AAPS News – July 2001


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of American Physicians and Surgeons, Inc.
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Omnia pro aegroto

Volume 57, No. 7 July 2001


A Florida student was barred from Commencement, faces felony
weapons charges, and may lose her National Merit scholarship. A
sheriff’s deputy had spotted a 5-inch serrated kitchen knife on
the floor of her car while patrolling the school parking lot.
District policy mandated him to report it. The student said that
the knife must have fallen out of a box when she recently moved
and that she didn’t know that it was there (Terry Spencer,
Associated Press, 5/31/01).

Similar examples are legion-a Northern Light search turned
up more than 87,000 references (see links collected at

). An 11-year-
old was hauled out of class in handcuffs for drawing a picture of
weapons (Wall St J 5/18/01). A 6-year-old was suspended
under a school’s anti-drug policy for sharing a lemon drop, and
the school called an ambulance for the lemon-drop-eating friend.
A 13-year-old girl was hand-cuffed, searched, finger-printed, and
interrogated for more than two hours at a D.C. police station
before her mother was called-because she ate a French fry in a
Metro station (Wash Times 4/10/01). A 10-year-old girl
was suspended for sexual harassment because she repeatedly asked
a boy whether he liked her. An 11-year-old British boy was
charged with racism for saying “G’day, sport” to an Australian
classmate (

The U.S. Supreme Court has validated the idea of zero-
tolerance law enforcement in the case of Atwater v. Lago
(99-1408). Failure to wear a seatbelt is cause enough
for police to search your vehicle, handcuff you, and take you to
the city police station, leaving your children to the care of a
friend and your vehicle to be towed away (WorldNetDaily

The American Bar Association has called for an end to school
zero-tolerance policies, calling them a “one-size-fits-all
solution to all school problems.”

The American Medical Association, on the other hand, rather
likes the ring of “zero tolerance”; there are 56 references to it
on its web site (
). It favors such policies for weapons and
violence, to “SAVE schools”; for illegal drug use; for alcohol
above the minimum reliably detectable level in the blood of a
driver; for “racially or culturally based disparities in care”
(Doctors, be sure to report any colleagues “suspected” of such
practices); and “true fraud and abuse.” In “this `zero tolerance
for errors’ environment, the federal government has an obligation
to emphasize prevention and education for physicians,” says the

This education might as well start in grade school. Getting
expelled from school is, after all, far more benign than being
excluded from Medicare, delicensed, fined into penury, or
sentenced to years in prison. Americans should learn early that
in the land of the free, there is zero common sense, zero
discretion, and zero justice for politically incorrect
transgressions-and that the definition of a crime can be a matter
of semantics. What is a “weapon”? Is a chicken finger, a plastic
ax in a fireman’s costume, or a cardboard gun equivalent to an
assault rifle? What is an illegal drug? Should sharing an asthma
inhalant or an ibuprofen tablet with a classmate in distress make
a permanent blot on your record? And is eating a snack in the
subway indistinguishable from vandalism?

Not surprisingly, a government that can’t make these
elementary distinctions has admitted “that even they can’t tell
the difference, in most cases, between simple, inadvertent error,
and blatant, deliberate fraud” (E. Ratliffe Anderson, Jr., M.D.,
1999 report to AMA House of Delegates). Nevertheless, the AMA
continues to supply the CPT codes, pretending that a subjective
opinion can be expressed to five significant digits with
sufficient accuracy that a lapse justifies a huge fine if not
imprisonment. (What is an “office visit” or a “new patient”?)

Coding noncompliance is only one area for zero tolerance.
Possible breach of a Corporate Integrity Agreement
(without any evidence) means that HCFA can arbitrarily withhold
payments, crippling revenue flow (Medicare Compliance
3/26/01). Hiring one of the 18,000 persons excluded
from Medicare could lead to payment loss or fines, if the
“employer should have known” (BNA’s HCFR
3/21/01). Coming soon: enforcement of the 401,034 words in the
HIPAA privacy regulations. JCAHO is already on the lookout for
violations. Inspectors stroll around looking for patients’ charts
on doors or names on white boards; try to entrap staff members
into conversations about patients; and eavesdrop to test for
“auditory privacy” (HIPAA Compliance Alert, 6/01).

While zero tolerance applies to most Americans, zero
accountability (“immunity”) is the norm for government or even
quasi-government officials. Carrier personnel asked for
information on Medicare requirements give incorrect answers and
refuse to divulge their true names (BNA’s HCFR 4/4/01).
According to a March 15 policy memorandum AB-01-44, carrier “fair
hearing” officers may not hear arguments that a local policy is
vague or contradictory (Part B News 3/21/01).

With respect to HIPAA, an entire government agency is a
scofflaw. Despite a 1998 law that forbids the creation of a
unique health identifier, HHS has instructed private entities to
reserve a field in their software for a “forthcoming government-
issued ID number for all Americans” (letter to Secretary Thompson
from Rep. Dick Armey, 5/15/01).

Worse, prosecutorial standards have been fatally diluted.
“Americans are no longer secure in law-the justice system no
longer seeks truth, and prosecutors are untroubled by wrongful
convictions,” stated Paul Craig Roberts (Forbes

There is a place for zero tolerance: of government officials
who violate their oaths to uphold the Constitution. The current
trend is for doctors (and the AMA) to enable this lawbreaking
through their cooperation. That must change.

Opted Out and Hanging On

Two years ago I began a new medical practice in which I work
only for the patient. I, therefore, have opted out of Medicare,
Medicaid (I see these patients without charge), and all insurance
plans. I have encountered some major problems that others
considering this path might want to know about.

First, I discovered that in opting out of Medicare I cannot
participate in hospice programs. Patients are told that “the
program will pay all medical expenses,” but they submit the
charges to Medicare, and I am excluded.

Second, local Medicaid officials advise their clients that
they are not allowed to see me, even for free. They must be
assigned to a Medicaid-participating primary doctor or be removed
from the program. That physician is paid about $11 per month to
supervise and restrict access to medical care.

Third, I was completely unprepared for the active efforts of
private insurers to sabotage my practice. They prevented or
discouraged patients from coming to me, even though my office
charge was $8 less than that of their “approved” doctors. Their
techniques astonished me. One company refused to pay for any
prescriptions that I wrote, even cancelling payment on the
maintenance medications previously prescribed by their “panel”
physicians. (It is through the pharmacy that the insurer finds
out that the patient is seeing me. Prescriptions are linked to
the insurer for approval of drug, doctor, amount, directions, and
cost. The prescription gets rejected on the spot; the pharmacist
tells the patient that “I can’t fill the prescription because the
insurance company won’t allow it.” Some heart-to-heart
discussions with pharmacists resulted in a change of phrasing to
“I can fill this, but the insurance won’t pay for it.”)

One insurer telephoned patients who had seen me to tell them
they were “at risk,” as I was “uncredentialed” (by them, for
their list, they didn’t say). The strong implication was that I
was practicing inferior medicine. When I confronted the company,
I was told that clients were “at risk” of having to pay a $500
deductible not required if they stayed with the approved list of
physicians. My lawyer said that I had no recourse since “what’s
said between the lines is not actionable.”

Most insurers have a rule that if a patient with an acute
illness can not get in to see the approved doctor within 24 hours
they will pay for “urgent care.” We photocopy our yellow pages ad
that says “urgent care” and attach it to a completed HCFA 1500.
We tell patients we will help them collect reimbursement if they
have insurance, but their arrangement is with the insurer; we
don’t get in the middle.

I am not optimistic. People in this area have yet to suffer
enough abuses to be willing to go outside traditional channels.
The working poor and self-employed come to see me gladly because
I give better value for money. It’s the executives and unionized
workers who think I am cheating them of their benefits. (They are
in my office because their regular doctor couldn’t see them for a

This practice is within sight of becoming successful,
although I’m sure I’ll never live long enough to pay off the debt
(I am 47 years old). I would do it again because I made the
decision that this is the only way I could continue to practice
medicine within my definition of ethical conduct. I refuse to
shortchange patients as Medicare demands, or to dispense
narcotics on demand as the hospital administrators insisted when
I was an ER doctor. If this fails, I will find another occupation
or another country.

Paul B. Duvall, M.D., family physician, Brevard, NC

Use Data, Go to Jail

In a May 9 letter to President Bush, Reps. Bill Thomas,
Chairman of the House Ways and Means Committee, and Nancy
Johnson, Chairman of the Health Subcommittee, informed him that a
new provision in the privacy rule, rejected by the Clinton
Administration until the issuance of the final rule, was
unworkable. This requires physicians to obtain a specific consent
form before using any personally identifiable
information [such as a letter from a referring physician, or
observations of a paramedic or caregiver] in treating a patient.

“Any time a doctor interacts with a patient, the doctor must
ensure a consent has been obtained. Because a patient may revoke
consent at any time, any subsequent interaction with the patient
means the doctor will have to check to see if consent has been
revoked.” Moreover, the physician must have a tracking system for
consents and revocations. The penalty: $100 to $250,000 in fines
and 10 years in jail, or both.

Physicians will have to check on consent before accepting a
call from a frantic mother with a sick child. If the physician is
out and has no access to the tracking system, advising a patient
based on prior information risks criminal penalties.

Pharmacists would need consent to fill a prescription.
Parents with sick children or homebound individuals would have to
send someone to pick up the consent (and return it signed) before
they could get the medication.

The authorization “does little to protect privacy, since it
is a coerced `sign or die’ construct. If patients refuse to
consent to use of their information, providers may refuse

“HHS repeatedly advised Congress that such a consent
requirement was unworkable. We can find no compelling reason why
HHS reversed its decision” (see p. 3).

AAPS Calendar

July 31. Making a Federal Case out of Health Care: Five
Years of HIPAA. Rep. Dick Armey, Mark Pauley, Conrad Meier, John
Hoff, Richard Epstein, Madeleine Cosman, Grace-Marie Turner, Greg
Scandlen, and others. Cato Institute, $175, see

Oct. 24-27. 58th annual meeting, Cincinnati, OH.

Nov. 17. AAPS, PA chapter, and SEPP. Healthcare Summit
2001, featuring Medical Savings Accounts, Pittsburgh, PA, call
(724) 929-5711 or see www.sepp.net.

Sept. 18-21, 2002. 59th annual meeting, Tucson, AZ.

Citizens’ Petition on Language Rules

On May 23, AAPS filed a Citizens’ Petition with the
U.S. Department of Health and Human Services (HHS), the Office of
Civil Rights (OCR), and the Health Care Financing Administration
(HCFA), under 5 U.S.C. Section 553(e) and the Petition Clause of
the First Amendment, to revoke the Rule requiring physicians to
provide translators for patients with limited English proficiency
(LEP), as published at 65 Fed. Reg. 52762-52774 (August 30,
2000), and to refrain from taking any administrative action
pursuant to the Rule.

The Petition notes that the Supreme Court has overturned
legal precedent for the Rule in Alexander v. Sandoval,
121 S. Ct. 1511 (2001). Sandoval had sued the Alabama Department
of Public Safety to enjoin the administration of state driver’s
license examinations only in English. The Court concluded that
this requirement did not constitute intentional discrimination,
which is forbidden by 601 of Title VI of the Civil Rights Act of

The Petition also argues that the Rule violated due process
by depriving physicians of prior notice and comment. There was no
good reason for the Rule’s violation of the 30-day notice-and-
comment period. It cannot qualify as an interpretive rule exempt
under Section 553(d)(2) because Sandoval overturned the
legal basis. Nor can the Rule qualify as a “statement of policy”
under Section 553(d)(2) because it establishes new duties for
physicians and creates new malpractice liability risks.

Finally, the Petition argues that the Rule is unconstitu-

tionally vague. Physicians do not receive the requisite notice of
“those who may run afoul of the enactment,” nor does the Rule
“channel the discretion of those who enforce it.” It is not clear
whether there is a threshold level of LEP patients that triggers
the application of the requirement for a given physician, or
whether it differs depending on the specific language. Moreover,
it does not specify whose duty it is to identify a communication
problem. Thus, the rule impermissibly subjects physicians to
arbitrary enforcement.

Congressman Ernest Istook (R-OK) has also suggested
rescission of the rule, which applies far beyond doctors’ offices
(as to the newspaper stand in a hospital built partly with
federal funds, a sandwich shop in a government building, or a
construction company that works on federal projects). In the
event that President Bush fears losing Hispanic votes, Linda
Chavez observes: “Just wait until some Mexican-American grocer
who accepts food stamps finds out that he has to hire Farsi
translators for his store” (Human Events 5/28/01).

Does the Chaperone’s Testimony Count?

The delicensure of New York internist Dan Alexander, M.D.,
based on accusations of sexual abuse of patients, raises serious
due process issues for all physicians. In an amicus brief filed
by AAPS in the State of New York Supreme Court (No. 89006),
attorney Janet M. Thayer states that AAPS does not condone
patient abuse of any kind, but recognizes that physicians can be
wrongfully accused.

In 1995, Dr. Alexander saw a patient for a variety of acute
complaints. She did not divulge, although asked, that she was
under psychiatric treatment. Her therapist testified that the
diagnosis was histrionic personality disorder and that she had
not cooperated with treatment, which she eventually terminated.
In 1998, the patient filed a malpractice suit, claiming
multimillion dollar damages, and caused an inflammatory front-
page article to appear in the Jamestown Post-Journal
headlined “Lawsuit Alleges Malpractice, Molestation.” About two
years later, the patient voluntarily discontinued the suit, with
prejudice. However, after the article appeared, four other
patients filed complaints about Dr. Alexander, some related to
examinations done five years previously.

As a matter of office policy, Dr. Alexander always had a
female chaperone, who was a health care professional, present
during breast and pelvic examinations. At the hearing, the
chaperone testified that she observed nothing unusual or improper
in the examinations. However, the Hearing Committee rejected her
testimony because of her “obvious interest in the well-being of
the Respondent after working closely with him for several years.”
AAPS argued that the finding of bias was not supported by
substantial evidence.

AAPS also argued that the administrative law judge deprived
Dr. Alexander of his right to a fair hearing by restricting
inquiries into the “connectedness” of the complainants with
respect to media coverage of the malpractice claim and their
contacts with the plaintiff’s attorney.

“Under the Determination and Order of the Hearing Committee,
as it stands today, it will be extremely difficult, if not
impossible, for any physician to have a fair opportunity to
defend charges of such inappropriate conduct.”

[The complete brief is posted here.]

Making Medicare Look Easy

“HIPAA will make Medicare look like child’s play,” stated Donna Boswell, Esq., a
partner with Hogan and Hartson of Washington, D.C., at the AAPS
spring meeting in Chicago.

A doctor is exempt from the privacy rule if and only if he
files no insurance claims and has no relationship with a
laboratory, hospital, or other entity that requires electronic
communication. (What’s electronic? A FAX is; a telephone call
probably isn’t, according to the HIPAA glossary.)

Be cautious about “HIPAA compliant” products, Ms. Boswell
warned. They may be compliant with only one of five parts, and
probably not with the privacy component.

The privacy rules require a special, separate federal form
before any information can be either disclosed or used, except in
emergencies, which require efforts to obtain consent
retroactively. The fact that the referring physician had
permission to disclose the information to you does not mean that
you have permission to use it, not even to answer a patient’s
questions prior to his first visit. Your existing general consent
forms probably need to be discarded; they violate federal law if
they even mention information disclosure.

The source of the rule that obstructs free exchange of
information among a patient’s caregivers: the AMA. Though
hospitals have tried very hard to have this provision removed,
the AMA is adamant about retaining it. In bold-faced print, on p.
8 of the comment letter to Margaret A. Hamburg of HHS, dated
November 3, 1999, the AMA writes: “We recommend application of
the controlling rule iterated previously: valid consent
should be obtained before personally identifiable health
information is used for any purpose
” (


[Tapes of the meeting are available; call (800) 635-1196.]

“Asking HCFA for help is like asking the Boston
strangler for a neck massage.

Senator Pat Roberts (R-KS)

Members’ Page?

Privacy Entrapment. A woman recently called my office,
identifying herself as from the US Public Health Service. She
requested information on one of our Medicare/Medicaid patients.
My receptionist advised her that we do not release any
information on our patients over the phone and could not even
tell her whether this was a patient of ours. The caller was
advised to put her request in writing and send it with a signed
authorization from the patient.

We soon received a packet of information with a cover letter
on U.S. Dept. of HHS stationery, in an envelope with a return
address “Westat-an Employee-Owned Research Corporation.” It
contained an authorization for release of information dated 6
months after the expiration date of the signature. The HHS letter
stated that participation is voluntary, although the surveyor who
called the office gave the impression that the information was
required by the government. The patient is covered by two
government programs, which already have the requested information
on the claims form that we submitted. Why would HHS hire a
private research firm to ask for information it already has, and
why by telephone?

I wonder whether this is another case of the right hand not
knowing what the left is doing-par for the course for HHS/HCFA.
Or is it someone trying to entrap me into committing a privacy
violation? And isn’t it a crime to misrepresent yourself as an
employee of a government agency to obtain confidential

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

A Hazard to Health, Liberty, and Security. The HIPAA
regulations give unlimited access to sensitive personal data to
government officials-and their friends in industry-to mine for
any purpose they choose, be it research, entertainment,
segregation, or population control. It’s akin to putting a
broadcast microphone into the confessional. Stalin couldn’t have
thought up a better means of control. We all should be afraid:
just ask Congresswoman Nidia Velasquez how she felt when her
psychiatric history was publicized during an election.

I see no end to the escalation in practice cost that the red
tape will cause. The only way to be certain that no data were
transmitted [in a way that required government involvement] would
be for the patient to hand carry every piece of information. How
inconvenient! And would an incapacitated patient have to hire a
bonded, notarized delivery service?

Zvi Herschman, M.D., West Hempstead, NY

False Protection. As a physician of 47 years
experience, I strongly oppose the so-called privacy protection in
the Clinton-Shalala HIPAA rules. This is the same kind of privacy
that permitted Hitler to eliminate enemies of the cause and is
characteristic of Clinton’s dictatorial administration.

A current custom that flies in the face of privacy [which
HIPAA rules only exacerbate] is quality assurance activities
dominated by institutional administrative staff. Free access to
private information by unqualified individuals is a gross
miscarriage of medical staff responsibility, which permits
prejudicial decisions contrary to the best interest of patients.

Delfin Beltran, M.D., Andover, KS

Take a Number Please [a unique health identifier] and
We Will Go Through Your Records Whenever We Want. My piece on
HIPAA is found at
. All of American
medicine is going to be taken over by this legislation. We should
be developing an alternative source of medical care that is
totally separate from all the intrusive regulations encompassed

Steve Fath, M.D., Paris, TN

Catch 22. HIPAA regulations are so confusing that no
one knows the ultimate result; final decisions are handed off to
the Office of Civil Rights. The rules require every doctor to
share patients’ records with the federal government without
consent, even handwritten phone notes. Patients have no recourse
for breaches of privacy other than the right to complain. Perhaps
the most inane part of these regulations is that patients would
be required to sign a release upon their first visit; many
patients refuse to do this, and we would have to refuse
treatment. In some states, doctors can be fined either for
refusing care or for providing medical records on request.

Stephen Reznicek, M.D., Cadillac, MI

HCFA Contest. For the “Name That Agency” game, how
about HURT (Health Underestimated Regulated and Trashed) or FRAUD
(Federal Regulatory Assistance Under Duress).

Frank Timmins,

Virtual Exposure in Canada. Within a few years of
implementing the compulsory government health plan, it was
obvious that massive leaks were occurring. Eventually, the
government was forced to appoint a commission of inquiry, headed
by Judge Horace Krever, who concluded that supposedly
confidential medical files were available to almost everybody-
lawyers, insurers, workers’ compensation boards, the police,
credit card agencies, and tax authorities-except the patients
themselves. Judge Krever made more than 100 recommendations, of
which very few have been implemented in the many years since the
report was published. So much for the confidentiality of
government records of any kind.

William Goodman, M.D., Toronto, Ontario, Canada

Legislative Alert

The Senate Changes Hands-

Vermont Senator James Jeffords’s recent announcement-
that he is dropping out of the Republican party to become an
Independent and vote to reorganize the Senate with the Democrats-
has set off some curious commentary in the nation’s capital and
elsewhere in editorial boards and media circles around the
country. The move is described variously as a seismic shift in
American politics, a death blow to the Bush agenda, a delayed
“act of conscience,” a wake-up call to callous conservatives in
the Senate and elsewhere who are congenitally insensitive to the
feelings of “moderates” like Senator Jeffords, and an overall
“good thing” for America because it will force the heretofore
recalcitrant and surprisingly conservative President George Bush
to move to the elusive and mushy “center,” which is always a
“good” thing, because that means he won’t or can’t pursue the
ambitious and genuinely serious conservative agenda he campaigned
on last year.

Curiously, the “liberal” agenda today in Congress and
elsewhere is quintessentially negative and rigorously
conservative in the worst sense of that word: Stop new things
from happening. Stop tax cuts, stop Medicare reform, stop Social
Security reform, stop education reform, stop increased energy
production, stop the appointment of conservative judges. Stop
meaningful change in government management.

The “liberal” agenda is also profoundly conservative in a
related sense: existing institutions-ranging from Medicare and
Social Security to public education and the federal civil
service-are to be preserved as is and even embellished; they are
not be changed in any meaningful way, even if the services
provided by these institutions are demonstrably substandard or
fail to meet the expectations of those they are supposed to
serve. The upshot: government institutions and their bureaucratic
processes are more important than individuals. The eighteenth
century Bourbon dynasty would have understood and appreciated
this: the sentiments of The Reaction.

How much will the Jeffords defection aid the cause of The
Reaction? Sure, it’s a setback for President Bush. But the
political rhetoric is overblown, for obvious reasons.

First, the Jeffords change of heart affects only
procedural matters, not the substantive balance of power in the
. The number of “liberals” and “conservatives”
remains the same. True, the Committee chairmanships change hands,
and move sharply to the left, and the Senate leadership
determines what is on the Senate calendar. In some cases it makes
a serious difference. For example, it does matter that Senator
Charles Grassley (R-IA) is being replaced by Senator Max Baucus
(D-MT) as chairman of the Senate Finance Committee. The initial
legislative products coming out of Finance on everything from
Medicare and Medicaid to prescription drugs and tax-related
issues will have a very different cast. But in other cases, it
does not. Take the Senate Education, Labor, and Pensions
Committee. Does anyone seriously think it makes much of
difference whether Senator Jim Jeffords, the liberal Republican
from Vermont, or Senator Edward Kennedy, the liberal Democrat
from Massachusetts, chairs the Senate Labor panel? The fate of
the Bush Education Reform bill in the Senate would not have been
much different. What, on most major issues, would be the
substantive policy difference? Right. None.

Obviously, the Jeffords change enables Senator Tom Daschle
(D-SD) and his Democrats to have the first crack at fashioning
the agenda. But the Senate is not the House of Representatives,
where a House Rules Committee sets the terms, time, and
conditions of the Congressional debate. The Senate rules are far
more flexible, and the President’s Senate allies will have ample
opportunity to offer floor amendments in the nature of a
substitute. Moreover, the Senate minority, never more powerful
than in this Congress, can easily stifle legislative proposals by
resorting to the traditional Senate filibuster, talking bad bills
to death, and it takes a full 60 votes to get cloture and cut off
the Senate debate. Not easy to do.

Second, the change does not alter the fact that
major policy decisions will be effected by shifting
: different combinations of Senate Democrats and
Republicans coalescing around different issues.
The pivotal
role of Senator John Breaux (D-LA), who supports the substance of
many of the Bush Administration’s policy initiatives, will surely
increase, making him perhaps the most powerful figure in the

The President, for example, can take heart from his recent
victory on tax policy. The Senate Democratic leadership waged an
all-out effort to slow down or stop Bush’s compromise on a $1.35
trillion tax cut and, in the end, managed to corral only 38
votes. For all of the sound and rhetorical fury, the routine
invocations of class warfare and denunciations of tax breaks for
“The Rich” (who pay the bulk of taxes in the first place), that
was not an impressive legislative performance. Senate liberals
will probably have an easier time on raising the minimum wage,
but some issues, like the “patients’ bill of rights” legislation,
soon expected to come to the floor of the Senate under the
sponsorship of Sen. Edward Kennedy (D-MA) and John McCain (R-AZ),
could prove to be a little more tricky; this is a “muddy” issue
inasmuch as the deadly combination of increased litigation and
vastly increased regulation could have unintended consequences on
the insurance markets, including ever sharper cost increases or
further increases in the ranks of the uninsured. Likewise, with
Medicare prescription drugs, the CBO estimate that a displacement
of the current private market for prescription drugs among
seniors would be a cost increase in excess of $1 trillion over
the next ten years is enough to dampen the enthusiasm of even the
most fiscally irresponsible of Congressional spenders.

In short, the President can still effectively press his
agenda. But his ability to do so will reflect his political
skills in assembling, managing, and nurturing shifting

Advancing a Common Ground?

As noted previously in this column, the Health Insurance
Association of America (HIAA), the big insurance trade
association, and the Families USA, a left-wing group that
routinely campaigns for greater government control over American
medicine, reached an agreement on a far-reaching proposal to
reduce the number of the uninsured. The crux of the proposal is
an expansion of two major government programs, Medicaid and the
State Children’s Health Insurance Program (S-CHIP), enacted as
part of the notorious Balanced Budget Act of 1997, along with the
creation of a new tax credit for businesses that would provide
health insurance coverage for previously uninsured workers. This
is sharply different, of course, from a proposal for tax relief
to individuals and families either for the purchase of health
insurance or for offsetting out-of-pocket medical expenses.
Naturally, the economic and political dynamics go in very
different directions.

The Left understands these political dynamics far better
than the health insurance executives, who will surely gain the
economic advantage of fresh contracts, but at the price of
expanded government control. One senses that they are simply
resigned to that prospect anyway. But, again, who knows?

A Budget Platform for More Government Control?

The debate on Common Ground takes on a special urgency
because of the recently enacted Budget Resolution (H. Con. Res.
83). Section 216 of the bill sets aside a total of $28 billion
over three years as a reserve fund for health insurance for the
uninsured. While the provision does not specify the kind of
infrastructure, it could become a vehicle for the Common Ground
proposal. Curiously, the Section specifies that it would include
a measure providing for a tax deduction for the purchase of
health insurance for “moderate-income individuals not receiving
health insurance from their employers.”

The Budget Resolution language is troublesome, for it
reinforces the erroneous idea that the employer’s contribution to
health insurance is the “employer’s money,” when every economist
this side of Adam Smith, living, dead, and yet to be born, knows
that it, just like wages, is an employee’s compensation-and that
working families, not employers, pay 100% of the nation’s medical
costs. Moreover, tax deductions, as the Congressional sponsors
surely must know, have only limited impact on the uninsured.
Overwhelmingly, the uninsured are low-income employees of small
businesses. Presumably, they would not be counted in the
“moderate income” category. But since leftists in Congress can
routinely expand the definition of the “rich,” perhaps the
meaning of “moderate income” can also be expanded. Nonetheless,
expanding tax deductibility itself, whatever its intrinsic merits
as a measure of tax equity, is not of much help in reducing the
uninsured. A Lewin Group analysis found that a tax deduction for
non-group coverage would cost of $6.3 billion in tax revenue but
would add only about 3.9 million Americans to the number of the

Congressional leftists are digging in to oppose any
provision of individual tax relief for the purchase of medical
insurance. The $28 billion set aside in the Budget Resolution is
not much, but it is enough to make serious structural changes in
the medical insurance market. And the Left is interested in
structure first-money later. The Common Ground proposal would
provide such a structure. But there have been practical problems
with both SCHIP and Medicaid as vehicles for expanding coverage,
largely due to poor communication with low-income families. Steve
Schroeder of the Robert Wood Johnson Foundation pointed out that
six out of ten parents of kids who qualified for CHIP or Medicaid
didn’t think they were eligible (Wash Post 6/1/01).
Likewise, Ron Pollack, Executive Director of Families USA
conceded, “If that program (SCHIP) doesn’t work, or is perceived
not to be working, it disparages our efforts to go beyond
children” (ibid.).

Still, in a recent report, The Commonwealth Fund suggests
that building on the SCHIP program and Medicaid is one of the
most effective “incremental” ways of covering the uninsured.
Senator Edward Kennedy (D-MA) is preparing legislation to boost
funding for both programs. The clear and unambiguous agenda is to
expand government programs to establish coverage on the
government’s terms, eventually through a national system of
government health insurance.

The Medicaid Option

What is curious is the new found enthusiasm for Medicaid,
despite the fact that 23 states report that their Medicaid
budgets are out of balance. The fiscal pressure will clearly
intensify, since Medicaid funds are also be drawn off by a
growing number of middle-class Americans who spend down their
assets and end up in nursing homes. In criticizing the Common
Ground proposal months ago, Representatives Bill Thomas (R-CA)
and Jim McCrery (R-LA) have called attention to the serious
shortcomings of Medicaid. In their December 2000 “Dear Colleague”
letter, they cite an analysis by the Medicaid Access Study Group,
which concluded that “Medicaid recipients in urban areas have
limited access to outpatient care apart from that offered by
hospital emergency departments” (N Engl J Med
1994;330:1426-1430). While disagreeing with the methodology of
that study, Drs. Robert Derlet and Donna Kinser state: “Over the
past six years, we have found that at any given time only 15 to
20 percent of clinics in Sacramento accept Medicaid recipients as
patients. This practice has compounded the problem of
overcrowding in emergency departments” (N Engl J Med

It would be interesting to add Medicaid to the Federal
Employees Health Benefits Program, just as an option, to see how
many Congressmen and Senators, who want to expand Medicaid to
working families, sign up themselves. The District of Columbia,
after all, is the equivalent of Medicaid Central.

Throw MAMA From The Train-Again

As Secretary Thompson said, “It’s hard to love something
called a HCFA. So I was thinking about changing the name. What
about the Medicare and Medicaid Association? Then you could call
it MAMA, and that’s something you can love” (Kristen Hallam,
Bloomberg News Service 5/31/01). More worrisome,
Thompson says he wants to clear out literally hundreds of
regulations that have been “languishing” in the equivalent of the
HHS regulation warehouse for 15 years “or more” (Marlene Cimons,
LA Times 5/29/01).

The HCFA story gets better. Thomas Scully, confirmed by the
Senate as the new HCFA Administrator, recently started a campaign
to “rename the Agency.” The winner gets to have lunch with
Scully. But how does one pick the winner? It’s the HCFA employee
whose suggestion comes closest to the name proposed by a public
relations firm hired by the agency. Even the contest is in
standard HCFA top-down format.

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

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