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A Voice for Private Physicians Since 1943

AAPS News – Jan 2002

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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 58, No. 1 January 2002


In days when smallpox was a clear and present danger,
Thomas Jefferson wrote: “to secure these Rights [as to Life,
Liberty, and the Pursuit of Happiness], Governments are
instituted among Men, deriving their just Powers from the Consent
of the Governed.”

In 2001, long after smallpox was pronounced extinct, “our
nation has awakened to the realization that the government’s
foremost responsibility is to protect the health, safety, and
well being of its citizens.” Or so declares the preamble to the
Model State Emergency Health Powers Act (MEHPA), which HHS
Secretary Tommy Thompson is urging States to adopt.

Under this Act, the Governor would derive dictatorial power
from declaring a public health emergency, with the consent of no
one. No unalienable rights would be recognized. Liberty and
property rights could be suspended; after 60 days, the State
legislature could terminate the state of emergency, but only by a
two-thirds majority of both chambers.

A public health emergency is whatever the Governor defines
it to be. The only pretext needed is “a disease caused by a
living organism.” The draft states, “An infectious disease may,
or may not, be transmissible from person to person,
animal to person, or insect to person” (emphasis added).

Public health officials, among others, would have broad,
unfettered access to personal health records. Pharmacists and
physicians would be required to report any “unusual” health
patterns, and personal information about patients exhibiting an
“unusual” pattern.

Individuals suspected of harboring an “infectious disease”
could be forced to undergo medical examinations-and physicians
could be forced to provide them, or be liable for a misdemeanor.
Patient refusal of a vaccine or medical treatment as directed by
the Governor would also be a misdemeanor.

Any inconvenient laws or regulations could simply be
suspended, and new laws-and penalties-effected by fiat.

The Governor could commandeer any private facilities or
resources considered necessary, including, but not limited to,
communication devices, carriers, real estate, fuels, food,
clothing, and medical facilities. He could impose price controls
and rationing, and otherwise control the allocation, sale, use,
or transportation of any item as deemed “reasonable and necessary
for emergency response”-specifically including firearms.

The State is supposed to provide “just compensation” to
owners for seized property-unless there is “reasonable cause” to
believe that it “may endanger the public health,” in which case
it may simply be destroyed, with no recourse.

With the whole structure of checks and balances abolished,
there is nothing to stop a Governor from condemning the property
of a political opponent and subjecting him to “quarantine”
[imprisonment] in a pesthouse on an ex parte order. His only
right would be to a hearing within 72 hours- or nearly a week if
the isolation began on Friday afternoon before a three-day
weekend. State officials would have no meaningful accountability
for taking such actions.

Adjectives such as “reasonable,” “significant,” and
“substantial” are in the Act-for the State to define. There is no
requirement for scientifically valid assessments, risk: benefit
analysis, or judicial or even administrative review. And risks
less than 1 in 1 million are already the pretext for intrusive,
costly regulations such as mandatory vaccinations.

These powers should “scare the immune system out of any
American”; though desperate times call for desperate measures,
“ceding this much power to states is too desperate by far”
(Investor’s Business Daily, 12/3/01). “This law treats
American citizens as if they were the enemy,” stated George
Annas, chairman of the Health Law Department at the Boston Univ.
School of Public Health (San Francisco Chronicle,

Since the Act relies exclusively on force and central
planning, it is not surprising that the author, Lawrence O.
Gostin, was a member of the informal single-payer group, as well
as the bioethics group, of the Clinton Task Force on Health Care
Reform. The ideas are not new; September 11 is the occasion for
what AAPS Past President Robert J. Cihak called “political war
profiteering” (WorldNetDaily, 11/29/01).

Dr. Cihak notes that in the State of Washington, public
financing of a sports stadium is an “emergency.”

Many powerful groups, such as the National Governors
Association and the National Association of Attorneys General are
promoting this legislation (see
for a list). The AMA
apparently concurs by silence, although it has opposed mass
smallpox vaccination because of the adverse effects, including a
1 in 1 million risk of death and 1 in 1,000 risk of potentially
serious reactions.

AAPS has posted a detailed analysis of the Act, a one-page
alert suitable for distribution to patients in your office, and a
letter sent to about 500 State, county, and specialty medical
societies, at www.aapsonline.org.
The analysis includes a number of suggestions that States should
consider for improving emergency preparedness.

Helpful laws would protect physicians and others from civil
liability when helping disaster victims, and suspend regulations
that impede public health measures (e.g. mosquito control) but
have no scientifically proven benefit.

To survive bioterrorism or other hazards, the State needs
trained personnel, state-of-the art laboratories and equipment,
stockpiled essential drugs and supplies, and protected utilities
and communications systems. Emergency electrical power would save
lives-potential empowerment of would-be dictators or
stormtroopers is a grave risk.

The destruction of citizens’ freedoms and rights also
imperils their very lives, as 20th century history shows.

Plan B

I have given some thought to Plan B if our lawsuit against
the new “privacy” regulations should fail, and have concluded
that I have already implemented as much of Plan B as possible.

As painful as the withdrawal may be for some, Plan B, as I
see it, involves withdrawing from participation in insurance,
HMOs, and government-run health programs. Except with Medicare,
if you don’t participate with the insurer or HMO, you incur no
obligation to file claims. By providing patients with a superbill
containing all of the necessary information, and allowing
patients to file their own claims, one removes one’s self from
the “electronic transaction code standards.” [Patients are not a
“covered entity.”] As for Medicare, under which physicians are
required by law to file claims-except when seeing Medicare HMO
patients out of network-file paper claims. This also
takes one outside the “electronic transaction code standards.”
After more than ten years of submitting claims to Medicare
electronically, our office returned to submitting paper claims to
Medicare. This costs the Medicare carrier more money, and it
dislikes paper claims intensely. There is no reason, however, to
make life easier for Medicare functionaries as they have made
life as miserable as possible for physicians, with 132,000 pages
of incomprehensible, constantly changing regulations.

As we do all of our own billing, we are not required to have
any privacy agreement with a third-party biller. We do not have
any “business associates”; yes, we even clean the office
ourselves so no privacy agreement with the janitor is needed. We
do not release medical information over the phone. Medical
information is released only with the patient’s written consent.
We have no shared computer network. Our computers are not
connected to the internet or to phone lines in any manner.

In summary, the best “protection” against government
destruction of medical privacy may be to return to the solo “mom
and pop” style practice with superbills, paper Medicare claims,
and as little interaction as possible with insurers and other
outside entities. It will be hard for most physicians to give up
the “guaranteed” direct payment from Medicare, HMOs, and insurers
(which has become increasingly less certain and less
remunerative), but to do otherwise will mean complicity with
government-sponsored destruction of privacy- or noncompliance,
with ruinous fines and possible prison time.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

State Reports

Arizona. The State chapter is sending all current and
lapsed members, as well as 300 randomly chosen Arizona
physicians, a copy of three annual meeting talks: “Medicare
Administration” by Leslie Aronowitz, GAO; “HIPAA Privacy
Regulations” by Vickie Yates Brown; and “Fraud and Abuse Audits”
by Amy Woodhall, with an invitation to join or rejoin AAPS.

Pennsylvania. The State chapter presents Merrill
Matthews explaining Medical Savings Accounts on video or
audiotape. The unedited 35-minute speech is available, along with
a 20-minute tape for physicians, a 13-minute tape for the public,
or a 12-minute video for insurance agents and their clients.
Accompanying handouts include a call to simple actions. Videos
$17.25 to $18, audios $3.45 to $3.95, plus $4.50 S/H. To order,
call Barrie Audio-Video, (215) 723-4469. For more information,
contact Dr. Pendleton, (215) 938-0781.

Medicare in the Rear-View Mirror

In 2000, Medicare patients comprised 67% of my urology
practice. My clinical research in minimally invasive prostate
cancer surgical technique and outcomes was thriving with the
steady infusion of men older than 65 and their cancerous prostate
glands. On December 31, 2000, I de-participated from Medicare and
sent a nice explanatory letter to my patients. Some of my
Medicare patients were upset with the hassle that they then
experienced from Medicare. My usual 4-to-6 week backlog for new-
patient appointments decreased to one week. Skiing was very good
last winter, so I was happy.

I had de-participated from all commercial insurers two years
earlier and stopped submitting electronic claims for non-Medicare
services. After my office overhead decreased, I lowered charges
for many services, but my income still increased. I started
collecting for elective surgery in advance to avoid being
“stiffed”-this was happening weekly!

On October 1, 2001, I opted out of Medicare entirely. My
office sent out 800 letters to Medicare patients seen in 2000 and
2001. By the first of December, we had transferred records of
about 60 patients to other urologists. While Medicare-eligible
patients comprise about 15% of my practice, the number of new
Medicare-eligible patients has declined sharply. Why not? They
can see other urologists in my community who participate with
Medicare. Those who value my expertise are the ones I want to
care for. My clinics are sufficient but often have openings. My
practice income is adequate, but much reduced. I have free time
to do the things I have longed to do since starting practice 8
years ago.

Most importantly, I am at peace! When I conclude a day in
the office, I have been paid, and no billing duties remain. In
the absence of billing charges and unpaid services, I am doing
well despite a reduced fee schedule. Many of my office charges
are lower than Medicare rates. Imagine the simplicity and purity
of practicing medicine in the absence of CPT and ICD-9 coding
stress or massive accounts receivable!

I believe that the first doctor in a community to go to a
“cash and carry” policy will find it easier to succeed than
doctors who do it later. In my community, many doctors are
waiting to see whether I remain viable. They would like to join
the ranks of third-party-free doctors, but fear the pain of
third-party-money withdrawal. I am not going back!

Evaluating Medicare as a business partner, no reasonable
person would ever do business with it. Medicare makes the rules
and changes them on a daily basis, without notice. If doctors
make an honest mistake, they can be prosecuted. If Medicare makes
a mistake, patients are told that the doctor has committed fraud.
Administrative burdens are placed on the practice of medicine
without benefit to anyone.

Physician happiness and the future of medicine await the
exodus from Medicare and all third-party relationships.

Michael J. Harris, M.D., Traverse City, Michigan

HHS Moves to Dismiss HIPAA Complaint

As expected, on November 30 the US Department of Health and
Human Services filed a Motion to Dismiss the
complaint filed by AAPS, Congressman Ron Paul, and several
citizens, challenging the HIPAA privacy regulations.

As AAPS member Taj Becker, M.D., of Utah explained: “A Court
is like a boxing ring. But to get your day in Court, you have to
overcome a number of barriers designed to keep you out of the

Disregarding all the expense that physicians are supposed to
incur in preparation for the April, 2003, deadline, HHS asserts
that the plaintiffs’ claim is unripe because they have not yet
suffered any injury due to enforcement. Patients’ fears of
disclosure of their records to the government, and the resulting
chill on patient-physician communications, is called a mere
hypothetical that depends on “a succession of increasingly
unlikely events.” After all, “the Secretary may decide not to
request access to any protected health information,” and the
chance of accessing that of the individual plaintiffs is
“statistically remote.” Privacy is thus relative and subject to

HHS apparently believes that the scope of regulations can be
much broader than the actual content of a law. The fact that
Congress included only electronic transmissions does not limit
rulemaking, in HHS’s view, as long as the regulations “contain”
the standards called for by law along with whatever else is
“reasonable and appropriate to effectuate the purpose of the
Act.” That purpose, as HHS perceives in its omniscience, was “to
promote the computerization of medical information.”
Congressional intent would be thwarted “if, by reverting to
paper, covered entities could circumvent parts of the statute and
the regulations.”
Congressional inaction after the rule was
promulgated is taken by HHS to mean acceptance.

On the other hand, HHS does seem to recognize the
Constitutional problems that would result from federal
regulations of patient-physician communications that are not
arguably part of a national, multi-billion-dollar industry:

It bears repeating that the Privacy Rule
applies only to covered entities. The proverbial
country doctor who deals only in paper, or who has a
computer but conducts none of the transactions referred
to in section 1173(a) electronically, would not be a
covered entity and would not be subject to this

As to the Regulatory Flexibility Act, the Secretary
demonstrated “reasonable compliance” by “retain[ing] an outside
consultant to assess concerns raised in the public comments about
the cost of systems compliance by small businesses.” Prosecutors,
of course, apply a much higher standard to physicians accused of
fraud and abuse.

The Paperwork Reduction Act, HHS argues, does not provide
for judicial review. The “sole remedy … is the ability to raise
non-compliance with the Act as a defense to an enforcement
action.” If a form lacks the required control number, “no
person shall be subject to penalty for failure to comply with the
collection of information.”

Even if some provisions of the rule might not pass
Constitutional muster, HHS argues that the “final” rule
might change before it is enforced, rendering the
complaint moot.

This Motion gives an interesting insight in the HHS view of
privacy: (1) HIPAA “protects” privacy in that it only permits but
does not require disclosure to government. (2) “There is no
common law or federal physician-patient privilege.” (3) Invasions
of privacy are merely an “unpleasant” aspect of many facets of
health care. (4) Being in a government data base is a small price
to pay for preventing the x-ray technician from getting an
unnecessary glimpse of your chart.

The Judge has scheduled a conference for January 4.

Litigation is being funded by the American Health Legal
Foundation. Contributions are tax-deductible.

Tip of the Month: Medical Staff Bylaws may require a
physician to consent to outside review of his charts. If the
physician suspects foul play and refuses to consent, then the
bylaws can mandate immediate suspension of privileges. Solution:
Consider providing consent as required by the bylaws, but
restrict it to specifically identified cases and do not consent
to immunity for the reviewer. If the hospital does suspend, and
the physician then consents to immunity, the consent was arguably
under duress, and the reviewer may not be comfortable with it.

Parents Fight Mandatory Vaccines in Court

In Arkansas, two Catholic mothers, Shannon Law of
Little Rock and Susan Brock of Royal, filed a federal lawsuit
claiming that the Arkansas statute on religious exemptions from
vaccines discriminates on the basis of religion. Mrs. Law wants
her children exempt from chickenpox vaccine because the vaccine
was developed using aborted fetuses. (Polio, MMR, rubella,
rabies, and hepatitis A were also derived from fetal tissue; in
the US, there are no alternate vaccines available for rubella,
hepatitis A, or chickenpox.) The Vatican, however, has not taken
a stand on the issue, and a committee headed by a Denver
archbishop ruled that the vaccines were acceptable. Mrs. Brock
objects to hepatitis B vaccine because of the mode of
transmission of the disease. The Arkansas Dept. of Health denied
an exemption because their religious beliefs are not officially
“recognized.” Thus, the State is defining which beliefs are
orthodox and worthy of protection (www.cnsnews.com, 12/07/01;
www.lc.org, Liberty
Counsel press release 11/5/01).

In New York, Joseph and Heyde Rotella and Maja
Leibovitz refused hepatitis B shots on behalf of their children,
who were expelled from school. In one case, Child Protective
Services was called to the scene because the children were not in
school. Liberty Counsel filed suit and obtained a court order to
allow the children back in school and prevent the school system
from overriding parents’ religious beliefs (www.lc.org).

Also in New York, Liberty Counsel has objected on behalf of
Lynn Friedman to a lengthy questionnaire and a deposition under
oath-an “inquisition”-concerning her religious beliefs, after
which the exemption was denied and her son expelled.

In New Jersey, Rick Shaftan is home-schooling his son
Zachary pending State court action to readmit him to sixth grade
in public school. The Shaftans have no religious objection to the
vaccine, but believe it to be “without substantial benefit,
unrelated to the school’s educational mission, and an unwarranted
and illegal intrusion into their rights, as parents, to direct
the care and upbringing of their child.” The Shaftans argue
further that “the state should not be permitted to compel
plaintiffs to choose between exercising their constitutional
rights to privacy and self-determination and securing a
constitutionally mandated education.” Arguments are to be heard
State Superior Court in Morristown, NJ, December 11.


Priorities. For more than 30 years, New York State paid
$7.50 to treat live Medicaid patients to help bring them back to
health. Now the State is offering more than $300 ($30 for office
visits and up to $272 for RU 486) to kill unborn Medicaid
recipients. In New York State, unborn Medicaid recipients are
targeted for elimination (a cost-containment program?) and
taxpayer funds are being used to carry out the death sentence.
[Elective, as opposed to “medically necessary,” medical abortions
are covered only for New York City residents. DOH Medicaid
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

Backlash. Baby Boomers may think that their generation
has the political clout to preserve their Social Security
benefits even if it destroys the economy for their grandchildren.
They live in dreamland. When we get old and feeble, no amount of
voting power will make the younger generation treat us kindly. I
think they will realize that our generation thought so little of
theirs that we killed many of them off with abortion. Faced with
extreme financial collapse, they will do the same for us with
“assisted suicide.” No way will they put up with a 50% payroll
tax to keep us going.

Alieta Eck, M.D., Somerset, NJ

Reversal. When we were primarily an agrarian nation, no
one imagined that we could provide taxpayer largesse to a large
portion of the population. As the number of farmers diminished,
their clout actually improved; and the remaining subsidy
recipients didn’t have to share their “rewards” with as many
people. Richard McKenzie projected that as the number of Social
Security beneficiaries grows, this cohort will have less ability
to extract proportionally similar amounts out of the remaining
taxpayers. Think in terms of the concentrated benefits/diffused
costs tenet of public choice theory. An aging population may
reverse the political dynamics for broad-based entitlement
programs. A majority really can’t effectively subsidize itself.

Tom Miller, Cato Institute, Washington, DC

It’s the Money. Dr. Eck asks, “Why do people so
vehemently defend big-government medicine when it has failed all
over the world?” Because, just because, only because of the
money. Change the paradigm so that the money that purchases care
or insurance lies within the control of the patient/subscriber
and not in the control of politicians, central planners,
employers, and HR executives, and the world changes dramatically-
but not in ways that everyone other than the patient desires.

Steve Barchet, M.D., Issaquah, WA

Unbalanced Incentives. Managed care came about because
of faulty analysis advanced especially by Paul Ellwood and Alain
Einthoven. They thought the incentives in fee-for-service
medicine were for physicians to provide excess care and earn more
money. They were wrong. The problem isn’t FFS; it’s third-party
payment, which removes the counter-incentive for consumers to
resist overtreatment.

Greg Scandlen, Frederick, MD

Untruth and Consequences. Consultants have every
incentive to lie to politicians about the consequences of their
schemes if (1) they are paid up front and (2) the cost of their
errors is spread over all taxpayers. In ancient Rome, the
engineer who designed the arch was forced to stand under it as
the scaffolding was removed. Could we adopt a similar strategy
for incentivizing our bold, radical would-be health care

Gerry Smedinghoff, Actuary, Phoenix, AZ

Shrugging. Medicare, Medicaid, Social Security, and
[other unconstitutional government programs] should be abolished.
Working as a contract physician for the federal government, I see
first-hand the failure of socialized medicine. Things have
deteriorated to the point that I cut my hours to half-time,
sacrificing all my benefits. By careful budgeting and maintaining
a lifestyle not much better than a medical student’s, I have been
able to pull half an “Atlas Shrugged.” I am trying to reach a
point at which I can abandon white-collar assembly line medicine
entirely. I have a few ideas about completely private medicine,
but I don’t know whether they’re economically viable, and I fear
being targeted by the federal government, as others have been. I
can always flip burgers or do clerical work when medical factory
work gets intolerable!

Bari Bett, M.D., Lake Ridge, VA

Redefining “Is.” In Canada, a clear lensectomy is a
cosmetic, noncovered service. Doctors and hospitals can charge
whatever they want for noncovered services, whereas it is illegal
to charge a Canadian patient anything for a “medically necessary”
service. Canadian doctors reduce their cataract surgery waiting
lists by redefining “cataract” to mean a “clear lens,” and then
charge the patient for extracting it.

In the U.S., on the other hand, doctors have an incentive to
call a clear lens a cataract (and are accused of doing so in
order to be paid for doing “unnecessary surgery”)!

Robert Gervais, M.D., Mesa, AZ,

AAPS Calendar

Feb. 9. Board of Directors meeting, Dallas, TX.

Sept. 18-21. 59th annual meeting, Tucson, AZ.

Legislative Alert

The Stimulus Debate

As this goes to press, Congress, under increasing public
pressure from the President Bush, is struggling to come up with
an economic stimulus package to revive the economy. The partisan
divisions, muted in the aftermath of the September 11 terrorist
attacks, are deep, and compromise will be difficult.

The Bush proposal, being promoted by Senator Charles
Grassley (R-IA), is calling for accelerated depreciation, fast-
tracking cuts in all tax rates, elimination of the corporate
alternative minimum tax, an extension of unemployment
compensation benefits, a $3 billion grant to the states to pay up
to 75% of medical insurance premiums covered by COBRA, and the
encouragement of states to use $11 billion in unspent State
Children’s Health Insurance Program (SCHIP) matching funds to
expand medical coverage for the uninsured.

The Daschle proposal is calling for supplemental tax rebates
for taxpayers who did not get the full amount in 2001; a 10%
bonus depreciation for investment in capital and software over
the next 12 months, thus emphasizing more spending; direct
assistance to displaced workers; changes in unemployment
insurance; and subsidized COBRA coverage and expanded Medicaid
coverage for displaced workers.

A recent econometric analysis by the Heritage Foundation’s
Center for Data Analysis indicates that the Bush proposal would
result in 211,00 new jobs in 2002. Disposable income would rise
$75 billion per year from 2002 to 2006, and personal and
corporate investment would increase by an average of $13.4
billion per year over the same period. Under the Daschle Plan,
108,000 jobs would be created in 2002, and investment would
increase an average of $1.1 billion per year. The Heritage report
(CDA01-09) is available on line at

While a national crisis can bring out the best in Americans,
it can also tap the resourcefulness of the worst instincts of
politicians and lobbyists. For example, a major agriculture bill
(H.R. 2646), renamed “The Farm Security Act of 2001,” would
transfer billions of farm subsidies to enormously wealthy
Americans who happen to own farmland, including Ted Turner,
Scottie Pippen of the Portland Trailblazers, and David
Rockefeller. Congressional disaster relief and legislation to
stimulate the economy have become the latest vehicles for special
subsidies and pork-barrel projects. Particularly disturbing is
that, given a real opportunity to make significant changes of
direct benefit to working families, particularly in the area of
medical insurance, Congress appears to be ready to either do
nothing, or to reinforce the most undesirable features of current

How Government Punishes the Unemployed

Displaced workers and their families are punished by
current government policy. The key federal policy, of course,
is tax policy.
American workers and their employers both get
unlimited tax relief for the purchase of medical insurance on one
and only one condition: that they obtain it through the
workplace. If they want a different policy or a different package
of benefits, that is too bad. The reason is that they don’t own
the policy; their employer does.

It is not economically feasible to have a thriving
individual market for medical insurance when the same package of
benefits costs 35 to 40% more if the worker has to buy it with
after-tax dollars.
For middle-income workers, that is a steep
extra cost. Most people can’t-or won’t-pay it.

Assume for a moment that a worker does not want to
participate in the employer’s plan, or that the person who is
temporarily out of work wants to buy a far less expensive plan on
the individual market. The government has already cut off options
there. State legislators have been literally working overtime to
undermine the effectiveness of that market with reams of rules
and regulations governing health insurance. In Kentucky, for
example, a lot of health insurers just packed up and left. In
many states, where the level of regulation is high, the insurance
companies have decided to stay and do business, but they have
passed the cost of these regulatory impositions off to workers in
higher premiums.

Additionally, in the individual market, the cost of
marketing may be 30 to 40% higher. But government policy
discourages association plans, or the creation of large group
insurance pools outside of the place of work.
Such pools
could stabilize premiums and encourage a decline in
administrative costs. But here politicians have an unrepentant
commitment to inaction.

If workers are without coverage in some states, their plight
might be bad, but it could be worse. They could be governed by
“carin’ and compassionate” state legislators, who bow to the
itinerant mobs of special-interest lobbyists who cram the
corridors of power and enact mandates specifying what kinds of
benefits, treatments, or medical procedures you must have and pay
for if you are to have insurance at all. California has 42 such
mandates. Maryland, a national repository of regulatory excess,
has 50. Nationwide, there are 1,403 mandates and more on the
, including acupuncture, alcoholism treatment,
chiropractors, contraceptives, dietician services, drug-abuse
treatment, in-vitro fertilization, infertility treatments,
marriage therapists, massage therapists, professional counselors,
psychologists, social workers, and treatments for TMJ. A worker
may want major medical, but the state politicians want to force
him to pay for things he doesn’t need or want-next session it
could be South Sea Island Witchdoctor’s chanting therapy. See the
fellow with the beads and feathers sitting in the state Senate
dining room with the esteemed Chairman of the House Multicultural
Subcommittee on Expanded Health Care Alternatives.

Of course, mandates price coverage out of reach for many
families, especially those who have a breadwinner who has just
been laid off. According to a recent study for the Health
Insurance Association of America, as many as one in four of
those who are without insurance are without coverage because of
the rising cost of these mandates
. Unfortunately, the leading
Congressional proposals to deal with the rising number of the
uninsured rely on amorphous federal subsidies to state
governments and would mean less personal choice of plans or

Flawed Policy: The Limited COBRA Option

Some in Congress, notably Senators Tom Daschle (D-SD),
Max Baucus (D-MT), and James Jeffords (I-VT), want federal
subsidies for displaced workers to continue their employer’s
medical coverage under a provision of the Consolidated Omnibus
Reconciliation Act (COBRA), under which they now pay the full
premium out of pocket for 18 months. Daschle and Baucus want to
subsidize COBRA coverage directly with federal funds, and
Jeffords to establish a new tax credit for COBRA coverage-a sharp
break with previous tax policy.

COBRA coverage is generally available to workers, as long as
they are eligible based on the size of the firm. Employees of
firms with 20 or fewer employees-millions of American workers-are
not eligible. Worse, COBRA plans, and large company plans
generally, are often very expensive for family coverage, often
running between $6000 and $8,000 per year.
Even with
significant federal subsidies, COBRA coverage may still be too
costly for many families. According to a recent Urban Institute
survey, only 25% of workers eligible for this extended COBRA
coverage would be able to afford it.

Bad Policy: Medicaid Expansion

Some in Congress, notably Senators Baucus, Carnahan, and
Kennedy, want to enroll displaced workers and their families in
Medicaid, a welfare program. If unemployment rises from 4.5%
to 6.5%, according to the Urban Institute, more than 43 million
would be on Medicaid rolls, surpassing Medicare.

Medicaid is financially troubled in most states,
characterized by poor quality of care and less access to doctors
and medical specialists. In fiscal 2001, Medicaid costs
increased 11%, and 28 states are considering budget cuts.

Medicaid patients are facing rationing. This program is not, of
course, on the menu of Congressmen who consider it the leading
policy option for displaced workers.

A Better Policy

It doesn’t have to be this way for Americans facing
hardship. Congress could do the right thing, and allow them to
keep or get private health insurance. One suggestion is an
individual tax credit or a voucher to help cover the cost of the
plan of the worker’s choice-preferably including a Medical
Savings Account option. Individuals are likely to select a less
expensive alternative to COBRA.

If the tax credit or voucher system is set up as a temporary
relief effort, it could be administered through the state
unemployment compensation system, the joint federal-state program
that assists workers with unemployment insurance. This would not
be difficult. The administrative apparatus is already in place,
and the standard for eligibility is already established. If you
are eligible for unemployment compensation, you would also be
eligible for assistance for private medical coverage. If the Left
is so certain that displaced workers and their families should be
enrolled in Medicaid, there is no reason why Medicaid should not
be made an explicit option. Let so-called liberals advertise it,
and see how many of the folks they say they so desperately care
about would actually sign up for that program by choice.

Simultaneously, as part of its effort to expand private
coverage for displaced workers, Congress could override-or pre-
empt-costly state mandated benefits and premium taxes for those
who lost their jobs, making private options far more affordable.

The chief political effect of a tax-credit approach for
private insurance would be structural: it would put a cap on
Medicaid expansion. Moreover, the provision of individual tax
relief or assistance to private insurance, giving individuals and
families the ability to pick and choose their own plans and
benefits, is a radical break with all previous tax policy. The
right thing to do is to make it permanent, and build upon it.
That’s why the extreme Left will vigorously fight it.

Rising Medical Liability Costs

Medicaid, Medicare, and managed-care organizations cap
reimbursement for doctors, hospitals, and other medical
professionals. But doctors are operating in an environment in
which medical liability costs are sharply rising again,
particularly among obstetricians, gynecologists, and surgeons.
This is especially true in New York, New Jersey, and Florida.
According to a New York Times report, rising
liability insurance costs account for about 10% of the overall
increase in medical costs this year
. In California, according
to the Times, the average jury award is $2.9 million in
medical malpractice suits. Of course, in many states there are no
caps on medical malpractice punitive damages or damages for pain
and suffering. For attorneys trying medical malpractice cases,
there are no caps on contingency fees in medical
malpractice cases in such states as Alabama, Alaska, Arkansas,
Colorado, District of Columbia, Georgia, Idaho, Kansas, Kentucky,
Louisiana, Minnesota, Mississippi, Missouri, Montana, Nevada, New
Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania,
Rhode Island, South Carolina, South Dakota, Texas, Vermont,
Virginia, and West Virginia. Strange how lawyers somehow manage
to escape the kinds of regulatory initiatives that routinely are
imposed on the medical profession.

Robert Moffit is a prominent Washington health policy
analyst and Director of Domestic Policy at the Heritage

HIPAA Compliance Extension

On Nov. 27, the Senate passed S. 1684 by unanimous consent.
This provides a one-year extension for compliance with the
electronic transaction code sets.

The House of Representatives passed H.R. 3323, introduced by
Rep. David Hobson (R-OH), which extends the deadline only if the
entity submits a compliance plan prior to October 16, 2002.
Entities failing to submit such a plan and failing to be in
compliance can be excluded from Medicare-and such exclusion shall
not affect the imposition of other penalties. Additionally, the
House bill extends the deadline for small health plans to comply
with Privacy Rules to April 14, 2004.

A new requirement included in H.R. 3323 is that all
Medicare claims must be submitted electronically, except by
“small” providers of services
(those having less than 25
full-time employee equivalents).

The bill appropriates more than $44 million for technical
assistance, education, outreach, and enforcement activities.

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