Volume 68, no. 8 August 2012
Most Americans believe that physicians “swore an oath” to do them no harm. If the physician is younger than about 60, this is probably not true. He may have sworn to “a Hippocratic oath,” but almost certainly not to the Oath of Hippocrates. Most of these do not contain the word “harm,” and most state or imply that the physician has a duty to an entity higher than the patient—society or the state (http://tinyurl.com/9ks4sc4, http://tinyurl.com/8eryvyv, http://tinyurl.com/8j2elpo).
If he is a member of the AMA, the physician has agreed to the AMA Code of Ethics. The AMA considers the Oath to be “outdated” (AAPS News, April 2012).
If he is in a managed-care network, he has almost certainly signed a contract with an Enrollee Hold Harmless Clause. The EHHC cannot be voided, superseded, or abrogated. Its purpose is to protect the insurer from harm. Its effect is to give the managed-care industry complete control over the practice of medicine, and to destroy two of three paths to access to care (AAPS News, July 2012): cash (direct payment) and catastrophic insurance.
Newspeak
When trying to understand the issues, remember that we live in an Orwellian world of Newspeak and doublethink. Red stands for conservative instead of radical (Mark Helprin, “The Hunt for Blue October,” WSJ 7/20/12, http://tinyurl.com/9fmwdh5). “Insured” means covered, which means captured. “Free market” is often taken to mean managed (controlled, unfree) care. “Not for profit” means not show a profit. “Ensuring access” means erecting barriers. A “right” coming from government is really a privilege that can be withheld by government. And most “health insurance” is definitely not insurance.
Third-Party Payment versus Insurance
The difference between true casualty insurance and health plans is obvious from looking at advertisements. Allstate has a “mayhem” series, showing, for example, a town devastated by a tornado and asking “Are you in good hands?” Health “insurance” ads, on the other hand, feature smiling, healthy people—not cancer patients. Your plan is there for you—when you don’t need it.
With casualty insurance, your premium is based on actuarial risk. The insurer is contractually obligated to pay for events that occur while the policy is in force, and is required by law to accumulate the reserves to do so. It has to pay even if you stop paying premiums while your roof is being repaired. If you switch policies, the new one is not required to pay for pre-existing damage.
With a health plan, the insurer’s obligation is open-ended; it promises to pay for all “necessary and appropriate” care. With guaranteed issue and community rating, it can’t price for or exclude pre-existing conditions, and with the new rules on the medical loss ratio, it will be more difficult to accumulate reserves. Thus, health plans are more like a “pay-go” system than a plan of saving for a rainy day.
Solvency Means the Ability to Say No
The payout on car insurance is limited by the total value of your car, and the maximum liability coverage. One illness can cost much more than a car, and with ObamaCare no lifetime coverage limits are allowed. So how can health plans stay solvent?
The key is the EHCC, which state law requires in provider contracts. This keeps providers from accepting payment from anyone for “covered” care that is denied on the grounds that it is unnecessary or inappropriate. Although the plan cannot practice medicine, and thus cannot define “necessary,” contracted providers will almost always agree with the plan’s determination. To do otherwise means that they cannot be paid for the service—and worse, risk expulsion by the plan or by their hospital.
Unless the patient can find a noncontracted physician willing to perform the service, it will not be available. Once a plan functionary decided that “given Sandy’s age and her condition, the cost of the care being prescribed can’t be justified,” no one would provide the care—despite her husband’s offer to pay—and Mrs. Lobb died. As Frank Lobb explains in his book The Great Health Care Fraud (see fall issue of J Amer Phys Surg), self-payment threatens the plan’s solvency. If the care is provided by a physician whose license requires him to render only care that is appropriate, that is evidence that the plan violated its promise to provide all necessary and appropriate care. Subscribers might then have grounds to sue the plan for reimbursement.
The Death Panel Equivalent in ObamaCare and Medicare
Government rationing means that you can’t legally buy more than your permitted share. When single-payer advocates say that we ration now, they are largely correct if there is a provider contract with managed care, even if they don’t explain why. Medicare Part B recipients can’t pay Medicare providers outside the system. With Medicare Advantage their Medicare benefit is turned over to the plan. Few notice the restrictions now—but the squeeze from exploding enrollment and tightened budgets will change that.
Will the Ryan Medicare reform simply funnel “premium support” directly into the coffers of plans with EHHCs?
Insurance is supposed to protect people from bankruptcy. But health plans protect themselves from bankruptcy by seizing control and turning captive doctors into death panels.
How Much Will the ObamaTax Cost?
To calculate the premiums, tax/penalties, and subsidies to help Americans make an economic choice, Sean Parnell of Impact Policy Management is working on a spreadsheet. So far, he has found no situation at incomes between 200% and 1,000% of the federal poverty level in which one would pay less for ObamaTax-qualified insurance than for the tax. John C. Parker, however, points out that there are too many unknowns at this time to project specifics. “HHS says guidelines are coming—who knows when.” The Essential Benefits aren’t even defined yet.
Parker notes that employees will lose the tax exclusion for benefits purchased through an Exchange. The federal government will send the subsidy to the insurer, which will send a bill to the subscriber, who will have to pay his share with after-tax dollars. Workers will lose all connection to employer programs such as Section 125 plans that would allow them to pay through payroll on a before-tax basis.
Congressional Budget Office estimates of cost to government depend on the assumption that millions of Americans will sign up for government-endorsed health plans even though they’d be better off paying the penalty and signing up when they have a medical need (http://tinyurl.com/9avqsna), writes James Capretta.
A key cost-saving mechanism, the accountable care organization (ACO), is supposed to give participants a chance to benefit. The ACO, however, bears all the administrative cost or potential loss, and must “share” any savings with CMS. Michael Riesberg, M.D., of Pensacola, FL, calls the binding, non-negotiable ACO contract a “3-year trap.”
More than 2,000 hospitals have already incurred $280 million in ObamaCare penalties for readmissions of patients with heart failure, myocardial infarction, or pneumonia. “It is not completely understood what goes into an institution having a high readmission rate and what goes into improving it,” said Dr. Kenneth Sands of Beth Israel in Boston. One factor is caring for the poor. And Beth Israel, like several other heavily penalized hospitals, has unusually low mortality rates (http://tinyurl.com/c4weqf2).
As Stanley Feld, M.D., points out, “If a patient died in the hospital, the overall readmission rate would fall.”
Where the Money Is
The shock and horror that Democrats feigned over the issue of death panels in ObamaCare was just a smokescreen., writes Gary North (http://tinyurl.com/73rj9jq). In an article entitled “The Case for Killing Granny” in Newsweek, Prof. Evan Thomas of Princeton writes: “A significant portion of the savings will have to come from the money we spend on seniors at the end of life.”
The system most admired by ObamaCare architects was celebrated at the London Olympics by dancing nurses, as patients lay dying from neglect (http://tinyurl.com/92v8kel).
George Orwell, “Charles Dickens” in Shooting an Elephant
A NICE Death
Recommended by the National Institute for Health and Clinical Excellence (NICE) and enjoying “overwhelming support” from clinicians, including the Royal College of Physicians, the Liverpool Care Pathway [LCP to certain death within an average of 33 hours] is used in about 29% of patients who die in British hospitals (MailOnline 6/19/12, http://tinyurl.com/d84valn). Once on the LCP, patients are heavily sedated and denied hydration and nutrition. One 71-year-old patient, who was removed from the LCP by his private physician on request of his family, lived 14 months. Some 130,000 patients each year have their lives ended by the NHS in this way.
Other causes of death in NHS hospitals: 95,000 accidental deaths, twice as many as in the U.S., which has six times the population; 1,200 deaths recently in Staffordshire alone from hospital-borne resistant S. aureus (http://tinyurl.com/4nxfe5f); 800 per year from dehydration and 300 from malnutrition, owing to simple neglect (http://tinyurl.com/3dyw24v). One woman in Westcliff-by-the-Sea was told she couldn’t keep her doctor because of the travel distance and carbon-footprint considerations (Canada Free Press, 4/12/12, http://tinyurl.com/cbuo5ym).
Arguments against State Exchanges
Only about 13 states have so far created an ObamaCare Exchange. Those who do not may have an advantage in attracting jobs. Employer tax penalties are attached to workers receiving a subsidy in a state-created Exchange. An IRS rule attempting to funnel subsidies through federal exchanges explicitly violates the Affordable Care Act (ACA). The provision was deliberate, as subsidies are one incentive to set up the Exchange, notes Jonathan Adler of Case Western Reserve Univ. Without subsidies from a state Exchange, more individuals will also be exempt from the tax penalty, and might be able to keep their lower cost, non-Obama-compliant high-deductible plan with health savings accounts.
Note that the federal subsidies do not go to the state treasury for roads, education, or other needs, but only for initial set-up of the Exchange bureaucracy. Likewise, they do not go to individuals, but only to compliant health plans, giving them a tremendous advantage over consumer-directed plans. This is the likely reason why governors and legislators are under intense pressure from the insurance lobby to set up the Exchange.
Data Held for Ransom
A practice in Illinois can’t get to its patient records. A hacker burrowed into the server, encrypted the data, and is demanding payment for the password (http://tinyurl.com/buuvbdb).
AAPS Calendar
Oct 4-6. 69th annual meeting, San Diego, CA.
ACTION OF THE MONTH
Do you have any provider contracts? Read them, looking for the Enrollee Hold Harmless Clause. Have you agreed not to divulge contractual provisions to patients?
Insurance Law and Managed Care
Third-party payment was created by BlueCross in the 1930s to protect hospitals’ financial situation during the Great Depression, writes Greg Scandlen (http://tinyurl.com/blh74uf). For many years, BlueCross (and later BlueShield) insisted that it was not “insurance” but “prepaid hospital (or medical service) organizations.” They were organized, not under state insurance laws, but under special enabling legislation that provided them with tax-exempt status and immunity from many of the regulations that apply to insurance companies, such as insurance reserve requirements. Their boards of directors were controlled by hospital members. This would have been an antitrust violation, had it not fallen under the “state action” doctrine.
“BlueCross strictly avoided insurance terminology, calling its customers ‘subscribers,’ rather than insureds, who paid ‘subscription fees’ rather than premiums and received ‘service benefits,’ rather than a payment upon a loss,” Scandlen explains. And because its purpose was to protect the hospital, it paid the hospital for services, rather than its subscribers.
Because of its many regulatory advantages, BlueCross quickly dominated the market for hospital financing, so other insurers learned how to replicate its third-party payment model.
And what is a health maintenance organization (HMO), since it arranges for the provision of services? In the 1980s, a number of unsettling HMO bankruptcies occurred, writes Frank Lobb. In the largest of these, the Maxicare HMO was granted protection under Chapter 11 of the Federal Bankruptcy Code, although the Code specifically excludes “domestic insurance companies” from this protection. The court ruled that, because of features distinguishing it from an indemnity insurer, the HMO was not a domestic insurance company. This ruling threatened to move HMOs and possibly all managed-care organizations (MCOs) out from under the control of the states’ authority to regulate insurance.
MCOs wanted it both ways. They wanted not to be insurers for bankruptcy protection, but they did want to be viewed as insurers in all matters related to medical liability.
The solution to the federal/state turf war was the Enrollee Hold Harmless Clause (EHHC), devised by the National Association of Insurance Commissioners (NAIC), which eliminated any justification for federal bankruptcy proceedings.
In Pennsylvania and probably other states, Lobb notes, regulations specifically reduce reserve requirements for MCOs. Everything covered by the EHHC is excluded from liabilities.
Lobb suggests that hospitals and insurers be viewed as single entities because of the operational control held by insurers.
The IRS and the ACA
The IRS will be the face of U.S. national heathcare, writes Dan Pilla (Heartland Institute Policy Brief, August 2012, http://tinyurl.com/8anyyo6). The benefits and penalties take the form of tax credits or tax penalties. The IRS will be the enforcer, but will not be the decision-maker on whether a person qualifies, and thus may have no way to work with a taxpayer who claims he does not owe what the IRS is supposed to collect.
The amount due to or owed by the taxpayer depends on factors that are difficult to define or that may change constantly. People are supposed to report “household income” to the Exchanges. Since household income is not reportable under current law, the IRS has no rules for figuring it and no mechanism for collecting the data. Employers do not have this information.
The small business tax credit depends on the number of full-time employee equivalents, and their average annual wages. The IRS does not collect this information currently; thus, unlike total wage payments, it cannot simply be lifted from a form already filed. If the employer allegedly owes a penalty, it is “assessable,” and must be paid before any appeal is possible. Penalties could be as much as $52 billion by 2019, and businesses are subject to the full wrath of the IRS collection machine.
“The IRS can be expected to play an ever-growing role in your life and in the day-to-day affairs of every business in the nation, as the tentacles of the PPACA wrap themselves around the most important and personal aspects of your life.”
ACA Enforcement and Physicians
The ACA has significantly altered the regulatory landscape, imposing new requirements that substantially increase the compliance burden and the risk of becoming an enforcement target, write Mark Olinsky and Laura Hunt (BNA’s HCFR 7/27/12).
The law not only requires reporting and returning any Medicare or Medicaid overpayment within 60 days of identifying it, but establishes a broad and undefined “duty to investigate” and to “make a reasonable inquiry” as to the existence of potential overpayments. CMS proposes a 10-year lookback.
As a likely harbinger of things to come in False Claims Act (FCA) enforcement, GlaxoSmithKline entered the largest health fraud settlement ever—$3 billion for allegedly promoting off-label uses of Paxil, Wellbutrin, and Avandia.
Fraud Suit Filed against Planned Parenthood
A 17-year employee has filed a qui tam suit against Planned Parenthood, alleging that nearly half a million fraudulent claims, worth $28 million, were filed with Medicaid between 2002 and 2009. If whistleblower Sue Thayer prevails, FCA penalties could reach $5.5 billion (http://tinyurl.com/94ke2j5).
The complaint alleges that Planned Parenthood management instituted a mandatory birth control pill distribution program called the “C-Mail program.” After a client had been seen once, sometimes by an unqualified staff person, she was mailed a one-year supply of pills, which were billed to Medicaid. Other allegations include improper use of funds to subsidize abortions. Thayer was fired after she objected to Telemed abortions.
Enforcement of Contraception Mandate Enjoined
In the first successful case so far against the HHS rule requiring employers to pay for abortion, birth control, and sterilization, a U.S. District Court in Colorado enjoined enforcement of the rule against Hercules Industries, an air conditioning company owned by devout Catholics. Other similar cases have been dismissed because plaintiffs have been unable to prove that they would not fall within an exemption for religious organizations. Judge John Kane did not examine constitutional claims because the legislation likely violates the Religious Freedom Restoration Act (Breitbart 7/28/12, http://tinyurl.com/8qh35ht).
Correspondence
Cash Deposits = a Felony. Government has been busy attacking honest, hard-working dairy farmers under the Bank Secrecy Act for depositing cash in the bank. They have been threatened with felony charges for accommodating a teller who said that the bank could avoid paperwork if the amount was below $10,000. The government has seized entire accounts and settled with farmers for half. Those who exercise their First Amendment right to complain may get hammered even more severely (http://tinyurl.com/74rkcde). Meanwhile, government allows money-laundering schemes involving hundreds of millions of dollars, likely related to terrorist organizations, to go on for years (Buffalo News 7/18/12, http://tinyurl.com/cr8avfq).
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY
EPO = HMO = Fraud. An HMO is an insurance-in-name-only product. Patients in HMOs have health cards that authorize them to see a doctor whose job is to deny them medical care (as opposed to cheap “wellness” care). Now that people have this figured out, the big insurance lobby tried to push a bill that assigned HMOs new alphabet letters standing for “exclusive provider organizations”—which provide no out-of-network benefits. Two alert Oklahoma legislators stopped it.
G. Keith Smith, M.D., Oklahoma City, OK, Surgery Center of Oklahoma
No, You Can’t Keep Your Doctor. The greatest tragedy of ObamaCare may be losing prematurely a generation of the most highly trained, skilled physicians in history to a health overhaul that Americans tried so hard to stop. Even without the mass exodus of 360,000 that were thinking of quitting according to an Investor’s Business Daily poll, the Association of American Medical Colleges expects a shortage of about 160,000 physicians by 2025.
Grace-Marie Turner, Galen Institute
Why “Healthcare” Costs So Much. Decades ago we bought medical care. We paid at the time of service for what we needed—no wondering about what was “covered.” Now we buy “healthcare,” which really means we are buying payments. With a “medical loss ratio” of 80%, 20% is lost immediately. Since premiums also finance contraception, wigs for cancer patients, and counseling for drug addicts, more than likely 40% is not paying for medical care. Since so many people are needed for billing and administrative functions, the average practice has an overhead greater than 60%, so that in many cases out of $100 in premium, only $16 or less actually goes to the doctor providing care.
Ralph Weber, C.L.U., Murfreesboro, TN, MediBid.com
Low Fine, by Design. Deloitte estimated that 10% of employers are going to drop health benefits (http://tinyurl.com/ca9c5lc). I think that is a serious underestimate. Faced with a choice of a $2,000 fine or a $14,000 to $16,000 cost for insurance, it doesn’t take calculus to figure out the net benefit of dumping employees into the government system. It looks as though the intention is to expand the government program and destroy the private market.
John Dale Dunn, M.D., J.D., Fort Hood, TX
Bizarre ACA Rules. About 3 million people may be affected by the Supreme Court’s ruling that ACA’s attempt to force states to expand Medicaid is unconstitutional. Say you head a family with a low income. ACA would have forced you onto a second-rate, care-denying program (Medicaid). The Supreme Court may have saved your life. If your state doesn’t raise the income level for Medicaid eligibility, you might be able to get private insurance in an Exchange—but only if your income is at least 100% of poverty ($23,050 for a family of four). There is a new no man’s land donut hole. This might be the only example in which it could be to your advantage to lie to the IRS, claiming that your income is higher than it is. As to getting private insurance outside the Exchange, you probably can’t—the insurers, the brokers, and the market are going away (http://tinyurl.com/busnwz3 ).
John Goodman, Ph.D., National Center for Policy Analysis
CMS Lied to Me. CMS/Medicare told me that form 1490S is for requesting reimbursement. It is not. It is rather a way to get the consumers to snitch on their doctors without knowing that that is what they are doing. The Medicare system is sick. The very second that I turned 65 and collecting Social Security they started collecting payments for Medicare and started dictating whom I could see and what services that I need and the medication that I take (even though they don’t pay a cent for it). This last week I had some pre-cancers burned off, and I am afraid Medicare won’t pay for those. I asked the doctor about things that Medicare won’t pay for. He was very tight-lipped about it and left the room as soon as he could without answering me. Wow, even doctors that give in to Medicare won’t talk about what services they are allowed to offer….. This systemhorrible.
Thomas Leonard, Livermore, CA
ObamaCare Changes Medicine. Americans should be concerned that they are being asked to suffer longer and die earlier to serve the “common good.” They should be angry that their doctors are being transformed from professionals they can trust to cogs they may need to fear as rationing agents for the state.
David McKalip, M.D., St. Petersburg, FL
