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

Volume 49, No. 8 August 1993


After a June 22 ruling by the Circuit Court for the District of Columbia, AAPS is engaged in expedited discovery. These proceedings will reveal much about the secret operations of the Interdepartmental Working Group (IWG) headed by Ira Magaziner, which the Clinton Administration has striven hard to keep from public view.

The Court was unable to determine what all the secret consultants of the Health Care Task Force were doing, and who was paying them for what, and whether they really were public employees or employees of special interest groups. Therefore, it couldn't tell whether or not the Federal Advisory Committee Act (FACA) applies to the IWG.

The Act would require, among other things, that the advisory committee ``must be fairly balanced in terms of the points of view represented.'' Further, precautions must be taken to ensure that the recommendations of the committee ``will not be inappropriately influenced by the appointing authority or by any special interest.''

The Circuit Court reversed a determination by the lower Court that exempted the IWG from FACA. A final decision on the issue will be based on evidence obtained in discovery. If the Court does decide that FACA applies, the documents can be made public.

While the Circuit Court was deliberating, Judge Lamberth of the District Court handed down an order to preserve all documents of the Health Care Task Force and IWG. This order followed a report in The Washington Times that documents were being shredded (Karen Riley, 6/14/93), despite earlier assurances by the Department of Justice that documents were safe under the protection of federal law. U.S. attorneys had strenuously objected to the issuance of a court order.

``I want a name to hold in contempt if I find documents destroyed,'' Judge Lamberth said, ordering that a custodian of records be appointed at every site where records are kept.

White House spokeswoman Dee Dee Myers denied that any documents had been improperly destroyed.

The Times (6/17/93) reported the names found on partially destroyed materials in its possession. These persons confirmed that they had indeed sent materials to the Task Force.

According to the lead Wall Street Journal editorial on June 24, the Party now in the White House is belatedly concerned about legislative incursions into the power of the executive. This tipping of the balance of powers could permit parochial interests to dominate the national interest the President is elected to represent.

However, ``instead of a more well-defined operation, they went secret over changing the entire American health care system,'' the Journal opined. ``Even defenders of executive authority would blanch at such imperial overstretch.''

As a consequence of the Circuit Court decision, the Journal continued, government officials ``will spend days bringing forth box after box of documentation, while arguing with a judge about `intermittent' vs. `full-time'-just the way private companies do for the federal prosecutors and agency bureaucrats who enforce the kinds of vague laws that the Clintons' political philosophy favors.''

According to the opinion written by Judge Silberman, the District Court apparently believed it would be unnecessary to put the IWG under such detailed scrutiny because FACA covered the 13- member Task Force itself. However, the Circuit Court reversed that determination, holding that Hillary Rodham Clinton was a ``full-time officer or employee of the government'' for purposes of FACA (also see p. 3).

``In doing so, we express no view as to her status under any other statute,'' the opinion continued.

``Prudent use of the maxim of statutory construction allows us to avoid the difficult constitutional issue posed by this case.'' Judges Silberman and Williams felt that applying FACA to Hillary Rodham Clinton would so impede the exercise of presidential power as to make the statute unconstitutional.

In his concurring opinion, Judge Buckley disagreed with the majority opinion about the First Lady's position, believing that she could not be construed as an employee or officer of the federal government, particularly in view of the Anti-Nepotism Act. He cited precedent to the effect that courts ``cannot press statutory construction to the point of disingenuous evasion, even to avoid a constitutional question.''

AAPS believes that it is crucial to bring the deliberations of the Task Force to light. Public knowledge could lead to a more critical review of a proposal that has the potential to destroy the foundations of American medicine.


Some Cost and Price Estimates?

According to Ira Magaziner, the percentage of physicians' gross income going for indirect and administrative costs has risen from 25% to 48%. In hospitals, where nurses spend 50% of their time on administrative tasks (including an average of 19 forms per patient per day), the amount has reached 50% (BNA's Medicare Report 5/28/93).

The least expensive reform option for major US corporations would be to retain the current health delivery system, according to a survey by Buck Consultants. Only 10% thought the Clinton plan would be the least expensive for their companies (BNA's Medicare Report 6/4/93).

Public sector medical expenditures grew 17.9% in 1991, while private sector spending for employee health care grew 9.3%, stated a June 24 report by HHS. Medicaid accounted for 65% of the increase in government spending (BNA's Health Care Policy Report 6/28/93).

About Price Controls

An uninsured English monarch who found his health threatened by a battle-ax once offered his entire kingdom for a horse. As we age and sicken, most of us will harbor spendthrift thoughts of that kind sooner or later, and if we are left with any shred of freedom, we're going to act on them in varying degrees.

Peter Huber, Forbes 11/23/92

In June, 1778, the Continental Congress adopted a resolution recommending that all of the several states repeal all laws limiting, regulating, or restraining the price of any commodity. This occurred after Washington's army nearly starved to death at Valley Forge, largely due to Pennsylvania's price controls on goods needed by the military. (See Heritage Backgrounder No. 929, Edmund Haislmaier, ``Why Global Budgets and Price Controls Will Not Curb Health Costs,'' 3/8/93.)

One reason Chiang Kai-shek lost China, according to Murray Rothbard, was that he lost his last shreds of public support when he shot merchants in the public square for violating his price controls. (He was trying to suppress the results of runaway inflation.) The South Vietnamese regime in Saigon took similar action (The Free Market, June 1993).

Ira Magaziner knows that price controls create shortages, states Llewellyn Rockwell, President of the Ludwig von Mises Institute. But shortages create demands for further government intervention and therefore a larger and more powerful public sector, a desirable object in their view (ibid.)

Might a US President someday prove to be more aggressive than Harry Truman? In 1946, price controls caused such a severe shortage of meat products (including animal-derived insulin) that Truman gave serious consideration to mobilizing the National Guard and Army to seize chickens and livestock from Midwestern farmers. He decided such a course was ``impractical.'' (There was the Second Amendment to consider. Also, it was a Congressional election year.) Reluctantly, he removed price controls instead. The meat shortage ended, and prices rose about 20% (ibid.)


Requirement to Provide Services

A provider enrolled in the Medicaid Program may not refuse to furnish services to an individual eligible to receive such services because of a third party's liability for payment for the service. This is required by Section 9503 (a)(1) of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 as amended by COBRA, Section 1902(a)(25)(D) of the Social Security Act.

Medicaid Update, NY Dept of Social Services, May, 1993


Washington Health Services Act of 1993

Sec. 463. All residents of the state of Washington are required to purchase a uniform benefits package from a certified health plan no later than July 1, 1999.

Sec. 427. On and after July 1, 1995, no person or entity in this state shall provide the uniform benefits package and supplemental benefits as defined in section 402 of this act without being certified as a certified health plan by the in- surance commissioner.

Sec. 406. The commission [a five-member commission appointed by the Governor] has the following powers and duties:

(5) Establish and modify as necessary the uniform benefits package....(15) Propose other guidelines to certified health plans for utilization management, use of technology,...(25) Establish guidelines for providers dealing with terminal or static conditions.

According to AAPS Director Michael Schlitt, MD, the new system may eventually find small office arrangements unaccept- able. ``The businesses we built, and the equipment we own would virtually be left without value.''


Chief Stark Offers Doctors a Choice

At the recent AMA summit in Washington, D.C., Pete Stark (D- CA) began his talk with a story ``the genesis of which'' he described as being ``quite factual.'' The purpose of the story was to illustrate the problem faced by doctors.

After a shipwreck, a Dr. Sammons and a Dr. Todd found themselves lost in a jungle. They had unwittingly invaded the sacred turf of Chief Stark.

Chief Stark gave them a choice: Varuba or death. Varuba was the most excruciating torture that anybody except Chief Stark could imagine.

Death turned out to be death by Varuba.

Congressman Stark, in effect, told 1000 doctors and the American people that we can have it any way we want: their way without having anything to say about it, or their way with nothing to say about it.

Varuba or death by Varuba.

excerpted from an editorial by Glen Griffin, MD
Postgraduate Medicine, 5/5/93


An Affidavit

I am a rightful, independent American freeman. Since I am free and independent I am not a federal municipal slave. I refuse to be a party to or be coerced by any government medical care scheme.

Lewis G. Allen, MD, February 2, 1993
filed in the Office of the Clerk, Izard County, AR


The Law of the Land

Amendment XIII, Sec. 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.


About Quality

The site of Ira Magaziner's first and possibly most success- ful overhaul is Brown University. As a junior, he and a friend Elliott Maxwell designed a New Curriculum that was adopted almost without change. The main features: elimination of almost all required subjects, reduction of the number of credits needed to graduate, abolition of the ``D'' grade, and allowance for ``F's'' to be stricken from transcripts.

One of Magaziner's current obsessions is lack of standards in (other) US schools. In a 1990 study he chaired for the National Center on Education and the Economy, he recommended that every US business, of all sizes and types, be required to spend 1% of payroll on training (The Washington Monthly May, 1993).

AAPS Scores Victory in the Court of Appeals

The case of AAPS v. Clinton took a major turn when the US Court of Appeals for the District of Columbia handed down its opinion on June 22, 1993.

In holding that Hillary Rodham Clinton was the ``functional equivalent'' of a federal officer, the Court reversed the US District Court and determined that the 13-member President's Task Force on National Health Care Reform was not a committee for purposes of the Federal Advisory Committee Act, 5 U.S.C. App. 1 (FACA). Although that holding made news, the Court went further.

AAPS won on the issue of its cross appeal: the question of whether the Task Force's ``Interdepartmental Working Group'' (IWG) and its cluster groups, as well as the Health Professional Review Board, the group looking at cost issues, the group considering legal issues, and the group looking at simplification and quality issues, were subject to the open meeting and record production requirements of the FACA. The Circuit Court reversed the lower court determination and remanded the case. This allows AAPS to conduct expedited discovery.

The Opinion allows AAPS to uncover how the huge working groups were assembled, how they were paid and by whom, and what happened during the meetings. Disclosure of this information was the purpose for which AAPS filed the case.

As the Court has acknowledged, the working groups were the ones that actually prepared the health-care reform plan. Hillary Rodham Clinton's 13-member Task Force did little or nothing in the actual development of the plan.

On July 9, 1993, AAPS filed a comprehensive set of interrogatories with the Department of Justice, asking for production of pertinent documents, including minutes, transcripts, agendas, travel records, payroll records, and expense records of working group attendees. If individuals' salaries and expenses were paid by any private organizations, AAPS is asking for their names.

The Justice Department will have 30 days to respond to the interrogatories and request for production of documents. Then AAPS can begin taking the depositions of the key players in the Task Force.


About Access to Care

In correspondence to AAPS, Senator Arlen Specter (D-PA) assured us that his Comprehensive Health Care Act of 1993 includes ``federal guidelines to better allow patients to exercise their rights to decline medical treatment.'' He says nothing about patients' rights to purchase medical care.

Current price controls are already limiting the availability of medical care. One physician recently wrote to John Rother of the AARP, explaining that ``as a practicing cardiovascular surgeon, it becomes increasingly difficult to consider providing care for patients [for whom] the reimbursement becomes so small compared to the amount of effort and time necessary to provide care.''

HCFA knows there is a problem. ``We are concerned about those Medicare beneficiaries who are unable to find a nearby physician who will accept them as patients,'' wrote Robert G. Eaton, Associate Administrator for Program Development. Nevertheless, Medicare at present is telling such patients that it's just tough luck. As Eaton stated,``We cannot...readily imagine anything that would be more destructive of the Medicare program than to exempt a physician from [the] Medicare requirements'' that cause the situation.

Specifically, Medicare continues to try to intimidate physicians who would make private agreements with Medicare- eligible patients. A certified letter dated June 17, 1993, from Jody L. Turpin, Medicare Fraud and Abuse Unit, Salt Lake City Regional RR Medicare, reads as follows: ``Medicare has recently received information that you are sending a letter to your patients informing them that you will no longer participate in the Medicare...program. Our information indicates that this letter requests that these beneficiaries sign a contract...waiving their Medicare entitlement for services received from your clinic.

This letter is to inform you that the Department of Health and Human Services has determined that agreements such as this have no legal force or effect, and existence of such an agreement between a physician and a beneficiary will be viewed as prima facie evidence that any violations of the Medicare requirements by the physician with respect to that beneficiary were intentional [emphasis in original].

The Medicare Carriers Manual dated June, 1993, includes ``new implementation instructions, effective date July 7, 1993,'' section 3044, ``Effect of Beneficiary Agreements Not to Use Medicare Coverage'':

There is nothing in the law that exempts physicians from these requirements or Medicare services from coverage because the physicians obtain from beneficiaries agreements of the kind described....Congress enacted these requirements for the protection of all Medicare Part B beneficiaries, and their application cannot be negotiated between a physician and his/her patients. Agreements with Medicare beneficiaries have no legal force or effect.

Nowhere in the statute or published regulations have we been able to find a provision depriving a Medicare-eligible citizen of the right to enter a binding legal contract. Nor do we find a provision depriving a person of the right to receive private medical services or requiring his physician to inform the government of all medical services that conceivably could be covered under Part B if a claim were submitted. Anyone having knowledge of such a provision or receiving a related sanctions threat from Medicare should contact AAPS immediately (800-635-1196 or 606-253-4868).

The legal standing of the Providers Reimbursement Manual was commented upon in National Medical Enterprises v. Bowen 851 F.2d 291 (9th Cir. 1988): ``The Manual is a guide for intermediaries in applying the Medicare statute and reimbursement regulations and does not have the binding effect of law or regulation.''

In National Medical Enterprises v. Sullivan 960 F. 2d 866 (9th Cir. 1992), the Court stated that ``where a statute is silent or ambiguous with respect to the specific issue, an agency's interpretation is upheld so long as it is based on a permissible construction of the statute....Administrative constructions that are inconsistent with the statutory mandate or frustrate the policy that Congress sought to implement are rejected by the reviewing court.''

New Members

AAPS welcomes Drs. R.O. Anya of Imo State, Nigeria; Thomas L. Ashcraft of Tulsa, OK; Malcolm Bacchus of Reno, NV; Richard M. Bachrach of New York, NY; Robert J. Bellino of Bradenton, FL; Tom Bohr of Loma Linda, CA; John P. Briody of Marinette, WI; Christ- opher J. Brown of Warrenton, VA; Gary W. Cage of Bethesda, MD; James E. Campbell of Phoenix, AZ; David E. Couk of Warrenton, VA; Thomas P. Dresser of Federal Way, WA; Patricia A. Duprey of Danville, VA; Paritosh C. Dutta of Dallas, TX; David Eskreis of Great Neck, NY; Steven A. Field of Brandon, FL; Jeffrey M. Frankel of Seattle, WA; Kenneth Fraser of Scottsdale, AZ; A. G. Gambrino of Toms River, NJ; David R. Grigg of Kettering, OH; Michael Gros of Houston, TX; Robert A. Herman of Houston, TX; Kevin B. Johnson of West Jordan, UT; George A. Joseph of Palos Verdes Estates, CA; Waite S. Kirkconnell of Tampa, FL; Bent O. Kjos of Seattle, WA; Ken G. Knott of Marietta, GA; Woodson Merrell of New York, NY; James P. O'Hara of Omaha, NE; Ella Sue Owen of Oklahoma City, OK; Rand Paul of Bowling Green, KY; Ambrosio F. Pinaroc of Sulphur, OK; Dominick A. Ricci of Del Mar, CA; Herbert Rubin of Beverly Hills, CA; Irwin D. Schlesinger of Manhasset, NY; Terril J. Schneider of Warner Robins, GA; Hugh A. Schuetz of Aberdeen, WA; Gary R. Schuster of Seattle, WA; Elden Sherman of Charleston, SC; William David Stewart of Gallatin, TN; Vincent J. Strangio of Trenton, MO; Terri Su of Santa Rosa, CA; Jack S. Weiss of Scottsdale, AZ; and Lance S. Wright of Philadelphia, PA.

Stephen Fraser of Milwaukee, WI, is a new student member, and Jeannette Lousteau is an Associate of the Washington State Chapter.

The Nevada State Medical Association has offered its members an Association membership in AAPS at a group rate.


Nominating Committee Report

The Nominating Committee presents the following slate of officers for the election to be held at the 50th annual meeting in San Antonio:

President: Charles W. McDowell of Alpharetta, GA

President-Elect: Lois Copeland of Hillsdale, NJ

Secretary: Donald Quinlan of Northbrook, IL

Treasurer: R. Lowell Campbell of Corsicana, TX

Directors: Dexter Blome of Zanesville, OH; John Boyles of Centerville, OH; Robert Cihak of Aberdeen, WA; Jim Coy of DeLand, FL; John Dwyer of Chicago, IL; Glenn Drumheller of Everett, WA; V.L. Goltry of Boise, ID; Andrew Mance of Oakland, MD; Bruce Schlafly of St. Louis, MO; Theresa Smith of Kamuela, HI; and James Weaver of Durham, NC.



To be considered at the 50th annual meeting, proposed resolutions must be received by Resolutions Committee Chairman Don Printz, MD, by September 8. His address is 354 Arcado Rd Ste 4, Lilburn, GA 30247.


Reclaiming the Moral High Ground

Hans Sennholz, PhD, President of the Foundation for Economic Education, told physicians and other Americans what they must do to earn the right to criticize government subsidies on moral grounds: Do not partake.

Socialist programs do not work, Dr. Sennholz said, but the practical critique always fails. The socialists claim the moral high ground, and they cannot be challenged by anyone who is accepting the benefits of their programs. Such persons are always vulnerable to charges of greed and self interest.

Dr. Sennholz and his wife can say, without hypocrisy, that Social Security is immoral. They never applied to receive it. (Of course, they did pay the taxes, but in the early years of the program the taxes were about $30 per year.) To those who have applied (and have not become dependent on the government's largesse), he recommends giving their monthly check to a good cause.

Dr. Sennholz was one of a star-studded cast of speakers at the meeting of the Medical Action Committee for Education in Dallas, June 18-19. The meeting attracted more than 400 physicians from all over the United States. Other speakers included William Bennett; Sen. Steve Symms; Rep. Phil Crane; John Goodman, PhD; William Goodman, MD; Carol Brown, MD; Brant Mittler, MD; Mona Charon; Michael Schlitt, MD; Edward Annis, MD; and Lois Copeland, MD. To order tapes, call (419)668-8282 or (614)221-5884.

(According to a recent study by the National Center for Policy Analysis, elderly persons who are self-employed may have reason to feel victimized rather than guilty under Clinton's economic plan. In the worst case, they could face a marginal tax rate of 130% on their earnings, if the ``benefit'' tax is increased to cover 85% of their Social Security check- NCPA Policy Backgrounder No. 126, 6/10/93).


AAPS Calendar

Oct. 5. Board of Directors meeting

Oct. 6-9. 50th annual meeting, Menger Hotel, San Antonio, TX. For hotel reservations, call (800)345-9285. To register, call AAPS at (800)635-1196.

Oct. 12-15, 1994 (tentative), 51st annual meeting, Atlanta.

Legislative Alert

The Clinton Administration's handling of the ``health care'' issue may serve as a textbook example to future Presidential Administrations on how not to do good public policy. First, hire hundreds of wonks with little or no practical experience but with different political and ideological agendas. Second, systematically exclude the one class of people who are experts in delivering the services-such as physicians.

Consider, for example, a campaign based on the proposition that the entire legal system is in crisis, that legal costs have soared through the stratosphere (they have, incidentally) and that far too many Americans have no access to affordable lawyers, even as chances of needing legal services increase with almost every major piece of legislation affecting business. Such a campaign is itself unimaginable, even without following it up with a task force on legal reform that made a virtue of excluding lawyers.

The Political Costs of Delay

The series of stops and starts, the constant floating and descending balloons, and the sequential postponements of deadlines make it appear that the Administration does not have its act together.

``They're so pathetic,'' one Washington insider remarked, ``they can't even get the wrong idea out right.''

As Joe Bast of the Chicago-based Heartland Institute wrote in the June 10th Wall Street Journal, ``The sheer number of trial balloons tells Congress and special interest groups that every element of the plan is negotiable. Mrs. Clinton and her commission are no longer respected or feared.''

While Vice President Gore and his aides say they want a bill signed in 1993, that is not at all likely. And 1994 is an election year, when Congressmen are traditionally fearful of taking any tough or controversial votes. Congressional Democrats, many of whom are already committed to a single payer, or Canadian-style approach, are worried about trying to sell a plan back home that more and more voters will see as costing them more and buying them less in medical services.

Beyond the Beltway, the early signs for the Clinton health package are bad. Last May, the Robert Wood Johnson Foundation entered into a $164,000 contract with the Harvard University School of Public health to conduct a national survey on health care reform. The Harvard team, headed by Dr. Robert Blendon, found that while 85 percent of the American people support ``major reform'' of the health care system, they are also relatively satisfied with what they have. More to the point, while a huge majority supports reform, 56 percent believe that it will have a negative effect on them personally-that they will end up paying the same or more without an increase in the availability or quality of medical services. More recently, the Washington Post-ABC News Poll, released on July 7th, found that 56 percent believe that they will be paying more under the Clinton plan (tracking Blendon's findings in May), but 43 percent said that they expected the quality of care to get worse. More serious for the Administration, only 17 percent of respondents thought that Clinton's health care plan would lead to major improvements in the health care system. Nearly half (47 percent) said that it would lead to ``minor improvements,'' and 30 percent said that it would lead to ``no improvements.''

Commenting on the most recent surveys, Harvard's Robert Blendon told the Washington Post, ``He's lost control of the national agenda on health care. By waiting, it will no longer be his plan versus the status quo, which everyone agrees is terrible. It's his plan versus the single-payer plan, versus the tax-credit plan, and it will be harder to get a consensus when these other plans are on the table. The result may be: back to gridlock.''

A Reverse Wofford?

June's special Texas Senate race, in which Kay Bailey Hutchison beat Democratic incumbent Robert Krueger by a 67 to 33 percent margin, is still sending shock waves through both the House and Senate.

Recall that when the colorless functionary Harris Wofford beat former Bush Attorney General Richard Thornburgh in a special Senate election for the Pennsylvania Senate seat in 1991, the health-care issue sizzled and became a major political weapon for Congressional Democrats. Jim Carville, the political wizard who would craft Bill Clinton's Presidential campaign, not only brought Wofford to life, but helped him overcome Thornburgh's mammoth 40 percentage point lead. Wofford's theme: If a criminal has a right to a lawyer, a working man's got a right to a doctor. Some sound bite. Recall also that the pale pastel Bush Administration, which had been studiously ignoring the issue, finally got serious and crafted a tax credit program. Congres- sional Democrats initiated citizen ``town hall'' meetings all over the country. And Presidential candidates, particularly Bill Clinton, started using the health-care issue as a wedge issue to break the GOP stronghold on the White House and lure working class Reagan Democrats back to the Democratic fold.

But the Wofford Formula failed in Texas. Paul Begala, Jim Carville's partner, flew down to Texas to help the embattled Krueger in the last few week of the campaign. Krueger trotted out the same ads that Wofford used, sounded the same themes, pushed the same emotional hot buttons with the electorate. And what happened: Nothing. Unlike Thornburgh, Hutchison was not caught flat-footed and clueless on the health care issue, but counter- attacked with a consumer-choice theme that struck a responsive chord in the electorate. In their final televised debate with Sander Vanocur moderating, Hutchison responded to Krueger: ``The difference between us is, you don't want to give everybody in America what you have as a Member of Congress. You have exactly the choice that I am trying to give everyone...You choose the one plan that is best for your family. You get the tax credit and you are able to spend your money the way you want to. I want everyone to have the choice that Bob Krueger now has.''

Members of Congress are starting to see the character of the debate shift. Three or four years ago the focus was on access- thus the liberal policy wonks' preoccupation with a Canadian style system. The fallback was to make adjustments to the employer-based system through mandates and price controls on costs. Price controls always are and always will be initially popular (and just as inevitably fail). But now the surveys are showing that while Americans are friendly to major reform, they are also generally satisfied with their medical insurance and they are positively happy with their doctors. The issues are narrowing: portability is the main theme emerging from the current debate.

Even more stunning is the recent remark from Congressman Ron Wyden (D-OR) that any health care reform plan that does not give high priority to ``choice''-of plan and physician-is dead on arrival.

Continuing Splits

The fallout from the internal divisions within Hillary's Task Force continues. If White House Aide Ira Magaziner has been the manager of the process, its intellectual leader is Paul Starr, the Princeton University sociologist who won national notoriety for his Pulitzer Prize-winning book, The Social Transformation of American Medicine. Starr cobbled together the regulatory regime favored by liberals (including a global budget) and the infrastructure of managed competition favored by the Conservative Democrats and the Jackson Hole Group. Starr's paper, ``The Logic of Health Care Reform,'' which he sent to Clinton in Little Rock, Arkansas, established the framework of the emerging Clinton health-care reform.

At the same time, Hillary Rodham Clinton has been as- siduously courting advocates of a single-payer system on Capitol Hill and elsewhere, stressing common areas of agreement on the shape of the overall package. Liberal critics such as Sidney Wolfe, M.D., of the Public Citizen Health Research Group (which now supports a Canadian style system), point out that the main beneficiaries of the Clinton reform plan will be large insurance companies. This view is generally shared by conservative critics of managed competition.

Alain Enthoven, the Stanford University economist who is most closely identified with the concept of managed competition, is unhappy with the whole process. His colleague Paul Ellwood, President of the Jackson Hole Group is telling friends on Capitol Hill that the Clinton program basically hijacked the ideas that he and others developed and then distorted them. Ellwood has also been complaining to Ira Magaziner and others that the Clinton plan would overregulate the health care economy and reflects a set of negative (and economically unrealistic) percep- tions about the medical sector of the economy. In particular, Ellwood is concerned about global budgets and price controls.

Another area of disagreement among liberals is the extent to which employer-based health benefits should be taxed, if they are to be taxed at all. The concept of taxing benefits appeals to economists, left and right, as a way to make consumers more sensitive to the price of benefits and thus control overutilization and costs. Managed-competition advocates argue that their plan cannot work without taxation of benefits at some level.

In a recent Washington meeting with union leaders, Hillary Rodham Clinton reaffirmed that the Administration is preparing such a tax. (Last February, Ms. Clinton ruled out a tax on employee health benefits as politically unpalatable.) The AFL- CIO is outraged at the proposal, and the unions can be expected to fight it.

Instead of a tax on health benefits, union lobbyists are pushing the Administration to adopt a ``wage-based'' premium or a straightforward payroll tax. Such a tax is likely to run into stiff opposition on Capitol Hill, especially from the ever independent and stubborn Senator Daniel Patrick Moynihan of New York, the Chairman of the powerful Senate Finance Committee. In public discussion with commentator George Will on the David Brinkley, Moynihan said the best level for a health-care payroll tax was ``Zero'' and that the health care system itself was already too much controlled and financed by the public sector. Of course, one of the bright and snappy young White House kids, early on in the Clinton Administration, threatened in the press to ``roll right over'' Moynihan if he ever became an obstacle to the Clinton domestic agenda. Hey kid, Moynihan's waiting outside.

The Tax and Economic Impact of the Clinton Plan

Lewin-VHI, one of the nation's top statistical research groups, estimated that if the Clinton team relies on a payroll tax to fund its health-care reform and confines the reform measure to workers and their dependents, the total tax would have to be set at 9.48 percent. This would add $66.8 billion in annual health care costs to the system. If the plan also covered all non-working people who are not now covered by health insurance, the added annual costs would be $73.3 billion, requiring a new payroll tax of 10.2 percent. If Medicaid were folded into the plan, an additional $102.1 billion would have to be raised each year, and the payroll tax would have to increase to 11.31 percent. Incorporating the Medicare Program also would increase total costs to $132.8 billion and the payroll tax to 12.85 percent.

In a separate but related development, the Employment Policies Institute recently announced the results of a survey of 600 economists. According to the survey, four out of five economists believe that employers who pay their workers less than $20,000 a year will cut jobs if they are required by the government to provide health benefits. Some form of an employer mandate is certain to be a key element of the Clinton Health Plan. Two of three of the polled economists stated that a better idea was to simply have the government subsidize in some fashion health care benefits for low-income workers.

The National Federation of Independent Business (NFIB), the nation's largest small business group, just released a study showing that a mandate on small business could cost 900,000 jobs and place the wages or benefits of 18.3 million workers at risk of being cut. Members of National Small Business United (NSBU) estimated that a 7 percent payroll tax would cost them about $50,000, which they could not afford. According to the US Chamber of Commerce, the payroll tax rate could reach 18 percent if states were allowed to set their own rates (BNA's Health Care Policy Report 6/21/93).

The Loyal Opposition

While Congressional Democrats are nervous, it is clear that they have a game plan. Look for Congressional Democrats to stress that whatever its financial drawbacks, the Clinton Plan will give Americans security. Every major survey of public opinion shows that Americans fear losing their health insurance. If they are faced with defending a plan that costs more and gives less, the best tack will be to hammer home that at least people are ``guaranteed access'' to health care.

The Congressional Republicans meanwhile still have not united on a comprehensive alternative. Conservatives in the House are worried that the House GOP leadership will continue to drift, fumbling around with bit and pieces of everybody's ``good idea,'' throwing the whole jumble into an incoherent grab-bag of sound bites. Sen. John Chafee of Rhode Island and his colleagues on the Senate Republican Health Task Force are still wedded to managed competition, but Gramm of Texas, Coats of Indiana, Nickles of Oklahoma, McCain of Arizona and Mack of Florida are diligently working away on a far more comprehensive bill. Meanwhile, as the debate heats up, the Republicans can expect to benefit if the Clinton health care plan becomes a debate on taxes.