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Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 58, No. 4 April 2002


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 the intelligentsia.

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 understand HIPAA."

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, or not.

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.


AAPS Calendar

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.

Illinois Prosecutions

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 civil commitment."

AAPS will seek to overturn the ruling.

The AAPS amicus brief was funded by the American Health Legal Foundation.


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 manifest injustice.

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 law."

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 Alert

The President's Health Care Agenda-the Details

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 doctor.

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 drugs.

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 Foundation.