AAPS News – Jan 1992

Volume 48, No. 1 January 1992

“GIVING” AND TAKING

One way of “giving” medical care to our citizens is by
simply not taking their money away from them in the first place,
notes Robert Cihak, MD, of Aberdeen, WA.

For the government to fund medical care, it must first take
money-from taxpayers, or, in the case of deficit financing, from
future generations. As the tax bite increases, resistance also
increases, leading the government to search for more innovative
methods. Cost shifting is one. A hospital administrator
estimated that everyone’s hospital bill could be reduced by 41%
if all patients paid the full cost of their care. As
commercial insurers have begun to resist the hidden sickness tax,
governments have found a more direct method of taking: price
controls on providers of services. For example, it was
politically impossible to raise taxes again in West Virginia.
Yet the state was not only able to keep its promises to its
beneficiaries but to realize a $21 million surplus in the Public
Employees Insurance Agency.

“This is about equal to the amount of money taken so far
from the states’ health care providers [as a result of the
Omnibus Health Care Cost Containment Act],” stated Jerome
Arnett, MD, who spoke at the AAPS 48th annual meeting about a
physicians’ challenge to this legislation.

Are Takings Constitutional?

The Fifth Amendment to the US Constitution provides that
private property shall not be taken for public use without just
compensation. Property rights may encompass certain intangibles,
such as contract rights (Omnia Commercial Co. v. US, 261 US 502
(1923) or the right to obtain a divorce (Mullane v. Central
Hanover Bank & Trust Co.). A taking occurred when, as “a result
of legislative enactment, it was impossible for parties to engage
in their business profitably” (Keystone Bituminous Coal Assn v.
DeBenedictis, 107 S. Ct. 1232 (1987)). In the opinion of Oliver
Wendell Holmes, “every man has a property interest in his own
person….The labor of his body and the work of his hands we may
say are properly his” (The Common Law).

Logical as it may seem to consider medical services as a
form of property, courts have not been willing to apply the
protection of the Takings Clause to physicians. The US Court of
Appeals for the Fourth Circuit held that federal statutory
provisions limiting physicians’ charges to Medicare patients do
not constitute a taking because “the regulated group is not
required to participate in the regulated industry” (Metrolina
Family Practice Group P.A. v. Sullivan, CA 4, No. 90-2320,
3/25/91). Furthermore, the regulations satisfy the due process
requirement because they have a “reasonable relationship to a
proper legislative purpose [spending money in aid of the `general
welfare’ while protecting the federal treasury and elderly
beneficiaries] and are neither arbitrary nor discriminatory”
(BNA’s Medicare Report 7/26/91).

The Fifth Circuit Court has ruled that requiring a physician
to perform services under “Anti-Dumping” legislation does not
constitute a taking (Burditt v. Sullivan CA 5, No. 90-4611,
7/9/91) [see AAPS News, Sept 1991].

Gammon’s Law

Although the government might be able to repeal constitu-

tional protections for physicians, there is another law that is
outside their jurisdiction. One such natural law was enunciated
by a British physician Max Gammon. His “theory of bureaucratic
displacement” states that in “a bureaucratic system…increase
in expenditure will be matched by fall in production…Such
systems will act rather like `black holes’ in the economic
universe, sucking in resources and shrinking in terms of
`emitted’ production” (Wall St J 11/12/91). In other words, the
more the government takes, the less it gives.

Examining input and output in medical care before and after
the enactment of Medicare, Milton Friedman concludes that
Gammon’s Law is in full operation (ibid.) Since 1946, hospital
personnel per occupied hospital bed multiplied nearly seven-fold
and cost per patient day, adjusted for inflation, rose 26-fold.
A slow rise in input before the enactment of Medicare became a
meteoric rise afterward. At the same time, the number of beds
declined rapidly. Growing costs led to increasing regulation,
which may have played a major role in the cost explosion, though
comprehensive data are not readily available. At the same time,
Friedman argues that improvements in health status suddenly
slowed.

Friedman asks why we should expect to be any better at
socialism than the Soviets. Instead of increasing the scope of
socialism, as most current “reform” proposals advocate, he
calls for moving in the opposite direction, toward reprivatiza-

tion. The biggest impediment is the huge constituency of people
involved in administering the current socialized system,
including a large private-sector component that has adjusted to
it. “They are sufficiently potent politically to kill any such
reform,…just as the educational bureaucracy has repeatedly
killed even modest programs for privatizing education.”

A Safety Net for a Sinking Ship?

The result of taking in order to give was described by
Michael Walker of the Fraser Institute in Vancouver, Canada:

“Rather than throw a group of drowning people life
preservers, the government sinks a yacht so they can cling to the
wreckage.”

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Without Malice Aforethought

[For perspective on the present rule of law outside of
medicine, this article by Petr Beckmann, DSc, is excerpted with
permission from the Dec. 1991, issue of Access to Energy.]

It is curious that energy-plutonium and oil-should be the
background of two legal decisions that may be the most important
in the ongoing collapse of American justice.

The first was Silkwood v. Kerr-McGee, which established the
principle, so far only for corporations, that Innocence is no
defense. Kerr-McGee had fully complied with the law, and the
plaintiffs were unable to point to a single case where a law or
regulation had been violated. But after an emotional media
campaign with false accusations, a jury nevertheless found the
defendants guilty of “negligence” and awarded more than $10
million in damages. It used to be typical only of totalitarian
states that compliance with the law was no guarantee against
being found guilty, especially if the victim was a member of a
group singled out for fanning public resentment, such as the Jews
or the members of the former “bourgeoisie.” Nowadays, the big,
evil corporations fit the bill.

The second was the US and Alaskan government vs. Exxon,…in
which a second totalitarian principle, so far again only for big
corporations, was established: Crime does not require intent.
Intent used to be what distinguished murder from manslaughter and
a premeditated misdeed from an accident. “With malice
aforethought” is the old English legal phrase charging a misdeed
and stressing that it was not accidental.

But Exxon was charged under the Migratory Bird Treaty Act
with killing migratory birds without a permit, and under the
Refuse Act with dumping waste without a permit. I shed few tears
for a corporation that thinks it can buy itself free from the
sham-environmentalist wreckers by paying them millions in
protection money….What I do fear is that this travesty of
justice…will eventually hit the private citizen….

Such abuses are invited by the absence of risk to the
litigating spongers. In all of Europe, the loser pays court
costs; in American, the government even hands out your money to
“interveners” for their barratry.

However, this type of abuse only makes the country
poorer…There are denials of justice that directly threaten
civil liberties. In what country under the rule of law could a
man get 10 years in prison in a first-offense burglary in which
nothing was stolen and no resistance offered to the police? Only
in America can political vengeance be inflicted in this way: it
happened to Gordon Liddy at Watergate. Only in America can the
accused be denied a fair trial because the government first
confiscates all his assets under the RICO act; thus effectively
deprived of a legal defense, he is then blackmailed into pleading
guilty to a lesser offense, and (as happened to Milken) even then
the government can simply renege on its promise.

Then there is trial by accusation and by political correct-

ness…Such drift into totalitarian lawlessness…cannot be
patched up by formal reform of the law, for it grows out of the
deeper soil:…the coercive ideologues fan resentment against the
producers while protecting the parasites. It is on this level
that the collapse of justice must be stopped.

The alternative for the individual citizen is what has
already arrived for corporations: Innocence is no defense, and
crime does not require intent.

The Doctor-Patient Relationship in Restructured Medicine:
Lessons from Public Psychiatry

In 1982, the absence of a doctor-patient relationship helped
kill 19-year old Judith Singer, previously in excellent physical
health, six days after she was readmitted to a New York State
Psychiatric Center for manic-depressive psychosis. No psychia-

trist was able to calm this frightened girl by talking with her.
She distrusted the staff and refused to take oral medication.
Thirteen psychiatrists in four different hospital wards then
ordered 34 injections of seven major psychopharmaceuticals. They
also ordered physical restraints for most of her hospital stay,
during which she lost 23 pounds.

A patient with overwhelming or disorganizing problems may
pour his heart out to a psychiatrist-or to any doctor. If that
physician is then prevented administratively from ever seeing him
again, his hopes will be dashed. Public psychiatric care in
American is increasingly structured to prevent such relationships
from continuing.

Most mental-hospital discharges now living in our streets
are products of fragmented care and wrecked doctor-patient
relationships. Susan Sheehan’s 1982 book, Is There No Place on
Earth for Me? vividly delineated the discontinuous and
disorganizing treatment and how it can render insane those who
are not crazy already. The harmful consequences are described in
two 1990 books, Johnson’s Out of Bedlam and Isaac and Armat’s
Madness in the Streets.

Our complicated psychiatric “care system” is often blamed,
but nothing is simpler than organizing care around one physician
caring for a patient as long as treatment is needed. Cambridge,
England, had such a public mental health care system in 1978.
Patients from a geographic area were treated on the same ward,
and the same doctor followed them after release to a clinic or
day hospital. A similar system had been set up in 1976 at
Kingsboro Psychiatric Center in Brooklyn, where I was Clinical
Director. But political administrators replaced both systems
with complicated ones, in which each patient was treated by a
series of psychiatrists.

Since 1980, the American Psychiatric Association has been
publicizing a redefinition of “continuity of care,” which
endorses such complicated systems. The term had meant having the
same doctor treat the patient whatever the treatment setting, but
the APA accepted Bachrach’s definition, “the orderly,
uninterrupted and unlimited movement of patients among diverse
elements of the service delivery system.”

That definition accepts fragmented care as a given. It says
nothing about the doctor-patient relationship. Faced with the
impossible task of making effective the hospital and aftercare
treatment provided by different organizations, nonmedical
psychiatric administrators now call for bureaucratically
“linking hospital and community programs on a regional basis”-
again without mentioning doctors and their patients.

The fiscal costs are as great as the therapeutic. A 1982
comparison of care for the mentally disabled in Cambridge with
New York State’s found that Cambridge did better with less than
40% as many personnel.

Restructuring medical care is a hot political issue…If we
do not learn from public psychiatry’s errors, and fail to
preserve doctor-patient relationships, reorganized medical care
may harm its patients as much as public psychiatry sometimes
does.

Nathaniel S. Lehrman, MD, Roslyn, NY

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Seventh Circuit Rules that PROs Have Absolute Immunity
Despite Wording of Statute

As the federal government has expanded its role in medical
care, the federal judiciary appears to share the belief of most
officials in the legislative and executive branches: the total
regulation of the medical profession and the total elimination of
the fundamental rights of physicians are both desirable national
goals. On the heels of the Fifth Circuit decision in Caine v.
Hardy (which eliminates the Civil Rights Act of 1871 as a viable
cause of action when state agents deny a person property without
due process of law-see AAPS News, Nov. 1991), the Seventh
Circuit Joint of Appeals has joined the Eight Circuit in ruling
that Peer Review Organizations (PROs) and their physician members
are absolutely immune from liability for decisions they make in
the Medicare sanctions process (Wood v. Freeman, 7th Cir.,
10/25/91).

The Social Security Act seems to be clear when it comes
to immunity from civil liability for PROs and their agents:

No organization having a contact with the Secretary
under this part and no person who is employed by, or
who has a fiduciary relationship with, any such
organization, or who furnishes professional services to
such organization, shall be held by reason of the
performance of any duty, function, or activity required
or authorized pursuant to this part or to a valid
contract entered into under this part to have violated
any criminal law or to be civilly liable under any law
of the United States or of any State (or political
subdivision thereof) provided due care was exercised in
the performance of such duty, function, or activity-
U.S.C. §1320c-6(b).

Clearly, this statute grants immunity, but it is not
absolute immunity. The PRO and its agents are not licensed to be
negligent in the performance of their functions. If it were
found that a PRO and its agents failed to exercise “due care,”
there would be no immunity from civil liability. This is the
unequivocal wording of the statute.

The Seventh Circuit reads it differently. In dismissing a
physician’s complaint against PROs and their agents for the entry
of sanction recommendations against him, the Court opined that
the aforementioned statute grants to PROs and their physicians
immunity irrespective of whether “due care” was exercised. In
other words, this shocking opinion grants absolute immunity.

Russell J. Wood, MD, filed a civil action in the US District
Court in Illinois against two PROs and their physician members,
alleging violations of the constitutions and antitrust laws of
the United States and Missouri and various common law torts. The
District Court dismissed the case. Affirming the dismissal, the
US Court of Appeals for the Seventh Circuit cited a 1991 opinion
of the Eighth Circuit in Kwoun v. Southeast Missouri Professional
Standards Review. The Courts held that absolute immunity “leads
to an effective, efficient, and economical Medicare program,”
and is “essential for the conduct of public business in this
critical health care area.”

This reasoning represents judicial activism at its worst.
The courts simply chose to ignore the standard of “due care”
that Congress incorporated into the statute. Then, they
bolstered their grant of absolute immunity by citing public
policy considerations as though they were enacting the statute
rather than interpreting it!

Circuit Judge Richard D. Cudahy of the Seventh Circuit
dissented in Dr. Wood’s case. Cudahy wrote that though the PRO
and its agents might be accorded “qualified immunity,” he was
“not persuaded that they were entitled to a more sweeping
absolute immunity.” He properly noted that Congress could have
provided for absolute immunity in the statute, but by implication
rejected it.

What the Seventh and Eighth Circuits have done is occurring
with ever increasing frequency in federal courts. In their rush
to close the federal courts to civil litigation-“judicial
restraint” it is called-judges are choosing to read statutes in
a way that fulfills their own purpose. At a minimum, this is
blatantly arbitrary decision-making. Such result-oriented
rulings undermine the role of the judiciary in our constitutional
system and erode citizens’ confidence in the role of the courts.

Virginia Supreme Court Says
Legislature May Discriminate

In November, 1991, the Virginia Supreme Court ruled against
physicians who challenged the constitutionality of the Injured
Infants Act. This Act, which is similar to the Florida Birth-
Related Neurological Injury Compensation Act, removes certain
claims against physicians who practice obstetrics from the
traditional tort system. It requires physicians who do not
practice obstetrics to pay an annual assessment of $250 to fund
the system.

In its ruling, the Court stated that “all statutes enacted
by the General Assembly are presumed to be constitutional.”
Challengers have the burden of proof, and “any reasonable doubt
as to the statute’s constitutionality must be resolved in favor
of its validity.”

Physician plaintiffs argued that the Virginia Constitution
prohibits “special laws” that grant an exclusive right,
privilege, or immunity to any private association or individual.
The Court responded that this constitutional provision “does not
prohibit legislative classifications,” as long as the
classifications are “natural and reasonable, and appropriate to
the occasion.”

A classification will not be invalidated [under
the Equal Protection Clause] merely because it results
in some inequality or some discrimination…if the
legislature could have reasonably concluded that the
challenged classification would promote a legitimate
state purpose….A statutory discrimination will not be
set aside if any state of facts reasonably may be
conceived to justify it [emphasis added].

The Court reasoned that the Anti-Discrimination Clause in
the Virginia Constitution refers only to “governmental
discrimination upon the basis of religious conviction, race,
color, sex, or national origin.”

The opinion did not address the taxation issues raised in
the similar Florida case, Coy v. NICA, which is still pending.
The American Health Legal Foundation contributed to the Virginia
case, which was funded through the Physicians’ Constitutionality
Challenge Group. An appeal to the US Supreme Court is being
considered.

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New Members

AAPS welcomes Drs. David Anderson of Anchorage, AK; Robert
Baker of Tucson, AZ; John Bauscher of Aberdeen, WA; Karl T.
Benedict, Jr. of Weston, MA; David E. Berckmueller of Tiffin, OH;
Robin Bernhoft of Everett, WA; Wayne Bryant of Hoquiam, WA;
Russell Burgess of Augusta, GA; Bill Coyne of Aberdeen, WA; Harry
Anderson Dollahite of Ft. Worth, TX; Michael P. Ederer of Mobile,
AL; Bertram Feingold of Scottsdale, AZ; Michael Ferdinands of
Bettendorf, IA; Irwin Finkelstein of Mesa, AZ; Ronald L Fraser of
Richmond, TX; Douglas L. Gaker of Middletown, OH; Edward
Gallagher of Saratoga Springs, NY; T. Kirkland Garner of Atlanta,
GA; Phillips L. Gausewitz of San Diego, CA; Phillip Gibbs of
Aberdeen, WA; Christin P. Glavey of Alpharetta, GA; T. Murphy
Goodwin of Monrovia, CA; Craig Hall of Hackensack, NJ; Michael
Hannan of Aberdeen, WA; W. Kirk Harris of Aberdeen, WA; Edward P.
Hoffman of Olympia, WA; Gerald B. Hogsette of Aberdeen, WA; David
F. Horton of Olympia, WA; W. Steve Hutton of Aberdeen, WA; James
R. Ingram of Sumter, SC; Russell M. Jaffee of Skillman, NJ;
Charles D. Jennings of Great Falls, MT; Peter M. Johns of
Littleton, MA; Thomas R. Johnston of Ada, OK; Robert C. Jordan of
Winston Salem, NC; Eleazar M. Kadile of Green Bay, WI; Ed Kilgore
of Aberdeen, WA; Jeffrey H. Kiviat of Alton, IL; J Kondola of
Pascagoula, MS; David E. Konn of Aberdeen, WA; Paul P. Krikorian
of Dover, NJ; Ross Levatter of Phoenix, AZ; Richard Lewis of
Hoquiam, WA; Dave Loken of Mercer Island, WA; Brian Lueth of
Everett, WA; Judith Marsden of Seattle, WA; Tom Mattice of
Granger, IN; Scott J. McCorkell of Seattle, WA; Albert Menduni of
Tallahassee, FL; Michael Miller of Houston, TX; Pat Mongan of
Augusta, GA; Bob Mysliewiec of Hoquiam, WA; Fred Ng of Raleigh,
NC; Mark Niclanovich of Santa Cruz, CA; Richard F. Ott of Fort
Lauderdale, FL; Peter Overstreet of Toledo, OH; Michael Pecararo
of Hackensack, NJ; William J. Peters of Hoquiam, WA; Henry Rosen
of Midland Park, NJ; Kimra Ross of Joplin, MO; Steve Sacks of
Plymouth Meeting, PA; Mitchell Simons of Southgate, KY; Will
Stewart of Las Vegas, NV; Dick Sypherd of Hoquiam, WA; James
Szwed of Indianapolis, IN; Charles Thompson of Aberdeen, WA; Jane
Tonkin of Monterey, CA; Mike Trygstad of Elma, WA; Marsha Hoffman
Vaile of Lakeland, FL; Richard Wall of Colorado Springs, CO;
Terrence B. Welsh of Portsmouth, OH; Thomas L. Yearwood of
Mobile, AL; and George S. Young of New Orleans, LA.

New medical students from Ohio are: Gregory M. Abbas, Shahab
Abdessalam, Brian K. Adams, Peter J. Adams, Vlad Alexander, Tahir
Ali, Rita L. Arend, Steven P. Balaloski, David M. Barrere, Mario
Brunicardi, Mark Alan Buddie, Douglas B.

Carr, Wei Chen, Walt Chlysta, Elena A. Christofides, Craig
Cole, Bridget Y. Cottrill, David Cummin, Laurie Dashner, Brian
Delay, David A. Epstein, John Fry, Anthony Gabriel, Anne E.
Gasior, Merrill Lee Gladden, Jr., Steve Greer, Cathy Greiwe,
Matthew T. Hazelbaker, Bernt Helgaas, Ann M. Hickey, John
Hoitink, Mike Hummel, Irene Katzan, Frank M Kelley, Keith Kellum,
Miguel Kerlado, Jennifer F. Kloesz, William Konomos, Thomas
Krivak, Thomas F. Lee, Brian Leon, Hannah Lim, Edwin Long,
Michelle Mackey, David R. Marques, Michael S. McLeod, Dave
Michael, Thomas J. Nero, Kerry Owens, Laurel E. Parker, Shawn
Reinhart, Bob Sawyer, Bert Silich, Bernadette Y. Smith, David
Streem, Kiran Tipirneni, David Venesy, Stephanie A. Wellman, and
Richard Yu.

Other new student members are: Carole Bresnahan, Sherry
Galt, Ken Gossler, Daniel E. Kates, Greg Labenz, and Rebecca
Pollak, all from Arizona, and Teresa Lugo Fagundo, Nordeli
Estronza, and Rub‚n A. P‚rez of Puerto Rico.

Where Will It End?

The most important fear that Senator Joseph Biden had about
Justice Clarence Thomas was his view on constitutional
protections of private property. Since the New Deal, federal and
state officials have regularly violated private property rights.
If the courts were to start enforcing the Takings Clause,
particularly with regard to regulatory takings, where would it
all end (Wall St J 11/27/91)?

One example is a $28.4 million suit filed by Nevada cattle
ranchers against the US Forest Service for barring access to land
on which they own the water rights, without paying compensation
(CEI Update Oct 1991). Another is the case of Lucas v. South
Carolina Coastal Council, which the US Supreme Court has agreed
to hear this session. David Lucas saw the value of his property
drop to $0 when the state declared he could never build anything
on it, lest he contribute to beach erosion that would damage his
neighbor’s property value. The action was justified on the basis
of the exercise of “police power,” which does not require
compensation.

If the Takings Clause can be enforced, then what about the
Contracts Clause that formerly protected private agreements from
government interference?

AAPS Calendar

Jan. 31, 1992. Board of Directors meeting, New Jersey.

Feb. 1, 1992. Medicine and Freedom: the Doctor, the
Government, and the Law, Pascack Valley Hospital, Westwood, New
Jersey.

Oct. 15-17, 1992. Annual Meeting, Seattle, WA.

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Legislative Alert