Volume 51, No. 12 December 1995

THE CASE FOR GOVERNMENT SANCTIONS

``The government has no trouble imprisoning people with no political clout for attempting to pervert words at the expense of plain meaning,'' writes AAPS Counsel Thomas Spencer in a Memorandum in Support of a Motion for Fees and Sanctions in the case of AAPS v. Clinton, filed Nov. 6.

But what if the tables are turned?

What if an Administration, in collaboration with its Department of Justice, through legal maneuvers and semantics creates a ``perception'' by a Court that is at war with the facts, thereby keeping essential documents hidden from the public until they become politically moot? (The President suddenly decided to release Health Care Task Force documents the day after the Health Security Act was declared dead.)

Although US Attorney Eric Holder has declared that there is no cause for criminal prosecution of senior presidential advisor Ira Magaziner for perjury, attention is now focused on the legions of attorneys that advised him and aggressively obstructed attempts at discovery.

And what about the more than 16 members of the DoJ assigned to the Interdepartmental Working Group (IWG)? Should they have known about the requirements of the Federal Advisory Committee Act, especially after AAPS v. Clinton was filed in February, 1993? Indeed, the IWG documents contained memoranda specifically alluding to the case.

There were ``Guidelines for Meeting with the President,'' a ``thinly disguised ruse for the working groups to give direct advice, but for the President to claim they [did] not. What is shocking,'' Spencer writes, ``is that someone convinced the inner circles of the White House up to the President to play a charade even with his schedule to defeat the plaintiffs.''

The incriminating documents had to be ferreted out from more than a quarter of a million pages jumbled into boxes at the National Archives, or 250 floppy diskettes that were released only after continuing pressure from Judge Royce Lamberth. Since AAPS was denied access to these diskettes until the eve of the decision to moot the case in December, 1994, they could not be used to fight that determination.

The key issue is a Declaration by Ira Magaziner asserting that all members of the IWG were ``full-time'' federal employees. The DoJ neither confirms nor denies the assertion, but simply claims that it did not ``expressly argue'' for this exemption from FACA-never mind that the plaintiffs, the District Court, and the Circuit Court of Appeals thought that they did or that the acceptance of this ``fact'' was prominent in the analysis and disposition of the case.

The ``position of the United States,'' argues Spencer, also ``includes the agency position (here the Executive Office of the President) that made the litigation necessary in the first place.'' This position was presented to Congress by Patsy Thomasson on March 30, 1993. She said ``the working group is made up entirely of federal employees.'' (She also said the budget was $325,000 although the Government Accounting Office found, by March, 1995, that more than $9,639,712 had been spent, including $325,520 to support litigation.) Senator John Glenn also thought defendants made this argument; he referred to it in a speech on the Senate floor on April 3, 1993.

Due to unwillingness to give up a potentially viable albeit weak defense, the DoJ never corrected the false ``perceptions'' that had been created. Instead, it suddenly changed its litigation strategy, seizing upon the IWG-as-``horde'' idea almost as soon as it was suggested by the Court of Appeals.

This defense was not tested at trial. DoJ tried to settle the case, offering documents plus $229,000. AAPS refused.

``We felt that...by accepting money in exchange for a waiver of wrongdoing by the defendants, we would chill the desire of others...who dare engage their government in justifiable litigation,'' wrote Dr. Charles McDowell, Jr., then President of AAPS.

Documents were released anyway in a successful attempt to moot the case. DoJ now argues that AAPS should be denied recovery of its legal fees under the Equal Access to Justice Act.

Spencer argues that this case exactly fits the rationale for the EAJA, which arose from ``Congress' concern that the high costs of litigation might deter small entities from vindicating their rights when faced with adverse action by a federal agency.'' He also argues that the continuation of the case was necessary to uphold the principle that ``lawyers, who serve as officers of the court, have the first line task of assuring the integrity of the process,'' quoting US v. Shaffer Equipment. ``Even the slightest accommodation of deceit or a lack of candor...quickly erodes the validity of the process.''

Spencer suggests that the Court consider fining the responsible lawyers as individuals, rather than charging the public coffers. He also suggests requiring them to attend an ethics course on the duties of lawyers to the Court.

The responsibility did not lie wholly with the DoJ. ``At least one defendant, who is herself an experienced lawyer with substantial governmental experience, who supervised directly the Task Force and was well aware of the litigation, has some responsibility.'' Spencer agrees with the opposing side on one point: individuals should have the right to a hearing.

Citing other FACA cases, Spencer shows the pattern: violation of the law, deployment of enormous resources in a war of attrition against plaintiffs, and the use of ridiculous semantical arguments to delay judgment until the goals were achieved, leaving plaintiffs with an institutional ``excuse us.''

The defendants claim that their actions resulted from reckless and inept errors of bewildered counsel. AAPS argues that they were deliberate, motivated by a desire to obscure the truth, and thus subject to sanction.

A Medical Sentinel

AAPS is pleased to announce the debut of a new official journal-The Medical Sentinel.

The Medical Sentinel will be a peer- reviewed scholarly publication concerned primarily with socioeconomic and political issues affecting medicine. The Medical Sentinel is committed to publishing high-quality articles in defense of the practice of private medicine, Hippocratic principles, individually-based medical ethics, and the sanctity of the patient-physician relationship-in other words to amplifying the voice of private medicine.

The Medical Sentinel will be published quarterly by Hacienda Publishing, Inc., of Macon, Georgia. Miguel A. Faria, Jr., M.D., Clinical Professor of Surgery (Neurosurgery) at Mercer University School of Medicine and author of Vandals at the Gates of Medicine, will serve as Editor-in-Chief. Helen E. Faria, RRA, Executive Assistant at Hacienda Publishing, will serve as managing editor.

Articles are invited for the premi�re issue scheduled for publication in the spring of 1996.

Information on format requirements for manuscript submission is available from Helen Faria, P.O. Box 13648, Macon, GA 31208- 3648, telephone (912)757-9873.

AAPS Reaffirms Opposition to RBRVS

The General Assembly of AAPS reaffirmed the Resolution Opposing the Relative Value Scale, originally passed at the 16th annual meeting in Fort Worth, TX, April 4, 1959. The ``Resolved'' was updated to read as follows:

THEREFORE, BE IT RESOLVED: that the Assembly of the Association of American Physicians and Surgeons, Inc., in regular session assembled at Falls Church, Virginia, this 14th day of October, 1995, condemn the Relative Value Scale as a dangerous device that is inconsistent with Principles #4 and #6 of the Principles of Medical Ethics and that is capable of causing great harm to the medical profession and the practice of medicine.

(Principle #4: The physician should not dispose of his services under terms or conditions which tend to interfere with or impair the free and complete exercise of his medical judgment and skill or tend to cause a deterioration of the quality of medical care.)

(Principle #6: The physician should limit the source of his professional income to medical services actually rendered by him, or under his supervision, to his patients. He should neither pay nor receive a commission for referral of patients. The value of professional services should be determined only by mutual agreement between the physician and patient, and in no other way.)

Officers Elected

The following officers were elected for the 1995-96 fiscal year: President: Don Printz, M.D., of Lilburn, GA; President- Elect: John Dwyer, M.D. of Chicago, IL; Secretary: W. Daniel Jordan, M.D., of Atlanta, GA; Treasurer: R. Lowell Campbell, M.D., of Corsicana, TX; Immediate Past President: Lois J. Copeland, M.D., of Hillsdale, NJ.

Elected to serve three-year terms on the Board of Directors: Claud Boyd, Jr., M.D., of Augusta, GA; Charles McDowell, Jr., M.D., of Alpharetta, GA; Michael Schlitt, M.D., of Renton, WA; Theresa Smith, M.D., of Kamuela, HI.

An Evolution

The July 19, 1965, issue of The New Republic described the ``AMA in Disarray.'' Although Dr. James Z. Appel, incoming President, called Medicare's supporters in Congress a flock of misled ``political sheep,'' he said it would be ``unethical and un-American'' to strike against the system. AAPS member Frederic M. Ball, M.D., accused him of asking doctors to ``walk like zombies or sheep into involuntary servitude'' under a program to ``extend Fascist control over hospitals and physicians.'' AMA leaders blocked declaration of a boycott, although the House of Delegates emphasized members' rights to refuse to participate in Medicare. The AMA also accused the American Hospital Assoc. of trying to seize ``ever-widening control over the provision of medical care in this country.''

On October 12, 1995, the Wall Street Journal announced (p. A24) that ``House GOP Medicare Bill Wins over Doctors with Hidden Enticements, Promise of Profits.'' The AMA ``threw its considerable political clout behind the House's bill.'' Reporter Christopher Georges stated that the ``sweetest offering of all,'' tucked away in the fine print, would make it easier for doctors and hospitals to set up and profit from their own Medicare managed-care plans by exempting them from state regulations, such as requirements for capital reserves.

In the early 1960s and 1970s, HMOs were exempt from large capital requirements, leading to ``financial instability and insolvencies [that] resulted in loss of coverage for a substantial number of consumers.'' Proponents of ``provider service networks'' say that providers do not need large reserves because ``they themselves represent the capital by taking responsibility for the risk.''

AAPS member Lawrence Huntoon, M.D., reports that sheep are being employed to clear minefields in Bosnia. The sheep get to munch the grass in return for taking the risks.

Anesthesiologists Endorse MSAs

A Resolution proposed at the annual meeting of the American Society of Anesthesiologists in Atlanta directed that ``official ASA policy support the concept of MSAs'' and that the ASA ``actively assist any legislative effort to enact MSAs at the federal level.'' The Board of Directors amended the resolution to direct that ``ASA support the concept of MSAs as but one option of beneficiary choice'' and ``actively support the AMA's plan that each Medicare beneficiary has an expanded set of choices to make prudent use of medical care resources.'' The House of Delegates disapproved the Board action and passed the original resolution in a slightly strengthened form.

Sen. Helms Fights for Choice of Physician

Senator Jesse Helms overcame considerable resistance from the leadership to insert an amendment stating: ``A Medicare Choice plan may not limit the ability of enrolled members to obtain covered items, treatments, and services from out-of- network providers. A Medicare Choice plan may determine a reasonable cost-sharing schedule and/or deductible with respect to any covered item, treatment, or service obtained by an enrollee from an out-of-network provider.''

Is Working Too Hard a Sanctionable Offense?

The continuing ordeal of George Krizek, M.D., began on December 12, 1989, when his wife, who was home alone, reported receiving a telephone call asking if she would be there to receive a ``Christmas delivery.'' A short time later, three people appeared at her door and flashed identification badges. They said they were from Medicaid and had some questions to ask her. When asked if they had ``anything in writing,'' they responded that they ``didn't need anything.'' They were later identified as investigators in the Office of the HHS Inspector General; two were former FBI agents specializing in counter- intelligence activities.

For three hours, Mrs. Krizek stated, the visitors accused her of enriching herself by filing claims for nonexistent patients on behalf of her husband. Mrs. Krizek produced the files on all the named patients. When Dr. Krizek arrived, they subjected him to the same treatment, including mockery of the couple's foreign accent. They asked why he put ``medical stuff'' in his hospital charts (which they had already examined), asserting that he was a ``psychologist.''

In 1995, suffering from clinical depression, with his career in ruins, Dr. Krizek is under pressure to settle with the government, giving up either his home or a piece of rental property. The alternative, he is told, is to face homelessness and utter destitution.

It was with great difficulty that Dr. Krizek managed to emigrate to the United States from Czechoslovakia in 1968. His passport had been confiscated because of his refusal to conduct politically motivated psychiatric evaluations. Ironically, his investigation in this country commenced just after the Iron Curtain was raised in Eastern Europe.

At Washington Hospital Center, where Dr. Krizek has had attending privileges since the early 1970s, he was known as a hard-working and dedicated doctor who saw his patients seven days a week. He had the shortest length of stay for admitted patients of all the members of his department. His billings were not unusually high; other psychiatrists in Washington, D.C., (who were not investigated) were paid up to five times more by Medicare and Medicaid.

Dr. Krizek also had a part-time practice in his home; his wife served as unpaid office manager. Dr. Krizek frequently covered for colleagues; in those situations, the covering physician's office submitted the billings.

Although Pennsylvania Blue Shield had in 1991 requested some records for review of ``level of care, frequency, and necessity of services,'' the carrier never informed him of any problem with his reporting of services. But on Christmas Eve, 1992, Dr. and Mrs. Krizek were ``invited'' to speak to a prosecuting attorney. They were offered an opportunity to discuss a cash settlement, in exchange for not facing prosecution. The attorney was unable to explain the charges.

On January 11, 1993, before the Krizeks had even located an attorney, local radio and television stations carried stories announcing that action had been filed against Dr. Krizek as ``part of a major health care fraud enforcement initiative.'' The press release claimed that Dr. Krizek submitted ``fraudulent multiple billings for patients' psychoanalytic sessions.'' Dr. Krizek does not perform psychoanalysis, and no mention of ``multiple billings'' was made in the actual complaint.

After a three-week trial, Judge Stanley Sporkin ruled that the government had not proved lack of medical necessity (see AAPS News, October 1994). Further, the Court found the government's procedures to be ``arbitrary'' and ``perverse.'' Nevertheless, the Court found that Dr. Krizek would be ``presumed liable'' under the False Claims Act for filing claims for services of more than 9 hours a day (12 or more sessions of 45 to 50 minutes) on any one day.

``While Dr. Krizek may have been a tireless worker,'' wrote Judge Sporkin, ``it is difficult for the Court to comprehend how he could have spent more than even ten hours in a single day serving patients'' (859 F.Supp. 5 (D.D.C. 1994)).

Because ``Mrs. Krizek made no effort to establish how much time Dr. Krizek spent on a particular matter,'' and because Dr. Krizek failed to supervise the claims submission, the Court concluded that ``the defendants acted with reckless disregard as to the truth or falsity of the submissions.'' According to the 1986 amendments to the False Claims Act (31 U.S.C. 3729(b)), liability may be found without proof of specific intent to defraud. ``[T]he Act...is intended to apply in situations that could be considered gross negligence where the submitted claims...are prepared in such a sloppy or unsupervised fashion that [it] resulted in overcharges to the government'' (US v. Entin, 750 F.Supp.512,518 (S.D.Fla 1990)).

Using a new data base to track Medicare and Medicaid billings, the government identified 266 days in 6 years on which Dr. Krizek billed for more than 9 hours of services. Half of them were coverage situations billed by others, not by Mrs. Krizek.

In a hearing before a Special Master, Dr. and Mrs. Krizek provided rebuttal evidence in the form of 39 declarations of physician colleagues and staff at WHC stating that Dr. Krizek was a hard worker who often worked more than 9 hours a day, especially when covering for others. The Washington Psychiatric Society wrote a ``Motion of Intervenor'' protesting that hospital-based psychiatrists were often required to work more than 9 hours, even 20 hours in a 24-hour period when severely disturbed patients required admission.

The Special Master refused to consider the rebuttal evidence and found that Dr. and Mrs. Krizek were liable for $47,105.39 worth of payments made to them over six years for time spent with patients in excess of 9 hours on any one day. If a 12-hour day were used, the Special Master found $19,148.35 in ``damages.'' Because the False Claims Act allows for treble damages and $5,000 of penalties per claim, the 9-hr benchmark produces total liability of $5,745,000, while the 12-hr benchmark produces liability of $2,295,000.

A freeze on the Krizek's assets has been in place since April, 1995. Dr. Krizek has been unable to practice since May, 1994. The outcome of the case is undetermined; an appeal is in progress. AAPS has provided some consultation through its Limited Legal Consultation Service.

``If the justification of exemplary punishment is not to be based on desert, but solely on its efficacy as a deterrent, it is not absolutely necessary that the man we punish should even have committed the crime. The deterrent effect demands that the public should draw the moral, ``If we do such an act we shall suffer like that man''....When a victim is urgently needed for exemplary purposes and a guilty victim cannot be found, all the purposes of deterrence will be equally served by the punishment (call it `cure' if you prefer) of an innocent victim, provided that the public can be cheated into thinking him guilty.''

C.S. Lewis, God in the Dock

Members' Page

Off to See the Wizard. To: Elizabeth McCaughey, Lieutenant Governor of New York: As we travel down the greenback road to the Land of HMO, we come to a fork in the road. One road leads to the Land of HMO, where doctors adopt a conflict of interest (less care = more profit) in exchange for ``security'' and HMO executives get wealthy, and the other leads to a land of free choice. Although the political scarecrows along the way are busy flailing their arms telling us that the road to the ``land of HMO'' is the only way to go, we mustn't forget that scarecrows have straw for brains.

The Wizards of HMO don't want you to know about Medical Savings Accounts. If people found out about this alternative, there might be no more HMOs, and no more HMO Wizards pulling down salaries of $15 to $20 million/yr. The HMO Wizards know that the combination of MSAs and a high-deductible catastrophic policy would be the water that would cause the Wicked Witch of the West (Esmeralda HMO) to melt. What a cruel cruel world it is when you have to compete with people being allowed to keep more of their hard-earned money. It's like competing against the American Way.

As it turns out, at this juncture in history you may be wearing the Ruby Slippers. You are in a position to help level the playing field in New York State by removing insurance regulatory obstacles which prevent MSAs from being offered in our State.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

On the Need for Private Contracts. In the program for the meeting in Falls Church, I noticed several presentations that recalled our own battle with the welfare statists in Canada (e.g. ``Managed Care: the Wrong Answer'' and ``Nazi Death Camps: the Ultimate Government Medicine''). The ideas I presented to the Social Development Committee of the then government of Ontario in 1986 will sound familiar to your members:

``The real issue at hand is not doctors' extra billing, -it is whether the doctors will continue to contract privately with their patients to administer necessary medical care, or whether the civil servants will take control of the practice of medicine, by controlling the purse-strings affecting doctors, hospitals, laboratories, and all other health care facilities....

``Bill 94, by terminating the doctor's right to contract privately with his patient without government interference, makes the doctor a servant of the state....He can no longer criticize the government with impunity; he can no longer act in his traditional role as patient-advocate...; he can no longer offer an alternative to a deteriorating government health care apparatus....In the extreme,...this can lead to state doctors like the notorious Mengele of the Nazi concentration camps and state psychiatrists in Russian political prisons.

``Re-privatization would reduce substantially the massive medicare bureaucracy-what Swedish Professor Gunnar Bjork has referred to as ``the cancerous growth in the number of medical administrators at all levels of incompetence.'' The return to fiscal sanity and financial responsibility would eliminate the increasing tendency of despairing bureaucrats, unable to cope with the monster they have created, to think in terms of civil conscription of medical personnel, medical institutions, and medical industries.''
William Goodman, M.D., Toronto, Ontario
[Copies of the complete address available on request.]

A Proposed Resolution. WHEREAS managed care companies are rapidly gaining a significant market share of business in the State of North Carolina;... and WHEREAS these same managed care organizations are creating and utilizing cost containment mechanisms which have the potential to compromise a physician's primary responsibility of advocacy for the individual patient; and WHEREAS these managed care business relationships can therefore potentially create conflicts of interest for the leadership of the North Carolina Medical Society, THEREFORE, be it resolved that all officers of the North Carolina Medical Society, disclose, for publication in the Bulletin, on a yearly basis, any and all business connections to managed care entities prior to taking office, and that officers required to disclose these business interests include all elected appointed officers, counselors, committee chairman, and the executive director.
James P. Weaver, M.D., Durham, NC
Copies of Dr. Weaver's slides on ``Managed Care and the Patient-Physician Relationship may be purchased or borrowed.'']

On ``Provider'' Networks. A physician who agrees to participate in a corporate managed care company is what I call an appeaser. He is willing to compromise his principles i.e. ration to just a few patients, so that his life may go on for the most part undisturbed....If, however, the physician owns the company (which will profit from the care denial), his take per denial will be substantially greater and the incentive to ration will become irresistible. The physician has now become not an appeaser, but a collaborator. Remember the Vichy government of Nazi-occupied France? An appeaser would say, ``Managed care is here to stay. Might as well learn to get along with it.'' A collaborator would say, ``Hey, let's see if we can get on the inside, maybe form our own rationing company and get rich!'' Coupled with tort reform, this is a recipe for true unaccountability. Ambrose Bierce said, ``Accountability is the mother of caution.''
G. Keith Smith, M.D., Edmond, OK

Legislative Alert

For the first time in decades, the Congress is getting ready to send a balanced budget to the President's desk- or at least one that aims to be balanced by a specified date. According to the Congressional Budget Office (CBO), the deficit will reach $0 in the year 2002. Beyond the spending cuts, the proposed budget would cut taxes by $245 billion over a 7-year period. At the heart of the tax reform is a family tax credit equal to $500 per child and a reduction in the capital gains taxation rate.

The reconciliation bill would also increase the public debt ceiling from the current level of $4.9 trillion to $5.5 trillion. Without raising the debt ceiling, the United States would officially go into a default.

Bill Clinton has signalled his intention to veto the balanced budget package, although what Clinton will really do when the chips are down is always mystery.

Candidate Clinton promised a balanced budget in 5 years. Central to that promise was the 1993 tax increase, $263 billion over 5 years, the largest tax hike in American history. In October, he told a Houston audience, ``I think I raised your taxes too much'' and blamed the excessive tax increase championed by his Administration on the Republican minority in Congress. The next day the spin control cops at the White House press office said that Clinton really didn't mean what he said; he meant something else. So too with the budget.

This year, balancing the budget in 5 years didn't look like such a good idea after all. In February, 1995, Bill Clinton sent Congress a budget that contained annual deficits of more than $200 billion as far as the mind's eye could see. In May, Clinton said that the 7-year plan offered by the Congressional leadership is too cruel; 7 years is just an arbitrary number, and 10 years would be better. In October, Bill Clinton said that balancing the budget in 7 years might be a good idea after all. Congressional liberals are going nuts.

Medicare: What Congress Did

For sheer political impact, nothing comes close to the ``Medicare Preservation Act of 1995,'' which was passed by the House as a separate bill and incorporated, with Senate modifications, in Budget Reconciliation. For the next several weeks the K Street crowd and the policy wonks will be trying to ferret out the details.

Limits in growth of the Medicare Part A Hospital Insurance (HI) program are calculated to keep the HI Trust Fund, now scheduled to go bankrupt in 2002, solvent until 2010, when the 77 million Baby Boomers start to retire. Nobody pretends that this is a permanent fix. The bill establishes a Medicare commission to recommend to Congress longterm structural changes in the program.

The plan establishes a new Medicare Plus Program that allows beneficiaries to enroll in private employer-based health insurance plans. Many people upon retiring could keep their employer-based plan, with costs paid by the government through the defined contribution mechanism. The basis of that defined contribution is the per capita spending in Medicare, which is now $4800 per person. It is scheduled to rise to $6700 per person by 2002, a $1900 increase. Of course, liberals in Congress say this is not enough. They are afflicted with spendaholism, the political equivalent of an addiction.

Medicare Plus incorporates a key feature of the discredited and defeated Clinton Plan, a standardized benefits package for private plans. They must offer the same package of benefits as the traditional Medicare program and are forbidden to charge a higher premium for it. The price and premium manipulations were a major surrender to liberal sentiments. Although not winning liberal votes for the bill, they undermine the very market forces of consumer choice and insurance competition that the Republicans in Congress say they favor. Practically, insurers who want to offer an innovative set of benefits that meet the particular needs of elderly citizens can do so under Medicare Plus only by charging higher premiums rather than by substituting a more attractive set of benefits. In contrast, neither a government- standardized benefits package nor government caps on premiums characterize the private plans that serve Members of Congress or retired Congressional employees and Members in the ever popular Federal Employees Health Benefits Program (FEHBP).

The bill incorporates a key feature that may have been the price of an endorsement by the AMA: it allows doctors and hospitals to set up provider-sponsored organizations, bypassing traditional insurance, to market insurance products and medical services directly to Medicare beneficiaries.

Traditional Medicare continues, with more price controls. The Prospective Payment System (PPS), now governing hospitalization payments, is extended to home health care services. And a ``fail-safe'' budget mechanism empowers the Secretary of HHS to reduce payments based on the RBRVS system if the Part B spending targets are not being met.

The bill reforms medical malpractice law by establishing uniform standards for health care liability and by capping non- economic and punitive damages, gives doctors relief from the Stark self-referral rules, and flat out eliminates Clinical Laboratory Improvement Amendment (CLIA) rules for physicians' offices.

For teaching hospitals and graduate medical education programs, the bill creates a new Trust Fund, to be financed by both Medicare and the federal treasury. (According to a forthcoming study by the Cato Institute, taxpayer funds provide approximately 56% of all medical school revenues in the United States.) Originally, the bill called for the elimination of all funding for foreign medical graduates, but the final bill raised spending to 25 percent of what American graduates receive. Perhaps Congress ought to extend this taxpayer generosity to foreign lawyers interning with Robert Shapiro, Johnnie Cochran or F. Lee Bailey, the Dream Team, or even lowly public lawyers like Marcia Clark.

The Dingell-Gibbons Alternative

Congressional liberals have rallied around an alternative offered by Big John Dingell (D-MI), one of the foremost champions of national health insurance, and Rep. Sam Gibbons (D-FL), whose public disclaimers against hysteria in the face of the impending bankruptcy of Medicare have become a national model of cool- headed statesmanship. Their plan, which went down to defeat, offered a $90 billion savings over 7 years, largely through cuts in payment to Medicare ``providers,'' while adding new benefits (mammography, pelvic examinations, colorectal screening, and Pap smears).

Congressman Gibbons's behavior throughout this entire episode has been instructive, a relic of what the old Congress was like. In May, 1995, commenting on the HI Trust Fund, he said that the Congress had been receiving those kinds of reports from the trustees for years. Congressman Pete Stark (D-CA) has also argued that the trustees' report should not be the source of so much consternation. But if the House Ways and Means Committee were, as Stark says, a kind Board of Directors for Medicare, how would they be regarded if they had fiduciary responsibility in the private sector for private insurance or private pension trust funds?

Clearly, members of Congress and private citizens operate under two different sets of rules. If they did not, the Cong- ressional managers of the failing Medicare system would have to meet the liquidity requirements in all 50 states in the union, maintaining enough reserves to meet benefit payments and cover contingencies. Under the laws governing private sector companies in most states, the Medicare system, with its ever worsening financial condition, would be decertified. And if a member of a private board of directors treated the fiscal condition of the trust funds so cavalierly-if he knew that the fund had financial problems and failed to act-he could be sued by the stockholders for negligence.

The Gephardt of Old

Befuddled taxpayers have got to be wondering what's real and what's unreal about the Medicare debate. What, in other words, do the Congressional participants in the debate really believe? Conservatives on Capitol Hill are circulating a remarkable statement on health care financing by the leader of the loyal opposition, one of the fountains of vituperation on the subject of Medicare reform and school lunch cuts.

In the 96th Congress, Congressman Richard Gephardt (D-MO), today's Minority Leader, introduced a remarkable bill, ``The National Health Care Reform Act of 1980,'' along with another bright, up-and-coming Congressman David Stockman (R-MN) of Minnesota, destined to become President Ronald Reagan's Chief of the Office of Management and Budget. Gephardt said: ``The basic issue in reforming the financial structure of the healthcare delivery system isn't how much of its resources America will devote to healthcare, but who should decide how much. I believe government cannot and shouldn't decide it. The answer is to permit the American people, all of whom are patients or prospective patients, individually to make the decision on what resources they wish to devote to health care. But this can be done only if each customer has a choice among competing providers of health care and if the customer has an economic stake in the decision.''

Even more remarkable is the Gephardt/Stockman 1980 prescription for Medicare reform, outlined in the Summary Section of the Act: ``Medicare beneficiaries would have the option of remaining with the present Medicare benefits system or of choosing to receive benefits of Plans being offered by the competitive system. Medicare beneficiaries who took this option would be provided a direct health care contribution by the federal government in an amount equal to the average cost of plans purchased by Medicare beneficiaries. Plans providing services to the Medicare individuals would be required to provide benefits which are greater than those currently covered by Medicare....If they selected a plans whose premium was less than the amount of the health care contribution, they would be able to keep the difference as a tax refund.''

Right on, Dick!

Last Minute Fight Over Medical Savings Accounts

Although the Archer-Jacobs language in HR 1818 (which would allow individuals who are covered only by a catastrophic health plan to maintain a medical savings account, with contributions excluded from an individual's taxable income) was incorporated into Budget Reconciliation, the fate of MSAs in Medicare reform is not clear as we go to press. During Senate consideration of the Medicare changes, Senator John Chafee (R-RI) joined with Senate Democrats on the Senate Finance Committee to strip out the Medical Savings Accounts in the Senate version of Medicare reform. The provision was nonetheless in the Senate Reconciliation package but was removed by a parliamentary maneuver.

Chafee's action set off a firestorm among House Republicans and conservative members of the Senate. Liberals in Congress and elsewhere rightly fear the introduction of MSAs; it is perhaps the best single weapon individual consumers have against the bureaucratization and control of medicine, whether on the part of the federal government or the corporate boards who are busily throwing workers and their families into HMOs or other managed care operations. The Chafee action is threatening the viability of Medicare reform with angry conservatives. Once again, Senate Majority Leader Bob Dole's got a problem.

There's a big numbers dispute here between the CBO and conservatives over the fiscal and market impact of the MSA option. CBO staff have estimated that only about 1% of the elderly are likely to take the MSA option but even so the MSAs could increase rather than decrease Medicare spending, while incurring a revenue loss of $3 billion over a 7-year period. Lewin/VHI estimates that 3% of elderly would be likely to take advantage of the MSA option and agrees that MSAs would increase Medicare cost. The National Center for Policy Analysis (NCPA) thinks these negative estimates are all wet. NCPA estimates that the MSAs would attract as many as 40% of the nation's elderly and would save $100 billion over the next seven years.

Complicating the debate is an October 24th report from the American Academy of Actuaries on the overall impact of MSAs in the private sector. It concludes that ``the overall health insurance market will probably be slow to respond if the MSA plans becomes law, but within a few years MSAs could capture a large share of certain market segments, such as individual and small group insurance.'' The good news is that this debate will end where it should end: in the open market.

Medicaid Mess

While Medicare has been stealing the headlines, the debate over the future of Medicaid has largely been submerged. But Rep. Henry Waxman (D-CA), who loaded up Medicaid with mandates for years, could see a life's work disappear in one big budget vote. The costs are exploding. Because states, unlike the federal government, can't print money, taxpayers take their tax medicine straight with Medicaid. According to Heritage Foundation economists, under the current growth of Medicaid spending, the states (which pay 40 to 50% of the costs) will have to absorb $668 billion between 1995 and 2002. Some sample per-capita tax increases would be $427 per year in Pennsylvania, $294 in California, $427 in New York, and $441 in Florida. As with Medicare, the cost of doing nothing is astronomical.