

“What physicians should realize is tht a health insurer’s
fundamental existence and financial success require detailed
analyses of each provider’s practice patterns using information
management systems that cost millions of dollars.” A refund
demand typically extrapolates a small sample retroactively for 6
years, using determinations of “medical necessity” by an HMO-
employed physician who often has no credentials in the specialty
being reviewed. Refusal to pay leads to threats of fraud and
racketeering charges and complaints to the licensing agency about
substandard and inappropriate care.

Thirteen states have False Claims Acts with qui tam
provisions, and others propose to follow their lead. Massachu-

setts, which has one of the most draconian laws, also imposes
liability for consequential damages flowing from the allegedly
fraudulent act. Florida recently extended the criminal provisions
of its already powerful false claims law to quality-of-care
issues, which the federal government does not explicitly define
as a false claim. (Medicare Compliance Alert 7/5/04).

More danger looms with the July 26 compliance deadline for
Phase II of Stark regulations. Even experts still have
significant questions about its interpretation. Linking Stark to
the Anti-Kickback Statute narrows the safe harbors, blurs the
objective bright lines so that providers cannot clearly decide
whether they are in compliance, and removes the necessity to
prove criminal intent (ibid.). Recruitment and relocation
programs will be under intense scrutiny (MCA 6/21/04).

Punitive actions by medical boards, including license
revocations and suspensions, increased 35% from 1993 to 2002,
from 3,081 to 4,169 actions (AM News 4/21/03), while the
number of physicians increased 25%, from 684,000 to 853,000
(AM News 4/26/04). Still, Sidney Wolfe complains that
“Lax medical boards give bad docs free ride” (Ariz. Daily
Star 3/5/03). Some groups advocate laws forcing doctors to
prove their competency every two years.

On the other hand, public pressure is also building for
reform of unfair practices by licensure boards such as the Office
of Professional Medical Conduct in New York: “Patients in the
thousands have signed petitions and written letters mourning the
loss of their doctors” because of biased OPMC actions and tactics
such as the use of OPMC police power to aid insurers in disputes
with doctors over medical benefits (see www.faim.org for
information on S.B. 4148a).

Meanwhile, no outcry from Sidney Wolfe has been heard as New
Jersey expands prescriptive privileges for advanced practice
nurses, physician assistants, and optometrists.

Not surprisingly, medical school applications in 2002 were
down 29% compared with their peak in 1996 (AAMC).

Do we even need physicians? After all, the Resource-Based
Relative Value Scale demands equal pay for equal (same code)
work, regardless of provider qualifications. As Linda Gorman of
the Independence Institute writes, “For the last 20 years public
education campaigns have emphasized that medicine is an
industrial production process, physicians are all alike, and you
can get perfectly good care if you go to a clinic with a rotating
cast of M.D.s, nurses, and P.A.s, as long as your records are
stored in electronic form…. Evidence-based medicine advocates
view physicians as diagnostic machines. Once the diagnosis is
made, they want physicians to key it into software and
mechanically follow the treatment plan recommended by a panel of
political appointees composed of two physicians, three consumer
advocates, two pharmacists, and two clueless `consumers.’ They,
in turn, will follow the recommendations of a university-based
consulting service….”

Physicians are needed if and only if individual human lives
count. It is better to serve as an R.N. than to fill an M.D. slot
only to enable the destruction of our profession.

---

AAPS Supports Due Process in Licensure

In correspondence to Senator Kemp Hannon, Chairman of the
New York Senate Health Committee, AAPS General Counsel Andrew
Schlafly wrote: “The Office of Professional Medical Conduct
(OPMC) has a record of grossly disregarding justice and the needs
of patients when it takes action against physicians.” AAPS
deplores “disingenuous expert-shopping” and supports legislation
requiring OPMC to disclose each expert who is consulted but does
not testify and whose work product tends to prove the innocence
of the accused. AAPS also notes that even if the physician
prevails in a committee hearing, the Administrative Review Board
can simply ignore the report and arbitrarily decide otherwise
without due process. Proposed legislation would help to remedy
this problem.

AAPS also submitted suggestions to the Sunset Review
Committee for improvement of the Texas State Board of Medical
Examiners. These include : (1) Term limits for Board members; (2)
use of appropriate reviewers: board-certified physicians in
active practice who are experienced in doing procedures similar
to those under review; (3) elimination of blanket immunity for
TSBME-hired reviewers; (4) recourse for physicians who are
treated unreasonably; (5) protections against indiscriminate,
politicized use of summary suspension; (6) not allowing the
posting of allegations about physicians on the website before a
full hearing and appeals have been completed.

AAPS comments are posted at www.aapsonline.org under
“licensure” and “state issues.”

EMTALA Made Simple

Todd Taylor, M.D., ER physician and principal EMTALA peer
reviewer for CMS in Arizona, calls EMTALA the “largest free
public health program in the world.” For the on-call physician,
the best response to any inquiry from any hospital is very
simple: “How can I help you with this patient?”

He explained the distinction between slavery and EMTALA: The
former is involuntary servitude with the potential for
exploitation (not all slaves are mistreated). EMTALA is
“voluntary” servitude with overt exploitation. The revenue loss
[unlegislated tax] on emergency physicians averages $138,000 per
year. For general surgeons, it is about $26,000;
anesthesiologists, $16,000; radiologists, $22,000; OBG, $4,000;
all physicians, $12,000 (AM News, June 2/9, 2003).

EMTALA obligations flow from a hospital’s contract with
Medicare. The Veterans Administration and military hospitals are
exempt; Indian Health Service hospitals are not.

Providing good medical care is not enough to satisfy EMTALA;
technical compliance with the rules is required. The fine is
$50,000 per violation, and an investigation usually alleges 6 or
7 violations for a single patient.

Who Is Qualified to Test Doctors?

At an American Thoracic Society meeting, physicians could
obtain 52 hours of CME credit. AAPS Director Del Meyer, M.D., saw
one pulmonary fellow purchase 85 tapes at $10 each to study
later. Dr. Meyer once asked a bureaucrat whether he obtained
additional information about his field by listening to tapes.
“Only if my employer pays for the hours,” he said. Yet
bureaucrats claim that they know how to protect against medical
errors and assure quality. The ulterior motive is to gain control
of medicine (Medical Tuesday 6/8/04).

Committee Reports

The Nominating Committee chaired by Chester Danehower, M.D.,
presents the following slate:

President Elect: Kenneth Christman of Dayton, OH

Secretary: Charles McDowell, Jr., of Alpharetta, GA

Treasurer: R. Lowell Campbell of Corsicana, TX

Directors: Drs. Art Astorino of Newport Beach, CA; Todd
Coulter of Ocean Springs, MS; John Dwyer of Chicago, IL; Ken Jago
of Canton, GA; Tim Kriss of Versailles, KY; Peter LePort of
Fountain Valley, CA; Robert McQueeney of Marinette, WI; and
Tamzin Rosenwasser of Venice, FL.

To be considered, Resolutions must be submitted to AAPS in
writing no later than Sept. 14.

The Bylaws Committee proposes the following changes: to
Article II, Section 1, add (F) Associate Member. (1) Any
person working in the medical care industry (other than an M.D.
or D.O.) may apply for membership as a Professional Associate
member. (2) Any person who shares the beliefs and principles of
the Association may apply for membership as an Associate member.
Change Article I, Section 3, to read: Membership dues in the
Association, which includes subscription to the official
publications, shall be payable with the application, and annually
thereafter on the anniversary of the first payment. Dues shall be
set by the Assembly established by the Board of Directors.
Failure to pay dues within ninety days after the due date shall
be cause for termination of membership. Add: Voting
Privileges. All members with the exception of Student,
Professional Associate, and Associate members shall have full
voting privileges at all meetings of the Assembly.

Why Does Medical School Cost So Much?

In 1974, tuition at Columbia University College of
Physicians and Surgeons, one of the most expensive private
schools in the country, was $5,000 ($19,000 in 2004 dollars, see
www.aier.org). It is now about $40,000, a 110% increase.
For decades, all medical school tuition went to the main
university, which used it to subsidize other areas, such as the
graduate faculty. Fiscal control was transferred to the medical
school in 1988 (Kastor JA, Mergers of Teaching Hospitals in
Boston, New York, and Northern California, Univ. Michigan
Press, 2001). Tracing the flow of money would be an interesting
study. Cross-subsidies can work in either direction and could
give academic institutions a hidden source of capital to squelch
their competition. Medicare subsidies and federal research
funding bring a huge influx of dollars, but accompanied by
expensive regulation. A key experiment would be to build a
proprietary school without walls or government funding, utilizing
technologic advances such as multimedia digital archives. Why
should large institutions have a monopoly on knowledge?

AAPS Calendar

Oct. 13-16. 61st annual meeting, Portland, Oregon.

Sept. 21-24, 2005. 62nd annual meeting, Arlington, VA.

---

AAPS Moves to Require Release of Prison Videos

Charles Thomas Sell, D.D.S., who has been incarcerated for 7
years without trial, claims that he has been brutally abused by
officials in the federal psychiatric facility in Springfield, MO.
Since 2000, Dr. Sell has been seeking the release of videotapes
that purportedly show mistreatment. He states that guards have
abused many inmates, using some in gladiator-style fights, or
handcuffing them to bunks for 30 days straight (St. Louis
Post-Dispatch 5/19/04). He hopes that public exposure may be
of help to other prisoners.

On May 13, Judge Stohr ordered the prison to release the
tapes under a protective order. After viewing them, Dr. Sell’s
attorneys moved to have the judge see the videos himself.

AAPS suspects that the tapes might show shocking treatment
like that depicted in an Iraqi prison, such as humiliating a
naked Dr. Sell in front of a female bystander.

Dr. Sell claims that on Nov. 9, 1999, after he had broken a
plastic food tray, guards shackled him, naked, to a concrete
block so that he could not move and left him there for 19 hours
straight. A few months later, after Dr. Sell complained of being
cold in his unheated cell, a guard allegedly stripped him, took
him to the shower, sprayed him repeatedly with scalding water in
front of a female nurse, slammed him face-first to the floor, and
dragged him back to his cell.

An internal government memorandum does not deny this but
simply states that Sell received “not inhumane treatment.”

In its motion to rescind the Protective Order, AAPS states
that judicial discretion to enter such orders is circumscribed by
long-established legal tradition that places high value on public
access to court proceedings. Dissemination of the tapes might
facilitate reform of psychiatric detention facilities and help
prevent recurrence of abuse. The Order has no plausible
justification other than to conceal government wrongdoing.

“The videotapes contain no national secrets nor any
information that might prejudice a jury pool against defendant
Dr. Sell,” writes AAPS General Counsel Andrew Schlafly.

The full brief is posted at www.aapsonline.org.

Mitriones Appeal Sentence Enhancements

Because of the Supreme Court decision in Blakely v
Washington, decided June 24, Robert Mitrione, M.D., and his
wife Marla DeVore have filed a supplemental brief to their
Petition for Writ of Certiorari (AAPS News July 2004).

The question presented is “whether the increase in
defendants’ sentences based on findings never made by a jury
violated their Sixth Amendment right to trial by jury.”

The defendants’ sentences were increased by factors of
nearly 4 and 2.5, respectively, above the statutory maximum,
based on allegations neither contained in the indictment nor
proved to a jury beyond a reasonable doubt. Without the
enhancements, both could have gotten probation.

In Blakeley, the Court held that “the `statutory
maximum’ is not the sentence the judge can impose after finding
additional facts, but the maximum he can impose without
any additional findings” (2004 LEXIS 4573, *14 [emphasis in
original]). In the Mitriones’ case, the judge made her own added
findings on a preponderance of the evidence standard.

Application of Blakeley could lead to a large
number of sentence revisions, stated Andrew Schlafly, counsel of
record for the petitioners.

The full brief is posted at www.aapsonline.org.

Tip of the Month: In nine jurisdictions (Delaware,
District of Columbia, Florida, Hawaii, Maryland, Missouri,
Pennsylvania, Vermont, and Virginia), doctors have an easy way to
protect their assets against malpractice lawsuits. If married,
they can place all their belongings into “tenancy by the
entirety” with their spouse, and no creditor (such as a
malpractice attorney) can ever touch them. This can be done for
bank accounts, stocks, houses, automobiles, and other personal
belongings. In addition, Indiana and Michigan allow some, but not
all, personal property to be held in this manner.

$1.75 Million Awarded for Legal Malpractice

When her case against Child Protective Services for the
wrongful death of her son failed, plaintiff Annette Hendrix sued
her lawyer for mishandling the case, as by failure to meet filing
deadlines. A judgment of $1.75 million was handed down against
lawyer Thomas Sylvester. Although another lawyer was jointly at
fault, she will not be asked to pay damages because she has no
malpractice insurance (Ariz Daily Star 5/25/04).

Guilty Verdict Reinstated

In October, 2002, U.S. District Judge Kenneth Ryskamp
reversed a guilty verdict against Mahendra Gupta for conspiracy
to defraud Medicare on the basis that CMS definitions of
“related,” “common ownership,” and “control” are opaque. A
defendant cannot be held criminally liable if the rules he
violated were indecipherable. The government appealed. On March
29, 2004, the Eleventh Circuit Court of Appeals reinstated the
guilty verdict on the grounds that the judge had waited too long
(three years) to reverse (MCA 5/10/04).

25 Years for Pleading Not Guilty

Even the prosecutors who obtained a 25-year prison sentence
for pain patient Richard Paey concede that he doesn’t deserve it.
Still, it’s his own fault, they say, for insisting on his
innocence and not taking a plea bargain. “All we wanted to do was
get him some help,” stated Assistant State Attorney Mike Halkitis
(Jacob Sullum, reasononline 4/23/04).

Now in a wheelchair with a morphine pump, Paey at one time
took Percocet. When he had trouble finding a new doctor, he used
undated prescription forms from his previous physician, who
denied authorizing them. Under Florida law, Paey is a drug
trafficker of the worst sort, even though he never sold a single
pill, because he illegally obtained more than 28 grams of
painkillers containing oxycodone. The mandatory minimum sentence
is 25 years. (See News of the Day Archive for 3/9/04 at www.aapsonline.org.)

Pfizer Unit Pays $430 Million

Although physicians are permitted to prescribe drugs for
off-label uses, pharmaceutical companies are forbidden to promote
use of their product for any but FDA-approved indications. In a
qui tam action, Warner Lambert was accused of violating the
Federal Food Drug and Cosmetics Act and defrauding state and
federal Medicaid by promoting the use of gabapentin (Neurontin)
for attention deficit disorder, migraine, restless legs syndrome,
bipolar disorder, and amyotrophic lateral sclerosis. The fine is
second only to that paid by TAP Pharmaceuticals in the Lupron
case (BNA’s HCFR 5/26/04).

---

Correspondence

A Model Waiver Form. In order to play in an annual
charity basketball event, participants (or their parents) must
sign a waiver form. This is published in a full-page newspaper
ad. Since the inception of the tournament in 1997, 10,000 persons
have signed this form. In it, they agree to hold tournament
sponsors harmless for any injury associated with the event. They
agree not to sue and to indemnify anyone for all costs if they do
sue, and also bind all heirs and assigns by this waiver.

Now that physicians and charity basketball players find
themselves playing on the same court, patient waiver forms may
become the only option compatible with economic survival in the
era of falling fees.

By the way, the whole concept of informed consent came from
the Nuremberg trials, in which 16 of 23 Nazi doctors were found
guilty, and seven sentenced to death.

Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY

Preventing Physician Ownership. Stark-like referral
prohibitions are generally not limited to Medicare. They
selectively prohibit physicians from investing in medical
facilities while permitting anyone else to do so. Such rules are
pushed hard by the American Hospital Association and its state
affiliates. If hospitals can prevent physicians from competing
with them, they will gain enormous control over their medical
staff and will not need to listen to physician requests for
better equipment, better nursing staff, better OR schedules, or
charges that accommodate price-conscious patients.

Donna Kinney, Texas Medical Association

Why Ban Self-Referral? If you’re good at what you do
and open a hospital to give the kind of care you think your
patients deserve, why shouldn’t you refer your patients there?
Nothing concentrates the attention like having a reputation and
cash at stake when you are trying to lure customers who can take
a hike if they don’t like your service. If there is a concern
about conflict of interest, require disclosure.

Linda Gorman, Independence Institute

Absence of the Market. The two major sectors of the
economy of which we have said “the rules of the market don’t
apply here” education and health are the two most dysfunctional
sectors. Is there any correlation?

Sean Parnell, Heartland Institute

Some seem to see medicine as an issue that transcends all
the rules of the universe because of the nobility of its very
existence. This is apparently why reasonably intelligent folks
persist in trying to rearrange the Titanic deck chairs.

Frank Timmins, HealthBenefitsReform group

Let the Customer Choose. I have no problem with kiosk
medicine even though it does compete with my practice. A kiosk
manned by a nurse practitioner in a grocery store in a nearby
city charges $5 less than I do. Let the patient decide whether,
in a particular situation, board certification in emergency
medicine and internal medicine is worth the additional $5. No
need to protect the producers.

Robert Berry, M.D., Greeneville, TN

Command and Control. Powerful interests are indeed
trying to control physician behavior by fiat: have panels of
experts develop practice protocols and enforce them on all
clinicians, by payment restrictions, malpractice suits, and
licensing. This is not a paranoid fantasy. It is quite literal.
It would be a huge mistake, freezing into place the medicine of
2004 and inhibiting any further innovation.

Greg Scandlen, Galen Institute

The Data Base Trap. You won’t see a “single database”
of auto manufacturers, not even in Germany. Putting all
physicians (and their patients) into such a database is a
mechanism for totalitarian control. It must be fought at all
cost.

Jack Tidwell, M.D., Columbus, GA

Licensure Board Actions. The California Medical Board
spends 35% of licensure fees on social programs for which they
have no mandate, such as forgiving indebtedness to place doctors
in downtown Los Angeles. If you doubt that the Board is violently
anti-doctor, read the monthly Bulletin to see the inconsequential
matters for which doctors have been censured.

Herbert Rubin, M.D., UCLA

Separate and Unequal. Every form of taxation involves
the creation of two classes: taxpayers and
taxreceivers. How can one measure the cost to the
grandkids and compare it to the benefit received by Grandma?

Robert P. Gervais, M.D., Mesa, AZ

“Liberal” Thought. You will remember from gross anatomy
that liberals lack a corpus callosum. Thus, one side of the brain
is unable to communicate with the other. I once asked a liberal:
“Then you think that the rich can pay 100% of their income in
taxes?” He said, “Absolutely. They can well afford it.” I decided
to push the point further: “Do you think the rich can pay 200% of
their income in taxes?” He responded, “Absolutely. They can well
afford it.” I think liberals have been taught from their youth
that the rich have hundreds of times more money than you can ever
discover, and that there are simply no limitations on what they
can be forced to pay.

Del Meyer, M.D., Carmichael, CA

---

Legislative Alert

The Presidential
Election Issue:

Health Care or Tax Cuts

The Nominating Conventions will soon be upon us, and the
Presidential race will be underway in earnest. The key domestic
policy issue will be Government-managed and financedhealth care or tax cuts. Or, we would say: more government
or more freedom. No matter how you slice, dice, or phrase it,
that’s the basic choice facing voters, according a leading
analysis of the coming Presidential contest in the June 28th
edition of The Washington Post.

The Post reporters have got the basics right. They
note that Kerry has a health care plan estimated to cost between
$653 billion and $950 billion over the next ten years. Ken Thorpe
of Emory University says that Kerry’s plan, a complicated and
multifaceted thing, would yield a net increase of insurance
coverage of about 27 million Americans. (This does not include,
of course, any of Senator’s Kerry’s more expansive proposals for
Medicare.) Kerry would pay for his basic health care expansion by
rolling back Bush’s tax cuts for all families with an annual
income of more than $200,000, raising the two top tax rates of
33% and 35% to 36% and 39.6%, respectively, reversing the Bush
tax cuts on capital gains and dividends for upper-income
families, and preserving the estate tax. The total tax increases
would amount to $860 billion over ten years, according to
analysts with Brookings and the Urban Institute.

Bush, on the other hand, is committed to making permanent
“an array” of federal tax cuts already enacted by Congress,
amounting to $990 billion over the next ten years. Bush has also
proposed a more modest program of refundable tax credits worth
$90 billion over the next ten years, with an estimated additional
increase of 2.5 million Americans getting coverage. Of course,
Bush has also signed into law a massive expansion of the Medicare
entitlement for prescription drugs, expected to cost, on the
Administration’s own estimate, an additional $540 billion over
the next ten years.

Medicare: It’s Unofficial!

Robert Novak, one of the best reporters in Washington,
writes this explosive little paragraph in a piece on the
President’s domestic policy: “Senior administration officials
privately admit that last year’s prescription drug bill was a
disaster substantively and politically. The golden opportunity
for Medicare reform was squandered. Although the need for basic
change along market-based lines persists, nobody has the will to
revisit this issue anytime soon” (Washington Post,
6/14/04). Clip that for the permanent file.

Here is another question: Did those same unnamed senior
administration officials feel the same way last year, and did
they convey their reservations to the President before or during
the November debate on the Medicare drug entitlement? The truth
will out. Someday.

Meanwhile, the debate on how much the taxpayers will pay is
just getting started. One very big estimate is that of Professor
Laurence Kotlikoff, chair of the Department of Economics at
Boston University and coauthor of The Coming Generational
Storm. Kotlikoff estimates that the “present value” of
promised Medicare benefits is $73.6 trillion, seven times
the current GDP and 14 times the official U.S. debt. (The
“official debt” doesn’t count unfunded liabilities.) The
“present value” of the future payroll taxes amounts to $12
trillion. What to do? Kotlikoff writes, “Historically, we’ve
used general revenues to cover the gap between Medicare’s
expenditures and receipts. But continuing to do so will require a
50 percent immediate and permanent hike in federal income taxes.
Alternatively, we can wait and raise taxes by an even larger
percentage in the future. Tax hikes of this magnitude would
severely damage our economy.”

In other words, we are not going to “grow” our way out of
the problem. Since nothing can be done about the demographics and
business as usual won’t work in the future, Kotlikoff thinks that
the best way out is to “voucherize” the entire Medicare program,
with a fixed government contribution adjusted by the Medicare
patient’s medical condition. Care delivery would be secured
through private sector options.

Remembering Ronald Reagan

The pomp and pageantry of Ronald Reagan’s funeral last
month was more than appropriate. It was the response of a great
nation in mourning for an increasingly beloved leader. Looking
back on Ronald Reagan is powerful reminder to ordinary Americans
of what real leadership means. Reagan not only changed America;
he changed the world.

For doctors and patients, Reagan’s health policy themes were
familiar, if unfulfilled. Reagan had faith in private medicine,
and he warned, repeatedly, of the threat that government programs
posed for American medicine. But on the details of federal
policy, the Reagan record was mixed. In 1983, he embraced the
Prospective Payment System (PPS), originally developed by
researchers at Yale University, as an answer to rising Medicare
hospitalization costs. But recall the context of the Reagan
initiative: the Carter Administration was pushing for price
controls on hospitals. The PPS system was sold by the Reagan team
at HHS as an attempt to inject an element of “fiscal
conservatism” but it turned out to be nothing more than another
federal price-control mechanism.

Likewise, Reagan signed the Medicare Catastrophic Coverage
Act of 1988 into law. Originally promoted by the President as an
attempt to provide peace of mind for America’s seniors through
the addition of a modest catastrophic benefit to the Medicare
program, the House and Senate bills became a twin engines of a
massive Medicare benefit expansion, including the addition of a
controversial and costly Medicare prescription drug benefit. Even
though the benefit was “self financing” in the sense that the
Medicare beneficiaries were going to pay for the new benefit
Reagan officials at HHS correctly warned Congress of the
exploding costs of the drug benefit and the practical
difficulties of the government administration of such a thing,
noting that it would require the doubling of Medicare claims and
the monitoring of all those new claims. But Congress, and its
enablers in the AARP, ignored these reservations, and insisted on
including the big benefit expansions. They thus passed it by
overwhelming margins in the House and Senate, and Reagan signed
the final bill into law. It turned out to be a huge political
mistake. The actual and projected costs soared, and seniors, who
were paying for the new benefit, staged a massive political
revolt. In 1989, less than a year after Reagan left office, the
Congress repealed the law, by equally lopsided margins in the
House and Senate.

On a positive note, the Reagan Administration firmly opposed
the Resource-Based Relative Value Scale (RBRVS), rejecting it as
bad policy. That bad policy was then being promoted by the House
Ways and Means Committee as the basis of a new Medicare payment
system combined with price controls. The first Bush
Administration acquiesced.

Politics of Prosperity

Reagan will not be remembered for health policy, but
rather for a dramatic economic revitalization at home and
international victory in the Cold War. When Reagan took office,
Americans were suffering under a savage inflation, a serious
economic slowdown, and declining income. The prime rate was 19%,
home mortgage rates 14.7%. By 1992, the prime rate was 6%, and
mortgage rates 8%. In 1981, he presided over the largest budget
and tax cuts in modern history. The overall result was that his
policies crushed a raging inflation that was killing the
prosperity of the country and destroying the lives of millions of
Americans, including those who were living on fixed incomes. He
stayed the course with his fiscal and tax policies, worked very
closely with the monetarily conservative Federal Reserve Chairman
Paul Volcker, and these combined fiscal and monetary policies
soon lifted the country out of a serious recession. Raging
inflation was dead.

Reagan presided over one of the longest periods of sustained
economic growth in the postwar period, creating more than 20
million jobs in the process. It was an economic expansion that
largely continued well into the 1990s, with only a brief downturn
in 1991. Real average income for American households increased by
16.8% from 1982 to 1989. Isabell Sawhill and Mark Condon of the
Urban Institute, no friends of “Reaganomics,” found that the rich
got “a little richer,” but the poor got richer too. Incidentally,
the share of income taxes paid by the wealthiest 5% of Americans
actually increased, from 35% in 1981 to 44% in 1989. Poverty fell
significantly during the Reagan years, from 35.3 million in 1983
to 31.5 million by 1989, just as it had increased rapidly during
the Carter Administration. On a per capita basis, charitable
giving increased about 4% per year from 1980 through 1989, double
the charitable giving from 1955 to 1979.

The “Reagan Revolution” charged uphill against a well-
entrenched and bitterly hostile Washington Establishment, and its
momentum in the latter eighties eventually slowed. For example,
Reagan led an effort to reduce the size and scope of government,
and reduced federal employment by 100,000 in the domestic
agencies in the first four years. After his big victories in
cutting government spending in 1981, federal employment started
to creep back up, reflecting the pushback by Congress and the
beneficiaries of government programs that accelerated in his
second term. But even during this period of backsliding, Reagan
had established the rhetorical terms of national debate on the
size and scope of government. It is supremely significant that
when President Bill Clinton came into office, he promised to
reduce federal workforce by 100,000, and actually ended up
reducing the total size of the federal workforce (including the
military) by 300,000. Clinton said that the “era of big
government” was over, even though it wasn’t. While formal federal
employment may have been reduced, government contractors were
growing in the millions in the Clinton years. Reagan may have won
the rhetorical debate on big government, and Clinton may have
echoed Reagan’s rhetoric, but the battle on the ground was lost.

Likewise, Reagan was unable to control domestic spending and
the consequent rise in deficits. With the enactment of The Tax
Equity and Fiscal Responsibility Act (TEFRA) of 1982, Reagan
agreed to raise taxes, but part of his agreement with the
leadership on Capitol Hill was that for every $1 dollar in tax
increases, Congress would cut government spending by $3 dollars.
Congress never honored that pledge and Reagan did not engage in
a “veto war” with House Speaker Tip O’Neill. We continue to run
deficits, not because Americans are undertaxed, but because
Congress overspends. They are spending again with reckless
abandon.

The “Vision Thing”

Reagan had a coherent philosophy of government: He
believed strongly in smaller government, lower taxes, and
individual freedom. He was a champion of traditional moral
values. These were not vague slogans or metaphysical
abstractions; they were a governing philosophy that pervaded the
Administration. At the staff level, this writer knows that the
policy impact was pretty simple. Whatever the issue was before
you, you had to simply ask yourself the question: “Why am I in
this job, and what would Ronald Reagan want me to do?” You did
that. You were not there to fatten your resume, or get
“government experience.” You were there to do a job. The key
questions were always: Will this expand or reduce the size of
government; will this help or hurt the taxpayers?

Changing the World

Reagan’s biggest success was in foreign policy. Margaret
Thatcher said it best: He won the Cold War without firing a shot.
He had no illusions about either the Soviet leadership or the
Soviet system. He called them publicly an Evil Empire, and he
meant it in Biblical language. Reagan also did not think that the
Soviet system was a permanent fixture, although a lot of people
in academic life and the big think tanks thought that it was here
to stay for a very long time. Right now, a lot of the same folks,
or their ideological heirs, are saying that Reagan did not
deserve credit for ending the Cold War because the Soviet Union
was on the verge of collapse anyway. Really? That was not what
they were all saying then, when the left was routinely denouncing
Reagan’s every move as cowboy diplomacy. In hindsight, the views
of Reagan’s critics on the subject of the Soviets look positively
clownish or naive. Reagan knew that the creaky Soviet economy
could not sustain a first-rate military program forever. He knew,
and so did Mikhail Gorbachev, that another arms race would run
them into the ground. He was right, his critics were wrong, and
the world was changed forever.

Robert Moffit is Director, the Center for Health Policy
Studies at the Heritage Foundation, Washington, D.C.