MEDICINE IN A
Volume 54, No. 3
Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
The art and science of medicine, through a
collaborative effort by the AMA and HCFA, is to be reduced to
the production of voluminous documents by the new "E&M"
"guidelines." Meanwhile, the business of insurance, which now
funds most of American medicine, is targeted for obliteration by
so-called conservatives in Congress in the Patient Access to
Responsible Care Act (PARCA), H.R. 1415.
The two actions are not unrelated. Both medicine and
insurance were compromised long ago by the practice of assigning
benefits to "providers" and by broad expansions of coverage to
routine, low-cost goods and services. Thus, doctors became the
servants of third parties rather than patients, and insurance
was transformed into third-party prepayment for consumption
rather than a voluntary mechanism for sharing catastrophic risk
and protecting financial assets.
The consequences were predictable, and were indeed predicted
by AAPS and many others. The most obvious effect, the one that
is driving the proposed remedies, is the cost spiral. Payment is
no longer made for the value of a physician's service to the
patient-customer but for the submission of paper to a remote,
disinterested third-party payer. It is much easier to produce
claims than to provide worthwhile medical services. Moreover,
patients are more likely to demand services that are "covered";
they may even urge physicians to shade the truth so as to obtain
insurance reimbursement. Therefore, much paper is submitted for
excessive, over-priced, marginal, misrepresented, or even
altogether fictitious service. And how is the third party to
tell the difference?
Attempting to shield themselves from rapidly rising costs,
third parties use a variety of mechanisms: audits, managed-care
arrangements, and increasingly punitive fraud statutes. Some of
the same methods can be and are being used to increase profits
for third parties at the expense of patients and physicians,
often in a highly offensive and abusive fashion. This has led to
cries for government micromanagement, at first targeted at
specific atrocities such as drive-through deliveries and
mastectomies, and now at the entire insurance market.
Practicing physicians have greeted the "Documentation
Guidelines for Evaluation and Management Services" (available at
http://www.hcfa.gov) with outrage (see p. 4). One member
said that doctors would be inclined to provide only minimal
services rather than risk stepping on a land mine while trying
to collect payment for anything complex. The guidelines comprise
about 379 kilobytes (some 60 pages), with Chinese menus for
documenting the examination of each body system.
While the AMA talks of revisions and an "extensive
educational program" (memo dated 1/26/98), AAPS counsel Andrew
Schlafly is developing a litigation strategy. He states: "This
rash appeasement of payers' wants has made a mockery of medical
standards. The interests of the patients and the efforts of
physicians to defend those interests are being trampled upon."
Schlafly argues that the guidelines violate the
physician-patient relationship, chill free speech, limit the
ability of physicians to uphold the standards of their
profession, and violate the procedural requirements of the
Federal Advisory Committee Act and the Administrative Procedures
"Physicians must remain able to focus on the needs of the
patient, not on whether HCFA might allege `fraud and abuse'
based on supposedly incomplete documentation. A physician cannot
render quality care with a sword of Damocles hanging above. The
proposed guidelines are so stifling that the practice of
medicine is imperiled; they are invalid as arbitrary and
capricious," Schlafly writes.
As physicians' liability for criminal prosecution escalates,
the PARCA would vastly increase the responsibilities of insurers
(and of employers who offer insurance), not just for paying
bills but for assuring actual provision of services (see p. 2).
The outcome could be the destruction of employer-provided
insurance (not necessarily undesirable in itself) and its
replacement with nationalized medicine for all.
In psychiatry, straitjackets may be appropriate at times, as
shackles sometimes are in law enforcement. Punitive restraints
may be used for persons whose behavior is not constrained by
rationality or morality.
What has happened to the ethical standards of the medical
profession? Have the basic principles been turned upside down
and replaced with a relativistic calculus in which all standards
are necessarily arbitrary? A book widely used in medical
schools, The New Medicine and the Old Ethics by Albert
R. Jonsen, suggests that this is the case: "[T]he ethical
problems posed by the new medicine reflect the omnipresence of
the population that stands behind the [patient-physician]
relationship." Individual patients are but a "statistic of one"
who can (and should) be sacrificed for those forming "an
infinite line at the door of the clinic." The author even
identifies one of the major causes for the change: "federal
payment for medical services has changed medical practice in
major ways." The same could be said for payment by other third
A straitjacket is never curative. It is likely by itself to
make the patient even more insane. The cause of the illness must
be identified; if an intoxicating, addictive drug is a cause,
then withdrawing the poison is essential.
If doctors and patients have become addicted to OPM (Other
People's Money), accepting the premises of socialism (which is
legal plunder), withdrawal is the only alternative to an
increasingly oppressive totalitarian regime. The restoration of
the patient-physician relationship-and of the proper role of
insurance-is essential. This probably cannot occur without
changing the federal tax code that strongly favors employer-
provided prepayment schemes.
The Norwood Bill
A respected conservative dentist from Georgia, Charles
Norwood, has gathered more than 200 cosponsors for a bill
intended to combat abuses by managed care (H.R. 1415).
The bill was endorsed by Rep. Fortney ("Pete") Stark (D-CA)
in a proposed amendment to House Joint Resolution 107 (see p.
3), as he called for implementing the work of the President's
Task Force on Health Care Reform-a signal to conservatives that
the bill is not exactly what they think.
Businesses warn that if this bill passes, they may drop all
indemnity plans offered to employees. According to their
reading, they would become responsible for the availability of
all services covered under the plan (such as 24-hour emergency
care), even in sparsely populated areas.
The first two conservatives to withdraw support for the bill,
David McIntosh (R-IN) and Steve Largent (R-OK), stated in a
letter to Congressman Norwood that the bill would force insurers
to operate under unaffordable community rating and guaranteed
issue requirements. Also, the bill would grant new regulatory
authority to HCFA, which would make it easier for the
Administration to enact through regulation a system that was
rejected by Congress. Moreover, the bill would destroy the
federal (ERISA) preemption of costly state mandates, pricing
many out of the insurance market altogether.
From a reading of the bill's actual language, AAPS is unable
to see how any health insurer could avoid becoming a provider of
services and hence a managed-care organization. Section 2771,
"Enrollee Access to Care" states: "A health insurance issuer
shall establish and maintain adequate arrangements...with a
sufficient number, mix, and distribution of health professionals
and providers to assure that covered items and services are
available and accessible to each enrollee under health insurance
coverage...." Additionally, the required "quality improvement
program" would necessarily involve comprehensive data collection
about all enrollees.
Employee benefits have a number of inherent drawbacks (Craig
Cantoni, Wall St J 8/18/97). They create a
paternalistic relationship and give the employer reason to
intrude on the most personal aspects of an employee's life. With
40% of total compensation being in the form of benefits, it is
difficult for employees to place a true market value on their
compensation or to walk away from a job they don't like. Also,
managers have difficulty linking pay directly to performance
when such a large percentage of payment is seen as an
The Norwood bill would only exacerbate these difficulties.
And instead of spurring true reform (such as tax equity and a
resulting move toward individually owned insurance), it would
probably accelerate movement toward compulsory government
medicine for all.
The midpoint estimate of costs projected by Milliman and
Robertson is a 23% increase in insurance premiums for all plans;
the increase would be 39% under the most pessimistic assumptions
(John Goodman, Wall St J 12/5/97). Some say this is an
exaggeration. However, the impact of regulation is more commonly
underestimated. The portability provision of the Kassebaum-
Kennedy legislation was predicted to raise insurance rates by
only 2 to 3%. According to the GAO, the increases by five
different carriers ranged between 29 and 125%. Moreover, these
were standard rates that applied to generally healthy
individuals; carriers might charge higher rates to unhealthy
individuals. The premium hikes will only get worse as healthy
people flee (Wash Times 12/8/97).
Action Plan for the Month
Write and call your Congressman and ask him
to oppose H.R. 1415 ("PARCA"). Let your patients know that their
insurance costs will increase, and encourage them to write and
call also. The answer to managed-care abuses is to change the
tax laws that favor employer- provided managed care and
discriminate against other methods of paying for medical care.
Ask these conservative Congressmen why they are sponsoring a
ClintonCare equivalent: Crapo (ID), Salmon (AZ), Cubin (WY),
Chenoweth (ID), Rohrabacher (CA), Cannon (UT), Barr (GA), Coburn
(OK), Hilleary (TN), Pickering (MS), Shadegg (AZ), and
Nagging will help and is needed, especially as a
Harry-and-Louise ad campaign is launched.
The Capitol Hill switchboard is (202)224-3121.
New Medicare User Fees Proposed
HCFA Administrator Nancy-Ann DeParle stated
that HCFA is an insurer and must recover some of its costs
through user fees (also see p. S1). "There should be some cost
of doing business with Medicare," she said, presumably with a
- Proposed fees that would impact most
physicians include: a $1 fee for any Medicare claim that is
not submitted electronically;
- an assessment for duplicate or
- fees for an initial registration in
the Medicare program and physician recertification every
five years. See: BNA's Health Care Policy Report
How to Reduce Insurance Fraud
Evidence from a Fortune 500 company that
wishes to remain anonymous shows that millions of dollars can be
saved by limiting the use of benefit assignments.
"There is an overabundance of evidence correlating fraud and
abuse with assignments....We see this most frequently in the
areas of chiropractice, physical therapy, mental health, etc.
When we spot what we strongly believe to be billing fraud, one
tool available to us is to prospectively disallow assignments to
the provider. (Our plan document permits us to accept or reject
assignments at our discretion.)
"When we notify a given provider that we will no longer
accept assignments, the claim abuse stops on the spot. This
particular class of abuse exists because the patient is told
that he will not be balance billed and will have the deductible
or copayment waived.
"In the last 5 or 6 years, since we have used this approach,
our plan has saved millions of dollars. Moreover, we have
managed to do so with virtually no disruption in patient care."
May 30. Board of Directors meeting, Dallas,
Oct. 9-11. 55th Annual Meeting, Raleigh, NC
House Joint Resolution 107, expressing the
sense of the Congress that "the award of attorneys' fees, costs,
and sanctions of $285,864.78 ordered by the United States
District Judge Royce C. Lamberth on December 18, 1997, should
not be paid with taxpayer funds," was passed on a vote of 273 to
126 in the House. The Resolution is non-binding.
Taxpayers have, of course, already paid more than an million
dollars defending the actions of the Task Force and will pay
more if the judgment is appealed.
Opting Out of Medicare
Misinformation from HCFA Corrected: A number of
physicians have written about carrier statements that decisions
to opt out would have to be made by February 2. In a Feb 2
letter to AAPS Director Lawrence Huntoon, M.D., Kimberly A.
Neville, Support Specialist, Program Education and Training,
Upstate Medicare Division, 33 Lewis Rd, PO Box 5200,
Binghampton, NY 13902-5200, tel. (607)766-6000 writes:
"I would like to apologize for giving you inaccurate
information. You are correct by saying that for a non-
participating provider, such as yourself, you only need to
make sure you submit the affidavit to the Medicare carrier
within 10 days of the date the first private contract is signed
by a Medicare beneficiary. Only participating providers
need to terminate their participation agreement with the
Medicare carrier by February 2, 1998, so that they can opt out
of the Medicare program."
Sample Affidavit. Here is the text of an affidavit
submitted by an AAPS physician in January, 1998, after
consulting the AAPS Limited Legal Consultation Service (LLCS):
"I, ...., declare under penalty of perjury that the following
is true and correct to the best of my knowledge, information,
"1. I am a physician licensed to practice medicine in the
state of .... My Medicare provider information number is ....
"2. I have entered or intend to enter into a contract for the
provision of medical services with a Medicare Beneficiary
(`Patient') pursuant to Section 4507 of the Balanced Budget Act
"3. I hereby confirm that I will not submit a claim to
Medicare for any Medicare Part B item or service provided to any
Medicare Beneficiary for a period of two years beginning on the
date that this affidavit is signed.
"4. I hereby confirm that I will not accept receipt of any
reimbursement for any Medicare Part B item or service directly
or on a capitated basis, nor will I accept receipt of
reimbursement for any Medicare Part B item or service rendered
from an organization which receives reimbursement under Medicare
for such item or service, for a period of two years beginning on
the date this affidavit is signed.
"5. A copy of this affidavit is being filed with [name of
Medicare carrier], the designated agent of the Secretary of the
Department of Health and Human Services, no later than 10 days
after the first contract to which this affidavit applies is
entered into."Executed on: [date] Signature ......
Many physicians have been calling the LLCS about this matter;
some are reluctant to file an affidavit, fearing government
reprisals. There are numerous areas in the law that are
ambiguous; please call for an LLCS consult if you have questions
concerning your personal situation.
Some Data Not Really Required
When Traveler's Insurance Company demanded
a copy of Dr. Huntoon's IRS form Schedule C, he balked.
"The Schedule C has things like gross income, and all of the
itemized expenses. Just imagine what an insurance company could
do with that kind of information...sell it to other insurance
companies to use as a bargaining chip in various negotiations,
etc. I, of course, called the number at the bottom of their form
and talked to the person who answered."
The form was to be used to facilitate an audit to be sure the
office isn't hiding any paid employees and failing to pay the
state-mandated worker's comp premium. However, Dr. Huntoon
explained that all of the pertinent information from Schedule C
is also on the quarterly 941 reports, so there is no need for
the Schedule C unless it is to be used for nefarious purposes.
Eventually, a supervisor was called to the line.
"The supervisor admitted that they didn't really need my
Schedule C information for their worker's comp audit-i.e. they
just thought it might be nice to see if they could get this
information simply by requesting it on the form. And,
apparently, they've had some success with this `ask and see what
you can get' approach, because I was told that I was the only
one who had called in so far to say NO!"
Dr. Huntoon is thinking of patenting his low-tech cerebral
aneurysm stress test, which requires only a worker's comp audit
form and a willing insurance combatant probing for private
information to which she has no right.
Consequences of a Data Deficit
In 1963, Milton Friedman asked John
Cowperthwaite, financial secretary to Hong Kong and disciple of
Adam Smith, about the paucity of statistics. He replied: "If
I let them compute those statistics, they'll want to use them
for planning." Nevertheless, there were some statistics.
Friedman computed that per capita income of Hong Kong was 28% of
that in Great Britain in 1960 and 137% of that in Britain by
1996, despite the overcrowded conditions and lack of any
resources except for a great harbor (Natl Rev
Reminder of a Government Promise
New plastic cards with Sections 1801, 1802,
and 1803 of the statute creating Medicare are enclosed. We
regret the error present on the cards distributed previously. To
request additional copies, call (800)635-1196.
State of the Regulatory State
The annual report on the burden of federal
rules and regulations produced by the Competitive Enterprise
Institute (CEI), called "10,000 Commandments," notes that during
Clinton's first five years, pages in the Federal Register ran to
more than 60,000 annually (IBD 2/3/98), a 20% increase.
The 104th Congress passed more than 75 criminal statutes, and
the 105th more than 20, each increasing the power of federal
prosecutors (Wall St J 5/16/97). As to the prosecutors
themselves, the Clinton DOJ has asserted that under the doctrine
of sovereign immunity, the US government could not be forced to
pay money even when it flagrantly violates a court order. Is it
only a matter of "policy and comity" for the Executive Branch to
abide by the law (Wall St J 3/12/97)?
Bonnie and Clyde with a Badge.
According to James Bovard (Wall St J 12/29/97), in many
cases of asset forfeiture "innocence is irrelevant." This is
progress beyond the KGB policy of "show me the man, and I'll
show you his crime," to "show me the man's money and property
and I shall take it." This reminds me of bands of thieves that
currently roam Nigeria. So large and powerful are they that they
actually write to prospective victims, informing the victims
that they will be at their house at a particular time and that
the victims should have the loot ready to go.
According to Chief Justice Rehnquist, quoted in the same
article, "The government may not be required to compensate an
owner for property which it has already lawfully acquired under
the exercise of governmental authority." Bovard believes that
Rehnquist has granted government "unlimited power to steal." The
power is especially likely to be exercised against persons who
show their distrust for government by not filling out forms
declaring that they are taking more than $10,000 out of the
country. "Reform" legislation, originally intended by Rep. Henry
Hyde (R-IL) to correct some of the worst abuses, was ultimately
written by the Dept. of Justice. "This is like letting burglars
write the laws on breaking and entering," observed Bovard. The
DOJ does not restrict itself to breaking and entering....and it
also is not eager to pursue perjury charges against friends of
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY
A Deep Pocket. From a letter to
Anthem/Blue Cross Blue Shield/Accordia: Can you please explain
to me why I am paying twice as much for family insurance here in
Kentucky as I was in central New York, receive less coverage,
and at the same time am expected, as a participating provider,
to accept below-Medicare rates for anesthesia services?
Furthermore, can you explain why clean claims go unpaid for
months...? And how can you claim that you must raise your
premium rates for small groups by 50%? The answer seems clear:
Anthem/BC-BS/Accordia must be pocketing 80% of what it should be
paying out in benefits.
Lee A. Balaklaw, M.D., Louisa, KY
Why Continue to Practice? A year
ago, I told all managed care companies to take a hike. I slashed
my overhead, let some of my staff go, closed my office on
Fridays, and continued to live scrupulously within my means.
Three months ago, I stopped accepting new Medicare patients.
I believe I could continue to have a fairly large practice in
the years to come even without managed care and Medicare; I have
perhaps the largest psychiatric practice in the state of
Missouri. However, I will be retiring from this mess in two more
years, throwing away 30 years of invaluable experience. Why
should I continue to practice in the current atmosphere of
bickering, haggling, distrust, unrealistic expectations, threats
of lawsuits, and the like....? Should one be involved in an
ongoing battle with hospitals, nursing homes, managed care
companies, government, patients, and every other agency that one
deals with? To give just one example: I see many patients as an
out-of-network "provider." The insurance companies give the
patients an unbelievable runaround as a way to discourage them
from seeing me....Blue Cross/Blue Shield, from which I resigned
a year ago, has in force many policies that deliberately create
animosity between doctor and patients in the course of routine
K.P.S. Kamath, M.D., Cape Girardeau, MO
Taking a Stand. Doctors could learn
from Sarah Bush Johnston, stepmother of Abraham Lincoln, who
married Thomas Lincoln a year after Nancy Lincoln died.
Nancy complained about the dirt floor in the family cabin,
but she never got a wooden floor. When Sarah arrived with a
wagon load of furniture, she said she couldn't possibly put her
nice furniture on a dirt floor and headed back home, promising
to return when the wooden floor was in. It was finished by
nightfall. Sarah was polite and nonbelligerant, but firm. She
addressed the issue immediately and left personalities out of
it. The decision was up to Thomas, but Sarah used what leverage
she had-the withholding of her presence. It's a workable formula
for getting action.
Gordon Meyerhoff, M.D., Roslyn Heights, NY
Medicare E&M Guidelines. This
publication is a masterpiece of bureaucratic idiocy. The service
being paid for is nothing but paperwork determined by word
count. Created is a massive bureaucratic jobs program for
non-medical readers who will determine what the doctor's notes
are worth. This busywork builds nothing, produces, grows
nothing, saves nothing, creates nothing, and cures nothing.
Wanted is one massive note covering everything, repeated over
and over. An experienced practitioner can do 500 things mentally
in a minute, but these technocrat sinecures do not care unless
it is written down. With the micro-brain mega-tongue bulletin,
we doctors need a court reporter with us to keep chart records
whenever we make rounds if we are really going to tell the
Medicare police what we do. This is the final touch to the
logorrhea of rules imposed by HCFA. It creates an administrative
kangaroo court ready to penalize anyone they arbitrarily decide
to target for reasons known only by Medicare. Guilt is automatic
because no one can do what these guidelines demand.
Samuel A. Nigro, M.D., Beachwood, OH
The Clinton Budget
Since the State of the Union show, the Clinton Administration
has outlined its budget and spending priorities. Clinton is
proposing a budget of $1.73 trillion and projecting a "surplus"
of $9.5 billion in Fiscal Year 1999.
In outlining spending programs, Clinton has described his
spending priorities as "investments," for example, $1.1 billion
in biomedical research work, largely for the National Institutes
of Health (NIH), with an emphasis on cancer research, and $15
million for HHS to improve the "quality and cost effectiveness"
of the health care system. The Agency for Health Care Policy and
Research would get $30 million to study outcomes and quality.
While the results would be applied first to Medicare and
Medicaid, it is expected that a bipartisan coalition will
attempt to move legislation this year to impose government
"quality" standards on the private insurance industry.
The Health Care Financing Administration (HCFA) would, under
the President's budget proposal, be given an opportunity to levy
$800 million in new "user fees" on doctors, hospitals,
and other "providers" to offset the costs of the agency's
"program management" budget. According to the Bureau of National
Affairs, $395 million would be used to cover the cost of "audit"
functions, enabling it to double the number of audits in the
campaign against the program's awesome fraud and abuse problems.
About $150 million would be earmarked to pay for HCFA's
dissemination of information on the Clinton- Congressional
"Medicare Choice Plans", the largely managed care "options"-with
federally dictated benefits packages.
The other major health care initiative is the proposal to
expand coverage for early retirees, or the near elderly.
A Bigger Medicare Program
Medicare expansion for early retirees would allow Americans
aged 55 to 64 to buy into the financially troubled Medicare
program; it will be there for them as a "guaranteed" option
outside of employer-based health insurance-if they can afford
it. They will pay a fixed (naturally) price of up to $400 per
month. The Clinton Administration says that these premiums will
fully pay for the expansion and that 300,000 people will be able
to take advantage of this offer.
Hand it to the President. He knows how to play Medicare
politics. Only certifiable Meanies, with little or no compassion
for the victims of employer- based health insurance
arrangements, could stand in the sway of this generous and yet
fiscally reasonable proposition. Congressional naysayers will be
painted once again into the corner of opposing help for a class
of citizens who Worked Hard and Played by the Rules. Have you
heard that line before?
A closer analysis of this proposal, though, should even give
the liberals some pause. It won't, but it should.
First, the vaunted Budget Deal does not even begin to solve
the deepening fiscal problems of Medicare. Everybody who is a
grownup in Washington knows this, and that is why the Balanced
Budget Act (BBA) calls for the creation of a Commission to set
forth the long-term reform options for the Medicare program.
That is also why Senator Bill Roth (R-DE), Chairman of the
Senate Finance Committee, has said that we should not be in the
business of expanding Medicare until the Commission presents its
report next year.
The Congressional Budget Office (CBO), after passage of the
BBA Act of 1997, did a series of projections on what is indeed
in store for the American people if matters are not attended to
with a degree of discipline that is highly foreign to Congress
and the Administration. This is not an easy job. Medicare is a
program that the public likes but does not understand, which
thrives not only because of its political popularity in Congress
but also because of its elaborate system of cost shifting.
Ignoring the systematic cost shifting for a moment, what is the
projected cost and tax burden going to look like?
In the short run, we are going to see a respite because the
number of beneficiaries entering into the Medicare program right
now is at a low. The Baby Bust generation, born during the
Depression and the War Years of the 1940s, is not piling up a
huge demand for services. Indeed, the CBO says that we are at an
historically low period of growth in Medicare beneficiaries. But
that changes in 12 short years. Then, the Boomers, the Sixties
Kids, will start coming into the system; no, they will cascade
into the Medicare program, creating demands on the Medicare
system and the supply of doctors and hospitals and clinics
unlike anything we have ever seen before. The demand for these
services will accelerate for at least two decades at an
CBO ran some number and presented them to the Senate Aging
Committee. Here goes. Between now and the year 2015, the
number of Medicare beneficiaries will climb from 38 to 53
million. A big jump. But the cost of the Medicare system
will not be proportional; it will be five times what we are
spending today. Indeed, assuming current law, i.e. no
changes in benefits or funding, CBO projects the Medicare
spending to go from $209 billion to $1.1 trillion in 2015. Right
now Medicare per capita spending is at $5500 per beneficiary. By
2015, it is projected to be at $20,000 per beneficiary because
of the acceleration in the volume of Medicare services.
Adding new beneficiaries to the financially troubled program
is an exotic idea. Senator Gramm said it best: When the
proverbial Titanic is sinking, it's best to try to get folks off
the ship, not to go out and buy your momma a ticket.
A second consideration is the impact of such an arrangement
on the broader problem of entitlements. In 1935, when Social
Security was enacted, the age of eligibility was 65, but average
life expectancy was 62. This really was a New Deal. In 1965, the
age of eligibility for Medicare was pegged to Social Security,
in spite of increases in life expectancy. Today, even as Social
Security's age of eligibility is scheduled to move up to 67,
that for Medicare is to stay at 65.
The Clinton proposal would create new incentives for folks to
retire early, even though, as Senator Gramm and others have
noted, there has been a strong consensus that we ought to try to
get people who are living longer to stay in the workforce longer
so that they will pay payroll taxes and contribu- te to the
growth of the national economy. Experienced workers, at their
peak levels of productivity, who can afford to pay $300 to $400
per month for Medicare, will be lost. Corporations will look
at the opportunities available for their older workforce as an
excuse to cut back on employer- provided health insurance. In
recent years, corporations have been desperate to unload the
health costs of their older workers and retirees onto the
Although the President says that his program is fully funded
today, will it remain so? Will not the sickest folks be the ones
most likely to take advantage of early Medicare? Isn't this
adverse selection against taxpayers? Will not costs then go up
disproportionately? William F. Bluhm, vice president of the
American Association of Actuaries, says that even modest
adverse selection could undermine the plan (Robert Pear,
NY Times 1/20/98).
This brings us to the third point. Expanding an entitlement
program will mean an expansion of entitlements. Once you have
a new clientele in the government program, then they will use
their influence to lobby for an expansion of their benefits.
Few folks on the government benefits program actively write
Members of Congress of their desire to have their benefits
reduced. Rather, the argument will be that paying the full cost
of the program will be a burden on these folks; they should get
help; and the help will come from the taxpayers in the form of
either reduced premiums or new subsidies. So the dynamics of
such a proposal will lead to another cost shift onto the
taxpayers. At the end of the day, the taxpayers are always the
But you've got to give it to the White House: they know how
to frame the issue.
As for the Congressional Republicans, when it comes to health
policy, their track record has been to set up more and more
federal mandates. And they have a bunch in the wings-ready for
enactment in 1998.
They could change course. Do a reversal. And in the process,
change the terms of the national health care debate and throw
the White House on the defensive for once.
As with children of working parents, the problem of lack of
insurance in this class of Americans is real, but it is hardly a
crisis. According to Senator Phil Gramm (R-TX), the number of
uninsured among this group is not huge-it's about 14%, not much
different than the national average. Why not allow Americans
to pick and choose the health insurance they want, outside the
workplace, with the same tax advantages now available for
Some suggest that a tax credit, even a refundable tax credit
tied to income or health condition, to purchase private plans
outside of employer- based insurance would largely solve the
whole problem. But it's obviously too simple-or too unlikely to
expand the bureaucracy.
The Medicare Commission
The best news to come out in the past few weeks is the
appointment of Senator John Breaux (D-LA) as chairman of
the bipartisan Medicare Commission. The Commission, under the
terms of the BBA of 1997, is supposed to make its
recommendations on Medicare reform to Congress and the
Administration in 1999.
Breaux has demonstrated, both in Senate hearings on the
topic and his public appearances, that he understands what is
wrong with the current system: reliance on price controls and
central planning. Count on him to be an opponent of the
status quo and HCFA's micromanagement of the financing and
delivery of medical services to the elderly. Another possible
bright spot is the appointment of Bobby Jindal of
Louisiana as Executive Director for the Commission. Jindal will
report to Breaux and Congressman Bill Thomas (R- CA). He's a
young man, a Rhodes Scholar, with an impressive track record of
cleaning up a large part of the Medicaid mess in Louisiana,
turning a $400 million deficit into a $170 million surplus (see
Wall St J 1/30/98). He's a Republican health care
policy wonk-normally a contradiction in terms. Jindal also
previously worked for Congressman Jim McCrery (R-LA), who serves
on the House Ways and Means Committee. McCrery knows something
about what's wrong with the current Medicare system as well as
the thing the corporate types call the employer-based insurance
"market" (sic.). Hopefully, Jindal is cut from the same
mold. In any case, conservatives in Congress, who've had little
to cheer about in the past three years on health care policy,
are hoping for the best.
The Commission has a big job ahead of it and a lot of stuff
to be undone. Expect them to be pressured by the standard cast
of characters who have made a living from Medicare and
Medi-Scare politics over the past three decades. Imaginative
thinking is called for; if the Commission should fail, and
failure here is easy, then we all pay a big price. Medicare
"politics-as- usual" garbage-so universally popular with the
demagogues in Congress and the professional lobbyists who made a
career out of misrepresenting senior citizens on crucial issues
like Medicare Catastrophic coverage, private contracting in
Medicare, and the Clinton Health Plan-won't cut it. If Congress
does not seriously restructure the program, promote real
consumer choice and competition-not phony managed competition
based on a heavy doses of government micromanagement-and
introduce market incentives into the Medicare system, then the
options will be very limited.
Think of the politics: the effect on the "social safety net"
of a generation that has become dependent on Medicare; the
"social contract" with the Boomers who have been paying into
Medicare through their payroll taxes lo these many years; the
working families who could be targeted by tax increases large
enough to trigger a tax revolt unlike anything we've ever seen.
As for increasing premiums on retired beneficiaries, in 1997
Congress could not even impose a $5 dollar deductible on home
health care services, the fastest growing component of the
Again, without radical changes in thinking, the Commission's
job is hopeless.
More Bureaucratic Illegalities
Please note that the General Accounting Office, the
investigatory arm of the Congress, has recently ruled that the
Technical Advisory Committee (TAC), which makes
recommendations to HCFA on medical technology coverage
questions, has been operating illegally. GAO notes that
these coverage discussions, much like Hillary's task force, have
involved private citizens (selected medical directors of
Medicare carriers, which are private entities) and not just
federal employees, and therefore should have been open to the
public under the Federal Advisory Committee Act (FACA). Sound
The medical technology industry has long criticized HCFA's
closed-door coverage and reimbursement-setting policy. A review
of TAC was requested by Rep. Bill Thomas (R-CA). HCFA
acknowledged that the TAC was probably not in compliance with
the law and will temporarily exclude private-sector members
until the committee can be reconstituted to conform with FACA.
HCFA's rapid decision to comply was probably heavily
influenced by sanctions recently imposed by Judge Lamberth in
the case of AAPS v. Clinton (M-D-D-I Reports,
The Gray Sheet, 1/26/98).