Volume 50, No. 12 December 1994

TASK FORCE COVER-UP CONTINUES

Is the government-in-the-sunshine law meaningless? Can the executive branch define legal requirements out of existence and eviscerate the role of the judiciary as a check on the unbridled use of presidential power?

The Clinton White House is field-testing a procedure for defying the Federal Advisory Committee Act (FACA) in its defense against AAPS v. Clinton, the lawsuit brought to challenge the President's secret Task Force on National Health Care Reform. The steps are as follows: Convene a top-secret commission stacked with special interests. Fail to keep a precise record of its membership so that even top officials can plead ignorance. Label its product ``Presidential Records'' (without foreclosing the option of arguing that the commission never advised the President). If someone sues, mobilize the unlimited resources of the Department of Justice to delay, evade, and stonewall-until plaintiffs run out of money or the work is already accomplished. If necessary, release an avalanche of mostly useless paper and challenge plaintiffs to prove that something is missing. Then use this partial and tardy disclosure as a reason to throw the plaintiffs out of court.

On November 10 (after this newsletter goes to press), oral arguments will be held in District Court on the narrow issue of whether AAPS v. Clinton is moot.

AAPS was permitted to depose Ira Magaziner, Marjorie Tarmey, and Terry Good on the single issue of whether the Administration has made adequate disclosure. The Department of Justice deposed AAPS Executive Director Jane Orient, M.D.

AAPS researchers noted that a few stray records at the Archives referred to meetings after May 30, 1993, when the Task Force and its Working Groups were allegedly disbanded. They wondered what had happened to Tollgates 6 and 7, which were initially scheduled to occur in April and May.

Testifying under oath, Magaziner admitted that certain documents had been deliberately removed from boxes-those dealing with work performed during the summer of 1993. The ``Working Group Drafts'' produced after May, 1993, were from a different ``Working Group,'' Magaziner said.

According to Magaziner, the summer work was done by ``audit groups,'' involving people from the private sector. Although this function was part of the initial work plan, the White House later determined that it should be ``separate'' (and therefore exempt from disclosure). Magaziner's memory was very fuzzy about the names and positions of the participants in this inner circle, although he did convene the small group of about 20 to 25 people and make their initial assignments.

Although Magaziner signed a sworn declaration on March 3, 1993, which asserted that the Interdepartmental Working Group was made up of 340 government employees and consultants, he ``didn't concern [himself] with the specifics of reviewing lists.'' In fact, no official data base was prepared until after March 29.

Various lists have been produced, with differing numbers of participants. The list maintained at the Archives has added a number of names, bringing the total to 614. New boxes still continue to dribble in, despite the Administration's assertion that they made a serious effort to collect documents in the spring of 1993. On April 29, 1993, both Hillary Rodham Clinton and Bill Clinton thanked more than 1,000 participants who were working in a ``regular way.'' The White House now contends that it does not have a list of the participants who were sent an invitation to the South Lawn event or a Certificate of Appreciation.

AAPS contends that Mrs. Clinton was factually correct about the number of participants, although the White House now contends that her statement was an overestimate or a confusion in terms. AAPS is compiling its own data base from a number of sources, including documents at the Archives. Interestingly, most of the previously unlisted participants found by AAPS are wholly private individuals. The White House vigorously disputes the accuracy of the AAPS list, but the Department of Justice has failed to provide a list certified to be complete.

``The position of the defendants today is more of a seemingly endless supply of semantical smoke obscuring the clear picture,'' stated AAPS Counsel Thomas Spencer in a brief filed November 3, 1994.

``The declaration that the groups ended on May 31, 1993, was simply planned theatrics to (i) continue the advisory process in secret, and (ii) tactfully and tactically eliminate undesired participants.''

Although the President failed to push his revolutionary plan through Congress this session, the idea of reinventing American medicine is by no means dead. HHS Secretary Donna Shalala has stated the Administration will ``get another kick at the cat'' and will refine its strategy, probably making use of the ``regulatory budget process.'' The ``shrewder'' approach will be an incremental one designed to overcome public opposition.

``People in the United States told us ... they were very gun shy over taking on the whole system, every aspect of it....They would like to see it be in stages'' (AP, 10/21/94).

The work product of this illegal Task Force will surely be used in future legislative and regulatory agendas. Full public disclosure is essential; no information about the funding of this gargantuan effort has been revealed. Declaring mootness at this point will serve to reward and encourage stealth and the ``institutional strategy of attrition for which the federal government is so infamous,'' stated Mr. Spencer.

AAPS continues to seek a declaratory judgment that FACA was violated, plus full disclosure and sanctions.

1994 Resolution

The following resolution, submitted by Tony Kampner, M.D., was passed by the General Assembly of AAPS at the 1994 annual meeting in Atlanta: BE IT RESOLVED THAT:

Officers Elected

The slate presented by the Nominating Committee was elected by acclamation: President, Lois J. Copeland, M.D., of Hillsdale, NJ; President-Elect, Don Printz, M.D., of Lilburn, GA; Secretary, W. Daniel Jordan, M.D. of Atlanta, GA; Treasurer, R. Lowell Campbell, M.D., of Corsicana, TX. Open positions for the Board of Directors, all for three-year terms, will be filled by Joseph Scherzer, M.D., of Scottsdale, AZ; John H. Boyles, Jr., M.D., of Centerville, OH; Donald Quinlan, M.D., of Northbrook, IL; and Nino Camardese, M.D., of Norwalk, OH.

Limited Legal Service to Be Reorganized

The Limited Legal Consultation Service has been unavailable since the resignation of Kent Brown as General Counsel. The Board of Directors has decided to continue this service in a reorganized format as soon as possible. Legal questions should be referred to AAPS (800-635-1196).

Shared Sacrifice

``Physicians will have to learn to take the pulse of the population-not just individual patients-to succeed in the health system of the future'' (AM News, 9/12/94).

For example, ``capitated providers'' have ``promised to spend money in a way that maximizes the health of the population,'' stated David Eddy. That means ``withholding some things from some patients.''

David Eddy is Senior Advisor for Health Policy and Management to Kaiser-Permanente and Professor of Health Policy and Management, Duke University. He headed Group 10 (Information Systems) of the Interdepartmental Working Group of the President's Task Force on Health Care Reform.

Eddy is one of several key Task-Force participants who failed to return documents to the National Archives.

News Briefs from Canada

What is a Community Health Center? To Grey Nuns Hospital in Edmonton, Alberta, its new status means the loss of its intensive care unit and its ability to offer ``highly specialized services'' such as hip replacement or treatment of blood clots.

The ``incredible overhaul'' of medical facilities in the province means the loss of thousands of jobs, untold bed closures, and the cancellation of plans to replace aging buildings and equipment (Edmonton Journal 7/15/94).

Rights Threatened in Ontario. The presumption of innocence and the concept of equality before the law do not apply to citizens accused of ``racism,'' according to guidelines recently adopted by the Ontario Human Rights Commission.

``The commission should stop demanding corroborating evidence from witnesses before accepting a complaint [of racism] as genuine,'' stated a secret report.

``Anti-white verbal behavior'' is a ``struggle for self- identity,'' not racism (Mackenzie Newsletter 9/94).

More Than 80% of Labs in Trouble with CLIA

By May, 1995, HCFA plans to have completed the first round of inspections of Physician's Office Laboratories (POLs), about nine months behind schedule. Enforcement actions have been initiated against 1,015 POLs.

About 11 percent of inspected labs have ``serious'' problems, while 80 to 84 percent have some kind of problem.

The number of regulated labs has declined by 8 percent in the past year. One reason may be the average compliance fee of $950. HCFA estimates that several thousand labs have still not enrolled in the program.

CLIA warnings called ``alerts'' have been generated by about 22 percent of the 1.1 million weekly Medicare billings from POLs because the labs do not have a certificate to perform the services for which they have billed (BNA's Medicare Report 10/7/94).

One physician was told by inspectors that they were being ``nice'' this time and were emphasizing ``education.'' It would be different, they warned, for POLs that had not registered. One way of finding such labs would be by investigating purchasers of supplies.

Urine dipsticks may be contraband.

Fraud Squads Augmented

The Department of Justice has transferred 10 percent of the FBI's agents and assistant U.S. attorneys to the health-care fraud arena in 1994. Agents are being routed away from savings and loans and other white-collar crime. The number of agents increased from 163 in FY 1993 to 300 in 1994 and will increase to 450 in 1995. There are 1,000 criminal investigations in progress (up 160 percent), 900 civil investigations (up 119 percent), 224 prosecutions (up 67 percent), and 118 convictions (up 23 percent).

In addition to $411 million collected by Justice in civil settlements, $378 million was taken as a result of qui tam (whistleblower) lawsuits.

One current target of investigators is physicians who accept inducements to refer work to a clinical laboratory. These might include free disposal of biohazardous waste, free testing for family members or managed-care patients, or use of a computer or FAX machine except for purposes directly related to the outside lab's work (Medicare Compliance Alert with Civil Money Penalties Reporter, 10/24/94).

Legal Briefs

Court Dismisses Challenge to Ohio Balance-Billing Law

In December, 1993, Medicare beneficiaries and two Ohio AAPS members challenged an Ohio statute that forbade balance billing of any Medicare patient whose family income was less than 600% of the federal poverty level (see AAPS News Feb. 1994).

On October 7, 1994, US District Court Judge James G. Carr granted the defendant's motion to dismiss the case, styled as Warren J. Downhour v. Ohio Department of Health.

One reason given by Judge Carr is that Ohio law does not require a Medicare claim to be filed each and every time a medical service is rendered. Carr further states that ``if the service is unnecessary or unreasonable, Ohio cannot impose a sanction against the physician [who collects fees for the service despite denial of Medicare payment].'' (Plaintiffs had argued that the law barred nonaffluent Medicare patients from contracting outside the system or from paying for services declared to be ``unnecessary.''

Attorneys for the Ohio Department of Health stated in a reply brief that ``the Medicare Handbook does not specifically define `covered service,' but the context in which the words are used indicates that it means `services for which Medicare pays'.'' Medicare cannot pay if the patient chooses not to have a claim filed.

Defendant's attorneys quoted the Ohio statute definition: ``Balance billing'' means charging or collecting an amount in excess of the amount reimbursable under the Medicare program for the Medicare-covered services or supplies provided to a beneficiary....'' (R.C. 4769.01(B).

``There is no reason to believe that the term `Medicare- covered service' is intended to mean anything different in the Ohio law than it does in the federal statute....Therefore, a service for which a patient chose not to file a claim...cannot result in a penalty to a doctor who balance bills.''

While asserting that physicians would not ``run afoul'' of the Ohio law by failing to file a claim under any circumstances, the defendant states that physicians might violate federal law by not filing a claim. This could happen if federal balance-billing restrictions apply to instances in which the patient chooses not to file a claim, and if physicians are found to have charged ``too much.'' How much is too much? The Ohio Department of Health asks (but cannot answer), ``how is the limiting charge determined for those cases in which no claim is filed?''

The plaintiffs will appeal the decision to the Sixth Circuit Court of Appeals.

Litigation is being funded by the Ohio Physicians Defense Foundation, PO Box 458, Delphos, OH 45833.

Medicare Technical Amendments

In the closing hours of Congress, almost anything can happen. Provisions can be slipped into bills that pass with unanimous consent, without the awareness of anyone except powerful committee staff members. This procedure illustrates the tremendous power of the Majority Party in Congress under current rules.

At midnight, just before Congress adjourned for elections, the following provisions were enacted in H.R. 5252:

Note that the Act refers to an ``enrolled individual'' and not to ``Medicare beneficiaries '' or ``covered services.'' The significance of this change is under review by AAPS.

On the Lawful Nature of the Private Contract

``The Secretary has not promulgated any rules or regulations either formally or informally espousing the policy [of forbidding Medicare beneficiaries to contract outside the system for certain medical services]....It is difficult for me to conclude that Dr. Copeland is facing the real dilemma of complying or being sanctioned'' (Judge Nicholas Politan, Stewart V Sullivan 816 F. Supp 281 DNJ 1992).

This case provides protection to physicians engaging in such contractual relationships with their senior citizen patients and can be cited in any case that might pertain to such right to contract.

Note that the Medicare Technical Amendments referenced above provide a method by which a physician may respond to Medicare carriers without incurring fines or sanctions, should a senior citizen change his mind after agreeing to a private contract. The physician is given a 30-day period to refund any amount above the RBRVS-determined limiting charge.

It is of paramount importance to senior citizen survival that the right to contract outside of government entitlements be maintained, as it is well known that all socialized medical systems in the world forcibly ration care to the elderly, who are usually pensioners receiving money from the state rather than contributing significant money (taxation) to the state. Their value is perceived as negative to the state, and thus preservation of their lives is given a low priority, a reflection of the Hegelian concept of rational utility.

As the population of Medicare-eligible citizens rises and funding decreases, privatization through contracting or the inception of private insurance alternatives to Medicare Part B would help relieve the pressure on the system. Charity work could continue to survive.

Socialists have always feared this so-called ``two-tiered'' system, wishing to keep all programs uniformly gray. In reality, however, the socialist system is two-tiered as well, with its second tier located either over the border or under the table.
Lois J. Copeland, M.D., Hillsdale, NJ

President, AAPS

``To do anything that suggested a taste for solitude, even to go for a walk by yourself, was always slightly dangerous. There was a word for it in Newspeak: `ownlife,' meaning `individualism'.''

George Orwell, 1984

Members' Page

Managed Care Harms Children. Managed-care companies play a bait-and-switch game: they promise quality care, consumer choice, and preventive medicine, then erect barriers to care. The ratio of patients to physicians, which should be about 1 in 400 has been increased to 1 in 800. The case load for some primary physicians is 2,700; some third-world countries do better than that!

HMOs deny choice of care on the incorrect assumption that all doctors are interchangeable. Not all plastic surgeons are specialists in cleft palate and lip. The cost of one operation by a specialist is much less than the cost of redoing an improperly performed operation, which may leave a child with infinitely worse deformities....I may be forced to choose between leaving a child permanently deaf or sending him to an ENT surgeon with less skill and experience, who might botch a reconstructive operation.

Some managed-care companies earn up to 20% profits annually by denying care. Utilization reviewers, who implement a secret computer protocol, often receive more money than the nurses or doctors. The physician is liable for inadequate care, but the insurer is not liable for blocking care! I have been in practice for 15 years. The first 10 years, my patients received excellent care with minimal outside interference. The last five years have become a nightmare....
Pamela Gallagher, M.D., Garden City, NY

``Voluntary'' Practice Guidelines. In a letter from Blue Cross Blue Shield of Florida, Participating Obstetricians are informed that the practice parameter entitled ``Cesarian Birth'' is ``defined in the current State of Florida Administrative Code and is mandated by the State for use by many physicians.'' The letter further states that: ``We believe that it ... would be inappropriate to depart from the parameter according to one's clinical judgment.''

Yet letters from the Florida Agency for Health Care Administration and the Florida Obstetric and Gynecologic Society clearly indicate that this is a wholly voluntary ``Demonstration Project.'' Data collection has barely begun; no conclusions are yet to be formulated.

It would be outrageous, irresponsible, and immoral for a physician to fail to follow his clinical judgment to intervene when a mother's or infant's life is endangered, for fear of not being paid. We will continue to follow the course of treatment that is in the best interest of our patients.
Eric S. Mudafort, M.D., Bradenton, FL

Is Managed Care Illegal? New York State Education Law states that it is ``professional misconduct to request, receive or participate in the division, transference, splitting or refunding of a fee or to receive a discount, credit, commission, or gratuity in connection with the furnishing of professional care.''

Most of the present managed-care systems and all capitated systems violate one or more aspects of this law. Organizations that discount fees and withhold 10% to 20% of the discounted fees consistently engage in complex kickback arrangements....

If an insurer sells a product to cover a set of services, while simultaneously creating financial incentives not to have those services performed, its actions could also be construed as fraud....In addition, many HMOs encourage physician stock ownership so that company profitability becomes a significant consideration for the owner physician....

All managed-care products are organized for the sole purpose of influencing clinical decisions in exchange for financial gain....
Carl Weber, M.D., White Plains, NY

Rights. (1) Health care is supposedly a right. (2) We have an inalienable right to life, liberty, and pursuit of happiness. (3) By limiting benefits and not letting us seek medical care in an open market, we can die waiting (a death sentence), as people in other countries do. (4) What is a greater ``right'': equality (within the group) or life (for an individual)?
Carl R. Meisner, M.D., Stafford, TX

Please Exclude Me. Dear C., I have received your disingenuous..., hand-addressed letter, in an envelope which did not identify your mailing as a Medicare mailing, in which you threaten to fine me $2,000 plus $2553.96, and to expel me from Medicare for an alleged overcharge of a Part B Medicare patient. Your office knows that I never accepted this patient as a Medicare patient....Your office has had returned all mail addressed to me in the form of ``Refused, return to sender.''

In your letter, you also threaten to expel me from Medicare. Since I do not participate in Medicare, I respectfully demand that you expel me. I have been attempting for two years to compel the Inspector General of HCFA to expel me....

If you contend that I have no choice to accept the patient as a private patient and the patient has no choice to see me and accept my services only as a private patient, I suggest you and your legal counsel immediately read Stewart v. Sullivan, 816 F. Supp 281 (D.N.J.) 1992....
John H. DeTar, M.D., Bellaire, MI

AAPS Calendar

Jan. 14, 1995. Board of Directors, Dallas.

May 20. Regional Meeting, Boise, ID.

Legislative Alert

You read it here first. (See last month's Legislative Alert): Ira Magaziner is taking the fall for the failure of the Clinton Plan. According to an article by Robert Pear (NY Times 10/13/94) an internal White House fight has broken out over the future role of Magaziner, dubbed the Dr. Strangelove of Health-Care Reform by conservative critics on Capitol Hill. Maga- ziner is opposed by forces within the Administration, including staff at HHS, Treasury, and senior Democrats in Congress and their increasingly influential congressional staff, the unelected representatives of America's taxpayers. White House Chief of Staff Leon Panetta has been discussing a downgrading of Magaziner's role in the next stage of the health-care fight. But the quote of the week came from outside the Beltway. Alain Entho- ven, the chief architect of the ``managed competition'' scheme, quipped: ``They ought to make Ira Magaziner the Ambassador to Kazakhstan.''

For Your Fat Seat-at-the-Table File

Remember how many doctors were saying that Clinton Health plan was inevitable, and that we needed to make sure that we got a seat at the table to cut the ``best deal'' under the circumstances? Remember, too, how many official representatives of organized medicine were trying to enhance their self-esteem as ``Players'' by abasing themselves before the White House and its Congressional allies, trying to help them craft the ``best'' version of government-run medicine? Well, the disciples of defeat were not confined exclusively to politically incompetent medical professionals and their malpracticing representatives in Washington. Recall this precious gem: ``With the pharmaceutical industry under withering attack from Clinton, `preemptive surrender,' I think, is the best strategy,'' said Mitch Daniels, an Eli Lilly executive and former Reagan political aide (Wall St J 2/13/93, p. 1). He predicted the industry will reverse its previous opposition to government reimbursement for prescription drugs. Remember Senator Phil Gramm's advice: Those who are desperate for a ``seat at the table'' are the ones likely to end up as the main course.

A New Congress?

As of this writing, House Speaker Tom Foley was struggling for his political life, although no Speaker of the House has been defeated since 1860. If he loses, one lesson is: Don't sue your own voters, even if you think Congressional term limits are positively terrible for ethereal reasons beyond the preservation of your political career.

What happened to the health-care issue? You would not even know that Congress was torn by an extensive debate on the issue from the character of the Congressional campaigns. According to Washington's political cognoscenti, this was the issue that was going to result in a bloody massacre of obstructionist Senate Republicans and conservative Democrats at the polls. But Conservative Democrats are desperately making it clear that they differ with the White House on a lot of key issues, including health care. In the few races in which health care is an issue, Congressional aspirants are pointing out that their opponents supported the Clinton Plan.

Large numbers of senior Congressional staff could be facing something that they normally read about in the Department of Labor reports: rising unemployment. Their own. If the surveys and pollsters are right, official Washington could be due for a life- changing experience. The anti-Washington wave is crashing in on the careers of some of the President's most prominent allies in Congress.

In the final days of the 1994 campaign, Congressional Democrats will target specific voter blocs to try to salvage the situation, including younger women and minorities, organized labor and the liberal groups, such as environmental organizations. When in trouble, the most important job is to play to the political base and get out the vote, a dependable vote. Will it be enough? (This newsletter goes to press on Election Day.)

While it was considered smart Republican Congressional strategy all year to ``nationalize'' the election and have Republican Congressional candidates run against the Clinton White House, the Democratic Congressional counter-strategy, which should have been to keep all politics local (Master Tip O'Neill understood these things), reverted instead to a counter ``national'' strategy of attacking the Republicans' ``Contract With America'' (balanced-budget amendment, tax cuts, terms limits, all the old ``Reaganite'' stuff). Senior Congressional Democrats hope to convince taxpayers that these things are all purple rhetoric and empty promises, the stuff of which huge federal deficits are made. To target the Contract, the Democratic National Committee set aside $2 million. The problem: If the Contract is bad because it is a recycled Reagan program, then somehow you've got to open up a debate on the contract without attacking Ronald Reagan, whose popularity still remains high with the American public, especially in light of the performance of the current incumbent in the White House. Tough task. Another little problem is talking about the Contract without talking about its specifics: term limits, balanced budgets, tax cuts, which folks generally like. And then there's the latest complication, the menu from Alice's Tax and Spending Restaur- ant...

``Big Choices''

That's the name of the leaked memo (``for handout and retrieval in meeting'') prepared by OMB's Alice Rivlin. It has the White House in a state of denial. The problem: What is to be done in the face of Republican Congressional attacks and the Kerry-Danforth Commission report on entitlements? The White House needs a response.

According to the Alice: ``Since August, two things have happened that make this discussion more urgent: First, without a health bill, we are deprived at least temporarily, of the `centerpiece' to our legislative agenda, and also our answer to the question: what are we doing about entitlements (or about the projected rise in the deficit)? Second, we know that the Republican strategy-at least for the 1994 election and probably longer-features empty promises about deficit reduction and unspecified spending cuts coupled with attractive sounding tax cuts.'' While Rivlin thinks that the attacks on the Congressional Republicans' ``Contract With America,'' have met with some success, she sees the need for the White House to try to recapture the domestic agenda, and outlines some suggested priorities. These include ``increased public investment'' (translation: more government spending), deficit reduction, ensuring the solvency of the Social Security system, and middle class tax cuts, now the preserve of Congressional conservatives, especially after the Clinton White House jettisoned the promise of a middle-class tax cut shortly after the election.

For the medical community, it was clear that the health- care reform effort is still front and center: ``Provide universal health security and reduce the rate of growth of health-care costs.'' The Problem: ``The big problem is that we cannot do any of these things without freezing resources that are now devoted to other things.'' In her memo, Rivlin outlines various options, including discretionary spending cuts, entitlement spending cuts, and, of course, new tax increases. In the health care area, this tax policy could include ``a tobacco tax or a tax on high-cost health plans tied to health care reform'' (basically the Cooper ``managed competition'' approach, so unpopular with both conservatives and organized labor.) Rivlin's comments on reducing entitlement spending are refreshingly candid. They are likely to be met with strong Congressional and public resistance, especially since ``90 percent of savings would come from Social Security and Medicare, and would probably be labeled by opponents as tax increases.''

Whatever happens in the elections, Congress is going to be faced with tough choices. Spending in entitlement programs is estimated at $803 billion in 1994 dollars, and will reach well over $1 trillion by 1999. There are approximately 400 entitlement spending accounts in the federal budget; approximately ten of the largest programs account for over 92 percent of all entitlement spending and about 50 percent of all federal outlays. The largest: Social Security ($317 billion); Medicare ($160 billion); Medicaid ($ 85 billion). Under current trends, by 2030 all projected spending for Medicare, Medicaid, Social Security, and federal employee retirement programs will consume all tax revenues collected by the federal government. In the near term, the solvency of Medicare is threatened, and will force long overdue reform of the program.

The Medicare Trust Fund is projected to run out of money in 2001, according to the Entitlement Commission's report of August, 1994. One can envision a bipartisan consensus developing around the idea of means testing Medicare. While liberal seniors groups were making friendly noises about the Clinton Plan, it is instructive that the Clinton Health Plan called for $124 billion in Medicare cuts over several years.

Lessons for Round Two of the Health Care Debate.

Americans, including physicians, have got to be clear about what kind of medicine we want. Throughout this year's debate, physicians have failed to communicate a clear message and thus have generally been sidelined, while the big scenes were being stolen by small business, insurance companies, and organized labor. Do we want a market-driven system, with real consumer choice and genuine competition? Or do we want a government- managed system choosing what kind of benefits Americans receive and forcing them into managed-care options?

Americans have also learned yet another important lesson from the health-care debate: Congress cannot lead on this issue. Unless they want to set up a British-style system where government runs the health service, cradle to grave, it is simply too complex.

And, because of that fact, it is foolish for members of either the medical community or the business community or anybody else to think that they can impose some backroom deal in an area that will affect every American family. Divisions between big business and small business only strengthened enemies of market- based reforms in Congress. In no case should business, the insurance industry, or the medical community attempt to use the health-care reform issue as a way to get Congress to micro-manage its competitive situation.

Look for the next round of the debate to be more focused, and yet even more intense. Undeniably, there are fundamental problems. First, there are far too many people who are uninsured, and that number will go up. Second, there are still far too many people who have gaps in their insurance coverage. For example, they may have terrific coverage for routine medical services, but are vulnerable to catastrophic illness and its financial devastation. Third, there is still no portability in the system. Loss of a job usually means loss of medical insurance. This is not true of any other type of insurance-auto, life, or homeowners' insurance. This is absurd. Finally, and most importantly, costs are still out of control; the current dip in corporate premiums is temporary. One major reason is that the United States has a rapidly aging population, and therefore the volume and intensity of the demand for medical services among this population is bound to increase. But it will do so outside of the normal collision of market forces that control costs.

What Next?

The flurry of wrong-headed state-based reform efforts will accelerate, and many states are likely to follow the lead of Washington State, Minnesota, Florida, Maryland, and Tennessee to enact ``managed competition'' style proposals. Expect single- payer advocates to pursue a Long March through the States toward a Canadian-style system. Whatever happens to the single-payer initiative in California-at this writing it is projected to fail- the proponents of straight socialized medicine feel that they will have the best chance of reaching a government-run system through state-based ``reform.'' The Clinton White House and its appointees in Washington's bureaucracy can be expected to assist these efforts by granting waivers to state reformers.

One of the main stumbling blocks for pro-socialist reformers is the current Employee Retirement Income Security Act, which establishes federal rules enabling private employers to escape state-based regulatory initiatives. Under ERISA, private companies can avoid state mandated-benefits requirements and can self insure, designing their own medical insurance packages. Liberals in Congress are likely to try to change the ERISA laws to strengthen the hand of state government allies who want to impose comprehensive standardized benefits packages and broad employer mandates.

The coming ERISA debate is an awkward one for Congressional conservatives. The states rights team in the House and Senate-a small team, to be sure-is going to have a hard time legitimizing their opposition to state ``flexibility.'' But the debate is likely to be dominated, not by ideological concerns, but by power politics. Big companies, who have been generally favorable to ``managed competition'' schemes and other regulatory initiatives to control benefits, are likely to oppose any changes in ERISA. But who knows? The Clinton team is resourceful. They are down, but not out. They could use changes in ERISA to accomplish their goals through the states instead of through Congress.

The new Congress may be more favorable to market-based reform. It is important to present the case early and often.