AAPS News – Dec 1999


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

Volume 55, No. 12 December 1999


By missing its self-imposed deadline for passing legislation
to protect privacy, Congress has defaulted to the back-up option
that it enacted in the Kassebaum-Kennedy bill: getting the
Clinton Administration to do it.

HHS Secretary Shalala has been circulating regulations to
federal agencies for months. They are published in the Nov. 3
Federal Register, with a Jan. 3 deadline for public comment (see


Bill Clinton stated: “In 1999 Americans should never have to
worry about nightmare scenarios depicted in George Orwell’s
1984. I’m determined to put an end to such violations of
privacy. That’s why I’m honoring the pledge I made in the State
of the Union Address and using the full authority of this office
to create the first comprehensive national standards for
protection of medical records.”

The regulations fill 147 pages and comprise 1.3 megabytes.
Penalties for unintentional violations range up to
$25,000 per person per year. Intentional [illegal] disclosures
are punished by fines of up to $50,000 plus one year in prison,
or $250,000 plus up to ten years in prison if there was an intent
to sell the data.

Just as physicians are now confronting a demand to have a
compliance plan for billing federal programs properly, they will
soon be required to write policies and procedures, including the
appointment of a privacy officer, concerning the protection of
any health records ever transmitted electronically.

The regulations define “covered entities” to include health
plans, health care clearinghouses, and health care providers.
Noncovered entities include workers compensation
carriers, researchers, life insurance issuers, employers, and
marketing firms: “an important gap” in the protections. Immune
entities include the protectors themselves (law enforcement).
Individually identifiable health information that is part of an
“education record” is not considered “protected health

The Secretary attempts to bridge the gap in her authority by
requiring the covered entities to apply many provisions of the
rule to “business partners” with whom they contract for
administrative and other services. Doctors can’t throw their
billing agents in jail, of course, but they can and must attempt
to make them mitigate any damages they cause by unauthorized use
of information, on pain of loss of future business.

The key feature of the “protections” is that “most uses
and disclosures of an individual’s protected health information
would not require explicit authorization by the
individual….[W]e propose to substitute regulatory
protections for the pro forma authorizations that are used

Specifically, covered entities would be permitted (or,
often, required) to use or disclose “protected
health information” without patient authorization
for “specific public and public-related purposes, including
public health [broadly defined], research, health oversight,
[and] law enforcement…”

Shalala states: “The need to obtain authorization for use of
health information would create significant obstacles in efforts
to fight crime, understand disease, and protect public health.”

While acknowledging that “privacy is a fundamental right
…[that] speaks to our individual and collective freedom,” the
Secretary asserts that “the right is not absolute.” Moreover, the
Fourth Amendment only guarantees “the right of the people to be
secure in their persons, houses, papers and effects, against
unreasonable searches and seizures.” Rights, in her
view, are a balancing act, with the government acting to
determine when the public good outweighs the individual’s
interest. And the health, including the mental health, of the
citizenry is “a public good of transcendent importance.”

A problem that especially troubles the Secretary is “any
provider who maintains a solely paper information system.” As she
views it, HHS must have authority over all
individually identifiable health information in order to protect
it. Thus, the statute must be interpreted as broadly as possible,
with terms defined to permit implementation of its perceived
purpose. For example, information becomes covered once it passes
through any computer, as by FAX, though paper-to-paper FAXes are
outside the rules at present.

“Health information is considered relatively `safe’ today,
not because it is secure, but because it is difficult to access.
These standards improve access….” states House
Report No. 496, 104th Congress, 2nd Session, at 99. The perceived
protections offered by the regulations might help alleviate
concerns about requiring electronic data transmission.

The primary right accorded to individuals under these rules
is the right to complain to the Secretary, who can then punish
the covered entity. As the proposal notes, there is no individual
cause of action to recover damages for unlawful disclosure of
protected information.

The cost of the rule is estimated to be more than $1 billion
in its first year, including nearly $400 million to develop
policies and $120 million to issue notices. The Secretary posits
“significant, non-quantifiable social benefits” to offset the
cost, as by better health due to increased utilization of medical

The unique cost to the federal government will be for
enforcement, through the Office of Civil Rights.

Through these rules, individuals are to be protected against
marketing efforts, job discrimination, or insurance underwriting
by noncovered private entities-while health
will benefit from increased government-approved research that can
now be done without the burden of obtaining consent, as well as
from the oversight of all medical care. We have HHS assurance.

The Fourth Amendment was written to protect individuals
against incursions by government. Now that government is
our protector, the Amendment is being turned on its head.

AAPS Annual Meeting Report

At the 56th annual meeting in Coeur D’Alene, the gavel was
passed to our new President, Lawrence R. Huntoon, M.D., Ph.D., of
Jamestown, NY. Robert Cihak, M.D., of Aberdeen, WA, is President-
Elect. Claud A. Boyd, Jr., M.D., of Augusta, GA, remains as
Secretary, and R. Lowell Campbell, M.D., of Corsicana, TX, as

Elected to three-year terms as Directors are: Chester
Danehower, M.D., of Peoria, IL; John J. Dwyer, M.D., of Chicago,
IL; Vernon L. Goltry, M.D., of Boise, ID; and Mark Schiller,
M.D., of San Francisco, CA.

The Assembly passed one Resolution: That the Association of
American Physicians and Surgeons consider starting an
organization which might be called American Association of
Presidents of Private Medical Staffs, as another way of
commitment to an undertaking of reclaiming the private practice
of medicine in America.

Audiotapes and videotapes are available: see enclosed order
form, or www.aapsonline.org.

“Single-Payer” Doctors Are Coming On Strong

On Nov. 6, an AAPS representative attended the Fall
Meeting of Physicians for a National Health Program (PNHP) in
Chicago. More than 200 of their 8,500 members gathered to plan
strategies for state and national government-controlled single
payer plans. Our representative files this report:

PNHP makes no bones about its position: health care is a
right. True to their socialist leanings (which they choose to
call “progressive”), their policy statements include these: “The
allocation of medical care should be based on need, not wealth.”
And, “We can t have one system for the old, one for the young,
one for the sick, one for the well, one for the working, one for
the unemployed.”

Many of the attendees were medical students belonging to the
30,000-strong American Medical Students Association, which has
endorsed single payer and the goal, as stated by the president,
of “making sure that the day students hit medical school they
believe medical care is a right.”

The group is backing several state single-payer initiatives,
such as those in Maryland and Washington. Both are extremely
well-organized and have substantial financial backing.

Other efforts include aggressive media outreach to publicize
surveys which show that 72% of Americans support “universal
health care for all” (of course, the question doesn t address the
who and how of paying for it), writing curricula for health
policy courses to slant to single-payer, bringing single-payer
supporters to grand rounds, house parties, and a nation-wide act
of civil disobedience.

They are geared up for a long term battle-planning for the
initiatives stretches out to 2004, and their simplistic message
could easily seduce the public.

This should serve as a reminder to AAPS members to recommit
their efforts to fight those who would destroy the independent
practice of medicine in this country.

Reports from Single-Payer Land

Accessibility. Dr. Patrick Hewlett reports that in
Ontario, the “Health Care Accessibility Act” passed in 1986 makes
it illegal for physicians to provide any “necessary medical
services” except at the government-dictated fee. If a patient
complains about having a bill from a doctor, the government pays
the patient the amount of the charge, then deducts that from the
doctor’s account plus an administrative fee. Dr. Hewlett fought
three of these-small charges for nonmedical services. He won, but
it wasn’t worth legal fees and three years of hassles.

Canadian Opinion Changing. About 41% of Canadians, a
larger minority than elected the present federal government, have
come to believe that individuals should be permitted to pay
privately for medical services if they wish.

“If one proves one’s patriotism by suffering for one’s
country, then Canadian medicare patients are among the most
patriotic people in the world,” writes David Frum. “Thousands of
them every year endure unnecessary pain and danger because of our
dilapidated national health-care monopoly.”

Among the luxuries that Canadians must do without is
anesthesia during childbirth. Doctors’ waiting rooms are jammed
because decision-makers value patients’ time at zero. An extra
infusion of $11.5 billion from Ottawa will “vanish into the maw
of our stumbling medicare system without a trace,” states Frum.
The hopeful news: “The crisis in medicare is creating something
that Canada seemed to have lost decades ago: a constituency for
freedom” (National Post 9/7/99).

HMOs Fail, MSAs Thrive in South Africa

An aggressive invasion by U.S. Health Care has mostly failed
in South Africa-in part because physicians were armed with the
facts about managed care in America, thanks to the efforts of
AAPS Past President Bud Goltry and local activist physicians such
as H. Hamersma. Some of the same U.S. companies that opted for
managed care at home are choosing MSAs abroad. In South Africa,
MSAs have soared from nowhere to capture 50% of the market. More
than 75% of employers either offer MSA plans or intend to do so.
South African law permits much more flexibility in the design of
the product, while American MSAs are crippled by provisions
written by opponents such as Sen. Kennedy, writes John Goodman,
Ph.D., of the National Center for Policy Analysis.

Regulation vs. Freedom: “Patients’ Rights”

The “Patients’ Rights” debate (see pp. S1-S2) will probably

carry over into the next session of this Congress. The
Norwood-Dingell approach, favored by the AMA and the Democrats,
imposes costly regulations on all insurance plans, not
just HMOs. External reviews are more likely to be demanded in
plans that allow doctors the most discretion. The more severe
impact of this regulation will put fee-for-service at a worse
competitive disadvantage, risking the destruction of such plans:
an ironic result of legislation that pretends to correct HMO
abuses. Remarkably, Norwood-Dingell protects HMOs from the only
costs that they can’t shift-punitive damages-as long as they go
through the prescribed process.

The AMA, though officially in favor of MSAs, is criticizing
the Talent bill, which would help expand access to insurance,
stating that “Bid to revive MSAs could thwart patient protection
legislation [Norwood-Dingell]” (AM News 11/1/99). The
AMA would apparently prefer increased federal regulation of
all insurance to putting control back into the hands of

The Norwood-Dingell and Talent bills, and pertinent
excerpts, are posted at www.aapsonline.org.

More HMOs Sued, Despite ERISA

Three huge class action suits have recently been filed
against HMOs: O’Neil v. Aetna (S.D. Miss. No.
2:99CV284PG); Conte v. Aetna-U.S. Healthcare (E.D. Pa.
No. 99-CV-4929); and Price v. Humana (S.D. Fla. No. 99-
8763). More such suits are probably to be expected in the wake of
a number of state and federal court decisions. Successful causes
of actions have included medical malpractice and negligence
claims; the Third Circuit has held that ERISA did not preempt
such claims, in Dukes v. U.S. Healthcare, 57 F.3d 350
(3d 1995).

In O’Neil, plaintiffs allege that Aetna engaged in
a “nationwide fraudulent scheme” to enroll members, promising
quality health care and then denying services to boost profits,
in violation of the Racketeer Influenced and Corrupt
Organizations Act (RICO) as well as ERISA. The complaint cites
multiple acts of mail and wire fraud and a breach of fiduciary
duty under ERISA. Aetna’s mergers and acquisitions gave it the
market power to engage in “heavy-handed profit and market
dominance strategies designed to coerce physicians into accepting
contracts and policies and practices on a `take it or leave it’

In Conte, plaintiffs claimed that Aetna failed to
disclose physicians’ incentives to limit care. Fuller knowledge
would have prompted plaintiffs “to weigh their physicians’
recommendations more accurately, … investigate treatment
options more aggressively, and … exercise more intelligently
their right to pay out of pocket.”

Price, also a RICO case, alleges that Humana failed
to inform beneficiaries that it employed “undisclosed cost-based
criteria, using factors different from and more restrictive than
those described in the Humana Medical Necessity Definition.”

Plaintiffs hope to be compensated for the cost of care that
was promised but denied them, and to “change forever the way this
HMO operates.” See: BNA’s Health Care Policy Report
10/18/99 and BNA’s Health Care Fraud Report 10/20/99.

Fraud Sentences Handed Down

Jerome Maciejewski, former executive vice president of
Upstate Medicare in New York, was been sentenced to two years in
federal prison and a $15,000 fine for Medicare fraud. The Judge
departed from mandatory sentencing guidelines of 5.8 to 7.25
years in prison because he felt that the government would be
fully compensated and Maciejewski didn’t need rehabilitation.
Maciejewski did not “try to line his pockets with government
money,” but persuaded employees to engage in “improper cost
shifting” of more than $1 million to pay private business costs,
and to file falsified performance reports. Blue Cross/Blue Shield
is negotiating a repayment deal with the government to cover the
misappropriated funds (Buffalo News 10/22/99).

Fraud by the private partners of HCFA is apparently rampant.
More than a quarter of the contractors have been or are currently
under investigation for fraud. Only three of the contractors
found to have “integrity problems” were identified by HCFA. The
agency prefers to rely on self-policing and gave the contractors
$1.6 billion in 1998 to fund their own internal fraud detection
units. Government investigators found that the corporate fraud
units are often incompetent and conceal their mistakes by
destroying backlogged claims, manufacturing documentation, and
hiding files (Post-Journal 7/23/99).

Providers recently sentenced for fraud include two Kansas
physicians and a Baptist Medical Center executive. A federal
judge found that the government lost no more than $65,716 in
connection with a patient referral scheme-even though the
hospital paid a $17.5 million fine to resolve the issue.

Dr. Robert LaHue, 58, owner of a medical practice that
served 7,000 patients in 200 Kansas and Missouri nursing homes,
was sentenced to 5.83 years in prison, a $75,000 fine, and
$142,040 in restitution. Dr. Ronald LaHue, 52, was sentenced to
3.1 years, and former CEO Dan Anderson, 59, to 4.25 years. The
plea that defendants intended to secure better treatment for
underserved elderly and did not intentionally violate the law
against paying for referrals, did not cause the judge to depart
from sentencing guidelines (Kansas City Business Journal
10/15-21/99, Kansas City Star 10/29/99).

Lawyer Jailed for False Affidavit

Doris Houser Allen, a Walnut Hills lawyer, was sentenced to
one year in prison for filing a false affidavit that resulted in
one night in jail for an innocent man. The affidavit included
false charges of domestic violence, in an attempt to help her
client win custody of her children. Ms. Allen was convicted of
perjury and tampering with records. Judge Steven Martin said that
a prison term is necessary because she broke a cardinal rule for
lawyers and sent an innocent man to jail (Cincinnati

Carrier Accused of Retaliation Against Patients

Richard Swint, M.D., of Abilene has asked Senator Phil
Gramm: “When is the Texas Medicare carrier going to be
investigated and audited?” He submitted documentation of 11
instances in which patients were denied all reimbursement on
properly submitted claims totalling about $396. (Dr. Swint never
accepts assignment.)

Dr. Swint stated that in 1992, after his complaints to
Congress about the ineptitude of the Medicare carrier, every one
of his patients’ claims was denied for a whole month.

Dr. Swint also sent copies of Medicare Remittance Notices
mailed by the carrier to his office, concerning claims for
patients he had never seen and using an incorrect clinic
identification number. He informed Senator Gramm that had he
filed claims on patients he had not seen, each claim would incur
a $10,000 fine plus triple damages.

The header on the notice reads: “Help prevent Medicare
fraud-report all suspected instance [sic.] of fraud and

Government-Approved Research

From a verbatim transcript of the Advisory Committee on
Immunization Practices, Feb. 18, 1999:

Dr. Pickering: “The Academy has come out in the published
statement and has stated the premature infants should be
immunized with rotavirus vaccine, and hopefully the ACIP
statement will somewhat mirror so there is not confusion in the
field about administration of rotavirus vaccine to these

Dr. Modlin: “Obviously a situation where we have to
make a judgment in the absence of data and with a vaccine that
has not yet been tested in this group

The vote for modifying the recommendations of ACIP to agree
with the Red Book was: 9 in favor, 1 opposed, 1 abstaining
because “conflicted with Wyeth-Lederle.”

Members’ Page

The Difference Between Private Enterprise and a Public-
Private Partnership
. When entrepreneurs in the free market
offer a product that consumers don’t like, they lose money and
either adapt or go out of business. When public-private partners
in the non-free market, however, offer a product that consumers
don’t like, they get a federal grant so they can continue doing
it! WCA Hospital in Jamestown recently got a $368,000 grant from
the Community Health Care Conversion Demonstration Project, a
$1.25 billion program, to “help make systematic changes necessary
to participate more fully in managed care networks.”

Trying to trace the source of funding isn’t easy. I called
the New York State Health Dept. and was transferred 7 or 8 times
until I finally got someone in budget and fiscal management, who
I suspect simply told me it was “federal money” to get me off the
line. She couldn’t tell me whether a not-for-profit foundation
gave the money to the federal government to distribute to the
states. It seems that $1.25 billion is a lot of money for those
who transfer it not to know where it comes from.

The amount the hospital got is about the same as was dema-

nded from a Buffalo-area physician who was hit by a “random
Medicare audit.” He was told he had no right to appeal unless he
paid up the $300,000 first. After taking out a loan from the
bank, he hired a knowledgeable lawyer and got most of the money
back. From this, he had to pay rather high attorney’s fees. How
many of us can afford to be innocent?

Lawrence R. Huntoon, M.D., Ph.D., Jamestown,
President, AAPS

Why an Actuary May Need to Repent. My article exposing
the Total Quality Management (TQM) scam [see enclosed pamphlet],
originally written in 1996 for Contingencies, the
journal of American Academy of Actuaries, got me into a lot of
trouble with my employer. Naively, I didn’t realize that most
consultants are in the business of generating billable hours, and
there’s no future in telling people not to spend their money on
consultants. My expertise fell into the category of “pay no
attention to the man behind the curtain”-like the one selling the
smoke and mirrors and snake oil called TQM.

What finally did me in as a consultant was that the job
required making the assumption that Medicare was a financially
solvent system that our clients could depend on.

Gerry Smedinghoff, Consulting Actuary

Sunshine on Research. Thanks for the information on the
Shelby provisions (OMB Circular A-110). This piece of legislation
is monumental in its ramifications. For example, the federal
government has financed more than 100 studies on the connection
between Simian Virus 40 (SV-40), vaccines, and cancer. The data
are scrubbed and filtered, then published. Public access to the
raw data would be very valuable….

Michael Horwin,
[email protected]

[See Mr. Horwin’s letter concerning ABC Nightline’s
program on vaccines, and AAPS comments on the OMB Circular
(“comments on regulations”) at

SimpleCare. From a letter to the Spokane
: In your coverage of our meeting, you
implied that our group was financially motivated. One speaker
[Dave MacDonald, D.O.] founded an innovative program for the
uninsured which makes medical care affordable and puts the
patient back in charge. He said, “I’ll work for one-half the
salary of the average physician if I can spend the time caring
for patients instead of caring for paperwork.” I disagree with
him somewhat. When the doctor is delivering my baby, I’d
like to think he’s worth at least half as much as a good airplane

Gregory N. Laurence, M.D., Memphis, TN

Simple Targets. Insurance carrier influence is on a
scale much larger than the restriction of provider networks or
the nightmares associated with referral/prior authorizations. I
recently asked a fraud investigator why regulation does not
follow the money trail. Understanding that the trail leads back
to carriers, his response was very direct: “Insurance companies
have too much money and too much influence allowing them to fight
the system.” He further stated that he was responsible for
delivering positive investigation results. The
discussion ended with my suggestion that doctors are “simple”

Debbie Fehr, CPC/APC, Glendale, AZ

Opt Out! Articles in a recent dermatology newsletter
tell how to deal with the Goon Squad when it breaks down the door
to your office and terrorizes you and your staff. It can invade
anyone’s office because it operates on the basis of tips and
denunciations. Once the finger is pointed at you, your rights are
zero, and it will cost you tens of thousands of dollars to
extricate yourself-if you’re lucky.

When stationed in Vietnam, I took umbrage at protestors
comparing the U.S. with Communist states. Thirty years later, I
am not sure they were wrong. Cross the bureaucrats and elites who
run our country, and they will do you serious harm.

If at all possible, the best thing a doctor can do to
protect himself is to drop out of all insurance, particularly
Medicare. (No doctor with any sense has anything to do with the
farce and lie called Medicaid.) The old-time docs of the 60s who
objected to Medicare were absolutely right.

Frederick A. Pereira, M.D., Flushing, New York

Legislative Alert

Patients’ “Bill of Rights” Debate: Part III

Now that the House has overwhelmingly passed (275-151)
the Bipartisan Consensus Managed Care Improvement Act (H.R.
2723), popularly known as the Norwood-Dingell bill, Congress is
preparing for the next phase of the debate: the House-Senate
Conference. The House and Senate bills are very far apart-
particularly on the question of health plan and employer
liability-and Capitol Hill observers expect it to be a rough and
drawn-out conference.

An indication of just how contentious the Conference is
going to be is already evident in the controversy surrounding the
appointment of the House conferees. On final passage, 68
Republicans voted for the bill. House Speaker Dennis Hastert has
appointed 12 House Republican conferees-including the big names
such as Congressmen Bill Thomas (R-CA), John Boehner (R-OH), and
Jim Talent of Missouri (R-MO)-but only one of his appointees
(Mike Bilirakis, R-FL) voted for H.R. 2723. The chief co-sponsor
of the bill, Congressman Charles Norwood (R-GA) has been
excluded. Dr. Norwood and Dr. Greg Ganske (R-IA), as well as
House Democrats, are furious with Hastert s decision. And on Nov.
3 the House approved a non-binding motion that the House
conferees insist upon the House position. Norwood, meanwhile,
turned down an offer by the Democrats to join John Dingell as a

Then, of course, there is the omnipresent Clinton question.
Bill Clinton holds the final card in the game and will only be
too happy to veto a bill he doesn t think is strong enough-in
other words, if there is not enough litigation in it for him.

Since 1994, the Congressional Republicans have never had
confidence that they could frame the health policy issue better
than Clinton, and thus they have been at the mercy of his
superior political skills. Look for the conference wrangle to
carry over into next year.

The House Republican leaders’ October strategy was a mixed
performance. They succeeded in winning adoption of the Talent
Bill, the Access and Choice Act (H.R. 2990), which provided for
various modest but valuable tax-related measures designed to
expand health insurance coverage, including expanded medical
savings accounts (MSAs) and a 100% deduction for health insurance
expenses for all Americans, including the self-employed. MSAs
provide the essence of portability and patient control, but they
are a top political target of the Administration.

The Talent bill promotes tax equity in the treatment of
health insurance through tax deductions. Tax deductions are good
as far as they go, but they do not go very far-if the object is
to reduce the number of the uninsured. The most likely families
to be uninsured are those who are working: about 65% of the
uninsured are in working families who earn $ 25,000 or less per
year. Most work for small firms, which may not offer coverage.
Moreover, one in five of the people who are offered health
insurance through the workplace, according to a recent report by
the Center for Studying Health System Change, turn it down-
usually because they can t afford it. The working uninsured, like
most Americans, pay more in payroll taxes than in income taxes,
and thus the income tax deduction does little to relieve them
from a fairly regressive system of federal taxation. Some
conservative economists have thus argued for a tax credit system.
Tax credits are portable, and they can be targeted to people who
need the most help. But the key feature is that they enable
individuals to make real choices and force insurance companies
into direct competition with each other for consumer s dollars.
But Congress, at least this year, is not listening.

The Talent Bill also provides for the creation of health
insurance cooperatives for small businesses and promotes the
establishment of private association plans. The access
provisions, which are generally pretty good as a matter of
policy, may survive the conference, if the conservatives can hold
on to them in the face of the Clinton Administration s

Lost Opportunities

After the Coburn-Shadegg and Boehner floor substitutes
failed, the House Republican leadership had no amendments ready
to attach to H.R. 2723, and that partially explains its
overwhelming passage on the final vote. It wasn t as if there
were no solid policy proposals ready and waiting to be included
in the debate. The House Rules Committee received, just before HR
2723 went to the floor, dozens of amendments, including some very
sound proposals for debate-but they were not allowed to see the
light of day. Examples include :

  • An amendment that limited the terms of the law according to
    its impact on insurance enrollment, ensuring that premiums
    would not increase and that the number of uninsured would
    not increase by more than 100,000 as a result of the passage
    of the Act-offered by Congressman Tom Bliley (R-VA).
  • An amendment that would have given insurance subscribers a
    choice of a lower rate for less liability coverage, just as
    consumers can do today in the purchase of auto insurance-
    also offered by Congressman Tom Bliley.
  • Limiting damages from “pain and suffering” to $250,000,
    while allowing patients to recover all medical expenses,
    lost wages, future earnings, and out-of-pocket expenses. The
    amendment would have also established a uniform statute of
    limitations of two years, joint-and-several liability
    reform, and a reasonable limitation on attorneys’ fees. This
    was offered by Congressman John Boehner (R-OH).
  • An amendment to give enrollees in ERISA plans a choice of
    legal remedy-offered by Rep. Christopher Cox (R-CA).
  • An amendment that would have established, as a preliminary
    qualification for any external review, the requirement that
    the items in the dispute must be covered benefits.
  • Application of “patients’ rights” to Medicare and other
    government health insurance programs-offered by Congressman
    John Peterson (R-PA).

None of these amendments were even discussed on the floor of
the House. Clinton had warned Congressional leaders not to load
up the bill with “poison pill” amendments, and the Republicans
obeyed-at least it appears they did so.

It is surprising that there was no major debate on key
policy issues, such as rising cost and rising numbers of
uninsured, as well as the provisions of the Norwood-Dingell bill.
After all, Republican leaders had been saying for months that
they were concerned about these issues. Then why weren t
Congressman Bliley s amendments in order? And why shouldn t Rep.
Bliley or Peterson force the Congress to make a trade-off
between the patients’ rights provisions and the likely increases
in premiums? There is no real dispute that higher premiums lead
to higher rates of being uninsured.

Likewise, if patients can sue private plans, why should
Medicare patients not be able to sue HCFA or its contractors for
personal injury? Why should HCFA not be required to meet
timeliness requirements on appeals? Fairness is not a “poison

As usual, instead of forcing the debate on their terms,
Congressional leaders let the White House and its political
allies in Congress define the terms of the debate for them. The
result was not surprising. House Republicans, including those who
had grave misgivings over the impact of H.R. 2327, felt compelled
to vote for the bill. They did not feel that they could be
perceived as being against “patient protections.”

The Medicare Fix Is In

As Congress and the Clinton Administration wrangle over the
final details of the budget package that will boost federal
spending by at least $30 billion, with no tax cuts, look for
Congress to restore between $10 and $15 billion to Medicare in an
effort to undo the reimbursement reductions enacted as part of
the Balanced Budget Act of 1997. Meanwhile, Congressional leaders
have shown no interest at all in fixing more egregious policy
problems embodied in the Balanced Budget Act, as by recognizing
the right to contract privately. Moreover, they don t seem
interested in blocking HCFA s collection of sensitive personal
data (OASIS).

Congress is into budget expansions. Medicare spending has
been slowed in the past year to 1.5%, more than anticipated. But
lobbyists for home health agencies, nursing homes, HMOs, and
others have been successful in drawing attention to their plight.
The Congressional Budget Office (CBO) predicts that Medicare
spending will more than double in the next ten years and will
exceed $400 billion by 2008. And then Medicare spending will
Assuming no changes, taxes will have to be raised,
other spending will have to be cut, Medicare benefits will have
to cut, or big deficits will be incurred-or there will be a nasty
combination of all of these miseries. As Robert Samuelson noted,
Clinton had a clear shot at a real legacy: work with Congress and
bring entitlements into line. Instead, he has chosen to ignore
the options and has proposed expanding benefits, ratcheting up
the political costs for any sober-minded legislators of either
party who disagree (Washington Post 11/4/99).

The Big Picture

In a remarkable 1997 speech to the Service Employees
International Union in Washington, Bill Clinton said: “Now
what I tried before won t work. Maybe we can do it another way.
That s what we ve tried to do, a step at a time, until we finish
Remarkably, Congress has responded to this agenda by
offering watered-down versions of White House proposals for
changes in the private insurance market. Republican leaders are,
in effect, surrendering to the Administration on the installment

Since 1994, the Clinton Administration has taken every
opportunity to bring additional sectors of the health care system
under government control. Key components have included an
unprecedented expansion of federal regulation over private
health insurance markets through the Kassebaum- Kennedy bill; the
creation, in that same bill, of a “unique patient identifier”
that threatens patient privacy; and, perhaps most notably, a
remarkable statutory restriction on the right of Medicare
patients to contract privately with physicians and spend their
own money on medical services without bureaucratic interference.
This provision, Section 4507 of the Balanced Budget Act,
resembles the restriction on private care in Clinton s proposed
regional alliances in the then ill-fated Clinton Health Security
Act of 1993. Sure, under that proposal, patients could spend
their own money on a physician of their choice-as long as that
physician dropped out of the government-sponsored managed-care
Norwood-Dingell would continue the trend toward
expanding bureaucratic control.

The President and his Congressional allies know that there
is not far to go if they keep up the pressure and put the squeeze
on the private sector. The prescription is simple: keep the
tax treatment of health insurance just as it is, and sit and wait
for the downturn in the economy, when the numbers of the
uninsured get really big. Then, declare another crisis,
ringing denunciations of the “profiteers” in the private sector-
drug companies, doctors, private insurance companies, employers-
and propose some complicated measure, packed with vast new
responsibilities for HCFA or its clone, which will, at the end of
the day, guarantee a system that looks like Britain or Canada.
We can make sure that the treatments will not only be
medically “necessary” and ” appropriate” according to new
government standards, but “politically correct” as well.

The White House team and its allies on Capitol Hill know
very well that medicine today is a “mixed” economy. Government
pays 47% of America s medical bills.
On the one end, they
propose to expand Medicaid, largely through Kidcare. At the other
end, they propose to expand Medicare, and try to get millions of
Americans between the ages of 55 and 65 into the Medicare
program. That option will become increasingly attractive if there
is a downturn in the economy, and millions more have difficulty
holding on to their private employment-based health insurance.

Employment-based medical insurance is increasingly
fragile, and will be made more so if Congress opens up a serious
avenue for litigation over benefits and services provided by
The health insurance system is already one of the
most highly regulated sectors of the American economy. It is not
a “free market” in any normal meaning of the term; for there is
little real consumer choice and the competition in this system is
increasingly constrained by law and ever more detailed,
intricate, and intrusive regulation. Big insurance companies,
meanwhile, are consolidating their market share. With the
“information explosion” and the knowledge transmitted in micro-
seconds comes “individual empowerment” in virtually every sector
of the American economy. The health care sector is the big and
glaring exception.

Needed: A new class of Washington policy makers who
can think of the next generation rather than simply the next
election, and who understand that the key to reforming the health
care system is returning the key decisions in the system to
individuals and families in consultation with their doctors.

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

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