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Omnia pro aegroto

Volume 56, No. 4 April 2000


As Lenin recognized, medicine is the keystone in the arch of socialism. The keystone in the arch of government-controlled medicine is a comprehensive data base. And the essential linkage element for a relational data base is a unique identifier, such as the Unique Health Identifier (UHI).

Vendors are already preparing software that can be used as soon as the federal government assigns the identifiers, according to Kent Snyder of the Liberty Study Committee, and regulations are on hold pending settlement of relevant issues, such as privacy concerns.

The data base and the UHI were extensively discussed by the Clinton Task Force on Health Care Reform, as shown by documents released as a result of AAPS v. Clinton. Federal "reporting protocols for developing a nationally standardized data base" were to be a part of the Performance Support System to "facilitate state accountability" for meeting federal standards. Providers would be required to submit claims for all medical services, even those paid out of pocket ("Medicare already has such a requirement"!), to help determine, among other things, whether a global budget was being exceeded.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) enacted a large portion of the Clinton Health Security Act of 1993, including the requirement for a "unique health identifier" that could be used to tag and track each individual's medical records from cradle to grave.

Six alternatives for creating the UHI are being considered by the Department of HHS, including biometric methods that employ DNA analysis or voice recognition technology. The project has been on hold for two years because of defunding, thanks to the efforts of Rep. Ron Paul, M.D. (R-TX). It will be back unless Congress repeals part of HIPAA.

Meanwhile, an expansive public-private partnership is granted access to all electronic medical records, without patient consent, in the HHS "privacy" regulations released last November. At the close of the comment period on Feb. 17, 50,000 comments had been received-an unprecedented number of pages and commenters. Despite the avalanche of privacy concerns, implementation is slated to begin January, 2001.

"Security of a medical records data base is an oxymoron," stated AAPS Public Relations Counsel Kathryn Serkes at a meeting of the National Committee on Vital and Health Statistics (NCVHS). Such a data base is designed to be accessible, to share data. Even systems designed to be secure, as in the Department of Defense, are highly vulnerable. Of 9,800 DOD systems, hackers cracked 7,000. Only 24 systems recognized the intrusion, and only three responded, according to Gary Christoph, Ph.D., Chief Information Officer in HCFA's Office of Information Services.

Security efforts would be very expensive; and HIPAA provides neither mechanism nor budget for enforcement. Christoph noted that attempts to do a security audit at a government agency generally meet with denial and resistance. "There is an enlightened self interest to seem more secure than they actually are."

Nevertheless, NCVHS envisions extending the rule to all records, including the paper ones specifically excluded by the proposed regulations. The AMA in its comments refers to the "backdraft" effect and is informing its constituency that a "prudent interpretation of the regulation would apply to all records...unless the physician is certain that the paper document will never be computerized and will never leave his or her office." [AMA comments can be accessed through www.aapsonline.org, along with those of AAPS and others.]

Concerns about preventing unauthorized uses of the data, while important, beg the questions concerning the legitimacy of the system itself and the intended uses of the data for purposes of central planning, rationing, and controlling the scope and quality of permitted medical care.

Various crises (such as costs and numbers of uninsured) and noble goals ("universal coverage") are fueling the movement toward the Clinton Plan's final solution: total takeover by the public-private partnership (a.k.a. fascism). A promise of security being one of the most powerful blandishments of socialism, it is not surprising that medical errors and safety are now in the spotlight as "national priorities" outweighing any right to privacy of medical records.

With the prestige of the Institute of Medicine (IOM) behind it in the book To Err Is Human: Building a Safer Health System, the Clinton-Gore Administration continues to push for the Task Force agenda. The book's executive summary reveals the Marxist premise of the analysis: the root cause of error is the "decentralized and fragmented nature of the health care delivery system." A "comprehensive" approach is required to "compel" participation. This will entail mandatory reporting systems, self-criticism, "multidisciplinary" national committees, practice guidelines, standards for the introduction and diffusion of new therapies and devices, and an obligation for providers to meet "social demands" such as caring for the uninsured.

Professional organizations such as the AMA can expect to have a leading role in developing practice guidelines "consistent with current medical practice," in training clinicians, and in advocating for change, states the IOM.

A new national center will focus solely on creation of a culture of safety to "reduce...departures from the way things should have been done." The "normalization of deviance" must be avoided because "when deviant events become acceptable, the potential for error is created."

A new era of rigid, lockstep medicine dictated by bureau- crats, with inspectors in every office, will dawn-unless the keystone of universal data is kept out of the arch.

The Anesthesia Model for Error Reduction

In the early 1980s, the death rate attributed to anesthesia was 2 in 10,000. Now, according to the IOM book To Err Is Human, the rate is about 1 in 200,000-300,000: the number of deaths decreased by a factor of 40 to 60. (The IOM would demand that errors decrease by a factor of 2.) Liability insurance premiums for anesthesiologists have decreased by a factor of about 6. The reason? The IOM credits "improved monitoring techniques, the development and widespread adoption of practice guidelines, and other systematic approaches to reducing errors." Obviously, an as-yet-nonexistent national Center for Patient Safety cannot take credit.

Curtis Caine, M.D., of Jackson, MS, attributes the change to better training and better equipment. Pulse oximetry did not wait for a recommendation by a national committee; anesthesiologists demanded it as soon as it was available.

By the time a blood gas is reported by the lab or the surgeon notices "black blood," the harm is already done. It is the instant feedback on patient status (the outcome), not rigid instructions on every step in the "process," that saves lives.

Practice guidelines are a hindrance, Dr. Caine thinks, because they frequently conflict with actions directed by training and experience. If an adverse result occurs, it is an "error" if and only if a guideline was violated. Necrosis of the trachea is just unfortunate as long as the pressure in the endotracheal tube cuff is the prescribed 20 cm H2O-even though the skilled anesthesiologist would have lowered it until he could hear evidence of a tiny leak.

Dr. Caine, also a pilot, notes that because of the system- wide priorities of the FAA (an agency cited as an example by the IOM), the Jackson, MS, airport, while excellent, has less sophisticated air traffic technology than LAX-while every operating room in Jackson, not being subject to national priorities, is equipped with the latest monitoring equipment.


Error in the Error Analysis

The IOM book presents no original data; it summarizes 49 studies done since 1974, with no critique of methodology. Its estimate of the number of fatal errors, ranging from 44,000 to 98,000 hospital patients per year, is based on an extrapolation from a study of 15,000 randomly selected hospital discharges in Colorado and Utah (in press), and 30,000 in New York (Brennan et al., N Eng J Med 1991;324:370-366), to 33.6 million hospital admissions. An error is defined as "the failure of a planned action to be executed as intended...or the use of the wrong plan to achieve an aim...." There is no standardized taxonomy for reporting adverse events or errors; an event was classified as preventable or negligent upon the concurrence of two reviewers, whose opinion was based solely on the medical record. The kappa statistic for agreement on preventable error was 0.61 (0.4 - 0.6 is "moderate agreement"), and on negligence was 0.24 (0.2 - 0.4 is "fair").


Ethics and Guidelines

The guidelines police may view themselves as the moral police: "Physicians have a professional obligation to be aware of evidence-based guidelines and to use them where applicable," stated David Nash, M.D., associate dean of Jefferson Medical College in Philadelphia. Failure to follow guidelines may be called "arrogance." In the view of Philip Boyle, Ph.D., of the Park Ridge Center in Chicago, which specializes in issues of health, faith, and ethics, "most physicians don't really have the scientific background to question the data. It's reprehensible [for them to do so]" (AM News 12/27/99).


Doctor Sues Over Guidelines

Stating that there is at least one risky recommendation on each of the 400 pages of Milliman & Robertson's pediatric guidelines, Thomas Cleary, M.D., head of pediatric infectious diseases at University of Texas-Houston Medical School, has filed suit against the publisher, which listed him as a "contributing author" without his consent. This may be the first lawsuit to directly attack the credibility of such guidelines and the secretive methods used to write them. It raises the specter that Milliman & Robertson tried to buy scientific credibility by contributing $100,000 to the pediatrics department at UT-Houston in exchange for the school's stamp of approval.

Insurers, HMOs, and hospitals serving about 50 million patients are believed to use the guidelines, which are a lucrative part of Milliman & Robertson's business. The pediatric guidelines sell for $900 each, and the entire nine volumes cost thousands of dollars.

"Physicians who are forced to follow these guidelines are forced to commit malpractice," Dr. Cleary stated.

As a condition of settlement, Dr. Cleary demanded a recall of all 1998 guidelines sold, apologies to buyers admitting wrongdoing, full-page ads in major newspapers, donation of proceeds from all volumes sold to charity, and an agreement to stop publishing recommended lengths of hospital stays. The company declined, and trial is scheduled for next January (Houston Chronicle 3/2/2000).


AMA Supports Public-Private Partnership

While disagreeing with mandatory reporting of errors, the AMA supported, in principle, the IOM's report and its call for a "system-wide approach to eliminating adverse outcomes." In Jan. 25 testimony before the Senate Committee on Health, Education, Labor, and Pensions, AMA Immediate Past President Nancy Dickey, M.D., stated that the National Patient Safety Foundation, established by the AMA in 1997, has an approach like that recommended by the IOM. She recommended federal funding to such private organizations.

In comments on the National Provider Identifier submitted July 6, 1998, the AMA stated that HCFA had grossly underestimated the costs of developing the NPI. "The best solution for the implementation of the NPI is to have the AMA be the enumerator for physicians using the AMA's Masterfile to assign the numbers."


How to Destroy Quality

LaMar L. Briner, President, LLBIS, Inc., writes: "The medical field is getting the same federal treatment accorded IBM....As with IBM, the goal is mediocrity in all that we do....The feds prevailed on IBM to downgrade the quality of its workforce through affirmative action....Eventually, only incompetent managers were willing to accept managerial positions in IBM. Their solution...was to apply quality control measures..., doubling or tripling the work force so that the groups could check on each other to assure managers that projects were being done right....Of course, they weren't....

AAPS Files Partial Birth Abortion Brief

AAPS has joined in a brief filed by amici curiae in the case of Don Stenberg, Attorney General of the State of Nebraska, v. Leroy Carhart, M.D., U.S. Supreme Court No. 99-830, in support of State law forbidding partial birth abortion. Other signatories include the Illinois State Medical Association, the Christian Medical and Dental Society, the Catholic Medical Association, Eugene F. Diamond, Edmund Pellegrino, and about 30 other associations and individuals.

The AMA declined an invitation to participate in the case, although the brief echoes positions previously expressed by AMA Executive Vice President P. John Seward in a May 30, 1997, letter to the New York Times:

This issue is whether the partial delivery of a living fetus for the purpose of killing it outside of the womb ought to be severely restricted. We believe, as a matter of ethical principle, it should rarely if ever be done. And although we also believe physicians should have broad discretion in medical matters, both this procedure and assisted suicide (as well as female genital mutilation and lobotomies) can and should be regulated if the profession won't do it.

Amici argue that it is both permissible under previous Court precedents and desirable to restrict the use of the procedure also known as "intact dilatation and extraction" (D&X) to circumstances in which it is necessary to save the life of the mother (if any such exist).

The District Court took contradictory positions: (1) that D&X could not be clearly distinguished from other abortion procedures, and the law thus threatened the availability of other types of abortion, and (2) that D&X was a superior (and thus distinguishable) method from the standpoint of maternal safety. In other words, the Court opined that the law had the effect of outlawing the "standard" but unsafe [dismemberment] dilation and evacuation (D&E). (See Carhart v. Stenberg, 972 F.Supp. 507, 513 (N.D. Neb. 1997).)

Dr. Carhart is the only provider in the State of Nebraska who performs intact D&X; yet in 90% of his own cases he apparently makes a deliberate choice to do a D&E rather than the procedure that he claims to be safer.

There are neither studies nor articles in the peer-reviewed literature to support the safety of the intact D&X. No authoritative medical opinion delineates any circumstance that necessitates its performance. The District Court relied solely on claims by expert witnesses that D&X was superior to D&E because of shorter operating time; less chance of trauma to the cervix and uterus from bony fragments or instruments; and less risk of disseminated intravascular coagulopathy, amniotic fluid embolus, retained fetal parts, or free-floating head. Neither of the two witnesses had ever intentionally performed or taught the intact D&X procedure, despite testifying to its superiority.

The District Court did not consider the complications of intact D&X, which include cervical incompetence; laceration of the cervix or uterus causing maternal hemorrhage as scissors are forced blindly into the fetal skull; and the risks of performing an internal podalic version to convert the lie into a footling breech, such as uterine perforation or rupture, abruption, or amniotic fluid embolus.

Although amici do not argue that the D&E procedure is untroubling or ethically justified, they state that the intact D&X blurs the line between abortion and infanticide in a way that imperils public trust in the integrity of the medical profession. In one moment the physician is using the terminology and techniques of obstetrics, and in the next turns into a destroyer of the life that he has all but delivered.

"The federal government should not interfere in the practice of medicine," stated AAPS Executive Director Jane M. Orient, M.D., "nor should it force States to declare infanticide to be a medical procedure, much less one with special judicial protections denied to interventions that enhance the life and health of those who receive them."

The States of Louisiana and Mississippi have also filed a brief, which has been endorsed by the State of Texas, arguing that pregnancy ends at the onset of parturition. Thus, the Nebraska "ban on the killing of a child in the process of birth does not regulate the `termination of a pregnancy'."


AAPS Supports Freedom of Association

AAPS has also signed an amicus brief in the case of Boy Scouts of America v. James Dale, U.S. Supreme Court No. 99- 699, joining with the Cato Institute, the Center for Individual Rights, the Texas Justice Foundation, the Southeastern Legal Foundation, the Independent Women's Forum, and Eagle Forum Education & Legal Defense Fund, in support of the Boy Scouts' right to exclude members and leaders who do not subscribe to its code of ethics concerning homosexual behavior.

Amici argue that the New Jersey Supreme Court had adopted an overbroad interpretation of the concept of "public accommodation," and then used the "public" label to degrade the Boy Scouts' First Amendment rights.

This case, amici believe, is critical in preserving areas of private sovereignty against government encroachment into all areas of life. "If the federal government denies the Boy Scouts of America the right to uphold its own Oath, why should medical associations, private schools, or even churches be immune from federal supervision of their teachings?" asked AAPS General Counsel Andrew Schlafly.

America's Founders proscribed titles of nobility to guard against the tendency of a given regime to project its authority forward in time, without the regularly renewed assent of a sovereign people. On the same principle:

Where a regime passes laws to entrench the present majority's viewpoint and to hinder the possible rise of competing viewpoints, the governors are merely seeking to pass power down to their intellectual, rather than their physical, heirs. Both forms of hereditary power are antithetical to the Constitution. And a government-imposed self-perpetuating orthodoxy is by far the worse of the two.

Gays and Lesbians for Individual Liberty (GLIL) also filed a brief supporting Boy Scouts of America's right to set its own standards for membership, while disagreeing with the exclusion of gays. "If government forces the Boy Scouts to change that policy, the constitutional rights of all of us...will be diminished," stated GLIL president Richard Sincere.

* * *

The American Health Legal Foundation frequently supports legal work of AAPS, on issues that have a Constitutional basis and relevance to the practice of private medicine. Contributions to AHLF are tax-deductible under section 501(c)(3) of the Internal Revenue Code. Enough printed copies of the partial birth abortion brief are available to distribute to the first 60 persons who contribute at least $100. A self-addressed envelope is enclosed.

Members' Page

E&M Guidelines and IQ. Enclosed is an 8-page sample of what has happened to physician thinking as a result of E&M Documentation Guidelines. I recently sent a patient with advanced Parkinson's disease to a prestigious clinic to be evaluated for deep-brain stimulation via implanted electrodes. The consultation note follows the E&M clinical pathway to the letter and hits every bullet point. There is even a little chart showing that the medical decision-making was of high complexity. And just to make sure that his clinic doesn't get hit with a PATH assault, my consultant documents that "residents were not involved in the examination or evaluation of the patient." (Too bad, they might have told me something useful.) I learned that the patient watched a video and received written materials about the surgical procedure plus a starter kit for Requip, with instructions not to start it unless told to do so by her PCP. (The patient was already on Requip, prescribed by me, her neurologist, as noted on pp. 2 and 5.) There were numerous didactic paragraphs that are also found in the PDR.

I think this patient is an excellent candidate for the procedure, but I cannot tell whether the consultant thinks so.

I do not think that these prestigious clinic physicians are stupid people. But what does this government coercion and physician compliance do to the physician's mind in the long term? If you get into the habit of doing stupid things because government tells you to, do you, in fact, become stupid?
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


Physician Profiles. Proposed methods of comparing physicians (such as the notorious Milliman & Robertson practice guidelines) focus on "outcomes"-many of which are patient behaviors not under the control of the physician. Additionally, as the world famous quality guru William Edwards Deming would say, "You can't judge outputs unless you can control inputs." I've yet to see a medical outcomes assessment that properly controlled for inputs. Physicians with the best reputation-to whom the most difficult cases are referred-may not have the best outcomes. So how can a patient choose a physician? How do you choose a mechanic or a contractor? Either you go by a friend's recommendation, or you rely on your gut instinct.
Gerry Smedinghoff, Consulting Actuary

[Our medical staff soundly rejected a proposal to put Milliman & Robertson criteria in every chart. Thanks are due to the 1996 series on the scientific pitfalls of such guidelines in the Medical Sentinel--Dr. Lawrence Huntoon.]


What "Is Covered" Is. We've been getting our CBCs denied for payment by Blue Cross/Blue Shield for their government employees. When we call the company to find out what the problem is, the reps tell us that they do pay for CBCs but that we are using the improper CPT code. When we ask what code we should be using, they refuse to tell us!

We now tell these parents that the company will not cover the test and that if they want us to do it in the office, they will need to pay for it out of pocket.
Gary Mirkin, M.D., Great Neck, NY


Dropping Out. This is the third year since I resigned from Medicare and the fourth since I resigned from all managed care. Now I see patients on a pay-per-view basis, the old- fashioned way. I work less and make almost as much money as when I was seeing twice as many people. Noncooperation with this evil system is the only way out for us. Wholesale resignation. Complete walk out. Drop out of this rat race.
KPS Kamath, M.D., Cape Girardeau, MO


Equal Compliance for All. From a letter to Empire Medicare Services: Over the past year, we have detected well over 100 recurring payment decision errors by you, which continue to occur despite our repeated calls for claims review and correction of the problem....In my office, I have a strict Compliance Program to address coding errors; we both share a compelling obligation under federal laws to correct errors promptly. In the absence of this corrective effort, a pattern of abuse is demonstrated and implicates the offender, and may result in substantial penalties....As a cooperative gesture, I will allow you 90 days before I begin to keep meticulous records of these errors for submission to our State's and HCFA's Fraud and Abuse Investigative Service.
Jeffrey T. Liegner, M.D., Sparta, NJ


Reactionary Policy. In the early 1980s, a surgeon proved to his dumbfounded colleagues that cataract surgery could be safely performed in a simple, non-hospital environment. Surgeons from across America (before it became Amerika) flew to Florida to observe simple yet safe cataract surgery in action. I came back to Arizona and immediately built my ASC. Medicare saved millions of dollars when surgeons like me moved out of the overbuilt, oversanitized, overregulated hospital environment. Yesterday, I visited a relatively new cataract ASC. Guess what? New regulations mandate a return to the old overly "built" hospital setting.

Of course, large ASC owners relish the thought because these regulations effectively snuff out competition from smaller "independents." Another instance of Big Business applauding Big Government. Forcing all doctors into a few government-controlled centers simplifies the task of controlling (i.e. rationing) medicine and demoralizing entrepreneurial doctors.
Robert Gervais, M.D., Mesa, AZ

Legislative Alert

Tax Credit Mania

As noted in the March issue of our Report, there has been some stirring in both the business community and on Capitol Hill to take a radically different approach to "health care reform" by changing the tax treatment of health insurance. This is grounds for serious optimism, as both Democrats and Republicans are starting to recognize that the same old regulatory requirements are not only not working, but are making matters worse. Free market reformers, regardless of their differences, have been united on the simple proposition that one cannot achieve real reform unless one changes the health insurance market, and one cannot change the health insurance market unless and until one changes the tax treatment of health insurance.

America s greatest economists understand this. The basic economic gospel on this issue, as stated by Milton Friedman: The Congress should eliminate the distinction between the tax treatments individuals get for the purchase of medical services as employees and the tax treatment that individuals get simply as citizens of the United States (Wall St J 10/8/98). While Friedman feels that the best alternative is to repeal tax preferences for the purchase of health insurance or medical services entirely, he recognizes that another way to fix the situation-a more viable alternative politically-is to simply extend the tax preference to "all medical expenditures" and create a level playing field. Says Friedman, "Either alternative would give individuals greater control over their own medical expenditures, lessen third party involvement and promote greater competition and efficiency in the provision of medical care. Medical savings accounts available to all with no restrictions are one way to extend the tax preference."

As this Report goes to press, the trickle of tax reform sentiment has grown into a veritable torrent of serious proposals. Congressman Bill Thomas (R-CA) is collaborating with Jim McCrery (R-LA) on a comprehensive tax credit system that would replace the existing tax structure for employer-based health insurance with a national system of tax credits. Also working on major tax credit proposals are Congressmen John Shadegg and Matt Salmon of Arizona.

In a letter to his colleagues Salmon states: "In most of the discussion of how to control the cost of health care and improve access and quality, the most important managers of all are usually left out of the equation-consumers."

Less comprehensive than the Thomas-McCrery, Shadegg, or Salmon proposals are those being developed by House Majority Leader Dick Armey (R-TX) and Rep. Jim McDermott (D-WA), best known among his colleagues as a champion of a Canadian- style health care system. Armey is proposing a limited credit to target those who are uninsured and don t or can t get health insurance through the place of work. In effect, what Armey would do is create a parallel system of tax breaks for the uninsured alongside the existing employer based system of tax subsidies. McDermott is proposing a flat 30% credit for the purchase of health insurance among those working families who don t have employer-based coverage.

Outside the Congress, among the Washington think tanks, from the libertarian Cato Institute to the conservative Heritage Foundation and the American Enterprise Institute to the Progressive Policy Institute, a "moderate" Democratic outfit, tax credits have long been a staple of comprehensive insurance reform. What is different this year is that the idea has moved well beyond the intellectual circles of those who occupy the center-right spectrum of American politics. Note that industry associations, not known for high falutin policy initiatives, are starting to develop tax-credit proposals. For example, the Council for Affordable Health Insurance (CAHI) is proposing a tax credit program, while the Board of Trustees of Not-for- Profit Hospitals is exploring private sector alternatives to the traditional employer-based health insurance. In a novel development, the American College of Physicians-American Society for Internal Medicine, whose health policies have listed to the left in the past, are now proposing to make lower income working people eligible for tax breaks, amounting to between $2400 and $2800 in tax credits per year. Their proposed credits would be financed by dedicating 12.6% of the estimated "budget surplus" to the new credits. Proponents expect that the credit could cut the current uninsured population by almost a fourth.

Perhaps the most comprehensive and detailed proposal yet offered by industry comes from the National Association of Health Underwriters (NAHU): Under the NAHU proposal all Americans not enrolled in Medicare or the military health plans would be eligible for a tax credit for the purchase of private health insurance. The amount of the credit would be $800 for an adult and $400 for a child, up to $2400 per family per year. The NAHU tax credit would be a flat credit, meaning the amount would be the same for all eligible persons or families, regardless of medical costs or income. It would be adjusted annually on the basis of the Consumer Price Index (CPI). It would be financed by simply changing the tax breaks that are now available to employees through the tax code (roughly $100 billion), as well as by changes in the Medicaid program. In other words, health benefits, just like wages, become taxable income, and the tax break would be available in the form of a flat credit rather than through the existing tax exclusion on the cost of health benefits at the place of work.

NAHU spokesmen argue that one of the chief advantages of their tax credit proposal is that it is simple to administer, largely because it is a flat credit. Thus, the calculations that must be made to administer a progressive credit, either in terms of income or health care costs, income or some risk factor, are unnecessary. Not only is the flat credit administratively simple, it does not allow for "gaming" because, as NAHU spokesmen insist, there is nothing to "game." It is a voluntary tax break; no one would be required to take advantage of it. At the same time, it is not intended to cover the whole cost of a family plan, but, like today's system, help offset the costs of private health insurance.

NAHU spokesmen also argue that their proposed credit will be superior to the existing tax breaks for health insurance for most American families: "For the vast majority of employees, the credit will more than offset the extra income tax on employer paid premiums. Even in the top 39% tax bracket, where the employer pays 100% of the cost of an average $5000 premium, the employee (average family of four) will come out ahead."

Finally, NAHU spokesmen argue that their proposal will not undermine employer-based health insurance, a charge made against many other tax-credit options, particularly those supported by conservative economists and policy analysts. Indeed, the NAHU argues that the credit will preserve the existing system of employer-provided health insurance: "The employer will still be permitted to deduct the cost of premiums as a business expense. The employer will not be required to pay a FICA tax on the employer paid premium that will be treated as unearned income to the employee. There will be no change in Section 125 Plans. The credit is not large enough to induce the employer to drop insurance coverage and leave the employees to fend for themselves in the individual market. Employers provide benefits in order to recruit good workers. That need will continue."

The NAHU proposal is highly refined, as these things go. But expect others soon to surface. This explosion of interest in tax policy as a key to health insurance reform is having a major impact. "Ideas," the great conservative philosopher Richard Weaver once said, "have consequences." And the consequences of years of thought and analysis are starting to take form.

Mandates and Misery

The Congressional Republican leadership is once again trying to figure out how to handle the agenda that the President has defined for them: the "patients' bill of rights." While Thomas and McCrery and others want to stake out a better and different agenda from that of the President, the lingering danger is that Congressional Leadership will be pressured into some sort of "go slow" compromise which will give the Clinton Administration, once again, the regulatory guts of its patients' rights legislation. The danger is that after the charges and counter-charges of "partisanship" hurled across the aisles in the poisoned atmospherics of the Clinton impeachment process, that the Congressional leadership will cave or be forced to settle for the bromide of "bipartisanship" on health care policy, which normally translates into taking the President s bad ideas, making them a little less worse, and enacting them into law with a "free market" fig leaf, perhaps yet another crabbed and highly regulated medical savings account "demonstration" somewhere, carefully designed to fail. One need only look back to the Kassebaum-Kennedy mush, or the equally bungled Balanced Budget Act of 1997, making the Medicare system even messier and even more highly regulated than it was in 1996. The ancient principle of healing is appropriate here: First do no harm-no more rules, no more regulations, and no more mandates making matters worse.

Michael DeBakey, the pioneering heart surgeon and director of the DeBakey Heart Center at the Baylor College of medicine, told the Wall Street Journal last October: "Intrusive government and the interposition of corporate managed care have imposed regulations that not only are burdensome and costly (more than 20 percent of health care expenditures), but are subverting the crucial physician-patient relationship." Nicely stated. And on this point the evidence is sharply mounting. Notice the results of the latest analysis of regulation of the health care system conducted by Professor Michael Morrisey of the University of Alabama and Professor Gail Jensen of Wayne State University on behalf of the Health Insurance Association of America (HIAA).

Some doctors will dismiss this study because of the sponsor. But the findings are perfectly in accord with previous studies done by independent analysts. After reviewing the more than 1000 state mandated benefits in all 50 states of the union, the HIAA study estimates that state mandates raise premiums by up to 13% for businesses that offer health insurance. Without mandates, 18% of small businesses without health insurance would buy it. In Maryland, the leader of mandate mania in the states, the mandates accounted for anywhere between 11 to 22% of health insurance claims; in Virginia, they account for 21%; and in Massachusetts, 13%. Premium increases for health plans vary with the level of mandates, of course. But the key finding of the HIAA study is that nearly one out of every four Americans without health insurance, more than 10 million Americans, have no health care coverage because of the cost of state mandates. That kind of thing, as Maryland s state legislators demonstrate, takes years of practice.

Competition and Cost Control

Under the current projections, Medicare will grow relatively slowly for the next ten years or so. But with the retirement of the baby boomers, things heat up. Between 2010 and 2030, according to the nonpartisan Congressional Budget Office (CBO), the retired population will grow about 3% per year, rising from 39 to 69 million. CBO expects that medical costs will grow much faster, especially in light of the demand for more sophisticated medical technology.

Well, the cost estimates for the Breaux plan-recently unveiled in outline by Senator John Breaux (D-LA), Co-Chairman of the National Bipartisan Commission on the Future of Medicare-have arrived by way of the work of the Commission staff and the CBO. The basic finding: Yes, Virginia, competition and consumer choice does control costs. According to a Commission staff memo, dated February 17, 1999, using an extension of CBO s projections, the Breaux proposal would slow the growth of Medicare spending gradually, by about 1% per year. Over the years, the impact of these accumulated savings would be considerable. The Commission staff estimate that by 2030, annual Medicare spending would be anywhere between $475 to $850 billion less under the Senator s proposal than under current law. While under current law, Medicare would be projected to grow to between 28 and 38% of the budget in 2030, under the Breaux proposal it would grow to 21- 28%. For the Medicare beneficiaries, the premiums would be supported by the taxpayer's contribution, just as premiums are supported for federal workers in the Federal Employees Health Benefits Program (FEHBP). Because the premiums for beneficiaries would be set at 12% of program costs, though individual premiums would vary with plan selection, the Commission staff estimates that Medicare beneficiary premiums would be 15-25% less than those projected under current law on average.

In spite of the impressive numbers, Senator Breaux has his work cut out for him. While Senator Kerrey (D-NE) and all of the Republican appointees on the Commission are behind his proposal, the Clinton Administration s appointees are either flatly opposed or driving a hard bargain on prescription drug coverage. Liberals in Congress, if Congressman Pete Stark of California is any barometer of rude rhetoric, are in the initial stages of launching a pre-emptive strike against Medicare reform. The new CBO director, Dan Crippen, is already coming under attack for writing a positive assessment of the Breaux proposal.

Look for "Mediscare II": Coming Soon to your local Congressional town hall meeting!

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