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AAPS News June 2011 – From “Stable” to “Negative”

Volume 67, no. 6 June 2011

On Tax Day, April 18, 2011, Standard and Poor’s rating service cut its outlook on U.S. debt from “stable” to “negative,” stating that there is one chance in three that it will eventually downgrade its AAA rating of U.S. Treasury debt.

On a medical scale, we’d be in the “denial” stage to view the patient’s status as other than “critical.”

Recall that S&P remained unrealistically optimistic about the mortgage debt problem until after the crash began. Weiss Ratings just gave the U.S. a “C,” a grade two notches above “junk.” Overall, Weiss rates the U.S. as 33rd out of 47 nations, worse than Bulgaria and Mexico, and 44th in terms of its debt burden. It is still 6th in terms of ability to borrow (Safe Money Report, May 2011).

The U.S. appears to be headed for Weimar-style hyperinflation, although a minority of observers point to another possibility: The bond market could deprive the U.S. government of its ability both to borrow and to print. This has not happened in previous similar historical instances—fiat currencies have always become worthless. But instantaneous worldwide communications may make this time different. Deflation, though highly improbable, is still a possible outcome (Access to Energy, April 2011).

The Effect on Entitlements
Every single penny of federal tax revenue is now spent on Social Security, Medicare, Medicaid, welfare, and unemployment. Even money to pay interest on the debt, $400 billion in 2010, must be borrowed (McAlvany Intelligence Advisor, May 2011).

Warnings about the so-called trust funds have long been unheeded. In a 1992 article entitled “Sooner Than You Think: the Coming Bankruptcy of Social Security,” it was noted that the trust fund had stopped purchasing marketable securities many years before. Instead, the fund’s “phantom assets” were in “special-issue bonds,” that collected “phantom income.” Before 1982, some of these bonds were redeemed by borrowing from Medicare’s hospital insurance trust fund. The “bonds” more closely resemble “budget authority”—to expend tax revenue. Such authority is often granted and revoked (Policy Review, fall 1992).

The entitlement itself could be instantly revoked by Congress. In the 1937 Supreme Court case that challenged the constitutionality of Social Security, Helvering v Davis, the Roosevelt Administration flatly denied that Social Security is “a scheme for compulsory insurance invalid under the Tenth Amendment.” While it told the public and Congress that the program was like an “annuity” or “insurance,” it told the Court that it was like a pension—a “gratuity” or “bounty” to which the “pensioner has no legal right.” In contrast, policies under World War I’s War Risk Insurance for servicemen “being contracts, are property and create vested rights.” Roosevelt cleverly disconnected the old-age benefits in Title II, valid under the “general welfare” clause, from the Title VIII taxes, claiming those to be “true taxes, their purpose being simply to raise revenue…available for the general support of government” and “not earmarked for any special purpose.”

In a 12-page decision, mostly lifted from the Administration’s brief, the Court ducked the core issue of whether Social Security is an unconstitutional government insurance program. “In saving Social Security, the Court saved itself—and the people knew it,” writes John Attarian (LewRockwell.com 5/23/03). Roosevelt had just won a landslide victory, and the Court ruled under the duress of his threat to pack an uncooperative Court with more justices.

Single-payer advocates claim that their program would circumvent the constitutional issues in the Affordable Care Act (ACA), which stem from the mandate to purchase private insurance. They rely on the constitutionality of Social Security, and by extension Medicare, which was created as an amendment to the Social Security Act. But if the decisions against the ACA hold up, John Graham hopes that the “shock-wave crashes up against Medicare and Medicaid” (National Review Online 12/15/10).

Attarian writes that the purported inviolability of Social Security “rests on sloppy argument, willful evasions of reality, and, ultimately, frightened submission to one of the worst acts of tyrannical bullying in the federal government’s history.”

In any event, the only reason that Social Security and Medicare are now held constitutional is that they are not really entitlements.

Cost Control: Abolishing Fee for Service
The ability to restrain expenditures under ACA or Medicare depends on “reconfiguring” the payment method, i.e. doing away with fee for service, or payment for providing medical services.

Instead of getting paid more for doing more, those entities that manage, despite 429 pages of regulations, to form accountable care organizations (ACOs), will get paid more for “savings,” “coordination,” and electronic documentation of compliance with 65 “quality metrics” (CMS-1345-P), which do not include accurate diagnosis or all-cause mortality. The only conceivable way to achieve savings is to block access to expensive, individualized, life-saving medical interventions, in a flurry of technician-performed, standardized, checklist-driven, low-cost, population-based “risk-reduction” healthcare maneuvers.

Medicine Is a Negative
In the zero-sum game of socialist entitlements, nontaxpayers’ lives are a liability, except as a pretext for government exercise of power, and lucrative employment for its minions.

Why Not Just Tax the Rich?

Eat-the-rich, envy-driven politics is popular. Even many physicians think that the budget gap could be plugged by “asking the rich to pay a little more.”

As Arthur Robinson points out: “The ‘rich’ lawfully possess their wealth. Our property is no more secure than theirs. Further plundering of wealthy people endangers us all. Moreover, the wealthy do not keep their wealth in piles of cash under their beds. Most of their wealth is invested in vehicles…that provide capital for the American economy. If they are forced to sell this capital and give the proceeds to wasteful federal programs, we will all become poorer, including the government itself” (AtE, op cit.).

Then there’s the problem that the rich don’t have enough money. “The government has dug itself into a hole so deep that if everyone earning more than $100,000 were taxed at 100%, this would not cover the federal deficit, much less the rest of government spending,” writes Richard Maybury (EWR, May 2011).

The total combined wealth of every American who earns at least $1 million per year is less than 100% of GDP. If the government could confiscate their entire wealth, it would not cover the public and intragovernmental debt, writes Michael Tanner, much less make a dent in the unfunded obligations (Cato Policy Analysis no. 673, Mar 23, 2011). If we eliminated the cap on income subject to Social Security tax, Tanner writes that it would give the U.S. the highest marginal tax rate in the world. This would cost as much as $136 billion in lost economic growth over 10 years, and as many as 1.1 million lost jobs—while adding just 7 years of cash-flow solvency to the system.

Wealthy people who have invested all their assets in tax-free municipal bonds could become poor overnight, warns McAlvany (MIA, op cit.). The highly illiquid muni market is in deep trouble, with states facing aggregate budget deficits of $175 billion over the next 2 years, not counting pension obligations of $2.5 trillion. When Vallejo, California, declared bankruptcy, bond holders received 5 cents on the dollar.

The average American family’s net worth declined 23% between 2007 and 2009 (ibid.). And while the GDP may show gradual, unalarming changes, Robinson points out that it is adjusted by mythically low government inflation indexes, not for real currency depreciation. A GDP based on real assets and productivity, not including “consumer” and “service” luxuries, would give a far more accurate and alarming view of U.S. economic prospects.

Maybury estimates a 50% probability that Americans will need to dip into their emergency food and water supplies, and a 90% chance they will need their silver or gold coins.

Breathtaking Fraud

Jack Lew, director of the federal Office of Management and Budget, recently stated that the Social Security trust fund would be able to pay full benefits for 26 years. “Preposterous,” writes John Goodman. “Breathtaking fraud,” writes Charles Krauthammer. Social Security now has a negative cash flow. The trust fund “bonds” cannot be sold on Wall Street or to foreign investors. Nor can they be used to pay benefits. If they were to be destroyed in a big fire, or tripled with a stroke of the pen, it would make absolutely no difference. To write a benefits check, the government has to tax, or borrow (Health Alerts 4/4/11).

Federal Interest Payments

Since 1988, the U.S. has paid $8 trillion in interest on the debt, enough to buy a dream car for every American. Annual interest payments of $413 billion total more than the spending of HHS, DHS, and numerous other agencies combined. See: http://www.youtube.com/embed/VtVbUmcQSuk.

Punishing Work and Marriage

Income-based subsidies for insurance purchased on exchanges in 2014, assuming ObamaCare takes effect, have a “cliff effect,” with a substantial disincentive to work. If a family with income at 400% of the federal poverty level earns even $1 more, an entire $15,000 in subsidies for the purchase of insurance could be lost (Foundry 4/26/11). Similar income cut-offs make Medicaid a poverty trap.

Subsidies also depend on marital status. A married couple would lose subsidies if family income exceeded $58,840. But two cohabiting unmarried persons could together earn up to $87,120 without losing subsidies, writes Dave Racer. These costs could encourage married couples to divorce so that they can pay their mortgage, he states.

Married couples could receive $10,000 less in subsidies each year. Cumulative penalties over a lifetime of marriage could mount to $200,000. The ACA shows a profound bias against marriage, writes Robert Rector, and establishes cohabitors as a privileged special interest (Heritage WebMemo #2767, Jan 10, 2010).

Unlimited ObamaCare Slush Fund

Perhaps foreseeing a Republican takeover of the U.S. House of Representatives, and its desire to defund ACA, Democrats slipped an unlimited implementation slush fund into the bill as §1311(a), reports Dean Clancy. According to the Congressional Research Service, the “state-based exchange grants fund” is an “indefinite appropriation”—which is open-ended and requires no further action by Congress. If he chose, Obama could increase the cost of ACA by hundreds of billions of dollars. Secretary Sebelius is already using the funds to seduce states to collaborate with implementation. CMS chief Donald Berwick has hinted at ambitious plans to tap the slush funds to bail out state governments that are being bankrupted by Medicaid.

In H.R. 1213, the House voted 238-183, with only 5 Democrats in favor, to shut off this tap. There is still no companion bill in the Senate. Arguably, the fund is unconstitutional because it violates the separation of powers, delegating to the President the power to appropriate funds from the Treasury without stint.

AAPS Calendar

Sep 28-Oct 1, 2011. 68th annual meeting, Atlanta, GA.

AAPS and Five Doctors Support Florida Case

Five physicians have joined AAPS in an amicus brief before the U.S. Circuit Court of Appeals for the 11th Circuit, in support of Florida and other states that are challenging ObamaCare. The physicians are Guenter L. Spanknebel, M.D., a past president of the Massachusetts Medical Society; Leah S. McCormack, M.D., immediate past president of the Medical Society of the State of New York; Janis Chester, M.D.; Mark J. Hauser, M.D.; and Graham L. Spruiell, M.D.

During debate over the ratification of the U.S. Constitution, James Madison stated that laws should be understandable, not too long, and “not be revised before they are promulgated.” The Affordable Care Act (ACA) is surely too long and incoherent, and is completely infected with violations of the Presentment Clause. Congress attempted to simultaneously enact and amend more than 90 provisions.

The ACA violates the right to a “private enclave,” an essential for liberty that underlies Fourth and Fifth Amendment jurisprudence, amici argue. As Judge Frank wrote in United States v. On Lee, in 1952, “A sane, decent, civilized society must provide some oasis, some shelter from public scrutiny, some insulted enclosure, some enclave, some inviolate place which is a man’s castle.”

“To protect personal medical information, the most private of private enclaves, an individual must be allowed to pay for medical care directly and not be required to purchase health insurance,” amici state. Even a patient who is a victim of a crime has less right to remain silent under ACA than a criminal perpetrator has under Miranda.

Click here to read the brief.

HIPAA Tsunami Predicted

The Office of Civil Rights is preparing to start conducting random audits of physicians’ offices, as required under the HITECH Act. Most physicians will be able to produce only a small subset of the documents required, states Ali Pabrai, CEO of the San Diego consulting firm ecFirst.

In general, physicians don’t take HIPAA seriously because the fines haven’t hit them directly,” he states. “A tsunami is coming at these practices.” Inability to produce documents is itself a violation of HIPAA.

Massachusetts General Hospital recently paid $1 million to settle potential HIPAA violations arising from an employee’s loss of patient records on the subway. HHS found the hospital didn’t have procedures in place to educate employees in how to protect patient information.

Having the documents is not enough. The government may interview employees to find out whether policies are followed.

A sample document checklist covers a full page and includes: employee background checks and confidentiality agreements; authentication methods to identify authorized users; encryption and decryption of electronic information; mechanisms to ensure data integrity during transmission, including on thumb drives and cell phones; disposal of media and devices; vulnerability scanning plans; use of wireless networks; and results of the most recent network penetration test (Medical Practice Compliance Alert 5/2/11).

Becoming a HIPAA-covered entity to enable use of electronic claims filing entails enormously expensive responsibilities.

Meaningful Use May Require Tsunami Plan

If you are trying to collect a $44,000 government subsidy for your interoperable electronic health record (EHR), remember that detailed risk analysis is an essential part of “meaningful use.” You need to plan for every contingency: loss of power, a computer virus, server failure, unavailability of the one person with access to protected health information, a hurricane if you’re near the coast.

Commonly overlooked aspects are failure to control USB or infrared ports, or giving one employee control over an entire process with no supervision. Constantly ask, “What if?”

Be sure that security policies do not overlook smart phones. Commonwealth Medical Management Services suggests requiring physicians to use passwords and encryption. Health and other data on smart phones are just as discoverable during litigation as data stored elsewhere (MPCA 3/21/11).

Secure Your Digital Copier

You may not know it, but your digital copier is actually a computer with a hard drive that keeps records of things that you copy. The Federal Trade Commission released guidance on Dec 13, 2010. Affinity Health Plan had to notify 334,000 people of a security breach when it sold a copier to CBS News. Check to see what security features your copier has. Some can overwrite data after every use or on a schedule. Some copier hard drives can be locked with a pass code. Document destruction of the data before you dispose of the copier (MPCA 2/7/11).

RACs Can Double Dip

Medicare recovery audit contractors (RACs) earn a contingency fee for identifying overpayments. They also have a personal financial incentive to view these payments as fraud, and collect a significant “bonus”—30% of the amount recovered—as a qui tam relator in a False Claims Act (FCA) case. Though it might appear to be a conflict of interest to permit auditors to profit from their work, and their ability to demand records, the FCA does not preclude them from doing so (BNA’s HCFR 2/9/11).

Prosecutors Virtually Immune

Although Congress, in a 1998 law, gave state regulators the authority to suspend and disbar U.S. Dept. of Justice prosecutors if they violate laws or state ethics rules, USA Today could find only six prosecutors who have been disciplined since 1997. Only two federal prosecutors had their license suspended, even briefly, because of the way they handled a criminal case. Prosecutors cannot be sued for violating a defendant’s rights. Regulators usually find violations to be errors rather than malicious wrongdoing, though the violations jail innocents, let the guilty go free, and cost millions of dollars in legal fees (USA Today 12/9/10).

Citing confidentiality, the Dept. of Justice consistently conceals its own investigations, making it impossible to assess the full extent or impact of prosecutorial misconduct, or the effectiveness of government’s attempts to deter it.

“OPR [the Office of Professional Responsibility] is a black hole. Stuff goes in, nothing comes out,” says Jim Lavine, president of the National Association of Criminal Defense Lawyers.


Pushed to the Brink. Communications about government-imposed regulations are increasingly about coming punishment for physicians who don’t bow down and crawl before government. Electronic health records (EHR) punishments are coming. So are ANSI 5010 punishments, and punishments for failure to join an ACO…on top of all the existing punishments. I got a call yesterday from a long-time member who said he wasn’t going to take it any more. He would start by opting out of Medicare and then transition toward a totally third-party-free practice. The average age of U.S. physicians is between 55 and 60. I don’t think the government realizes how close they are to the tipping point. Some will retire, some will transition into a related field, and some will go third party free to finish their careers.
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY

Privatization. The main problem with all the supposed privatization of Medicare is that CMS simply cannot be trusted. You have true privatization when Medicare puts a sum of money in an account that people own that can be spent on any Medicare-allowed medical expense, including premiums to any insurance company that the patient chooses. People need to benefit from any savings, as by getting to keep half of whatever is left. Anything else is just government doing what government does.
Linda Gorman, Ph.D., Independence Institute, Golden, CO

“Change” and EMRs. In 2001, before the Bush Executive Order to create them, I thought electronic medical records were a great tool. In 2003, tired of chasing old records and writing the same patient information five times over in charts, I developed a prototype for a patient-centric EMR—private, protected, not available to government or corporate America except by court order. It was actually a user-friendly prototype of the Veterans Administration Vista system : it is intuitive, requires no training to use, and follows normal physician workflow. It is better, faster, cheaper than any seen on the market today.

Last year I attended a government Regional Extension Center (REC) presentation of how the government wants EMRs to roll out and about the “vendors” (mostly bad) and all the rules and processes you’d have to follow with your EMR in order to get the government enticement money—which I believe the majority will never see. It became evident that this push for mandating EMRs is a government control method that will be used to deny payment and sanction physicians who do not meet its demands: abuse of what could be a good thing.
Robert C. Villare, M.D., M.P.A., NJ State Assembly candidate

HCFAC Budget. With a current budget of nearly $1 billion per year, the Health Care Fraud and Abuse Control agency has enough money to spend $10,000 to investigate every doctor in the country every 6 years. The Affordable Care Act’s doubling that budget will give them $20,000 per doctor.
Robert J. Cihak, M.D., Aberdeen, WA

$50 Please. Speaking to about 300 mostly retired people in his home community, Sen. Sheldon Whitehouse (D-RI) emphasized how he would fight for Medicare. When he came to speaking of physicians’ charges, he said, “Call a doctor and ask what they charge for a certain visit or procedure. They’ll ask what insurance you have.” I rose and said, “$50.” I introduced myself to the audience and said that I charge $50 for an office visit, that I don’t take insurance, and that as a result of the massive cost savings by not having a coding specialist, collections specialist, billing overhead, or rent for an office big enough to house all those people, I can charge a reasonable fee while each patient retains the confidence of knowing that no third party will have any of their private medical information, of knowing that there are really only two people in the room when we talk.

I expected that this largely Medicare-covered audience would shake their heads and whisper “dinosaur.” Instead, I received applause and a few dozen new patients the next day. Each said roughly the same: “I’d rather pay for the care I want than have insurance cover me for care I don’t want.”
Stuart Gitlow, M.D., Woonsocket, RI

The Medicaid Gold Mine. Managed-care plans are “Mining for Medicaid” (AM News 12/06/10), according to an article that states, “The Medicaid expansion is a huge business opportunity for health plans.” The accompanying cartoon shows a prospector dumping coal into a convoluted series of pipes. At the bottom, a man in a suit, presumably the HMO administrator, stands next to a stack of gold coins, while a man in a white coat frowns as one coin drops at his feet. Where’s the AMA’s outrage at a system where physicians are pawns, and kings and queens get paid while telling us what to do? They are mining profits from our medical licenses, and we need to dismantle their system.
Alieta Eck, M.D., AAPS President-Elect, Somerset, NJ

Market Failure? While problems in American medicine are often attributed to market failure, in economics this is an exception to the norm, when customers spend their own money. Government failure, however, is inevitable. No political system (majority voting, bribes, vote selling, etc.) can produce ideal decisions.
John Goodman, Ph.D., Dallas, TX

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