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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 58, No. 4 April 2002
TOOLS OF THE INQUISITION
A long time ago, in a place far, far away, an Institution
arose to address pressing social concerns, offering exciting work
and rapid advancement. Previously, problems had been dealt with
on an individual basis, as by telling miscreants to desist, and
excommunicating them if they persisted.
The watershed was passed with the publication of a book
comparable to Kefauver's Hearings on drugs, Rachel
Carson's Silent Spring, or the U.S. Department of Health
and Human Services estimates of fraud and abuse imperiling the
integrity of the Medicare program. The Malleus
Maleficarum (The Hammer of the Witches), published
in 1486, amassed the evidence that justified collective action by
the central authority, in the name of protecting the common good.
It "socialized" the witch risk.
Huge resources were poured into the war on witches, just as
they are now being poured into the war on health care fraud and
abuse (and other evils such as poor quality perpetrated by
medical professionals). The bigger the staff and the stronger its
motivation, the more evildoers will be found.
The most important tool of the witch hunters was the ability
to confiscate the property of the victim. The moment a person was
arrested, his property was sequestered (Cecil Roth, The
Spanish Inquisition 1964). Whole families were reduced from
affluence to beggary at one blow. The budgets of the
investigators depended on getting results.
In 1558, qui tam actions were deployed. The Spanish King
Philip II announced that accusers would receive one-fourth of the
confiscated property of the condemned. In 2001, qui tam lawsuits
generated 75% of the Department of Justice's $1.2 billion in
civil health-care fraud recoveries (HCFR 1/23/02).
Self-disclosure was strongly encouraged. An "Edict of Grace"
invited all malefactors to confess-and to denounce their
associates-within a limited period of time, in order to receive
merciful treatment. Confession and penitence was then essential
for salvation of the soul and to avoid being burned alive; in
2002, lack of remorse is likely to lead to a sentence
enhancement, as is testimony in one's own defense (which is
defined to be perjury if the jury doesn't believe it).
The Inquisition forbade the use of any witnesses likely to
be helpful to the prisoner (cf. limitations on testimony by
grateful patients or a chaperon employed by a physician).
However, witnesses for the prosecution could be excluded only in
case of "mortal enmity to the accused."
Data collection was pervasive. A general habit of espionage
was inculcated into the entire population.
Guilt was presumed. The formula of acquittal implied not
that the accused was innocent but only that the case against him
could not be proved.
Witch hunts increased the power of the elite institutions
that conducted them, and directed discontent into nonthreatening
channels (Harris, Cows, Pigs, War and Witches, 1974).
In the 20th century, the witch hunt was carried on at an
unprecedented level of intensity under Communist regimes, though
the vocabulary changed: the villains were now called "wreckers."
They were still disproportionately professionals or members of
In the Soviet Union, blame for the failures of the socialist
economy-shortages, chaos, stupidities, and even cold weather -was
laid on engineer-wreckers. They had tied up capital funds, and
used up scarce resources, as they confessed in endless detail at
show trials, the modern auto de f‚.
As Solzhenitsyn explained in The Gulag Archipelago
II: "On the threshold of the classless society, we were at
last capable of realizing the conflictless trial ... in
which not only the judge and prosecutor but also the defense
lawyers and the defendants themselves would strive collectively
to achieve their common purpose."
Solidarity among engineers was destroyed. A state accuser
pointed out that the intelligentsia had "no backbone, and this
constitutes unconditional spinelessness" (ibid.)
Even with all of its awesome tools, the inquisitorial
apparatus requires an indispensable ingredient: false witness.
This is also in abundant supply in 21st century America.
An AAPS member recounted a conversation he overheard in the
cafeteria of a federal court building: "One U.S. attorney asked:
`Do you have a problem with lying under oath?' The other replied,
`Not at all'." A litigant was told by his attorney on the way to
a deposition: "Remember, this is a lying contest." Even before
1900, perjury was rampant in high-profile cases; thus, "the
surest test of truth is cross-examination," not the oath, wrote
Francis Wellman in his classic book, The Art of Cross-
Examination. It is rare for a lawyer to make an issue of
lying by his opponent: there is solidarity among lawyers, and
progress toward the conflictless trial. Recently enacted
protection against lies of omission-the McDade law, which among
other things prohibits prosecutors' withholding of exculpatory
evidence-is under attack because it interferes with
"traditionally accepted investigative techniques." Lying in peer
review procedures is explicitly protected by immunity under the
Health Care Quality Improvement Act.
Remarkably, it is the Spanish Inquisition that "deserves the
gratitude of all thinking men" for the "service to the cause of
humanity and truth" (Cole, op. cit.) that ended witch
hunting as a profession in Europe. The exceptional Inquisitor
Alonso Salazar y Frias prohibited the use of torture and
"introduced rules of evidence which recognized the perverse and
essentially meaningless forms which unstructured `facts' could
take." No accusations could be considered unless supported by
independent evidence (RC Schwing, WA Albers, "Witches, Floods,
and Wonder Drugs" in Societal Risk Assessment, 1980).
The U.S. Dept. of Justice needs such an Inquisitor.
Prosecutors Reveal Strategy
After attending a March 2 seminar in Buffalo, NY,
cosponsored by the Erie County Medical Society and the Erie
County Bar Association, AAPS Past President Lawrence Huntoon,
M.D., submits the following observations:
"Although I did not know any of the speakers, I was
astounded at how easy it was to pick out the prosecuting
attorneys. They had an unmistakable aura of arrogance and power,
which I would imagine is not unlike that of a Nazi concentration
camp guard who struts about knowing that he has the power to
shoot anyone he desires. Both of their speeches were marked by an
almost pathologic delight, gloating, and pride over the doctors
they had prosecuted and the careers they had ruined."
U.S. Attorney Robert Trusiak described how he had prosecuted
a doctor for fraud based upon his certification of home-bound
status for a patient. From the sign-out sheets for the adult
health care center, Trusiak displayed the actual signature of the
patient, who had on two occasions apparently signed out for an
all-night skating party.
A physician in the audience inquired about how the doctor
could have committed fraud, as he had nothing to gain from
signing the certification. "The U.S. Attorney brandished a smile
from ear to ear and said: `He injured the Medicare Trust Fund'."
To the physician's exclamation that any physician who signed a
certification form was a fool, the attorney's reply was a grin.
Trusiak's handout states: "It is pointless to discuss the
role of a compliance plan in avoiding False Claims Act liability
for billing misconduct...in the absence of understanding the
breadth of fraud actionable under the [FCA].... Recklessness and
deliberative [sic.] ignorance are the key fraud terms,
... [which include] a broad range of activity between criminally
fraudulent and inadvertent billing conduct."
A prime criterion is the frequency of CPT codes billed,
which can be determined in seconds and compared with that of the
physician's peers-even though there is no statutory authority
that identifies non-average frequency as a violation.
Trusiak advised: "Disabuse yourself of the notion that you
are too small or too isolated to merit investigative scrutiny."
In his view, "the litigation goal of a False Claims Act
matter is the creation of a compliant atmosphere through monetary
and remedial measures." He warns, "DON'T think ...you will never
be indicted." In other words, Dr. Huntoon writes, "the main goal
is to terrify the herd so there will be more compliant sheep."
Among the "futile excuses and defenses" is to say that
"somebody at the carrier told me to bill this way."
Failure of CMS or the carrier to respond to a written
question on how a proposed corporate restructuring would affect
Medicare and Medicaid reimbursement, and its continued payment of
the nursing home's rent, was insufficient to establish entrapment
or estoppel, explained Michael Kelly, Esq., Regional Director of
the Medicare Fraud Control Unit.
The main message of the defense attorneys was: "Resistance
is futile." The attorneys all advocated self-disclosure or
confession, never mind the Fifth Amendment's protection against
forced self incrimination.
"If this is the `defense' offered by our legal defenders,
why hire an attorney when a 50-cent bull's eye pinned to your
chest would seem to do the job just as well?" Dr. Huntoon asks.
Dr. Huntoon will speak in Las Vegas on May 18.
HIPAA Myths and Realities
According to a PriceWaterhouseCoopers report commissioned by
Blue Cross and Blue Shield Association, these are some of the
dangerous myths concerning the transaction code sets (TCS) rules:
"Providers only need to contract with a clearinghouse to achieve
compliance" and "vendors can deliver HIPAA compliance to
providers via software."
In fact, providers will have to do enormous amounts of work
themselves. They will need to collect and submit more and
different data than they do today. Many data fields currently in
use are being redefined. The "ripple effect" will necessitate
changes in many operations. Everything needs to be tested with
each payer and each type of transaction: "The omission of one
required field or the inclusion of any non-valid data ... renders
the transaction noncompliant.... If providers cannot submit
standard transactions that are entirely compliant in all
respects, payers thus cannot accept them."
Some vendors are making adequate investments in compliance;
others are not; the two are difficult to distinguish. "Any vendor
who claims to be HIPAA compliant-or worse yet, that use of their
product(s) will make a client/customer HIPAA compliant-does not
Even though a "wait and see" attitude is no longer
acceptable, major changes in the rules are anticipated.
Although it may be said that "HIPAA compliance will be much
simpler for small providers," the only basis for this
argument is the ability of small providers to revert to paper/
manual transactions. The TCS requirements are not
scalable to reduce the impact on small organizations. An entity
will either be able to submit and receive compliant transactions,
State agencies also face an enormous unfunded compliance
mandate (estimated at $100 million), far more complicated and
costly than Y2K. (HIPAA skirts the Unfunded Mandates Law by not
stating the mandates "explicitly.") Few have budgeted for the
costs. Most or all will impose new requirements on all who deal
with them. The ability to monitor bioterrorism threats will be
jeopardized by HIPAA implementation.
An understanding of HIPAA-and an update on the AAPS lawsuit-
will be a major focus of Las Vegas meeting.
May 17. Board of Directors meeting, Las Vegas, NV.
May 18. Spring meeting, Las Vegas, NV.
Sept. 18-21. 59th annual meeting, Tucson, AZ.
Sept. 24-27, 2003. 60th annual mtg, Point Clear, AL.
More than 100 physicians recently heard AAPS General Counsel
Andrew Schlafly speak in Peoria, IL. During and after that
meeting, AAPS became aware of still more threatened prosecutions.
All Medicaid providers in central Illinois are endangered unless
an abusive prosecutor is stopped.
The sentencing hearing of Robert Mitrione, M.D., (see
AAPS News Legal Supplement, Jan
2002) has been postponed a second time. The prosecutor has
been challenged to explain the methodology used to produce the
exhibit that brought about Dr. Mitrione's conviction.
Sergei Rinaldi, D.D.S., has pleaded guilty to mail fraud and
obstruction of a federal fraud investigation. Hundreds of
children in Springfield and Edwardsville, IL, now have bands on
their teeth and no orthodontist who will accept Medicaid. At age
66, Dr. Rinaldi could face 5 years in prison for each count.
Under federal sentencing guidelines, the prison term depends
largely on the loss to the government, as calculated by the
prosecutor, with little opportunity to offer a defense.
In 2001, Dr. Rinaldi was ordered to produce voluminous
records dating from 1995-1999, and was imprisoned for months on a
contempt citation for failure to produce all of the material. The
dentist and an office worker gave conflicting testimony about
whether the records existed at the time the subpoena was served.
The judge chose to believe the employee.
In September, 2001, the U.S. Court of Appeals for the
Seventh Circuit affirmed the order of contempt (No. 01-3215, 2001
U.S. App. LEXIS 28346) and denied release pending appeal. The
opinion published Feb. 14, 2002, holds:
For civil contempt, a person may be imprisoned for an
indefinite term, up to 18 months, and also fined. The purpose is
"coercive," not "punitive," as the prisoner is said to hold the
key to his own cell and need only comply with the government's
demand in order to gain release. It is up to the judge to
determine whether the prisoner actually can comply.
When Dr. Rinaldi complained that he did not receive the due
process rights to which he was entitled in a criminal
contempt proceeding, the Court changed the order from criminal to
civil, giving him less due process while imposing a heavier
punishment. Eighth Amendment protection against excessive fines
does not apply to civil contempt penalties.
Doctor Chooses Death over Prison
Returning from a trip to bid an aunt and uncle good-by
before reporting to prison on his 61st birthday for a 5.83-year
term, Robert LaHue, D.O., hit an oncoming tractor-trailer. In the
hospital, he refused surgery to stop internal hemorrhage.
Dr. LaHue had been assigned to a minimim security prison
close to his wife, children, and grandchildren. At the last
minute, federal prosecutors ordered him to a prison with "real
criminals behind razor wire," 450 miles from home. "He needed a
higher level of security," his lawyer was told, because he was
under indictment in an unrelated Medicare fraud case. His family
believes that this "surreal" development caused him to lose his
will to live, though they don't think he deliberately tried to
end his life (Kansas City Star 3/7/2002).
There was no evidence that Dr. LaHue had provided
substandard or unnecessary care to his gerontology patients.
However, the prosecution contended that the hospital paid him too
much ($75,000/year) for "minimal services," in violation of the
Medicare Antikickback Act (see AAPS News Dec. 1999).
Court Upholds Unlimited Forced Drugging
Defendants can be forcibly drugged with psychotropic agents-
even though they haven't been convicted of any charges and pose
no danger to themselves or others-according to a March 7, 2-to-1
ruling by the U.S. Court of Appeals for the Eighth Circuit
(USA v. Charles Thomas Sell No. 01-1862).
"It's a shocking, inhumane decision," stated AAPS General
Counsel Andrew Schlafly. "Now all the government needs are
allegations and a cooperative psychiatrist to drug any citizen."
Dr. Sell, imprisoned for more than 4 years without trial
(AAPS News, Nov. 2001), was
recently released from solitary confinement, just after the BBC
requested an interview.
The Court cited three criteria for forcible drugging: (1) an
essential state interest that outweighs the individual's liberty
interest; (2) the lack of a less intrusive way to fulfill the
state's essential interest; and (3) proof by clear and convincing
evidence that the medication is medically appropriate.
The government's interest is in adjudicating an alleged
crime. In his dissent, Judge Bye wrote that "the charges are not
serious enough to warrant the forced medication of the defendant,
who, we must not forget, is a non-dangerous pre-trial detainee
cloaked with the presumption of innocence." The maximum sentence
under federal sentencing guidelines would be 41 months-a year -
less than Dr. Sell has already served.
The "clear and convincing" evidence was apparently the
testimony of a clinical psychologist who had treated two
delusional patients with psychotropic medications and a
psychiatrist who had treated four such patients with the purpose
of restoring competency, with 50% and 75% success.
Judge Bye wrote: "if the State cannot render the defendant
competent without involuntary medication, then it must resort to
AAPS will seek to overturn the ruling.
The AAPS amicus brief was funded by the American Health
AAPS Argues for Right to Withdraw Plea
Despite strong opposition from the State, the Nevada Supreme
Court accepted the AAPS amicus brief in support of the right of
Mitchel Earl Phillips, D.O., to withdraw a plea of nolo
contendere for failure to maintain certain records.
AAPS argues that a plea agreement is analogous to a
contract, with an added gloss of constitutional rights. Thus, a
guilty plea must be based on a "full understanding of what the
plea connotes and its consequences." The Arizona and Hawaii
Supreme Courts have allowed the withdrawal of a plea upon later
discovery of unanticipated consequences, in order to prevent
Dr. Phillips was assured by his attorney that the plea would
not affect his ability to practice medicine; nor did the State
intend to exclude him entirely from practice. However, the actual
result was complete deprivation of his livelihood, a consequence
that was not only unanticipated but grossly disproportionate to
the severity of the offense.
Dr. Phillips will speak at the AAPS meeting in Las Vegas.
* * *
"To make it easier to ensnare people, Caligula, the
Roman tyrant, wrote his laws in small print and posted them on
high pillars to prevent ordinary people from knowing the
Paul Craig Roberts, Lawrence M. Stratton
The Tyranny of Good Intentions
Movie Proposal. Remember the movie called As Good
As It Gets that tore the veil off the deceit in managed
care? After receiving a "special offer" from the Medical Society
of the State of New York, I'm proposing a sequel called As
Sick As It Gets.
There's actually a "Fraud and Abuse Certification Test" that
you can take, for a mere $344 (less $89 for MSSNY members). If
you pass it, you will be issued a formal certificate from the
Heathcare Fraud and Abuse Institute, as a "Certified Compliance
Professional" or CCP. Can you imagine a physician desiring such a
certificate? And how is it different from being a good
Nazi...just following orders?
The flyer promises that the CCP designation will "enhance
your stature in your organization...and in the compliance
community." But note: the "100% money-back guarantee" does not
promise that the information is complete or error-free: "Your
organization remains responsible for complying with all the fraud
and abuse laws and regulations."
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY
Patient to Congress: My son Larry is finding it
difficult to make a living serving Medicare beneficiaries. It
appears to me that Medicare bureaucrats are using their power to
ruin doctors. I wonder how long they would put up with their
paychecks being reduced to minimum wage and below? Physicians
often spend more time on bureaucratic red tape than on attending
patients. I am enclosing several installments of the comic strip
Rex Morgan, M.D. The author appears to be aware of the
strong-arm tactics of Medicare bureaucrats. [Dr. Morgan: "I'm
considering not taking any new Medicare patients myself. I want
to help people...not work for the government."]
Donald Huntoon, Des Moines, IA
Insurer Games. A company that processes Medicaid claims
here has created a number of hoops for Providers to jump through,
such as requiring them to send claims by certified mail-then
claiming that they were receiving empty certified envelopes!
Hand-carrying the claims didn't work either. After meeting with
the president of the Clark County OBG Society, the company's
attorney sent him a letter hinting at anti-trust violations,
slander, and interfering with contractual relationships with
Providers. The insurer apparently thinks that doctors are under
such pressure from liability premium increases that they will
accept anything, including 35% cutbacks in fees and
recredentialling fees of $300.
James W. Zeluff, M.D., Las Vegas, NV
"Taking Insurance." Rattlesnake handling is a
gratifying business. It proves that you are fearless. But
all rattlesnake handlers get bitten. A Texas colleague
asked me to help him get paid: I received a two-page letter from
the insurance company detailing the 26 requirements for a "clean"
claim, including pre- and post-op photographs. All 33 blanks on
the HCFA 1500 must be filled in. Remember the joke about the
Alabama literacy test for voting: ability to read a Chinese
newspaper? The intention is that no doctors can be paid.
For all mail received from insurance companies, I have a
red-ink rubber stamp: "Return to sender." If you don't open it,
you don't have to pay postage. Our computer is programmed to
print "assignment not accepted."
My Austin city friend may make more money than I do, but I
spend less, so we're even. He is rattlesnake-bitten, but it was
inevitable. Too bad he didn't use preventive medicine.
Richard Swint, M.D., Abilene, TX
Audit Help. AAPS has been the only group to support me
during my Medicare audit. The Chicago Medical Society and the
Illinois state medical society were worthless. The American
Society of Interventional Pain Physicians journal was helpful in
supplying data supporting my use of the codes; the President
wrote a letter on my behalf after several contacts. But AAPS
openly and warmly embraced me without any strings attached or
hidden agendas. I hope to get more doctors to join.
Mary Jo Curran, M.D., Chicago, IL
How AAPS Is Different. AAPS fights to keep doctors out
of jail and to repeal stupid laws. It does not fight for
the privilege of writing the rules or teaching doctors how to
obey them-at a handsome profit to the association. AAPS can
not help doctors increase income from the public trough;
rather, it fights for freedom. In the long run, free markets tend
to bring rich rewards to those who please their customers.
Robert P. Gervais, M.D., Mesa, AZ
Why Attend an AAPS Meeting. You will not leave saying,
"Wow! Just like a Steeler victory in the Super Bowl!" Our
meetings are more like pre-season training camp. We seek to learn
fundamentals about how the control game is played. It is at times
brutal, and people get hurt. There is a long, tough season ahead
of us, and no easy wins. To win, we must be tenacious, develop
our strengths, and expose the weaknesses of the financial elite
who are trying to compromise medicine. We need every player on
the field, getting his uniform dirty.
Lawrence A. Dunegan, M.D., Pittsburgh, PA
A Red Herring. The resurgent calls for "health care
reform" are a surrogate for the real issue: the drive to
socialize and centralize the economy and culture of the U.S.A.
Steve Barchet, M.D., Issaquah, WA
Legislative AlertThe President's Health Care
As expected, the details of the Bush $300-billion policy for
both public and private sectors in medicine follow principles
laid out in the President's February speech at the Medical
College in Wisconsin, which largely repeated comments made on the
campaign trail in 2000 and in the State of the Union address.
While he repeated his call to promote access to insurance
coverage and high-quality care, and to promote new and innovative
treatments, he has stressed that patients should be the key
decision-makers in the system-they should pick the plans they
want at a price they can afford. Bush outlined his laundry list
of proposed changes in the system:
A new system of tax credits. Bush proposes to
allocate $89 billion over 10 years for tax credits for the
purchase of medical insurance. The objective is to make medical
insurance affordable for low and middle-income individuals and
families who lack employer-based coverage. Credits would amount
to $1,000 per individual and $3,000 for families. Eligibility
would phase out at $30,000 in annual income for individuals, and
at $60,000 for families. The credits would be "advanceable"; that
is, directly available to people when needed; they would not have
to wait until the end of the year. Credits would also be
refundable, meaning independent of tax liability. The Bush
proposal is coupled with State grants to create purchasing pools
for low-income or high-risk individuals. Based on Administration
estimates, the credit would help about 6 million people who do
not now have medical insurance to get it.
Help for Displaced Workers. Bush is also
proposing a two-year refundable tax credit for displaced workers.
The credit amount is the same as that twice enacted by the House
of Representatives and twice blocked in the Senate: 60% of the
cost of coverage, with no income cap. It would be available for
unemployed workers to use toward their COBRA coverage, or
whatever private plan they might choose. The credit would be
retroactive to March 15, 2001, and it would help another 4
million workers and their families.
Expanded Medical Savings Accounts. The
President proposes to lift the current regulatory restrictions on
MSAs, particularly by lowering the deductible requirements, from
$1,500 for individuals and $3,000 for families to $1,000 for
individuals and $3,000 for families. The Bush MSA proposal would
apply to all workers and employers with a high-deductible plan.
Elimination of roll-over restrictions on Flexible
Spending Accounts (FSAs) The Bush proposal would allow
employees either to redeposit $500 per year tax free from their
FSAs or to roll that amount over into a 401K retirement plan. The
funds in the FSAs, like the funds in MSAs, would be used for the
routine payment of medical expenses. The budgetary cost of both
the MSA and FSA changes would amount to $14 billion over a period
of 10 years.
The promotion of Association Health Plans.
Proposed legal and regulatory changes would make it easier for
small employers to pool together to offer employee insurance
plans through associations, expanding personal choice and
reducing administrative costs.
Changes in Medicaid and SCHIP. The Bush
proposal calls for $350 million to help keep Medicaid recipients
from losing coverage when they get off the welfare rolls and
start a new job. Under the State Children Health Insurance
Program, $3.2 billion in unused SCHIP funds that would otherwise
be terminated would be available to the states to expand coverage
to the uninsured. This would reverse the current policy of
requiring the return of unused funds to the federal treasury.
Reform of Medicare. The proposal would
allocate $190 billion in additional spending for "improving"
Medicare. This would include prescription drug coverage; Medigap
changes; and the promotion of more private-sector options.
The President has indicated that Medicare reform will be a
long-term undertaking. In the meantime, he is re-introducing his
prescription drug discount card and a program to give low-income
seniors assistance through the states. Under the Bush proposal,
the federal government would pay 90% of the premiums for seniors
with incomes between 100 and 150% of poverty, at a projected cost
of $8 billion over three years, and would reverse the "chronic
underpayments" to private plans participating in the troubled
"Medicare Plus Choice" program. Finally, Bush proposes to add two
new Medigap-style plans.
Long-Term Care Initiative. The President is
proposing to make premium payment for long-term care fully
deductible, just like medical insurance is today for private
firms. The Administration estimates a resulting $20 billion
revenue reduction over ten years.
The Bush policy is almost total reversal of the Clinton
health care policy agenda, which has so captivated leftists in
Congress and their allies in health policy research. Bush makes
significant changes in the tax code to promote consumer choice
and competition. But the proposal still leaves the current
structure of the tax treatment of medical insurance very much
intact. It expands both MSAs and FSAs, but does not eliminate all
of the restrictions on MSAs. The tax-free FSA roll-overs could be
considerably more generous than $500 per year. Still, it's a
start; Congressional conservatives can always increase the
amount. To borrow from the Left, "It's the structure, stupid!"
Once again, Senate Majority Leader Thomas Daschle (D-SD) is
blocking direct tax relief for premium subsidies for unemployed
workers who have lost their insurance. Medicaid expansion is now
the Left's major policy initiative.
Maryland Re-examines Insurance Mandates
On March 5, the House Economic Matters Committee of the
Maryland House of Delegates held hearings on the growth and
impact of Maryland's mandated benefit laws. There are well over
1,400 state mandates nationwide. But Maryland is the leader of
the nation in regulation and mandates on private medical
insurance. Maryland now has 52 mandated benefits, and more are on
the way. Only California, with 43, comes close to Maryland.
Maryland officials report mandates account for 14% of premiums;
independent estimates suggest much higher costs for the Maryland
regulatory regime. But, as a famous former President might say,
it all depends on how you define what a mandate is. For example,
Maryland does not count provider mandates, only benefit or
service mandates, which amount to 39 specific legal requirements
on Maryland medical insurance plans.
Experts point out that mandates impact different employers
and employees in different ways. For example, they further
aggravate the inequities in the insurance market created by the
tax code by making it even more difficult for persons who do not
have employer-based health insurance to buy a policy. They impose
higher costs on those who are least able to afford it. They have
a disproportionate impact on the cost of medical insurance in the
individual market and price more individuals and families out of
the market. They depress wages. Medical insurance benefits are
not, we repeat for the trillionth time, a free good that
automatically comes with the job, courtesy of the employer's
beneficence, but are part of the worker's compensation. Every
increase in benefit costs results in a corresponding decrease in
workers' wages or other compensation. And mandates are imposed
unevenly: if you are in a self-insured plan, Medicare, Medicaid,
or the Federal Employees Health Benefits Program, you have
escaped the clutches of the medical experts who are blossoming in
the state legislatures, the kind of folks who just love to play
On a per-policy basis, Maryland's mandates have a bigger
impact on the price of policies in the individual market than the
small-group market. But the latter is governed by a law requiring
every employee to have a Comprehensive Standard Benefit Plan.
This is the equivalent of a mandate. As described by the Health
Management Associates, a Washington-based consulting firm, the
Maryland state legislature has used the Comprehensive Standard
Health Benefits Plan as a floor, while imposing a
ceiling in the form of a premium cap: the average
premium for the Standard Plan must not exceed 12% of the average
annual Maryland wage, and only a government commission is
empowered to make benefit changes to stay within that pre-
ordained cap. This restriction is reminiscent of the medieval
concept of the just price, though its metaphysical justification
is less apparent. It does not appear that any market changes in
consumer demand, innovations in medical delivery, breakthroughs
in biomedical research, or advances in medical technology can
have any impact on the economic value of a benefits package sold
in the state of Maryland. This "ceiling," then, is also a
remarkable restriction on the market's ability to supply
services. It is not clear yet what will emerge from the state
legislature's reconsideration of mandates.
More on The Medicare Mess
In the aftermath of the 5.4% cut in physicians' allowed
fees, it is likely that Congress and the Administration will
reach an agreement to secure "give backs" to doctors. The reason
for the reduction is that the formula, which was adopted by
Congress, drives the final numbers. If you don't like the pay
reduction, you don't like the administrative pricing system that
governs Medicare. But the growing problems of physician payment
are being seized upon by the lobbyists of the American
Association of Retired Persons (AARP). This powerful leftist
group has told Congressional leaders that they will oppose "give
backs" to doctors unless they get what they want on prescription
What kind of drug benefit? AARP CEO William Novelli says
that a meaningful drug benefit would cost $750 billion over a
period of 10 years. That's right, $750 billion. Obviously, the
more modest prescription drug expansions advocated by the White
House don't even begin to meet the AARP litmus test.
It is not yet clear how the AARP will formally respond to
the problem that more and more doctors will determine that they
can't afford to see the ever greater numbers of Medicare patients
that are coming down the demographic pike. But that's tomorrow.
Like Miss Scarlet, perhaps AARP will think about that tomorrow.
You will be shocked to learn that the General Accounting
Office (GAO) has found that Medicare bureaucracy gives bad
information to physicians. In a report requested by House Budget
Committee Chairman Jim Nussle, the GAO found that Medicare
Bulletins are "poorly organized," contain "dense legal language,"
are "incomplete," and fail to provide "timely information." GAO
conducted an experiment and called the "customer service
representatives" of Medicare carriers, asking them three commonly
posed questions. GAO found that these representatives answered
only 15% of the inquiries correctly. Then, GAO reviewed
10 web sites of the Medicare carriers, and found that only
20% contained all the information required by CMS. (The
report is available at www.budget.house.gov)
John Q, Call Your Office
Denzel Washington's gun-toting character in the
blockbuster John Q is dead serious about getting an
organ transplant for his little boy. We got the point. Yes, of
course, HMOs are not the equivalent of Nirvana, though lots of
big Foundation-funded policy nerds and managed care and "managed
competition" mavens were claiming they were back in the early
90s, remember? And remember how the high-powered, politically
correct firm of Clinton and Clinton, with the assistance of their
big impressive-and yet secret-health care task force came up with
a national plan to force everyone and his parakeet into managed-
care networks as a matter of policy? A Comprehensive Plan with
The Great Global Budget, to curb "unnecessary," "inappropriate,"
and otherwise unnecessarily sentimental and humane public and
private medical spending. Remember that? How so quickly we all
forget! Lost as we are amidst the passionate Helen Hunt-Charlie
Norwood-John Dingell-Tedster din on the evils of managed care.
But I digress. The point is that even if HMOs were just bubbling
over with bountiful benefits for every boy and girl under Heaven,
there would still be a shortage of organs for transplantation.
It's not quite an insurance problem, it is a donor-incentive
problem. And if we just flat out socialized HMOs and PPOs, and
Tostitos and Cheerios, it would be worse.
So, if John Q is cited by your local neighborhood
Lefty as yet another cinematic call to British-style health care,
take note. In Britain, where well over 1.3 million persons are
awaiting hospitalization services, there are 5,474 on the active
national transplant waiting list. British transplants from
cadaver donors amounted to a total of 213 in 2002; transplants
from living donors amounted to 32.
Robert Moffit is a prominent Washington health policy
analyst and Director of Domestic Policy at the Heritage