AAPS News – June 2005

Volume 61, No. 6 June 2005

DEPENDENCY AND DEATH

The problem with Social Security and Medicare is that life
expectancy is too long. The early beneficiaries could feel that
their benefits were secure because populations were growing, and
most people died a few years after retirement.

“That hasn’t been true for 20 years, and voters have figured
it out,” writes Holman Jenkins, Jr. (Wall St J 5/4/05).

Throughout the industrialized world, younger workers are
seeing politicians cut their promised future benefits. Such
“reforms” may reassure seniors but cannot make pay-as-you-go
systems solvent because we cannot dictate how much future
generations will pay in taxes or offer in benefits.

Without privately owned assets that they control and have a
title to, prospective retirees are “throwing themselves on the
mercy of future taxpayers.”

HHS Secretary Leavitt signaled what they can expect, as he
told the American Hospital Association of the proposal to
incorporate a consultation on living wills into the “welcome to
Medicare” physical examination (NY Times 5/2/05). AHA
sample documents (
www.putitinwriting.org) include a 100% effective method
of reducing life expectancy to two weeks or less: forgoing
“artificial nutrition and hydration,” defined as “a method of
delivering a chemically-balanced mix of nutrients and fluids when
a patient is unable to eat or drink.”

Living wills are not needed to prevent overtreatment in days
when hospital procedures have “produced the imperative to `move
things along.'” Death is usually “orchestrated by professionals
in hospitals,…a transition that has markedly shortened the
`waiting time’ for dying.” “Imminently dying” may be legally
interpreted to mean having a life expectancy less than 6 months
to a year. (N Engl J Med 2005;352:1500-1501).

To speed the process further, pressures mount to legalize
physician-assisted suicide. Bills are pendng in California and
Vermont (NY Times 4/1/05). Meanwhile, there is “terminal
sedation,” even for those who would not be eligible for PAS.

Getting people to “choose” death in advance is important
because patients very frequently change their minds about life-
saving treatment when they’re dying, or about living with
disability once they become disabled.

Under “universal coverage,” care of the sick or “hopelessly”
disabled competes with “coverage for the chronic conditions and
preventive care that might enable the uninsured to lead more
productive and happier lives.” To achieve the goal of broad
access, “Americans must understand that they are going to make
real sacrifices for other Americans” (N Engl J Med
2005;352:1260-1263).

A “fee-for-service” structure is antithetical to enforcing
sacrifice, and “direct payments” impede the reallocation of
resources to social priorities such as the “well-coordinated…
care that is needed by the growing number of people with chronic
illnesses.” Thus, “some combination of the heavy hand of health
plans and government would be needed.” Private plans might
succeed better at clawing funds out of hospital budgets. Some
think government should be the single payer of plans, not of
providers (N Engl J Med 2005;352:1252-1254).

For political palatability, proposals such as the one to
achieve universal coverage through vouchers in a Federal-Reserve-
style system might allow “freedom to purchase additional
services” with after-tax dollars, of course. These include a
“wider choice of hospitals and specialists or more comprehensive
mental health coverage” (N Engl J Med 2005;352:1255-
1260). But additional “covered” life-saving services? If Medicare
is the precedent, these would be forbidden, or restricted to
totally opted-out physicians.

As Robert Berry, M.D., points out, that’s comparable to
Columbus’s method of keeping his men from returning home: he
burned their boats. Preventing escape is a necessary feature of
“a vision that weaves the individual parts into a functional
system” as in the failed HSA (Clinton’s Health Security Act, the
antithesis of the new HSAs, Health Savings Accounts)
(JAMA 2004;292:2000-2006). Or as in Canada.

Canadians pay one fourth of their medical expenses out of
pocket or through private insurance but only for things like
homeotherapy and psychological or dental services. “We can pay to
obtain a breast implant, but not to treat breast cancer. We can
pay for a vasectomy, but not to treat our prostate,” writes Mario
Dumont, the leader of Action d‚mocratique du Qu‚bec the first
major Canadian political leader to speak for a mixed public-
private system (National Post 3/14/05).

Nontreatment or undertreatment of common diseases such as
schizophrenia, asthma, and heart disease is widespread in Europe,
according to an exhaustive review by Oliver Sch”ffski of the
University of Erlangen-Nuremberg. For example, 90% of patients
with acute asthma receive inadequate treatment in France
(Wall St J 10/1/03).

A system that considers all expenditures as “national
expenditures” subject to government control and that requires
eradication of all distinctions has the recipe for “equal
opportunity ruination,” writes economist Linda Gorman. In purest
form, think Russia: massive redistribution of wealth and strip-

mining of capital assets produces utter destruction. Longevity
there has been on the decline for decades.

Independence produces the evils deplored by the Left:
“fragmentation,” “dispersion,” “disparity,” and allowing
individuals to focus on their own perspective. And innovation,
prosperity, and the extension and enhancement of life.

A public relation campaign, comparable to the one on
smoking, is needed to inform Americans about what happens to care
when people become dependent on government as the only permitted
source of payment, suggests Gorman.

One outcome, often an intended one, is death.

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Socialized Priorities

The Oregon Health Plan still uses the prioritized list of
conditions first released in 1991 (AAPS News, July 1991) to determine what is covered.
The line was drawn at #587 in 1991 and is now between #546 and
547 (
http://egov.oregon.gov/DAS/OHPPR/HSC/docs/Apr05PList.pdf
).

As Linda Gorman notes, everybody gets free counseling on
seat belts, helmets, smoke detectors, hot water temperatures,
infant sleeping positions, diet, exercise, the dangers of tobacco
including “passive smoking,” and safe storage of firearms and
matches plus free STD screening by age 10. Persons aged 11-24
are advised on STD prevention, with a footnote that “the ability
of clinical counseling to influence this behavior is unproven.”
Vasectomy is #93, contraception is #54, and treatment of ectopic
pregnancy is #57.

High on the list are things like severe head injury (#1),
ruptured spleen (#13), and aortic aneurysm (#21), which the Plan
will pay for (at Plan rates), assuming that you can find an open
facility and willing physician quickly enough to help you. Items
below #546 may be paid for at market rates by the patient.
Examples include acute conjunctivitis (#547); unspecified urinary
obstruction (#550); peripheral enthesopathies (#588); acute anal
fissure (#625); and excision for cyst, hemorrhage, or infarction
of the thyroid (#629).

The visit to make the diagnosis is covered, and it’s the
doctor’s job to tell the patient that the diagnosis is “below the
line.” The doctor has been “turned into the greedy bogeyman in
the eyes of the patient,” writes Russ Faria, D.O., of Newport,
OR. Patients will demand treatment anyway, for free, or will try
to maneuver the doctor into lying to claim that rhinitis is
really asthma. Most somatic pain syndromes such as low back pain,
he observes, fall below the line.

Medicaid pays well for “comprehensive” services, observes
Dr. Faria. That may mean “no physician involved.” On paper there
are “plenty” of doctors in the community, but none are available
when you really need them because they are all doing low-risk
“wellness” work and no high-risk “sickness” work.

As the insatiable demands of government dependents mount,
supply dries up. Cedars-Sinai, one of the largest nonprofit
hospitals in Los Angeles, is packed and losing money on every
case, writes Herbert Rubin, M.D. UCLA, the other big nonprofit,
is in receivership, and has announced the impending layoff of 400
doctors and the closing of clinics.

“No amount of cash can now get you in no matter how sick you
are,” Dr. Rubin states.

“Two-Tiered Care”

In Quebec, 90 doctors have opted out of medicare. Montreal
has become “the private health care capital of Canada.” Yet the
supposedly underfunded public sector now devotes more than 40% of
expenditures to medical care, and the amount is expected to reach
50% by 2011 (Natl Post).

* * *

“Your principle has placed these words above the
entrance of the legislative chamber: `Whosoever acquires any
influence here can obtain his share of legal plunder.’ And what
has been the result? All classes have flung themselves upon the
doors of the chamber crying: `A share of the plunder for me, for
me!'”

Frederic Bastiat, Plunder and Law [orig. published
1850]
Selected Essays on Political Economy

SEPP Healthcare Summit in Pittsburgh

Once again, AAPS past president Bob Urban, M.D., has
arranged an outstanding program for the Society for the Education
of Physicians and Patients, on Saturday, Oct 22, at the Holiday
Inn Greentree in Pittsburgh. Topics include the malpractice
maelstrom, the specter of nationalization, and the cost and
availability of prescription drugs. Speakers include Andrew
Schlafly and Jane Orient of AAPS, plus former Rep. Pat Toomey,
Rep. Melissa Hart, Sue Blevins, Mary Ruwart, Joseph Antos, and
Robert Goldberg. For details, see www.sepp.net or call Dr. Gabos at
(412) 364-2758.

A Great Retirement Program?

How many would choose to invest in an account with the
following features: (1) Funds are untouchable until you retire.
(2) If you and your spouse die, funds are lost unless you have
school-age children. (3) When you retire, the entire amount will
be converted to an annuity that dribbles the cash out in low
monthly payments. (4) All funds must be parked in a low-yield
government instrument. (5) You must, by law, “contribute” 12.6%
of your earnings. This, of course, describes Social Security. As
Kevin Hassett explains, it is not designed to make the 80% of
Americans who are rational and productive (the “ants”) better
off, but to protect the “grasshoppers” (Wall St J
2/7/05) by making everyone a dependent of government which has
no legal obligation to pay a dime.

What Congress hates most about private accounts, writes
Linda Gorman, is that the funds would be “beyond its reach and
could not be applied to federal pork.”

Why Rent When You Can Own?

Just as you have a right to occupy a house only so long as
your rent is paid, health insurance premiums give you the right
to access benefits only for a limited period.

“I have rented employer-sponsored insurance for about
15…years, writes Devon Herrick. “[It] cost around $31,000…,
returned only $2,000 in benefits…, and covered only one-quarter
of my medical and dental needs. Moreover, I accrued no equity.”
(Health Care News, May 2005).

Herrick estimates that insuring against only major expenses
would have cost only half as much. Had he deposited the rest in
an HSA, he could have accumulated nearly $30,000 by now. By age
55, he could have had a $100,000 nest egg. Instead, he helped
subsidize coworkers who overused services, or who were older
(wealthier) and sicker, and paid for bureaucracy.

“Americans who are currently renting their health coverage
should consider the benefits of ownership,” he advised.

AAPS Calendar

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

Oct 22, 2005. SEPP meeting in Pittsburgh, www.sepp.net.

Sept 13-16, 2006. 63rd annual meeting, Phoenix, AZ.

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CMS Enforcement Updates

Recovery Audit Initiative. Section 306 of the Medicare
Modernization Act (MMA) provides for a 3-year demonstration
project in at least two states. Contractors are to “identify
under or overpayments and collect the overpayments.” The
Secretary shall determine the proportion of funds to be retained
in the CMS program management account, and the contractor keeps
the rest. Practices in California, Florida, and New York will be
the first targets.

Pamela Moore, Ph.D., predicts that “more physicians, fed up
with being the scapegoats, will leave the system.” She notes that
seniors are already having trouble finding physicians willing to
see them. “Perhaps that is CMS’s true plan for saving
Medicare…. [I]f there are no services being rendered, Medicare
could save a ton of money” (Physicians Practice 5/05).

Comprehensive Error Rate Testing Program (CERT).
Established in 2003, the CERT program has the right to demand
patient records in order to check compliance with all rules. If
providers fail to submit the requested documentation, CMS is to
treat the claims as errors and send the provider an overpayment
letter (www.cms.hhs.gov/CERT/
).

Providers may be tempted not to send the documentation
because the cost of say $32.50 is greater than the $27.50
payment, stated Noridian contract medical director William
Mangold, M.D. He warned, however, that failure to respond could
be treated as fraud. The initial request for a small sample of
records could be followed by a demand for 100.

Administrative Simplification Rules. HHS has asked for
comments by June 17 on the proposed enforcement rule (www.regulation.gov,
search for 0991-AB29). The rule disclaims any distinction between
errors of commission and omission. It is not clear whether each
item on a cost report is a separate potentially violative item.
Covered entities could be liable for the actions of their
business associates if the covered entity does not comply with
business associate requirements. Note that some civil monetary
penalties can be imposed without a hearing. (BNA’s HCFR
4/27/05).

EU Food Supplements Directive Challenged

The European Court of Justice’s Advocate General Geelhoed
issued a statement on April 5 that the ban on vitamin and mineral
forms not included on the EU’s “positive list” is illegal because
it infringes the principle of proportionality. The ban, scheduled
to go into effect on August 5, would remove some 5,000 products
from UK health stores, including several forms of vitamin C
(
www.alliance-natural-health.org).

Dr. Eist Still Fighting for Patient Privacy

Harold Eist, M.D., former president of the American
Psychiatric Association, has gone to court to appeal a $5,000
fine and a reprimand from the Maryland Board of Physician Quality
Assurance (BPQA). Dr. Eist was accused of failure to “comply with
a lawful investigation” when he refused to turn over records of a
mother and two children he was treating during a divorce
proceeding. Because the patients refused permission, he wrote to
BPQA asking how he should proceed. Instead of replying, the board
simply imposed penalties 7 months later. Despite an
administrative law judge’s ruling favorable to Dr. Eist (AAPS
News, September 2003), BPQA refused
to back down.

AAPS has sent a letter to
the Governor’s chief legal advisor asking him to rein in the
board to end its “unrelenting harassment of a good physician over
his plainly ethical conduct”.

Language Rule Lawsuit Appealed

In March, U.S. District Court Judge Barry Moskowitz
dismissed the AAPS lawsuit against Clinton Executive Order 13166,
which requires physicians to supply interpreters for non-English
proficient patients (Colwell et al. v. HHS, U.S.
District Court for the Southern District of Calif., No. 04CV1748,
see AAPS News, March 2001 and October 2004). The Judge ruled that none of
the coplaintiffs could show sufficient injury to have the
standing to challenge HHS.

“Federal courts routinely grant standing to individuals and
groups like `Friends of the Earth’ with far less specific
allegations of injury-in-fact than ProEnglish and its physician
coplaintiffs demonstrated,” stated ProEnglish Executive Director
K.C. McAlpin. The decision is being appealed to the U.S. Ninth
Circuit Court of Appeals.

The Pacific Legal Foundation is funding the litigation (www.pacificlegal.org). Briefs and the text of E.O. 13166 are posted at www.proenglish.org.

AAPS Files Amicus in Support of Dr. Springer

Because he spoke out against poor patient care at a state
hospital, Dr. David Springer’s contract was not renewed. He sued
the hospital, citing an unconstitutional retaliation against his
exercise of free speech. A federal jury held in his favor, but
the hospital appealed (Springer v. Henry, U.S. District
Court for the District of Delaware, C.A. No. 00-885-GMS).

In an amicus brief, AAPS argues: “As training director at
the DPC [Delaware Psychiatric Center], it was Dr. Springer who
stood up for defenseless mental patients. It was he who demanded
better care for them that seems so obvious in retrospect. He
should have ultimately been commended by the State for
highlighting what others would not recognize or admit until years
later.”

Problems included attempted suicides, security failures
(including patient escapes), and unsafe working conditions.

The jury awarded less than $1 million, a modest amount for a
physician who had risked his career for his patients. “Affirmance
is essential to make it clear that retaliation will not be
tolerated against those who stand up for patient care.”

Read the AAPS brief..

Wisconsin Patient Compensation Fund in Danger

Last year, Gov. Jim Doyle attempted to raid the Patient
Compensation Fund, to which physicians are forced to contribute,
for $200 million. The Wisconsin Medical Society authored
legislation to assure that funds are used only for paying claims.
Lobbyists warn, however, that the Governor will now ask for a
“loan” to fund “health care initiatives” perhaps to pay off the
$800 million Medicaid deficit?

Organized medicine sees the Fund as a crowning achievement.
It is “oblivious to the damage done to the profession by excess
insurance requirements, and sees no link to the loss of
independent practitioners,” writes Al Fisher, M.D.

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Correspondence

Physicians Will Follow. While physicians may complain
about intrusions into their practices, they seem totally
unwilling to do anything to preserve the integrity of our
profession.

Yet, physicians will adopt changes though not necessarily
because it is the right thing to do for their patients. When the
source of money begins to change, physicians will follow.

Much to the chagrin of fans of socialized medicine, once
freedom is out of the box, it’s like the spark that ignites a
forest fire. That’s why they are doing everything they can to
stop the spread of HSAs. But the power of the market is greater
than that of the socialists.

People are tired of managed-care bureaucrats who make the
road to medical care into an ever-changing obstacle course.
Third-party-addicted physicians, now reluctant to accept cash,
will change when they find out that they can actually be paid for
what they do. Their revenue stream will diversify, and they will
be much more secure than when dependent on government and a half
dozen HMOs.

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

Shucking the Burden. When I dropped all networks and
government programs, I was able to eliminate two FTEs whose job
was to fight government and insurance clerks for my fee. All that
transaction cost was eliminated by having patients pay me
directly. I’m able to keep my fees low and competitive, while
barring third parties from my examining room.

Herbert Rubin, M.D., UCLA

Problems with a Cash-Based Practice. It is practically
impossible to hospitalize a cash-paying patient. Hospitals don’t
want them. Specialists don’t want to see them either, or to give
them a discount. Sometimes they will see self-paying patients
because I have sent them “good” (insured) patients in the past.
If the number of cash-paying patients grows sufficiently large,
as through HSAs, pure cash-based practices will become much more
feasible than they are now.

R. Wayne Porter, M.D., Terrell, TX

Hidden Costs. The tax breaks for low-copayment, low-
deductible insurance should be listed among the Extraordinary
Popular Delusions and the Madness of Crowds by Charles
McKay, originally published in 1841. The indirect costs are
incredible: $200 billion in tax revenues that has to be raised
elsewhere, skewed incentives, administrative costs of insurers
and doctors, delays, etc. All costs are factored into the final
cost of goods and services, and global markets are not fooled.
These hidden costs contribute to the outsourcing of labor.

Robert Berry, M.D., Greeneville, TN

Explaining HSAs. By agreeing that the concept is
difficult to understand, we plant the seeds of failure. Our
adversaries want us to assume that burden; I will not. Give me 2
minutes with anyone, and I can explain the concept: “Look, Bob,
all we’re doing is rearranging how you pay out-of-pocket medical
expenses. In a good year, you make money. In a bad year, you
break even.” What is more time-consuming is undoing the brain
damage done by infecting people with corporate welfarism and the
belief that the material wealth of the nation is theirs by right.

Joseph Lee Pugh, Diamondhead, MS

Two Possibilities. You can ration by bureaucratic fiat
resulting from a political process, or you can ration by price
and the interaction of private actors in a free market. When
presented with outcomes data, any reasonable person has to pick
rationing by price: it allows for charity and professional
standards. Political rationing degrades quality, wastes money,
and ends up treating producers and consumers as slaves. Hence the
food stamp program. It rations by price but people “get access”
through income supports. You know what the subsidy is, producers
have incentives to reduce costs, and consumers have an incentive
to constrain demand. None of these properties describe current
medical subsidies.

Linda Gorman, Independence Institute

An Illusion. In the short term, socialism can appear to
succeed because governments can borrow (i.e. steal) inordinate
sums from future generations. That is, governments can fool us
into believing that we can live beyond our means for decades. In
the long term, there must be economic chaos when debts cannot be
repaid. As Bastiat said, the mark of the great economist is to
recognize both short and long-term consequences of our action.

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

Who Are the “Rich”? My father told me that in Broken
Arrow, Oklahoma, in the 1940s and 50s, the children who had shoes
to wear in the summertime were “rich.” Others got only one pair
of shoes per year, when school started. The definition used by
the Left isn’t all that different today.

Sean Parnell, Heartland Institute

Why Pre-Pay? If I had incurred a big medical bill while
I was uninsured, I would have paid it off over time, assuming I
recovered. There is no reason to “pre-pay” for medical care if
you can “post-pay.” Imagine if no one could buy a car on credit,
but had to pre-pay $26,000! Similarly for homes, an education,
and almost everything else. Job creation and entrepreneurial
activity would surely suffer.

Greg Scandlen, Hagerstown, MD

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Legislative Alert

Medicare Costs

The Medicare Trustees say that the total unfunded liability
of the Medicare program is now $29.7 trillion. This is the long-
term estimate, calculated over a 75-year period, meaning that
taxpayers are going to have to cough up that amount, plus
whatever is needed to maintain the solvency of Social Security
and pay the exploding costs of Medicaid, which is now larger than
Medicare. The significance of the latest Trustees Report, largely
ignored in the media, is that the unfunded liabilities for the
whole program have increased roughly $2 trillion in just one
year, while that of the drug benefit alone jumped from $8.1
trillion to $8.7 trillion. What’s another $600 billion?

Not surprisingly, all of the official Medicare estimates are
going up. The latest Congressional Budget Office (CBO) estimate
over the years 2006 to 2015 is $849 billion, while the
Administration figure is $724 billion. The Administration says
that the CBO is not counting the savings that will surely come
with the implementation of other provisions of the massive
Medicare Modernization Act (MMA) of 2003. Congress by law is
required to follow the CBO estimates.

Spending Caps?

Senators Lindsay Graham (R-SC) and Jeff Sessions (R-AL) are
proposing legislation to cap Medicare 10-year drug spending at
$395 billion, the amount the CBO originally projected during the
2003 Medicare debate. Their proposal would require spending in
any given year over the next 10 years to stay within the 10-year
total. If at any time spending would exceed the cap, the bill
would require the President to submit legislation to curb it.
This is a variation on the new law that requires the President to
submit legislation if two consecutive Medicare Trustees reports
in any 7-year period say that Medicare spending will require an
excessive draw-down on the general treasury to pay benefits
(i.e., 45% of Medicare spending is to come from general
revenues). That requirement may be triggered as early as 2007.

Price Fixing

Taking a different tack, Sen. Arlen Specter (R-PA) is
aligning himself with the Left again and proposing to remove the
“non-interference” clause of the MMA, which prohibits the
government from fixing prices. This is supposed to allow HHS to
“negotiate” drug prices, just as the VA does today.

The CBO, incidentally, directly disputes the idea that
savings would be greater from government “negotiation,” citing
the superiority of private-sector purchasing and bidding
arrangements. The CBO finding was bolstered by a recent
PricewatershouseCoopers analysis that estimated that under the
MMA in 2006, where private plans compete for enrollees there
would be a 6% increase in drug usage, but an 8% decline in drug
prices as competing plans negotiate larger discounts.

Aside from the vast differences in population and purpose
between the VA and Medicare, the term “government negotiation” is
a euphemism for price controls. The government doesn’t
“negotiate” anything. It’s simple: If you don’t accept the
government price, you do not have access to the government
“market.” It’s a process of exclusion, or flat-out supply
restriction. So, don’t be fooled by the business-like, free-
market-sounding rhetoric. This price-control proposal would mean
that in 2006, not only will 60% of all prescriptions sold in the
United States be purchased by the federal government. It will
also mean that government would dictate the prices of a huge
share of drug prices, just as it now dictates the price of a
large portion of physicians’ services. This would be another big
step toward government control of medicine, which, for the Left,
is the real point. “Cost control” is often a leftwing wolf in the
“fiscal conservative” clothing.

The recent Congressional concern with the costs of the drug
entitlement is laudable, but the danger is that the solution will
be exactly wrong. The solution to an excessive indulgence in
Swedish-style socialism is not to resort to heavy-handed, Moscow-
style pricing regimes. The correct focus should be the policy of
the universal drug entitlement itself. Yes, Once Again, It’s
the Structure Stupid!

Central Planning on Steroids

While Medicare costs continue to soar, we are going to
witness an extraordinary Congressional experiment in central
planning. It’s boring, of course. But, as Friedrich Hayek would
counsel us, follow it closely, anyway. Medicare has always had
big managerial problems. These include a painfully sluggish
response to change, delays in adopting medical technology in
benefits packages, delays in the adoption of advanced information
technology, the multiplication of thousands of pages of confusing
rules and regulations that agency officials themselves cannot
explain, and the use of payment methodologies that have little to
do with market realities.

On top of these problems, the Center for Medicare and
Medicaid Services still “HCFA” to those of us who know
better has had serious problems in personnel management,
including a loss of skilled personnel. But Congress made matters
with the complex Medicare drug entitlement, which has to be
administered, of course, in accordance with the specific
provisions of the law.

The more than one thousand pages of new Medicare rules
governing the drug entitlement cover a variety of items, such as
the rules governing the health plans, including the new Medicare
Advantage (MA) plans and the unprecedented Prescription Drug
Plans (PDPs) envisioned by the Congress; the provision of an
estimated $71 billion worth of taxpayer subsidies for employers
over the next 10 years; and the close coordination of federal and
state officials who must work together to enroll Medicaid “dual-
eligibles,” poor and disabled seniors, in the new program. This
is already taxing CMS’s 4,500-member staff, and the agency is
preparing to hire another 500 staffers just to cope with
enforcement of the new law.

CMS Tasks

Just look at what the agency has done already. After issuing
its Final Medicare Part D Regulations, CMS quickly started
conducting training sessions, while issuing guidance to potential
employer and union sponsors of the future Medicare drug plans. In
February, CMS officials issued an “advance notice” on
methodological payment rules for drugs, and started to process
Part D applications from PDPs and MA plans, while educating
insurers on how to make “bids” for the Part D benefit. Next, they
started to accepting proposed “drug formularies” from MA
executives, to make sure that they conform to the rules governing
the drug formularies. (Apr 18, 2005 was the final day for
submission of proposed formularies.) Then, CMS officials released
the 2006 “plan benefit package” and “bid pricing tool” software
and technical instructions for the executives so that they can
correctly administer, under CMS supervision, the Part D benefit
in MA plans. CMS issued a letter to all organizations with
instructions for payment and enrollment in Part D. This will
include getting their “plan benefit package” and making sure that
they get “bid pricing tool” software “uploads.” It is hard to
imagine where old-fashioned government central planning would be
without 21st Century modern information technology.

What’s Next?

Just look at what the agency must still do. Next month, CMS
is to accept the MA plans’ bids. (June 6, 2005, is the final day
to submit bids for calendar year 2006.) Then CMS has to continue
mass mailings to millions of Medicare beneficiaries who are
deemed eligible to get federal subsidies for their drugs. Of
course, claims processing in Medicare has often been a headache,
at least for medical professionals, who often don’t understand
the Medicare lingo. And the sheer number of claims will explode
with the implementation of Part D next January. So, CMS, starting
in July, will start a new program of “drug claims training” for
Part D “providers,” while holding another “open forum” for health
plans and managed care plans on various aspects of the MMA.

In August, CMS is scheduled to release the “national average
monthly bid amount” for the drug benefit and call for “a
reallocation of rebates” for MA and PDP plans. In September, CMS
is scheduled to approve the MA drug benefit packages, hold
another “open forum” for managed-care plans, and sponsor a Part D
enrollment and payment conference.

Medicare & You information to seniors is supposed
to go out Sept 30 to Oct 15. The content of the proposed mailing
is already being challenged by House Democrats, led by Rep.
Charles Rangel (D-NY), ranking member of the House Ways and Means
Committee, because it does not spell out in detail the pitfalls
of the new drug benefit. Meanwhile, throughout October 2005, CMS
must oversee the beginning of the marketing and enrollment of
seniors in the Part D, and will unveil “new plan compare” website
and create a “personal plan finder” on the web to help seniors
secure their chosen plan.

November is crunch time. “Open enrollment” in Part D begins
on Nov 15, 2005, and ends on May 15, 2006. This is likely to be a
politically difficult time for Members of Congress, because by
this time, employers will have made the decision either to scale
back or drop retiree drug coverage. Rest assured that employers
and political activists, right and left, will blame Congress for
the disruption. Dec 31, 2005, is the last day that more than 6.5
million seniors will be able to use their Medicare drug card, a
competitive program that has yielded some impressive personal
savings. Dec 31 is also the last day 6.4 million dually eligible
beneficiaries will have access to their existing Medicaid drug
coverage. They are ordered to enroll in the new Medicare drug
program. See, as George Orwell might have said, some drug
coverage is more “voluntary” than others.

Playing Well with Others

While CMS must accomplish the bulk of these regulatory
tasks, both the state officials and private employers must also
play a key role in the administration of the drug entitlement.
Their efficient coordination and cooperation will be essential to
avoiding major problems or minimizing their impact. Given the
complexity of the Medicare law and its many requirements, this is
a tall order. State Medicaid officials are already warning that
the coercive transition of the 6.4 million Medicaid covered
seniors, many of who are mentally and physically disabled, into
the Medicare drug program is burdened with far too many pitfalls.
Check it out. Are your Medicaid nursing home patients, let alone
state officials and Medicaid directors “ready”?

Forget Congressional rhetoric about the drug provisions
being a triumph of choice, competition, and voluntary enrollment.
That’s nonsense. The creation of a universal government
entitlement for drugs is another step toward government
management of American medicine, characterized by price controls
and benefit standardization, evolving towards a single-payer
regime. While private plans are today the Medicare mechanism of
choice for the delivery of the drug benefit, they could very well
end up being private plans in name only; they could instead
become another set of vehicles for government control, rather
than consumer choice and market competition.
Clintonesque.

Flake Yells “Stop”!

Congress could yet admit a major mistake, and repeal or at
least delay the drug entitlement before it goes into effect on
Jan 1, 2006. The universal entitlement was, and is, totally
unnecessary, since roughly three quarters of seniors already have
drug coverage. Congress could instead do the right thing and
target assistance to seniors without drug coverage, particularly
low-income seniors who do not qualify for Medicaid.

Only one member of Congress thus far has shown by deed and
word that he gets it: Rep. Jeff Flake (R-AZ). Flake introduced
the Prescription Drug COST (Control Overspending to Save
Taxpayers) Containment Act (H.R. 1382). The bill would delay the
drug entitlement for one year; retain the Medicare drug discount
card and the annual assistance to low income seniors; and allow
the 6.4 million dual-eligible seniors to continue to get their
drug coverage through Medicaid in 2006. It’s a delay, not a
repeal. But it would give Congress the precious time to take a
deep breath, collect itself, and figure out how it is going to
pay almost $9 trillion in promised Medicare drug benefits.

That would be the rational and responsible thing to do.

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