Volume 53, No. 11 November, 1997


The showdown of Medicare's lifetime could happen this year, if Congress does not lose its nerve. Bill Clinton could face an awesome choice: veto freedom for senior citizens-or face the wrath of the Medicare bureaucracy, big government advocates in Congress, and cheerleaders for corporate socialism such as the AARP.

Starting with an August 22 Wall Street Journal editorial called "Medicare Showstopper," the mainstream press and talk radio are finally telling Americans the shocking truth about Medicare: British citizens, Helmut Kohl, and even Boris Yeltsin have more rights than American Medicare beneficiaries.

What Bill Thomas (R-CA) and the other Republicans did in Section 4705 of the Budget Reconciliation Act (see pp. S1-S2 and AAPS News Oct 1997)-supposedly to fix the problem while appeasing the Administration -effectively allows freedom only for a very exclusive group of senior citizens: those able to find a doctor who is completely opted out of Medicare. This was the method used in Canada to kill private medicine without a straightforward law forbidding citizens to spend their own money for medical care. Few doctors are willing to accept a dramatically lower income or able to attract enough patients willing to forgo a government entitlement.

Senators Kyl and Nickles and Congressman Archer have introduced free-standing bills to correct the "correction": H.R. 2497 and S. 1194. The text can be downloaded from Thomas or http://www.primenet.com. These bills would greatly expand the potential of private contracting. But they too contain a poison pill: "Nothing in this title shall prohibit a medicare beneficiary from entering into a private contract ... if ... the Secretary has been provided with the minimum information necessary to avoid any payment under part A or part B for services covered under the contract." In other words, no Medicare beneficiary may lawfully have private medical care without telling the Secretary whatever she demands to know about it. (As usual, the diabolical details are delegated to the regulators.)

The reporting requirement is rationalized as a necessary defense against fraud and abuse. Those are magic words: any measure, no matter how ill-advised, is difficult to oppose if someone claims it will prevent or punish fraud.

But the problem with private contracting is not fraud.

Think about it: Suppose that an unscrupulous doctor decides to bill both the patient and Medicare for a service.

First question: How much money does the federal treasury lose from double-dipping compared with Medicare payment alone? Answer: the same amount. (Assume that some member of the same unscrupulous profession would have treated the patient under Medicare constraints.)

Second question: How much money does the patient lose from double-dipping compared with private contracting alone? Answer: the same amount. In fact, if the claim is unassigned, the patient would gain back the entitlement he gave up.

Third question: What about the taxpayer? Answer: the taxpayer loses the same amount-because Medicare pays, not because of private contracting.

Fourth question: What about the doctor? Answer: the doctor would receive two payments only if he filed an assigned claim. This would be both dishonest and extremely foolish. When Medicare pays the claim, it is supposed to send the patient an Explanation of Medicare Benefits form. When the patient receives the EOMB, he will immediately know that the physician violated his word and betrayed his trust. The patient may complain to Medicare, and the doctor can be fined $10,000 per episode, excluded from Medicare, and imprisoned.

The Medicare program is rife with fraud because patients do not pay directly for services in most instances. Private contracting makes fraud very difficult because an interested person with first-hand knowledge of the care-the patient-is watching every transaction.

The problem with private contracting is not unfairness.

Since the Archer-Kyl bill would expand the availability of private contracting, it is obviously fairer than the Budget Reconciliation Act. Moreover, we do not hear the AARP complaining that seniors are allowed to buy nicer housing or better food than their Social Security allotment would permit.

The problem with private contracting is that it is a tiny tear in the seamless web of government control over medicine. It might be enough to keep the independent practice of private medicine alive in an age of corporate socialism.

Realizing this, medical groups that were mostly silent in 1992 about the case of Stewart v. Sullivan are making themselves heard. More importantly, a broad coalition of consumer groups, including Seniors Coalition and United Seniors, is spreading the word.

One wonders if the AARP wants American physicians to be in the same plight as "the Old Doctor" in Chapter 30 of Solzhenitsyn's Cancer Ward:

The most persistent and oppressive persecution had been due to his stubborn insistence on his right to maintain a private medical practice in the face of stricter and stricter prohibitions. What he did was a forbidden source of private enterprise....There were years when he had to take down his copper plate and turn away every patient, no matter how much they implored him or how ill they were. This was because the neighborhood was full of spies from the tax office, paid or voluntary, and because the patients themselves could never refrain from talking. As a result, the doctor was threatened with the loss of all work, even with the loss of his house.

Resolution on the Oath of Hippocrates

At the 54th annual meeting, held September 17-20 in Chicago, the AAPS assembly passed the following resolution:

WHEREAS: Physicians are entrusted with the sacred duty of protecting the lives and well-being of their patients; and

WHEREAS: In the practice of the art and science of medicine, physicians should adhere to the highest ethical standards for the protection and care of their patients in order to fulfill that sacred trust; and

WHEREAS: The Oath of Hippocrates is the centuries-old, time- tested standard of ethics for physicians; and

WHEREAS: All physicians should swear adherence to the Oath of Hippocrates as the common set of principles for physicians;

BE IT THEREFORE RESOLVED THAT: the Association of American Physicians and Surgeons urges all medical schools to administer the Oath of Hippocrates at graduation. To that end, the Association of American Physicians and Surgeons will send a formal request to all medical schools in the United States to that effect.

Shalala Wants Your Medical Record

On September 11, HHS Secretary Donna Shalala released recommendations to Congress concerning medical privacy, as required by the Health Insurance Portability and Accountability Act of 1996 (Kassebaum-Kennedy). The report is available at Department of HHS.

Shalala professed concern for the "dangerous" lack of protection of medical records and "our most sacred family secrets," but in her view, privacy is not a right: "Individuals' claims to privacy must be balanced by their public responsibility to contribute to the common good, through use of their information for important, socially useful purposes."

"National priority activities," justifying the requirement of personally identifiable information, include in her view "public health, oversight of the health care system, research, and law enforcement." Specifically, "Federal law should permit use of information for research without consent." Moreover, "oversight agencies can see health records, or use them against patients, providers, and others for wrongdoing in health or related programs"-and without the knowledge of the patient, because notification might be "reasonably likely to impede those activities." Law enforcement agencies would not even need to obtain permission of a court to view records. Senator Patrick Leahy (D-VT) said the proposal would allow wider use of health records than Congress has permitted for bank, cable, and video rental records (BNA's HCPR 9/15/97).

Federal agencies do now have expansive authority to seize records from private offices. However, the search capabilities offered by computerization open unprecedented areas to investigators. While recognizing that there are "arguments in favor of new restrictions to address these possibilities," Shalala specifically refuses to consider them: "Until more experience is gained with the uses of computerization of these records, and the types and frequency of requested searches, it is premature to change existing law in this area."

One suggested use of patient records is for investigating providers' compliance with tax laws or safety regulations.

The report states that a Federal [lack of] privacy law should apply uniformly, regardless of setting. Presumably, this means that the Federal government, like the Maryland State government, could demand disclosure of information about all patient visits, even if no third-party payment is claimed.

Dr. Denise Nagel of the Coalition for Patients' Rights observes: "Dr. Shalala did not support restricting access to personally identified medical information by HMOs, managed care entities, employers, auditors, ... cost-containment managers, and others."

The only absolute protection against abusive disclosures is to keep all personally identifiable information out of a networked computer in the first place. But on the heels of passage of the national health identification number, the Administration, on July 31, announced its opposition to allowing citizens to opt out of having information entered into the computer.

Private data management companies, with an abysmal record of protecting privacy, are waiting for a green light, reports Dr. Nagel. A recent ad reads: "Strike it rich! Turn nuggets of [medical] data into valuable information."

Action Plan for the Month

Copy and distribute the enclosed premier issue of Patient Power to your patients. Let us know what you think-and send suggestions for future issues.

The FBI Wants Your Key

The government aims to expand law-enforcement authority further still, seeking guaranteed access to every communication and every stored record of every American user of encryption, without the required Fourth Amendment notice or consent. Under the proposed Oxley-Manton Amendment to the Security and Freedom through Encryption (SAFE) Act, H.R. 695, which was written by the Department of Justice, strong encryption would be outlawed unless the private key is on file with the government.

"This is not one step toward the surveillance society-it is the surveillance society," said Jerry Berman of the Center for Democracy and Technology (NY Times:, 9/7/97).

For further information, check < href = "http://www.atr.org">http://www.atr.org and http://www.cdt.org.

HHS Trains Senior Spies and Informers

The Dept. of HHS has awarded grants totalling $2 million to 12 advocacy groups to train seniors to detect waste, fraud, and abuse in Medicare and Medicaid programs. "Deceptive health practices" include overbilling or providing unnecessary or inappropriate services.

"In order for our anti-fraud efforts to really pay off, we need to ... help older volunteers across the country become the eyes and ears of our communities ... and assist us in saving precious taxpayer dollars," stated Secretary Shalala (BNA's Health Care Policy Report 6/3/97).

HHS is also working with the AARP to improve its public hotline for reporting health care fraud. The "TIPS" hotline has generated 13,000 calls since its inception nearly two years ago (BNA's HCPR 5/26/97).

Administrative Civil Rights

At the 54th annual meeting, AAPS Past President John H. Boyles, Jr., M.D., explained the devastating losses that could be inflicted on physicians and Americans through Star Chamber proceedings in which the accused has few if any rights. This is called administrative law; it is rendered by Administrative Law Judges, who are hired by the agency that is making the accusation. Dr. Boyles reminded members of the Administrative Civil Rights Act, which was endorsed by the AAPS assembly at the 49th annual meeting in 1992:

The constitutionally guaranteed civil rights of American citizens shall be protected in administrative proceedings.

Any agency acting under color of federal or state law shall have the right to impose only limited penalties through administrative proceedings, even when these penalties are called "deterrents" or "means of protecting program integrity" rather than "punishments." Allowed forfeitures include only:

(1) Withholding of future direct payments from the public treasury (except that Social Security benefits up to the amount funded by actual contributions by an individual, including amounts paid by employers in the individual's name, plus interest, may not be withheld);

(2) Fines or civil monetary penalties not to exceed one week's after-tax income to an individual or one week's net profit to a corporation.

Before larger economic penalties or loss of liberty may be imposed, the defendant shall have the right to demand a trial in a court of law and in which the defendant has all the rights accorded to criminal defendants. These include but are not restricted to: trial by jury, representation by counsel, protection against self incrimination and double jeopardy, a presumption of innocence, and protection against unlawful searches and seizures. Personnel of the court shall be independent of the agency bringing the complaint against the citizen and shall receive no direct or indirect remuneration from that agency.

Citizens who are under investigation for violation of any law or regulation by an administrative agency shall be informed of their rights and shall not be penalized for exercising or refusing to waive these rights.

No person shall be permitted to make an anonymous complaint about a condition that carries an administrative sanction, and no monetary rewards shall be given to informants.

This law shall supersede all federal laws that mandate or permit larger administrative penalties to be enforced without proper judicial procedure.

No individual agency shall be exempted from these guarantees of citizens' rights. The law shall apply equally to the Food and Drug Administration, the Environmental Protection Agency, the Health Care Financing Administration, the Internal Revenue Service, the Occupational Health and Safety Administration, and any other agency acting under color of federal or state law.

To assure adequate consideration of the serious consequences of abridging the rights of citizens, this Act may be amended only in legislation specifically directed to that purpose, not as part of the budget reconciliation process or as an amendment to unrelated legislation.

All agreements between a citizen and a governmental agency, in which a citizen has waived his rights, shall be held invalid and unenforceable if signed under duress, such as a demonstrable or perceived threat of seizure of assets, loss of licensure, loss of liberty, loss of property value, criminal prosecution, or other adverse consequence imposed upon a citizen under color of federal or state law or regulation.

Citizens deprived of economic or other rights by governmental agents acting in violation of this Act shall not be denied access to federal court or to damages at law.

Case Dismissed

On September 29, the case of United States of America and Revenue Officer Douglas Stelmach of the Internal Revenue Service v. Jacob Lapp was dismissed pursuant to Rule 41(a)(1)(i) of the Federal Rules of Civil Procedure. This rule provides for voluntary dismissal by the plaintiff. Jacob Lapp faced imprisonment for contempt of court and confiscation of his farm for refusing to file forms that he said could not be completed honestly (see AAPS News Aug and Sept 1997).

AAPS Director Lawrence Huntoon, M.D., asks whether the dismissal has anything to do with Senate Finance Committee hearings in which six IRS agents testified behind special screens with black hoods over their heads and electronically altered voices. According to Michael Hirsh ("Behind the IRS Curtain," Newsweek 10/6/97), IRS Acting Commissioner Michael Dolan placed a nationwide conference call to IRS managers, telling them to "crack down on [IRS] abuse" [of innocent taxpayers].

"Apparently, government trying to force a hard-working farmer to lie on a public document just became politically incorrect," writes Dr. Huntoon. Similar hearings are needed for the behavior of HCFA, he suggested.

Regulatory Violation May Be a "False Claim"

Government agencies are no longer focusing on areas of obvious false claims, such as billing for services not rendered, stated Los Angeles attorney Patric Hooper at a May 2 conference sponsored by the American Bar Association and the National Association of Medicaid Fraud Control Units. In a growing number of cases, the government states that a patient received poor care-or care not meeting government specifications-and that the bills submitted were therefore false claims.

Hooper noted that very few, if any, statutes involving government health programs cover how to submit a bill. Given the lack of formal guidance, Hooper questioned the legal validity of the requirements that originate from intermediary or carrier guidelines, fraud alerts, or soon-to-be-released advisory opinions, none of which are subject to the rule-making procedures in the Administrative Procedure Act.

"We have a whole host of informal rules, and I can assure you that in most cases...you can come up with a rule that can contradict the rule that the government is relying on," he said (BNA's Health Care Fraud Report 5/21/97).

In his presentation at the AAPS annual meeting on how to respond to a federal probe, Philadelphia attorney Frank Rapoport stated: "Other than no longer providing health care services, it may now seem as if there are few ways to protect yourself from the government....Special Fraud Alerts purport to inform the community what conduct is illegal..., [but] they are vague and difficult to apply in many circumstances."

The response of Congress has been to increase funding for prosecutors and increase penalties. "Daunted by expensive investigations and onerous penalties for mere mistakes, [physicians] may simply exit the market."

Members' Page

If I Had a Computer. Back in the 60s there was a popular folk song called "If I Had a Hammer." When we all had hammers, the thing to do was to look for something to pound. Now that we all have computers, we have to look for something to compute. The problem with creating a tool and then looking for something to use it for is that inevitably something will be broken with all the indiscriminate pounding. In the case of computers, patient confidentiality is being broken beyond repair. Employers can now get lists of the drugs that their employees are taking and figure out what diseases they have. At a hospital demonstration of digital EEG equipment, a salesman boasted that he could get vital signs and EKG data, by name, from any patient in the ICU of a local hospital. He said, "This is the way things are going and neither you nor I can do anything to stop it."

In the early 1940s, Hitler convinced many people that he was going to take over the world and nobody could stop him. I submit that the little Hitlers are around us every day and that they can be stopped. We need to tell our patients and the public the truth about the plans to computerize everyone's medical records. Ask not what others will do to protect your privacy; ask, if I don't do it, who will?
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


Goal 2001. In little-noticed comments last week to the Service Employees International Union Labor Convention, Clinton said, "What I tried to do before won't work. Maybe we can do it another way. That's what we tried to do, a step at a time until we finish this." He drew cheers from the audience when he said his health plan could all be in effect before the end of his second term in 2001.
Ernest J. White, Alexandria, VA


Strings. I worry that the suggestions in the "Kid Care Update" in the October legislative supplement will take us in the wrong direction. Vouchers and tax credits are a Trojan horse. They have strings attached: Washington values. Until we replace the income tax with a sales tax, the federal government will continue to expand because people are dependent when Washington takes their savings.
Bert Loftman, M.D., Atlanta, GA


Saving $1740 in Four Months. Instead of paying $585 per month in health insurance premiums, we have been sending $150 per month to a family in need through the Christian Brotherhood Network and banking the rest in our own personal [non-deductible] Medical Savings Account. This is NOT insurance, with all the government mandates and restrictions. It's a group of people with a moral commitment to help each other in time of need. We envision other such organizations arising. They will make medical care more affordable and accessible, restore confidentiality, promote freedom of choice, and eliminate the profiteers.
Alieta Eck, M.D., Piscataway, NJ

AAPS Calendar

Oct 8-10, 1998. 55th annual meeting, Raleigh, NC

Counter Attack

Senior Members of Congress, particularly Congressman Bill Archer (R-TX), Chairman of the House Ways and Means Committee, along with Senators Jon Kyl (R-AZ) and Don Nickles (R-OK), the Senate Majority Whip, have introduced the Medicare Beneficiary Freedom to Contract Act of 1997. This is serious stuff, potentially the opening of a new and raucous debate that could reverse the current direction of America's health care policy. The key issue: Will you, once you turn 65, be able to spend your own money on medical services that you want from a physician of your choice?

The Archer-Kyl bill would repeal the restrictions on private contracting in the Balanced Budget Act of 1997. Specifically, it would remove the two-year exclusion from Medicare of doctors who enter into such private contracts.

Senator Jon Kyl tried earlier to clarify the right of doctors and patients to contract privately, introducing S. 1289 in the last (104th) Congress, and was severely "burned" by The Process. Proving again: No good deed goes unpunished in D.C.

Kyl complains that Congress has failed to rein in the Health Care Financing Administration (HCFA), just as it has long failed to control the Internal Revenue Service (IRS). The ugly revelations about the IRS, its victimization of innocent taxpayers, have recently surfaced in three days of sensational hearings conducted by the Senate. The Congress has yet to give similar scrutiny to the HCFA, which threatens doctors who enter into private agreements with civil penalties, fines, and exclusion from Medicare. Now, with the new raft of fines and jail terms under the Kennedy-Kassebaum bill, it is anybody's guess how HCFA will interpret its new authority to combat fraud. If past performance is any guide, it will be in the most expansive fashion imaginable.

About Face

It was Congressman Bill Thomas (R-CA), Chairman of the House Subcommittee on Health, who agreed to the Conference language that caused such an uproar. The House Ways and Means Committee staff circulated a "fact sheet" on August 29, which criticized the August 25 Wall Street Journal editorial, "Medicare Show Stopper," as "grossly inaccurate". It almost looks as if the Ways and Means staff had been plagiarizing from a HCFA- compiled list of bullet points on "What's Wrong With Private Contracts." For example, the staff document says that private contracting is illegal under previous law because HCFA issued a "Carrier Manual Instruction" that says so-precisely the kind of communication that the federal Court in the case of Stewart v. Sullivan (1992) said was an insufficient basis for federal policy! But let us say that HCFA is right and the rest of the world is wrong, and that the patient- physician relationship through private contracts is illegal for Medicare beneficiaries, simply because HCFA says so in some not- so-exalted thing as a "Carrier Manual." HCFA is either right or wrong. The Congressional interpretation is, therefore, either true or false. If HCFA is wrong, then Congress, in passing the 1997 Balanced Budget Act language imposing restrictions on private contracting, cannot possibly be making the situation "better" for private contracting, as members of the Mickey Mouse Club among the staff of the House Ways and Means Committee have been insisting all along. If HCFA is right, then Congress has failed miserably in its responsibility to oversee and restrain the potent federal agency, allowing it to exercise such extraordinary power at the expense of the personal freedom of millions of Americans and the professional integrity of America's doctors. With the phone calls coming into the Hill, staffers are learning that what they assumed to be true and widely understood is in fact surprising and shocking to most Americans. How could their personal freedom be restricted in this fashion?

From the backtracking and backsliding and lame excuses coming from the House Ways and Means Committee Members and Staff, one wonders whether they read the 1992 decision, misunderstood it, and coached their Congressional superiors on a flawed interpretation of the current state of the law. What did the law say? Kent Masterson Brown, the attorney for the plaintiffs who argued the case inStewart v. Sullivan (1992) wrote that, "Under the Medicare Act, payment for medical services by the Medicare program-and the resulting physician obligations-were triggered only if a claim was filed. The Medicare beneficiaries in Stewart did not want to file claims with Medicare" (Wall St J, 10/1/97).

A good guess: HCFA helped the Congressional staffers on Ways and Means with their interpretation of the law. That could be a great case study for some enterprising reporter.

Interestingly, while Congressman Thomas initially emerged as a defender of the Congressional language in the Budget Bill, he offered the argument that he and his colleagues were pressured by the Clinton Administration into adopting it. Whether or not the Congressional excuse is good enough to meet the ``you did what?'' -test, it is now clear that the Clinton Administration really was prepared to play hardball over the private contracting issue. The Congressional leadership is now revealing that Clinton was prepared to veto the entire Balanced Budget Act of 1997?-tax changes, budget targets, deficit reduction provisions, the whole thing-if the original Kyl language was in the bill. Was this an idle threat or not? Who knows? It depends on whom you believe. But it belies all the subsequent claptrap about this being a minor provision.

No matter. That stage of the debate is over. And there's new language on the Congressional table. The House version of the Medicare Freedom To Contract Act has garnered more than 87 cosponsors, including Speaker Newt Gingrich, and Congressional leaders are talking as if they want to put the bill on a fast track. There is a growing sentiment in Congress that the idea to limit the private contracts between doctors and patients is not only bad policy. It's also pretty stupid. Worse than either deficiency, it's also a political loser. Give the idea of signed affidavits and loss of Medicare practice for two years a psychological road test with ordinary Americans, and they are likely to respond with disbelief. They did that?

A Reason To Reform The Budget Process?

This all goes to show how out of the loop Washington's Health Care Policy Wonks really are. The HCFA wonks and Congressional staffers who collaborate behind closed doors to write goofy bureaucratic rules on behalf of their bosses think they can get away with it. Well, they do-far too often. This time, though, they miscalculated.

It's true, too many Members of Congress don't read the Bills. Recall Claude Raines playing the silver-haired Senior Senator-the best representation of The Establishment ever on the Silver Screen-telling poor bewildered Jimmy Stewart, the na�ve and idealistic Freshman Senator Jefferson Smith, the awful truth in Mr. Smith Goes to Washington. They don't read the bills. The Frank Capra classic should be required viewing for taxpayers. Most Members of Congress depend, like so many of us in other spheres of life, on the division of labor. Certain members specialize in certain areas of public policy, and their committee assignments reflect that specialization. They depend on their colleagues to do a good job, reflecting both competence and philosophical commitment to mutual goals that are periodically articulated on the stump, in speeches, and in fundraising letters. Sometimes, it works. But with the shell- shocked Republican leaders in Congress, it simply doesn't work in health-care policy. You're never really sure what they are going to do, regardless of what they say. They spout now conventional anti-Clinton rhetoric, and prattle on about their commitment to consumer choice and competition, but you have to check and recheck the fine print. Otherwise, they'll be spending taxpayers' money on some crazy scheme, dreamed up by HCFA, like paying hospitals not to train doctors, or installing some component of the Clinton Plan.

The Public Relations Debate

The idea of restricting the freedom of Medicare beneficiaries to deal directly with their doctors, as in Section 4705, turned out to be political dynamite. Predictably, it has run into a veritable storm of opposition. A series of hot-blooded editorials appearing in high prestige journals like the Wall Street Journal, Forbes, The Washington Post, and others are now generating similar pieces in newspapers all across the country. Rush Limbaugh, with an estimated listening audience of 20 million citizens, has thrown more gasoline on the political prairie fire. And if Republicans can't quickly fix it, they could yet be severely burned, even more than Senator Kyl.

AARP Lines Up With HCFA

Liberals on and off Capitol Hill are starting to rally to the defense of HCFA's authority. Congressman Pete Stark (D-CA) is arguing that private contracts in Medicare are an excuse for greed. In the September 23 floor statement, Stark said: "In 1995, Medicare paid 393 Doctors more than $1 million for services; 3152 doctors received between $500,000 and $1 million. Now a greedy few want more." He elaborates: "Strip away the rhetoric, and a private contract is a contract between a doctor who holds his life in your hands in which he demands that you give up your Medicare benefits and that you promise not to file a claim with Medicare. Instead, you agree to let him charge you anything he wants-because you are desperate for your health. We like to think of contracts between equals, negotiated fairly. There is no equality, and there is no fairness in these contracts."

Not to be outdone are the high-minded leaders and Washington staff of the American Association of Retired Persons (AARP), the terror of Congressmen and Senators great and small. In its formal statement on the subject, AARP says: "AARP believes that such attempts (as private contracting) would leave Medicare vulnerable to greater fraud and abuse and beneficiaries at risk of higher health care costs." On fraud possibilities, specifically, the AARP argues that private contracting would lead to double billing, doctors billing their patients and also Medicare: "Unless HCFA has complete information on each private contract-including the doctor, the patient, and the specific services involved-and can align it with claim filings, both Medicare and the beneficiary could end up paying for the same services."

AARP also notes that the private contracting provision will not guarantee the Medicare folks the same "protections" now enjoyed by patients in HMOs in the private sector. Why? Get this: "Physicians who contract with employer provided plans to provide care for younger workers typically abide by the plan's reimbursement rates and the limits on enrollee's out-of-pocket costs." According to AARP, the HMO-style restrictions-"private sector" price controls that could only be imposed in a system devoid of consumer choice and competition-are a positive good. Under the Kyl language, doctors will be able to circumvent similar restrictions-and that's bad: "This practice essentially would deny Medicare beneficiaries a protection enjoyed by millions of workers and their families." Right: millions of workers are madly in love with managed care corporations, siphoning off billions in premiums and paying doctors more for doing less.

AARP also complains that the bill does not require doctors to disclose the cost of services being privately contracted. The premise of this is that people over 65 can enter into private contracts for every other professional service imaginable and remain sensitive to price, but not medical services when they know-up front-that Medicare is not going to reimburse for the service. Says AARP: "There would be no fee schedule, no limits on what physicians may charge under private contract and no protection from out of pocket costs under Medigap policies. Therefore the beneficiaries would not know what their out of pocket liability for private contract charges would be and would have difficulty budgeting the costs for their care. While this may be manageable for some wealthy individuals, it may not be manageable for the average beneficiary."

In a nutshell, the AARP rhetoric all focuses on the defense of existing political and economic institutions: Medicare's price control system, HCFA's bureaucratic authority, managed care's corporate restrictions.

The AMA has jumped in to support Archer and Kyl. Look for a nasty fight in Congress over the future of the doctor-patient relationship. If Congress can regulate this, they can regulate anything.

Consolidating the Corporate Empire

And speaking of regulation, please note what many health policy analysts have suspected all along: the big managed care industry wants more, not less, government regulation. Kaiser Permanente, HIP Health Insurance, and Group Health Cooperative of Puget Sound, joined by the liberal interest groups Families USA and the AARP, have recently called for national, legally enforceable standards to ensure "quality care" for managed care enrollees and to "restore consumer trust"] in the health insurance industry. The coalition called for national regulation in 18 specific areas, from soup to nuts.

Now, an economic lesson for the kids: government regulation on any industry imposes higher costs. Big companies with big profits can absorb higher costs; little companies with marginal profits often can't. So supply is restricted, and demand remains constant or increases, and what happens to prices? Right, class: Prices go up. Go to the head of the class and get a gold star.