Volume 53, No. 10 October 1997


Have you committed a federal crime today?

Chances are that you have. Moreover, the act was probably committed ``knowingly and willfully.'' (You probably knew what you were doing, even if you had no intention of violating any law; ignorance of the law is no excuse.)

The Report on the Financial Statement Audit of the Health Care Financing Administration for Fiscal Year 1996 (A-17-95- 00096, July, 1997) has been released by the Office of Inspector General (see p. S2). From this report, it is apparent that the Medicare system is indeed permeated with fraud.

Consider the following statements from the accompanying memorandum: ``We were not able to apply other auditing procedures to satisfy ourselves as to the fair presentation of the accounts involved.'' Therefore, the auditors expressed no opinion about the HCFA's 1996 financial statements. However, they made the following observations:

Examples of the errors uncovered by the audit: One contractor included $700 million as a receivable under the periodic interim payment method (PIP), when in fact all but $32 million was a payable. (About 38,000 institutions receive periodic payments and only later file a cost report to be reconciled with the payments received.) At another contractor, about $7 million could not be reconciled to reported amounts.

It would seem obvious that HCFA itself and Medicare carriers should be subjected to more intense scrutiny. However, the government's search for fraud is focused elsewhere: on the 5314 claims that were examined (6.6 per million or 0.00066% of claims submitted).

On the basis of this tiny sample, auditors conclude that $23.6 billion in ``improper payments'' were made: 14% of the total of $168.6 billion in fee-for-service payments. This does not include ``waste'' (excessive pricing) or outright fraud such as phony records and kickbacks. The most pervasive error, involved in 47% of the improper payments, was insufficient documentation kept by the provider. Next was ``lack of medical necessity'' (37%), then incorrect coding (8.5%). These determinations are apparently judgment calls by the auditors.

Auditors' recommendations included: stronger deterrents to reduce improper payments and stronger HCFA oversight to assure that providers comply with Medicare rules, lest they fail to document a visit or receive $1 too much in payment.

Janet Reno has enhanced deterrence by deputizing all inspectors general so they may carry firearms, thereby circumventing the need for legislation to authorize these auditors to carry deadly weapons (Insight 6/16/97). Providers can expect more random audits. In the Phoenix area alone, 60 FBI agents have reportedly been assigned to Medicare fraud.

And it's not just providers who need to worry about enhanced penalties. Their attorneys could have their legal fees confiscated if the money was derived from health care fraud (18 USC 1345 and 18 USC 982). This power has not yet been used in a health fraud case, but has been used in narcotics cases. Attorney Bob Biddle of Ober Kaler Grimes of Baltimore recommends that lawyers try to link their fees to assets that the client acquired prior to his exposure. ``Ideally, the client should have diversified income that is above suspicion'' (Medicare Compliance Alert 5/5/97).

And if the prison terms and fines associated with the fraud itself aren't enough, prosecutors often add on ``money laundering'' charges. If the perpetrator used the proceeds of fraud, say to pay the utilities or the rent, then they could face 20 years in prison instead of a mere five. The money laundering charge can be used a backstop in case the rest of the prosecutor's case falls apart. Even the US Sentencing Commission recommended reducing the penalties in cases that did not involve drugs, but Congress vetoed the proposal (Wall St J 6/9/97).

And just what constitutes fraud? It depends on who defines the terms ``medically necessary'' and the meaning of the codes. Attorney Joe A. Izen, Jr., of Bellaire, TX, writes that small medical practitioners will be forced ``to expend defense funds, to the point of bankruptcy, to define the meaning of these terms.'' Jeffrey Rutgard, M.D., writes from the Metropolitan Correctional Center in San Diego that a 30- something-year-old military physician may be chosen to tell the jury that your diagnosis, treatment, or CPT billing code was wrong, even if he has less experience in his entire career than you have in one year. ``Of course, we are all human and capable of making [such errors]..., but even when we do choose the correct CPT code, ... according to Medicare's own definition, it can be said that we have chosen the wrong one.''

``It is duck hunting season....and the ducks are being shot down mercilessly. The remaining ducks just look down and say things like `too bad, he must not have been the good upstanding ducks that the rest of us are.' But the ducks being hit by the bullets are not `quacks,' they are just the current targets....Who is next?''

Medicare is bankrupt and failing. Someone must be held responsible for wrecking it.

Private Contracting: All or None?

Many physicians are calling AAPS to ask how to take advantage of the Budget Reconciliation Act's private contracting provision-some Congressmen's belief that no physician would completely forego Medicare payments notwithstanding. Others wonder whether private contracts on a case-by-case basis are now forbidden.

Legal analysis is pending, and AAPS plans to distribute kits with instructions on private contracting before the bill takes effect in January, 1998.

Physicians can download the private contracting provision from http://www.primenet.com/~snavely, or AAPS will FAX a copy of the pertinent pages of the Congressional Record on request.

The wording is curious. Briefly, the law states: If an affidavit is filed, and if the physician remains completely out of Medicare for two years, and if certain contractual wording is used, then private contracting is not prohibited. Does this mean that if all of the above are not done, then private contracting is prohibited? It is possibly the intent of Congress to outlaw private contracting except under the narrowly defined circumstances. But the wording, not the intent, is the determining factor. Has Congress accomplished this supposed objective?

From a logical standpoint, the negative of a true conditional statement is not necessarily true. (Look it up in your high school geometry book.) For example, it is true to say: If an object is red, then it is not blue. However, it is not necessarily true to say: If an object is not red, then it is blue.

The meaning of a law is determined by the Court, which might or might not adhere to the laws of logic. Adherence to the Constitution is, of course, an additional issue. AAPS will carefully scrutinize the law from that standpoint as well.

The most critical question is this: Will physicians assert their rights? If not, then they will surely lose them.

The measure of the importance of private contracting is the vigor of the opposition to it in both Executive and Legislative branches of government. This small escape hatch could keep the keystone of socialism from being set.

Until the Budget Reconciliation Act was passed (and described in the August 22 issue of The Wall Street Journal), most Americans, including talk show hosts such as Rush Limbaugh, had no idea that the right of senior citizens to spend their own money for medical care was ever in question. This right was guaranteed in the initial Medicare law (as quoted on the plastic card enclosed with this newsletter). Without this guarantee, it is probable that Medicare could not have been enacted in 1965. Either the guarantee still holds-or there is no better illustration of the worthlessness of such solemn promises, even when enacted into law.

Use MSAs to Prepare for Retirement

Medical Savings Accounts may be attractive for paying some medical bills with pre-tax dollars. However, this may not be their best use. You may want to pay those medical bills out of pocket and allow the MSA funds to compound, tax-free, until retirement. If you use the MSA during retirement for medical bills or nursing home bills, the withdrawal is tax-free:

``Tax-deductible going in, tax-free compounding, tax-free going out. No IRA is that good; IRA distributions are always taxable,'' writes Laura Saunders in Forbes (6/19/97).

Additionally, after age 65 funds may be withdrawn for any purpose without penalty (you simply must pay the taxes).

If a young persons has $1000 compounding in an MSA, it can grow to as much as $30,000 by age 70. The same funds sitting in a brokerage account, invested in the same way but exposed to a 34% tax rate, would grow to only $10,000.

``Even if the program is discontinued,'' states the Forbes article, ``owners can keep these policies and accounts going forever. So if you want one, get it before the window slams shut.''

More than 40 companies now offer coverage qualified for a tax-deductible MSA. A list may be obtained the Internet: the Forbes site ( http://www.forbes.com/taxes) or Americans for Free Choice in Medicine (http://www.afcm.org).

Action Plan for the Month

Send us the FAX number of your local talk show hosts. Also send us your own FAX number if you are willing to call the show upon receiving an alert.

Sharing Burdens Rather Than Risk

Alieta Eck, M.D., of Somerset, NJ, writes: ``Those of you who have been following our travels out of health insurance [see AAPS News Dec 1996] might be interested in a brief story about the Christian Brotherhood Newsletter in the September 8, 1997, issue of Forbes, pp. 142-144. We have gone from paying $585 per month for our $1000 deductible `health insurance' policy to paying $150 per month directly to a needy family instead. The CBN simply directs us where to send the check. It avoids the coercion, micro- management, denial of claims, insistence on pre-authorization, restriction of choice of doctors, etc.

``The article, although it admits that the founder and president makes only $55,000 per year, seems to take issue with the fact that he lives on a 500-acre farm in a very nice house. The house is owned by the mission for alcoholics that Bruce Hawthorn also runs. I find this a bit disingenuous-in an age in which the CEO of a large HMO personally netted $1 billion in profit when he sold it.

``One great point of the article came at the end: `Insurance companies and state regulators are, of course, outraged. These outfits are siphoning off many people who are excellent risks. They also threaten regulators' efforts to socialize medicine'.''

CBN is not for everyone. Subscribers must attend church regularly and never touch tobacco or alcohol. However, new ``clones'' might become viable, with different requirements. There are already five ``copycats.''

Hawthorn forbids promoters to use the term ``insurance.'' CBN has, in fact, been challenged many times by insurance regula- tors, who have usually backed down. CBN does not have all the earmarks of insurance. It has no reserves, for example. If the bills exceed monthly revenues, payments are delayed.

That never happens, of course, with real insurance backed by reserves and legal, heavily regulated contracts.

[Audiotaped presentations by Dr. Eck and others are $27.50 from Freedom in Medicine, 48 N. Linwood, Norwalk OH 44857.]

Disputed Psychiatric Billings Called False Claims

In United States v. Royal Geropsychiatric Services, Inc., the US Attorney for the Northern District of Ohio contends that four psychiatrists, the company performing billing and office management, and the owners of the management company filed claims violating the False Claims Act. Specifically, the government makes these allegations:

Through its attorneys (Waldheger, Coyne, and Associates of Cleveland, Ohio), Royal has filed a counterclaim against the Medicare carrier and the Secretary of Health and Human Services asking for a Declaratory Judgment from the court to establish that False Claims Act liability occurs only upon the violation of regulations promulgated by the Secretary and that the Secretary has not implemented any regulations that prohibit Royal's billing practices.

In addition, Royal asks that the False Claims Act and the Medicare regulations be declared void due to vagueness.

Also, Royal asks to be indemnifed for any damages that it incurs due to the Secretary's breach of her statutory duty to issue reguations and the carriers' breach of contractual and regulatory duties.

When HCFA established 24 new alphanumeric codes for psychotherapy effective January 1, 1997, the psychiatric community received little warning of the need to adjust its billing practices. Royal requested clarification concerning the correct billing for medication checks. It was told that the designation was correct but never received a written reply. The carrier then audited the claims and approved and paid for services as billed.

In the introduction to 1997 regulations, HCFA admitted that the code for reporting ``interactive psychotherapy'' (CPT Code 90855) was ``not clearly defined, and the lack of a clear definition has led to the submission of approximately 500,000 claims for interactive therapy.'' Federal Register 59522. HCFA therefore redefined Code 90855. Nonetheless, the OIG issued a ``fraud alert'' in March, 1997, and around the same time the U.S. Attorney filed the action claiming that Royal's bills under Code 90855, filed between April, 1993, and December, 1995, were fraudulent.

According to the Medicare Manual 230.5, Medicare is supposed to cover outpatient psychiatric services designed to control symptoms, maintain a functional level, and prevent deterioration. Services to patients with severe dementia are ``appropriate'' if the cognitive defect is not so severe as to prevent establishing a relationship with the therapist. However, Royal has received information that carriers are routinely denying claims for patients with Alzheimer's or dementia, based on diagnosis alone. Royal claims that such patients can benefit significantly from treatment of depressive and anxiety disorders, hallucinations and delusions, and aggressive, combative behavior.

``Denying claims ... based on age or diagnosis is a breach of trust to the beneficiaries and violates Medicare law. Bringing a false claims action against providers for providing these services is outrageous,'' state Royal's attorneys.

The ostensible cost containment strategy of filing a False Claims action, even when the regulations are ambiguous or unintelligible, ``converts what is essentially a regulatory dispute into an act of war.'' The penalties are so severe that providers are often anxious to settle claims by paying the federal government what many view as an extortion fee.

Instead of embarking on a reasoned public debate about coverage decisions, the government is, through such back-door techniques, effectively rationing care to the elderly.

Laputa: ``I would take care to encourage the breed of discoverers, witnesses, informers, accusers, prosecutors,...and swearers,...placing them all under the pay...of powerful persons who desire to raise their own characters as profound politi- cians....[They would agree among themselves] what suspected persons shall be accused of a plot; then, effectual care being taken to secure all their letters and papers, and the criminal placed in secure custody, these papers might be delivered to a set of artists sufficiently dexterous to find out the mysterious meanings of words, syllables, and letters. They should be allowed to place what interpretation they please upon them, even if it is contrary to their true intent and meaning; for instance, they may...interpret a buzzard [to signify] a great statesman; ... a mousetrap, an employment; a bottomless pit, a treasury; a broken reed, a court of justice; ... a running sore, an administration.''
Jonathan Swift, Gulliver's Travels

Perez Petition for Rehearing Denied

The Court of Appeals for the State of Michigan issued a one-sentence ruling in the case of People of MI v Edgardo Perez DeLeon (see AAPS News Aug 1997): ``The motion for rehearing is denied.'' Because of improper service (the ruling was issued ten days before being mailed), Mr. Perez has only ten days to file for appeal to the Michigan Supreme Court.

Mr. Perez has been in court since 1992, when criminal charges were filed against him and his wife. Although employees generally are immune from criminal liability, Mr. Perez states he was convicted ``on grounds of marriage,'' after dismissal of charges of conspiracy against him and his wife.

Multiple proceedings have left him impoverished, and he has necessarily gained considerable experience as a pro se litigant-a risky undertaking. ``I paid for my mistake to be `alone' in a public place full of people with AAG Thomas Quasarano with 30 days in jail'' (see AAPS News Sept 1997).

However, it is also ``risky for an attorney with license to conduct an aggressive defense.'' And ``while a physician can teach a patient to treat a wound, an attorney can risk his license by teaching someone to be in pro per.''

Mr. Perez cautions: ``The main problem in physicians' defense is that attorneys do not look carefully at the law. They see the facts in the context of traditional criminal law because they think that a crime is a crime.'' But that is not so. Excellent communication between the legal and medical professions is crucial to establish how the law is applied to the facts of medical practice. Thus, it is crucial for physicians to seek help from persons experienced in health care law, early in the proceedings. Many cases have been lost due to early legal mistakes. [AAPS members have access to the Limited Legal Consultation Service.]

Members' Page

The New Code of Ethics. According to the Position Statement by the Ethics and Humanities Subcommittee of the Practice Committee of the American Academy of Neurology (Neurol 1997;49:321-322), if neurologists encounter aspects of managed care that are harmful to patients, we should ``try to remove or alter restrictions (through negotiation, appeal, and the like) before acceding to them.''

I believe that in boxing and wrestling, they call that putting on a good show before taking a dive.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY


Preoccupation with Death. An active, evolving, innovative society is concerned primarily with life. A decaying, backward- looking society is more likely to be preoccupied with death [as was ancient Egypt] to the exclusion of a vital interest in life.

A basic issue is presented by euthanasia: the right and responsibility to live or the surrender of life when its quality is presumed to decline. Such a judgment has striking societal implications....In essence, it is the repudiation of a melioristic society-a society dedicated to overcoming difficulties....

Each person alive can contribute to the total universal good....Even a person who has limited intentional capacity may be a stimulant toward moral behavior (Philadelphia Med 1982:78:490-491).
Paul S. Friedman, M.D., Philadelphia, PA


The Basic Mistake. It was a mistake, motivated by tax considerations, for employers to become involved in health insurance purchases. If people bought health insurance the way they buy auto and homeowners coverage, everything would be simpler and better. Now people won't work for a company that doesn't sponsor health insurance....

The question is how to get from here to a system in which participants are in the drivers' seat. Attacks on managed care, in isolation, do nothing except drive the country toward Medicare-for-all. Unfortunately, Congress and the states are in a race to destroy the individual health insurance market.
Tom Emerick, Vice President, Wal-Mart


A Method of Non-Participation. I decided to take the enclosed monthly [Social Security] check out of the regular rotation on a one-time basis to cover last year's and the coming year's dues to AAPS....This is one way to divert funds from the federal Treasury into useful and productive channels, although it is only a trickle alongside the torrent of waste and counterproductivity into which so much of the taxpayers' money is diverted. While I would like to see more of the ``entitled'' join in the diversion, I am very circumspect about discussing this with friends and colleagues, many of whom freely admit accepting these funds (``because I have paid for them''), to avoid an appearance of ``holier than thou''....
Thayer Smith, M.D., Downey, CA


Another Reason for Unassigned Billing. This year, I have been billing unassigned because oncology visits are time consuming and talking is not considered by Medicare to be ``medically necessary.'' I have lost some patients to whom I have given my heart and soul. The majority have gone along with the unassigned plan, and this has caused me to enjoy my practice much more. I have noticed that unassigned patients are ``more careful'' about scheduling too many visits.

I cannot tell you how hurt and insulted I have been when patients have absolutely refused to pay. To me this is the true test of whether the patient thinks your time and effort are worth anything. Doctors who think their patients like them should try this out and see the truth.

Even this small gesture of billing unassigned would help to decrease the entitlement mentality and the cost of medical care. However, most doctors know that they can make more money by billing more services assigned. The government does not understand this-or does not want to understand....
Linda W. Wilson, M.D., Culver City, CA


Double Standards. Is it medical pamphlets and operative permits that must be (and are) written in plain English, or legal documents that you are expected to agree to and abide by?

Yet, if a patient doesn't understand something, it's assumed to be because the doctor is negligent or trying to hide something. But concerning legal matters, ``there is no excuse for not knowing the law.'' The numerous absurd laws now make it possible to arrest and prosecute anyone at any time. But one of our local Congressmen claimed that ``these laws and punishments are only to be able to get after the bad guys, not the good citizens like you.''

Who defines bad guys, and who is above the law?
Gary K. Keats, M.D., Clearwater, FL


Guilty. I had been prescribing anabolic steroids since the 1970s with no problems. In 1990, the anabolic steroid act was passed, and I pled guilty to buying $3000 worth of a German anabolic steroid called Primabolan. The judge sentenced me to five years. I am now warehoused in this facility. My medical license has been suspended. After this experience, I'm not sure I will want to put myself in the sights of the federal government again. I can assure you that prosecutors care nothing about your career, family, or profession. They are only interested in getting more notches on their guns. And your own lawyer is often friendly with them....
Walter F. Jekot, M.D., Nellis Federal Prison Camp, NM

Year-End Spending

Running scared, Congress is going to try to get out by Halloween. The Clinton Administration's long-awaited report to be issued by its Health Care Quality Commission is also expected to be out in October. It will, of course, lay the groundwork for the next installment of the previously defeated Clinton Health Care Plan. Gotta hand it to him, Bill Clinton knows how to play this game. Piece by piece.

Look for conservatives in Congress to try to rectify some of the big mistakes they made in the Balanced Budget Act of 1997. They will likely use the Labor HHS Appropriations as the vehicle to correct the mistakes, especially some of the big ones foisted on the agreement with the cooperation of the House Ways and Means Committee. Republicans in the House have already ginned up approximately 120 amendments. In the Senate, look for a similar effort. In the meantime, the Congressional leader in the House fear another confrontation with Clinton, thinking that if they fight over the tough issues with Clinton, regardless of the merits, Clinton will veto the appropriations bills, reframe the issue as a stand against something mean-spirited, and they will lose, politically, the public relations battle. They have not yet recovered from the Big Government Shutdown of 1995. The Republican self-styled ``revolutionaries'' scatter today at even a hint of a whiff of grapeshot from Pennsylvania Avenue.

After the appropriations bills are finished, House and Senate leaders will try to prioritize which non-spending measures should get top consideration. One sure bet is that the House will try to undo what they did to welfare reform in the Budget Bill and restore serious work requirements in the program. Clinton is proposing regulations to gut the work requirements by defining work for welfare as ``employment'' under federal law, thus making 25 separate work-related statutes, such as minimum wage, applicable to workfare programs. This would, of course, destroy welfare reform. There will also be committee action, probably in both the House and Senate, on FDA reform. The agency has come under criticism for being too slow and cumbersome, and a bill is likely to get out of committee even if it doesn't get to the floor before the end of the session.

Kidcare Update

In October, the Kidcare money will start flowing to the states, and the states will be charged with designing the Kidcare programs. We will see here a replay of the basic battles of the continuing health care reform wars. The Children's Defense Fund, Hillary Clinton's old outfit, is working day and night at the state level to make sure that the Kidcare funds are spent ``right.'' This means, of course, the creation of governmental systems at the state level to tightly control the financing and the delivery of medical services to children, with the state bureaucrats making the key decisions about how and in what way the Kids get care. Naturally, conservatives are asleep at the switch in most states, and the debate at the state legislative level is likely to be dominated by the folks that were routed three years ago during the debate on the Clinton Health Plan. Conservative state legislators can take the initiative, if they wish to do so. In the Conference Report of the Balanced Budget Act of 1997, the language specifically encourages states to ``consider such innovative means as vouchers and tax credits in developing strategies'' for Kidcare. Perhaps conservative state legislators will use a little more imagination than their counterparts in Congress. One can only hope so.

Crop Subsidies for Hospitals

Look under the Congressional Budget rock and you will find some weird stuff. Perhaps the most galling is a new program to pay over 1000 hospitals not to train doctors. The reason: there is a ``glut'' of doctors, and it is the job of the government to determine how many and what kind of doctors Americans should have. Therefore, the government should pay medical instructors more for doing less. Thus the economic principle is more for less. Rather like managed care. The fact that this incentive system is nuts on the face of it doesn't seem to bother anybody. Remember that the intrinsic stupidity of an idea has never been an obstacle to its success in official Washington.

The Congressional Republican provision grew out of a Clinton Administration proposal this past spring to pay New York hospitals $400 million not to train doctors. Hospitals around the country protested-saying that they should not be excluded from the opportunity to do nothing for something. According to The Washington Post (8/24/97): ``Their protests attracted the sympathy of congressional Republicans who decided that, instead of trying to block the money for New York, they would expand the opportunity nationwide.'' Why beat 'em, when you can join 'em? As Ari Fleischer, a top Congressional staffer on the House Ways and Means Committee said, they felt that ``need'' out there in America, and that is why they thought it was a ``good idea to extend the policy.''

But its gets better than this. Dig the justification for the subsidies: ``[Fleischer] said the subsidies were consistent with Republican preferences for market solutions to health care problems.'' When the old fashioned liberal Democrats dish out pounds of pork for their pals and take your money, they are often shameless. On occasion, they'll try to make a case, trying to control their own laughter, that the grants and subsidies and contracts for special interest and politically correct friends serve some higher national purpose. Sometimes, they are even flat out honest: they simply want to buy the votes. When Republicans take your money dish out the pork, they too often don't even dish it out to their friends, but to the same old special interests nurtured by Democrats for years. The Republicans, if Fleischer is reading his lines correctly, not only take your cash, but they also insult your intelligence.

The same group of ``experts'' and their congressional staff pals, who clog Washington's policy arteries, shutting off oxygen to the brains of Congressmen, also think that if you limit the doctors, it follows that you will limit the services and the cost of medical care. Please note that this was indeed the argument advanced by Professor William C. Hsiao in 1988 for creating the Resource Based Relative Value Scale (RBRVS), perhaps the silliest price control contraption since Hammurabi imposed fee schedules on prostitutes for their beauty and charm. (Posit a value for beauty and then another for charm, add and weigh the components of time, energy, effort, and skill, and come out with a HCFA-style fee schedule for ladies of the night? Just an impure thought.) Cost control by limiting supply and ignoring demand-nobody boldly puts it in these terms, but that's what it is.

There is the gnawing feeling on the part of members of Congress, particularly in the Senate, that the federal government does not really possess a magic formula to determine exactly how many doctors we need. They keep hearing incessant complaints from folks back home, particularly in rural areas, that there are not enough doctors. Perhaps then there are too many specialists? But specialization in the division of labor is a mark of enhanced productivity in the economy. This is not the first time that in the health care sector of the economy a whole class of wonks is making an argument that is exactly the opposite of common sense in every other sector of the economy.

Regardless of the situation today, America has a rapidly aging population. As the number of Medicare beneficiaries climbs from 38 million to more than 60 million in the next three decades, it is likely that the demand for specialized medical services will increase, not drop off.

Medicare Corruption

Official abuse of the taxpayers, as in the case of the aforementioned subsidies, is compounded by impressive corruption in the Medicare program itself, as shown in an audit of HCFA by the Office of Inspector General (see p. 1). Medicare processes about 800 million claims per year, and only about 3% are subject to even a ``cursory review.'' According to The Washington Post (8/8/97), ``The sheer size of the program, which pays about 800 million claims per years, makes it impractical for the government to verify the basis for more than a tiny sample of the charges. The complexity of Medicare's voluminous billing regulations has been an invitation to manipulation-as well as errors of interpretation.'' As the Post observes, ``The regulatory maze has spawned an industry of billing consultants who help health care businesses maximize their reimbursements-and avoid fraud charges.'' Of course, this adds a whole new layer of costs to medical care. Also, the Post acknowledges that the many gray areas create a real potential for innocent doctors to get caught up in investigations for fraud.

The worst cases of fraud have come in the field of home health care. Federal auditors estimate that 40% of home health care expenditures-the fastest growing component in the entire Medicare program-are ``unjustified.'' Nevertheless, in the 1997 Balanced Budget Act, Congress did what many Members of Congress declared they would never do, and moved home health care from Part A of Medicare to Part B, where taxpayers pick up 75% of the costs through general revenues. At the same time, liberals in the House and Senate made sure that the taxpayers would pay the extra costs without even a modest $5 copayment for home health care services. As the Post notes: ``The program pays for an unlimited number of visits and requires elderly beneficiaries to pay nothing out of pocket, giving them little economic motivation to curb the excesses.'' It hard to imagine how one could design a program more ineptly than the way Congress has deliberately designed the Medicare home health care program.

The response to all of this has been to expand the federal government's police power, not to restructure the Medicare program to make fraud more difficult. To get an idea of how overwhelming the problem is in the view of federal investigators, the Post reports that they have turned to a computer technology developed by the Strategic Defense Initiative (SDI) at the Los Alamos National Laboratories. That's got to tell you something. If we can put a man on the moon, why can't we...? If we can develop a technology to stop incoming missiles, perhaps we can develop a technology to combat Original Sin. To make Medicare work well and to clean out the ``wreckers and spies''-to use Stalin's old phrase for the underlings accused of sabotaging the Worker's Paradise-the best weapon is informers and bounty hunters. As The Washington Post observes, ``The gusher of fraud has nurtured a potentially profitable specialty within the health care industry: whistleblowing. Under federal law, informants who help the government expose frauds are entitled to 15 percent to 30 percent of any funds the government recoups. This year the Justice Department has given HHS inspectors 200 whistleblower claims to investigate, up from just 40 three years ago.''

The Cost of Mandates

Congress will be working, you bet, on some way to protect consumers from managed care by expanding government regulation over the health insurance industry-again. So more mandates are on the way at the federal level. No Member of Congress wants to be caught dead in opposition to some new good benefit, or cast as opposing poor or sick people who need protection from greedy insurance companies. The worst part of it is that managed care is giving private health insurance a terrible reputation.

At the same time, the states are continuing to impose mandates at the state level. Altogether, there are now more than 1000 state mandates. The Dallas-based National Center for Policy Analysis contracted with the firm of Milliman and Robertson, a prominent actuarial firm, to find out the costs of these requirements. Looking at the 12 most common health insurance mandates, the firm concluded that, together, they raise the cost of health insurance by as much as 30%. Of course, one of the objectives of health care reform is to control cost, right? Guess again.

Private Contracting Update

Most ordinary folks don't have a clue what kind of regulatory machine HCFA has become. So, when it was revealed, largely through The Wall Street Journal, that Congress is prepared to allow doctors to contract privately with patients in Medicare if, and only if, the doctor dumps the rest of his Medicare practice for a period of two years, well, that sounds sort of weird to ordinary folks. With appearance of the Journal editorial this past month, the House Ways and Means Committee, the panel largely responsible for the shape of the final language in the balanced Budget Act of 1997, was deluged with telephone calls from outraged folks. Worse for the Congress, Rush Limbaugh brought the issue to the attention of his millions of listeners, and Steve Forbes used it in an attack on the weakening of the Republican Congressional leadership in the face of the Clinton Administration. Stay tuned. This could get interesting.

Uwe Reinhardt, on the medical profession: ``I know of no profession where there has been as much federal effort to regulate. You don't do it for economists, for architects, or for engineers.'' The Washington Post (8/24/97)