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“The only thing necessary for these diseases to the triumph is for good people and governments to do nothing.”



Volume 54, No. 3 March 1998

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 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 Act.

"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 parties.

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 entitlement.

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 Scarborough (FL).

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 straight face.

  • 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 "unprocessable" claims;
  • fees for an initial registration in the Medicare program and physician recertification every five years. See: BNA's Health Care Policy Report 2/9/98.

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."

AAPS Calendar

May 30. Board of Directors meeting, Dallas, TX
Oct. 9-11. 55th Annual Meeting, Raleigh, NC

Taxpayers Shouldn't Have to Pay

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, and belief:

"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 of 1997.

"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 12/31/97).

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)?

Members' Page

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 the Administration.
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 medical care.
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

Legislative Alert

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 unprecedented pace.

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 government.


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 suckers.

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 employment-based insurance?

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 Medicare system.

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 familiar?

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).