AAPS News – Apr 2000

Volume 56, No. 4 April 2000

DATA-BASE KEYSTONE

As Lenin recognized, medicine is the keystone in the arch of
socialism. The keystone in the arch of government-controlled
medicine is a comprehensive data base. And the essential linkage
element for a relational data base is a unique identifier, such
as the Unique Health Identifier (UHI).

Vendors are already preparing software that can be used as
soon as the federal government assigns the identifiers, according
to Kent Snyder of the Liberty Study Committee, and regulations
are on hold pending settlement of relevant issues, such as
privacy concerns.

The data base and the UHI were extensively discussed by the
Clinton Task Force on Health Care Reform, as shown by documents
released as a result of AAPS v. Clinton. Federal
“reporting protocols for developing a nationally standardized
data base” were to be a part of the Performance Support System to
“facilitate state accountability” for meeting federal standards.
Providers would be required to submit claims for all medical
services, even those paid out of pocket (“Medicare already has
such a requirement”!), to help determine, among other things,
whether a global budget was being exceeded.

The Health Insurance Portability and Accountability Act of
1996 (HIPAA) enacted a large portion of the Clinton Health
Security Act of 1993, including the requirement for a “unique
health identifier” that could be used to tag and track each
individual’s medical records from cradle to grave.

Six alternatives for creating the UHI are being considered
by the Department of HHS, including biometric methods that employ
DNA analysis or voice recognition technology. The project has
been on hold for two years because of defunding, thanks to the
efforts of Rep. Ron Paul, M.D. (R-TX). It will be back unless
Congress repeals part of HIPAA.

Meanwhile, an expansive public-private partnership is
granted access to all electronic medical records, without
patient consent, in the HHS “privacy” regulations released
last November. At the close of the comment period on Feb. 17,
50,000 comments had been received-an unprecedented number of
pages and commenters. Despite the avalanche of privacy concerns,
implementation is slated to begin January, 2001.

“Security of a medical records data base is an oxymoron,”
stated AAPS Public Relations Counsel Kathryn Serkes at a meeting
of the National Committee on Vital and Health Statistics (NCVHS).
Such a data base is designed to be accessible, to share data.
Even systems designed to be secure, as in the Department of
Defense, are highly vulnerable. Of 9,800 DOD systems, hackers
cracked 7,000. Only 24 systems recognized the intrusion, and only
three responded, according to Gary Christoph, Ph.D., Chief
Information Officer in HCFA’s Office of Information Services.

Security efforts would be very expensive; and HIPAA provides
neither mechanism nor budget for enforcement. Christoph noted
that attempts to do a security audit at a government agency
generally meet with denial and resistance. “There is an
enlightened self interest to seem more secure than they actually
are.”

Nevertheless, NCVHS envisions extending the rule to all
records, including the paper ones specifically excluded by the
proposed regulations. The AMA in its comments refers to the
“backdraft” effect and is informing its constituency that a
“prudent interpretation of the regulation would apply to all
records…unless the physician is certain that the paper document
will never be computerized and will never leave his or her
office.” [AMA comments can be accessed through
www.aapsonline.org, along with those of AAPS and others.]

Concerns about preventing unauthorized uses of the data,
while important, beg the questions concerning the legitimacy of
the system itself and the intended uses of the data for
purposes of central planning, rationing, and controlling the
scope and quality of permitted medical care.

Various crises (such as costs and numbers of uninsured) and
noble goals (“universal coverage”) are fueling the movement
toward the Clinton Plan’s final solution: total takeover by the
public-private partnership (a.k.a. fascism). A promise of
security being one of the most powerful blandishments of
socialism, it is not surprising that medical errors and safety
are now in the spotlight as “national priorities” outweighing any
right to privacy of medical records.

With the prestige of the Institute of Medicine (IOM) behind
it in the book To Err Is Human: Building a Safer Health
System, the Clinton-Gore Administration continues to push
for the Task Force agenda. The book’s executive summary reveals
the Marxist premise of the analysis: the root cause of error is
the “decentralized and fragmented nature of the health care
delivery system.” A “comprehensive” approach is required to
“compel” participation. This will entail mandatory reporting
systems, self-criticism, “multidisciplinary” national committees,
practice guidelines, standards for the introduction and diffusion
of new therapies and devices, and an obligation for providers to
meet “social demands” such as caring for the uninsured.

Professional organizations such as the AMA can expect to
have a leading role in developing practice guidelines “consistent
with current medical practice,” in training clinicians, and in
advocating for change, states the IOM.

A new national center will focus solely on creation of a
culture of safety to “reduce…departures from the way things
should have been done.” The “normalization of deviance” must be
avoided because “when deviant events become acceptable, the
potential for error is created.”

A new era of rigid, lockstep medicine dictated by bureau-

crats, with inspectors in every office, will dawn-unless the
keystone of universal data is kept out of the arch.

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The Anesthesia Model for Error Reduction

In the early 1980s, the death rate attributed to anesthesia
was 2 in 10,000. Now, according to the IOM book To Err Is
Human, the rate is about 1 in 200,000-300,000: the number of
deaths decreased by a factor of 40 to 60. (The IOM would demand
that errors decrease by a factor of 2.) Liability insurance
premiums for anesthesiologists have decreased by a factor of
about 6. The reason? The IOM credits “improved monitoring
techniques, the development and widespread adoption of practice
guidelines, and other systematic approaches to reducing errors.”
Obviously, an as-yet-nonexistent national Center for Patient
Safety cannot take credit.

Curtis Caine, M.D., of Jackson, MS, attributes the change to
better training and better equipment. Pulse oximetry did not wait
for a recommendation by a national committee; anesthesiologists
demanded it as soon as it was available.

By the time a blood gas is reported by the lab or the
surgeon notices “black blood,” the harm is already done. It is
the instant feedback on patient status (the outcome), not rigid
instructions on every step in the “process,” that saves lives.

Practice guidelines are a hindrance, Dr. Caine thinks,
because they frequently conflict with actions directed by
training and experience. If an adverse result occurs, it is an
“error” if and only if a guideline was violated.
Necrosis of the trachea is just unfortunate as long as the
pressure in the endotracheal tube cuff is the prescribed 20 cm
H₂O-even though the skilled anesthesiologist would have
lowered it until he could hear evidence of a tiny leak.

Dr. Caine, also a pilot, notes that because of the system-
wide priorities of the FAA (an agency cited as an example by the
IOM), the Jackson, MS, airport, while excellent, has less
sophisticated air traffic technology than LAX-while every
operating room in Jackson, not being subject to national
priorities, is equipped with the latest monitoring equipment.

Error in the Error Analysis

The IOM book presents no original data; it summarizes 49
studies done since 1974, with no critique of methodology. Its
estimate of the number of fatal errors, ranging from 44,000 to
98,000 hospital patients per year, is based on an extrapolation
from a study of 15,000 randomly selected hospital discharges in
Colorado and Utah (in press), and 30,000 in New York (Brennan et
al., N Eng J Med 1991;324:370-366), to 33.6 million
hospital admissions. An error is defined as “the failure of a
planned action to be executed as intended…or the use of the
wrong plan to achieve an aim….” There is no standardized
taxonomy for reporting adverse events or errors; an event was
classified as preventable or negligent upon the concurrence of
two reviewers, whose opinion was based solely on the medical
record. The kappa statistic for agreement on preventable error
was 0.61 (0.4 – 0.6 is “moderate agreement”), and on negligence
was 0.24 (0.2 – 0.4 is “fair”).

Ethics and Guidelines

The guidelines police may view themselves as the moral
police: “Physicians have a professional obligation to be aware of
evidence-based guidelines and to use them where applicable,”
stated David Nash, M.D., associate dean of Jefferson Medical
College in Philadelphia. Failure to follow guidelines may be
called “arrogance.” In the view of Philip Boyle, Ph.D., of the
Park Ridge Center in Chicago, which specializes in issues of
health, faith, and ethics, “most physicians don’t really have the
scientific background to question the data. It’s reprehensible
[for them to do so]” (AM News 12/27/99).

Doctor Sues Over Guidelines

Stating that there is at least one risky recommendation on
each of the 400 pages of Milliman & Robertson’s pediatric
guidelines, Thomas Cleary, M.D., head of pediatric infectious
diseases at University of Texas-Houston Medical School, has filed
suit against the publisher, which listed him as a “contributing
author” without his consent. This may be the first lawsuit to
directly attack the credibility of such guidelines and the
secretive methods used to write them. It raises the specter that
Milliman & Robertson tried to buy scientific credibility by
contributing $100,000 to the pediatrics department at UT-Houston
in exchange for the school’s stamp of approval.

Insurers, HMOs, and hospitals serving about 50 million
patients are believed to use the guidelines, which are a
lucrative part of Milliman & Robertson’s business. The pediatric
guidelines sell for $900 each, and the entire nine volumes cost
thousands of dollars.

“Physicians who are forced to follow these guidelines are
forced to commit malpractice,” Dr. Cleary stated.

As a condition of settlement, Dr. Cleary demanded a recall
of all 1998 guidelines sold, apologies to buyers admitting
wrongdoing, full-page ads in major newspapers, donation of
proceeds from all volumes sold to charity, and an agreement to
stop publishing recommended lengths of hospital stays. The
company declined, and trial is scheduled for next January
(Houston Chronicle 3/2/2000).

AMA Supports Public-Private Partnership

While disagreeing with mandatory reporting of errors, the
AMA supported, in principle, the IOM’s report and its call for a
“system-wide approach to eliminating adverse outcomes.” In
Jan. 25 testimony before the Senate Committee on Health,
Education, Labor, and Pensions, AMA Immediate Past President
Nancy Dickey, M.D., stated that the National Patient Safety
Foundation, established by the AMA in 1997, has an approach like
that recommended by the IOM. She recommended federal funding to
such private organizations.

In comments on the National Provider Identifier submitted
July 6, 1998, the AMA stated that HCFA had grossly underestimated
the costs of developing the NPI. “The best solution for the
implementation of the NPI is to have the AMA be the enumerator
for physicians using the AMA’s Masterfile to assign the numbers.”

How to Destroy Quality

LaMar L. Briner, President, LLBIS, Inc., writes: “The
medical field is getting the same federal treatment accorded
IBM….As with IBM, the goal is mediocrity in all that we
do….The feds prevailed on IBM to downgrade the quality of its
workforce through affirmative action….Eventually, only
incompetent managers were willing to accept managerial positions
in IBM. Their solution…was to apply quality control
measures…, doubling or tripling the work force so that the
groups could check on each other to assure managers that projects
were being done right….Of course, they weren’t….

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AAPS Files Partial Birth Abortion Brief

AAPS has joined in a brief filed by amici curiae in the case
of Don Stenberg, Attorney General of the State of Nebraska,
v. Leroy Carhart, M.D., U.S. Supreme Court No. 99-830, in
support of State law forbidding partial birth abortion. Other
signatories include the Illinois State Medical Association, the
Christian Medical and Dental Society, the Catholic Medical
Association, Eugene F. Diamond, Edmund Pellegrino, and about 30
other associations and individuals.

The AMA declined an invitation to participate in the case,
although the brief echoes positions previously expressed by AMA
Executive Vice President P. John Seward in a May 30, 1997, letter
to the New York Times:

This issue is whether the partial delivery of a
living fetus for the purpose of killing it outside of
the womb ought to be severely restricted. We believe,
as a matter of ethical principle, it should rarely if
ever be done. And although we also believe physicians
should have broad discretion in medical matters, both
this procedure and assisted suicide (as well as female
genital mutilation and lobotomies) can and should be
regulated if the profession won’t do it.

Amici argue that it is both permissible under previous Court
precedents and desirable to restrict the use of the procedure
also known as “intact dilatation and extraction” (D&X) to
circumstances in which it is necessary to save the life of the
mother (if any such exist).

The District Court took contradictory positions: (1) that
D&X could not be clearly distinguished from other abortion
procedures, and the law thus threatened the availability of other
types of abortion, and (2) that D&X was a superior (and thus
distinguishable) method from the standpoint of maternal safety.
In other words, the Court opined that the law had the effect of
outlawing the “standard” but unsafe [dismemberment] dilation and
evacuation (D&E). (See Carhart v. Stenberg, 972 F.Supp.
507, 513 (N.D. Neb. 1997).)

Dr. Carhart is the only provider in the State of Nebraska
who performs intact D&X; yet in 90% of his own cases he
apparently makes a deliberate choice to do a D&E rather than the
procedure that he claims to be safer.

There are neither studies nor articles in the peer-reviewed
literature to support the safety of the intact D&X. No
authoritative medical opinion delineates any circumstance that
necessitates its performance. The District Court relied solely
on claims by expert witnesses that D&X was superior to D&E
because of shorter operating time; less chance of trauma to the
cervix and uterus from bony fragments or instruments; and less
risk of disseminated intravascular coagulopathy, amniotic fluid
embolus, retained fetal parts, or free-floating head. Neither of
the two witnesses had ever intentionally performed or taught the
intact D&X procedure, despite testifying to its superiority.

The District Court did not consider the complications of
intact D&X, which include cervical incompetence; laceration of
the cervix or uterus causing maternal hemorrhage as scissors are
forced blindly into the fetal skull; and the risks of performing
an internal podalic version to convert the lie into a footling
breech, such as uterine perforation or rupture, abruption, or
amniotic fluid embolus.

Although amici do not argue that the D&E procedure is
untroubling or ethically justified, they state that the intact
D&X blurs the line between abortion and infanticide in a way that
imperils public trust in the integrity of the medical profession.
In one moment the physician is using the terminology and
techniques of obstetrics, and in the next turns into a destroyer
of the life that he has all but delivered.

“The federal government should not interfere in the practice
of medicine,” stated AAPS Executive Director Jane M. Orient,
M.D., “nor should it force States to declare infanticide to be a
medical procedure, much less one with special judicial
protections denied to interventions that enhance the life and
health of those who receive them.”

The States of Louisiana and Mississippi have also filed a
brief, which has been endorsed by the State of Texas, arguing
that pregnancy ends at the onset of parturition. Thus, the
Nebraska “ban on the killing of a child in the process of birth
does not regulate the `termination of a pregnancy’.”

AAPS Supports Freedom of Association

AAPS has also signed an amicus brief in the case of Boy
Scouts of America v. James Dale, U.S. Supreme Court No. 99-
699, joining with the Cato Institute, the Center for Individual
Rights, the Texas Justice Foundation, the Southeastern Legal
Foundation, the Independent Women’s Forum, and Eagle Forum
Education & Legal Defense Fund, in support of the Boy Scouts’
right to exclude members and leaders who do not subscribe to its
code of ethics concerning homosexual behavior.

Amici argue that the New Jersey Supreme Court had adopted an
overbroad interpretation of the concept of “public
accommodation,” and then used the “public” label to degrade the
Boy Scouts’ First Amendment rights.

This case, amici believe, is critical in preserving areas of
private sovereignty against government encroachment into all
areas of life. “If the federal government denies the Boy Scouts
of America the right to uphold its own Oath, why should medical
associations, private schools, or even churches be immune from
federal supervision of their teachings?” asked AAPS General
Counsel Andrew Schlafly.

America’s Founders proscribed titles of nobility to guard
against the tendency of a given regime to project its authority
forward in time, without the regularly renewed assent of a
sovereign people. On the same principle:

Where a regime passes laws to entrench the present
majority’s viewpoint and to hinder the possible rise of
competing viewpoints, the governors are merely seeking
to pass power down to their intellectual, rather than
their physical, heirs. Both forms of hereditary power
are antithetical to the Constitution. And a
government-imposed self-perpetuating orthodoxy is by
far the worse of the two.

Gays and Lesbians for Individual Liberty (GLIL) also filed a
brief supporting Boy Scouts of America’s right to set its own
standards for membership, while disagreeing with the exclusion of
gays. “If government forces the Boy Scouts to change that policy,
the constitutional rights of all of us…will be diminished,”
stated GLIL president Richard Sincere.

The American Health Legal Foundation frequently supports
legal work of AAPS, on issues that have a Constitutional basis
and relevance to the practice of private medicine. Contributions
to AHLF are tax-deductible under section 501(c)(3) of the
Internal Revenue Code. Enough printed copies of the partial birth
abortion brief are available to distribute to the first 60
persons who contribute at least $100. A self-addressed envelope
is enclosed.

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Members’ Page

E&M Guidelines and IQ. Enclosed is an 8-page sample of
what has happened to physician thinking as a result of E&M
Documentation Guidelines. I recently sent a patient with advanced
Parkinson’s disease to a prestigious clinic to be evaluated for
deep-brain stimulation via implanted electrodes. The consultation
note follows the E&M clinical pathway to the letter and hits
every bullet point. There is even a little chart showing that the
medical decision-making was of high complexity. And just to make
sure that his clinic doesn’t get hit with a PATH assault, my
consultant documents that “residents were not involved in the
examination or evaluation of the patient.” (Too bad, they might
have told me something useful.) I learned that the patient
watched a video and received written materials about the surgical
procedure plus a starter kit for Requip, with instructions not to
start it unless told to do so by her PCP. (The patient was
already on Requip, prescribed by me, her neurologist, as noted on
pp. 2 and 5.) There were numerous didactic paragraphs that are
also found in the PDR.

I think this patient is an excellent candidate for the
procedure, but I cannot tell whether the consultant thinks
so.

I do not think that these prestigious clinic physicians are
stupid people. But what does this government coercion and
physician compliance do to the physician’s mind in the long term?
If you get into the habit of doing stupid things because
government tells you to, do you, in fact, become stupid?

Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

Physician Profiles. Proposed methods of comparing
physicians (such as the notorious Milliman & Robertson practice
guidelines) focus on “outcomes”-many of which are patient
behaviors not under the control of the physician. Additionally,
as the world famous quality guru William Edwards Deming would
say, “You can’t judge outputs unless you can control
inputs.” I’ve yet to see a medical outcomes assessment
that properly controlled for inputs. Physicians with the best
reputation-to whom the most difficult cases are referred-may not
have the best outcomes. So how can a patient choose a physician?
How do you choose a mechanic or a contractor? Either you go by a
friend’s recommendation, or you rely on your gut instinct.

Gerry Smedinghoff, Consulting Actuary

[Our medical staff soundly rejected a proposal to put Milliman
& Robertson criteria in every chart. Thanks are due to the 1996
series on the scientific pitfalls of such guidelines in the
Medical Sentinel–Dr. Lawrence Huntoon.]

What “Is Covered” Is. We’ve been getting our CBCs
denied for payment by Blue Cross/Blue Shield for their government
employees. When we call the company to find out what the problem
is, the reps tell us that they do pay for CBCs but that we are
using the improper CPT code. When we ask what code we should be
using, they refuse to tell us!

We now tell these parents that the company will not cover
the test and that if they want us to do it in the office, they
will need to pay for it out of pocket.

Gary Mirkin, M.D., Great Neck, NY

Dropping Out. This is the third year since I resigned
from Medicare and the fourth since I resigned from all managed
care. Now I see patients on a pay-per-view basis, the old-
fashioned way. I work less and make almost as much money as when
I was seeing twice as many people. Noncooperation with this evil
system is the only way out for us. Wholesale resignation.
Complete walk out. Drop out of this rat race.

KPS Kamath, M.D., Cape Girardeau, MO

Equal Compliance for All. From a letter to Empire
Medicare Services: Over the past year, we have detected well over
100 recurring payment decision errors by you, which continue to
occur despite our repeated calls for claims review and correction
of the problem….In my office, I have a strict Compliance
Program to address coding errors; we both share a compelling
obligation under federal laws to correct errors promptly. In the
absence of this corrective effort, a pattern of abuse is
demonstrated and implicates the offender, and may result in
substantial penalties….As a cooperative gesture, I will allow
you 90 days before I begin to keep meticulous records of these
errors for submission to our State’s and HCFA’s Fraud and Abuse
Investigative Service.

Jeffrey T. Liegner, M.D., Sparta, NJ

Reactionary Policy. In the early 1980s, a surgeon
proved to his dumbfounded colleagues that cataract surgery could
be safely performed in a simple, non-hospital environment.
Surgeons from across America (before it became Amerika) flew to
Florida to observe simple yet safe cataract surgery in action. I
came back to Arizona and immediately built my ASC. Medicare saved
millions of dollars when surgeons like me moved out of the
overbuilt, oversanitized, overregulated hospital environment.
Yesterday, I visited a relatively new cataract ASC. Guess what?
New regulations mandate a return to the old overly “built”
hospital setting.

Of course, large ASC owners relish the thought because these
regulations effectively snuff out competition from smaller
“independents.” Another instance of Big Business applauding Big
Government. Forcing all doctors into a few government-controlled
centers simplifies the task of controlling (i.e. rationing)
medicine and demoralizing entrepreneurial doctors.

Robert Gervais, M.D., Mesa, AZ

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Legislative Alert

Tax Credit Mania

As noted in the March issue of our Report,
there has been some stirring in both the business community and
on Capitol Hill to take a radically different approach to “health
care reform” by changing the tax treatment of health insurance.
This is grounds for serious optimism, as both Democrats and
Republicans are starting to recognize that the same old
regulatory requirements are not only not working, but are making
matters worse. Free market reformers, regardless of their
differences, have been united on the simple proposition that one
cannot achieve real reform unless one changes the health
insurance market, and one cannot change the health insurance
market unless and until one changes the tax treatment of health
insurance.

America s greatest economists understand this. The basic
economic gospel on this issue, as stated by Milton Friedman: The
Congress should eliminate the distinction between the tax
treatments individuals get for the purchase of medical services
as employees and the tax treatment that individuals get simply as
citizens of the United States (Wall St J 10/8/98).
While Friedman feels that the best alternative is to repeal
tax preferences for the purchase of health insurance or medical
services entirely, he recognizes that another way to fix the
situation-a more viable alternative politically-is to simply
extend the tax preference to “all medical expenditures” and
create a level playing field. Says Friedman, “Either alternative
would give individuals greater control over their own medical
expenditures, lessen third party involvement and promote greater
competition and efficiency in the provision of medical care.
Medical savings accounts available to all with no restrictions
are one way to extend the tax preference.”

As this Report goes to press, the trickle of tax
reform sentiment has grown into a veritable torrent of serious
proposals. Congressman Bill Thomas (R-CA) is collaborating with
Jim McCrery (R-LA) on a comprehensive tax credit system that
would replace the existing tax structure for employer-based
health insurance with a national system of tax credits. Also
working on major tax credit proposals are Congressmen John
Shadegg and Matt Salmon of Arizona.

In a letter to his colleagues Salmon states: “In most of the
discussion of how to control the cost of health care and improve
access and quality, the most important managers of all are
usually left out of the equation-consumers.”

Less comprehensive than the Thomas-McCrery, Shadegg, or
Salmon proposals are those being developed by House Majority
Leader Dick Armey (R-TX) and Rep. Jim McDermott (D-WA), best
known among his colleagues as a champion of a Canadian- style
health care system. Armey is proposing a limited credit to target
those who are uninsured and don t or can t get health insurance
through the place of work. In effect, what Armey would do is
create a parallel system of tax breaks for the uninsured
alongside the existing employer based system of tax subsidies.
McDermott is proposing a flat 30% credit for the purchase of
health insurance among those working families who don t have
employer-based coverage.

Outside the Congress, among the Washington think tanks, from
the libertarian Cato Institute to the conservative Heritage
Foundation and the American Enterprise Institute to the
Progressive Policy Institute, a “moderate” Democratic outfit, tax
credits have long been a staple of comprehensive insurance
reform. What is different this year is that the idea has moved
well beyond the intellectual circles of those who occupy the
center-right spectrum of American politics. Note that industry
associations, not known for high falutin policy initiatives, are
starting to develop tax-credit proposals. For example, the
Council for Affordable Health Insurance (CAHI) is proposing a tax
credit program, while the Board of Trustees of Not-for- Profit
Hospitals is exploring private sector alternatives to the
traditional employer-based health insurance. In a novel
development, the American College of Physicians-American Society
for Internal Medicine, whose health policies have listed to the
left in the past, are now proposing to make lower income working
people eligible for tax breaks, amounting to between $2400 and
$2800 in tax credits per year. Their proposed credits would be
financed by dedicating 12.6% of the estimated “budget surplus” to
the new credits. Proponents expect that the credit could cut the
current uninsured population by almost a fourth.

Perhaps the most comprehensive and detailed proposal yet
offered by industry comes from the National Association of Health
Underwriters (NAHU): Under the NAHU proposal all Americans not
enrolled in Medicare or the military health plans would be
eligible for a tax credit for the purchase of private health
insurance. The amount of the credit would be $800 for an adult
and $400 for a child, up to $2400 per family per year. The NAHU
tax credit would be a flat credit, meaning the amount would be
the same for all eligible persons or families, regardless of
medical costs or income. It would be adjusted annually on the
basis of the Consumer Price Index (CPI). It would be financed by
simply changing the tax breaks that are now available to
employees through the tax code (roughly $100 billion), as well as
by changes in the Medicaid program. In other words, health
benefits, just like wages, become taxable income, and the tax
break would be available in the form of a flat credit rather than
through the existing tax exclusion on the cost of health benefits
at the place of work.

NAHU spokesmen argue that one of the chief advantages of
their tax credit proposal is that it is simple to administer,
largely because it is a flat credit. Thus, the calculations that
must be made to administer a progressive credit, either in terms
of income or health care costs, income or some risk factor, are
unnecessary. Not only is the flat credit administratively simple,
it does not allow for “gaming” because, as NAHU spokesmen insist,
there is nothing to “game.” It is a voluntary tax break; no one
would be required to take advantage of it. At the same time, it
is not intended to cover the whole cost of a family plan, but,
like today’s system, help offset the costs of private health
insurance.

NAHU spokesmen also argue that their proposed credit will be
superior to the existing tax breaks for health insurance for most
American families: “For the vast majority of employees, the
credit will more than offset the extra income tax on employer
paid premiums. Even in the top 39% tax bracket, where the
employer pays 100% of the cost of an average $5000 premium, the
employee (average family of four) will come out ahead.”

Finally, NAHU spokesmen argue that their proposal will not
undermine employer-based health insurance, a charge made against
many other tax-credit options, particularly those supported by
conservative economists and policy analysts. Indeed, the NAHU
argues that the credit will preserve the existing system of
employer-provided health insurance: “The employer will still be
permitted to deduct the cost of premiums as a business expense.
The employer will not be required to pay a FICA tax on the
employer paid premium that will be treated as unearned income to
the employee. There will be no change in Section 125 Plans. The
credit is not large enough to induce the employer to drop
insurance coverage and leave the employees to fend for themselves
in the individual market. Employers provide benefits in order to
recruit good workers. That need will continue.”

The NAHU proposal is highly refined, as these things go. But
expect others soon to surface. This explosion of interest in tax
policy as a key to health insurance reform is having a major
impact. “Ideas,” the great conservative philosopher Richard
Weaver once said, “have consequences.” And the consequences of
years of thought and analysis are starting to take form.

Mandates and Misery

The Congressional Republican leadership is once again
trying to figure out how to handle the agenda that the President
has defined for them: the “patients’ bill of rights.” While
Thomas and McCrery and others want to stake out a better and
different agenda from that of the President, the lingering danger
is that Congressional Leadership will be pressured into some sort
of “go slow” compromise which will give the Clinton
Administration, once again, the regulatory guts of its patients’
rights legislation. The danger is that after the charges and
counter-charges of “partisanship” hurled across the aisles in the
poisoned atmospherics of the Clinton impeachment process, that
the Congressional leadership will cave or be forced to settle for
the bromide of “bipartisanship” on health care policy, which
normally translates into taking the President s bad ideas, making
them a little less worse, and enacting them into law with a “free
market” fig leaf, perhaps yet another crabbed and highly
regulated medical savings account “demonstration” somewhere,
carefully designed to fail. One need only look back to the
Kassebaum-Kennedy mush, or the equally bungled Balanced Budget
Act of 1997, making the Medicare system even messier and even
more highly regulated than it was in 1996. The ancient principle
of healing is appropriate here: First do no harm-no more
rules, no more regulations, and no more mandates making matters
worse.

Michael DeBakey, the pioneering heart surgeon and director
of the DeBakey Heart Center at the Baylor College of medicine,
told the Wall Street Journal last October: “Intrusive
government and the interposition of corporate managed care have
imposed regulations that not only are burdensome and costly (more
than 20 percent of health care expenditures), but are subverting
the crucial physician-patient relationship.” Nicely stated. And
on this point the evidence is sharply mounting. Notice the
results of the latest analysis of regulation of the health care
system conducted by Professor Michael Morrisey of the University
of Alabama and Professor Gail Jensen of Wayne State University on
behalf of the Health Insurance Association of America (HIAA).

Some doctors will dismiss this study because of the sponsor.
But the findings are perfectly in accord with previous studies
done by independent analysts. After reviewing the more than 1000
state mandated benefits in all 50 states of the union, the HIAA
study estimates that state mandates raise premiums by up to 13%
for businesses that offer health insurance. Without mandates, 18%
of small businesses without health insurance would buy it. In
Maryland, the leader of mandate mania in the states, the mandates
accounted for anywhere between 11 to 22% of health insurance
claims; in Virginia, they account for 21%; and in Massachusetts,
13%. Premium increases for health plans vary with the level of
mandates, of course. But the key finding of the HIAA study is
that nearly one out of every four Americans without health
insurance, more than 10 million Americans, have no health care
coverage because of the cost of state mandates. That kind of
thing, as Maryland s state legislators demonstrate, takes years
of practice.

Competition and Cost Control

Under the current projections, Medicare will grow
relatively slowly for the next ten years or so. But with the
retirement of the baby boomers, things heat up. Between 2010 and
2030, according to the nonpartisan Congressional Budget Office
(CBO), the retired population will grow about 3% per year, rising
from 39 to 69 million. CBO expects that medical costs will grow
much faster, especially in light of the demand for more
sophisticated medical technology.

Well, the cost estimates for the Breaux plan-recently
unveiled in outline by Senator John Breaux (D-LA), Co-Chairman of
the National Bipartisan Commission on the Future of Medicare-have
arrived by way of the work of the Commission staff and the CBO.
The basic finding: Yes, Virginia, competition and consumer choice
does control costs. According to a Commission staff memo, dated
February 17, 1999, using an extension of CBO s projections, the
Breaux proposal would slow the growth of Medicare spending
gradually, by about 1% per year. Over the years, the impact of
these accumulated savings would be considerable. The Commission
staff estimate that by 2030, annual Medicare spending would be
anywhere between $475 to $850 billion less under the Senator s
proposal than under current law. While under current law,
Medicare would be projected to grow to between 28 and 38% of the
budget in 2030, under the Breaux proposal it would grow to 21-
28%. For the Medicare beneficiaries, the premiums would be
supported by the taxpayer’s contribution, just as premiums are
supported for federal workers in the Federal Employees Health
Benefits Program (FEHBP). Because the premiums for beneficiaries
would be set at 12% of program costs, though individual premiums
would vary with plan selection, the Commission staff estimates
that Medicare beneficiary premiums would be 15-25% less than
those projected under current law on average.

In spite of the impressive numbers, Senator Breaux has his
work cut out for him. While Senator Kerrey (D-NE) and all of the
Republican appointees on the Commission are behind his proposal,
the Clinton Administration s appointees are either flatly opposed
or driving a hard bargain on prescription drug coverage. Liberals
in Congress, if Congressman Pete Stark of California is any
barometer of rude rhetoric, are in the initial stages of
launching a pre-emptive strike against Medicare reform. The new
CBO director, Dan Crippen, is already coming under attack for
writing a positive assessment of the Breaux proposal.

Look for “Mediscare II”: Coming Soon to your local
Congressional town hall meeting!

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