AAPS News – Jan 2006


Volume 62, No. 1 January 2006


Doctors are just like other Englishmen: most
of them have no honor and no conscience: what they
commonly mistake for these is sentimentality and an
intense dread of doing anything that everybody else
does not do, or omitting to do anything that everybody
else does.

The Doctor’s Dilemma, George Bernard Shaw, 1913

In the early 1900s, as now, there were pressures for
conformity, yet great disparities in treatment. Medical errors
killed people; medical costs bankrupted people; medical science
was flawed; therapeutics was driven by fad and fashion;
professions were called a “conspiracy against the public,”
concerned only about protecting their ego and their income; and
socialism was the cure.

Shaw proposed to have physicians employed by the state as
public health officers, with salary determined by the health of
their district: payment for performance. The idea was to
eliminate the possibility of a “vested interest in ill health.”

He believed in massive data collection: “Remember that an
illness is a misdemeanor; and treat the doctor as an accessory
unless he notifies every case to the Public Health Authority.”

Socialism is harsh. Even though Shaw wanted to force doctors
to remind their patients of their fallibility, he advised that
society “[t]reat every death as a possible…murder…; and
execute the doctor, if necessary, as a doctor, by
striking him off the register.” The number of registrants would
be strictly limited, and care, naturally, would be rationed.

Apparently, in his advocacy of socialism Shaw was blind to
his own remonstrances about the uncertainties of science, and the
fact that by playing on people’s fear of death, “any trader can
filch a fortune,…and any tyrant make us his slaves.”

Rereading the Fabian socialist Shaw can help immunize us
against thinking that current trends are New Ideas. But the
proposed new standard of care is a radical change from the court-
determined, case-by-case criterion for negligence. It is
universal, and while supposedly based on science rather than
authority (expert witnesses), a powerful authority will dictate
what constitutes evidence, and what the evidence shows.

Congress has passed a bill creating the National Medical
Error Reporting System to encourage voluntary, confidential
reporting of medical errors. This was inspired by the system for
reporting aviation errors or near-misses to NASA, to help reduce
accidents. Senate Majority Leader Bill Frist, M.D., subscribes to
the Institute of Medicine’s assertion that medical errors are the
nation’s eighth leading cause of death.

The Center for Health Transformation, founded by Newt
Gingrich, wants President Bush to “set as a national goal the
elimination of deaths due to medical errors.” Senators Hillary
Clinton (D-NY) and Barack Obama (D-IL) introduced the National
Medical Error Disclosure and Compensation (MEDiC) Act, S. 1784,
which would provide federal support for a program that would
require disclosure of errors to the patient and offer to enter
negotiation for compensation if the patient was found to have
been harmed by “medical error or the standard of care not being

Deviating from the standard of care could thus be treated in
the same way as an error. And who will determine the standard?
The AMA proposes developing “evidence-based, valid performance
measures” through a “consensus-building organization involving
multiple stakeholders.” This appears to be the proposed trade-off
for eliminating the Sustained Growth Rate (SGR) methodology of
setting Medicare fees, and its 26% fee cut expected over the next
6 years.

Our current parlous state persists despite the fact that the
United States has the most heavily regulated medical system in
the world; laws and regulations governing it comprise more than
half the words in our entire body of law. The added element in –

proposed solutions like the AMA’s is a greater merger of state
and corporate power: Mussolini’s definition of fascism (Jones HE,


The biggest stakeholder is the pharmaceutical industry. In a
survey of more than 200 guidelines deposited with the U.S.
National Guideline Clearinghouse in 2004, specifically written to
influence physicians’ practice, only 90 contained details about
individual authors’ conflicts of interest, and of these only 31
were free of industry influence (Nature 2005;437:1070).

While various types of surgical and endovascular
intervention are included for peripheral arterial disease, the
ACC/ AHA guidelines also recommend a long list of drugs: statins,
fibric acid derivatives, ACE inhibitors, beta blockers, nicotine
replacement, bupropion, aspirin, clopidogrel, cilostazol, and
pentoxifylline (75-page executive summary, www.acc.org).

Since the “gold standard” for “evidence-based” medicine
(EBM) is the randomized controlled trial (RCT), drug therapy is
bound to be favored. Methods based solely on individual clinical
observation or pathophysiology (thyroxin for myxedema,
antibiotics for infection, surgery for obstruction, oxygen under
pressure for carbon monoxide poisoning or ischemic brain damage)
can never measure up by definition.

EBM is not exclusively a tool for reducing error, writes
Kenneth Goodman of the University of Miami bioethics program.
Fledged about the same time as managed care, EBM “was bound to be
about money and lawsuits.” EBM is a “cudgel for beating down
costs” (PBM 2005;4:548-556).

Physicians must beware of accepting the concept of a
standard of care that is itself evidence-based, threatening the
autonomy of physicians and subjugating the patient’s interest to
that of the collective. Ethically, the standard of care remains
the Oath of Hippocrates: “I will prescribe regimen for the good
of my patients according to my ability and
my judgment.”

Reflections on Evidence-Based Medicine

What it is: a collection of secondary resources
that “digest and summarize” the medical literature for
clinicians; a creed; “one of the most influential doctrines in
the medical world”; a “search for rules in a world of
exceptions”; a hierarchical account of evidence; a branding

The top of the hierarchy: the randomized controlled
trial (RCT), the “gold standard” even in circumstances when it is
impossible to perform; poorly performed RCTs trump all non-RCT

Absent from the hierarchy: listening to patients and
their concerns.

The role of patients: “objects from which information
is to be gleaned and then inspected.”

Pitfalls of RCTs: the “privileging of inferential
gaps” by abjuring pathophysiologic rationale; “evidence for
sale”; studies underpowered to determine the harm/benefit ratio;
limited ability to evaluate combination therapy or comorbidities.

[See autumn 2005 issue of Perspectives in Biology and

From Autonomy to Accountability

“Third parties traditionally have not been in a position to
prescribe medical behavior because medical professionals largely
determine the content of their work. Outsiders, though, can try
to hold the profession accountable to its own guidelines.
Dovetailing on the professional authority already invested in the
guidelines, these outside parties will try to enforce the
normativity of the guideline and erode its flexibility, turning a
guideline into an enforceable standard. The key mechanism for
such conversion is financial accountability….

“What is at stake is who decides how medical work should be
done. Are the people trained to do the work or those who pay in
charge?” (PBM 2005;48:498).

“Doctors have been given the opportunity to scuttle
Medicare,” writes AAPS President Elect Robert Gervais, M.D. “All
they had to do was to refuse to sit down with government and
assist it in implementing coding, HIPAA, P4P, etc…. Doctors
repeatedly had the chance to choose principle over expediency,
but never did. They are now paying the price in innumerable

The Standard for Review

The senior author of the Agency for Healthcare Research and
(AHRQ) negative review on the use of hyperbaric
oxygenation in cerebral palsy made a private comment that no
matter what
, he would not find HBOT useful for neurologic
indications, writes K.P. Stoller, M.D. A physiologic study of
brain blood flow and metabolism after injury was thrown on the
trash heap of “uncontrolled” studies. Papers reporting on SPECT
scan imaging were simply disregarded.

A parent writes: “An artificially high standard that is
still not in place for any other modality…now prescribed for
brain-injured children” can be used selectively to exclude data.

This method, he continues, appears to be the “standard” for
other reviews done by the Evidence-Based Practice Center at OHSU,
such as one on vaginal birth after caesarian, which examines only
20 of 6,828 potentially relevant articles (Guise JM, et al.
Obstet Gynecol 2004;103:420-429
), excluding 99.7%.

Standard of Care Killed Washington

In the 12 hours before his death, from what in retrospect
was probably bacterial epiglottitis, George Washington had 80 oz
(2,365 ml) of blood removed and was also treated with calomel and
tartar emetic. The reasoning was that vasoconstriction might
relieve the inflammatory edema. The proposal to do a newly
described procedure called a tracheotomy was rejected. This was
also based on reasoning about pathophysiology, not on an RCT.
Meanwhile, Benjamin Rush, a champion of bleeding, was facing
allegations of malpractice. He had sued journalist William
Cobbett, who had charged Rush with killing patients. Rush won the
lawsuit the day Washington died (Morens DM, N Engl J Med

Applying for Government Money

To see whether they are eligible for “extra help” of up to
$2,100 with prescription drugs, Medicare beneficiaries are asked
to disclose income and all their “resources,” including bank and
brokerage accounts, “cash at home or anywhere else,” and value of
life insurance “if cashed in today,” under penalty of perjury
including imprisonment (SSA-05-10128).

Hand Surgeon Opts Out

Having decided to opt out of Medicare as of July, 2005, hand
surgeon Paul Gorman, M.D., of Johnson City, TN, explains why on
his website

“In keeping with the quote from the 18th century Irish
philosopher, Edmund Burke: `Better be despised for too
anxious apprehensions, than ruined by too confident
my conscience has compelled me to voluntarily
no longer participate in Medicare Part B for physicians services
and any federal-state reimbursed health programs…. That which
the government subsidizes, it ultimately controls, and while
there is still a vestige of the free market left in medicine and
the 13th Amendment to our Constitution which prohibits my
involuntary servitude, I intend to work as hard as possible to
show that a free and independent physician can outdistance a
government bureaucrat anytime….

“Medicare has become the cornerstone of the socialist
welfare state in America…. With its price controls and
burgeoning enrollment as the `baby boomers’ enter retirement age,
the following are inevitable if the program is not disbanded or
privatized soon: taxes will increase, services will be cut, rules
will increase in complexity, and compliance penalties will become
more punitive….

“Instead of restricting access to hand care, my policy is to
contract privately….”

AAPS Calendar

Feb 11, 2006. Board of Directors meeting, Houston, TX.

Sept 13-16, 2006. 63rd annual meeting, Phoenix, AZ.

Medical Staff Reappointment Watch

The appointed Medical Staff Leaders of St. Dominic-
Jackson Memorial Hospital in Jackson, MS, expect that, if you
accept reappointment, you will:

  • Bring any concern regarding patient care…to the
    attention of either the Chief Executive Officer, Chief of Staff,
    or Department Chair;
  • Refrain from discussing these issues with others,
    who cannot effect change;
  • Provide care at the generally recognized level;
  • Follow medical staff approved protocols of care when such
    protocols have been determined by the Medical Executive Committee
    to promote quality care and appropriate use of

Recertification Watch

As of January 2006, recertification by the American Board of
Internal Medicine requires completion of a “self-evaluation
module for practice performance.” Physicians conduct a chart
review of patients with the selected condition, submit data,
receive a document comparing their performance with national
guidelines, develop a “plan for improvement,” and measure its
effects after implementation (N Engl J Med

Conscience Watch

Pharmacists’ refusals to fill prescriptions for
contraceptives, which they may consider to be abortifacients, is
increasing worldwide and is headlined as “a threat to women’s
health” (Science 2005;308:1557-1558). A small number of
administrative and judicial bodies have considered challenges to
pharmacist refusals. The Wisconsin pharmacy board found that a
pharmacist’s failure to transfer a birth-control prescription
“fell below the standard of care,” charged him the $20,000 cost
of adjudication, and placed stipulations on his license. Bills
permitting refusals on moral or religious grounds, introduced in
28 states since 1997, also have implications for treatments
derived from embryonic stem cell research.

When Drs. Christine Brody and Douglas Fenton refused to
provide artificial insemination to Guadalupe Benitez, she sued
them for discriminating against her based on her lesbianism. The
trial court declined to allow the physicians to raise religious
freedom as a defense, but a California appeals court ruled that
the doctors had the right to refuse the procedure based on
marital status because it violated their religious beliefs.
California nondiscrimination laws did not include marital status
at the time the service was refused; the law has since been
amended to cover same-sex couples who cannot legally marry. The
case will be appealed to the California Supreme Court.

The California Medical Association initially supported the
doctors, but withdrew upon discovering that the patient was a
lesbian (AP 10/12/05; 365gay.com 12/8/05).

Right to Use Dangerous Off-Label Drug

An Ohio law that restricts the use of RU 486 intravaginally
or past 7 weeks of pregnancy unfairly prevents some women from
using the drug, says Planned Parenthood, which has challenged the
constitutionality of the law with the help of the ACLU and ACOG.
A practitioner who violates the law could be imprisoned for as
long as 18 months. The FDA states that the “off label” use of the
drug can result in death from bacteremia. State Attorney General
Anne Berry Strait stated that FDA trials showed a great decrease
in efficacy and increase in adverse effects after 49 days (LifeNews.com 12/5/05).

Pain Doctors’ Convictions Upheld

The Fourth Circuit Court of Appeals affirmed the convictions
of three physicians who worked at the Comprehensive Care and Pain
Management Center in Myrtle Beach, SC, on charges of drug
distribution, drug conspiracy, and money-laundering conspiracy
(AAPS News, March and June 2003). The doctors claimed that they
were entitled to a new trial because the lawyers on both sides
confused the standards for civil malpractice and criminal

Both the prosecutor and the court acknowledged that the
doctors are entitled to resentencing under U.S. v.
. Dr. Michael D. Jackson was sentenced to 24 years and
4 months; Dr. Ricardo Alerre to 19 years and 7 months; and Dr.
Deborah Bordeaux to 8 years and 1 month (AP 12/1/05).

Tip of the Month: Although it is not a crime for the
government to lie to us, a special law makes it a crime to utter,
during a federal investigation, something later deemed to be
false and material (significant). See 18 U.S.C. 1001. Martha
Stewart, for example, was prosecuted because the government felt
she lied to an investigator. She was not prosecuted for the
activity that triggered the investigation. States do not
generally criminalize comments made to investigators, but federal
law does. As a result, no one could fault or prosecute someone
for responding to an investigator by saying: “I’d like to speak
with my attorney first.” In 50 years, will disagreeing with
government be a crime?

On Tape Recording Officials

Laws vary regarding the legality or admissibility of tape
recordings without the consent of all parties (

). In two
cases in Australia, surreptitious recordings that parents made of
child protection officials were allowed in court. While they had
little effect on the proceedings, as the court felt they were too
easily distorted or altered, the tapes did help to expose wild
inaccuracies and fabrications by social workers. Even if
recordings are never used in court, they can be an invaluable aid
in transcribing your written notes of a meeting.

Australians advise: never rely on their recording
of a session. It might take a long time to get a copy, and it
could be damaged or altered. One might have a tape machine ready
and start it as officials arrive, asking on the tape about any
objection to taping the meeting “in order to create an
accurate record for access later.” Taping the
refusal and answer to the question “Why?” could improve chances
of acceptance. It is advisable to have a separate microphone
placed away from guests to discourage interference. Have a
witness and introduce him on the tape, and also name everyone
present. Consider offering a copy of the tape to social workers
(they have been known to refuse, but the offer was on the tape).
While officials might be reluctant to compare the tape with their
record to correct errors, their behavior has reportedly been much
better while they were being taped, and errors turned out to be
minor though possibly distressing.


Hospitals Seek More Protection. An interesting
sidelight to the clause that Horty Springer devised for medical
staff applications (AAPS News December
): In the Clark case (AAPS News October 2005), the hospital had the
physician sign an “agreement not to sue” and thought it was home
free when it did a sham peer review on Dr. Clark. The judge held,
however, that the clause only applied to the time when the doctor
signed it, as he could not reasonably foresee future claims
(Clark v. Columbia HCA 25P.3d 215 2001).

This case was one of the first to crack the virtually
impenetrable shield of immunity provided by the Health Care
Quality Improvement Act (HCQIA). The verdict shocked and
frightened many hospital administrators. As a result, the
hospital bar is attempting to find a way around it, such as the
“code of conduct” (unilaterally determined and enforced by the
administration), the “competing physician clause,” barring
doctors who own any part of a competing facility from serving as
an official of the medical staff, and other devious ways to
deprive physicians of any due-process rights.

Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY

Price Transparency. Somewhere there is an entity that,
for a cost less than that of massive paperwork exercises
requiring hospitals to publish meaningless lists of prices nobody
pays under laws of 50 different states, could put consumer-
friendly English-translation Medicare procedure prices on the
web. A private firm, Kelly Blue Book, does annual price surveys
on cars around the country: instant price transparency, no
legislation required, huge consumer acceptance.

Maybe the AMA could do it, thereby making money from the
consumer-directed health care revolution. Instead, it seems to be
cowering in the corner, possibly owing to its dependence on
handouts from the Robert Wood Johnson Foundation. Maybe it could
get the Kelly people interested!

Linda Gorman, Independence Institute, Englewood, CO

Barriers to Accurate Pricing. According to a hospital
CEO, his industry has never had cost-accounting procedures that
provide accurate estimates of the cost of hospital testing or
treatment. Developing them will take a major effort, especially
considering the totally illogical billing procedures that have
evolved owing to the market-blind, coercive demands of Medicare,
Medicaid, and managed care which ties its contract arrangements
to Medicare’s dicta.

Hospitals’ best hope may be that, at some glorious time in
the not-too-distant future, they can begin to deal with patients
and insurers on the basis of accurate cost-accounting instead of
self-beggaring contracts. This means not signing managed care
contracts, and encouraging consumer-directed health care (CDHC).

Robert F. Hamilton, M.D., Godfrey, IL

Hospitals Could Compete. I think that well-run
hospitals, especially nonprofits relieved of tax burdens, could
do very well, and even clean the clocks of some specialty
hospitals. But they won’t, because they are dominated by the same
thinking as our education system : competition, productivity,
results, incentives, and other basics that created the most
prosperous economy in the world are utterly foreign, even
despicable, concepts to their leaders.

Sean Parnell, Heartland Institute, Chicago, IL

Who Determines Value? It appears that one can’t improve
on the natural exchange of values between individual persons.
Many call this the free market. Politicians who think their
wisdom exceeds that of many such counterbalancing exchanges tread
very close to hubris which the ancient Greeks considered the
worst of character defects.

Robert S. Berry, M.D., Greeneville, TN

How to Sell Stuff. From a sales manual by a cemetary
plot salesman: If you’re having trouble selling something, first
yell at the prospective customer and tell him he’s a functional
idiot if he doesn’t buy your product. If that doesn’t work, run
to Congress and get them to pass a law requiring everybody to buy
what you’re selling. This may be much easier than finding
products that people actually want to buy.

Greg Scandlen,

Doctors’ Prices. The government made a big error in
prohibiting discussion of fees among doctors. The overall effect
was to increase charges, eliminate transparency and competition,
and lead to game playing.

Milton Kamsler, M.D., St. Augustine, FL

How Things Have Changed. It used to be that if one had
a better mousetrap, he had a way to introduce it into the
American economy. Now, in addition to the mousetrap, he needs to
find a loophole.

Don Levit, HealthBenefitsReform Group

Punishing “Price Gougers.” Say you have some
generators, and disaster has struck. How much should you charge
to offset loss of other business, replacement costs, delivery
costs, etc.? If you face prosecution as a “generator king pin” in
a chain of price-gougers if you charge by the value customers
place on the product, the prudent action is to hide the

James L. Pendleton, M.D., Bryn Athyn, PA

Legislative Alert

Medicare Payment and the Budget

Doctors will get a 1% increase in the Medicare physician
update if the Senate provisions are accepted in the House and
Senate budget conference that is taking place as this essay goes
to press. Remarkably, the House of Representatives has no
Medicare provisions at all in its version of the big budget
reconciliation bill. So, on Medicare, everything rides on how the
conferees deal with the Senate provisions.

If the Congress enacts the Senate’s temporary change, it
would avoid a 4.3% cut in physician services in Medicare, already
ordained under current Medicare payment update formulas. The
technical name for the Medicare physician update formula is the
Sustained Growth Rate (SGR). Among other things, the SGR
formula ties Medicare physician payment updates to the
performance of the general economy
. That there is no logical
connection between the performance of the general economy and the
market conditions that obtain in provision of the professional
services of the physicians is, of course, quite beside any
rational point vaguely discernible on the intellectual horizon.
This stupidity, like so many others, is a product of
Congressional imagination, amply fueled by bipartisan economic
illiteracy, and thus firmly embodied in federal law.

Our own suggestion is to make the Medicare physician system
more rational by tying Medicare physician updates to the pricing
for physicians’ services as reflected in real conditions of
supply and demand for physician services. This could be done
simply through market surveys conducted by the Medicare Payment
Advisory Commission (MedPAC), the panel that has responsibility
for reporting to Congress on physician and hospital payment.
Short of that, we could update physician payment according to the
phases of the moon, which would be more rational, and more
aesthetically pleasing, than relying on the SGR.

Another crucial conference issue is the “Values-Based
Purchasing” provision, sometimes called “Pay for Performance,” of
the Senate bill; the House, thankfully, has no similar provision.
As noted previously, this would establish government
guidelines for medical practice in Medicare
, and break from
the tradition of government noninterference in medical practice,
which was codified in the original Medicare statute.

Under the Senate bill, doctors would get paid according
to their adherence to federally determined quality standards
Those who report that information, following the appropriate
forms, paperwork, or filling in the right quality boxes, would
get “bonuses.” Those who didn’t, would not, and the “savings”
would be used to fund all the good little boys and girls who sit
up straight in Medicare’s Obedience School. While attractive to
the health wonks, the idea is chock full of problems, including
the further rupture of the patient-physician relationship,
opportunities for gaming for higher reimbursements, and a
retardation of innovation in the delivery of medical care. Sound
and solid House conservatives (yes, there are some left) may
still be able to unravel this latest roll of Medicare red tape
before Congress wraps it tightly around another generation of
physicians. We’ll see.

Drug Bust

The exclusive Washington Adult community says we can’t
afford it. And the polls show it’s still not a popular idea among
seniors. And yet, the United States Senate, reputed to be “the
world’s greatest deliberative body,” never even considered
Arizona Senator John McCain’s proposal to delay the Medicare drug
entitlement for two years securing between $40 and $80 billion
in savings to the taxpayer through the delay alone.
Unfortunately, the McCain proposal is unlikely to be introduced
by the House conferees as a compromise Medicare provision in the
House and Senate budget deliberations.

Meanwhile, R. Glenn Hubbard, until recently former chairman
of the President’s Council of Economic Advisers, now says that
the Medicare drug entitlement was “unwise.” Question: Did Hubbard
volunteer that advice to the President when he was the
President’s adviser, which is what advisers are supposed to do?
As recently reported, both Hubbard and former Clinton
Secretary of Labor Robert Reich said that the Medicare program
was “unsustainable,” with Reich volunteering that he didn’t even
think that the Medicare drug benefit was “sustainable” over the
next five years
(Wall Street J 11/30/05).

Spinning Left

The Left is spinning the initial implementation problems
as reflective of a structural flaw: Free Market Competition and
Choice. Plans offering the Medicare drug benefit have multiplied
beyond all expectation 2,900 of them nationwide. So, the Left’s
basic complaint: There is too much choice. It is confusing
seniors, angering them, and making it difficult for them to
choose the “right” plan for them. Harold Meyerson, for example,
entitles his op-ed piece on the topic: “Bewilder Thy Father and
Mother” (Washington Post 11/30/05). Choice among many
alternatives introduces complexity, says Meyerson, which is both
bewildering and economically inefficient. The value of the
European style “single payer” alternative is its simplicity it
rescues us from complexity and its efficiency; it’s also said to
be cheaper. This is a curious line of reasoning that we normally
do not extend to other sectors of the economy. Monopoly is
good for you, as long as it’s government monopoly.
Applied to
emerging fashion crisis, the Meyerson prescription would be the
Mao Suit.

While most seniors clearly do find the unexpected range of
choice in drug options confusing, it’s worth clearing up a few

First, the problem with the drug program is its
structure It’s the Structure Stupid a weird benefit
designed by Congress, with absolutely no analogue in the
private market.
It is also universal, which means
it is crowding out all other coverage
. The left is wrong to
imply that the drug program, with its donut hole and weird
benefit design, is somehow the product of a free-market approach
to health care policy.

Second, what is meant by choice? Real choice implies the
personal choice to keep what you have and what you like. It is
the right to be free of coercion. The reality in this remarkable
case is that almost half of the entire pool of eligible
Medicare beneficiaries those who are in employer-based
retirement plans and those in Medicaid will have no personal
choice at all in their drug options
. If employers decide
that they no longer wish to offer drug coverage and dump retirees
into the government program, they can do that. Retirees have no
say in the matter. Why? Because, as everybody with two neurons
firing knows, the employer-based system is not a consumer-based
system, and employees and retirees get what their employer gives
them whether they like it or not. In this case, most retirees
like their existing retirement coverage, but, regardless of their
wishes, they probably won’t be able to keep it. For persons
eligible for Medicaid, their opinion about either Medicaid or the
Medicare drug program doesn’t make any difference: Congress says
they are going into the Medicare drug program. Period. Some

The anxiety of millions of seniors is understandable. They
never liked this legislation; they don’t understand it; and the
dynamics of a universal entitlement do not let them keep what
they want or what they have. It crowds out existing coverage.
It’s the Structure Stupid! The result is a vast
uncertainty among seniors and a political backlash against the
White House and the Congressional Republicans
. None of this
was necessary. And it all could have been avoided with a targeted
drug benefit for seniors who did not have coverage, especially
those who were low income. But no, the Congressional Republican
leadership aligned themselves with the Senator Kennedy’s basic
agenda and created, drum roll, please, a universal drug

Act II Drug Price Controls

The carping will go on over the next few months, well into
the next congressional election. But the Democratic agenda will
be what it has always been: Impose price controls on drugs, fill
up the notorious donut hole with even more federal subsidies,
tighten up the regulations on private plans and drive them out of
the program once and for all.

So, ladies and gentlemen, fasten your seatbelts: The nation
is now committed to plunging eyes open, arms up, and
screaming into the greatest entitlement expansion since the
Great Society. We’re talking trillions of dollars in drug
benefits alone. Moreover, we’re talking trillions that have been
promised in total Medicare benefits that nobody on Capitol Hill
or elsewhere has yet figured out how to pay for.

Economists at the Heritage Foundation estimate that, if we
decide to actually make up the $30 trillion Medicare shortfall
(that’s the size of the long-term unfunded liability of the
program) through tax increases, that would amount to an
equivalent Medicare payroll tax jump from the current 2.9% of
payroll to 13.4%
right away. Still higher taxes, later on.
That kind of taxation would sharply reduce disposable income,
reduce investment spending, retard capital formation, and cost
the economy in jobs and productivity. So, you don’t want to pay
the taxes? OK, let’s just go straight into debt? Heritage numbers
crunchers, using the best economic modeling on the market, are
working on the economic impact of that option, too. Not good.

Better Next Year?

For health policy, this has been a disappointing year. The
Medicare mess has deepened, and Congress has shown no willingness
to act responsibly. The federal insurance market reform proposal,
which would have allowed individuals and families to buy
affordable health insurance plans across state lines, authored by
Rep. John Shadegg (R-AZ), was reported out of committee, but has
not even come to the floor of the House of Representatives for a
vote. The Tax Reform Commission proposed capping the tax
exclusion on health benefits, but stopped short of promoting
serious reform. The Medicaid Commission has yet to signal any
intention to promote serious structural reform. Yet, there are
reasons to be optimistic. For example:

On Medicare, the good news is that Senator McCain (R-AZ),
Congressman Jeff Flake (R-AZ), and 100 members of the House
Republican Study Committee have introduced legislation to at
least delay the drug bill. While not successful this year, the
mounting fiscal crisis will soon force some serious action on
Medicare; it’s unavoidable.

On Medicaid, the largest health care program with 53 million
enrollees and total costs of approximately $300 million, there
are some interesting state initiatives. South Carolina and
Florida have introduced new options for Medicaid recipients,
including health savings accounts
, and promoting choice and
competition among providers to improve access to care among the
poorest citizens. The big task is to promote long-term care
insurance among the middle class, so that nursing home care
doesn’t become just another middle-class entitlement. If we do
not control middle-class entitlements, we are going to shred the
safety net for the poor.

Health savings accounts are also taking off. There are more
than a million policies, and they are rapidly growing. Moreover,
they are broadly affordable, and about 30% of these new policy
holders are Americans who were previously uninsured
Meanwhile, Governor Mitt Romney of Massachusetts is trying to
enact an innovative insurance reform, characterized by reduced
regulation, defined contributions for health insurance coverage,
and a robust system of private health plan competition.

Remember, one out of every seven dollars spent is spent on
medical goods and services. Conservatives and
, whatever disagreements they may have among
themselves, must do everything they can to make sure that
individuals and families control that spending, not the
. This is a common fight for the future.

Robert Moffit is Director, the Center for Health Policy
Studies at the Heritage Foundation, Washington, D.C.

“[G]overnment power operates a lot like a gas in a
closed space…. [A]s you expand the space, the gas fills it
completely and absolutely. And it is hard often to restrict that
gas again…. In times of crisis is when that space expands and
it often expands with very little foresight and very little

Jonathan Tu

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