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Volume 61, No. 6 June 2005


The problem with Social Security and Medicare is that life expectancy is too long. The early beneficiaries could feel that their benefits were secure because populations were growing, and most people died a few years after retirement.

"That hasn't been true for 20 years, and voters have figured it out," writes Holman Jenkins, Jr. (Wall St J 5/4/05).

Throughout the industrialized world, younger workers are seeing politicians cut their promised future benefits. Such "reforms" may reassure seniors but cannot make pay-as-you-go systems solvent because we cannot dictate how much future generations will pay in taxes or offer in benefits.

Without privately owned assets that they control and have a title to, prospective retirees are "throwing themselves on the mercy of future taxpayers."

HHS Secretary Leavitt signaled what they can expect, as he told the American Hospital Association of the proposal to incorporate a consultation on living wills into the "welcome to Medicare" physical examination (NY Times 5/2/05). AHA sample documents ( www.putitinwriting.org) include a 100% effective method of reducing life expectancy to two weeks or less: forgoing "artificial nutrition and hydration," defined as "a method of delivering a chemically-balanced mix of nutrients and fluids when a patient is unable to eat or drink."

Living wills are not needed to prevent overtreatment in days when hospital procedures have "produced the imperative to `move things along.'" Death is usually "orchestrated by professionals in hospitals,...a transition that has markedly shortened the `waiting time' for dying." "Imminently dying" may be legally interpreted to mean having a life expectancy less than 6 months to a year. (N Engl J Med 2005;352:1500-1501).

To speed the process further, pressures mount to legalize physician-assisted suicide. Bills are pendng in California and Vermont (NY Times 4/1/05). Meanwhile, there is "terminal sedation," even for those who would not be eligible for PAS.

Getting people to "choose" death in advance is important because patients very frequently change their minds about life- saving treatment when they're dying, or about living with disability once they become disabled.

Under "universal coverage," care of the sick or "hopelessly" disabled competes with "coverage for the chronic conditions and preventive care that might enable the uninsured to lead more productive and happier lives." To achieve the goal of broad access, "Americans must understand that they are going to make real sacrifices for other Americans" (N Engl J Med 2005;352:1260-1263).

A "fee-for-service" structure is antithetical to enforcing sacrifice, and "direct payments" impede the reallocation of resources to social priorities such as the "well-coordinated... care that is needed by the growing number of people with chronic illnesses." Thus, "some combination of the heavy hand of health plans and government would be needed." Private plans might succeed better at clawing funds out of hospital budgets. Some think government should be the single payer of plans, not of providers (N Engl J Med 2005;352:1252-1254).

For political palatability, proposals such as the one to achieve universal coverage through vouchers in a Federal-Reserve- style system might allow "freedom to purchase additional services" with after-tax dollars, of course. These include a "wider choice of hospitals and specialists or more comprehensive mental health coverage" (N Engl J Med 2005;352:1255- 1260). But additional "covered" life-saving services? If Medicare is the precedent, these would be forbidden, or restricted to totally opted-out physicians.

As Robert Berry, M.D., points out, that's comparable to Columbus's method of keeping his men from returning home: he burned their boats. Preventing escape is a necessary feature of "a vision that weaves the individual parts into a functional system" as in the failed HSA (Clinton's Health Security Act, the antithesis of the new HSAs, Health Savings Accounts) (JAMA 2004;292:2000-2006). Or as in Canada.

Canadians pay one fourth of their medical expenses out of pocket or through private insurance but only for things like homeotherapy and psychological or dental services. "We can pay to obtain a breast implant, but not to treat breast cancer. We can pay for a vasectomy, but not to treat our prostate," writes Mario Dumont, the leader of Action d‚mocratique du Qu‚bec the first major Canadian political leader to speak for a mixed public- private system (National Post 3/14/05).

Nontreatment or undertreatment of common diseases such as schizophrenia, asthma, and heart disease is widespread in Europe, according to an exhaustive review by Oliver Sch”ffski of the University of Erlangen-Nuremberg. For example, 90% of patients with acute asthma receive inadequate treatment in France (Wall St J 10/1/03).

A system that considers all expenditures as "national expenditures" subject to government control and that requires eradication of all distinctions has the recipe for "equal opportunity ruination," writes economist Linda Gorman. In purest form, think Russia: massive redistribution of wealth and strip- mining of capital assets produces utter destruction. Longevity there has been on the decline for decades.

Independence produces the evils deplored by the Left: "fragmentation," "dispersion," "disparity," and allowing individuals to focus on their own perspective. And innovation, prosperity, and the extension and enhancement of life.

A public relation campaign, comparable to the one on smoking, is needed to inform Americans about what happens to care when people become dependent on government as the only permitted source of payment, suggests Gorman.

One outcome, often an intended one, is death.

Socialized Priorities

The Oregon Health Plan still uses the prioritized list of conditions first released in 1991 (AAPS News, July 1991) to determine what is covered. The line was drawn at #587 in 1991 and is now between #546 and 547 ( http://egov.oregon.gov/DAS/OHPPR/HSC/docs/Apr05PList.pdf ).

As Linda Gorman notes, everybody gets free counseling on seat belts, helmets, smoke detectors, hot water temperatures, infant sleeping positions, diet, exercise, the dangers of tobacco including "passive smoking," and safe storage of firearms and matches plus free STD screening by age 10. Persons aged 11-24 are advised on STD prevention, with a footnote that "the ability of clinical counseling to influence this behavior is unproven." Vasectomy is #93, contraception is #54, and treatment of ectopic pregnancy is #57.

High on the list are things like severe head injury (#1), ruptured spleen (#13), and aortic aneurysm (#21), which the Plan will pay for (at Plan rates), assuming that you can find an open facility and willing physician quickly enough to help you. Items below #546 may be paid for at market rates by the patient. Examples include acute conjunctivitis (#547); unspecified urinary obstruction (#550); peripheral enthesopathies (#588); acute anal fissure (#625); and excision for cyst, hemorrhage, or infarction of the thyroid (#629).

The visit to make the diagnosis is covered, and it's the doctor's job to tell the patient that the diagnosis is "below the line." The doctor has been "turned into the greedy bogeyman in the eyes of the patient," writes Russ Faria, D.O., of Newport, OR. Patients will demand treatment anyway, for free, or will try to maneuver the doctor into lying to claim that rhinitis is really asthma. Most somatic pain syndromes such as low back pain, he observes, fall below the line.

Medicaid pays well for "comprehensive" services, observes Dr. Faria. That may mean "no physician involved." On paper there are "plenty" of doctors in the community, but none are available when you really need them because they are all doing low-risk "wellness" work and no high-risk "sickness" work.

As the insatiable demands of government dependents mount, supply dries up. Cedars-Sinai, one of the largest nonprofit hospitals in Los Angeles, is packed and losing money on every case, writes Herbert Rubin, M.D. UCLA, the other big nonprofit, is in receivership, and has announced the impending layoff of 400 doctors and the closing of clinics.

"No amount of cash can now get you in no matter how sick you are," Dr. Rubin states.


"Two-Tiered Care"

In Quebec, 90 doctors have opted out of medicare. Montreal has become "the private health care capital of Canada." Yet the supposedly underfunded public sector now devotes more than 40% of expenditures to medical care, and the amount is expected to reach 50% by 2011 (Natl Post).

* * *

"Your principle has placed these words above the entrance of the legislative chamber: `Whosoever acquires any influence here can obtain his share of legal plunder.' And what has been the result? All classes have flung themselves upon the doors of the chamber crying: `A share of the plunder for me, for me!'"

Frederic Bastiat, Plunder and Law [orig. published 1850]
Selected Essays on Political Economy


SEPP Healthcare Summit in Pittsburgh

Once again, AAPS past president Bob Urban, M.D., has arranged an outstanding program for the Society for the Education of Physicians and Patients, on Saturday, Oct 22, at the Holiday Inn Greentree in Pittsburgh. Topics include the malpractice maelstrom, the specter of nationalization, and the cost and availability of prescription drugs. Speakers include Andrew Schlafly and Jane Orient of AAPS, plus former Rep. Pat Toomey, Rep. Melissa Hart, Sue Blevins, Mary Ruwart, Joseph Antos, and Robert Goldberg. For details, see www.sepp.net or call Dr. Gabos at (412) 364-2758.


A Great Retirement Program?

How many would choose to invest in an account with the following features: (1) Funds are untouchable until you retire. (2) If you and your spouse die, funds are lost unless you have school-age children. (3) When you retire, the entire amount will be converted to an annuity that dribbles the cash out in low monthly payments. (4) All funds must be parked in a low-yield government instrument. (5) You must, by law, "contribute" 12.6% of your earnings. This, of course, describes Social Security. As Kevin Hassett explains, it is not designed to make the 80% of Americans who are rational and productive (the "ants") better off, but to protect the "grasshoppers" (Wall St J 2/7/05) by making everyone a dependent of government which has no legal obligation to pay a dime.

What Congress hates most about private accounts, writes Linda Gorman, is that the funds would be "beyond its reach and could not be applied to federal pork."


Why Rent When You Can Own?

Just as you have a right to occupy a house only so long as your rent is paid, health insurance premiums give you the right to access benefits only for a limited period.

"I have rented employer-sponsored insurance for about 15...years, writes Devon Herrick. "[It] cost around $31,000..., returned only $2,000 in benefits..., and covered only one-quarter of my medical and dental needs. Moreover, I accrued no equity." (Health Care News, May 2005).

Herrick estimates that insuring against only major expenses would have cost only half as much. Had he deposited the rest in an HSA, he could have accumulated nearly $30,000 by now. By age 55, he could have had a $100,000 nest egg. Instead, he helped subsidize coworkers who overused services, or who were older (wealthier) and sicker, and paid for bureaucracy.

"Americans who are currently renting their health coverage should consider the benefits of ownership," he advised.


AAPS Calendar

Sept 21-24, 2005. 62nd annual meeting, Arlington, VA.
Oct 22, 2005. SEPP meeting in Pittsburgh, www.sepp.net.
Sept 13-16, 2006. 63rd annual meeting, Phoenix, AZ.

CMS Enforcement Updates

Recovery Audit Initiative. Section 306 of the Medicare Modernization Act (MMA) provides for a 3-year demonstration project in at least two states. Contractors are to "identify under or overpayments and collect the overpayments." The Secretary shall determine the proportion of funds to be retained in the CMS program management account, and the contractor keeps the rest. Practices in California, Florida, and New York will be the first targets.

Pamela Moore, Ph.D., predicts that "more physicians, fed up with being the scapegoats, will leave the system." She notes that seniors are already having trouble finding physicians willing to see them. "Perhaps that is CMS's true plan for saving Medicare.... [I]f there are no services being rendered, Medicare could save a ton of money" (Physicians Practice 5/05).

Comprehensive Error Rate Testing Program (CERT). Established in 2003, the CERT program has the right to demand patient records in order to check compliance with all rules. If providers fail to submit the requested documentation, CMS is to treat the claims as errors and send the provider an overpayment letter (www.cms.hhs.gov/CERT/ ).

Providers may be tempted not to send the documentation because the cost of say $32.50 is greater than the $27.50 payment, stated Noridian contract medical director William Mangold, M.D. He warned, however, that failure to respond could be treated as fraud. The initial request for a small sample of records could be followed by a demand for 100.

Administrative Simplification Rules. HHS has asked for comments by June 17 on the proposed enforcement rule (www.regulation.gov, search for 0991-AB29). The rule disclaims any distinction between errors of commission and omission. It is not clear whether each item on a cost report is a separate potentially violative item. Covered entities could be liable for the actions of their business associates if the covered entity does not comply with business associate requirements. Note that some civil monetary penalties can be imposed without a hearing. (BNA's HCFR 4/27/05).


EU Food Supplements Directive Challenged

The European Court of Justice's Advocate General Geelhoed issued a statement on April 5 that the ban on vitamin and mineral forms not included on the EU's "positive list" is illegal because it infringes the principle of proportionality. The ban, scheduled to go into effect on August 5, would remove some 5,000 products from UK health stores, including several forms of vitamin C ( www.alliance-natural-health.org).


Dr. Eist Still Fighting for Patient Privacy

Harold Eist, M.D., former president of the American Psychiatric Association, has gone to court to appeal a $5,000 fine and a reprimand from the Maryland Board of Physician Quality Assurance (BPQA). Dr. Eist was accused of failure to "comply with a lawful investigation" when he refused to turn over records of a mother and two children he was treating during a divorce proceeding. Because the patients refused permission, he wrote to BPQA asking how he should proceed. Instead of replying, the board simply imposed penalties 7 months later. Despite an administrative law judge's ruling favorable to Dr. Eist (AAPS News, September 2003), BPQA refused to back down.

AAPS has sent a letter to the Governor's chief legal advisor asking him to rein in the board to end its "unrelenting harassment of a good physician over his plainly ethical conduct".


Language Rule Lawsuit Appealed

In March, U.S. District Court Judge Barry Moskowitz dismissed the AAPS lawsuit against Clinton Executive Order 13166, which requires physicians to supply interpreters for non-English proficient patients (Colwell et al. v. HHS, U.S. District Court for the Southern District of Calif., No. 04CV1748, see AAPS News, March 2001 and October 2004). The Judge ruled that none of the coplaintiffs could show sufficient injury to have the standing to challenge HHS.

"Federal courts routinely grant standing to individuals and groups like `Friends of the Earth' with far less specific allegations of injury-in-fact than ProEnglish and its physician coplaintiffs demonstrated," stated ProEnglish Executive Director K.C. McAlpin. The decision is being appealed to the U.S. Ninth Circuit Court of Appeals.

The Pacific Legal Foundation is funding the litigation (www.pacificlegal.org). Briefs and the text of E.O. 13166 are posted at www.proenglish.org.


AAPS Files Amicus in Support of Dr. Springer

Because he spoke out against poor patient care at a state hospital, Dr. David Springer's contract was not renewed. He sued the hospital, citing an unconstitutional retaliation against his exercise of free speech. A federal jury held in his favor, but the hospital appealed (Springer v. Henry, U.S. District Court for the District of Delaware, C.A. No. 00-885-GMS).

In an amicus brief, AAPS argues: "As training director at the DPC [Delaware Psychiatric Center], it was Dr. Springer who stood up for defenseless mental patients. It was he who demanded better care for them that seems so obvious in retrospect. He should have ultimately been commended by the State for highlighting what others would not recognize or admit until years later."

Problems included attempted suicides, security failures (including patient escapes), and unsafe working conditions.

The jury awarded less than $1 million, a modest amount for a physician who had risked his career for his patients. "Affirmance is essential to make it clear that retaliation will not be tolerated against those who stand up for patient care."

Read the AAPS brief..


Wisconsin Patient Compensation Fund in Danger

Last year, Gov. Jim Doyle attempted to raid the Patient Compensation Fund, to which physicians are forced to contribute, for $200 million. The Wisconsin Medical Society authored legislation to assure that funds are used only for paying claims. Lobbyists warn, however, that the Governor will now ask for a "loan" to fund "health care initiatives" perhaps to pay off the $800 million Medicaid deficit?

Organized medicine sees the Fund as a crowning achievement. It is "oblivious to the damage done to the profession by excess insurance requirements, and sees no link to the loss of independent practitioners," writes Al Fisher, M.D.


Physicians Will Follow. While physicians may complain about intrusions into their practices, they seem totally unwilling to do anything to preserve the integrity of our profession.

Yet, physicians will adopt changes though not necessarily because it is the right thing to do for their patients. When the source of money begins to change, physicians will follow.

Much to the chagrin of fans of socialized medicine, once freedom is out of the box, it's like the spark that ignites a forest fire. That's why they are doing everything they can to stop the spread of HSAs. But the power of the market is greater than that of the socialists.

People are tired of managed-care bureaucrats who make the road to medical care into an ever-changing obstacle course. Third-party-addicted physicians, now reluctant to accept cash, will change when they find out that they can actually be paid for what they do. Their revenue stream will diversify, and they will be much more secure than when dependent on government and a half dozen HMOs.
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY


Shucking the Burden. When I dropped all networks and government programs, I was able to eliminate two FTEs whose job was to fight government and insurance clerks for my fee. All that transaction cost was eliminated by having patients pay me directly. I'm able to keep my fees low and competitive, while barring third parties from my examining room.
Herbert Rubin, M.D., UCLA


Problems with a Cash-Based Practice. It is practically impossible to hospitalize a cash-paying patient. Hospitals don't want them. Specialists don't want to see them either, or to give them a discount. Sometimes they will see self-paying patients because I have sent them "good" (insured) patients in the past. If the number of cash-paying patients grows sufficiently large, as through HSAs, pure cash-based practices will become much more feasible than they are now.
R. Wayne Porter, M.D., Terrell, TX


Hidden Costs. The tax breaks for low-copayment, low- deductible insurance should be listed among the Extraordinary Popular Delusions and the Madness of Crowds by Charles McKay, originally published in 1841. The indirect costs are incredible: $200 billion in tax revenues that has to be raised elsewhere, skewed incentives, administrative costs of insurers and doctors, delays, etc. All costs are factored into the final cost of goods and services, and global markets are not fooled. These hidden costs contribute to the outsourcing of labor.
Robert Berry, M.D., Greeneville, TN


Explaining HSAs. By agreeing that the concept is difficult to understand, we plant the seeds of failure. Our adversaries want us to assume that burden; I will not. Give me 2 minutes with anyone, and I can explain the concept: "Look, Bob, all we're doing is rearranging how you pay out-of-pocket medical expenses. In a good year, you make money. In a bad year, you break even." What is more time-consuming is undoing the brain damage done by infecting people with corporate welfarism and the belief that the material wealth of the nation is theirs by right.
Joseph Lee Pugh, Diamondhead, MS


Two Possibilities. You can ration by bureaucratic fiat resulting from a political process, or you can ration by price and the interaction of private actors in a free market. When presented with outcomes data, any reasonable person has to pick rationing by price: it allows for charity and professional standards. Political rationing degrades quality, wastes money, and ends up treating producers and consumers as slaves. Hence the food stamp program. It rations by price but people "get access" through income supports. You know what the subsidy is, producers have incentives to reduce costs, and consumers have an incentive to constrain demand. None of these properties describe current medical subsidies.
Linda Gorman, Independence Institute


An Illusion. In the short term, socialism can appear to succeed because governments can borrow (i.e. steal) inordinate sums from future generations. That is, governments can fool us into believing that we can live beyond our means for decades. In the long term, there must be economic chaos when debts cannot be repaid. As Bastiat said, the mark of the great economist is to recognize both short and long-term consequences of our action.
Robert P. Gervais, M.D., Mesa, AZ


Who Are the "Rich"? My father told me that in Broken Arrow, Oklahoma, in the 1940s and 50s, the children who had shoes to wear in the summertime were "rich." Others got only one pair of shoes per year, when school started. The definition used by the Left isn't all that different today.
Sean Parnell, Heartland Institute


Why Pre-Pay? If I had incurred a big medical bill while I was uninsured, I would have paid it off over time, assuming I recovered. There is no reason to "pre-pay" for medical care if you can "post-pay." Imagine if no one could buy a car on credit, but had to pre-pay $26,000! Similarly for homes, an education, and almost everything else. Job creation and entrepreneurial activity would surely suffer.
Greg Scandlen, Hagerstown, MD

Legislative Alert

Medicare Costs

The Medicare Trustees say that the total unfunded liability of the Medicare program is now $29.7 trillion. This is the long- term estimate, calculated over a 75-year period, meaning that taxpayers are going to have to cough up that amount, plus whatever is needed to maintain the solvency of Social Security and pay the exploding costs of Medicaid, which is now larger than Medicare. The significance of the latest Trustees Report, largely ignored in the media, is that the unfunded liabilities for the whole program have increased roughly $2 trillion in just one year, while that of the drug benefit alone jumped from $8.1 trillion to $8.7 trillion. What's another $600 billion?

Not surprisingly, all of the official Medicare estimates are going up. The latest Congressional Budget Office (CBO) estimate over the years 2006 to 2015 is $849 billion, while the Administration figure is $724 billion. The Administration says that the CBO is not counting the savings that will surely come with the implementation of other provisions of the massive Medicare Modernization Act (MMA) of 2003. Congress by law is required to follow the CBO estimates.

Spending Caps?

Senators Lindsay Graham (R-SC) and Jeff Sessions (R-AL) are proposing legislation to cap Medicare 10-year drug spending at $395 billion, the amount the CBO originally projected during the 2003 Medicare debate. Their proposal would require spending in any given year over the next 10 years to stay within the 10-year total. If at any time spending would exceed the cap, the bill would require the President to submit legislation to curb it. This is a variation on the new law that requires the President to submit legislation if two consecutive Medicare Trustees reports in any 7-year period say that Medicare spending will require an excessive draw-down on the general treasury to pay benefits (i.e., 45% of Medicare spending is to come from general revenues). That requirement may be triggered as early as 2007.

Price Fixing

Taking a different tack, Sen. Arlen Specter (R-PA) is aligning himself with the Left again and proposing to remove the "non-interference" clause of the MMA, which prohibits the government from fixing prices. This is supposed to allow HHS to "negotiate" drug prices, just as the VA does today.

The CBO, incidentally, directly disputes the idea that savings would be greater from government "negotiation," citing the superiority of private-sector purchasing and bidding arrangements. The CBO finding was bolstered by a recent PricewatershouseCoopers analysis that estimated that under the MMA in 2006, where private plans compete for enrollees there would be a 6% increase in drug usage, but an 8% decline in drug prices as competing plans negotiate larger discounts.

Aside from the vast differences in population and purpose between the VA and Medicare, the term "government negotiation" is a euphemism for price controls. The government doesn't "negotiate" anything. It's simple: If you don't accept the government price, you do not have access to the government "market." It's a process of exclusion, or flat-out supply restriction. So, don't be fooled by the business-like, free- market-sounding rhetoric. This price-control proposal would mean that in 2006, not only will 60% of all prescriptions sold in the United States be purchased by the federal government. It will also mean that government would dictate the prices of a huge share of drug prices, just as it now dictates the price of a large portion of physicians' services. This would be another big step toward government control of medicine, which, for the Left, is the real point. "Cost control" is often a leftwing wolf in the "fiscal conservative" clothing.

The recent Congressional concern with the costs of the drug entitlement is laudable, but the danger is that the solution will be exactly wrong. The solution to an excessive indulgence in Swedish-style socialism is not to resort to heavy-handed, Moscow- style pricing regimes. The correct focus should be the policy of the universal drug entitlement itself. Yes, Once Again, It's the Structure Stupid!

Central Planning on Steroids

While Medicare costs continue to soar, we are going to witness an extraordinary Congressional experiment in central planning. It's boring, of course. But, as Friedrich Hayek would counsel us, follow it closely, anyway. Medicare has always had big managerial problems. These include a painfully sluggish response to change, delays in adopting medical technology in benefits packages, delays in the adoption of advanced information technology, the multiplication of thousands of pages of confusing rules and regulations that agency officials themselves cannot explain, and the use of payment methodologies that have little to do with market realities.

On top of these problems, the Center for Medicare and Medicaid Services still "HCFA" to those of us who know better has had serious problems in personnel management, including a loss of skilled personnel. But Congress made matters with the complex Medicare drug entitlement, which has to be administered, of course, in accordance with the specific provisions of the law.

The more than one thousand pages of new Medicare rules governing the drug entitlement cover a variety of items, such as the rules governing the health plans, including the new Medicare Advantage (MA) plans and the unprecedented Prescription Drug Plans (PDPs) envisioned by the Congress; the provision of an estimated $71 billion worth of taxpayer subsidies for employers over the next 10 years; and the close coordination of federal and state officials who must work together to enroll Medicaid "dual- eligibles," poor and disabled seniors, in the new program. This is already taxing CMS's 4,500-member staff, and the agency is preparing to hire another 500 staffers just to cope with enforcement of the new law.

CMS Tasks

Just look at what the agency has done already. After issuing its Final Medicare Part D Regulations, CMS quickly started conducting training sessions, while issuing guidance to potential employer and union sponsors of the future Medicare drug plans. In February, CMS officials issued an "advance notice" on methodological payment rules for drugs, and started to process Part D applications from PDPs and MA plans, while educating insurers on how to make "bids" for the Part D benefit. Next, they started to accepting proposed "drug formularies" from MA executives, to make sure that they conform to the rules governing the drug formularies. (Apr 18, 2005 was the final day for submission of proposed formularies.) Then, CMS officials released the 2006 "plan benefit package" and "bid pricing tool" software and technical instructions for the executives so that they can correctly administer, under CMS supervision, the Part D benefit in MA plans. CMS issued a letter to all organizations with instructions for payment and enrollment in Part D. This will include getting their "plan benefit package" and making sure that they get "bid pricing tool" software "uploads." It is hard to imagine where old-fashioned government central planning would be without 21st Century modern information technology.

What's Next?

Just look at what the agency must still do. Next month, CMS is to accept the MA plans' bids. (June 6, 2005, is the final day to submit bids for calendar year 2006.) Then CMS has to continue mass mailings to millions of Medicare beneficiaries who are deemed eligible to get federal subsidies for their drugs. Of course, claims processing in Medicare has often been a headache, at least for medical professionals, who often don't understand the Medicare lingo. And the sheer number of claims will explode with the implementation of Part D next January. So, CMS, starting in July, will start a new program of "drug claims training" for Part D "providers," while holding another "open forum" for health plans and managed care plans on various aspects of the MMA.

In August, CMS is scheduled to release the "national average monthly bid amount" for the drug benefit and call for "a reallocation of rebates" for MA and PDP plans. In September, CMS is scheduled to approve the MA drug benefit packages, hold another "open forum" for managed-care plans, and sponsor a Part D enrollment and payment conference.

Medicare & You information to seniors is supposed to go out Sept 30 to Oct 15. The content of the proposed mailing is already being challenged by House Democrats, led by Rep. Charles Rangel (D-NY), ranking member of the House Ways and Means Committee, because it does not spell out in detail the pitfalls of the new drug benefit. Meanwhile, throughout October 2005, CMS must oversee the beginning of the marketing and enrollment of seniors in the Part D, and will unveil "new plan compare" website and create a "personal plan finder" on the web to help seniors secure their chosen plan.

November is crunch time. "Open enrollment" in Part D begins on Nov 15, 2005, and ends on May 15, 2006. This is likely to be a politically difficult time for Members of Congress, because by this time, employers will have made the decision either to scale back or drop retiree drug coverage. Rest assured that employers and political activists, right and left, will blame Congress for the disruption. Dec 31, 2005, is the last day that more than 6.5 million seniors will be able to use their Medicare drug card, a competitive program that has yielded some impressive personal savings. Dec 31 is also the last day 6.4 million dually eligible beneficiaries will have access to their existing Medicaid drug coverage. They are ordered to enroll in the new Medicare drug program. See, as George Orwell might have said, some drug coverage is more "voluntary" than others.

Playing Well with Others

While CMS must accomplish the bulk of these regulatory tasks, both the state officials and private employers must also play a key role in the administration of the drug entitlement. Their efficient coordination and cooperation will be essential to avoiding major problems or minimizing their impact. Given the complexity of the Medicare law and its many requirements, this is a tall order. State Medicaid officials are already warning that the coercive transition of the 6.4 million Medicaid covered seniors, many of who are mentally and physically disabled, into the Medicare drug program is burdened with far too many pitfalls. Check it out. Are your Medicaid nursing home patients, let alone state officials and Medicaid directors "ready"?

Forget Congressional rhetoric about the drug provisions being a triumph of choice, competition, and voluntary enrollment. That's nonsense. The creation of a universal government entitlement for drugs is another step toward government management of American medicine, characterized by price controls and benefit standardization, evolving towards a single-payer regime. While private plans are today the Medicare mechanism of choice for the delivery of the drug benefit, they could very well end up being private plans in name only; they could instead become another set of vehicles for government control, rather than consumer choice and market competition. Clintonesque.

Flake Yells "Stop"!

Congress could yet admit a major mistake, and repeal or at least delay the drug entitlement before it goes into effect on Jan 1, 2006. The universal entitlement was, and is, totally unnecessary, since roughly three quarters of seniors already have drug coverage. Congress could instead do the right thing and target assistance to seniors without drug coverage, particularly low-income seniors who do not qualify for Medicaid.

Only one member of Congress thus far has shown by deed and word that he gets it: Rep. Jeff Flake (R-AZ). Flake introduced the Prescription Drug COST (Control Overspending to Save Taxpayers) Containment Act (H.R. 1382). The bill would delay the drug entitlement for one year; retain the Medicare drug discount card and the annual assistance to low income seniors; and allow the 6.4 million dual-eligible seniors to continue to get their drug coverage through Medicaid in 2006. It's a delay, not a repeal. But it would give Congress the precious time to take a deep breath, collect itself, and figure out how it is going to pay almost $9 trillion in promised Medicare drug benefits.

That would be the rational and responsible thing to do.

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