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Volume 60, No. 7 July 2004

FALSE WITNESS

Most Americans know that politicians lie, even though they live as though certain fictions were true: the value of the dollar, the sacredness of entitlements, and the integrity of public health officials and regulatory authorities.

Most Americans assume that criminal defendants and defense attorneys will lie. Some are willing to accept such perjury, even in the Oval Office, at least on some subjects by politicians who give them what they want.

Lies may be acceptable if necessary for the greater good: the defeat of the Nazis, the detection of a terrorist plot, or the apprehension of serial killers.

Some feel that lies may be tolerable if the intentions are good enough: protecting the public against bad doctors, winning compensation for victims of malpractice, stopping drug dealers, or perhaps even maintaining public confidence in vaccines. That is apparently why the AMA and its Federation support absolute immunity even for bad-faith peer review, and why the public isn't outraged if a plaintiff's expert witness invents a convenient "standard of care."

Most Americans, however, still believe in the integrity of the criminal justice system. They also think that prosecutors are hamstrung by the exclusionary rule and other legal technicalities. With respect to certain unambiguous crimes that involve a body or damaged property, this may be true.

The idea being reinforced by numerous "law and order" television dramas, people believe that 95% of federal defendants end up pleading guilty or being convicted because, as The New York Times stated, "only the cases with the most compelling evidence ever make it to the indictment phase." Even in the scientific literature, the fact of a jury conviction or a confession is taken to confirm, for example, the pretrial diagnosis of "shaken baby syndrome" in the absence of any direct evidence that the only person on the scene actually abused the child.

If a defendant decides to plead, as Dr. Jeri Hassman did (see AAPS News, June 2003), she must assert her guilt in public after the judge instructs her in all the rights she is giving up, as well as the standard of proof ("beyond a reasonable doubt"). Such "acceptance of responsibility" can shave years or decades off prison time under the 1988 federal sentencing guidelines that drastically limit judges' discretion. If the defendant takes the stand to state her innocence, as Marla DeVore did, and the jury convicts, she can expect a sentencing enhancement because she is then presumed guilty of perjury.

Marla DeVore and her husband, Robert Mitrione, M.D., (AAPS News, May 2003 and March 2004) are now both incarcerated in federal prisons, serving terms of 15 and 23 months, respectively, for fraud proved at trial amounting to $75.25. Ms. DeVore must live in a 12 ft x 14 ft cell, into which 10 women are crammed owing to prison overcrowding. Meanwhile, Malcolm "Tadd" McVay, the former chief financial officer of HealthSouth, accused of $2.7 billion in accounting fraud, was sentenced to six months of home detention, a $10,000 fine, and forfeiture of $50,000. U.S. District Judge U.W. Clemon took into account McVay's admission of guilt and cooperation with the investigation (Wall St J 6/3/04).

Defendants are held to a very high standard. Dr. Sergius Rinaldi was accused of misrepresentation for saying he "was a Medicaid provider," meaning he "had been," whereas he now treats Medicaid recipients without charge (Telegraph 1/24/04).

Prosecutors, however, frequently use witnesses with a history of fabricating testimony. Three key witnesses in an allegation of conspiracy to commit murder against Charles Thomas Sell, D.D.S., (AAPS News, June 2004) have such a record (St. Louis Post-Dispatch 3/21/04). They haven't been cross-examined yet, as Dr. Sell has been imprisoned without trial for nearly 7 years.

Lying by wired undercover investigators is a favorite tactic for entrapping physicians. Some recommend that physicians purchase a radio-frequency (RF) detector and wear it while seeing even long-standing patients, especially if they prescribe controlled substances. (An RF detector responds to cellular telephones, but that signal is intermittent rather than constant.)

Prosecutors conceal or distort the truth with impunity, as extensively documented by investigative reporter Bill Moushey ("Win at All Costs," available at www.post-gazette.com ). And under a new Court standard, defendants who prove perjury also have to prove that a jury would have acquitted in the absence of perjured testimony (Mitrione v. U.S.A.), contravening 75 years of precedents in the Seventh Circuit, the law in at least four other Circuits, and Supreme Court teachings. Evidence for criminal intent by the Mitriones depended on the false testimony of a member of the prosecutorial team.

As Andrew Schlafly writes in a petition for Writ of Certiorari, "the implications of the new standard...would be catastrophic for the integrity of the criminal justice system, sacrificing rights of due process and fair trial." He notes that

had the Mitriones been convicted in the Fourth Circuit, they would have obtained a new trial. If the Seventh Circuit's decision stands, "the fate of defendants victimized at trial by lying witnesses thereby becomes subject to the happenstance of where the trial occurred." The scourge of conviction by lies, already rampant, will be worsened by the inconsistent standard.

With a jury tainted by false testimony on counts later dismissed, the Mitriones were convicted of "substitute billing," which is legal under a formally promulgated federal regulation but not allowed under an informal state handbook, and of "mail fraud" on a disputed $25 claim a "derivative crime."

"Show me the man, and I will find his crime," said the KGB. Shall American jurisprudence say: Show me the man, and I will create his crime, and manufacture the evidence?


The Value of a Dollar

A dollar is now worth about the same as a dime in the 1930s. Multipliers to convert old dollars to 2002 dollars are:

  • 1920    8.98
  • 1930   10.77
  • 1940   12.82
  • 1950    7.47
  • 1960    6.08
  • 1970     4.63
  • 1980     2.18
  • 1990     1.38
  • 2000     1.04
    Source: American Institute for Economic Research

 

The Value of Social Security "Contributions"

Assuming no change in the current structure of Social Security, workers under the age of 26 will reach full retirement age after the Social Security trust fund is exhausted. In 2042, beneficiaries will receive no more than 73% of their promised benefits. By 2078, benefits will be cut by 32%.
Source: Republican Study Committee

 

ArMA Calls for Scientific Integrity

On June 5, the Arizona Medical Association passed the following Resolutions:

No. 8-04, Scientific Integrity

Resolved: that the Arizona delegation to the American Medical Association urge AMA to urge the federal government to use only sound medical science to formulate public health decisions to safeguard scientific integrity in federal policymaking.

No. 10-04, Autism Commission

Whereas: Autism grew at an alarming rate in the last 15 years;

Whereas: The cause of this increase is unknown;

Whereas: Vaccines are increasingly being blamed and supporters of this hypothesis do not trust authorities;

Whereas: Authorities often have conflicts of interest making them appear suspect;

Whereas: The bottom line is vaccination rates may be affected and authorities tainted in all pronouncements, not just those speaking to autism;

Whereas: A neutral body can objectively look at the information, as did the Rogers Commission after the Challenger accident, and make recommendations; be it therefore

Resolved: That the Arizona Medical Association support a call to the American Medical Association to support the convening of a neutral national commission to look at autism (its rise and causes) modeled on the Rogers Commission that looked at the Challenger incident; be it further

Resolved: That the Arizona delegation to the American Medical Association take and advocate this resolution at the next AMA meeting.

"The practice of having people admit to what did not happen in order to avoid charges for what did happen creates a legal culture that elevates fiction over truth. By making the facts of the case malleable, plea bargains enable prosecutors to supplement weak evidence with psychological pressure.... Confession and self-incrimination have replaced the jury trial. Just as Bentham wanted, torture has been resurrected as a principal method of conviction. As this legal culture now operates, it allows prosecutors to bring charges in the absence of crimes."
Paul Craig Roberts, Independent Review, Spring 2003

 

Pentagon Auditors Alter Files

The Inspector General of the Defense Department found that the Defense Contract Audit Agency, the watchdog for defense contractors, spent more than 1,000 hours altering its own files to pass an internal review. The manager who directed the alterations resigned before discipline could be imposed.

In 2001, the IG's office itself reportedly destroyed documents and replaced them with fakes to avoid embarrassment (Margasak L, Associated Press, 1/11/04).

 

Independent Vaccine Investigation Called For

Arizona pediatricians voted against the ArMA resolution on the autism commission, citing a retraction of a Lancet article by 10 of 13 authors to support their contention that the question of a vaccine/autism connection has been thoroughly researched and disproved. The 1998 article reported an inflammatory intestinal condition in autistic children, with isolation of measles virus from tissue specimens. This fueled concerns of parents, many of whom had reported onset of autistic symptoms in their children subsequent to the MMR vaccine. The factual content of the article was not retracted, only the suggestion that a possible connection between MMR and autism warranted further investigation. The Lancet's main concern was lack of disclosure of "aspects of funding for parallel and related work and the existence of ongoing litigation" (Lancet 2004;363:820-824). Author Andrew Wakefield explained that a few of the children described in the Lancet report were also included in a second study funded in part by the Legal Aid Board (ibid.; Lancet 2004;363:1327-1328).

British journalist Melanie Phillips calls attention to the isolation of measles virus in CSF of three autistic children, reported to the Institute of Medicine (and published in the summer 2004 issue of the Journal of American Physicians and Surgeons). She writes: "The government insists that research overwhelmingly shows the vaccine is safe. But this is not so. The research in question investigates patterns of disease based on medical records. But this is unlikely to get to the bottom of the issue, since countless parents have said doctors not only failed to diagnose autism or bowel disease in their children but dismissed out of hand the parents' reports that the problems seemed to start with the triple jab."

Ms. Phillips observes that the stakes are high for "drug companies, the government, and the medical establishment." Quite independently of ArMA, she urges the government to commission an independent clinical investigation of affected children. "Only then will we be able to judge who in this wretched story is actually right, and only then will all children get the vaccinations they need" (Daily Mail 2/23/04).

 

AAPS Calendar


Oct. 13-16. 61st annual meeting, Portland, Oregon.
Sept. 21-24, 2005. 62nd annual meeting, Arlington, VA.


Green Light for Perjury

In appealing their conviction, Robert Mitrione, M.D., and his wife Marla DeVore argued that the 75-year-old standard of Larrison v. United States, 24 F.2d 82 (7th Cir. 1928), required a new trial because the jury outcome on Counts 12 and 14 "could have" been different in the absence of the perjury of the prosecution's star witness. (See www.aapsonline.org/judicial/ mitrione.htm for the history of this case, and p. 1.)

The prosecutor told the jury: "If you look at all the records as this Public aid auditor [Ms. Statler] did, and you come up with three times more billed than not billed, accident? Be kind of weighted a little more evenly if it were an accident, wouldn't it?" Ms. Statler had even testified that she "would have allowed [only] 14%" of defendants' claims, conveying to the jury that 86% of the defendants' bills were fraudulent. But her testimony was entirely false and the jury had been completely misled. Truthful testimony would have been that her audit of the records did not indicate any scheme to defraud.

Yet, the government insisted that the penalty for this highly prejudicial and material perjury should be essentially nothing and that defendants should be sentenced as though the perjury had not been uncovered. Agreeing, the court held:

Today, we overrule Larrison and adopt the reasonable probability test. In order to win a new trial based on a claim that a government witness committed perjury,...defendants will have to prove the same things they are required to prove when moving for a new trial for other reasons. Defendants will have to show that the existence of the perjured testimony (1) came to their knowledge only after trial; (2) could not have been discovered sooner with due diligence; (3) was material; and (4) would probably have led to an acquittal had it not been heard by the jury [emphasis added].

The acceptance of perjury is in glaring contrast to the inadmissibility of evidence obtained as the fruit of improperly seized evidence the so-called poisonous tree. Other improprieties do not shift the burden of proof to the defendant.

The Mitriones were deprived of their Sixth Amendment Constitutional right to an impartial jury, Andrew Schlafly argues. Additional constitutional issues are the failure to apply the Supremacy Clause to conflicting State and federal regulations and improper delegation of authority to agencies. "Courts should not defer to an agency's informal interpretation of an ambiguous statute or regulation in a criminal case." Supreme Court review is necessary, Mr. Schlafly writes, to "resolve widespread uncertainty and conflicts for prosecutions that exploit ambiguities in Medicare regulations."

The Court denied a Petition for Rehearing and a motion to allow the Mitriones to remain free pending appeal to the U.S. Supreme Court. The Petition for Writ of Certiorari is posted at www.aapsonline.org.

 

Derivative Crimes

Under the Constitution, States are responsible for prosecuting common-law crimes such as robbery or murder. The U.S. Supreme Court, however, has created a category of statutory crimes called "public welfare offenses," with criminal penalties for acts or omissions that technically violate a regulatory statute. These encompass an increasingly broader range of ordinary business activities. Additionally, to circumvent federalism, Congress and the Supreme Court have created what William L. Anderson and Candice Jackson have termed "derivative crimes," covering activities with some connection, however remote, to interstate commerce.

The first derivative crime, created more than a century ago, was mail fraud. In 1970, the Racketeer Influenced and Corrupt Organizations (RICO) law bundled any discernible "pattern" of crimes into a new, federal crime. In 1984, the "money laundering" statute depositing money allegedly garnered from criminal activity was greatly expanded.

In their drive to convict people, federal investigators often target individuals by stretching already dubious laws beyond recognition. "Obstruction of justice," for example, may mean nothing more than refusing to incriminate oneself.

Lying is permissible, according to a syllabus for an FBI course on ethics for new recruits, because subjects of investi- gations have "forfeited their right to the truth."

We now have, according to defense attorney Harvey Silvergate, three categories of prisoners: those who are guilty of a crime; those who are wrongly convicted of a crime; and those who are convicted under vague statutes for conduct that a reasonable person would not have assumed to be criminal.

Judge Edith Jones of the Fifth Circuit stated that "the integrity of the law, its religious roots, its transcendent quality are disappearing...." The American legal system, she states, has been "corrupted almost beyond recognition." As our legal philosophy has descended into nihilism, "zealous prosecutors are increasingly willing to sacrifice what is morally right for political expediency."

In 1981, there were 1,500 U.S. attorneys. Today, there are more than 7,000, all of whom need high conviction rates to gain promotions and pay raises. The federal prison population stood at about 20,000 in early 1981 and is now more than 170,000. The human wreckage of devastated families and ruined businesses continues to grow, and entrepreneurial activity must eventually be chilled because of uncertainty about the law.

What remains of America when its law becomes a weapon the state uses against whomever it chooses, for the political benefit of those in power?

[See Anderson WL, Jackson CE. Losing the law: from shield to weapon, Freeman 2004;54(May):20-23, www.fee.org.]

 

Doctors in Service of the State

The case of Charles Thomas Sell (see AAPS News, June 2004), on forced drugging of prisoners, raises questions about the potential institutional bias of state- employed physicians. As Justice John Paul Stevens wrote in a dissent to Washington v. Harper [494 U.S. 210 (1990)], "the mere fact that a decision is made by a doctor does not make it certain that professional judgment was in fact exercised." George Annas, J.D., M.P.H., cautions that prison psychiatrists, because of their own identification with their employer, may be able to persuade themselves too easily that the interests of the government and the prisoner are not really in conflict (N Engl J Med 2004;350: 2297-2301).

From farther down the slippery slope, the newly released video Remembering Saddam shows surgeons amputating the right hands of Iraqi merchants convicted of the crime of dealing in American dollars. They also had tattoos etched on their foreheads. American benefactors have provided prosthetic hands and plastic surgery. Pending suitable arrangements, the video will be screened at the AAPS annual meeting.


Correspondence

Doctors Worse Than Terrorists. In April, President Bush gave a speech in Buffalo touting the first successful convictions under the USA PATRIOT Act, which he hopes Congress will extend past its slated expiration date at the end of the year. The Lackawanna Six pleaded guilty to aiding terrorism. They trained at Osama bin Laden's al-Farooq terrorist training camp. The longest prison sentence was 10 years.

When prosecutors promise to treat doctors like the Taliban, don't believe it. They plan to treat doctors worse. Dr. James Graves got 63 years because four of his patients died while abusing their pain medicine without his knowledge. Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY

 

A Query to Organized Medicine. From a letter to the American Academy of Dermatology: After nearly 20 years as a member in good standing, I am debating whether to renew my membership. Our academy actively lobbied for the recent monumental expansion of Medicare. The cost will be astronomical, and the legislation may prove crippling to our innovative pharmaceutical industry. The real price will be loss of freedom: as prices go through the ceiling, we'll see restrictions on what drugs seniors can buy. Perhaps the most malignant consequence of all will be the requisite tax burden on our children and grandchildren.
Terry W. Marsh, M.D., Muncie, IN

 

Doctors' Opinions on Government. Physicians should not be consulted about what form of government should rule the land. Medical people may be the first to lick the boots of those in power, those with the promises, because it seems that they cannot afford to do otherwise. Moreover, they may think that the government would not, one by one, take away their ability to serve patients. They would be mistaken. Having physicians in its pocket greatly amplifies the power of government; hence, the reason for its blandishments.
Jack Tidwell, M.D., Columbus, GA

 

Where Does It End? In the beginning, powers of government were limited in the U.S. But now the government has no stopping place as to what it can or will do. Can you suggest some functions that the government should be denied?
Joseph Lee Pugh, Diamondhead, MS

 

A Losing Game. The etiology of medicine's problems lies with the aggressive, avaricious, dishonest "Liberals," who have never been liberal but have always been radical. Medicine has bought into the game, is playing on their field, and is losing both for physicians and patients. Physicians must stop caving into politicians and third parties and must not let themselves be compromised for a buck.
Milt Kamsler, M.D., St. Augustine, FL

 

Never Underestimate the Left. These are the people who can hold two perfectly contradictory philosophical positions in their head at the same time and not have their brain explode. Remember the Grand Unifying Principle: No matter what the issue or contemplated actions, government is always good, and the private sector is always bad.
Linda Gorman, Independence Institute

 

Government Solutions. When astronauts first went into space, NASA discovered that ballpoint pens would not work in zero gravity. To combat this problem, NASA spent a decade and $12 billion to develop a ballpoint pen that writes in zero gravity, upside down, under water, on almost any surface including glass, and at temperatures ranging from below freezing to more than 300�C. The Russians used a pencil.
Vern L. Goltry, M.D., Boise, ID

 

Neighbors, or Villagers? Auschwitz, once a village, should dispel Sen. Clinton's quaint ideas about villages. Had more Germans taken to heart what it really means to be a neighbor, there might have been the critical mass of resistance to prevent the genocide carried out by the "village."

As medicine is a very personal endeavor one doctor and one patient at a time you can't squeeze the village into it. Instead, I am trying to answer the age-old question: "Who is my neighbor?" Can American physicians rise to meet challenges from our own Village, by helping our neighbor?

An inscription on Union Station, across from the Capitol, reads: "Be noble and the nobleness that lies in other men, sleeping yet never dead, will rise in majest to meet thine own."
Robert S. Berry, M.D., Greeneville, TN

 

Freedom. I'm making people better and making a living as a free man. No DRGs, ICD-10, CPT, HMO, PPO, IPA, OIG, insurance clerks, etc. The proof that I'm a good doctor is the happiness of my patients in paying me with their own money. They are free agents too. If they are unhappy, they leave. I am not the one to solve everyone's medical problems. My Oath of Hippocrates only requires me to worry about my own patients' problems, as I freely and happily do.
Herbert Rubin, M.D., Los Angeles, CA

 

A Corollary. As Orwellian scholars know all too well, "no child left behind" means, by definition, that no child will be allowed to advance.
Gerry Smedinghoff, Phoenix, AZ


Legislative Alert

The Memorial Day Medicare Recess Report

Remember that the Medicare prescription drug bill was supposed to be the political bonanza for the Republicans. One thing is certain: the hot-shot, K-street, megabucks political consultants who sold this turkey (stuffed with massive debt and taxation) are guilty of gross political consulting malpractice. It goes without saying that they don't know anything about the real dynamics of health policy and its painful, political trade offs. (Senator Hillary Clinton can explain that in some detail.) What was supposed to be a massive net plus, is turning out to be a politically dangerous net minus.

And the evidence is trickling in. Nationally syndicated columnist Robert Novak reports that Republicans fear losses in November. The anxiety over Iraq is compounded by fear, confusion, and hostility toward the prescription drug benefit. The danger is compounded by the fact that the strongest hostility is to be found in the Congressional Republicans' conservative base. Says Novak: "What acutely torments these voters is the prescription drug bill. Republicans are fearful that the plan will take away benefits they have and replace them with something they don't want" (Washington Post 6/3/04). The late House Speaker Tip O'Neill, author of the famous aphorism "All politics is local," understood that you never, ever, come Hell or High Water, alienate your political base.

Novak reports that the growing anxiety on Capitol Hill surfaced on May 20, when the President delivered a pep talk to about 200 assembled Members of Congress: "He encountered dead silence in going on to the prescription drug program. 'I guess your eyes just glazed over,' an unamused Bush told his congressional audience. Defiantly, he said, 'Other presidents have promised help for prescription drugs, but I have actually done it.' That generated a little applause. Only when Bush mentioned health savings accounts, the token conservative element in the prescription drug bill, did he again get an enthusiastic reception from the legislators." Surprise.

The New Medicare Discount Cards

Since June 1, the new Medicare drug discount card program has been in effect. Like most government programs, this one was not market tested, and CMS has had only four months to get the program up and running. It is unique in one key respect, however: unlike most of Medicare, this program relies on the provision of comparative pricing information, consumer choice, and free market competition. That's what's really wrong with it; it might work. Already, leftists in Congress and elsewhere are calling the new program a mess, a failure, and something so beneath serious health policy that it is even undeserving of seniors' participation. Families USA is, predictably, against it; so is Senator Kennedy, Senator Daschle and Senator Clinton. While Rep. Pete Fortney "Pete" Stark (D-CA) said the program was a mass of confusion that promised only minimal savings, House Minority Leader Nancy Pelosi reportedly urged seniors not even to sign up to get the discounts. Stay away from these drug discounts, if you know what good for you and us, by the way.

True, there have been glitches. This is a big government computerized information program, and some of the prices listed on the new CMS website are wrong. But the facts are undeniable. The cards cost no more than $30 a year, poor seniors get a $600 subsidy on the card of their choice, and there are no "asset tests" to qualify for the subsidy. Any remaining money in the subsidized accounts can be rolled over to the next year tax free, just like a health savings account. And the program can deliver serious discounts, especially for low-income seniors. Joseph Antos, a top health policy analyst at the American Enterprise Institute (AEI) and a former Assistant Director of the Congressional Budget Office (CBO), estimates that a low-income senior, eligible for the subsidy, could get a savings of 62% annually on drug purchases. An excellent summary of the impact of the discount card is posted at www.heritage.org/research/healthcare/bg1766.cfm.

This weird controversy has prompted Jeff Lemieux, a yellow dog Democrat, recently a senior economist with the Progressive Policy Institute, and now health policy guru for Centrists.Org, to remark: " The average Martian would be justifiably perplexed about why the Democratic Leadership wants to repeal a program that does no harm, might actually help quite a few people, and offers a significant benefit to low income seniors." No, they are not crazy, Jeff. The Martian might not get it, perhaps. But, It's the Structure Stupid!

Medical Costs Again

This year medical costs are expected to increase by 10%, reports The New York Times, a slowdown from previous double-digit increases. In 2003, medical insurance premiums rose 14%; in 2002, 23%; in 2001, 11%. A decline in hospital and physician costs and an increase in competitive pressures this year are cited as reasons for the slowdown. But the increases are still more than double the rate of inflation.

Yet even as we complain, we really do want expenditures to rise. We demand more medical services for the aging, as well as for the young, and politicians listen. Moreover, we nurture and protect unhealthy behavior by insisting on community rating, meaning that we will have everybody pay the same insurance rates, regardless of personal risk-taking behavior.

Curiously, while Families USA and AARP are complaining that drug costs about 10% of medical dollars are outpacing general inflation, they are not outpacing other medical costs. From January 2003 to February 2004, the compound annual growth rate for the cost of drugs was 2.8%, compared to 4.8% for all medical services. Nonetheless, we like drugs and we like modern technology, and we are in the process of making sure that drug coverage is universal in public programs.

Back in the early '90s, Professor Bob Blendon at Harvard University did a survey contrasting the views of the general public and the health policy wonks. He found a big gap. The wonks always worried about rapid increases in spending. The general public is likely to say that we meaning somebody else or "the government" should be spending more on medical care. The only costs the public cares about are out-of-pocket payments, coinsurance, and deductibles. That's the problem. Politicians obviously take this to heart, and offer what they believe to be popular proposals. If President Bush wants to spend a little more than $100 billion over the next ten years on the uninsured, Senator Kerry is prepared to spend an additional $900 billion, or $650 billion, depending on which analysis of the Kerry Plan you think is right.

Value for Money?

There is an even more important question about spending than its sheer size, and that is whether we are getting good value for our dollar. This is a more complicated question. In actual services and products, the answer is yes. Consider newer and more effective biologics and pharmaceuticals and the rapid and continuing advances in diagnostic technologies and surgical techniques. But in financing, the answer is probably not. While there are some efficient health insurance arrangements out there, we are still spending a lot of money in ways we would not choose if we were actually forced to make the economic tradeoffs. For example, while too many Americans are uninsured, it is also true that far too many are overinsured and have no idea how much the coverage actually costs.

Policy Options to Control Costs

What can we do or should we do about medical costs? We cannot make people younger. We could reduce or slow advances in medical technology, biologics, or pharmaceuticals with price regulations or other regulatory obstacles. (The Europeans are generally very good at this. We already do this to a limited extent in Medicare, and there are some serious Washington policy analysts who will tell you that we have a "lot to learn" from these public programs on this score.) But if we want to pursue something sane and humane, we can adopt several policy changes that will moderate costs.

Promote price transparency in all public and private programs. Health care is notorious for lack of clear information on prices, and, for most Americans there is little or no comparative shopping on the price of insurance or medical services. They are in a black box. In the field of medical insurance, the one major exception is the FEHBP. In the private sector, there are small but growing insurance brokerage websites on the internet, such as eHealthInsurance.com, which covers only the individual market. In the field of medical services, there is little or no comparative information that individuals as consumers can actually act on with their own dollars. Ironically, the big exception may turn out to be prescription drugs. The new Medicare drug discount card program is posting prices on the internet for 73 different discount cards. According to the Lewin Group, seniors could save more than 20% on the most common prescriptions. If we are serious about controlling costs, we need to accelerate the trend toward price disclosure, along with readily available information on quality of care and performance. That is what is routine in other, market driven sectors of an economy.

Change the tax treatment of medical insurance. Federal and state tax breaks for employer-based insurance amount to nearly $210 billion in 2004. The current tax policy distorts the health insurance market and drives costs up. A 1994 CBO analysis of the tax treatment of medical insurance concluded that it hides the true cost of medical services as well as the identity of the person paying for the care. It creates the impression that medical care is a free fringe benefit, not a service purchased with money that would otherwise be spent on wages or other compensation. The Lewin Group has estimated that 88% of the cost of medical benefits is actually paid for by lower employee wages or other compensation. CBO also concluded that current tax policy fuels higher medical costs by encouraging workers to seek more comprehensive and expensive benefits the bigger the benefit package, the higher the tax-free income. While HSA policies are a first step in this direction, they do not, of themselves, repeal the current tax laws governing medical insurance. If we are serious about insurance reform, we must be serious about tax reform.

Reduce or eliminate third party payment for routine medical services in both private and public programs. As the Joint Economic Committee reports, only one in seven health-care dollars is spent directly out of consumers' pockets. This guarantees high and unnecessary administrative costs in the system. Every dollar that is passed through the bureaucratic apparatus of a insurance bureaucracy is more expensive than the dollar paid directly to the doctor. For routine medical services, we should promote direct payment wherever possible, and health savings accounts and debit cards will expand this option. This would progressively move medical insurance to true insurance financial protection for catastrophic events.

Review and reduce regulation. Medical care is the most highly regulated sector of the American economy. A recent cost-benefit analysis presented to the Joint Economic Committee of Congress by professor Christopher Conover of Duke University found that the net cost of health-care regulation that's dead weight loss amounts to $128 billion annually. If one excludes, just for the sake of statistical analysis, federal ERISA rules, the net cost rises to $175 billion. ERISA, whatever its merits, does indeed secure lower levels of state-based regulation. Conover details the impact of health regulation over several sectors. For example, in medical facilities regulation, of 16 areas of regulation studied by Conover and his team, only two produced benefits that exceeded costs. Three of eight areas in the regulation of medical professionals produced benefits over costs, and seven of 19 in the area of medical insurance regulation. The message is simple and clear. Both federal and state authorities need to get to work and start doing cost-benefit analyses of their own.

Single Payer Update

Sweden's tax rates are among the highest in the world, and the waiting lists and costs of the Swedish government medical system are both growing. Goran Persson, the Prime Minister of Sweden, needs a hip replacement operation. He says he's in pain, that his health is a private matter, but he has publicly pledged that he will not seek private-sector treatment; he will rely on the public sector, and will remain faithful to the Swedish Social Democratic Party's motto: "People Before Markets." According to a May 25, 2004, report from Reuters News Agency: The Prime Minister says, "Right now I'm in quite a lot of pain, but that's not the fault of the health system." The Prime Minister says that the 1.5-hour hip operation will be carried out sometime before Christmas. This is a public matter. Who says socialists are sissies?

Robert Moffit is Director, the Center for Health Policy Studies at the Heritage Foundation, Washington, D.C.