AAPS News December 2016 – OPEC and “Healthcare”


Volume 72, no. 12 December 2016

The Organization of the Petroleum Exporting Countries was created in 1960 for the stated purpose of assuring “fair and stable prices” for producers and a steady supply to consumers. For many years OPEC nations built ski resorts in the desert while the U.S. and the rest of the world complained that $120/barrel oil was sucking the life out of business and the public. But in 2016, OPEC countries were willingly pumping aggressively and selling at $30/barrel, still triple their production costs. What changed? Competition. The U.S. and others found ways to produce oil themselves as through fracking.

What is now draining the U.S. economy? The middle class has been in a 20-year long economic depression that is, according to David Chase, at least 95% due to “healthcare,” an enterprise that provides medical care at a cost 30% to 50% higher than necessary. “We’ve gone to war for much less than what healthcare has done to America” (Forbes 9/5/16, http://tinyurl.com/zy978ee).

Of all the tricks that the industry plays on consumers, the most pervasive and easiest to fix, he thinks, is PPO networks. The “greatest heist in American history” has redistributed trillions from the American working class to the healthcare industry.

PPO networks charge “access” fees of $12–$20 per employee per month “for what is arguably the right to overpay providers” [at least hospitals] as much as 10 times Medicare prices. Employee benefits managers have no idea of this cost difference. The BUCAs (Blues such as Anthem, United Healthcare, Cigna, and Aetna) hide that information.

Hospitals happily collude because PPOs blindly pay their outrageous bills, likely claiming they got a “50% discount”—from a charge that is 550% or greater of Medicare.

Employers who are switching to Reference-Based Reimbursement are seeing costs tumble by 20% to 40%. For example, CALPERS announced what it would pay for common services to California state employees, and encouraged workers to make financially reasonable choices. Hospitals who demanded more quickly changed their minds when they started losing business.

Eliminating the “healthcare payment fairy” and restoring honest prices forces buyers and sellers to find common value.

While PPO networks and other managed-care methods are usually assumed to be the private sector, they are part of a trend for greater and greater government involvement in medicine that began with the enactment of Medicare in 1965 and the immediately ensuing cost spiral. Congress passed the Health Maintenance Organization Act in 1973, mandating that companies with 25 or more employees offer federally certified HMO coverage. But costs continued to soar, averaging increases greater than 10% annually throughout the 1970s (http://tinyurl.com/guxxcpk).

Networks, ACA, and “Reform”

Exchange plans under the [Un]Affordable Care Act (ACA) increasingly feature narrow networks. Efforts to force patients and doctors to stay in network are becoming very aggressive. The California “surprise billing” law (AB72, AAPS News, November 2016) is already spreading. New Jersey has introduced A1952/S1285, reviving a bill that was killed in a previous session.

In a letter to New Jersey senators, AAPS general counsel Andrew Schlafly writes that this legislation “unfairly target[s] life-saving physicians. It would place outlandish price controls on the amount that out-of-network physicians may charge insurance companies, thereby jeopardizing charity care.”

“Currently, insurance companies should pay out-of-network physicians the bills that physicians submit for medically necessary care, so that the patient is not held responsible for the ‘balance bill.’ Insurance companies often refuse to pay their bills, however. In the State of Texas, insurance companies acting as administrators for third party plans are generally responsible for paying the physician his charged fees, and the insurance climate in Texas has been relatively smooth and well-functioning….”

Most of the savings in such bills accrues to insurers: 83%, according to Dr. Eileen Natuzzi of California. Most often, the balance bill from a physician is no more than a few hundred dollars, but outrageous exceptions are seen. One Arizona state senator reportedly got a $12,000 bill from an out-of-network physician called in by her in-network hospital without her knowledge. (AAPS suggests actions patients can take: http://tinyurl.com/h7hs86k.)

According to a Consumer’s Union survey, “surprise bills” hit 30% of privately insured Americans, and 40% of those seeing out-of-network physicians did so involuntarily (http://tinyurl.com/h5z5azz). Apparently, plans have trouble contracting with enough physicians to provide promised care.

Most of the plans that went up for sale Nov 1 on the Your Health Idaho exchange threaten patients with responsibility for up to $100,000 of charges if they go out of network (ibid.).

PPOs arose because of quality and access problems with HMOs. Now the HMO “population health” equivalent is back.

Congressional Republicans’ ACA “replacements” by Paul Ryan, Tom Price, and Pete Sessions all take networks [cartels] for granted. Ryan touts Medicare Advantage, which is managed care, and Sessions (H.R. 5284) imposes a $25,000 penalty for violating rules on “excessive” out-of-network charges.

Monopolies generally cut prices at first—until competitors are driven out of business. Why would we expect government-backed BUCA to behave any differently from OPEC once it has a chokehold on a product essential to life?


There are two main causes of medical price increases, writes actuary Gerry Smedinghoff: the tax advantage and muda.
The inflationary tax subsidy follows Gold’s Law, which states that 95% of a legally mandated cost advantage will end up as waste. It also creates two classes: the privileged, who get the subsidy, and the disenfranchised, who don’t (“Shopping at the IRS Mall,” AAPS pamphlet 1074, July 2000, http://tinyurl.com/jjlw57w).
Muda, a term coined by Toyota production engineer Taiichi Ohno, is any activity that adds cost, but does not add value. There are seven categories: delay (e.g. preauthorizations); movement (e.g. making HMO patients see a gatekeeper before the specialist they knew they wanted to see); oversight (e.g. having a case manager watch another worker do his job); inspection (e.g. retrospective reviews); rework (e.g. re-filing claims); overproduction (e.g. defensive medicine); and defective design (e.g. HMOs, Medicare, Medicaid, CPT, DRG, ICD, and other coding schemes) (“MUDA: the Cause of Medical Cost Increases,” AAPS pamphlet 1082, May 2001, http://tinyurl.com/hku998a).

High-Value Care Education

In the new age of “payment for value,” medical education programs are struggling with the inclusion of cost considerations in “professional identity formation”—the process through which trainees “incorporate their own internal beliefs with external influences.” The ethical tension between the physician’s commitment to steward “societal resources” and the primacy of patient welfare is codified in the Physician Charter on Professionalism and the AMA Code of Medical Ethics. Programs should “tread lightly in teaching cost-quality trade-offs to trainees” and tailor it to trainees’ developmental stage, lest “ambiguity regarding patient welfare in high-value care education” result in patient distrust and societal backlash” (JAMA 12/6/16).

Note that this tension is not found in the Oath of Hippocrates. Authors Matthew DeCamp of the Johns Hopkins Berman Institute of Bioethics and Kevin Riggs of the Dept. of Preventive Medicine at the Univ. of Alabama Birmingham evidently assume that “society” will be paying through involuntary redistribution of wealth. They do not discuss the lack of honest, transparent prices.

John H. Boyles, Jr., M.D.: R.I.P.

We mark with sadness the death of Dr. Tim Boyles, a member of AAPS since 1973. Dr. Boyles served as president of AAPS in 1992 and as president of the American Health Legal Foundation for many years until the time of his death. An ENT specialist and allergist, he was also active in the American Academy of Environmental Medicine. He was a courageous advocate for personalized patient care and for physicians’ rights.

“Fathom the hypocrisy of a government that requires every citizen to prove they are insured… but not everyone must prove they are [sic] a citizen.” Now add this: “Many of those who refuse, or are unable to prove they are citizens will receive free insurance paid for by those who are forced to buy insurance because they are citizens.”
Paradoxical Quote of the Day from Ben Stein

Managed Care’s Cash Cow

ACA has been called the Medicaid Expansion Act by Stuart Butler of the Brookings Institution because the majority of newly insured were enrolled in Medicaid. The Congressional Budget Office (CBO) estimated that 14 million of the estimated 22 million increase in the uninsured if ACA were repealed would result from loss of Medicaid (http://tinyurl.com/hyjq8ez). The number might not be nearly that high, however, if Jonathan Gruber’s new study is correct: two-thirds of new Medicaid enrollees in 2014 were eligible before ACA but had simply not enrolled. In other words, 60% come from the “woodwork effect,” and states are collecting a higher rate of federal reimbursement illegally, writes Brian Blase (Forbes 121/27/16, http://tinyurl.com/zp8h4vx).

Where does the Medicaid funding go? “Most states use managed-care companies to serve beneficiaries, thereby ensuring support from some insurers,” writes Michael Sparer, Ph.D., J.D., of Columbia University (NEJM 11/16/16). Most states already require beneficiaries to enroll in some form of managed care; nearly 80% of beneficiaries are enrolled either in capitated managed-care plans or primary care case management (PCCM) programs, he writes. He suggests shoring up ObamaCare exchanges by requiring Medicaid managed-care companies to offer exchange plans. While they may object, they are unlikely to withdraw because “Medicaid is often their primary source of revenue.”

But what is the value of this management? A study by MIT economist Amy Finkelstein et al. estimated that enrollees receive only 20 to 40 cents of benefit for every dollar spent, and that Medicaid produced no discernible improvement in measurable physical health outcomes. This may explain why areas of the country with poorer health measures, who theoretically gain the most from ObamaCare, were most likely to swing their votes to the candidate who promised to repeal it, writes Michael Cannon (Forbes 11/21/16, http://tinyurl.com/z8sh6vr).

ObamaCare Losers

The Middle Class is the big loser under ACA. Outside a narrow income band, Americans are being hammered. Both the previously uninsured and those who were previously insured in the individual market are worse off financially, writes John Goodman (Forbes 10/8/15, http://tinyurl.com/za7syjk).

Healthcare spending reached 18.2% of GDP in June, up from 13.3% in 2000. Deductibles are up 67% since 2010, seven times more than wages (http://tinyurl.com/zrkccuk). One working class American had to get a second mortgage because of increased premiums and a $6,900 IRS “clawback” (http://tinyurl.com/hdblel6).

AAPS Calendar

Jan 27, 2017. Thrive Not Just Survive XXV, Orlando, FL.
Jan 28, 2017. Board of Directors & FL chapter, Orlando, FL.
Oct 5-7, 2017. 74th annual meeting, Tucson, AZ



Is your practice on our list of cash-friendly doctors (http://aapsonline.org/direct-payment-cash-friendly-practices/)? Are you listed on jointhewedge.com?

Mandatory Flu Shots and Discrimination

Title VII of the Civil Rights Act protects against employment discrimination based on religious beliefs. Requests for a religious exemption from influenza vaccine are increasing, and there is ambiguity about what qualifies as a sincerely held religious belief. The Equal Employment Opportunity Commission (EEOC) has filed for an injunction against Pennsylvania-based St. Vincent Health Center, which fired six employees for refusing the shot after denying their request for exemption. EEOC is asking for back pay with interest, related costs such as job search expenses, and punitive damages (Medical Practice Compliance Alert, December 2016).

Right to Die but No Right to Try

Canadian patients with amyotrophic lateral sclerosis (ALS) are lobbying for a “Right to Try” bill that would allow physicians to treat terminally ill patients with unproven procedures or drugs, such as adult stem cells. An Israeli-American company called Brainstorm has developed an adult stem cell treatment for ALS.

“Right to Try” laws passed in 32 U.S. states might fail if challenged by federal regulators (http://tinyurl.com/hsxan5k).

Updates on Right to Die

  • The legal distinction between euthanasia and physician-assisted suicide is likely unsustainable. Most nations that legalize PAS legalize both, and 99% of deaths in those countries are from euthanasia (Sulmasy et al., JAMA 10/18/16).
  • Ontario physicians could lose their license for refusing to perform or refer for abortion or euthanasia. Five doctors sued over this policy, and the government and the physicians’ college are responding with intimidation tactics (http://tinyurl.com/j48oglb).
  • The Dutch government proposes euthanasia for those who are “done with life” though healthy (http://tinyurl.com/hljqo9j).

Tip of the Month: It is not possible to opt out of TRICARE, but one can disenroll and become a “non-authorized provider.” According to a Jul 22, 2005, letter from TRICARE, the physician must post a sign stating that he is “not a TRICARE Authorized Provider.” The sign must not use the term “non-participating.” The letter states: “If you have a TRICARE beneficiary that you elect to treat by mutual consent anyway, prior to treatment, you must specifically advise the beneficiary that you are not an Authorized Provider. You must have the patient sign a statement that they were informed of this, that they will be solely responsible for the bill and that neither the beneficiary nor the provider will submit a claim for the services to TRICARE. Thus, the beneficiary is exempting the provider from the Balance Billing rules for the specific episode of care.” The letter further advises having all patients sign the statement, to protect the doctor from a beneficiary who fails to inform the doctor of eligibility and submits a claim, thereby subjecting the doctor to exclusion from all federal programs for violating the Balance Billing rule.

Note that active military fall under different rules and cannot exempt physicians from Balance Billing rules.

In a letter dated Aug 11, 2005, the Dept. of Defense acknowledges that TRICARE is not insurance, but rather
a government entitlement similar to Medicare and Medicaid.

The Electoral College v. Democracy

Hillary Clinton’s anguished followers are calling for the abolition of the “antiquated” Electoral College. “It is alleged,” writes Walter Williams, “that Hillary Clinton won a popular vote majority.” He explained that he used “alleged” because according to Gregg Phillips of True the Vote, an estimated 3 million noncitizens voted, presumably for Clinton.

Slightly more than half the U.S. population resides in just nine states: California, Texas, New York, Florida, Illinois, Pennsylvania, Ohio, Georgia, and Michigan. Conceivably, just nine states could determine the outcome of the popular vote. But the Founders deliberately set up the Electoral College to force candidates to respect the views of people in thinly populated states.

“The Founding Fathers held a deep abhorrence for democracy and majority rule,” Williams writes. “In fact, the word democracy appears nowhere in the Declaration of Independence or the Constitution.” James Madison wrote in Federalist No. 10, “Measures are too often decided, not according to the rules of justice and the rights of the minor party, but by the superior force of an interested and overbearing majority.” Williams concludes that “majority rule equals tyranny” (http://tinyurl.com/hfbjk5g).

HHS Moves to Circumvent Congress

A U.S. Dept. of Health and Human Services (HHS) memo signals willingness to pay for part of ACA by using a special Treasury Dept. fund reserved to pay plaintiffs who successfully sue the federal government. Insurers are suing to recover billions they believe they are owed in the risk corridor program (see AAPS News, June 2016). House Republicans state that the Administration’s offer to settle these lawsuits “appears to be a direct circumvention of clear congressional intent to prohibit the expenditure of federal dollars.” However, the Government Accountability Office (GAO) stated that “the mere failure to appropriate sufficient funds is not enough” to change the scope of an entitlement.

Nicholas Bagley, J.D., argues that using the Judgment Fund to pay up is “the responsible thing to do” (NEJM 121/24/16).

Nathan Nascimento of Freedom Partners argues that “this is a transparent attempt to manipulate the justice system to force the taxpayers to bail out another failed Obamacare program.” Chris Jacobs of Juniper Research Group states that repeatedly bailing out insurers would establish a de facto single payer system (Health Care News, December 2016, http://tinyurl.com/zhm3x29).

Planned Parenthood Accused of Medicaid Fraud

Up to two-thirds of all Medicaid payments to Planned Parenthood facilities in Wisconsin were fraudulent, according to state inspectors. “Margin-padding” practices included up-coding, lack of valid prescriptions, or billed quantity not matching quantity prescribed or dispensed. The state considered broadening the scope of its investigation after a 2014 audit found that two clinics had overcharged the state $3.5 million for distributing contraceptives. PPWI public policy director Nicole Safar said that an Office of Inspector General audit would trigger a round of “clinic-closing” decisions. Limited audits in other states have also uncovered tens of millions in waste, abuse, and possible fraud in PP’s family planning programs (http://tinyurl.com/h2agndm).


Terminated. A physician who opted out of Medicare was terminated from a Blue Cross/Blue Shield plan called Omnia and cannot be reinstated without again becoming a Medicare provider. The name, which means “all,” is certainly ironic—it will not include all willing participants. Omnia has an extremely restrictive network—and still is not cheap. The physician’s contract says the plan may drop a physician from all plans without cause.

A physician has few options. He can cave to the plan’s bullying, or dump the plan. Some patients might continue in the practice; with reduced administrative expense, the physician might be able to lower fees and remain financially viable. Caving in means the physician will continue to be subject to abuse from Medicare as well as from the plan. Is being on the plan worth the double abuse, and will the plan do something even more intolerable later?
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY

$29,000 > $69,000. According to the Pennsylvania Dept. of Public Welfare, a single mother is better off earning a gross income of $29,000 with net income and benefits of $54,327 than she would be earning a gross income of $69,000 with net income and benefits of $57,045. The moment a waitress increases her $29,000 income by a penny, she loses thousands of dollars in benefits. She’d need a leap to > $69,000 just to break even. As Trump says, the system is rigged—to trap people in poverty….
C.L. Gray, M.D., Physicians for Reform

Drug Dangers Soar. Overdose deaths in West Virginia were 34/100,000 in the years 2011–2013, up from 22/100,000 in 2007–2009. As many as 10% of W.V. newborns suffer a neonatal abstinence syndrome. Street heroin has become even more dangerous, partly from mixing it with even more powerful drugs such as carfentanil, an opiate tranquilizer used in elephants.
Paul Martin Kempen, M.D., Ph.D., Weirton, WV

ObamaCare III Alive and Well. Generally known as MACRA, this Medicare “doc fix,” passed almost unanimously by Congress in 2015, implements the ObamaCare goal of a government takeover of medicine, including “payment reform” aimed at restricting access to care. This includes Accountable Care Organizations (ACOs), the CMS “Innovation Center,” the Independent Payment Advisory Board (IPAB), the Patient-Centered Outcomes Research Institute (PCORI), “population health” initiatives, the National Strategy to Improve Health Care Quality, and more. Every word of ACA should be repealed, but repeal of ACA is not sufficient.
Twila Brase, R.N., Citizens’ Council for Health Freedom

My Corvette and Capitalism. Somebody said to a Corvette owner, “I wonder how many people could have been fed for the money that car cost.” Well,… it fed families in Bowling Green, KY, where the car was manufactured; the people who made the components; the people who mined the copper in the wires; the truckers who hauled the copper ore and the finished cars; etc. When you buy something, you give people money—and dignity for their skills. When you give people something for nothing, you rob them of their dignity and self worth. Capitalism is freely giving your money in exchange for something of value. Socialism is taking your money and forcing things on you that you do not value.
Jim Douthit, Tucson, AZ

ObamaCare Is a Sideshow…. Medicare and Medicaid are the problem. There was no healthcare crisis before these programs. ObamaCare was enacted because of the crisis they caused, and the crisis will continue even if ObamaCare is abolished. That’s because socialism is inherently defective. Nobody can make it work (Ron Paul Liberty Report 10/11/16, http://tinyurl.com/htnfrea).
Jacob Hornberger, Future of Freedom Foundation

Contemporary Bioethics. A “consensus statement” from a meeting held in Geneva on the question of conscientious objectors in medicine reminded me of the function sophists used to fill in ancient Greece: to provide moral cover to the powerful (http://tinyurl.com/hjex7qk). It is “indefensible,” these bioethicists held, for practitioners to refuse access to services that are legal and societally accepted when requested by a patient for any reason. One of the most popular articles on their Practical Ethics blog is “7 Reasons Not to Feel Bad about Yourself When You Have Acted Immorally.” One commenter remarked that “it seems most curious for ‘ethical’ guidelines to discourage independent ethical thought on the part of practitioners.”
Michel Accad, M.D., San Francisco, CA

Not a “Better Way.” The proposed Republican ObamaCare replacement could keep its worst though most popular features: the toxic expense of Medicare Advantage (a massively subsidized managed-care program that spends 14% more per person than regular Medicare); destructive guaranteed issue/community rating (to cover pre-existings, like buying insurance only when your house is on fire at the same price as faithful premium payers); and bonuses for bedside rationing of care masquerading as “value pay.” The “quality reporting and paying for value” is an already failed ObamaCare experiment run by CMS a few years ago. The only value is to insurance companies’ profits.
Robert Geist, M.D., St. Paul, MN

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