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

Volume 64, No. 8 August 2008


Politicians promise to "invest," to "provide," or to "fix" - whatever the crisis, from undesirable global climate to lack of "universal coverage" or "quality health care." All it takes is hope, faith, commitment, political will and money.

Various factions (these days called "stakeholders") are lined up at the "table" (trough?) to get their share of the "pie." The AMA wants a fix to the SGR. Its new ally the AARP wants doctors to get paid by somebody other than patients. Payers want electronic records (tracking and monitoring). Reformers want "medical homes" with "incentives" for screening, preventive interventions, "coordination," and compliance. A few tens or hundreds of billion dollars here, or there.

Where Will the Money Come From?

Mandatory redistribution of wealth is needed, since the government doesn't have any money a fact that all wonks know, at least subconsciously, even if rarely acknowledging it.

Obama wants to repeal the Bush "tax cuts for the rich." The AMA wants to pay for insurance for low earners by making the tax burden more "socially equitable." Physicians for a National Health Program (PNHP) promises that universal care will be paid for by abolishing profits and administrative costs of private insurers, replacing them with the vastly more efficient Medicare. Beefed-up auditors and enforcers will "recover" billions paid out for fraudulent or abusive claims by efficient Medicare and Medicaid administrators (see p 3).

But the yield from taxation has iron-clad limits. The top 50% of America's earners pay almost 97% of federal income taxes, and the top 10% pay nearly 70%. The fact is that "you can't soak the rich" (David Ranson, Wall St 5/20/08). The graph of revenue/GDP vs. time is virtually a horizontal line; it has hovered around 19.5% since 1950. This discovery "deserves to be called Hauser's Law, because it is as essential to the economics of taxation as Boyle's Law is to the physics of gases," Ranson writes. High taxes dampen economic activity.

The social cost of collecting $1.00 in taxes is $1.24, notes Linda Gorman. For every four jobs created by spending, about five jobs or their equivalent will be lost because of taxes.

The AMA Council on Medical Service (CMS Report 8-A-08) proposes subsidizing health insurance coverage through refundable, advanceable tax credits that are inversely related to income. Removing the tax exclusion for employer-provided insurance would help offset the cost of the credits. In general, the AMA opposes deductibility because it helps only those who pay taxes: The value of the tax exclusion ranges from $250 to those earning $20,000 $30,000 to somewhat more than $2,500 to those earning more than $100,000.

While the reported direct administrative costs of Medicare (around 3%) are much less than private insurance, the real economic costs of delivering health-insurance benefits under a single-payer system would be at least double that of the current private system, concludes Benjamin Zycher of the Manhattan Institute for Policy Research (Medical Progress Report No. 5, October 2007). This includes the cost of the economic distortions caused by taxation.

Also note that some of the purported waste in the private system is related to compliance with regulations, or to customer satisfaction. While it is believed that Medicare is better staffed and can make better coverage decisions, it has only about 20 physicians and 40 total clinicians (including nurses) in its coverage office, while United Healthcare employs about 600 physicians and 2,000 clinicians (Wall St J 6/24/08).

Two other differences, notes Linda Gorman: Medicare leaves people with unlimited financial liability. Any analysis must include the administrative costs of supplemental policies that people buy to protect their finances from Medicare. Also, Medicare is not solvent, and does not need to incur the costs that private companies must in order to ensure solvency.

The Government's Balance Sheet

On PerotCharts.com, former presidential candidate Ross Perot states: "The economic crisis facing America today is far greater than any since the Great Depression."

John Williams's Shadow Government Statistics gives an even grimmer picture (Hyperinflation Special Report 4/8/08, www. shadowstats.com). The U.S. "has already obligated itself to liabilities well beyond its ability ever to pay off." If the government used generally accepted accounting principles (GAAP), the deficit would be more than $4.0 trillion for 2007 alone. More than 80% of net U.S. Treasury issuance is now funded by foreigners. "If the government were to raise taxes so as to seize 100% of all wages, salaries and corporate profits, it still would be showing an annual deficit using GAAP...."

Social Security and Medicare, however, are off the balance sheet. The Administration's rationale: the government always has the option of changing the programs (see p 3).

Collectivism vs. Independence

AMA policy is apparently hostile to individual patient responsibility for medical payments. It proposes tax credits for insurance only, not out-of-pocket payments, and opposes tax deductibility for OOP expenses. A mandate to purchase a "minimum level of catastrophic and preventive coverage" is proposed for those with incomes greater than 500% of poverty, to be expanded once tax credits are in place.

"Collective accountability across providers" (bundled payments) is proposed for selected hospital episodes by MedPAC (N Engl J Med 2008;359:3-6).

Good July 4 advice to "declare independence" comes from liberal columnist Ellen Goodman: "Plant a backyard garden."

Hyperinflation and the Velocity of Money

It's not just a thing of the past: Inflation in Zimbabwe is now running at more than 1 million percent. A loaf of bread costs 30 billion Zimbabwean dollars. Robert Mugabe needs a constant supply of banknotes with ever increasing numbers of zeroes to pay the soldiers that keep him in power. Civil servants are paid by direct deposit to bank accounts that limit withdrawals to 25 billion Zimbabwean dollars per day. Under pressure from the German government, Giesecke & Devrient, the company that supplied the Weimar Republic and Hitler, is cutting off the paper supply (Wall St J 7/1/08).

Hyperinflation can happen without much warning. "Like lightning it struck," said law professor Friedrich Kessler, describing his experience in Weimar. "The shelves in the grocery store were empty. You could buy nothing with your paper money" (quoted by Williams, op. cit.).

Watch the velocity of money, advises Richard Maybury (Early Warning Report, June/July 2008, www.chaostan.com). Unfortunately, the speed at which money changes hands, the inverse of demand, is extremely difficult to measure. His subjective impression is that the world velocity of the U.S. dollar is in stage 2 ("beginning to circle the drain"), when prices rise faster than money supply. In the U.S., velocity is still in stage 1, with the money supply rising faster than prices, because people are only beginning to catch on.

In the early stages, Weimar's hyperinflation was accompanied by a huge influx of foreign capital, as had happened during the U.S. War Between the States. Then, the U.S. had significant untapped potential. Now, it has shipped much of its manufacturing base offshore, and imports 30% of its energy supply essential for economic activity.

Will the U.S. ultimately defend the value of the dollar? Critics of Federal Reserve Chairman Ben Bernanke have called him "Helicopter Ben" since a 2002 speech in which he alluded to Friedman's "helicopter drop" of cash to stave off deflation.

Beware of open manholes, warns Maybury. During the inflation of the 1970s, cities were being dismantled as thieves stole metal infrastructure to sell for scrap. Manhole covers are reportedly going missing once again.


IMF Investigating U.S. Financial System

Unheard of in the past, when the Fed chairman was a "pope among the financial elite," Ben Bernanke will have to endure the humiliation of a Financial Sector Assessment Program by the International Monetary Fund (IMF). Major investment banks, brokerages, and hedge funds will have to hand over confidential documents, answer questions, and have their databases subjected to "stress tests." After 7 years, President Bush gave permission on condition that the review be completed after he has left office (Spiegelonline 6/26/08).


William E. Goodman, R.I.P.

Well known to many AAPS members, Toronto otolaryngologist William Goodman, M.D., died June 23. Refusing to practice medicine as a servant of the state, Goodman went "on strike," permanently, with the passage of notorious Bill 94, which banned balance billing in Ontario in 1986. He authored more than 70 articles and lectured frequently. His classic AAPS talks on Canadian medicare are available on our website.


AMA President Nielsen Pledges to Bridge Chasms

Incoming AMA President Nancy Nielsen, M.D., promised "to use all of the power of this office of this association to ...let the nation know that we must cover America's uninsured." She plans to engage in some "civil engineering" to build a new system that brings insurance to all. "[E]very American must bear part of the weight, share the burden and distribute the force." She wants to "set national health care goals" and "to divorce financing of healthcare from ownership of insurance."

Although Dr. Nielsen told the Buffalo News on Jun 25, 2007, that "I'm not quitting my day job" as an executive officer of Independent Health, a Buffalo insurance company, she is now listed as "former chief medical officer" for that company.


Should Academics Be Allowed to Opt Out?

The AMA Code of Medical Ethics states that except in emergencies physicians are free to choose whom to serve. Opting out of Medicare may give a senior clinician more time for teaching and research. Although Duke University radiologists assume that it's about the money attracting "carriage trade" pa- tients they think few physicians will have the reputation or be in a personal financial situation to forgo Medicare. Since others in the practice will care for the Medicare patients, no one will be denied care.

If too many opt out, however, it could create a shortage of "Medicare providers." Moreover, the AMA Code also holds that "every physician has an obligation to share in providing care to indigent patients." Thus, opting out "engenders a complex debate between individual autonomy and the collective good. It raises questions concerning the power of senior faculty members...and equity issues...." And what if patients able to pay out of pocket "just happen" to less often be black? Authors conclude that individuals wishing to opt out should have to submit a proposal to a faculty practice committee "to allow a collective voice...." A successful practice "cannot permit unbridled freedom of choice by individuals" (Halperin EC, et al. J Am Coll Radiol 2005;2:841-845).


Is It Immoral to Be Uninsured?

Newt Gingrich called it "fundamentally immoral" for a person who can afford insurance to save money by going without, then demand free care (Consumer Power Report 6/13/08). But suppose the person pays his own bill; has he wronged society by refusing to "share" the bills of others?


AAPS Calendar

Jul 24, 2008. Dr. Orient speaks to LACMA in Torrance, CA.

Aug 27, 2008. Dr. Huntoon speaks on sham peer review, Lake County Medical Society, Wickliffe, OH.

Sep 9-13, 2008. 65th annual meeting, Phoenix, AZ.

Sep 30-Oct 3, 2009. 66th annual meeting, Nashville, TN.

Right to Bear Arms Affirmed

In a 5-to-4 decision, the U.S. Supreme Court held that the Second Amendment does indeed mean that individuals have the right to keep and bear arms. D.C. v. Heller effectively overturns the most restrictive local gun ban in the nation. The District of Columbia has a virtually total ban on handguns and requires rifles to be disassembled or disabled by trigger locks.

In a dissenting opinion, Justice Stephen Breyer puts forth an "interests-balancing test": the District's interest in reducing gun violence vs. Mr. Heller's right to defend himself. Breyer cited the AAPS amicus brief as an effort to discredit the methodology in the studies relied on by the District. He made note of studies showing that gun bans are followed by increases in violent crime. He concludes: "The upshot is a set of studies and counterstudies that, at most, could leave a judge uncertain about the proper policy conclusion." All the Court needs to do is to assure that the legislature has "drawn reasonable inferences based on substantial evidence."

Writing for the majority, Justice Antonin Scalia observes that no other Constitutional right is subjected to this sort of interest balancing. "The very enumeration of the right takes [it] out of the hands of government" (Wall St J 6/27/08).


No Right to Entitlements

In an Independence Day reflection, Craig Cantoni writes that "Helvering's general welfare trumps Heller's gun."

"There is a very low probability of a bad guy taking my property. But there is 100 percent certainty that federal agents will take my property," he writes. "The Heller decision says that I have the right to defend my property in the first instance.... On the other hand,...Helvering v. Davis says I have no right to defend my property in the second."

The 1937 Helvering decision said that Social Security was constitutional, and that the "general welfare" means anything that Congress wants it to mean. As a result, Cantoni states, the nation is bankrupt if that means having more IOUs than it can possibly pay and more than half of Americans are dependent on government subsidies or handouts, or work in a job dependent on government regulations.

Because he knew that Social Security would face stiff opposition if seen as a welfare program, Franklin Delano Roosevelt said that participants could be "likened to the policyholders of a private insurance company." The Federal Insurance Contributions Act (FICA) tax was labeled a contribution, and people knew they had to work a certain period of time to become eligible. Every effort was made to convince Americans that the deduction was "their money," which would be paid back with interest when they retired.

One rationalization for this structure was so that "no damn politician can ever scrap my Social Security program."

As the date of insolvency nears, a means test has been proposed. However, nearly 75% of benefits go to recipients with annual income under $20,000, and less than 2% to those with income over $100,000 (Willard Hogeboom, USA Today [Soc. for the Advancement of Education], November 1995).

Workers are not party to a sacred contract. Section 1104 of the 1935 Act, entitled "Reservation of Power," reads: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to Congress." The constitutionality of this provision was tested in Flemming v. Nestor 363 U.S. 603.

Under a 1954 law, Social Security benefits were denied to persons deported for, among other things, membership in the Communist Party. Mr. Nestor's benefits were accordingly terminated although he had paid into the system for 19 years.

In 1960, the Court held: "To engraft upon the Social Security system a concept of accrued property rights would deprive it of the flexibility and boldness in adjustment to ever- changing conditions which it demands...."

All Congress needs is a rationale that is not "patently arbitrary" or "utterly lacking in rational justification," stated the Court, citing Helvering v. Davis:

Whether wisdom or unwisdom resides in the scheme of benefits set forth in Title II, it is not for us to say. The answer to such inquiries must come from Congress, not the Courts. Our concern here, as often, is with power, not with wisdom. (See www.ssa.gov /history/nestor.html.)


Innocent Caught in Dragnet

With a 19.7% increase in budget, and a 64-person increase in staff to a total of 1,495, the Office of Inspector General (OIG) is aggressively looking for fraud. The anti-fraud cash cow brings in $20 for $1 spent. To "find" fraud, the government gets creative, elevating ordinary billing disputes to fraud.

"The government overkills. It ruins their life. Doctors lose their career. They overbill Medicare, and it may have been sloppy," states attorney Patric Hooper. "But rather than pay back $100,000, they owe millions" (MCA 6/30/08).

One Pinellas County, Fla., physician was hauled off in handcuffs because of an ongoing dispute with UnitedHealth Care over E&M coding. What preceded the indictment was a refusal by the physician to use products sold by Ingenix, a United subsidiary. "It's clear from the documents that United filed the claim in retaliation," said the doctor's attorney. "I've never before encountered such a blatant attempt at coercion by a payer public or private" (ibid.).

Note that electronic medical record software, such as Amazing Charts, could make you liable for false claims, as through unintentional misuse of cut-and-paste functions or temp- lates that automatically fill in blanks (ibid.).

Enforcement is being enhanced through use of anti-fraud "strike forces." The investigators are often retired policemen, and they do not treat physicians as "white collar" (MCA 6/30/08). Some suggestions from Medicare Compliance Alert:

Guard your NPI. Screen staff carefully, and watch out for "rogue employees" who might be identity thieves. Report business partners to the government; it can protect your own business. Have procedures in place to deal with search warrants. Be sure the information on your Medicare enrollment form is accurate; wrong information from a form filled in 20 years ago could result in a false claim (ibid.).

AAPS advice: consider opting out.


NPI Alert

A new federal rule requires that every detail in their NPI data match IRS data, including the exact spelling of legal names, the use of initials, and even blank spaces. The slightest discrepancy could cause claims denial or NPI deactivation. The IRS requirement has "blindsided the entire industry," said Cyndee Weston of the American Medical Billing Association (Health- care Finance News 6/17/08). Incidentally, GAO reported in June 2008 that 6% of Medicare providers have tax debts.



Low-Volume Doctors Targeted. A question of the week from an advertisement by Horty-Springer, a law firm representing many hospitals, asks how to assess the competence of medical staff members who admit all their patients through hospitalists. The answer: "Low/no volume practitioners are a challenge for many hospitals" also because of "Joint Commission-required obligations like ongoing professional practice evaluations." Some facilities "have decided that the challenges of a continued relationship with these practitioners outweigh the benefits and have imposed threshold requirements which would render the low/no volume practitioner ineligible for appointment."

The "alternative" forms of evaluation involve reports from managed-care organizations (which third-party-free physicians will not have) or from allowing the hospital to rummage through patients' files in the office including coding and billing records. The more the hospital knows, the more ways it can find to put the financial squeeze on the doctor.

Note that some specialists will be "low volume" by nature because they rarely admit patients themselves, but generally serve as consultants to the admitting primary physician.

Hospitals are finding more ways to increase control over physicians on staff, and are gearing up to eliminate low-volume practices which includes most third-party-free practices.
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY


"We Owe It to Ourselves." This is pure nonsense. As Congress always spends more than it takes in (it's no fun being a legislator if you can't make people love you by spending other people's money on them), it borrows by issuing promises to pay later in exchange for money now. These are called government bonds ("the debt"), and they are owed to whomever has possession of them when they come due.

The American people are not the same as the federal government, unless one inhabits the fever swamps in which one stops seeing individuals and hallucinates about a utopian existence featuring huge undifferentiated blobs of out-of-focus humanity. There, one may also start thinking that Mao, Stalin, Che, Castro, Lenin, and Pol Pot were great nation builders worthy of being enshrined on posters and tee shirts. Such people also tend to think that single-payer is a good thing.
Linda Gorman, Ph.D., Independence Institute, Golden, CO


Economic Illiteracy. For the past 50 years, we have failed to teach basic economics. It is astounding to me what younger people take for granted. They have absolutely no idea how wealth is created, but think the economy is a great pile of money for which distribution decisions are to be made.
Frank Timmins, Dallas, TX


Scapegoats. Doctors are "targeted" by government bureaucrats because they accept government money. As perceived by a government bureaucrat, the obvious culprit for cost overruns is the one requesting payment. The last person to blame is the one who designed the perverse incentives, and the next to the last to blame is the patient who, when offered a smorgasbord of free or low-cost services, tended to overuse them.
Alieta Eck, M.D., Somerset, NJ


OPM. The politics of medical financing rests on a mass illusion, as Robert Samuelson pointed out ("Rx for Health Care: Pain," Wash Post 12/6/07). Most Americans think that somebody else pays: government or employers.
Ernest J. White, J.D., WAR Report 1/25/08


"Third-Party-Free" Not Just for the "Rich." I don't turn people away; they may turn themselves away for various reasons, however. If they don't want to see me, I still try to point them in the right direction with the names of colleagues who could help and are likely contracted with their plan. I have seen the uninsured, the indigent, those on disability, those on very limited budgets, on up to the independently wealthy. Payment plans on the honor system, discounts, charity care, contributions from generous donors are all possible and legal.
Michael J.A. Robb, M.D., Phoenix, AZ


Ode to the Paperless Society

Write on the beach, the tide will erase;
Write on the dune, the wind will deface;
Write on the disk, time will show its hand;
Remember now* they're all just sand.
But papyrus and parchment are so well made
The Dead Sea scrolls will never fade.
The vaunted electron will soon turn to vapor
And its principal product is still just paper.

*For those in Washington, we're talking about silicon, get it?
Bill Waters, M.D., Atlanta, GA


On Collectivism. Craig Cantoni is so right in his May 2008 pamphlet: the battle over who controls access to our medical care has been lost. Sadly, there really was no battle. The option to control our own purchases was just given away, when a majority of Americans decided that medical care was a right, not a privilege that had to be paid for by somebody. It's one symptom of the philosophy of collectivism overcoming individualism. Here comes another transfer of earnings from those who worked to those who did nothing. We physicians may be paid less, but we'll work much less; it is being a patient in a nationalized universal health care system that is terrifying.
Everest A. "Tad" Whited, M.D., Pflugerville, TX