AAPS News – May 1996

Volume 52, No. 5 May 1996

DISCRIMINATION

“Do you realize what managed care is doing?” asked AAPS
Director James Weaver, M.D. “They’re creating a whole new type
of discrimination-against sick people.”

The billboards, the posters in the airport, the television
ads, the full page newspaper spreads all show youthful, vibrant,
healthy people. And some Plans do provide some good advice about
health-much of which you could have learned from your grandmother
without paying up to $600/month.

Reading the provider contracts shows just what Dr. Gervais
means (see p. 4): physicians and sick patients have no
mutual benefits under managed care. CompreCare (which
“erroneously” told physicians they had to sign up with
managed care to treat Medicaid beneficiaries in Chautauqua
County) requires providers to agree to these provisions:

* [I]n no event, including but not limited to nonpayment by
the Plan, insolvency of the Plan, or breach or termination
of the agreement, shall the Provider bill, charge, collect a
deposit from, seek compensation, remuneration or
reimbursement from…a subscriber…for services provided
pursuant to the agreement….This clause shall survive
termination of the agreement.

* Provider understands that there may be withholding from
Provider’s compensation to fund a utilization incentive
risk-sharing program….The Plan shall have the discretion
to determine the percentage of a Provider’s compensation to
be withheld, and to determine the portion, if any,
…to be distributed among Providers.

* Provider agrees that in the event of plan insolvency or
termination of this contract, covered services to covered
persons confined in an inpatient facility…and courses of
treatment in progress, will continue until medically
appropriate completion, discharge, or transfer to other
appropriate provider.

In case that isn’t clear, Lawrence Huntoon, M.D., explains:
if the plan becomes insolvent or simply decides not to pay the
doctor, he cannot collect from anyone. And if he has
accepted a patient who has seizures, congestive heart failure, or
another chronic conditions, he is obligated to continue
treatment, without pay, indefinitely.

Patients are victims, not beneficiaries, of this
arrangement. They pay huge premiums for “health maintenance.”
But if their health fails and their Plan becomes insolvent, they
are left with a pre-existing condition and no coverage. They are
an unfunded liability to their Plan Provider, even if they are
fortunate enough to have some assets that they have not turned
over, permanently, to a Plan.

Under capitation arrangements, all sick people are charity
patients even if the Plan is solvent, because their physicians
are not compensated for their care.

In the past, before politicians tried to manufacture a right
to “health care,” charity patients were not discriminated
against-that is, they were not deprived of anything to which they
had a natural right (life, liberty, property, or the pursuit of
happiness). Nor could they legally deprive others. At that time,
large charitable institutions were founded, voluntarily, as
people availed themselves of the opportunity to serve
their less fortunate neighbors. These institutions may be unable
to survive in the managed-care environment.

As a rule, true discrimination does not arise against those
who are simply less fortunate. For example, the most pervasive
and recurring discrimination-anti-Semitism-didn’t arise because
Jews are inferior. Quite the contrary. Anti-Semitism becomes
virulent when Jews are perceived as a threat.

Sick people are now a threat. They threaten the livelihood
of their doctors and the solvency of their insurance Plan. And
they threaten the healthy as well.

This new development occurs when sickness care is paid for
from the same collective pool as “health care.” The problem is
magnified because prepaid health care requires a much larger pool
of resources and attracts more thieves.

Nobody really wants to collect catastrophic insurance
benefits. But everyone has a claim on prepaid “health care.”
Sick care takes money that subscribers prefer to have spent on
their own “health” needs-as the Plan promised to do in its
advertising. And Plan managers get paid for keeping the income-
generators and the stockholders happy.

Payment at the time of service, by the person receiving the
service, is voluntary and involves mutual benefit. But payment
from the pool deprives others. Every transaction involves an act
of coercion that may be more or less subtle.

While the sick have become a threat, they are weak and
relatively few in number. It is easy to discriminate against
them. The cruel irony is that the ersatz “right to health care”
quickly requires the surrender of natural rights. The Plan takes
property from all so they are less able to provide for themselves
and more dependent on the managers. Liberty is the next
casualty. Before long, life itself is at risk. The rise of
managed care and clamors for physician-assisted suicide are not
coincidental. Even in Des Moines, Iowa, physicians are split
50:50 on this issue, despite increasing awareness that in
Holland, half of those who die at the hands of their physicians
did not ask for their “termination.”

AAPS has declared the week of May 5-11 to be National
Patients’ Rights Week as the focus of a nationwide educational
campaign. We will join a nurses’ march on Washington-not to
demand more legal plunder, but to focus attention on the dangers
of waiving genuine rights for the mirage of health security.

Members can help by posting, copying, and distributing the
enclosed flyer and returning the enclosed survey.

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Physician Receives High Honor-from Patients

“You were always there when we needed you,” wrote a mother
of five children, one of nearly 600 patients who brought a
memento to a surprise party to thank Andrew Mance, country
physician, for 54 years of dedicated service.

“I didn’t do any more than God gave me the ability to do,”
said Dr. Mance of Oakland, MD, who still sees patients.

Dr. Mance, a former AAPS Director, believes that his
patients are his responsibility, not the government’s. He has
never taken money from government programs.

Though Dr. Mance has seen many changes, he states that
“real medicine is exactly where it was years ago. In real
medicine, you think of the patient. You think of yourself as a
servant. If you are a good servant, you get paid.”

Dr. Mance is also a poet, and he is not a “go along man.”

The Go Along Man

can be shackled by

The finest of thread –

When there is –

Unawareness,

Silent acquiescence,

No resistance.

A. E. Mance, M.D.,
March 8, 1996

The HMO Bottom Line

AAPS President Don Printz, M.D., reports that two Atlanta
HMOs ran out of money at the end of October, 1995: Blue Choice
and PruCare. They didn’t bother to inform the doctors, until the
week before Christmas, that they would not be paid for any
patients seen during November or December. One dermatologist
wrote off $20,000-not for voluntarily providing life-saving care
to the needy, but for providing discretionary services to
“insured” patients. He signed up again, saying that the HMOs
had promised to do better this year. U.S. HealthCare physician
“providers” in Atlanta also had a bad year-so bad that more
than half of them quit. It is not known whether the $9-million-
per-year chief executive got his paycheck garnished too.

Managed care is also increasing physician overhead. Medical
Protective Co., one of the largest professional liability
insurers in Texas, said that the use of “gatekeepers” is a
major factor behind their 23% rate increase. The company had
noted increased losses due to misdiagnosis.

CNA Insurance Cos. of Chicago is asking state regulators to
approve a 45% overall rate increase in liability premiums, and
American Physicians Insurance Exchange of Austin is seeking a 32%
rise.

Precise statistics on the impact of managed care don’t exist
because the rapid spread of managed care has occurred so recently
(Am Med News 4/1/96).

Patients are apparently feeling some impact on their care.
According to a March, 1996, survey by Aragon Consulting Group,
less than 25% of HMO subscribers and 26% of PPO members are
completely satisfied with their coverage, compared with 42.5% of
conventional policyholders. Only 38.8% of those enrolled in an
HMO and 44.2% in a PPO are highly satisfied with the selection of
doctors available to them, compared with 76.5 % in traditional
insurance plans.

A Conflict of Interest

Known as the “Queen of the Senate” and in line to be White
House chief of staff in a Dole Administration, Sheila Burke has
an interest in health policy issues that apparently doesn’t stop
at the office. Her husband, David Chew, held options to buy
18,200 shares of Aetna stock at the beginning of 1995. If he had
exercised the options in January, he could have purchased more
than $1.3 million in stock, with an instant profit of $482,000.

According to Michael Calabrese, director of the public
interest group Congress Watch, Burke has helped negotiate
Republican “reform” bills that would move tens of billions of
Medicare dollars into Aetna and other companies owning HMOs.
Burke claims that her stock options have not influenced her
actions, and that none of the bills she has worked on would
benefit Aetna to the exclusion of its competitors (Kansas
City Star, 1/21/96).

Nonetheless, one must wonder if the Senate reluctance to
enact MSAs is related to factors other than a threatened
filibuster by Sen. Daschle (D-SD) or a veto by Bill Clinton.

FDA Obstructs and May Seize Lasers

Some of the most dramatic advances in the field of
ophthalmology have been in the field of refractive surgery, and
the most exciting development in recent years has been the advent
of the excimer laser as a tool for shaping the cornea.

Invented in the U.S. in the late 1970s, these devices have
been bogged down in the FDA regulatory morass until recently.
Even now, only limited approval has been granted. In March, 1995,
lasers produced by Summit Technology were approved for removal of
corneal scars. Meanwhile, surgeons abroad have moved on to a
better type of refractive surgery that spares the surface of the
cornea: Laser-assisted in situ keratomileusis (LASIK).
In the U.S., surgeons have only four options to make LASIK
available to their patients:

(1) Become an “investigator” for a laser under study for
FDA approval. The protocols are very restrictive, and
opportunities are limited to an elite. Coincidentally, some
“investigators” hold large grants, sit on FDA advisory panels,
and are heavily invested in commercial laser centers. (2) Build a
“custom” laser. (3) Purchase an older FDA-approved American-
made laser abroad and reimport it. Such devices are well made
and cost about $100,000 instead of $400,000 to $500,000. (4)
Purchase a new “approved” laser. These are prohibitively
expensive, and manufacturers demand a $250 royalty payment
per treatment.

The FDA is attempting to block options (2) and (3). At the
urging of Summit Technology, the FDA issued an “Import Alert”
in February, barring reimportation of Summit lasers; this is
viewed as a prelude to seizure of lasers already imported.

The FDA claims inappropriate labeling, but will not say what
the labeling should be; this information is being sought under
the Freedom of Information Act. It also claims the lasers are
somehow different from the approved devices and will not release
a Letter of Equivalency previously issued.

The FDA overextends its reach when it dictates how doctors
care for their patients. The Society for the Advancement of Laser
Technology (SALT) has been fighting the abuse by regulation;
physicians of all specialties are invited to join (1345 Oak Ridge
Turnpike, Suite 304, Oak Ridge, TN 37830).

Robert Dotson, M.D., Oak Ridge, TN

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Correspondence from the LLCS

The Public Health Committee of the Pima County Medical
Society (Tucson) proposed to survey its members regarding their
experiences with various managed-care plans and the effects of
these arrangements on patient care. Because of fears of
antitrust liability, the survey was referred to the Society’s
attorneys, who advised deleting two questions related to fees:
“If your contract defines a task, and you do not feel you are
adequately qualified to do that task and refer, does that come
out of cap, affect a withhold, have no effect, other?” And
“Under terms of your major managed-care contract, are referrals
to you paid by capitation, usual and customary, procedure fee,
other?”

AAPS also referred the survey to the Limited Legal
Consultation Service and received this opinion:

Our view is that there is nothing about the purpose,
verbiage, proposed compilation, and publication of the survey
which violates U.S. law. It is true that for alleged public
policy reasons, the Dept. of Justice has taken aggressive
positions in actions against physicians who appear to combine to
effect fee barriers and “price-fixing.” This is because the
prevailing political view of the federal government is that
managed-care organizations tend to effect cost savings while
physicians’ groupings tend to be anticompetitive. While this is
highly debatable, that policy is driving the prosecutorial
philosophy of the Dept. of Justice.

It is interesting to note that surveys of the fee structures
of law firms have always passed antitrust muster. We know of no
prosecution attempting to prevent the common use of legal fee
surveys performed on a national, regional, state, or city basis.
Indeed, it is common practice of the American Bar Association and
other similar organizations to publish “standard rates” for
various groupings of lawyers. Not surprisingly, even published
court opinions affirming fee awards relate to “standard rates”
in given localities. Even more interestingly, both federal
standards and those employed by managed-care organizations
attempt to define “customary fees” by locale.

Against this backdrop, we offer our prediction of the likely
result in the event that the Dept. of Justice challenged the
survey as violative of the Statement of Dept. of Justice and
Federal Trade Commission Enforcement Policy on Provider
Participation in Exchange of Price and Cost Information: the
survey as proposed is perfectly permissible. In the event of
litigation, our view is that the government would not be
successful in a challenge. Further, in our view there is nothing
about the proposed publication which could result in a successful
action for defamation. The respondents are offering opinions,
not factual allegations which could be viewed as defamatory
per se.

Thomas R. Spencer, Jr., Esq.,
Miami, FL

Privacy Killed in Maryland; Medicare Next?

Petitioning for the redress of grievances failed in the
Maryland legislature. A bill requiring patient consent for the
release of sensitive medical information to a state computer data
base (see AAPS News Mar, Apr 1996) was killed in the House
Environmental Matters Committee and also failed in the Senate by
one vote. Siding with the state bureaucrats of the Health Care
Access and Cost Commission (HCACC) were the Maryland
Psychological Association, the Maryland Hospital Association, the
American College of Emergency Physicians, the Psychiatric
Advanced Practice Nurses of Maryland, Kaiser Permanente and the
Maryland Academy of Pediatrics. On the side of patients were 60
other medical and patient advocacy groups, including AAPS, Med
Chi, and the Maryland Psychiatric Society.

Some believe that self-pay patients were exempted from the
required reporting. This is not true, press accounts to
the contrary. The only patients permitted to receive medical care
of any kind in Maryland, without reporting to the state data
bank, are those whose care is paid for by capitated HMO plans or
small employer/self-insured plans, according to MPS
News.

AAPS will investigate grounds for legal action.

Meanwhile, Medicare is moving in the same direction. Dr.
Huntoon stumbled upon the fact of centralized claims processing
in the course of complaining about a Blue Bungler snafu. “They
let slip a new excuse,” he writes, “i.e. someone else actually
processes the claims. I don’t think they meant for that to slip
out, but I pursued it. The system has been in place for seven
years now, and I see that the Blue Bunglers have decided to make
it public in the April Medicare Bulletin.”

The Bulletin states that the Multi-Carrier System
(MCS) has grown to include 8 carriers responsible for processing
Part B claims in 17 states. The shared system now accounts for
more than 30% of the national Part B claims volume.

“At the present time, private medical information about one
third of all Medicare patients in the country can be accessed in
this one central location,” writes Dr. Huntoon. “Frightening,
but true. We note that both HCFA and the Robert Wood Johnson
Foundation for years have viewed the computerization and
centralization of claims processing as key factors in their
shared goal of government-run healthcare. Unfortunately, most
people don’t learn about these things until they are already in
place.”

An AAPS member recently asked how the “non-consent” form
(see AAPS News April 1996 and the for Patient Power
Patient’s Handbook) applied to Medicare. If central
processing is used for your area, you may need to inform your
patients that the consent they sign on their Medicare form
contradicts the non-consent form. Both cannot be
implemented. The only way out for the patients is private
contracting.

The International Information Superhighway

Appended to a Briefing Book in the records of the Health
Care Task Force is a “Progress Report on the Information-Based
Infrastructure Project,” by the Diebold Institute for Public
Policy Studies. Among the dignitaries signing the report are H.
Ross Perot, Chairman of the Perot Group; Robert Galvin of
Motorola; Roy Vagelos of Merck; Karlheinz Kaske of Siemens AG,
and John Macomber, CEO of the Export-Import Bank. The report was
brought to the attention of talk-show host Michael Reagan by
Karen Mazzarella of Speak Out America, who helped AAPS review
Archives documents.

The “deployment” of “health care
information infrastructure functionality” has a timetable. In
1997-2001, the Supreme Court is supposed to rule that providing
information service is “not practicing medicine without a
license.” Goals for 2002-2006: “transjurisdictional licensure
approved in U.S. and Europe” and “Supreme Court rules patient
information co-owned with government insurer.” For 2007-2011:
“information utilities interconnected across national
boundaries” with “UN assigned role in regulation of information
utilities.”

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Members’ Page

Only Trying to Help. One of my internist colleagues
came up to me one day apparently feeling a slight twinge of
conscience about throwing in with the HMOs. He said: “Larry,
you know I have never been in favor of any of this managed care
stuff.” I said, “but John, you were one of the first to join
and you actually became the regional medical director for the …
HMO.” John replied: “Yes, but I didn’t take any money from
them to do it…I was just doing it because I felt sorry for my
patients who didn’t have anything other than HMO coverage, and I
just wanted to help them.” Well, you know, Dr. Kevorkian doesn’t
charge anything for his services either, and he also claims he is
simply doing what he can to help. Does that make it OK? I guess
if my colleagues are looking for “absolution” of their choice
to participate in managed care, they’ve come to the wrong place.
They really should be approaching their patients and asking
them for forgiveness.

Another of my colleagues informed me that he and I are
likely the only two in town who have not signed managed-care
contracts or otherwise participated with insurance companies. I
am also apparently the only one in town who does not participate
in Medicare and the only physician in Chautaqua County who does
not participate in Medicaid, as in “the cheese stands alone.”
Still, I be not Swiss cheese. You’ve heard of “Sleepless in
Seattle.” Well, I am “Hole-less in Jamestown.”

I have looked down the “gun barrels” pointed in my
direction, and have heard the words “Ready…Aim…Fire.” Yet
to the astonishment of myself and others, I remain whole and
hole-less. I have simply stood up for my patients and continued
to practice the best medicine I know. Some of my patients have
gone elsewhere and experienced a “patient mill” mentality due
to the financial pressures imposed by the HMO. Some have
returned to my office, saying “it may have been cheaper, but it
was no bargain.”

The underlying concept in managed care, a physician selling
his loyalty and clinical judgment to the HMO as in less care =
more profit is so blatantly wrong that it will no doubt self
destruct on its own, given enough time. The truth is that
physicians didn’t have to and don’t have to promote, through
collaboration, the managed care malignancy. Those who have sold
their soul to the company store have brought shame to the entire
profession.

Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

Managed Care Can Never Work…because its goal is to
pay doctors from premiums rather than claims.
“Providers” must adopt the mindset of an insurance executive
who profits by collecting premiums and avoiding claims. Von Mises
stated that socialism can’t work because of the economic
calculation problem. I say that managed care is impossible (in
the long run) because of the premium-claim problem….

In my view, all other payment mechanisms are parasitic on
fee for service. Salaried workers ultimately derive their income
from a fee-for-service mechanism. Because the fee under managed
care is the premium, managed care providers cannot enter into
mutually beneficial exchanges with sick patients.

All attempts to have providers depend on premiums for their
income are wrong on both utilitarian grounds (because quality is
impossible) and moral grounds (because patients are deceived into
believing the provider has the mindset of a physician). In short,
managed care is a fraud.

Robert Gervais, M.D., Mesa, AZ

Are Employers Liable? If lawsuits alleging misconduct
by managed care also included the employee’s company, which
placed him or her in the relationship, MSAs would have a greater
corporate appeal ….Certainly, 401(k) plans are superseding
pension plans, in part, because their self-directed approach
relieves the employer of a degree of liability.

A Member from Ohio

Selling Out for Profit. The February, 1996, issue of
Review of Ophthalmology covers consolidations like we
have observed with the takeover of Intergroup by Foundation
Health. Just as the latter created instant millionaire status for
the partner physicians of Thomas-Davis Clinic in Tucson (each
received stock worth about $3.8 million), you will see that a
number of physicians have sold out for stock, making more money
than they would ever make treating patients.

Wall Street is prepared to pay for earnings growth, and it
regards health care as a hot market. I think this is primarily
because patients are no longer to have a choice of physicians,
since these firms will contract directly with employers. The
employer pays less than previously for “health care,” yet there
is tremendous profit potential for the managed-care company,
since it has no intention of actually delivering the same product
(doctors seeing patients) but rather a rationed, assembly line
situation, primarily using non-physicians. This is borne out by
the fact that despite the rising number of contracts that
companies like Intergroup are signing with employers, they are
doing remarkably little recruiting for physicians.

T. Glendon Moody, M.D., Tempe, AZ

AAPS Calendar

May 10. Nurses of America march on Washington.

June 1. Board of Directors, Airport Marriott, St. Louis.

Oct 10-12. 53rd annual meeting, La Jolla, CA.

Sept 17-20, 1997. 54th annual meeting, Chicago, IL.

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Legislative Alert

Big House Health Reform Bill

The House of Representatives really did it. In 1993,
after months of Task Force work orchestrated by Hillary and Ira
Magaziner, Bill Clinton never even got his 1342-page monstrosity
to the floor of a then very friendly and very left-wing House of
Representatives for a vote. But Speaker Newt Gingrich, the
Universally Despised Grinch, did it. On March 28th, the Health
Care Coverage and Affordability Act of 1996 (HR 3160) passed. On
balance, unlike most big bills, it’s pretty good. The House bill
does three big things for workers and their dependents:

First, it increases the 30% deductibility of health
insurance premiums for self-employed individuals, signed into law
earlier last year, to 50%. More importantly, the House bill sets
up Medical Savings Accounts (MSAs), enabling individuals and
families to sock away up to $2000 and $4000 per year,
respectively, to pay for routine medical services. Under the
House bill, the employers can also contribute to this MSA, and
the funds will roll over year after year, tax free, under the
same rules that govern Individual Retirement Accounts (IRAs).

A second major feature of the House bill is its provisions
for small businesses, which employ the majority of uninsured
workers. The bill would allow small businesses to pool together
to purchase insurance, amending the ERISA law to pre-empt states
from forbidding or prohibiting such multiple- employer
arrangements. The effect would be to give small businesses the
same purchasing advantages enjoyed today by large corporations:
a sharing of insurance risk and administrative costs. But small
businesses will continue to shoulder the burden of premium taxes,
thanks to Rep. Harris Fawell (R-PA), who agreed to allow these
state taxes in order to soften opposition from Congressional
leftists and insurance regulators. The exemption for all private
plans competing in the Federal Employees Health Benefits Program
(FEHBP), however, survived: the leftist double standard continues
to prevail.

Thirdly, the bill would advance the popular cause of
portability by restricting pre-existing condition exclusions in
group-to-group and group-to-individual insurance changes.
Insurance would also be subject to guaranteed renewability rules,
so that insurance companies can’t simply drop a person because he
gets sick. However, while the new rules will aid some
individuals, there can be no true portability unless and until
individuals and families are able to own their own medical
insurance policies, just as they own their own life, auto
and homeowner insurance policies. This cannot happen without a
thorough overhaul of the federal tax code-unlikely, given the
ideological commitments of the present regime.

The House bill also contains elements of medical tort
reform. It would limit pain and suffering damages in medical
malpractice cases to $250,000, while punitive damages would be
capped at $250,000 or three times the amount of the economic
damages, whichever is greater. It would also eliminate joint-and-
several liability and would bar punitive damages in most cases
against drug and medical device manufacturers whose products had
been approved by the Food and Drug Administration. Finally, the
bill would set a five-year statute of limitations for any
liability action filed after the date of the injury, and
unsuccessful defendants in liability cases would be able to
spread out their payments over time.

Clinton’s Reaction

Leftists in Congress were quick to attack the bill as a
sell-out to special interests, especially doctors. The
Administration has not issued any communications to Congress
using the “V” word, although it has signalled opposition to
both MSAs and the medical liability provisions. The argument is
virtually the same one used by leftists against IRAs: they would
purportedly favor the wealthiest sector of the population to the
detriment of the poorest and unhealthiest. The Clinton
prescription amounts to a combination of class warfare and
adverse selection bugaboos. Senator Nancy Kassebaum (R-KS), the
model of “moderate” Republican respectability, said she might
be willing to accept an increase in the tax deductibility of tax
deductibility for private insurance among the masses, but not
MSAs. Echoing the White House position, Senator Kassebaum said
that she would oppose the addition of MSAs and tort reform in the
Senate because it might drag down her mushy bill, carefully
crafted so as not to offend Senator Edward Kennedy, long a
prominent champion of “moderation,” as well as national health
insurance and Spring Breaks.

Profiles in Courage?

MSAs have been so popular in Congress for so long that it is
hard to understand the preemptive surrender signal on MSAs sent
by House Budget Committee Chairman John Kasich (R-OH) and Speaker
Newt Gingrich. They argued that MSAs would be sacrificed to
avoid a presidential veto, so workers and their families would be
able to get “portability,” which isn’t real and which is just
likely to mean going from one managed-care, employer-based
arrangement to another. This is not the stuff of which
Revolutions are made; and Gingrich and Kasich should walk the
walk, as well as talk the revolutionary talk. Also, it’s bad
politics. Clinton is going to be hard-pressed to veto a “health
care reform” bill in any case. What’s the nub of his veto
message? Let’s guess: “I’m vetoing that House-inspired health
care reform bill because a bunch of extremists in the House, the
same ones who want to destroy your Medicare and give tax breaks
to the rich, wanted you to open up the equivalent of IRAs for
medical care and allow you to spend your own money-an extremist
idea if there ever was one. And you all know how bad those IRAs
were and are; and anyway, in this great country of ours that
can’t be tolerated, because, as you know, and as Hillary and I
discussed, after conferring with Ira, some people might not be
able to do that or even want to do that, and anyway, the
HCFA/managed care/policy wonks and the actuaries, who can read
the future health care markets even better than they can read
future Medicare and Medicaid cost projections, tell me it’s bad
for health if people save on insurance premiums, when they should
be spending more on managed care, so unhealthy people can spend
less,….” Doesn’t have a convincing ring, does it?

Still, he still might do it. It’s hard to say what Clinton
will do. The left, which has always had more regulation on its
mind, really wants to stop tax changes, particularly MSAs.
Clinton is getting support from the New York Times,
which editorialized a few years ago that people should not be
able to make medical insurance choices because only professionals
can make such complicated choices for them (unless they work for
the federal government). The March 28, 1996, editorialists
clarify the point for us: Personal choice of different benefits
and options, including MSAs, is fundamentally a bad idea because
it is incompatible with the true goal of health care reform. And
here it is: “The goal of health reform ought to be the
opposite-to standardize policies so that everyone buys the same
basic package. That way health plans would be forced to compete
by offering better treatment, rather than by tailoring coverage
to attract only applicants unlikely to need treatment.” So,
in case you misunderstood, you have it from the Mouthpiece of the
Left-wing Establishment: The same benefits for everybody. One
Size Fits All. No real choice. Got It?

The Power Game

All of these ruminations are indicative of the real stakes:
The debates on “health care” never were really debates about
health; they are about political power. The rest is a vast
political exercise in a Chinese-style making up of faces.

Consider the recent flap in Maryland over the decision of
the St. Agnes Hospital to thwart the managed care plans’ policies
of sending new mothers home 48 hours after delivery. St. Agnes
officials said that they would not force women and their newborn
babies out of the hospital until they were good and ready, and
offered a free day of maternity stay to women even if the
insurance companies refused to pay for it. The Maryland Health
Services Cost Review Commission announced that St. Agnes had run
afoul of state regulatory policy, which is a mortal sin to idiots
in Maryland and elsewhere who still think, after 40 centuries of
experience, that price controls are an economically efficient way
of doing business. Robert Murray, Executive Director of the
Commission, moaned that St Agnes’ policy of paying for the extra
days out of their own bottom line was “highly problematic.”
But Murray’s statement to the February 16th edition of The
Washington Post is a gem: “It tears at the fabric of our
rate setting system…We cannot just allow hospitals to go off on
their own.” The very idea! Pretty soon patients might be going
off on their own.

On March 7th, The Washington Post reported that the
Maryland Commission, stung by unfriendly publicity, finally
approved of the previously scandalous decision of St. Agnes
Hospital-but only after a promise that the cost would not be
shifted to other patients. (At the very beginning of the
controversy, St. Agnes had said they would not shift the costs,
which would come out of the Hospital’s bottom line, but at that
time this policy was “problematic.”) Murray said other
hospitals could also do such a good deed, but first they would
have to seek government approval. Not consumer approval. No free
exchange of goods and services or even of good will or love and
friendship between doctors and hospitals and patients. In the
bureaucratic state, governed by “value-free” ethics and
puritanical political correctness, it’s not the good deed that
counts; it’s the political decision and who makes it. You always
have to get permission, even to be what the Wizard of Oz called a
“good deed doer.” That’s why MSAs are such a mortal threat. As
Senator Bob Dole, a Kansas man himself, would say, perhaps,
That’s What It’s All About.

Next, the Senate…

The Kennedy/Kassebaum bill (S. 1028) is scheduled to come to
the Senate floor on April 18th. The bill limits exclusions for
preexisting medical conditions for those who lose employer-based
coverage and provides for guaranteed availability and
renewability of health insurance. The bill also sets up group
purchasing arrangements but, unlike the House bill, formalizes
these arrangements in Health Plan Purchasing Cooperatives
(HPPCS), a throwback to “managed competition.” Unlike the
earlier version, the HPPCs are voluntary, but the bill does not
establish an even playing field for medical insurance. Under
Kennedy Kassebaum, the HPPCs would get more favorable treatment
under certain state laws, thus worrying conservatives who fear
that the Senate insurance reform proposal could, whether intended
or not, create the insurance cartels that were the major threat
in the proposals surfacing in 1993 and 1994. The more open
business pooling arrangements carefully crafted in the House bill
are clearly superior to those of the Senate.

Medicare Again

Though the public posturing on both sides of the great
Medicare divide is that they are searching for an agreement,
privately most Capitol Hill observers don’t think that there will
be a Medicare compromise. The same is true for Medicaid, which is
not as politically potent an issue although it is fiscally the
most explosive of the federal programs. According to a February
6, 1996, analysis published by Senate Republican Policy
Committee, annual Medicaid growth has been well over 10% over the
last decade and approached 20% in five of those years. As a share
of state spending, Medicaid has increased from 10.2 to 19.4% over
the 1987-1994 period.

For the Clinton Administration, no agreement is good
election-year politics. But the fiscal mess in Medicare just
keeps getting messier. The Hospital Insurance trust Fund ended
fiscal year 1995 in worse shape than the Medicare Trustees
projected six months earlier. Instead of finishing the year with
a $4.7 billion surplus, Part A lost $36 million. This increases
the likelihood that Medicare could go bankrupt before the due
date of 2002. This latest miscalculation caused a stir on the
Hill and kicked off an oversight investigation by the House Ways
and Means Committee into the old question, directed primarily at
Secretary Robert Rubin: What did you know and when did you know
it? The Treasury Department said that they released early news
of the shortfall when it came to their attention on October 27,
1995, right in the midst of the Big Budget Debate. But nobody,
including senior Administration officials nor members of
Congress, apparently had a clue about the shortfall until the
New York Times published a front page story on December
5, 1995. The good news in all of this is that the day of
reckoning on Medicare costs is close at hand.

Clinton’s Budget

The President may have told Americans in his State of
the Union Show that the Era of Big Government was over, but the
Administration’s latest budget submission says something else.
The President finally submitted his Fiscal Year 1997 budget
proposal to Congress-proposing $358 billion more in federal
spending and $232 billion more in taxes over the next seven years
than the Balanced Budget enacted by Congress and vetoed last
fall. According to an analysis published by the Heritage
Foundation, this amounts to $3,580 in higher spending and
$2,320 in higher taxes for every household in the United
States. Compared to the Balanced Budget Act, which he
vetoed, the president’s 1997 Budget submission will add $125
billion in new red ink through 2002. This amounts to an
increase of the debt burden on every household by $1250. So
much for the end of Big Government.

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