Volume 66, no. 7, July 2010


The pace of the transformational change promised by candidate Obama is breathtaking.

On June 11, the Arizona Medical Association advised its members by email alert to act immediately on a letter from the Medicare carrier about the need to be listed in the Provider Enrollment, Chain and Ownership System (PECOS) before July 6. That is 6 months earlier than previously announced.

Carriers and Part A/B Medicare Administrative Contractors (A/B MACs) are expected to process enrollment applications within 60 days, as long as they are submitted before Sep 1, 2010.

While not in PECOS, physicians face nonpayment of any interim claims, inability to order or refer for items or services paid for by Medicare, deactivation of their provider number, and nonpayment of electronic health records incentives.

The Patient Protection and Affordable Care Act (H.R. 3590, now called ACA), §6405, specifically lists durable medical equipment and home health services, but gives the Secretary the authority to extend it to all other categories of items or services.

In his Truth Serum blog for June 16, Joseph Scherzer, M.D., writes that doctors, like Wild West legend Pecos Bill, “feel as if they are riding a wild tornado each day of the week”.

Insurance Rules

Internal White House documents reveal that new insurance requirements will cause between 39% and 69% of workers to lose their “grandfathered” benefits. Under the most likely scenario, 87 million Americans will lose their current plan; under the worst-case scenario, 80% of employees of small businesses will lose it.

“Grandfathering” was never intended to be a long-term phenomenon, and will probably end completely in 2013, except for unions. Many employers will drop their coverage sooner, even if it is grandfathered. And between 1 and 2 million people with limited benefits coverage will lose it by September because it doesn’t comply with the “no lifetime limits on benefits” regulation.

The bizarre pattern of subsidies could result in a complete restructuring of American industry. The higher one’s income, the greater the subsidy for employer-owned insurance, and the lower the subsidy in the exchanges. For lower-paid workers, the reverse applies. A hotel would profit by firing its lower-paid workers and contracting for their services from a firm that pays a fine instead of offering insurance (www.john-goodman-blog.com 6/16/10).

Patient Rules

“Health reform is not only about...mandating health insurance for everyone,” writes Robert H. Brook, M.D., of RAND Corporation (JAMA 2010;303:2289-2290). Should patients have to pass something like a driver’s license test to get and keep health insurance? He suggests rewards and penalties, to be “applied first to the middle class, as opposed to disadvantaged individuals who are enrolled in Medicaid.” For example, a “severe penalty” for not taking medications or having procedures “known to be necessary.” Or for not getting a vaccine as soon as it becomes available and then contracting a disease it could have prevented. Or for parents who don’t maintain their children’s weight-to-height index at the 50th percentile or less. [No irony was detected.]

Institutional Rules

In their 1996 book, New Rules: Regulation, Markets, and the Quality of American Health Care, Troyen Brennan and Donald Berwick extol the industrial model of Total Quality Management. In the mass-production era, craftsmen (“craftspersons”) do not trim individual wheels and axles to fit. Rather, any wheel has to fit any axle taken from off the shelf. Thus, “each individual worker had better not solve problems at the point of production, as this would lead to variation and waste.” In this view, “workers’ behaviors, like the parts of machines, are objects for standardization.”

Brennan and Berwick believe in “integrated” institutions that shift the locus of power away from independent physicians, whose decision making is the “critical element in health care inflation.” Also, they believe that “the country lacks sufficient redistributive impulse to guarantee access to care for the poor.”

While acknowledging the moral hazards in managed care, including the threat of “implicit rationing,” they oppose efforts to “turn the clock back on medical care.” They identify many problems with regulation: enormous costs and burdens, inhibition of innovation, “capture” of the regulators by the regulated, and lack of evidence that it improves safety or quality. Physicians often view regulators as intrusive meddlers, who demand meaningless extra work. Even those who don’t find regulators troublesome have difficulty seeing that they accomplish any useful purpose. Nonetheless, Brennan and Berwick want more and better— “responsive”—regulation. “If anything, regulation has a larger role as the market evolves, not a smaller one,” they conclude.

Their prescription for change “cannot pass their own tests,” writes book reviewer Peter Budetti, M.D., J.D. (N Engl J Med 1996; 334:741-742): there is no evidence it would work. Still, the current regime is committed to Berwick’s ideas.

In trying to throw off Pecos Bill, the tornado poured out enough rain to create the Grand Canyon, and his final crash made Death Valley. Pecos Bill survived. So may America, but the damage to medicine and our economy may be horrendous.


NICE Science

An example of the scientific procedures of the UK’s National Institute for Clinical Excellence (NICE), much admired by Obama’s nominee to head CMS, Donald Berwick, M.D., is analyzed in: BMJ 2010;340:c1786.

Since 2002, multiple sclerosis patients in England have been able to access disease-modifying drugs (interferon beta and glatiramir acetate) only through a special scheme. If data reviewed at 2 year intervals showed an observed benefit less than predicted by the NICE model, the drug price was to be reduced to achieve a target cost-effectiveness ratio of $54,000 per quality-adjusted life year (QALY). Results showed that disease progression was greater for treated patients than expected for untreated patients, based on historical controls. By the original terms, manufacturers would have to pay the NHS to make the drugs cost-effective [even if harmful]. But a scientific advisory group heavily influenced by manufacturers has prevented this outcome.

Many clinicians considered it unethical to undertake a randomized controlled trial, depriving patients of treatment for scientific reasons, as opposed to open-eyed rationing. The treatment rate in the UK is 10%–15%, compared with 55%–70% in the U.S. and 40%–50% in France and Germany.

It was noted that we still have no long-term outcome data, although the drugs have been licensed for 20 years; the U.S. Food and Drug Administration (FDA) failed to tie approval to follow-up of hard outcomes or validation of surrogate measures.


The Massachusetts Forecast

The Massachusetts model for ObamaCare augurs ill for the rest of the nation. Two large insurance carriers have asked for more than double-digit increases for plans renewing in July. They expect to be declined, but are preparing for a two-front war, with regulators and providers.

“The system is inherently unstable and primed for a series of nasty fights,” writes Sally Pipes (DC Examiner 6/11/10). “Like a dry season at an Everglades watering hole, all the players confined in a tight space, hungry, and all eyeing the same receding resources. Like this tight ecosystem, the players will start to feed on each other, as survival of the politically-fittest takes hold.”

Mandatory global payments, a state-dominated HMO or single payer, and the equivalent of physician conscription, are being sought by politicians.

The exchanges reward people for working less and earning less, write Shawn Tully (CNNMoney.com 6/15/10). Mandates give employers an incentive to drop insurance. To take advantage of subsidized Commonwealth Care, many work part time at two or three jobs. One-fourth of home health agencies in Massachusetts are reducing workers’ hours so they can get state subsidies.


Stock Market Rally?

If they are to work and sacrifice, people must believe there is a link between effort and reward. “Money forges that link by providing a store of value,” writes Judy Shelton (Wall St J 5/27/10). Sound money is needed for an economic recovery. Since dipping to 7 in 2009, the Dow-gold ratio has not even reached 10; it was about 44 in 1999 (Access to Energy , April 2010).



To be considered at the annual meeting, resolutions need to be received in writing by July 15. Mail to 1601 N Tucson Blvd Suite 9, Tucson, AZ 85716, fax to (520) 326-3529, or email to [email protected]


Do-It-Yourself Demonstration

Instructions from William Summers, M.D.: Make a sign, with “TEA (taxed enough already) Party” on it. Pick a street corner. Bring a friend or family member to serve as a witness and to take pictures. On July 4, stand at your corner for an hour or two. Count the cars that pass in a 5-minute period, and multiply by 12 (or 24). Email your pictures and car count to a local TEA party (e.g. http://albuquerqueteaparty.com).


Is Default Inevitable?

According to the Greenspan-Guidotti rule, to avoid default nations need hard currency reserves at least equal to their short-term foreign debt maturities. The U.S. owns about $300 billion in gold, $58 billion in strategic petroleum reserves, and $136 billion in foreign currency reserves. We owe foreigners at least $880 billion in the next 12 months (Porter Stansberry, http://silverbearcafe.com).

Some startling economic facts from Blacklistednews.com: In 2010, the U.S. is expected to issue as much new debt as all other world governments combined. Total U.S. government debt is now 90% of GDP. Total credit market debt in the U.S., public and private, is 360% of GDP. RealityTrac has announced that foreclosure filings in the U.S. reached an all-time high for the second year in a row in 2009. More than 40% of those employed in the U.S. are now working in low-wage service jobs. In February, there were 5.5 unemployed for every job opening. Nearly 40 million Americans are on food stamps, an all-time high.


$125 Million PR Campaign for ObamaCare

Now that people are beginning to feel the effects of the ACA, Democrats are launching a public relations campaign to explain, defend, and “depoliticize” it. Before the November elections, the White House will launch a series of high-profile events. Pollster Joel Benenson states: “As misinformation...gives way to real-life experience with it, voters are slowly becoming increasingly comfortable with the law and resistant to Republican efforts to repeal it” (Politico 6/7/10).


AAPS Calendar

Aug 7. National Doctors’ Tea Party, San Diego, CA.
Sep 15-18. 67th annual meeting, Salt Lake City, UT.
Sep 28-Oct 1, 2011. 68th annual meeting, Atlanta, GA.


A Threat Worse than RACs

Audits by Zone Program Integrity Contractors (ZPICs), formerly program safety contractors (PSCs), are in full swing and specifically targeting physicians. Every audit is a potential fraud investigation, and the ZPICs are under pressure to produce more results. Besides claims, they can review contracts, licenses, and files. They are authorized to make unannounced visits and “turn the place upside down.” If ZPICs decide to require prepayment reviews, they can delay payments for months. Some practices have laid off staff or considered closing because of cash-flow problems (Medicare Practice Compliance Alert 6/14/10).

Tip of the Month: If you receive a subpoena for medical records, handle with care. Sending records in response to an invalid subpoena violates HIPAA, and you are required to notify the patient, investigate the breach, and self-report to HHS. Subpoenas are valid only in the state in which they are issued, and it must be sent in accordance with state law (regular mail may be unacceptable). If there is any doubt, consult an attorney (MPCA 6/14/10).


Organ Transplants After Euthanasia

Between 2005 and 2007, four Belgian patients had their organs harvested after a euthanasia procedure, immediately upon declaration of cardiac death. The patients, aged 43 to 50 years, had a severe stroke or primary progressive multiple sclerosis. Euthanasia is legal in Belgium and the Netherlands. Between 5% and 9.5% of cases involve debilitating neurologic disease. “The potential [for organ retrieval] could be substantial” (Transplantation Proc 2009;41:585-586).


Update on ObamaCare Challenges

Virginia: On July 1, arguments will be heard on the government’s motion to dismiss. The key issue is standing. Unlike in the multistate case, the state of Virginia is the only plaintiff; there are no private individuals lacking insurance who would be subject to the mandate. The Virginia legislature passed a law charging state attorney general Kenneth Cuccinelli to sue on behalf of all citizens who would be affected. There is no clear Supreme Court precedent on whether this creates standing.

The Virginia suit raises the severability issue. The ACA lacks the clause, found in almost all legislation, stating that if one part of the law is found unconstitutional or unenforceable, the rest will still have full force and effect. “It’s not an exaggeration to say that the future of American health care may turn on severability,” stated Ken Klukowski, a senior legal analyst with the American Civil Rights Union. It could be the silver bullet that destroys the whole system. Otherwise, certain parts could survive challenges and become entrenched (Health Freedom Watch, June 2010).

ACLJ: On June 9, the American Center for Law and Justice filed suit in the U.S. District Court in the District of Columbia on behalf of three plaintiffs under the Religious Freedom Restoration Act of 1993 (RFRA). The individual mandate “substantially burdens the exercise of their religion,” the suit alleges. “They are forced to either join a health insurance system that contradicts the tenets of their faith or pay substantial penalties” (ibid.).


Snitch Law Passes in Wisconsin

A law passed by the Wisconsin legislature in May places a legal duty on all licensed physicians to report other physicians to the Medical Examining Board (MEB) if they are aware of unprofessional conduct, incompetence, mental or physical disability rendering them unsafe to practice, or acts constituting a danger to patients or the public. Failure to report may result in discipline by the MEB. MEB Chair Sujatha Kailas acknowledged that the law “may create a conflict for some physicians, particularly those engaged in medical management/peer review and those physicians treating other physicians for psychiatric and substance abuse problems.” Complete guidance is forthcoming.


Medical Liability Costs

Figures presented by various groups and lawmakers may diverge widely. The following figures are from an analysis by Lawrence McQuillan and Hovannes Abramyan (Pacific Research Institute, Health Policy Prescriptions, October 2009):

  • Tort losses (damage awards): $5.9 billion/y
  • Direct tort costs (defense, administration): $16 billion/y
  • Average defense cost/claim: $94,284 in 2006
  • Defensive medicine: $191 billion/y (pacificresearch.org).


The Role of Community Health Centers

The ACA underwrites community health centers (CHCs) and will enable them to serve an additional 20 million patients and add 15,000 providers. They are already the “medical home” to 20 million, 5% of the U.S. population (N Engl J Med 2010;363:2047-2050). They are shielded from malpractice liability since the Federally Supported Health Centers Assistance Act of 1992 and 1995, through the Federal Tort Claims Act. Their employees are deemed to be federal employees and are immune from malpractice claims while acting within the scope of their employment. Patients who allege malpractice must sue the federal government. CHCs are thus not affected by tort reform or its absence (see p 4).


“Best Practices” and Liability

Although practice guidelines are often suggested as a defense against malpractice suits, Donald Berwick notes in his book New Rules (op. cit.) that “the primary use of practice guidelines in litigation has so far been for inculpatory purposes.” Ideally, he writes, “guidelines and malpractice litigation will be mutually reinforcing.” Assuming sound methods of guideline development, “guideline-based litigation can have a positive effect on the quality of medical care.”

For anyone accused by an insurance company or other entity of not following “best practices,” Alan Shewmon, M.D., of UCLA, offers two articles from the Nov 11, 2008, issue of Neurology by Jacqueline French, M.D., and Gary Gronseth, M.D. “Lost in a Jungle of Evidence” discusses a scheme for measuring quality and bias in a study. “Practice Parameters and Technology Assessments” explains that these methods are not definitive, and are “sometimes incapable of answering the simplest clinical questions.” Their use as evidence in medical-legal cases is an “overinterpretation of ‘recommendations’ as ‘rules’.”



First Victims of ObamaCare. Insurers are already beginning to implement some provisions of ObamaCare, even before the law requires. To pay for them, they are charging people with high-deductible health plans (HDHP) more for less coverage, while simultaneously increasing the stranglehold the insurer has on patients and physicians. The out-of-pocket maximum for my HDHP has doubled if I see an out-of-network physician. And the monthly premium has increased.

Years ago, when New York State adopted community rating, our monthly premiums doubled immediately.
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY


Liability and Medicaid. Some suggest that states may face a flood of litigation because of ObamaCare’s requirement that states assure timely care. Keep in mind that federally qualified health centers (Section 330 health clinics) are (a) paid their reasonable costs for services, and (b) covered by federal law in lawsuits (see p 3). Hospitals run by governments are also covered by state immunity laws. This combination further shoves private medicine out of the mix. Government sources will provide most Medicaid care. Big inefficient government-dependent hospitals will love it since they all have those clinics and they’ve managed to get rid of physician-owned hospitals in the bargain.
Linda Gorman, Ph.D., Independence Institute, Golden, CO


Spend It or Lose It. At the Veterans Administration hospital where I was a resident we followed the same principle as in the military: by the end of the year we needed to spend all the money in the budget, or else it would shrink. We were encouraged to round up homeless people and bring them into the hospital for “treatment,” so the hospital could ask for more money the following year. What ObamaCare envisions is a universal VA system. We desperately need more for-profit hospitals; they are the only ones who understand economics and the free market.
Kenneth D. Christman, M.D., Dayton, OH


What the IPAB Means. Sec. 10320 of ACA, which expands the scope of the Independent Medicare Advisory Board, now known as the Independent Payment Advisory Board, is difficult to read, with many changes to existing law. I think James Capretta, writing in the Kaiser Health News, probably has it right: With IPAB, “Medicare spending is now officially capped.” Since IPAB is strictly limited in what it can do (it cannot, for example, change cost sharing), the “only thing it can do is cut Medicare payment rates for those providing services to beneficiaries.” Thus, when Obama says he intends to cut the cost of health care, he means that he intends to ration care to seniors.
Dave Racer, M. Litt., St. Paul, MN


She’s Insured, But.... Walking back to my office from the hospital at 11:00 p.m., I saw an elderly woman limping on the sidewalk looking for the entrance to the hospital. I asked how I could help. She had reported polyuria for more than a month, and a random blood test showed a glucose of 500. Her doctor had called her and told her to go to an ER. After waiting 3 hours and finding she could not see a physician, she left and was coming to my hospital. Of course, she has Medicare.
Marcy Zwelling, M.D., Los Alamitos, CA


Guaranteed Cost Increase. Our councilman was astonished to learn that Medicaid patients visit the ER twice as often as the uninsured. Handing people a card does not make them more responsible, or healthier. It makes them care not one whit whether they visit an expensive ER, or their local doctor, or a free clinic. I remember seeing patients at St. Louis County Hospital who showed up at 3 a.m.—“because I figured you wouldn’t be too busy.” Universal coverage will just exacerbate bad behavior and totally overwhelm the system. But we knew that.
Alieta Eck, M.D., Somerset, NJ


Best Practices. Present a tough case to five urologists, and you will probably get five opinions. Will there now be a god who will somehow divine who is right, and discipline the other four? When I started practice, practically every renal mass was explored; now less than 1% are. We use ultrasound instead of catheterizing for residual urine, and lithotripsy for stones. So many profound changes in such a short time. Now it looks as though we will surrender the natural flow of knowledge, and replace it with commands from high, with penalties for those who do not conform.
Louis Keeler, M.D., Cherry Hill, NJ


Virtue and Wealth. Al Sharpton says the ideal is “making everything equal in everybody’s house.” All collectivists believe this, and think they have the moral high ground because economic activity should be a zero-sum game. Sharpton wants us all to be equally rich; if we do things his way, we will all be equally poor. The truth is that in a free society, everyone comes out ahead on every trade. The rich have more because they have done more for others that the others were willing to pay for. As shown in “Moral Trades” in the “Civilization” section at www.trybasics.com, wealth creation under freedom is a virtuous process.
Sherwood Kaip, M.D., El Paso, TX