1601 N. Tucson Blvd. Suite 9
Tucson, AZ 85716-3450
Phone: (800) 635-1196
Hotline: (800) 419-4777
Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 46, No. 7 July 1990



Previously the scapegoat for all woes related to medical care, US physicians are now being held responsible for the noncompetitiveness of US industry, in particular the automobile industry. Who can blame a poor frequency-of-repair record for the lagging sales of Detroit's cars when the burden of health insurance is such an obvious explanation?

``Health care adds $700 to the price of every American-made automobile,'' stated Walter Maher, spokesman for Chrysler Corporation, at meetings of National Small Business United and the National Health Forum. Besides, the existence of the uninsured is an ``offense to his social conscience.'' His solution: let the government pay the bill, while placing tough controls on expenditures. Maher thinks the Canadian system might be a good model. He denies that Canadians often come to Detroit for their health care (even if they buy their cars from Japan), although almost half the 1200 persons treated by lithotripsy at Buffalo General Hospital last year came from Canada (AARP Bulletin 3/90).

Chrysler Corporation's economic analysis has been challenged in a crucial report, ``What a Canadian-style Health Care System Would Cost US Employers and Employees'' by Aldona Robbins and Gary Robbins, published by the National Center for Policy Analysis. The NCPA study concludes that the auto industry would pay more than twice as much per worker for national health insurance (NHI) as it now pays for private health insurance, even if health care expenditures did not increase (contrary to the experience in all other nations after introducing NHI). The reason is that high-wage industries would pay above-average taxes, while receiving average benefits. They would also lose the tax exemption they now receive on insurance benefits. Ironically, lower-wage industries such as foreign auto dealerships would gain a cost advantage.

A total of $339.3 billion in new taxes-almost one third of the current federal budget-would have to be raised to finance NHI, according to the NCPA report. This includes all costs currently borne by employers, all out-of-pocket expenses by individuals, plus the cost of health insurance for the currently uninsured. It does not include individuals now covered by Medicare or Medicaid, which are (unrealistically) assumed to remain unchanged. Depending on the type of tax (payroll, income, or consumption tax), the cost of US goods would be raised between 4 and 10%. To fund NHI, the payroll tax would have to rise from 15% to at least 29%, or the income tax would have to increase by at least 14 percentage points. Alternately, if NHI were funded by a consumption tax, the price of everything we buy would rise by 9 to 10%.

The NCPA analysis denies that the cost of health insurance adds to the price of an automobile, being simply one element in the compensation of workers. While Americans do spend a higher proportion of their income on health care, Japanese spend a higher proportion on food; this fact does not add to the price of Japanese cars. Taxes, on the other hand, do have an important effect on competitiveness because they effect a redistribution of income among producers in different industries. It happens that the industries that would be penalized most heavily by NHI are manufacturing industries that produce exports, and the industries that would be subsidized (mostly service industries) contribute largely to domestic rather than international markets. At present, the US tax burden is lower than that of most other developed countries. Only Japan has a comparably low rate (29% of gross domestic product). With NHI, the US tax burden would approach that of Britain and West Germany (around 38%).

The cost of NHI would not simply be measured in dollars, but in lost efficiency. Richard Clarke, an American consultant to the British National Health Service, noted that while Britain spends much less on health care than the US does (6.1% of GNP v. 11%), the care is rendered in a state of ``startling inefficiency.'' For example, an American orthopedist might do twice as many hip replacements as his salaried British counter- part, by working longer hours (Medicine & Health 5/7/90). (The auto industry understands incentives for productivity.)

The cost in lost autonomy for patients and physicians may be discounted, or denied altogether. An AARP report states that the Canadian system is based on ``freedom of choice,'' after describing controls on technology, restriction of laboratory testing to hospitals and larger clinics, and the generation of quarterly physician ``practice profiles.'' ``Aberrant'' service patterns are referred to peer review committees, and may result in demands for repayment of substantial sums, resulting in a ``strong sentinel effect on physicians'' (see also p. 4). An Ontario committee, composed of equal numbers of physicians and government representatives, and chaired by an attorney, has been appointed to develop practice guidelines. (A similar committee structure could help Chrysler develop engineering standards, providing that Toyota was also subjected to it.)

Although Chrysler and other large corporations might be eager to transfer the burden of their health insurance benefits, it is somewhat doubtful that the workers would knowingly trade the availability of the medical treatment of their choice for higher taxes, higher unemployment, higher prices, and millions of dollars in ``free'' cough medicine for all.

John Goodman of NCPA will discuss private sector alternatives to NHI at the 47th annual meeting of AAPS.

Canadian News Briefs

Debt Cards Proposed. ``Smart cards,'' computerized plastic cards, were first introduced in Saskatchewan to monitor patients' drug use and doctors' prescribing habits. Ontario followed suit with a similar pilot project. After a $4.2 million study, the government of Alberta recommended cards to keep track of all patients' use of the health care system. An alarm could sound somewhere if the patient's profile varied from the norm in some significant way. And each month, families could receive a statement showing how much of their annual health allocation had been used up-possibly for information purposes only. Lou Hynd- man, chairman of the commission that recommended these ``debit cards,'' estimated that this might reduce people's use of services by 30%. Some have suggested that overusers might be required to have counselling or to use only certain government- approved doctors.

One objection to the card is that ``it can only lead to a kind of Orwellian sense of Big Brother.'' Others fear that it ``could undermine the tenet of universal accessibility that now underlies the health-care delivery in this country'' if it scared people away from necessary treatment (Leader-Post Regina 2/14/90, Globe and Mail 2/26/90).

More Bureaucracy Recommended. After two years and $1.65 million worth of input, the Saskatchewan Commission on Directions in Health Care came up with 262 suggestions. The most important was to create 15 regional health-services divisions, each with the authority to levy taxes worth 5% of their provincial funding (about $5 million annually). Although the Canadian single-payer system is touted by US authorities for its administrative simplicity, Saskatchewan ``needs to straighten out a confusing situation that exists with some 450 boards and agencies'' that have province-wide responsibility for various aspects of health (Leader-Post Regina series, April-May 1990).

Doctors Eye US Insurance. After a poll of Ontario doctors showed that 43% felt that ``some patients should purchase American health insurance that would allow them to avoid waiting lists in Ontario and obtain the procedures in the US,'' the Ontario Medical Association is considering the purchase of American insurance for its own members. Such a plan would spare members ``the aggravation of dealing with the Ontario health care system.''

The President-Elect of the Canadian Medical Association condemned the trend toward using the American health care system as a ``safety net'' for an overburdened Canadian system (Leader- Post Regina 4/11/90, 4/21/90).

``There's a Spending Epidemic Here, and It's Time for Big Brother to Step In,'' stated Robert Sheppard, columnist for the Globe and Mail (4/18/90). Saskatchewan has been exporting people, its population having dropped by about 6,000 in each of the past two years. But its health care system has been ``growing like crab grass.'' Last year's 10% increase in the health care budget could have been financed by raising the provincial sales tax from 7% to 9%, but instead it contributed to growing deficit. (Canadian taxpayers are growing a little restive.) The cost of health care is $80 million more than the province collects from both personal income taxes and sales taxes, two of its largest revenue sources.

Other provinces have similar woes. Ontario's annual growth in health care costs is 12.5%, while the population increases by only 1.2% per year. And the anticipated surge in the elderly population has not yet occurred.

Proposed solutions: more health system managers; less patient privacy; closing more hospitals; and in New Brunswick, expenditure targets for physicians (i.e. limits on what doctors can earn). Medical research will also need more government direction. The Alberta Heritage Fund for Medical Research, which has unveiled a device to help a paraplegic boy move his legs, will need a new breed of scientist and a ``new societal ethic, which governments are going to have to provide,'' to study quality and cost issues (Globe and Mail 4/26/90).

Strikes Threatened. Manitoba physicians threatened to strike over a plan to put a ceiling on the number of billings for which they could receive full payment. On any charges that exceed a 2% annual increase in the number of billings throughout the province, physicians would be paid only 50%, which might barely cover overhead. The issue could not be taken to arbitration, because the physicians' right to arbitrate, won in 1985, was taken away by the government. To avoid the strike, the government withdrew the contentious contract offer and returned to the bargaining table (Globe and Mail 3/13/90).

The British Columbia Medical Association have threatened a ``job action,'' accusing the government of ``double-crossing'' them. Although giving the public the idea that physicians were receiving a fee increase, the BCMA calculated that physicians would experience a decrease of 23% in real net income over two years (BCMA correspondence to members, Apr 1990).

Medical associations in at least six Canadian provinces have agreements with provincial governments that authorize some form of mandatory dues and bargaining rights, effectively turning them into labor unions (Globe and Mail 2/14/90).

``No Strings to Pull''. At the IATROS meeting in London, Dr. William Goodman of Toronto reported the death of a doctor's son on the waiting list for ``elective'' open-heart surgery. There were simply no beds, not even for persons with influence. A patient with a dissection of the thoracic aorta died in Calgary, after a 30-hour delay in finding an operating room in a remote hospital. The open-heart surgery program in Victoria may shut down altogether due to a shortage of perfusionists (The Province 3/15/90).


``Public Service'' and Serfdom

The enclosed pamphlet by Salvatore Durante, DDS, explores the logical consequences of the assumption, accepted by many well-meaning physicians, that their existence is justified only by the public service concept.

Additional copies are available for $0.70 each; 50 for $20; or 100 for $40.

Canadian progress along the public service road to serfdom was chronicled by Dr. William Goodman of Toronto at the recent AAPS seminar in Toledo. An audiotape of his presentation is available for $8; a pamphlet will be available soon.

Dr. Hollis Merrick, formerly of Canada and now of the Department of Surgery, Medical College of Ohio, also shared his observations on Canadian medicare. A tape of his talk, with a discussion of confidentiality by Vickie Yates Brown, is also available for $8 (call 1-800-635-1196).

AAPS to Enter Supreme Court in Title X Case

In the fall of 1988, AAPS submitted an amicus curiae brief in support of Dr. Louis Sullivan, Secretary of the US Department of Health and Human Services, in the US Court of Appeals for the Second Circuit (New York, New York) in the case of The State of New York et al. v. Dr. Louis Sullivan. AAPS argued for upholding the judgment of the US District Court for the Southern District of New York, which affirmed HHS regulations prohibiting the use of Title X funds in programs in which abortion is a method of family planning.

On November 1, 1989, the US Court of Appeals for the Second Circuit agreed with the AAPS position. The Court held that the regulations were constitutional and were based on a permissible construction of the statute, §1008, 42 U.S.C. §300 to 300a-41 (1982 and Supp. V 1987) (``Title X'') and therefore within the Secretary's authority. The statute provides as follows: ``None of the funds appropriated under this subchapter shall be used in programs where abortion is a method of family planning.''

The regulations in question were promulgated in early 1988 and constituted a divergence from past agency policy. The new regulations limited the activities of Title X granted projects with regard to counseling and referral for abortions, required physical and financial separation of Title X projects from prohibited activities, and restricted advocacy concerning abortions by Title X projects.

In challenging the new regulations, the plaintiffs in the case raised three principal issues: (i) whether the regulations were consistent with 1008; (ii) whether the prohibition on counseling concerning abortion within Title X projects violated the First and Fifth Amendment rights of pregnant women; and (iii) whether the regulations on counseling and advocacy infringed the First Amendment rights of health care providers.

Immediately after the US Court of Appeals issued its opinion, the plaintiffs filed a petition for writ of certiorari in the US Supreme Court. In the meantime, the Court had also received a petition for a writ of certiorari from the Secretary of HHS, after the US Court of Appeals for the First Circuit (Boston, MA) entered an opinion striking down the regulations. The First and Second Circuit Courts are thus in conflict. The Supreme Court consolidated the two cases and recently granted the writs of certiorari.


$225,000 Fine for Rounding Off

Regulatory agencies with funding difficulties may have a new source of revenue, as several voluntary hospitals recently discovered: fines for technical violations of the billing rules.

Although the front-page article in the local newspaper said that the $225,000 fine was for ``overcharging patients and other billing violations,'' undercharging was just as prevalent and just as illegal. Investigators ``found no evidence that individual patients were seriously affected,'' a reporter stated, and ``the settlement...does not require [the hospital] to pay any refunds to patients.'' The amounts involved were all less than 50 cents.

In addition to the fine, the hospitals incurred the costs of hundreds of man hours of labor to be sure the problem does not recur. Rounding off is forbidden by state law, and all rates must be properly filed in a timely manner, whether they increase, decrease, or remain the same.

Rounding off charges is also an issue for physicians' offices, which may be spending six hours a month balancing the odd cents. According to a special report by Part B News, the HCFA central office in Baltimore has sent a memo to regional offices stating that overcharges of less than $1 over the MAAC may be overlooked as an allowance for rounding, unless they are part of a pattern of increasing all charges by 99 cents. However, some carriers caution against rounding up, and most doctors are waiting to receive permission in writing. Physicians may be identified through a MAAC-exceeder report if they charge more than the exact amounts. The fine of $2000 per violation is very severe, and the expense of refunding a few cents to thousands of patients would be prohibitive.


Bureaucrat of the Year Nominees

At the 47th annual meeting in Scottsdale, the first Bureaucrat of the Year award (hanging in effigy from the Liberty Tree) will be conferred. To date, nominees and their achievements include: William Roper, MD, for forcing his expertise in patient care and office management on doctors throughout the land, despite his lack of practical experience; Rep. Ronald Wyden (D-OR) for stifling a variety of physician enterprises, including dispensing; Kathleen Buto, HCFA Acting Director, for stating the legal position of the HCFA that denies any Medicare-eligible patient the right to be seen as a private patient; Rep. Pete Stark (D-CA) for progress in bringing all physicians under federal control; Nameless, Faceless Bureaucrat for stealing from the sick (diverting $225,000 from patient care into bureaucracy maintenance by fining voluntary hospitals for rounding off fees); Thomas Scully, associate director of OMB, the ``only person besides Bill Roper to really want expenditure targets''; Norbert Goldfield, MD, an internist and managed care consultant, for collaborating on the development of DRGs for ambulatory patients; and John Ball, MD, executive vice president of the American College of Physicians, for his definition of quality patient care (``appropriate patient outcomes from appropriate medical services at an appropriate cost, within the context of societal agreement on what we can afford'').

Send your nominations (or vote for one of the above) to AAPS, 1601 N. Tucson Blvd. #9, Tucson, AZ 85716. Additional official ballots available on request. Note that while Congressman are not, strictly speaking, bureaucrats, they are responsible for increasing the bureaucrats' powers, and thus have not been disqualified for the award.


New Members

AAPS welcomes Drs. Richard D. Anderson of Scottsdale, AZ; Charlotte Blynn of Merion Station, PA; Lea and Paul Gorsuch, Jr., of Great Falls, MT; Fred Holt of Charleston, WV; John H. Jarvis of Mesa, AZ; L.C. Mendoza of Toledo, OH; Darrell Smith of Scottsdale, AZ; John A. Straka of Sewickley, PA; Efren B. Valencia, Jr., of Middlesboro, KY; and Burt Webb of Scottsdale, AZ.

From Capitol Hill

HIV Appropriations Up; Danger Disputed. On May 16, the Senate voted 95-4 to authorize $2.9 billion over five years to aid facilities caring for AIDS patients. New York City would receive the largest share, as it now has the largest AIDS caseload in the nation. (One Bronx hospital reported that 38% of its 1989 emergency room patients tested positive, compared with 13% in 1987 and 2% in 1985.)

Although Congress has declared HIV infection to be on the list of ``dangerous and infectious'' diseases (the Senate vote was 96 to 0), Congressmen Henry Waxman (D-CA) and Roy Rowland (D- GA) have introduced legislation to remove it from the list, in response to a General Accounting Office (GAO) opinion on the appropriateness of immigration restrictions.

Rep. Waxman has also introduced the so-called AIDS Prevention Act of 1990 (HR 4470) that would actually create additional costly impediments to the diagnosis and containment of HIV infection (in contrast to HR 3102, which was proposed by Rep. William Dannemeyer-see AAPS News Nov 89). AAPS Executive Director Jane Orient, MD, submitted written testimony in opposition to HR 4470.

Medicare Claims Filing. There are few exceptions to the requirement that physicians file all Medicare claims after September 1, 1990. Claims need not be filed for noncovered services, such as routine physical examinations.

The penalty for failure to file an unassigned claim within one year is $2,000 per violation. For assigned claims not submitted within that time period, payment will be reduced by 10%. Physicians are responsible for determining who is a Medicare patient and who isn't.

Rep. Joe Kolter (D-PA) has introduced legislation to repeal the requirement, as it will fall hardest on rural solo practitioners, increasing their overhead though their pay has potentially been cut by thousands of dollars by limits on balance billing. (An AMA study showed that the average cost to have a billing service file claims was about $8.50 each.)

Carrier Audits of Medicare Claims. A Medicare carrier's request for a sampling of medical records may be the first sign of an extensive audit that can take up to five years and involve hundreds of medical records. The most common trigger is the computer screen compiled from billing data on factors such as the number of patients seen and the frequency of visits assigned various CPT codes. The carrier can apply a ``percentage of error'' to the doctor's entire Medicare population and demand staggering repayments (see AAPS News Dec 1989 and Apr 1990, Phys Finan News 4/30/90, Part B News 6/4/90).

An immediate call to the LLCS is advisable in case of an audit. To decrease the chances, avoid mass mailing of bills and rubber-stamping follow-up visits as ``intermediate.''

Spending Money to Save Money? At a recent hearing on the HCFA's proposal to up HMO rates to 100% of fee-for-service coverage, the GAO cited its own data to show that Medicare paid 15 to 33% more for HMO enrollees than it would have paid for the same group using fee-for-service physicians. A study by Mathematica Policy Research found the HMO costs to be 50 to 74% higher. Still, HCFA Chief Gail Wilensky and the HMO industry want Congress to spend about $1 billion over five years to ``encourage greater involvement of managed care programs in Medicare''-ostensibly to save money.

Whereas the Reagan Administration ``promoted choice,'' according to Robert Streimer, HCFA's associate administrator for management, the bolder Bush Administration has a more aggressive game plan, as only 3% of Medicare beneficiaries have chosen HMOs, apparently preferring ``unbundled, � la carte medicine'' (Wilensky's description, Med Econ 5/21/90).

A New Approach to RAPEs. In a renewed effort to gain control over radiologists, anesthesiologists, pathologists, and emergency physicians, HHS is proposing that hospitals should have the option of signing agreements with the HCFA that would require hospital staff physicians to accept Medicare assignment, according to Robert Moffit, Executive Director of the National Alliance of Physicians and Surgeons. HHS argues that hospitals signing the agreement would improve their competitive position, while patients would be ``protected'' from unassigned bills. No cost or savings estimates have been made, though increases in participation have historically been associated with increased expenditures. (Patient demand increases as financial responsibility decreases.)

This proposal may be a part of the Budget Reconciliation bill; subcommittee recommendations will be made early this summer. If you did not receive information about the proposal in the most recent Alert and want to be included on the Action Network, call headquarters (1-800-635-1196).


AAPS Calendar

Sept 12, 1990. Board of Directors meeting, Scottsdale, AZ.

Prelude to annual meeting: Bureaucrat of the Year Awards Ceremony and Cattleman's Cookout.

Sept 13-15, 1990. 47th Annual meeting, Camelview Resort, Scottsdale, AZ. (Send in your reservation now and save! Note change in location.)

Oct 17-19, 1991. Annual meeting, Lexington, KY.