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Volume 63, No. 7 July 2007
A luscious prize it certainly is. Control of even a small
portion of $2 trillion is extremely lucrative.
Imaging alone cost $100 billion in 2006. "Even saving a
fraction is real money," said Robert Beauchamp, M.D., medical
director for UnitedHealthcare's Western region. A mere 1.7% would
be enough to pay for CEO Bill Maguire's stock options.
Three Democratic presidential hopefuls have unveiled plans
for nationalizing American medicine under the rubric of
"universal health coverage." It's been debated for decades, and
"the time has finally come to act," said Sen. Barack Obama.
John Edwards and Hillary Clinton have also presented plans,
which are supposed to stop short of being "an overhaul as
ambitious as the 1993-94 Clinton plan."
The confluence of forces may be more favorable now. Most
importantly, the insurance industry is thought to be in the mood
to try to "shape" the proposal, rather than simply opposing it
with "Harry and Louise" ads (Wall St J 5/7/07).
"Lenin was right when he said that `the Capitalists will
sell us the rope with which we will hang them,'" writes Linda
Gorman of the Independence Institute. Business interests accept
the current political climate and plan to roll over, hoping to
get the best deal they can under existing constraints.
Individual Mandates
Lenin was also right, Gorman states, when he said that to
exercise control one must adopt five basic measures. These
include "compulsory syndication (i.e. compulsory amalgamation
into associations) of industrialists, merchants, and employers"
and "compulsory organization of the population into consumers'
societies"; "nationalisation of the syndicates"; and abolition of
commercial secrecy. Individual mandates, Gorman thinks, achieve
all of these in medicine and would advance the single-payer
agenda faster than any other policy recommendation. For the first
time, government would force people to pay for a package of
services they have no control over. And mandates permit
government to control the definition of insurance.
Clinton says we may need an individual mandate; Edwards
would mandate coverage as soon as it becomes "affordable"; and
Obama will revisit the issue if his new rules don't make coverage
so attractive that everybody chooses to buy it.
Where Will the Money Come From?
No one is actually demanding that we spend a greater
percentage of the GDP on medical care, only that we shuffle the
money around so as to "cover" everyone. There are theoretical,
unproved probably imaginary savings from information technology,
preventive efforts, better management of chronic disease, and
"negotiation" (price controls).
There will be losers. "It's going to mean taking money away
from people who make out really well right now," Clinton
explained at a recent Presidential Forum at the University of
Nevada at Las Vegas.
When asked who that might be, she replied, "Well, let's
start with the insurance companies." Also, there would be "no
more free riders" such as young healthy people who choose to be
uninsured. "You're going to have to be in the system."
It may be argued that the failure of low-risk persons to buy
insurance increases the cost for "all of us." Actually, states
actuary Gerry Smedinghoff, the fact that many young healthy
people are uninsured has no effect on the cost of true
sickness insurance. Such persons also tend to decline to buy life
insurance, and this has no effect on the rates either of 23 or
53-year-olds. If health "plans" were underwritten like
insurance practically speaking, illegal today there would be no
group insurance and rates for 23-year-olds would be very low.
Fundamentally, there are only four real ways to bring in the
money for universal care or other government objectives. In the
U.S., these are taxes and fees (including community-rated
"insurance premiums"); borrowing; and printing money (inflation).
Other types of government also use confiscation, so far
restricted here to asset forfeiture and Kelo-type seizures.
Most health insurance companies pay out $1.01 in overhead
and claims for every $1.00 taken in. Their profit of 3% comes
from investing the money between receipt and payout, explains
Edward Dee Hinds.
Representative governments are institutionally incapable of
investment, states Linda Gorman. "They are good at one
thing collecting money from productive people and spending it on
their friends," including those who vote for them.
Some private insurers will gain from universal coverage. The
program will limit their freedom, in exchange for forcing people
to buy their product, explains David Hogberg.
There Is Another Way
Americans do not have to choose between the status quo and
the proposed recycled "managed competition" or Clinton redux on
the way to total socialization or nationalization.
As Regina Herzlinger writes in her new book Who Killed
Health Care?, transformation can occur with astonishing
rapidity, if we unleash consumers and entrepreneurs. She notes
that managed care went from zero to 100% penetration in only 4
years. The sense of urgency to seize government control may come
from the realization that the opportunity could quickly pass if
patient power gains momentum.
There are four basic scenarios for providing medical care,
writes Michael Glueck, M.D., defined by whose money and whose
benefit (NewsMax.com 5/21/07). Most
politicians advocate using someone else's money. But Americans
might learn, soon enough, that using their own money is the only
way they can make their own decisions for those they love.
After the United/PacifiCare merger, physicians in Tucson
confronted increasing problems. Dr. Robert Beauchamp and Dennis
O'Brien, VP for Network Management, agreed to meet with them and
answer some pre-written questions.
Physicians complained that "premium designation" to steer
patients to certain physicians had been arbitrarily imposed, and
they could not even find out their designation.
Prior authorization was replaced with prior notification,
with the result, after all the hassles and wasted time, that 3.5%
of requests for imaging studies are altered. Neurosurgeon Thomas
Scully, M.D., said he could not possibly do his work without
studies. "I have used the peer-to-peer discussions and found they
do not read the notes I send. They refuse to speak to my
physician assistant because they aren't peers. Well, they
[physician reviewers with United] aren't neurosurgeons."
Beauchamp said, "No promises, but we may need to look into
exempting certain specialties."
An office using state-of-the art information technology
complained that United's technology doesn't work. Also, "online
adjudications are all denied, always."
Physicians objected to threats of $25/occurrence fines if
patients use an out-of-network lab. "This is a national program,"
O'Brien said.
It was an "embarrassment," Beauchamp said, that letters to
700 Arizona doctors had gone out complaining of their patients
overusing the emergency room say for an acute traumatic injury 6
months after their last office visit.
The underlying theme is that local executives may promise to
"look at this," but the answer will probably be "it is a national
initiative, and we have to do what it says until we convince
Minneapolis different."
One of the most influential persons on the Clinton Task
Force on Health Care Reform was Lois E. Quam, on leave from
UnitedHealth, where she is now President of the Public and Senior
Markets Group. Quam is on the Fortune 2006 list of the 50 most
powerful women in America.
Northwest Neuro Specialists of Tucson has been performing
something like Mohs surgery on managed-care contracts. The group
reviews its contracts annually, explained practice administrator
Lynda Smith at an Arizona chapter meeting in Tucson. Also
speaking there was chapter president Michael J.A. Robb, M.D., a
Phoenix otoneurologist who has never signed such a contract.
Some practices prefer the staged radical administrativec-
tomy, pioneered by urologist Mike Harris of Traverse City, MI. At
the June 8 Milwaukee AAPS meeting, Harris gave a 10-year follow-
up. He reported that the side effects of eliminating third
parties are all favorable: a higher procedure/visit ratio, fewer
unnecessary visits, motivated patients, and less cost for charity
work or vacations. His accounts receivable decreased from
$220,000 in Jan 1998 to about $20,000 now. "There is no better
time to opt out than now," he said. "Medicare is bankrupt, and
business cannot afford today's program." (AAPS News, Feb 2001, Nov
2003, and www.northernurology.com.)
Also speaking in Milwaukee, family physician and AAPS
Director Todd B. West, M.D., provided facts and figures from the
third cash clinic he founded, Doctor's Walk-in Care of
Thomasville, GA. Happy customers are the key, he noted.
Since being out of all managed-care contracts in 2004, his
practice's profit per Relative Value Unit increased 360% compared
with 2002, reported the late Robert DeGroote, M.D., of Hacksen-
sack, NJ, in the April 2007 issue of the Bulletin of the
American College of Surgeons (www.facs.org/fellows_info/bulletin/bullet.html). The
still more radical idea of opting out of Medicare is explored in
the May issue. In recent years, several large orthopedic
practices have opted out, as have vascular surgeons, urologists,
neurosurgeons, and ophthalmologists, writes Barbara Peck, J.D.,
of the ACS Division of Advocacy and Health Policy.
In a survey conducted by the American Academy of Family
Physicians and Family Practice Management, 307
respondents graded health plans from A to F. Plans graded by at
least 200 doctors included Medicare (which got a C-), Aetna (C-),
CIGNA (C-), and UnitedHealthcare (D+). It is possible that
Medicare outscored other payers "because physicians have lower
expectations for the program and expect higher levels of
performance from large commercial payers that post billions of
dollars of profit each year." Payment rates were the biggest
concern; many PPOs pay 80% of Medicare (FPM June 2007).
"In 2000, tens of thousands of people on Medicare (because
they had no other choice) probably thought they had normal health
insurance. Then they got hit with bills of $15,000 or more,"
writes Linda Gorman of the Independence Institute. According to
CMS figures, nearly 73,000 beneficiaries had total hospital or
supplementary medical insurance liabilities greater than $15,000,
averaging $21,528.
AAPS mourns the death of James L. Pendleton, M.D., of Bryn
Athyn, PA, on June 7, 2007, at the age of 76. He joined AAPS in
1976 and was active in the cause of private medicine until weeks
before his final illness. He was our President in 2005 and
continued to serve on the Board of Directors. He founded the
Pennsylvania chapter, and tirelessly organized and participated
in debates and meetings that informed and inspired many of our
colleagues. He contributed valuable original ideas for free-
market insurance reform. In his honor, the Board of Directors
will give gift memberships to 50 physicians.
Jul 18. Wolf pack meeting, Arizona chapter, Yuma.
It is possible that the NPI will effectively become the
federal "license" to practice medicine. Doctors without an NPI
who order expensive tests may find themselves out of business if
patients leave because insurers refuse to pay for such tests.
Some physicians, however, are being surprisingly successful
in resisting the pressure to obtain an NPI. Hospitals, labs, and
even some insurance companies have backed off on receipt of the
template that one of our members developed (www.aapsonline.org/npi/npi-letter.doc).
AAPS advised physicians to remain noncovered under HIPAA to
avoid some government harassment. What we did not expect was that
some state medical boards would use the federal
HIPAA as a basis for disciplining physicians. But that is
happening now! A physician reports that his medical board
criticized him for not having a HIPAA compliance plan in place
reflecting regular meetings (with minutes) with employees to
provide them with HIPAA education. But physicians who followed
our lead are able to say, "I don't comply with HIPAA because I am
a noncovered entity." Note that covered entities also have
obligations associated with having an NPI, which are only
recommendations for noncovered entities with NPIs.
According to a HIPAAdvisory from Phoenix Health Systems (www.hipaadvisory.com),
the NPI may be used for any lawful purpose requiring
identification of a health care provider. This includes cross-
referencing files in fraud-and-abuse or other program integrity
function, and debt collection under the Debt Collection
Improvement Act of 1996 (Pub. L. 104-134) and the Balanced Budget
Act of 1997 (Pub. L. 105-33).
Unlawful purposes include identity theft. This will be
facilitated by the publicly accessible NPI database that CMS is
making available at the end of June. Physicians who have
an NPI must take action before then to delete their DEA number
and other "optional" information from this data base.
See AAPS News of
the Day 6/6/07; if you are not receiving this, send your
email address to [email protected].
The DEA registration number is not specifically listed as an
element that may be disclosed under the Freedom of Information
Act (FOIA), but is probably subsumed under "other provider
identifier." The only items not disclosable are the Social
Security Number, the IRS Individual Taxpayer Identification
Number (ITIN), and date of birth (Federal Register, vol. 72, no.
103, May 30, 2007, pp 30011-30014).
Request a paper NPI Application/Update form by calling the
Enumerator at (800) 465-3203, or submit online at https://nppes.cms.hhs.gov/NPPES/StaticForward.do?forward=static.npistart.
The government will allow physicians who are not able to use
their NPI to use their UPIN on Medicare claims for part of the
next 12 months. CMS will make monthly assessments of provider
readiness, and could pull the plug on the extension at any time.
Medicare will allow claims filers to submit "legacy"
numbers to identify referring physicians for the full 12
months. Private insurers may terminate extensions at any
time after May 23 after notifying providers. Some plans want the
NPI, some the UPIN, some both. "It's a real nightmare for
doctors," said Roger Belson, M.D., of Henniker, NJ
(AMNews 5/14/07).
From FAQs at
www.cms.hhs.gov/NationalProvIdentStand:
An indelible mark? An NPI can be deactivated. Its
record will still be in the downloadable file, along with the
deactivation date and NPI Deactivation Reason Code (ID 8444).
Quoting a commenter, HIPAAdvisory noted: "Removal of a health
care provider's [HCP's] records at some point after the [HCP's]
death is reasonable, as long a there are guarantees that the
[HCP's] NPI will never be used by another [HCP] or re-issued to
another [HCP]."
NPI not needed for disability exams. The Social
Security Administration or State Disability Determination Service
are not covered entities (ID 8432).
Will the NPI Become Universal?
In a June 15, 2004, Report to Chairs of WEDI National
Provider Identifier Policy Advisory Group, the issue of
nonavailability of an NPI, because a provider is a noncovered
entity, was addressed by Mary Kay McDaniel, consultant to the
Arizona Health Care Cost Containment System (AHCCCS). One option
is to hold the provider who actually renders services accountable
for the financial transaction. The other is to refuse care to
those who present orders or prescriptions from a provider without
an NPI. She suggests that health plans and institutions make the
NPI a contractual requirement or a condition for obtaining
privileges. "With these requirements, use of the NPI may become
nearly universal."
It was also suggested that state law require all health care
providers to obtain an NPI.
White Papers prepared by WEDI and NCPCP for the Pharmacy
Services Sector recommend that the NPI be placed on prescription
pads. It does not replace the DEA number, which is still
required for controlled substances prescriptions. Several states
prohibit or restrict use of the DEA number on pharmacy claims
transactions. It is recognized that noncovered entities are
not required by law to obtain an NPI. Pharmacies will
need to validate the NPI by calculating the check digit by an
algorithm to be posted on the CMS web site and also to perform a
lookup against a database indexed by NPI. Electronic prescribing
standards that are not HIPAA-covered transactions are not
required to use an NPI.
Disruptions in service are anticipated because of the
complex requirements.
Compliance personnel are advised to persuade administrators
that more money is needed to keep up with ever-changing
compliance laws and to do more in-house audits. The average
budget for compliance staff with 6 10 years of experience is
nearly $500,000. To get still more money from the boss,
"emphasize the importance of compliance versus the risk of
getting caught in noncompliance. The organization could lose a
lot of money if there's a big slip-up" (MCA 5/27/07).
One more weapon in the anti-fraud arsenal: the Medicare
Fraud Strike Force, which began operation in southern Florida Mar
1, using real time billing data to try to "catch criminals in the
act." Some caught in the first sting will be taking plea bargains
to give information leading to more busts (ibid.)
NPI Test Case Needed. The problem with fighting for the
rights of noncovered entities is that the HSA market is not yet
big enough to attract those who provide big-ticket items. Such
entities (hospitals, labs, free-standing radiology facilities)
are thoroughly hooked on third-party payment, and anything else
is viewed as an unacceptable risk of nonpayment. Changing this
mindset will require further decline in Medicare payment and
growth of HSAs. There will come a point at which payment by
patients is more reliable than payment by government. During this
difficult transition period, it is predictable that some big-
ticket provider is going to refuse to do a test because the
ordering physician is opted out and does not have an NPI. We need
to investigate legal approaches. Anyone who confronts such a
difficulty should contact AAPS.
Fair Prices. Fair payment for medical services can only
be achieved by third-party-free practice. Fair costs of doing
medical business can be achieved only by free-market competition
among medical vendors. America became great because our Founding
Fathers allowed free-market competition.
Sadly, there are many who do not wish to compete, but would
rather live on a government salary. I suggest that they join
Michael Moore during his Cuba visitation and stay there.
Ruthless Cost Cutting. On-line lab tests can be
obtained at a huge discount and doctors should be thrilled when
a patient walks in with a battery of tests. Similarly, a patient
of mine found that he could get a 100-day supply of all his
medicines paying cash at Costco at a price cheaper than his copay
for a 30-day supply. But such competition is threatening to
statists, who would lose control over people's lives.
Limitless Demand. Physicians are only a small part of
those who have many recommendations on how to get more out of
your health insurance motorized wheelchair salesmen come to
mind. The existence of insurance spurs many to develop drugs and
devices of marginal benefit that people would never purchase for
cash but are happy to get "through insurance."
Alieta Eck, M.D., Somerset, NJ
P4P, etc. With such fads as pay for performance and
managed care, buyers tell providers how to practice medicine.
Does no one notice how strange this is? In normal markets, buyers
do not tell sellers how to produce their products more
efficiently.
The Root of the Problem. Single-payer systems
(Medicare/ Medicaid) cannot peacefully coexist in the same
economy as a free-market system.
Explaining HSAs. I think we emphasize the deductible
too much; it's insurance lingo and confusing to a lot of people.
"Deductible" also refers to tax treatment, and that is probably a
more common usage for most people.
Lumenos explained their product as an account, then a
bridge, then full coverage. The $1,500 account covers everything.
If you don't spend the money in the account, you keep it and it
builds up with interest. If you spend all of it, you have a
bridge of $1,000 you have to pay directly. Once you cross that
bridge, the insurance pays 100%.
Health Police. In a program said to be copied from one
in Reno, NV, members of the Boise Police Department went door to
door in an apartment neighborhood, identifying families who might
benefit from free immunizations and service referrals. The BPD is
teaming up with health agencies in the Kids Korner program,
funded by a grant from Idaho's Generation of the Child. One Idaho
legislator told me that "this is not a proper role for the
police."
Zero Tax-Filers. In 2004, a record 42.5 million tax
returns one-third of all returns filed had no income tax
liability because of the available credits and deductions. This
is a 42% increase in the number of zero-tax filers in 4 years.
These filers probably represent 120 million people. There are
also 15 million individuals or households who do not earn enough
to file a tax return. Is tax reform possible when the burden is
increasingly borne by a shrinking pool of taxpayers who, at least
on paper, appear to be "upper income"?
Massachusetts Plan. The legislation itself says that
people seeking state-subsidized insurance to fulfill the mandate
will be on Medicaid up to 300% of federal poverty level (FPL).
Since, we are told, most uninsured people are below 300% of FPL,
this boils down to Medicaid for all. I love the logic here.
Medicaid is busting state budgets. So to save state budgets, we
provide more medical care through Medicaid so that the uninsured
will no longer have to use their own money to buy medical care
because it is somehow unfair to require them to do that. If the
state spends more on medical care, it is supposed to cost less.
Expand Medicaid; reduce state spending!
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