Tucson Blvd. Suite 9
Tucson, AZ 85716-3450
Phone: (800) 635-1196
Hotline: (800) 419-4777
of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 46, No. 7 July 1990
A NATIONAL HEALTH PLAN: Rx FOR
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
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-
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
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
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
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
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
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
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.
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,
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
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).
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.