AAPS News – Sept 2003

Volume 59, No. 9 September 2003

PRIVACY, LIBERTY, AND TELEOCRACY

What Americans are living through today is not a mere
“health care reform,” but a profound transformation, as Newt
Gingrich explains in his new book Saving Lives & Saving
Money (also see AAPS News Feb
2001).

Nor is it just a transformation of American medicine, but a
giant step in the metamorphosis from the traditional Western
political tradition of nomocratic or rule-based government into
modern teleocracy. A teleocratic government of which communism is
one extreme form is designed to achieve certain ends. These might
be building a “new society,” abolishing poverty, or redesigning a
system of “health and healthcare.”

There are virtually no limits to the government role in a
teleocracy, observes Joseph Sobran, because anything that people
do could be subversive of the desired outcome. Thus, many
spontaneous activities are apt to be censored or criminalized
(Griffin Internet Syndicate 7/17/03).

Incentives are touted, but if they don’t work, the
government can always resort to brute force. Even Newt Gingrich,
who styles himself a “free-market conservative who believes in
minimal government involvement,” thinks it is justified to
“mandate the use of electronic systems to drag the medical system
into the 21st century.”

Information, after all, is critical to achieve his goal of a
“collaborative government [that] manages by outcomes.”

Change is urgent; Gingrich invokes the bioterrorism threat,
and the looming choice of “quality or bankruptcy.”

Recall that, although separated by a few years in implem-

entation, the Clinton criminalization and “administrative
simplification” provisions were passed in the same package, the
Health Insurance Portability and Accountability Act of 1996
(HIPAA). They also mesh nicely with the USA PATRIOT Act. Still
more demands for data, and more punitive uses for it, are rapidly
coming to the fore.

Patient safety bills now being considered (H.R. 663 and S.
720) are more about surveillance than safe care, writes Twila
Brase, R.N., of the Citizens’ Council on Health Care. Taxpayer
funds would be used to build computerized data systems, falling
in line with an initiative announced on July 1 by the Dept. of
Health and Human Services to create a “national electronic health
care system” (
www.cchconline.org).

The Institute of Medicine (IOM) is urging the federal gov-

ernment to use the leverage that it acquires by paying medical
bills for one in three Americans to address quality concerns.
Payment should be partly based on quality as judged from data
that practitioners would have to submit (AM News
11/18/02).

Punishments are being developed faster than incentives.
Since the IOM released its To Err Is Human report in the
fall of 1999 (AAPS News Apr 2000), “the timing is about
right for us to see cases that have been percolating behind the
scenes,” said Joan Krause of the Univ. of Houston Health Law &
Policy Institute (BNA’s HCFR 7/23/03). Federal
prosecutors are looking for a good False Claims Act case based on
allegations of inadequate quality of care.

The campaign of prosecutions of nursing homes for quality
will probably spill over to hospitals and physicians’ practices,
according to Jim Sheehan, Assoc. U.S. Attorney for the Eastern
District of Pennsylvania (Medicare Compliance Alert
8/4/03).

Private payers’ Special Investigations Units use common data
bases and data mining programs to target providers who are
referred to the FBI for criminal prosecution. HIPAA can turn what
was formerly a private billing dispute into a federal crime with
heavy fines and up to life imprisonment if a beneficiary dies
(ibid.; AAPS News Jan
1994). Failure to report significant events may be taken as a
sign of “conceal[ing] endemic quality problems,” and thus of
fraud.

HHS claims that “Congress intended a broad interpretation of
`health care fraud and abuse,’ including adverse patient
outcomes, failure to provide covered or needed care…, or
delays in diagnosis and treatment” [emphasis added] (Turner G-M,
HIPAA and the criminalization of American medicine, Cato
J 2002;22(1):121-150.)

The “basic tool kit of a health-care quality movement”
includes practice guidelines linked to the medical record. This
will allow the government to combat the “epidemic” of wide
variation in how doctors treat patients with similar ailments.
Getting doctors to “embrace these tools as the standard of care”
is essential. Without them, the system will “continue to spiral
out of control” (Winslow R, Wall St J 2/3/03).

Control: that’s what the debate is about. Control
requires information. Privacy is the right of a person to control
information about himself and is a subcategory of the right to
liberty. In a teleocracy, privacy is balanced against the need of
the state to know or used to shield the state from exposure.

The same government that wants unimpeded mining rights in
private records jealously guards its own secrets from public
view. In Office of
Independent Counsel v. Allan J. Favish (see p. 3), the
OIC is attempting to block the release of certain original
Polaroids of the body of Vincent Foster under the Freedom of
Information Act, citing a “privacy” interest of Foster’s
remarried widow in being free of added emotional distress. Favish
argues for the interest of the public in disclosure as a check on
government trustworthiness.

The extent to which government secrecy now overrides
individual privacy is seen in the modest proposed
amendments to the USA PATRIOT Act (S. 1552). These would restrain
government from “sneak and peek” searches of homes unless
“absolutely necessary,” and prevent certain political activists
from being labeled “domestic terrorists.”

The Panopticon (see p. 2) is being built under the cloak of
“privacy,” “safety,” “national security,” “quality,” and
“health.”

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The Panopticon

The Panopticon of Jeremy Bentham is an architectural figure
that “incorporates a tower central to an annular building that is
divided into cells, each cell extending the entire thickness of
the building to allow inner and outer windows. The occupants of
the cells…are thus backlit, isolated from one another by walls,
and subject to scrutiny both collectively and individually by an
observer in the tower who remains unseen. Toward this end,
Bentham envisioned not only venetian blinds on the tower
observation ports but also mazelike connections among tower rooms
to avoid glints of light or noise that might betray the presence
of an observer.

“The Panopticon thus allows seeing without being seen. `Such
asymmetry of seeing-without-being-seen is, in fact, the very
essence of power…because ultimately, the power to dominate
rests on the differential possession of knowledge’.”
(Barton and Barton, Modes of Power)

The utilitarian philosophy of Jeremy Bentham (1749-1832) is
seen by many as the foundation for collectivism and
interventionist government.

More Data “Sharing”

Education Records. The Childhood Medication and Safety
Act (S. 1390), while prohibiting schools to force children to
take drugs like Ritalin, would require the Comptroller General to
review prescription rates. The CDC has long sought access to
student medical records. Gingrich wants to “start with the
children” in his “nutrition-activity-attitude” system for health.

TIA II, State Based. Florida’s new counterterrorism
database called MATRIX (Multistate Anti-Terrorism Information
Exchange) hopes to circumvent the criticisms leveled at the
national Total Information Awareness (TIA) system (AAPS
News Jan 2003) with networked state repositories, rather than
one central database. The system will serve regular crime-
fighting as well as emergency preparedness (Wash Post
8/5/03).

Mission Creep at Homeland Security. The CAPS II program
that is supposed to enhance airline security would subject about
200,000 airline passengers per day to additional harassment for
general law-enforcement goals (The Hill, 8/5/03).

Prescription Tracking. The National All Schedules
Prescription Electronic Reporting Act of 2002 (H.R. 5503) would
require dispensers to report electronically to HHS on every
prescription for Schedule II, III, or IV drugs, including the
patient’s date of birth and SSN or alternate identifier. It would
permit physicians to access the database. Currently, 17 states
have lists of patients who receive Schedule II drugs, used by the
police to “catch drug abusers and the doctors and pharmacists who
provide the drugs” (USA Today 11/25/02).

HIPAA and National Security. The U.S. National Security
Agency (NSA) and the Dept. of Defense have partnered with private
firms to develop HIPAA-compliant (and NSA-compatible?) software.
Anyone from a national security agency can demand records with an
oral administrative subpoena; 2,102 were issued for the FBI in
2001. Unlike much evidence uncovered by search warrant, these
records can be widely circulated among government agencies. Even
the PATRIOT Act requires a court order (sfweekly.com 5/28/03).

Government Databases: Accuracy and Compliance

More than half the providers in the active Unique
Physician/Practitioner Identification Number (UPIN) database had
inaccurate information in at least one practice setting record,
according to a study by the Office of Inspector General (

http://oig.hhs.gov/oei/reports/oei-03-01-00380.pdf).

Government compliance with the Privacy Act of 1974 is
uneven, and the General Accounting Office (GAO) concludes in a
June, 2003, study that “the government cannot adequately assure
the public that all legislated individual privacy rights are
being protected.” Noncompliance was highest (29%) for the
requirement to verify that information is complete, accurate,
relevant, and timely before disclosure to a nonfederal
organization. Agencies generally place a low priority on
compliance efforts (

www.gao.gov/new.items/d03304.pdf).

Homeland security needs may be generating more personal
information that is maintained outside the Act. The ease with
which electronic databases can be created and merged may result
in “unofficial” systems of records so that agencies themselves
are unaware of all the uses of their data.

There are now 2,400 federal databases on citizens, and one
system of records holds data on 290 million people, notes Twila
Brase of CCHC (www.cchconline.org).

House Probing Hospital Charges to Uninsured

Reps. Billy Tauzin (R-LA) and James Greenwood (R-PA) have
sent letters (

energycommerce.house.gov) to 20 large providers, including
HCA and Tenet, as part of an investigation of “billing
inequalities many uninsured patients face during hospital visits”
(see AAPS News July 2003). Up to
35% of one hospital chain’s profits are purportedly accounted for
by the 2% of its patients who are uninsured (BNA’s HCFR
7/23/03). In a June alert, the American Hospital Association
urged its members to change their billing and collection
practices (Wall St J 7/17/03).

State Coordinators Still Needed

State coordinators will be appointed at the annual meeting;
you do not need to be present. If you’d like to volunteer to
advise us about issues in your state, please call us at (800)
635-1196, or send e-mail to [email protected].

AAPS Calendar

Sept. 17. Board of Directors mtg, Point Clear, Alabama.

Sept. 17-20. 60th annual mtg, Point Clear, Alabama.

Oct. 13-16, 2004. 61st annual mtg, Portland, Oregon.

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AAPS to File Amicus in FOIA Case

Ten years ago, Vincent Foster became the highest ranking
government official to die in office in 30 years since the
assassination of John F. Kennedy. Foster was the attorney
assigned by Hillary Clinton to “fix” the AAPS lawsuit against the
Health Care Task Force. Foster was found dead the day after
President Clinton fired FBI Director William Sessions, and the
FBI was not allowed to perform a prompt investigation of Foster’s
death.

To this day, the government has refused to release for
independent scrutiny ten photographs of Foster’s fully clothed
body taken in Fort Marcy Park. One of the photographs, which
showed a gun in the hand of the post-mortem body, was leaked and
widely published in degraded form. But it raised more questions
than it answered, such as how the .38 caliber gun of an alleged
suicide remained in his hand and even appeared to be lodged
underneath his leg.

Briefs are being filed before the Supreme Court on the issue
of whether the government can continue to conceal the
photographs, which might show multiple bullet wounds or a pattern
of blood flow inconsistent with the posture of the discovered
body. The precedent at stake is whether the government can hide
behind the privacy exception to the Freedom of Information Act
(FOIA), “exemption 7(C).”

The AAPS brief will argue for full disclosure. Government
needs to be held accountable. All future FOIA cases will be
affected by this precedent.

Taking Aim at Hired Guns

The Coalition and Center for Ethical Medical Testimony
(CCEMT) was recently incorporated to expose self-designated
experts who falsify credentials, prevaricate on witness stands,
and intentionally or carelessly mislead lay juries about the
standard of care, for personal gain.

Lying in court is “nothing less than a fraud against the
public,” stated cofounder Bernard Ackerman, M.D., a
dermatopathologist from New York. CCEMT will develop tools to
promote peer review of expert testimony and to make unethical
experts accountable. See www.CCEMT.org.

Nullification

More than 100 cities have passed resolutions condemning the
USA PATRIOT Act, saying that it gives the federal government too
much snooping authority. The Arcata, California, City Council was
the first body to pass an ordinance that would impose a criminal
penalty, a fine of $57, on any city department head who
voluntarily complies with investigations or arrests under the
aegis of this act.

U.S. Justice Dept. spokesman Jorge Martinez defended the
Act, saying it is constitutional and is being used only against
people suspected as acting as agents of foreign powers or foreign
terrorist organizations. He also calls the groundswell of
resolutions “merely symbolic.” There have been no instances of
actual noncompliance by localities (CNN.com 5/18/03).

The New Mexico House of Representatives passed House Joint
Memorial 40, sponsored by Rep. Max Coll, on a vote of 53-11,
directing state law enforcement officials not to enforce the
PATRIOT Act when doing so would infringe on civil liberties. The
resolution does not have the force of law, and was tabled in the
Senate.

These actions are a step toward the constitutional remedy of
nullification, proposed by Thomas Jefferson in 1798 and
eloquently supported by John C. Calhoun. They suggested that it
was the nature of compacts that one side could not have the
exclusive right to interpret the terms (Wood TE, Nullification:
the Jeffersonian brake on government, Ideas on Liberty
3/02).

Dr. Eist Wins Appeal of BPQA Decision

Relying in part on an amicus brief filed by AAPS with other
organizations, the judge ruled from the bench in favor of Dr.
Eist in Harold Eist v. Maryland State Board of Physician
Quality Assurance (civil case no. 240300, Cir. Ct.
Montgomery County). The court appears to have rejected the BPQA
position that it has the unqualified right to demand disclosure
of patient records without notice to the patient.

Tip of the Month: We inherit our legal tradition from
England, where a man’s home was his castle. Landowner rights have
not survived the environmental movement, but do remain important
in criminal law. An arrest in one’s home requires a warrant,
signed by an impartial magistrate based on evidence. In contrast,
no warrant is required to arrest someone outside of his home.
Many defendants including at least one doctor have been tricked
into leaving their home by officials seeking to make an arrest
without a warrant. Deception by government is fully allowed
(e.g., “Come out and look at your flat tire” followed by an
arrest outside of the home). Note also that a search of a home
without a warrant is presumptively unconstitutional, while
warrantless searches of cars and offices can be upheld.Andrew Schlafly, Esq.

Veeck Decision Stands

The Supreme Court declined to grant the petition for writ of
certiorari in Veeck v
SBCCI (AAPS News Jan
2003), allowing the Fifth Circuit decision to stand. AAPS
wrote to the Dept. of Justice, which the Court had asked to
comment: “Regulatory complexity needs to be exposed rather than
concealed. The Department of Justice should not be siding with
narrow special interests like that of Petitioner SBCCI and the
American Medical Association, at the expense of the citizen’s
right to disseminate the law. We support an unfettered right of
free speech to disseminate legal requirements.”

Prosecutors Avoid Jury Trials

In 1989, 17% of drug prosecutions were disposed of after
jury trials; by 1998, this had fallen to 7%. In FY 2001, only
3.4% of all federal convictions resulted from a trial; the rest,
from guilty pleas. Criminal defense lawyers are leaving the field
because “they are no longer permitted to defend their clients but
are left with the role of negotiating guilty pleas, submitting
memoranda on sentencing guidelines, and encouraging their clients
to turn in other persons…. The huge disparity between the
offered sentences…has forced virtually all defendants except
the foolhardy to plead guilty to whatever is offered” especially
since it may cost $600,000 to go to trial (NY Magazine
3/4/02).

Prosecutors can compensate witnesses by allowing them to
avoid decades in prison with proper testimony. A defense attorney
who offered comparable dollar value would be disbarred and
imprisoned for bribery (Kuykendall GJ, Ariz Daily Star
9/5/98). See
www.lawmall.com/pleabarg.

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Correspondence

Trainwreck Is on Schedule. More than half of America’s
neurologists are no longer accepting complex cases. Neurologists
typically have a high percentage of Medicare patients, and they
have fared poorly in the RBRVS system. Payment is simply not
commensurate with the time and effort required to care for
complex Medicare patients. The superimposed liability crisis will
cause the “Medicare marketplace” to change even more rapidly. If
Congress adds a prescription drug “benefit,” shortages and
impaired access will accelerate at a whirlwind pace. If a
Medicare patient can find a neurologist willing to see him, that
physician will probably have been trained to give the “system”
priority over the patient. There is now a “GME core competency
requirement” in “system-based care.” Medical devolution is
underway with selection of the unfittest.

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

Electronic Systems. The government’s goal is to have
double-digit-IQ coders decide payment based on ICD code
(diagnosis), CPT code (procedure), V code (background), E code
(history), and Q code (supplies). They can deny claims for
$8/hour. Emergency rooms comply by getting rid of expensive
doctors and employing physician assistants to run off a 2-page
printout of all the negatives that apply to a human
being possibly without mentioning the fracture. Recently, a
patient with a broken hip who had a cast on his other leg for a
trimalleolar fracture had three extremities coded as normal
because the coder didn’t look under the blanket. Physicians now
have to call each other on the phone when they want information.

Owen McCarthy, M.D., Bradenton, FL

Who Is the Enemy? We need to stop circling the wagons
and firing inward. Doctors are not the enemy. Neither are
insurance companies, consumers, drug companies, hospitals, or
employers. The enemy is socialists who revel in a divide-and-
conquer strategy, seek to politicize everything, want to
confiscate other people’s property for their own use, and strive
to increase government power because they enjoy ordering other
people around “for their own good.” The enemy is the laws and
regulations used to accomplish these things.

Linda Gorman, Englewood, CO

What Health Care Reform Is About. To win the battle, we
must win the hearts and minds of those who do not understand that
the war is not about medical care but about how we are governed.
We cannot win the war by arguing about health care. The masses of
people will obviously want everything “free”; the illusion is
just too strong a temptation to resist.

One group believes that all resources and wealth should be
evenly distributed and that no one has a prior claim on that
wealth. The other believes in property rights, the concept that
people have a right to the wealth and resources they produce or
own. The question is: do we want socialism or communism or a
free republic? The answer determines the type of medical system
that we shall have. It’s that simple.

Joseph Lee Pugh, Diamondhead, MS

Next Installment of Hillary Care. Why did the “simple
insurance portability” bill, HIPAA, pass almost unanimously in
1996? It also contained, verbatim, Hillary’s “fraud and abuse”
legislation that makes every doctor a virtual criminal, and the
“privacy rules” that are driving us crazy now, and the
“electronic payments” provisions that will grind doctors’
payments to a halt in October. The AMA actually denied
the presence of the privacy rule (that AAPS pointed out before
passage) until 1998 and didn’t use the word “onerous” until 2000.
Now we have this bipartisan “simple drug bill” that we
know is too expensive and unpaid for and will drive the
elderly from their private plans. It contains provision for 10 or
12 “private regional PPOs” with a “temporary right” to impose
price controls. It looks a lot like Hillary’s regional
cooperatives. Bet that it too passes almost unanimously.

Stephen R. Katz, M.D., Fairfield, CT

Jury Nullification. After reading the June newsletter,
I obtained a copy of Sparf v. U.S. 156 U.S. 51, 1895,
from the internet and read all 71 pages of its century-old dense
legalese. Although the Latin sometimes ran off my 40-year-old
Latin register, I am reasonably sure that I tracked the document
adequately. It did not actually hold that “…juries…have the
right to nullify the judge’s instructions on the law, but only if
they didn’t know about this right.” The majority of the court
made it quite clear that juries don’t have the right to
nullify the judge’s opinion. The opinion only notes that juries
have the power to do so, and makes the distinction with
care. It was implied though not specific in the majority opinion
that a judge is under no obligation to inform juries of their
power. The dissenting opinion was close to sparkling in its
correctness about the rights of juries and the salubrious reasons
for these rights in the defense of liberty….

I’ve watched with dismay attacks on the jury system : grand
juries that are the pet of prosecutors, contracts that require
binding arbitration, proposals for “professional” juries,
reductions in the size of juries, systematic exclusions of any
juror who might retain the capacity to think, and regulatory
tribunals used by the likes of CMS and the IRS. Even though the
legal system doesn’t respect the rights of juries, it appears to
be wary of the power and determined to erode it.

Hilton Terrell, M.D., Florence, SC

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Legislative Alert

Underway: The House-Senate
Medicare Conference

While their bosses are back home meeting and greeting the
voters and feeling political pulses, staffers from the House Ways
and Means and the Senate Finance Committees are slogging through
the competing versions of the Medicare legislation, the largest
single entitlement expansion since the Great Society in 1965. The
Senate bill is 1043 pages. The House bill is 747 pages.

With only a couple of brief meetings, the House and Senate
conferees have left for the August recess, leaving the staffers
to prepare positions for the resumption of the conference in
September. Thus far, the first major area of agreement has been
on the House provisions dealing with regulatory reform, a welcome
set of changes that would ease the burden on doctors and
hospitals and other medical professionals in the traditional
Medicare program. The Senate bill had no similar provisions.

Another area of “tentative” agreement is on the prescription
drug card for seniors for the period 2004-2006. In 2006, the
proposed Medicare drug entitlement program begins. Under the
tentative staff conference agreement, Medicare beneficiaries
would be able to purchase drug discount cards for $30 a year. The
staff-level agreement also calls for a $600 per annum federal
subsidy for drug purchases with the card for seniors with incomes
up to 135% of the poverty level. House conservatives initially
proposed an $800 subsidy reaching more seniors.

The American Enterprise Institute (AEI) and the Galen
Institute had proposed a discount/debit card provision, focused
primarily on low-income seniors, as a permanent feature
of Medicare, with a personal right to roll over funds in the drug
accounts, much like medical savings accounts. It appears that the
Medicare conferees will not be creating such a permanent
structure. Too bad.

Two other areas of major contention are whether to change
Medicare into a system like the Federal Employees Health Benefits
Program (FEHBP), as in Section 241 of the House bill, and whether
to establish a government fall-back for prescription drug
coverage, as in the Senate bill.

Kennedy versus Ryan

The FEHBP-style competition, even though it would not
even start to take effect until 2010, is considered a deal
breaker with Senate leftists. Sen. Edward Kennedy (D-MA) and 36
of his colleagues have warned that such a system would be
unacceptable to them. But Rep. Paul Ryan (R-WI) and 75 of his
fellow House Republicans, in a letter to the President, are
saying just the opposite: there must be the FEHBP-style
reform in 2010. Moreover, the House provisions creating health
care savings accounts must also be included in the final
legislation. Both look like conservative lines in the sand. In
the House, where the bitterly contested Medicare bill passed by
just one vote, Ryan’s insistence on these provisions has real
clout.

The big question is whether the White House will stand
behind conservatives promoting any serious reform. Thus far, as
Robert Novak of The Washington Post and other syndicated
columnists have observed, the President has yet to draw any line
in the Medicare sand, thus sending a message that he might sign a
flawed bill. Apparently believing that the prescription drug
entitlement is a political imperative, how far might the
President go if he can’t secure an agreement with congressional
conservatives to stand firm for real reform? Would he go to the
Left, abandon the conservative base, and seek the votes of
liberal Democrats to pass a popular Medicare bill? Bill Clinton,
after all, abandoned the Left and signed the politically popular
1996 Welfare Reform Act, largely written by congressional
conservatives. So there is precedent for such a maneuver but it
carries huge political risks.

Unfocused Debate

The Medicare conference may turn out the most important
piece of legislation in the 21st century, setting the course for
retirees, taxpayers, and their children and grandchildren for the
rest of this century.

The political target of the prescription drug benefit is the
current generation of seniors, a population that votes in
significant numbers. But the Medicare debate is not, in fact,
about the World War II generation, many of whom will not even
survive to see this legislation take effect.

The Medicare debate is about the Baby Boomers, 77 million
strong, who will begin to retire in just eight years and
inescapably about their children, the young people now starting
out in life, who are marrying, buying homes, and having and
raising their own kids. These are the folks who are going to pay
the taxes to sustain this program for the huge Baby Boomer
generation.

The Boomers are used to having it all now, not later. They
are not like their parents. No future Tom Brokaw is
going to write adulatory tomes about the Sixties Kids. So, if you
think the Medicare program is already in trouble, even without
the addition of a Medicare drug entitlement, just wait ’til the
Boomers a huge voting Bloc get on the Medicare rolls. The Mickey
Mouse Club on subsidized drugs, or subsidized whatever else we
want now. Think about that.

Untargeted Solution

The drug access problem afflicts a minority of the senior
population, and the reasonable and responsible thing would be to
assist those who do not or cannot get drug coverage. The facts
should dictate the solution; but in this case, for some reasons
that are downright strange among Republicans, and for left-wing
ideological reasons that are not at all strange among Democrats,
both houses of Congress are seeking to enact and enforce a
universal entitlement in drug coverage. Congress thus made a huge
policy decision. According to Rep. Bill Thomas (R-CA), Chairman
of the House Ways and Means Committee, the House bill covers 95%
of seniors.

Both House and Senate bills provide for a “voluntary”
drug benefit. But that’s a formality, really, and everybody knows
it. Many seniors, if not most, of course, would either be
involuntarily dumped out of their existing private coverage by
former employers, or would see their coverage severely scaled
back. The Congressional Budget Office (CBO) predicts that 37%
of seniors with employer coverage would lose it under the Senate
bill, and 32% under the House bill. CBO is sticking by its
estimates. That’s no doubt why some big corporations are
enthusiastic about the Medicare entitlement expansion. They will
have an opportunity to off-load billions of dollars of
obligations onto the backs of the taxpayers, who are already
facing huge tax increases for future entitlements.

This means that these retirees would not only lose their
current coverage, but they would also lose their deferred
compensation for that coverage, the money that they had
forgone in wages to secure the promise of retiree health care
coverage. The AFL-CIO, the UAW, and other unions are screaming
bloody murder over the loss of private employer-based coverage.
And it would not just be private employers who would dump
retirees onto the government entitlement; it would also be state
and local retirees, many of who also enjoy generous drug
coverage.

Not so the federal retirees. The House quickly passed
legislation to protect their drug coverage from the impact of the
Medicare bill on July 8 under the Suspension of the Rules
Calendar. The bill was passed on a voice vote no recorded votes
on this, thank you very much. This is the House Calendar for
“non controversial” legislation. Now get this. Several key
Senators, on a bipartisan basis of course, are considering
similar legislation to do the same. Rank hypocrisy.

Political Slam Dunk?

Recall that, for the congressional Republicans, the
“stealing” of the Democrats’ Medicare prescription drug issue is
supposed to be the political equivalent of General MacArthur’s
stunning Inchon Landing in the Korean War. A strike deep into the
enemy’s political territory, throwing the other guys on the
defensive. A political slam dunk: winning popular accolades,
locking up the “senior vote,” and taking the drug issue away from
the Democrats. Really?

Well, let’s follow the script. Senate staff and some folks
in the business community will say that CBO is flat-out wrong
about one in three seniors losing private coverage, or
exaggerating, or operating on the wrong assumptions, or whatever.
But others, less sanguine about the intentions of the Medicare
expansion lobby, will say otherwise, and they will be right.
Private drug coverage will either be lost altogether, or
dramatically scaled back within the framework of the government
program. In either case, this will be a major policy triumph for
the Left.

Meanwhile, the seniors so dumped will generally have to
pay much more out of pocket for an inferior government drug
benefit. The Left, of course, will gleefully blame this on
the bewildered and defensive congressional Republicans. But the
Left in Congress will start to do something about it, as Senator
Kennedy has already clearly and loudly indicated; they will start
to fill up the “doughnut holes” or the “benefit gaps” in the
Republican- devised Medicare drug benefit package. Expect the
Congressional Left and its allies to make it a slow, painful,
agonizing political process. Any doubts? Look at the amendments
Senate Democrats already prepared for consideration of the Senate
Medicare bill in June: fill the “doughnut hole” for Alzheimer
victims, cancer patients, diabetes patients, and force an up-or-
down vote on every last one of the amendments for every last one
of the disease groups to close the “holes.” Those amendments will
be back, like insurance mandates, a replay of body-part politics.
Who do you think wins in this process?

Then, the private sector market for prescription drugs
contracts, and the government control over the prescription drug
market expands. (Roughly 50% of all prescription drug purchases
in America are by patients older than 65, so the government
expansion has huge implications for the financing and delivery of
prescription drugs.) So, the process results in a huge expansion
of government control over medical care, setting off an explosion
in drug utilization, enormous tax increases, and sooner rather
than later draconian regulations to control expenditures.
Nonetheless, this script is supposed to be a box office hit, a
public policy triumph and an act of sheer political genius. We’ll
see.

Exploding Drug Entitlement Costs

The President caved on the demand for a universal rather
than a targeted benefit. A little more than a month later, the
price tag has already increased from $400 billion over the 2004
to 2013 period to $415 billion for the House or $432 billion for
the Senate version. It’s not going to stop there; depend on that.

Say Bye Bye to the Bush Tax Cuts?

Dr. Daniel Mitchell, a senior economist at the Heritage
Foundation, predicts that, under the best-case scenario, with
government paying “only” 25% of prescription drug costs, the
Medicare deficit would still consume about a quarter of income
taxes in 2026 and 39% in 2042. Such expenses would probably doom
any future tax reform, as would become clear later this decade,
just as most of the Bush tax cuts of 2001 and 2003 were expiring.
Good economic policy, says Mitchell, would make the tax cuts
permanent, thus maximizing the economic benefit of lower taxes,
but, given the Medicare pressures, the tax cuts would probably be
eliminated. Another victory for the Left.

William Beach, director of Heritage Foundation’s Center for
Data Analysis, says that Congress needs to take a realistic look
at what the drug benefit will cost 15, 20, even 25 years from
now. Beach says the drug benefit would, in inflation-adjusted
dollars: (1) add $2 trillion to the $5 trillion shortfall
Medicare will face in 2030; (2) cost today’s typical 40-year-old
head of household an extra $16,127 in taxes between now and the
time he retires; and (3) saddle households with extra taxes
averaging $1,125 annually by 2030.

Combined with Medicare’s current projected shortfall
by 2030, the average household would pay $3,980 per year in
higher taxes. Congress must raise the funds necessary to
prevent Medicare from going bankrupt once the new drug benefit
becomes law. Raising most income tax rates or eliminating
existing tax breaks are also possible options. More fiscal
victories for the Left.

The plan needs to go back to the drawing board.

Robert Moffit is a prominent Washington health policy
analyst and Director of Domestic Policy at the Heritage
Foundation.