AAPS News – June 1995


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

Volume 51, No. 6 June 1995


Speaker Gingrich is setting the agenda, and Medicare is at
the top for the next few months. With great political
astuteness, Gingrich lobbed the ball into Bill Clinton’s court.
With equal savvy and lightning speed, Clinton slammed it back.

They both know where the “third rail in American politics”
is, and neither wants to touch it. What politician could survive
the credit for bringing down the federal building of Medicare,
the great shining showcase of the Welfare State and government-
funded medicine?

On the other hand, everyone wants credit for saving
Medicare-including physicians. And something must be done.

If a building is in trouble, one needs to send in men in
hard hats to examine the foundations.

Let’s set aside the various Reports, Plans, Bills, Opinion
Surveys, and Trial Balloons-and take a hard look at the
foundations of Medicare. Here are the rock-solid indisputable
facts that every American needs to know:

  • Medicare Part A is built on a first-dollar tax on
    Out of every dollar an American earns, 2.9 cents goes
    to Medicare Part A. No one may lawfully earn money to buy milk
    for the children, a train ticket to work, or insurance for
    himself, without paying that tax first. Americans who earn
    $20,000 pay $580; those who earn $200,000 pay $5800 to Medicare
    Part A.
  • Medicare Part B premiums are about 75 percent
    subsidized by general tax funds.
    Uninsured working Americans
    are paying part of the premiums of wealthy retirees.
  • The tax is not enough; bankruptcy is inevitable.
    Receipts from the payroll tax already fall about $22 billion
    short of covering current Part A outlays.
  • The tax cannot be increased enough to keep
    politicians’ promises.
    Increased longevity plus decreased
    fertility yields a demographic bomb. By 2040, the Medicare
    payroll tax alone would consume between 10.6 and 20.26
    percent of all wages to maintain present benefits. Long before
    tax rates rise that high, capital and labor will move to places
    where they can earn a decent return. If forced to remain, their
    productivity will be minimal.

The dreadful truth is that Medicare is a pyramid scheme
founded on deceit. It is like a poorly constructed building that
straddles a major fault.

The answer to the question in the title is simply “No,
Medicare in its present form cannot be saved.” That is simply a
fact, not a wish or a statement of political philosophy.

The next question is what to do about it. One approach is
to deny the magnitude of the problem and offer a palatable
nostrum. Appealing but dangerous “solutions” include changes
in the top management along with schemes that paper over the
cracks with price controls.

Those in power know that they cannot repair the problem, but
they hope to postpone the day of reckoning so that it does not
occur on their watch. Or they simply wish to delegate the
responsibility so that someone else will be blamed for the
debacle. “Private” entities, namely “managed” care, are
popular candidates. Let them skim a fat share of gross receipts
from the top for playing the heavy and taking the heat.

“Managed care” may be called a “market-based” or
“private” solution, but those terms are in Orwellian Newspeak.
As documents of the Clinton Health Care Task Force acknowledge,
enterprises that exercise powers belonging to government, or that
are under pervasive government control, are private only in name
or form. Medicare HMOs are funded by the government and act as
an arm of the government. But their failure will be construed as
a failure of the marketplace and as a reason for frank government

Another approach is to call for the outright, immediate
repeal of Medicare. This would be about as irresponsible as
dynamiting an unsound building while people are inside.

The humane and rational approach is to shift our attention
from saving the building to saving the people who are trapped in

The first step is to avoid further damage from loading on
additional costly regulations. The second is to unload the
counterproductive stresses that already exist (the Clinical
Laboratory Improvement Act, restrictions on balance billing,
claims filing when no reimbursement is expected, etc.). Next is
to protect as well as possible the most vulnerable patients who
cannot find assistance outside the system. Most important is to
evacuate in an orderly manner those who are willing and able to
leave-and simultaneously to allow the development of sound
structures to replace the failed Medicare system.

Persuading people that they should leave a heavily
subsidized program will not be easy-especially when they
themselves have been taxed to provide the subsidy. Persuading
young persons that they should not enter is somewhat easier.
Finding the means for them to do so, given present levels of
taxation, is the difficult part.

Under politics as usual, Congress will study plans to
remodel the top floor. The health-care management interests will
try to block the front exits, while fashioning policy that must
inevitably hasten departures via the morgue.

Meanwhile, the real support for the structure is crumbling-
the support of workers. Their ability to produce is drained by
taxes and regulations, and their anger grows as they see the
legacy that awaits them.

The choices are stark: we can tell the truth and rescue the
people-or we can lie and do nothing to mitigate the inevitable

Washington’s Clinton Plan Repealed

Mrs. William J. Clinton was present by satellite at the
signing of the 1993 Washington Health Services Act, which came by
FAX from the war room of the secret Health Care Task Force in the
Old Executive Office Building in Washington, D.C. She was
nowhere to be seen when most of the bill was repealed in May,

Governor Lowry, who had forced the “reform” bill through
the legislature, decided to sign the repeal rather than his
political death sentence. Michael Schlitt, M.D., President of
the Washington chapter of AAPS, was in Olympia for the ceremony
and has a Lowry pen to commemorate his years of battle.

Provisions that were repealed included: mandatory managed
care; a uniform benefit package for all insurance companies;
employer mandates; the requirement that all physicians belong to
a Certified Health Plan; and caps on insurance premiums. The
Health Care Commission, which had extensive regulatory authority,
was replaced by an advisory panel. And medical savings accounts,
which would have been unlawful under the former bill, were
endorsed by statute:

“The legislature recognizes that the costs of health care
are increasing rapidly and most individuals are removed from
participating in the purchase of their health care.

“As a result, it becomes critical to encourage and support
solutions to alleviate the demand for diminishing state
resources….The legislature intends to clarify that health care
savings accounts may be offered as health benefit options to all
residents as incentives to reduce unnecessary health services
utilization, administration, and paperwork, and to encourage
individuals to be in charge of…their use of service….”

Although Washington State has no income tax and thus cannot
offer any tax savings from MSAs, the law does request the U.S.
Congress to amend the IRS code to establish tax equity for
individual insurance.

The Washington Chapter of AAPS played a leading role in the
coalition that fought the Clintonization of medicine in a
bellwether liberal State.

Exodus from Canada

Both patients and physicians are jumping ship as the
Canadian single-payer system begins to sink.

With six-month delays common for knee and hip replacements,
Canadians are buying insurance that pays for procedures in the
U.S. if the approved waiting list at home is longer than 45 days.

The price is right: about $25 per month for a single adult.
Policyholders can choose from 800 U.S. hospitals, including the
Houston Heart Center and the Mayo Clinic. Travel expenses are
also covered (Medical Tribune).

Meanwhile, Canadian surgeons who perform the procedures are
pulling up roots to move south. Orthopedic surgeon Robert
Jackson, a “national treasure,” recently left Toronto for
Baylor University in Dallas. In an extensive interview by the
Toronto Sun (Sunday Magazine 4/9/95), Dr.
Jackson noted that Canada has become “the only place in the
civilized world where private practice is forbidden.”

Among Dr. Jackson’s reasons: “I don’t like being
considered the bad guy all the time.” Physicians are held
responsible for the constant cuts. At The Orthopedic and
Arthritic Hospital in Toronto, wards were closed and the staff
had to sell pizza to pay for repairing the elevators. It was Dr.
Jackson’s job to explain to staff doctors why they were limited
to some 25 joint replacements per year. The hospital could not
afford more plastic joints, and patients were not allowed to buy
their own lest a “two-tiered” system develop.

Although they must fight for operating room time,
specialists still work very long hours seeing patients to earn a
living. As the exodus exacerbates the shortage of specialists in
many areas, those who remain have a crushing workload, often 100
hours per week. This may include two hours per day of unpaid
labor to return phone calls and fill out government forms.

An additional attraction of the U.S. is the ability to do
research that is no longer possible in Canada. Dr. Jackson will
study joint motion, using computer technology, thanks to a grant
from an anonymous Texas millionaire.

“Pathological egalitarianism” is Dr. Jackson’s diagnosis
for the malady that has caused the “systematic dismantling” of
medicine in Canada.”

Help Congress Dismantle Harmful Regulations

Senator Frank Murkowski (R-AK), Chairman of the Committee on
Energy and Natural Resources, has issued a call for documented
examples of regulatory excess or abuse of regulatory process,
especially within the Departments of Energy or Interior. He is
specifically interested in unnecessary or overly burdensome
forms; requirements for information unrelated to the objective of
the regulation; conflicts between regulations; abusive action as
conditions for permitting; and standards that are clearly
unreasonable considering the nature of the risk and the fiscal
impact. Questions can be addressed to James P. Beirne, Senior
Counsel to the Committee, at (202)224-2564. The address is Hon.
Frank Murkowski, US Senate, Washington, DC 20510-6150, Attn:
Regulatory Analyst.

Arizona Patient Protection Act Signed into Law

Not one legislator voted against this act, although five
representatives abstained. Managed care did win two concessions.
The title was changed from “Patient Protection” to a bland and
nondescript “Health Care Services Organization,” and the
disclosure requirements were changed to apply only upon request
of an employer. Nonetheless, managed care organizations will now
have to provide information concerning contract provisions-for
example, limitations on services, including procedures for
emergency room, night or weekend visits, and referrals to
specialists; procedures for securing prior authorization;
circumstances under which the plan may retroactively deny
coverage for emergency or nonemergency medical treatment that had
prior authorization; any requirements that plan providers must
comply with any specified numbers, targeted averages or maximum
duration of patient visits; procedures for consulting a physician
other than the primary care physician; and a description of any
incentives or penalties associated with influencing plan
providers to withhold services or minimize referrals to

After the legislature adjourned, the Arizona chapter of AAPS
heard a rumor that the Governor might be persuaded to veto the
bill on the grounds that it was “unnecessary.” President
Joseph Scherzer, M.D., spoke about the Act on talk radio, the FAX
network was activated, the phones rang in the Governor’s office,
and the bill became law.

Correspondence from the LLCS

This is in response to a request to review the new Medicare
Electronic Claims Rider effective February 1, 1996. The analysis
is limited because the requester was not able to locate a copy of
his Electronic Trading Partner Agreement.

Part A, paragraph 1, states that the physician as the
“trading partner” will be liable for all breaches of the
agreement, whether caused by himself or any partner, employee, or
other subcontractor. Accordingly, the physician may wish to
protect himself by making a contract with his billing service,
under which they agree to abide by the terms of the Medicare
Electronic Claims Rider and indemnify the physician for any
breaches of that agreement due to their own conduct.

Part A, paragraph 2, prohibits a physician from disclosing
information about a Medicare-eligible individual to any other
person or organization other than HCFA, without the individual’s
express written permission [see Dr. Huntoon’s form, p. 4 —
Ed.]. Because of the broad wording of this paragraph,
it appears that a physician will be required to obtain written
permission from the Medicare eligible individual in order to use
a billing or an electronic transmission service….

Part A, paragraph 7, requires the physician to certify that
all claims for Medicare primary payment have been developed for
other insurance involvement and that Medicare is the primary
payor. It does not state the procedure or level of investigation
necessary to determine whether insurance other than Medicare is

Part A, paragraph 10, requires the physician to attempt to
prevent unauthorized users from submitting claims or committing
data security violations. It does not state the types of
security measures or the degree of effort that will satisfy the
requirement. Moreover, there is no wording to indicate that the
physician’s security measures will be reviewed on the basis of
what was reasonable under the circumstances.

Paragraph 14 also imposes a requirement for “sufficient”
security procedures without specifying what these might be.

Because a physician is likely to have little control over
the actions of the billing service, it is advisable to have a
contract under which the service agrees to indemnify the
physician for any breaches of the Medicare Electronic Claims
Rider caused by them.

Part A, paragraph 18, seeks to absolve HCSA and HCFA from
all claims, costs, or damages as a result of any claims
discrepancies, regardless of the source of those discrepancies.

A physician will probably be given little latitude in terms
of negotiating modifications to the Electronic Claims Rider
Agreement. Accordingly, your best course of action [if you
decide to submit electronic claims — Ed.] may be to
implement intraoffice procedures to ensure your own compliance
with the claims rider and then protect yourself contractually
from breaches of the claims rider by the outside billing services
you elect to use.

Timothy M. Schellberg, AAPS General Counsel

and Thomas P. Gallagher, Esq.

[Members who have legal questions are invited to call
1-800-635-1196. Questions that fit within the purview and budget
of the AAPS Limited Legal Consultation Service will be referred
to Counsel. AAPS members and directors are quite willing to share
their own experiences and opinions relevant to ethics and
legality, but they cannot give legal advice.]

Physicians Forbidden to Supply Equipment

As of January 1, 1995, a physician who sells any kind of
durable medical equipment to a patient is in violation of the new
Stark II anti-referral regulations.

This means physicians may not supply wheelchairs, crutches,
or anything else that Medicare classifies as “DME” but must
send the patient to a supplier with whom he has no financial
ties. There are complex exceptions for “ancillary services,”
but regulations have not yet been written (Part B News

Surgeons Challenge 5% Rule?

Under Medicare rules, an assistant surgeon cannot be paid if
fewer than 5 percent of surgeons use an assistant for a certain
procedure. Even if the patient willingly elects to pay out of
pocket, the assistant surgeon is threatened with sanctions if he
accepts the money. The billing prohibition was challenged
(specifically with respect to cataract surgery) in NY State
Ophthalmological Society v. Bowen
. Because both sides
stipulated that private contracting was illegal under Medicare,
the patients’ right to contract was not argued. The Long Island
Ophthalmological Society intends to file a constitutional
challenge, referring to the case of Stewart v. Sullivan
brought previously by AAPS President Lois Copeland, M.D., and
several Medicare beneficiaries.

The society argues that “this is the only example of the
government forbidding payments for a rightful and contracted
service. The Government has a long history of wage and price
controls, but the wages and prices can never be zero.”

For further information, contact the Long Island
Ophthalmological Society, Clinton, NY, (800)416-2020.

Under False Claims Act, Anyone Can Sue

All that it takes to become a qui tam plaintiff
under the federal False Claims Act is information that someone
submitted a claim that could be fraudulent. One need
not have been harmed by, nor have any relationship to the
plaintiff. However, most such plaintiffs are current or former
employees. They may even be the very people that the defendant
hired to review and correct its billing procedures.

The potential rewards are enormous: 15 to 25 percent of the
amount collected from the defendant in a successful case. (And
the penalties are up to $10,000 per false claim.)

The risks are minimal. The court may order an unsuccessful
plaintiff to pay the fees and expenses of a defendant only if the
action was clearly frivolous or vexatious. There is a separate
private cause of action for employees who suffer retaliation for
exercising their rights, but no comparable relief for employers
damaged by unfounded allegations.

Because the Stark II amendments state that no one may
request payment of a claim that results from a prohibited
referral, such claims are arguably encompassed under the False
Claims Act and thus subject to qui tam provisions (L.M.
Robison, P.R. Roest, Mark D. Folk, Natl Law J 4/24/95).

Whenever we depart from voluntary cooperation and
try to do good by using force, the bad moral value of force
triumphs over good intentions.

Milton Friedman

Members’ Page

QA for Reviewers. It amazes me that people feel they
can obtain information about psychiatric treatment by phone. How
is the physician to know the caller is not from The National
? My patients would be interested to know who is
reviewing their case. Here is a suggested letter to be signed by
the patient and sent to would-be reviewers:

This letter requests Dr. Nigro to obtain all appropriate
information from all health care reviewers, managers, and
examiners, or any other person so designated by my medical
insurance company, who will see my records….Please answer the
following 20 questions, [including] name, direct dial phone
number, how long employed by this management program,
professional qualifications, documentation of familiarity with
direct clinical care, CME credits, number of lawsuits filed
against you, and number of patients cared for per week.

Samuel A. Nigro, M.D., Cleveland Heights, OH

Equal Protection of the Law. To the Deputy to the
Deputy Assistant, Secretary for Health Policy, Dept. of HHS:

Knowing your keen interest in bureaucratic rules,
regulations and laws, and violations thereof, I would like to
refer you to Section 552 on Public information….Then please
turn to a letter dated Dec. 13, 1994, by the Director of the
Freedom of Information section, responding to my FOIA request of
April 16, 1993. That is 60 times longer than the time period
required by law, Section 552 (A)(1)(i). As a true blue
bureaucrat, your duty is clear: turn your subordinate and
yourself in to the Dept. of Justice, for the good of the State.

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

Doctors Need Permission to Help. A one-page consent form
for patients gives Dr. Huntoon permission to release information
concerning Medicare claims. In part, the form reads:

“In order to allow our office to help you with botched
Medicare claims and other problems created by the bloated and
bungling Medicare bureaucracy, the government requires us to have
a form….If we do not have this form signed, the Medicare
carrier will not research or reply to our inquiries concerning
your Medicare claim that they have mishandled….

“I give Dr. Huntoon permission to send any and all
information to Senators, Representatives, other government
officials, medical societies, or others deemed appropriate by Dr.
Huntoon to help resolve improperly processed Medicare claims or
other Medicare created problems….”

Dr. Huntoon reports that patients are all too willing to
allow their names and claim information to be used toward the
goal of ending the pervasive and constant bungling.

The Ethics of Capitation. Due to the
Washington State Medical Plan, I cannot afford AAPS dues. I have
never compromised my standards, although it now means losing
money when I care for children enrolled in the “Healthy
Options” program. For example, if a Strep screen is obtained,
the MSC plan will bill the practitioner $7, presumably as a
penalty, leaving $3 of the $10 capitation fee for the child’s
care that month. Virtually all children over 3 years old,
especially if they are in day care or school, become ill
frequently enough that a physician can meet expenses only by
prescribing medication by phone without seeing these patients.

Carol F. Truitt, M.D., Richland, WA

Right to Private Contracting Asserted. On Feb. 9,
Marilyn Singletary, Fraud Investigation Unit, wrote an inquiry
concerning a “waiver of Medicare Part B entitlement” form used
by Dr. Kerr, stating that “Medicare is monitoring physician
compliance with the Medicare claims filing requirement.” As of
May 1, Dr. Kerr still had received no response to this letter,
despite a follow-up telephoned request to confer with Medicare’s
legal department:

Let me share with you the dilemma that I face. I am a
liberty nut. For reasons that you probably would not understand,
I cannot accept the notion that the federal government has any
constitutional role in financing or regulating my intrastate
medical practice. Furthermore, I cannot, as a matter of
conscience, accept money that the federal government has taken
from one person and given, unearned, to another person.
Therefore, I do not take Medicare or Medicaid money. I am,
however, law abiding.

In September, 1990, when I heard about the “law” that
requires physicians to submit bills to Medicare, I stopped, as a
matter of conscience (and fear of prosecution), seeing Medicare-
eligible patients. Later, after hearing about Judge Nicholas
Politan’s findings in the case of Stewart v. Sullivan, I
began my present practice of using the contract that has
apparently come to your attention.

In view of the Judge’s finding that there is no “clearly
articulated policy” against private contracting, I will continue
privately to contract. If you can show me that such a policy
does exist, and that an enforceable rule against private
contracting has been published in the Federal Register,
then I will have to reconsider my position, and Stewart v.
might be ripe for reopening. A mere reference to a
Medicare carrier manual or bulletin would not be sufficiently

If, as I maintain, there is no rule against what I do,
please have the courtesy to apprise me of that fact. This is a
most important issue, and I look forward to resolving it quickly.

Richard S. Kerr, M.D., Morgantown, WV

Legislative Alert

Congress Returns; Budget Battle
on Agenda

Coming back from their respite from the whirlwind 100 days,
Members of Congress are plunging into the tougher part of the
national agenda: the federal budget and “Health Care Reform,”
including the reform of Medicare and Medicaid.

The federal budget battle promises to be a major-league
clash this summer. Many Congressional and media critics of the
House Republican agenda argue that the goal of a balanced budget
simply cannot be reached, especially if tax cuts are included in
the budget package. Others argue that it’s simply a matter of

Bolstering the case that a balanced budget and tax cuts can
be achieved simultaneously is a formidable 260-page set of
recommendations from the Heritage Foundation, a conservative
Washington think tank. It targets for elimination nine federal
departments, proposes major consolidation of numerous federal
programs, and transfers dozens of federal functions, including
the major federal welfare programs, to state governments. The
proposal would cut $755 billion in federal spending over five
years and achieve a balanced budget by the year 2000.

Members of Congress, testing the waters back home, are
finding that a transfer of federal functions to state and local
government has broad popular support. According to a March, 1995,
survey jointly conducted by Democratic pollster Peter Hart and
Republican pollster Robert Teeter for the “Council for
Excellence in Government,” 75 percent of the American people
favor giving the states “more responsibility” for programs now
run by the federal government, and only 17 percent are opposed. A
total of 50 percent think that their local government spends
money wisely; 24 percent think that their state government does;
and only 10 percent think that the federal government does.

Congress is getting the message. House Budget Committee
Chairman John Kasich has the Department of Energy and the
Department of Commerce on his hit list. Several conservatives,
including Congressman Matt Salmon of Arizona, want him to go
after the Department of Education also. Congressman Roscoe
Bartlett of Maryland is floating a proposal to link Congressional
pay to the Congressional success or failure to achieve a balanced
budget by the year 2002. The goal would have to be achieved by
cutting spending, not raising taxes. If Gingrich wants to play
budgetary hard ball, this measure may just be the weapon he

In the Senate, the key items of the House “Contract With
America” will be debated. It will be tough going.
Deliberations will be strongly affected by competition between
Senators Dole and Gramm for the 1996 Presidential nomination.
Gramm wants the Senate to pass the entire House “Contract” and
then some, and is staking out a legislative strategy early.
Capitol Hill observers expect that regardless of the Clinton
Administration’s approach to the Contract items, Gingrich and his
allies in the Senate will fold the Contract provisions into the
Budget Reconciliation Bill, which authorizes spending for federal
departments and agencies. This will be a major political
challenge to President Clinton. Another hard-ball tactic is the
attachment of the conservative reform items to the Debt Ceiling
Bill, which enables the government to borrow.

Expect longwinded press releases about “responsible
government.” Of course, Senate and House Democrats used such
tactics regularly against President Reagan, even before

Senator Judd Gregg’s Medicare Initiative

Following orders from Dole and Company to come up with
a Budget plan to cope with the deficit without touching the
Social Security System and without raising taxes, Senator Judd
Gregg of New Hampshire has issued a major report on “Options for
Non-Social Security Entitlement Reform.” By the Senator’s
calculation, adopting the recommendations of this report would
slow the growth of entitlement spending by nearly $500 billion
over the next five years. Still, non-Social Security federal
entitlement spending would be enormous: $2.82 trillion in
spending from 1996 to the year 2000. Without the Gregg reforms,
that spending would be $3.2 trillion.

Gregg has put the details of his budget plan on the table
and has issued a simple challenge to potential Congressional
critics: if they find the plan unacceptable, they should propose
their own alternatives. Medicare, of course, is the most
controversial item.

Gregg’s report recites the universally gripping figures.
Medicare Trustees project bankruptcy for the Hospitalization
Trust Fund as early as the year 2001. While private health care
costs have been dropping, Medicare costs rose 10.5 percent last
year, and they show no sign of slowing.

While Gregg affirms, contrary to some of his House
colleagues, that the fee-for-service system should be preserved
for those seniors who want it, he proposes the following “cost
containment” measures: home health copayment of 20 percent
(19.7 billion in savings over 5 years); lab coinsurance ($6.1
billion over five years); means testing for Part B premiums ($10
billion over five years); extending the HI tax to state and local
government employees ($7.6 billion over five years); reducing the
hospital inflation update by 1.5 percent ($10.2 billion over five
years); and implementation of Physicians Payment Review
Commission recommendations ($10 billion over 5 years).

Gregg also proposes a major restructuring of the “terribly
outdated” Medicare system : a “Choice Care” option. Under
this option, senior citizens would be able to get a “Choice
Check” equal in value to the capitated Medicare amount in their
region of the country. During an annual open season, they would
be able to use this check to purchase various medical insurance
options. A senior citizen who chose a less expensive plan could
keep 75 percent of the difference. A senior citizen could choose
a more expensive plan if he paid the extra amount.

In his report, Senator Gregg states: “The Clinton health
care reform plan projected $207 billion in savings under Medicare
from forcing all seniors into a managed-care system with per
capita spending limits. Choice Care does not share the Clinton
plan’s coercive aspects, and only budgets $35-45 billion in
savings over 5 years. It is likely that Choice Care will be
positively received by seniors and that even more savings will

Of note, the Gregg plan has no provision for a Medical
Savings Account option. If one really wanted to put consumers in
charge, then an MSA option would be a natural, coupled with a
catastrophic insurance plan. Additionally, it is not at all
clear from the language of the Gregg proposal whether the
“Choice Check” is an inducement to managed-care plans only.
Instead of leveling the playing field, this plan could make
Medicare an extension of the corporate-care revolution that is
limiting consumer choice, not only of insurance, but also of
personal physician. Gregg refers to the “antiquated and costly
fee-for-service system,” but he also cites the example of the
Federal Employee Health Benefit Plan, which does not discriminate
in favor of managed-care plans.

The Gingrich Factor

Regardless of the options, the final shape of things to
come in Medicare and in health care reform in general is likely
to have the strong imprint of Speaker Newt Gingrich. Gingrich
shepherded through the restoration of partial tax deductibility
for the self-employed. And despite the fury of the American Bar
Association, his team managed to secure a cap of $250,000 on non-
economic damages as part of medical malpractice reform by a vote
of 247 to 101. He has pledged to make medical savings accounts a
key element of reform this year.

In an unprecedented public performance for a House Speaker,
Gingrich addressed the nation on prime-time television, outlining
the recent achievments of the new Congress and telling Americans
where he wants to take the nation. This is stuff normally
reserved for Presidents in modern times, but Gingrich may be
taking the political system of the United States back to the much
older republican tradition of Congressional supremacy as the
first among equals in the three branches of government, a view
clearly in accordance with the consensus of the Founding Fathers.
In the aftermath of the recent legislative onslaught by Gingrich
and Company, Clinton has felt compelled to assure the nation of
his continuing “relevance.”

While Speaker Gingrich is getting grudging respect for his
performance as a political Leader-Americans are unused to real
leadership-the establishment press is really upset with the
content of the now notorious “Contract With America.”

“Let no one begrudge House Speaker Newt Gingrich full
credit for his achievements as a political strategist,” states
the editorialist of the April 9th New York Times. “He
has supplanted the President as the most important shaper of
national political debate. Before that, he pulled off the most
difficult trick in campaign planning, which is to impose a single
theme on hundreds of races…in an off-year Congressional
election. No dispassionate judge of political talent can fail to
be impressed. This is a skill of a high and rare order.”

However, commenting on the substance of the Contract and the
Speaker’s lack of personal popularity, the Times
observes: “He projects a seething anger that the American people
are picking up on their emotional radar. Even for those who
believe that Americans need a dose of fiscal discipline and boot
strap ambition, Mr. Gingrich seems extreme because the nation he
would create would be pinched, unfair, and punitive. His gift for
tactics is not matched by a talent for seasoning power with

The editorial is spiced with intemperate language-
intemperate, mind you, not the red-meat stuff of the far left.
Indeed, the Times editorial conjures up the image of a
proper old lady trying her best to retain her composure,
admonishing the bad behavior of the vulgar rabble. Imagine the
editorials after the first round of budget cuts. Which brings

More Voices of Moderation

In the aftermath of the Oklahoma City bombing, Clinton
gave the nation some sound advice. It is time to lower the octane
on this country’s political rhetoric.

Clinton’s political friends and allies should take that
advice. The President is also right-and we give him credit for
saying so-that this sound advice pertains to liberals, as well as
conservatives, journalists on the left as well as popular radio
talk show hosts on the right.

For example, the national dialogue on public policy was not
elevated when, during the “school lunch” debate, opponents of
the House welfare reform bill accused the Congressional
leadership of taking food from the mouths of starving children.
Nor was it uplifting for Congressman Lewis of Georgia to compare
the House welfare reformers with Nazis or for Mr. George
Bushnell, major domo of the American Bar Association, to call the
House Congressional leadership “reptilian bastards” for
pursuing tort reform. Likewise, Carl Rowan, a nationally
syndicated columnist writing in The Washington Post did
no service to humanity by claiming that Senate Majority Leader
Robert Dole and Speaker of the House Newt Gingrich are somehow
vaguely responsible for creating the “climate” that incited the
unspeakable terrorist violence in Oklahoma City.

Transforming Employer Health Insurance

While Gingrich has called for a congressional
investigation of managed care in his speech to the American
Medical Association (see May Legislative Alert), other
Republicans in Congress are aggressively pushing HMO-style
medicine as the key element in the reform of Medicare and medical
insurance in general. The conflict within Congressional ranks on
managed care is deepening. Backers of private employer-based
insurance are saying that the movement to managed competition is
a “triumph of the market” and proof that the Clinton Health
Plan or anything like it was unnecessary all along. Others,
largely conservatives, are arguing that the corporate movement to
managed care is nothing less than another proof of the distortion
of employer-based insurance, which thwarts real competition and
deprives consumers of any meaningful control over their own

Meanwhile, employer-based insurance is changing
dramatically. With the rise in medical costs, large firms have
been moving aggressively toward managed-care plans, and now 63
percent of all of those enrolled in employer-based insurance are
enrolled in managed-care plans. But small firms are changing as
well. A survey by Arthur Anderson and Co. Enterprise Group,
published in the March, 1995, edition of INC., shows
that the average increase in medical costs among small to mid-
size firms fell from 22 percent in 1993 to 14 percent in 1994.
The most common responses to rising insurance costs were to
change insurance companies (40 percent); change policies from low
to high deductible (36 percent); switch to HMO or PPO plans (26
percent); increase employee’s contribution (25 percent); reduce
benefits (16 percent); institute wellness programs (9 percent);
switch to self-insurance (9 percent); switch to cafeteria-style
plans (6 percent); or drop coverage (4 percent). Of course,
American workers and their families have very little to say about
any of these decisions. After all, it’s only their money.

As long as Americans are effectively denied the use of their
own money for the purchase of insurance or medical services,
because of the penalties of the tax code, the American medical
system will remain broken.

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