AAPS News, Volume 66, No. 2 February 2010


The U.S. federal government desperately needs money. And money is in banks. Many U.S. entities called banks are now a sink rather than a source for the U.S. Treasury, so here we will use Willie Sutton's definition: banks are where the money is.

"Healthcare" is a bank-out of which Barack Obama plans to fund the bulk of his agenda, which requires massive new investments in education, energy, and many other areas. "By squeezing inefficiencies out of the health care system, he could have his New Deal and also restore the nation to long-term fiscal balance," writes David Brooks (NY Times 5/14/09).

Preventing national insolvency is the first short-term priority. By 2019, the Congressional Budget Office projects that more than $800 billion will be spent annually just to service the debt. Every month, the government has to meet payroll: some 2 million federal employees, earning on average twice as much as they could in the private sector (Chris Edwards, cato-at-liberty.org 8/24/09).

Tax revenues are down, and there is growing resistance to tax increases. But people voluntarily will spend their last dime on medical care-and they have long been conditioned to believe that they need to pay in advance, through "insurance."

Many have noticed that the payments required by recently passed House and Senate bills begin immediately, whereas benefits don't start for several years. Just like insurance.

Medical Assets

Transfusions require a donor, and the medical sector is one of the few remaining healthy parts of the economy. Out-sourcing is in an early stage. While overall employment has been falling, healthcare employment has been growing. As Richard A. Cooper, M.D., former dean of the Medical College of Wisconsin, pointed out, without the 2.8 million jobs added in the healthcare sector in the past decade, unemployment last April would have been 10.5% rather than 8.5%. (http://buzcooper.com/2009/04/).

Physicians nearing retirement have usually accumulated some assets. Draconian penalties for alleged false claims could seize them-and the prospect of a $50,000 fine for a "fraudulent" (i.e. "unnecessary") service tends to put a person in a compliant frame of mind. Newly minted physicians carrying at least $100,000 of debt-much of it federal and not dischargeable in bankruptcy-have little bargaining clout.

Many influential authorities assert that the system has around 30% excess capacity. The "30% solution" would be simply to eliminate the "geographic disparities" shown in the Dartmouth Atlas-all of which are assumed to represent overuse of tests and treatments because of the incentives in a fee-for-service system. In fact, the main source of disparity is poverty, according to a trenchant critique by Cooper and others (see AAPS Mythbuster 33). The poorest 15% of Americans consume twice as much medical care as the richest, Cooper notes.

The poorest also make no net contribution to the tax base.

Medical Liabilities

Various techniques for "kicking the can down the road" have been used with Medicare. But the day of reckoning is dead ahead, and default is ultimately inevitable. As previously noted (see AAPS News, December 2009), Social Security and Medicare beneficiaries have no contractual right to their benefits, only an entitlement that can be changed at congressional whim.

Both government and its private partners shift costs-and liabilities. Physicians who have signed managed-care contracts need to read them: for how long must they continue providing services, without billing patients, should the plan go bankrupt?

Will government "providers" be bled into bankruptcy as they continue to work at a loss, or face charges of abandonment?

In 2006, CMS "capped" payments to oxygen suppliers at 36 months, but required them to continue service for 2 more years, with maintenance visits only every 6 months. Then, patients must reapply for their oxygen. The six-fold disparity in spending for oxygen might suggest this as a target for reducing "excess"-in states like Colorado. The "unexplained" variation correlates almost perfectly with altitude and incidence of COPD. But the private sector is held responsible-either for overuse or neglect.

The Infrastructure
During the first few years of reform, its impact might appear to be less than critics predicted. Agencies will be hiring, and drafting rules that will not immediately be implemented in full force. Doctors may continue to work-and hope for change.

Why the rush to install health information technology that is not fully tested, or has actually been shown to be inefficient or dangerous (see AAPS Mythbuster 32)? If the main federal function of healthcare is to serve as a bank, the main use of the HIT is to keep track of assets, liabilities, and "disparities."

The rules of the new system will be immune from administrative or judicial review. Congress is even trying to bind its successors through a requirement that the Independent Medicare Advisory Board can only be abolished by a two-thirds vote.

Adverse effects may become apparent incrementally-or in rapid, catastrophic decompensation. The regime is apparently betting that by the time the need for resistance is undeniable, the means will have been seized. A revolt by free men could succeed. Spartacus and his followers were crucified.

The New System

A revolutionary transition is beginning in U.S. medicine. Instead of being paid for transactions, some organizations are being paid instead for producing outcomes, write Robert M.J. Bohmer and Thomas H. Lee (N Engl J Med 8/6/09). Their mission is shifting from a service to an outcomes orientation.

"Physicians will be accorded less freedom to deviate" (ibid.).

To be allowed to sit for a recertification exam, physicians would have to provide "appropriate care" (JAMA 9/2/09).

Blue Cross is trying to change the payment model to one in which "doctors and hospitals earn more by...keeping patients out of doctors' offices and hospitals." Improved information systems will permit tracking of amount of care provided, and permit "quick adjustments if costs head out of control" (WSJ 11/27/09).

Liberty is an important American value, concedes Thomas H. Murray, Ph.D., but "job lock" could prevent an entrepreneur with a chronically ill child from pursuing his dream. Other values-such as fairness and "stewardship" of "community resources"-require universal participation (N Engl J Med 12/23/09).

The Healthy People process of goal setting aims to improve health-and reduce disparities-by "investments in determinants of health": medical care, individual behavior, social environment, physical environment, and genetics (JAMA 5/8/08).

The predictive power of a systems approach has been shown for some microorganisms. Phylogenetics suggests that these results "can be scaled to humans," achieving an evolutionary breakthrough from "reductionism to holism," write Howard Federoff and Lawrence Gostin (JAMA 2009;302:994-996).

Quoting Lord Beveridge, whose report led to the British NHS: "A revolutionary moment in the world's history is a time for revolutions, not for patching." In the U.S., it is "now a matter of when, not whether, change will occur" (N Engl J Med 8/6/09).


Abolishing Insurance

Since the health reform bills will not solve any of the problems that its proponents talk about, why the celebrations, asks John Goodman. The reason: the not-talked-about accomplishments that health insurance will be nationalized, and nobody will ever be able to pay a real price for insurance again. People will either be overcharged, or unfairly subsidized as others who may be less fortunate must still pay more so that favored ones can pay less. Everyone will be trapped in the same type of third-party payment system that has created problems of cost, quality, and access, and insurers will not be allowed to innovate to solve problems.

"Instead of a market...in which health plans compete to solve the problems of the seriously ill, health plans will do everything they can to avoid the sick…[or] to undertreat them."

Pressures will build for a government takeover.

"Nationalization is the abiding, overriding, everlasting, immutable...goal of the political left…. All else is sound and fury signifying things that are way down on the priority list" (www.john-goodman-blog.com 12/28/09).


"I feel confident that I could persuade a millionaire on Friday to subsidize a revolution on Saturday out of which he would make a huge profit on Sunday even though he was certain to be executed on Monday."

Saul Alinsky, Rules for Radicals, 1971


State Budget Shortfalls

In FY 2010, all states except Montana and North Dakota are facing projected budget shortfalls. The five worst are: California, $51.8 billion (56% of budget); Arizona, $5.2 billion (53%); Illinois, $14.3 billion (41%); Nevada, $1.2 billion (40%); and New York, $21 billion (38%) (Kaiser State Health Facts).


Servitude in Massachusetts

Proposed legislation in Massachusetts, S. 2170: "Every health care provider licensed in the commonwealth which provides covered services to a person covered under an ‘Affordable Health Plan' must provide such service to any such person, as a condition of their licensure, and must accept payment at the lowest statutory reimbursement rate…." Balance billing, or attempts to recoup losses by billing other plans more are forbidden.


National Servitude

In an introduction to a new health policy section in Pharos, the journal of Alpha Omega Alpha, Robert H. Moser, M.D., of Georgetown University updates a 1999 article. The Universal Health Care System (UHCS) will develop incrementally, but each step will be iconoclastic by current standards. The distinctions between M.D., D.O., P.A., and R.N. will blur. There will be universal capitation, the elimination of profit, the end of "futile care," and service in an expanded National Health Service Corps, with no option to buy out. While the "dream plan seems to have Orwellian overtones," it need not. We can contain the "inevitable bureaucracy." The tumultuous transition should be far less turbulent than the "prevailing nonsystem." We simply must accept the "seismic changes" the system demands (Pharos, Autumn 2009).


Socialism Kills

Through three decades after independence in 1947, India drew heavily on the socialist Soviet model, achieving an annual GNP growth of 3.5%, compared with 7%-8% in Korea, Singapore, Taiwan, and Hong Kong. After cumulative market-based reforms, India became a miracle economy in 2003-2008, with a 9% growth rate. Swaminathan Aiyar calculated the human cost of delaying these reforms by one decade: 14.5 million fewer children survived, 261 million fewer people became literate, and 109 million fewer were able to rise above the poverty line (Cato 10/21/09, www.cato.org/economicliberty/).


AAPS Calendar

Feb. 5-6. Workshop, board of directors meeting, Houston, TX.
Sept. 15-18. 67th annual meeting, Salt Lake City, UT.
Sept. 28-Oct. 1, 2011, 68th annual meeting, Atlanta, GA.

Have you planned your exit strategy from the New System yet?
Last chance to attend our Houston seminar, Feb 5.
Details at www.aapsonline.org/houston.

Medicare Disenrollment: What Does It Mean?

Physicians are beginning to receive letters from CMS demanding that they "revalidate" their enrollment: "Section 42(424.515) of the Federal Register requires Medicare providers to verify accuracy of their enrollment information every five years in order to maintain Medicare billing privileges."

Individuals must submit a CMS 855I application within 60 calendar days of receipt of the letter.

A physician who declined to do this received a letter notifying him that his Medicare Provider Transaction Access Number (PTAN) and associated NPI were in the revocation process.

Patients of this physician file form CMS-1490S, Patient's Request for Medical Treatment, accessible at www.cms.hhs.gov, and are often reimbursed. This asks for a description of the illness or injury for which a patient received treatment, and requires an itemized bill that shows the provider's name and address. The form, signed only by the patient, has neither CPT codes nor NPI.

The physician files a nonassigned claim 3 months later, which is always denied-because the physician submitted only an affidavit stating that he has fewer than 10 full-time employees instead of the payroll records that CMS demanded to prove that he is not required to file electronically.

The question is: How do non-enrolled, or disenrolled physicians differ from opted-out physicians? The non-enrolled physician could not file a claim for an emergency service. He also does not file an opt-out affidavit with the carrier, re-opt out every 2 years, or have patients sign contracts agreeing not to file claims. This means that patients might not relinquish their Medicare benefits by choosing a non-enrolled physician.

It is not clear what position CMS will take concerning whether enrolled patients have this escape hatch, with or without the prospect of reimbursement. Please send copies of any relevant correspondence or notices to AAPS.


Enrollment as an Enforcement Tool

Because it is said to be "easier to screen people out in advance than to deal with them after they're in," the enrollment process is becoming one of the government's top enforcement tools. But it is not just excluding physicians for abusive billing, but also for submitting misleading information or making a mistake on the application, not returning overpayments, not reporting a change of ownership, or "other suspect activities." Address mismatches will have "dire consequences." Solo practices will "get special attention" (MPCA 11/2 and 11/16/09).


The PECOS Gatekeeper

Since Jan 4, 2010, Medicare claims will not be paid if the ordering/referring physician, whose name and unique identifier must be on the claim, is not in the Medicare Provider Enrollment Chain and Ownership System (PECOS). The practitioner must also be of a type or specialty that is eligible to order/refer services for Medicare beneficiaries. A physician cannot enroll in PECOS without an NPI (CMS MLN Matters MM6417). Note that the practitioner is responsible for any unauthorized release of information furnished for the enrollment process. AAPS is attempting to learn the effect on patients of opted-out physicians.


Tip of the Month: In order to be listed in PECOS, physicians must submit to electronic funds transfers (ETFs), even if they never accept assignment. This allows for "adjustments," which means taking money directly out of the account, for example in the event of alleged "overpayment." To protect against the erroneous seizure of money from their main bank account, physicians may want to establish a separate account for PECOS.


"Enhancements" to Anti-Fraud Law

A bill referred to the Senate Judiciary Committee, the Health Care Fraud Enforcement Act (S. 1959), would greatly expand the scope of fraud to cover crimes involving ERISA, drug marketing, or "kickbacks." This categorization increases the tools available to law enforcement such as asset forfeiture. It would lower the "mental state" requirement; impose harsher sentences; and expand the concept of "intended loss" to the total amount of claims submitted, rather than the amount actually received.

The already-passed America's Healthy Futures Act (S. 1796) would allow suspension of a provider's reimbursement during investigation of a "credible allegation" of fraud (MAG J 98(4)).


White House Sued over Secret Meetings

To cut deals to win passage of health legislation, Obama and his surrogates have been holding closed-door meetings with industry lobbyists, including the AMA, AARP, and Planned Parenthood, contends Larry Klayman in a lawsuit filed in U.S. District Court in Washington, D.C. Klayman, founder of Judicial Watch and Freedom Watch, states that the meetings constitute de facto advisory committees and thus fall under the Federal Advisory Committee Act (FACA). He demands release of minutes and other documents pertaining to the meetings (WND 12/21/09).

In addition to the Louisiana Purchase and the Cornhusker Kickback, more and more secret deals are leaking out. "The sheer magnitude of vote-buying for what was supposed to be largely a policy bill puts it in a class by itself," stated John Berlau of the Competitive Policy Institute (Human Events 12/30/09).


Whistleblower Sues Siemens

Soon after raising concerns about the safety of a software product, anesthesiologist Murray Malin, M.D., was terminated from his position as systems analyst for Siemens Medical Solutions. He filed suit in U.S. District Court in Maryland under the whistleblower protections of the Sarbanes-Oxley Act. Malin believes that Siemens filed documents containing false statements of fact about the product with the FDA. He also believes the company misrepresented the utility of the product to buyers, creating the impression that it supports physician workflow in a critical care environment although it failed to accomplish that task.


Social Security Owes "Fugitives" $500 Million

At least 200,000 elderly and disabled people lost Social Security benefits in recent years because they were deemed to be "fugitive felons." They include a quadriplegic man and a 79-year-old grandmother mistaken for a rapist. A federal judge has approved a civil-court settlement (WSJ 9/26-27/09).


De Facto Government Employees. As everyone is focused on the frontal assault on physicians in "healthcare reform" legislation, the bureaucracy has been mounting an attack on the flanks. A little-known item in a 2005 tax bill will cause those who "do work" for the federal government to suffer an additional loss of cash flow beginning in 2012. The effect is that the government now basically considers physicians in the Medicare program-both participating and non-participating-to be de facto employees of the federal government, and the employer will begin to withhold 3% for federal taxes. The amount is refundable when tax returns are filed the following spring.

The provision is expected to result in $7 billion in increased revenues over 10 years, owing to accelerated tax payments; thus, new revenue would have to be found in order to repeal it.

The bill is an accounting nightmare for both government and contractors. Compliance costs are estimated to be $17 billion over 5 years for the Defense Department, and much more for state and local governments. The AMA prefers the tax levy program, which reduces Medicare payments to tax-delinquent contractors by 15% until the overdue taxes are paid (AM News 12/7/09).
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY


Taking. Every dime used to pay for every government program comes from forcible expropriation of money from taxpayers. Yes, some of those taxes support an orderly society by funding police, courts, military, roads, and so on. But an increasingly large fraction simply takes from some and gives to others without any possibility that the activities of the recipients will make the people from whom it was taken any better off.
Linda Gorman, Ph.D., Independence Institute, Golden, CO


Government and Technology. "Interoperability standards" did not need to be imposed so that my Mac e-mail can communicate with Yahoo. The computer industry accommodated my needs, not by subsidy but by innovation and competition. In Canada, the government bestowed $6 million on our region to develop telemedicine. There were no results for 6 years. Then I learned in the news that a woman hundreds of miles away could have her mammogram instantly read by one of the three radiologists in my department in Thunder Bay, who had to cover a region with 250,000 patients. We had not been consulted. With government at the helm, the rational introduction of information technology will be impeded, not facilitated, no matter how much money is thrown at the problem.
Lee Kurisko, M.D., Eden Prairie, MN


The Price of Participation. According to a survey by Medical Group Management Association (MGMA), the cost of dealing with health plans averages $70,000 per physician per year. The average primary-care physician spends 4.5 hours per week dealing with plans, on everything from contracts to quality data reporting. Physicians may spend as much as 14% of their revenue on efforts to collect it! (Am News 6/8/09).
Albert Fisher, M.D., Oshkosh, WI


Deadbeats. An official of Great West Insurance Company admitted under oath in a deposition that her company eventually paid only $100 of the $12,000 billed by a medical practice. Is there any other industry in America where payment of less than 1% of the billed charge would be considered a legitimate practice?
Walter Borg, M.D.


Juxtaposition. The Aug 31, 2009, New Yorker article on "Status Quo Anxiety," defending Obama's healthcare reform, appeared adjacent to an article on corruption in the New York public school system and the impossibility of firing incompetent teachers because of the union ("Rubber Room" by Steven Brill). "Reform" organized by Service Employees International Union (SEIU) would likely be just as corrupt and absurdly expensive. As National Right to Work Committee Chairman Mark Mix points out, ObamaCare is a Trojan horse for more forced unionization.
Howard Maccabee, M.D., Walnut Creek, CA


Choice. Some people would choose to have government pay for their food, housing, and clothing. That is not a legitimate choice. Choice means allowing people to spend their own money as they prefer; it does not allow them to spend my money.
Greg Scandlen, Heartland Institute


Unprecedented Public Involvement. An insurance agent needed some home repairs. The plumber, knowing she sold insurance, asked to discuss proposed reform. From his truck, he brought a three-ring binder, with H.R. 3200 and his many sticky notes. Have citizens ever before read the bills?
Dave Racer, M. Litt., St. Paul, MN


P4P. Pay for performance will be followed by pay for outcome-measured in dollars. Beware of geriatrics. If your death rate is higher than average, your quality is suspect, especially if your independent practice is more popular than the hospital's in-house bought practice. If the King died, so did the doctor. In the modern scenario, the practice dies, for lack of income.
Curtis Caine, M.D., Brandon, MS