AAPS News – June 2004

Volume 60, No. 6 June 2004

DOCTORS FIGHT BACK ON “MEDMAL”

What lawyers call “med mal” really refers to anything bad
that happens to a patient for which a court might award money. It
is a medical maloccurrence that might or might not involve
malpractice culpable neglect but certainly imposes liability on
doctors, at least for defense costs.

The explosion in liability costs, like that in medical
costs, is to a large extent sustained by an enormous pool of
third-party “free money.” Everyone with the right ticket has
access to the pool, which manifests the tragedy of the commons.
When the pool is in danger of running dry, the third party just
extracts higher premiums. But there is a limit, which is being
reached with both medical and professional liability insurance.

More states are nearing or reaching the crisis point,
including Illinois and Arizona. According the Chicago
Tribune, billboards are going up with messages such “How far
away is the nearest obstetrician?” or “Drive safely: no brain
surgeon in Will and Grundy Counties.” Christ Hospital, a major
trauma center, has recently lost three vascular surgeons, one
general surgeon, two neurosurgeons, a cardiologist, and an
internist. At nearby Palos Community Hospital, five of the 10
pulmonary doctors are leaving because of liability insurance
rates.

“In Illinois, we are on our third round of crisis
litigation-State Supreme Court overrule since I entered practice
in 1973,” writes Robert F. Hamilton, M.D., President of the
Madison County Medical Society.

Patient access to care is the issue, stated James Balserak,
M.D., Chief of Surgery at Tucson Medical Center, at a town hall
attracting 650 physicians, the largest physician gathering in
Tucson’s history. Tom Scully, M.D., a neurosurgeon who serves on
the Board of Trustees of Northwest Hospital, said that his
hospital was losing the two obstetricians who deliver 25% of the
babies there. A survey of the medical staff showed that 20% were
thinking of leaving Arizona this year.

Arizona has a constitutional provision forbidding caps on
awards. Two past efforts to amend the constitution have failed;
another is contemplated for 2006. Whether or not that succeeds,
the only way to obtain an immediate reduction in premiums is to
reduce limits of coverage, stated James Klein, M.D., a colorectal
surgeon. He observed that many Texas physicians now carry
$100,000/$300,000 coverage instead of $1 million/$3 million. This
would require policy changes by hospitals and managed-care plans.

At a meeting attended primarily by insurance agents, the
former president of the Mississippi Trial Lawyers Association was
heard to say, “If we can’t get a half million, then I’m not going
to pursue it.” Uninsured doctors are not often sued.

This mode of thinking is the reason that “10% of the doctors
cause 90% of the malpractice suits” a slight
modification of the personal injury lawyers’ frequent canard,
explains Stephen Katz, M.D., former President of the Connecticut
Medical Society. “The 90% of cases come largely from
obstetricians, neurosurgeons, and, to an extent, orthopedists,”
Dr. Katz writes. “The most incompetent people in medicine do not
choose those fields. They are just the areas with the most
lucrative payouts for lawyers.”

While the value of a human life, or human suffering, may be
infinite in the cosmic sense, people place contractual limits on
compensation every time they buy life or disability insurance.
Many endeavors have legal limits placed on liability otherwise
these endeavors would not be pursued. State-run medical
facilities excel at limiting their own liability, observes
Russell Faria, D.O., of Newport, OR, citing $100,000 limits per
claimant, plus potential special damages of $100,000, in
malpractice cases against Oregon’s medical school (ORS 30.268-
30.270, see www.leg.state.or.us/
ors/030.html).

Limits do have an impact on premiums. The largest insurer in
Texas dropped physicians’ liability premiums by 12% after the
enactment of a $250,000 cap on noneconomic damages.

Contractual waivers of liability work in many commercial
endeavors, including nanny services (Business Week
2/9/04). Methods of dispute resolution, or a definition of what
restitution means for an injury (say $80,000 for loss of an eye),
might also be agreed upon in advance. If the patient violates an
agreement, say not to file a frivolous lawsuit, a countersuit
could be argued as a breach of contract (Wall St J
3/23/04).

Limits on liability are morally justified, argues Robert
Gervais, M.D., to protect innocent doctors who lose in 100% of
malpractice actions because of the burdens of defense and
innocent patients forced to pay higher medical fees.

Some version of the loser-pays principle must be invoked to
make lawyers accountable for harming the innocent. As Rep. John
Shadegg (R-AZ) pointed out, the so-called English Rule applies in
most of the civilized world.

Only about 20% of med mal lawsuits are definitively related
to adverse outcomes caused by negligence, writes Kyle McCammon,
D.O. (
Medical Sentinel, Fall 2002). Physicians need to fight
back against this abuse of process: “Free access to the courts
cannot be achieved while effectively denying access to some (i.e.
the physician who has been unjustifiably sued).”

Julie McCammon, M.D., an obstetrician, filed a pro-se
lawsuit against the West Virginia Trial Lawyers Association for
the intentional tort of civil conspiracy to file baseless
actions. Between 1993-2003, there were 941 dismissals and 291
physician verdicts in West Virginia, which cost an average of
$40,000 to defend. A summary judgment in favor of the lawyers is
being appealed in a brief written by AAPS General Counsel Andrew
Schlafly (see p. 3 and
www.aapsonline.org).

Physicians are fighting back, by withdrawing premium
payments (often by leaving medicine); legislative action; patient
agreements; and engaging lawyers on their home turf.

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Waiting Lists Good, Say Brits

According to an article from the London School of Hygiene
and Tropical Medicine, “benefits can result from a well-managed
waiting list,” although prolonged waiting (say more than six
months) is clearly undesirable. The list “maximizes efficiency by
ensuring a steady demand for precious resources such as staff,
theatres, and beds. It also enhances staff satisfaction and
morale by ensuring theatre lists have an interesting mix of
cases” (J Royal Soc Med 2004;97:159-160).

According to secret provisions of contracts between the
National Health Service (NHS) and private consortia that build
and run hospitals, penalties must be paid if too many patients
are treated in a year, even if they are emergencies. The bed
occupancy rate is not supposed to exceed 90%. The Worcestershire
Royal Hospital, which has a deficit of œ15 million, was fined
œ200,000 this year because of a record number of emergency cases
(The Observer 3/28/04, cited by Del Meyer, M.D.,
4/13/04, see www.MedicalTuesday.net).

Shortages Looming in U.S.?

According to the AMA, the percentage of young doctors (under
the age of 35) dropped from 22% to 16.6% between 1990 and 2001.
The ranks of young physicians include more women, who tend to
take time off for their families. The effect of lack of
replacements will be intensified as older physicians retire
earlier. In Washington State, Physicians Insurance reported that
the average age of retirees had dropped from 63 in 1996 to 58 in
2001. One sign of stress is that 91% of small hospitals and 100%
of large hospitals, in a statewide survey, reported an
overcrowding problem in the emergency room (Washington State
Medical-Education and Research Foundation, 2002). The percentage
of sick or injured patients waiting more than 21 days for an
appointment in the U.S. increased from 24.4% in 1997 to 27.4% in
2001 (AM News 4/8/02).

Reversing 15 years of predicting physician surpluses, the
Council on Graduate Medical Education anticipates a shortage of
85,000 physicians by 2020 (AM News 11/3/03).

The number of medical school applicants peaked at nearly
47,000 in 1996-1997 (2.7 per medical-school place), but fell to
33,625 in 2002-2003 (1.9 per place), lower than the 1982-1993
level of 35,720 (NCPA, Weekly Health Policy Digest, 5/11/04,
citing N Engl J Med 2004;350:1780-1787). Medical school
may no longer look like a good investment, stated Thomas Sowell,
observing that Britain has to import physicians from the Third
World, where medical school standards are lower.

How to Achieve Quality Targets

To help meet Whitehall targets and qualify for financial
bonuses and independence, the Brent Teaching Primary Care Trust
of north London offered inducements of œ100 pounds to general
practitioners for each patient who claimed to have quit smoking
for at least four weeks. Conservatives called for an inquiry into
the Brent scheme, and the use of targets in general also came
under fire (Independent.co.uk
3/28/04).

* * *

“A shortage is a sign that somebody is keeping the price
artificially lower than it would be if supply and demand were
allowed to operate freely. That is precisely why there is a water
shortage in the western states.”

Thomas Sowell, townhall.com, 3/19/04

First Anniversary of HIPAA Privacy Rule

After a year and the diversion of at least $17 billion from
patient care into implementing HIPAA rules, Jim Harper, editor of
Privacilla.org, concludes that “consumers today have …far less
confidence in the privacy of their health information and health
decisions.” The forms that people receive make it clear that they
“have no control in this system.”

As pointed out in a special report issued in April 2003 (see
www.privacilla.org),
“the regulators ignored a substantial web of existing privacy
protections and constructed a complex regulatory contraption out
of whole cloth.” The rules ignore the major cause of privacy
threats: the persistence and continuing growth of third-party
payment. The payers oversee choices that otherwise would be made
in confidence.

At last count the Office of Civil Rights had received 5,350
privacy complaints, about 100 per week, most based on
misunderstanding of the law (AM News 5/3/04). Meanwhile,
medical information is serving as the source of information for
identity theft (HIPAA Compliance Alert 4/26/04).

How to Mine Data

A May 25 audio conference (see

www.compliancealert.net/conferences/A418 ) promises to
teach you, for $249, “new ways that the government uses data
mining, and how you can do the same.” Whistleblowers do it: why
shouldn’t physicians, hospitals, and home health agencies? You
can uncover your high-risk billing problems before the government
does, and even “help recover money you’re due!”

Illinois PTA Votes to Repeal Hepatitis b Mandate

Assisted by testimony from AAPS Past President Chester
Danehower, M.D., the Illinois state Parent Teachers Association,
meeting in Peoria, voted for repeal of mandated hepatitis b
vaccination. The Dept. of Public Health refused to provide
incidence data, claiming its computer was down for 3 weeks.

California Tort Reforms Shaken by Abuse Laws

In a State long considered a leader in tort reform, trial
lawyers have possibly found a way around strict rules on punitive
damages. The California Supreme Court has decided that the rules
do not apply in cases that allege wrongdoing under the Elder
Abuse and Dependent Adult Civil Protection Act (AM News
5/17/04). In 2002, a similar decision was handed down in Arizona;
the Arizona chapter of AAPS filed an amicus brief supporting the
physician (AAPS News Feb. 2003).
The Arizona legislature passed a law mitigating the decision,
except for medical directors of nursing homes.

AAPS Calendar

Oct. 13-16. 61st annual meeting, Portland, Oregon.

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Doctor Sues Lawyers

Like many obstetricians, Julie McCammon, M.D., has been
victimized by unfounded malpractice suits. In one, the patient
claimed a femoral neuropathy resulting in inability to walk
without a brace. The lawyer pursued the case, even after being
confronted with videotapes of the patient walking downstairs,
sans brace, carrying heavy boxes.

The epidemic of baseless lawsuits has driven Dr. McCammon’s
professional liability premiums to $115,000, although no
successful claim has ever been filed against her.

Dr. McCammon filed a pro-se lawsuit in February 2003
(Julie K. McCammon, M.D., v. William L. Frame and the West
Virginia Trial Lawyers Association, Civil Action No. 03-C-
66-2, Cir. Ct. of Harrison Cty), alleging that plaintiffs
“engaged in the institution of frivolous, nonmeritorious, and
malicious lawsuits against physicians in the State of West
Virginia resulting in the unwarranted and stifling increase in
the cost of professional liability insurance.” Moreover,
plaintiffs acted “maliciously and in civil conspiracy.” As a
result, Dr. McCammon has suffered economic loss, emotional
distress, mental anguish, and other noneconomic damages.

In Dr.
McCammon’s Petition for Appeal, AAPS General Counsel Andrew
Schlafly argues that Judge Booker T. Stephens should have been
disqualified because his wife is a member of the West Virginia
Trial Lawyers Association. She would be directly affected by any
demands for payments by the Association and could conceivably be
called as a material witness to the alleged civil conspiracy. The
Judge had also received campaign contributions from Association
members.

There is nothing unusual about suing trade associations for
civil conspiracy, write Mr. Schlafly: “This has been a staple of
attorneys’ own repertoire for some time.” The Court has
previously clarified that “where persons combine not for the
purpose of protecting or advancing their own legitimate interests
but for the purpose of injuring another in his trade or business,
they are guilty of unlawful conspiracy.”

Dismissing Dr. McCammon’s action was precipitous because no
discovery had been allowed. Dr. McCammon was even denied access
to information on the Association’s own web site. The information
she acquired from public sources, pertaining to the $50 million
cost of unjustified actions, was “only the tip of the iceberg.”
Then-president William Frame evaded deposition. The tactics he
used in pursuing frivolous claims could shed light on such
questions as whether certain insurance carriers were targeted as
victims in the hope of easy settlements. Other materials
requested but denied in discovery could illustrate conspiratorial
activities to target certain experts or to engineer voir dire to
maximize verdicts.

Tip of the Month: Increasingly physicians are
ambushed by malpractice attorneys, sham peer reviews, medical
boards, and even prosecutions. The question arises for the
victimized physicians: whether and how should they hire private
investigators? The answer is that private investigators are often
essential to exposing frauds on the other side. They can unearth
criminal convictions by witnesses; make video or tape recordings
of adversaries disproving their lies; and even catch an expert
witness doing the same thing he criticizes others for doing. Some
investigators are better than others, of course. But when your
attorney is cross-examining a witness who is lying about you,
then you want to have as much information for the questioning as
possible.

Dr. Sell Asks for Competency Hearing

After a Supreme Court decision in Sell v. U.S. 2003
(see AAPS News, Aug 2003), orders
for involuntary drugging of Dr. Charles Thomas Sell were vacated
by the Eighth Circuit Court of Appeals on Sept. 2, 2003, states
Dr. Sell in a
hand-written pro-se motion.

“As no new Court Order[s] have been forthcoming, after nine
months of continued hospitalization, incarceration is serving
absolutely no purpose,” Dr. Sell writes. As the latest commitment
order by U.S. District Judge Donald Stohr expired on April 8,
2004, his continued incarceration at the U.S. Medical Center for
Federal Prisoners in Springfield, Mo., is without authority under
the law.

Dr. Sell argues for release on his own recognizance pending
a proper competency hearing and a trial on the charges against
him. He requests an independent psychiatric evaluation by the
psychiatrist of his choice, and fees to cover it.

Dr. Sell, a dentist, was
charged with Medicaid fraud. If convicted, his maximum prison
term would have been completed years ago. He has been held
without trial for nearly seven years as government doctors
asserted his incompetence.

Schumer Fights Medicaid Recoupments

Sen. Chuck Schumer (D-NY) says that the federal government’s
plan to recover $172 million in improper Medicaid payments is an
“outrage.”

“If 56% of claims were not submitted properly, common sense
tells you the regulations were not explained properly,” he said,
and HHS should send experts to help.

The errors were uncovered in an audit of speech services
paid for by Medicaid and provided by local schools. There have
been no threats to incarcerate anyone.

Another issue is the extent of schools’ dependence on
Medicaid funding, notes AAPS Counsel Andrew Schlafly.

Is Charity Unlawful?

The Office of Inspector General (OIG) thinks that the Civil
Monetary Penalty (CMP) statute may forbid religious charities to
distribute free medications to the poor or to provide discounted
room and board for families who could not otherwise afford to
stay near their sick children.

This broad application of the CMP statute may conflict with
the Religious Freedom Restoration Act (RFRA), which provides that
“[the] [g]overnment shall not substantially burden a person’s
exercise of religion even if the burden results from a rule of
general applicability.” Until the issue is clarified, religious
organizations had better beware. Aiding the poor may serve as an
inducement for them to seek Medicaid-covered services from those
institutions. It is not necessarily unconstitutional to force an
organization to abandon or alter its religious mission as a
condition of participation in Medicare or Medicaid (BNA’s
Health Care Fraud Report 4/29/04).

Concierge Practices Threatened

Physicians who charge a “retainer” for services not covered
by Medicare could be accused of understating the true cost of
services, engaging in the practice of insurance, or abandonment
of patients who don’t switch (Med Compliance Alert
4/19/04).

Opting out is much
safer.

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Correspondence

Physician Devaluation. “New Revenue Streams Can Keep
Your Practice from Going Under,” Practical Neurology,
March 2004, is the third or fourth article I’ve seen in the
neurology literature noting that “it’s hard to make a living as a
neurologist.” Although the neurologist is said to be “the
specialist to whom all others turn for overwhelming diagnostic
confusion resolution,” the head of an epilepsy group in Minnesota
concludes that current marketplace conditions “make it almost
impossible to earn decent revenues just by treating patients.”

Over the past decade, insurers have followed the
government’s lead in adopting the devaluation scheme called the
RBRVS (Resource-Based Relative Value Scale). In this distorted
market, a number of neurologists turn to treating “wrinkled
brows” with Botox, instead of potentially devastating neurologic
conditions that might respond to intervention.

Patients should be alarmed. But do any of the “I don’t even
want to pay my $10 co-pay” patients value a specialist’s services
enough to pay for them?

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

A “Right” to Care. Under the Constitution, the
government can’t pass laws that limit access to care. Here’s how
it’s done: Individuals have a natural right to seek and
receive medical care, and if they choose to do so, they must pay
for it. By law, individuals receive a societal right to
access care, and limited provisions for payment. Then, government
cuts funding so that payment may be withheld, and thus care is
denied, in violation of the unnatural (societal) right. The
government also makes it illegal to pay for care, violating
natural rights as well.

Joseph Lee Pugh, Diamondhead, MS

One More Reason to Open a Cash-Based Practice. From an
ad for a live audioconference produced by HCPro: “The ICD-10-CM
and ICD-10-PCS systems are on the horizon….It’s not too early
to learn about these new systems…[that] will impact every area
that uses coded data…. The U.S. is the only country that hasn’t
switched to the ICD-10 coding system.”

Greg Scandlen, Galen Institute

What Next? Family Practice News of 2/15/04
carries a report that the federal government is requiring medical
insurers to check their provider and member lists against a
federal list of potential terrorists. Will budget deficits
constrain Big Brother? The tyrant’s response is simply to command
private parties to do his detective work for him, at no pay,
under threat, and with uncertain accuracy. How long will it be
before physicians are told to perform a background check on a
patient before performing a medical service? If the check flags
the name as a government suspect and the patient is bleeding,
would it be a federal crime to render service? What is the
physician’s duty? The answer comes from Philadelphia, July 4,
1776….

Hilton Terrell, M.D., Ph.D., Florence, SC

Drug Prices. Price controls do not reduce the cost of
production. Consumers bid up the price of manufacturing inputs
because these have alternate uses. Moreover, the cost is obscene
because of government mandates. Of course, legislators say that
drug companies make excessive profits. Really? Goods are
profitable because consumers bid up the price. If a law prevents
response to consumer preference, investors (including Grandma)
channel their savings into profitable companies such as
entertainment. Price controls negate consumer choices.

Robert P. Gervais, M.D., Mesa, AZ

Why Some Thrive with Medicaid. Large operations that
accept Medicaid without limit imply that they are more
altruistic, or more efficient, than a doctor like me. If you can
somehow pry out the financial particulars, you will probably find
that they use their size and clout to extract more Medicaid
money. At a presentation to our medical society by a big outreach
clinic, I divided their gross income by the number of visits, and
came up with $160 for a primary-care visit. The speaker was very
uncomfortable when I pointed that out, and mentioned all the
“extras,” like masters-level psychologists and nutrition
counselors that the clinic offered. If I were paid that much, I
could provide these services also.

One would almost think there is a plan to see private
practice fail, to create a crisis so the government and large
businesses can ride in to rescue us from problems they created.

Russell W. Faria, D.O., Newport, OR

Subsidizing Lattes. Why don’t media lapdogs write a
story like this: “Mary Jones, 20-something years old, is one of
the 40 million uninsured Americans. Each year she spends $750 on
double lattes and muffins from Starbucks; $1,250 on deli lunches
instead of bringing a sandwich to work; $2,000 on $4.50 drinks
after work; $1,820 on cigarettes; $5,700 on loan payments and
expenses for her new car; $1,250 on concert tickets; $400 on CDs;
and $960 on cell phone charges. That comes to $14,005. If she
spent $4,000 of that on a high-deductible medical insurance
policy, she could still invest $10,005 and have a nestegg of $2.8
million when she retires, assuming the government doesn’t
confiscate it in taxes.”

You won’t read it in the press because (1) economics is not
taught in government schools; (2) it would challenge the pack
media’s belief in redistribution and collectivism (plunder); and
(3) lapdogs live to please their master.

Craig Cantoni, Scottsdale, AZ

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Legislative Alert

Single Payer Update

The latest edition of Health Affairs, one of
the nation’s most prominent health policy journals, has a series
of interesting articles dealing with health spending, and also
quality and performance of the medical systems in a variety of
different countries. The picture that the authors of these pieces
paint is a mixed mosaic of good and bad performance, and reflects
differing viewpoints, of course, but you will find revealing
nuggets of information in all of them.

The U.S. spends about $1.5 trillion on health care, far more
than any other of the developed countries. Based on 2001 data,
this represents about 14% of America’s GDP, almost twice as much
as many other developed countries. The Center for Medicare and
Medicaid Services (CMS) projects that this spending will reach
18.4% by 2013, when the first waves of the Baby Boomers are
enrolled in the Medicare program. Princeton University Professor
Uwe Reinhardt and his colleagues state that the level of U.S.
spending is $4,887 per capita, far more than that of
other developed countries. The practice of medicine is labor-
intensive and generally well-compensated in the U.S. But a key
structural reason for higher spending, they note, is that the
U.S. government is not yet a “monopsony” purchaser a single
buyer, thus exclusively dictating the payment, or the payment
limits, for medical goods and services.

Some powerful Members of Congress would like to change that,
of course, and move the U.S., in a series of crab-like maneuvers,
toward the European model. This consumes a lot of energy and
takes political skills; but movement toward some European-style
or Canadian-style health care system is likely to be accomplished
only through a carefully calibrated, step-by-step process. That
is why, as the readers of this column are regularly warned:
It’s the Structure, Stupid! That is why the issue of the
future of the government “negotiation” over drug prices in
Medicare is now so crucial to the Left’s general agenda. It also
explains the Left’s responses to the new Medicare consumer-driven
prescription drug discount card. The responses range from the
merely boring repetition of anti-market rhetoric (seniors can’t
make choices, so many prices will confuse them, etc.) to the
flat-out hysterical. All the confusion and the messiness of
choice and individual decisionmaking goes away if the government
does it all for you. If government becomes a monopsony purchaser
of drugs for seniors, it would mean direct government control
over the pricing of half of all drugs sold in the United States.

That’s the real issue, of course; not “cheap drugs” for
seniors. Cost control in government systems is a simple process:
In the face of rising demand for medical services, government
controls costs simply by reducing reimbursement and thus limiting
supply. This has profound effects on the functioning of the
system.

How? Well, another crucial article in the recent edition of
Health Affairs, authored by Harvard University’s Robert
Blendon and his colleagues, sheds some light on this question.
Blendon and his colleagues have conducted a major survey of
hospital administrators in five countries Australia, Canada, New
Zealand, the U.K., and the U.S. Every one of these countries,
except the U.S., has a “universal health care” system. The survey
covered financial resources, quality of care, waiting times,
staffing shortages, the disclosure of performance data, and
efforts to improve quality. This is just the flavor of some of
the more interesting findings:

Americans are the most critical of their own
system. No more than 12% of hospital officials in the
four other countries said they were “not very satisfied” or “not
satisfied at all” with the health care system, compared with 49%
in the U.S. Only 4% of American hospital administrators, versus
16% of Canadian, said that they were “very satisfied.” As Blendon
et al. point out, the foreign administrators are more satisfied
with their universal health care systems than their patients are,
based on responses to an earlier survey.

Hospitals under “universal care” are a financial basket
case. While 71% of U.S. hospitals reported having a
surplus or making a profit, and 6% broke even, between 32% and
82% of hospitals in other countries had a deficit or were unable
to stay within their budget. A surplus or profit was reported by
only 35% of hospitals in Australia, 9% in Canada, 11% in New
Zealand, and 7% in the U.K. While 30% of U.S. hospitals reported
that their financial situation made it impossible to maintain
current levels of service, 57% of hospitals in Australia, 81% in
Canada, 75% in New Zealand, and 63% in the U.K. said they could
not maintain current services.

Americans dramatically outscore all others on the
quality of hospital resources. On the question of the
intensive care units, 51% of Americans said their facilities were
excellent, compared to 23% of the British, 30% of the Canadians,
35% of the New Zealanders, and 42% of the Australians. On the
quality of operating rooms, 47% of Americans said that they were
excellent, compared to 9% of the British, 25% of the New
Zealanders, 21% of the Canadians, and 29% of the Australians. On
diagnostic imaging equipment and medical technology, 51% ranked
the facilities as excellent, as did 13% of the British, 11% of
the New Zealanders, 17% of the Canadians, and 20% of the
Australians. The lesson: If you are really sick, you want to be
in an American hospital.

On waiting times for services, there is no comparison
with America’s responsiveness to care for the sick in American
hospitals. A total of 0% of American officials said that
patients had to wait six months or more for elective surgery
“very often.” But 22% of the British admitted this was the case,
as did 21% of New Zealanders, 9% of Canadians, and 12% of
Australians. For a 50-year-old woman with an undefined mass in
the breast, 74% of Americans said that a biopsy would be
performed in “less than one week,” but only 6% of the British,
20% of the New Zealanders, 30% of the Canadians, and 49% of the
Australians said the procedure would be this prompt. A routine
hip replacement could be done “less than three weeks,” said 86%
of the Americans, 2% of the British, 8% of the New Zealanders, 3%
of the Canadians, and 34% of the Australians. Average waiting
times for treatment in emergency rooms were said to be less than
one hour by 38% of Americans, 17% of the British, 26% of the
Canadians, 44% of the New Zealanders, and 37% of the Australians.

On setting forth written policies to inform patients of
preventable medical errors, Americans are more conscientious than
anybody else. Such policies are said to be in place in
88% of American hospitals, 74% of British, 50% of New Zealanders,
47% of Canadians, and 59% of Australian. Interestingly, no more
than 5% of administrators in any country thought that government
policies or targets are effective in improving quality of care.
All did agree that electronic medical records and computerized
drug prescriptions would improve quality.

HSAs for Federal Workers

Next year, federal workers will be able to enroll in
plans with health savings accounts. Kay Cole James, Director of
the Office of Personnel Management (OPM), the agency that runs
the Federal Employees Health Benefits Program (FEHBP), just
outlined the solicitation for HSAs in her annual call letter to
insurers. Since the FEHBP is the largest group health insurance
program in the world, what happens in the program can have a
major impact. This is a huge victory for freedom.

As expected, the Left has trotted out the same old, tired
complaints that the choice of HSAs will benefit the healthy and
wealthy at the expense of the older, sicker, and poorer. The
facts, however, are quite different. The first hard data
collected by ehealthinsurance, one of the nation’s largest health
insurance brokers, is instructive. Among the enrollees in HSAs,
the largest group are in 40 to 49 years old, and 55.7% are over
the age of 40. The cost varies from $50 to $300 per month.

These preliminary data match experience with similar
consumer-driven plans, such as Health Reimbursement Accounts
(HRAs). According to the Galen Institute, enrollees in these
plans tend to be older and have health problems; to be high users
of preventive health services; to choose generic drugs; and to be
highly satisfied with their plans. Scott Krienke, Vice President
of Assurant Health, a company offering the new HSAs, says that
30% of those who signed up for these accounts since January 1,
2004, were previously uninsured.

Fixing the Medicare Law

The Medicare Modernization Act of 2003 is law, but the
mammoth drug entitlement doesn’t go into effect until 2006.
Across the political spectrum, critics say that the added burden
on current and future taxpayers will be enormous. But nothing is
inevitable. Congress could conceivably still regain some vestige
of fiscal sanity, and reverse course on this disastrous path.
What can be done?

The first solution can be found in one solid provision of
the law that does go into effect this year: the prescription-drug
discount cards. As noted, they are at the source of heated
controversy. They are projected to result in savings of 10% to
25%, with a $600 subsidy for drug purchases, for low-
income seniors lacking drug benefits. The problem is that,
after all this work in setting it up, Congress kills the program
in 2006.

Congress should make this program permanent, and abandon the
universal benefit entirely. The drug discount card, with a means-
tested assistance for poor old people without drug coverage, is
precisely the best practical alternative to a universal
entitlement expansion of unknown cost. That a targeted discount
card approach would be less expensive than a universal
entitlement is beyond dispute; for champions of personal freedom,
a reliance on private-sector competition and consumer choice is
also superior to a centralized financing and government delivery
of prescription drugs. Thus, the adoption of the drug discount
card is simultaneously a political victory for limited
government. Expanding markets, personal choice, and competition
is reducing, not expanding, government. The key issue in
governance is personal choice; who makes the choices. It’s
the structure, Stupid!

Government subsidies, such as the $600 low-income subsidy on
the drug card, do not make either fiscal conservatives or
libertarian economists comfortable; that’s indisputable. But the
other indisputable fact is that for the minority of older
Americans the absence of drug coverage is a real problem. These
are persons in their late 60s, 70s and 80s, long out of the work
force, and living on fixed incomes, retired without a generous
employer-based health plan or unable to afford increasingly
effective but expensive prescription drug coverage through
private-sector health plans. No one in Congress, in either party,
is prepared to say that these poor old people should simply fend
for themselves. In fact, they won’t. After they spend down their
limited assets, they will become Medicaid recipients. For many on
the left, Medicaid expansion is, of course, just fine. The
obvious is worth repeating: in health policy the status
quo always advances the expansion of government control. For
those in Congress and elsewhere intent on preventing that, and
preserving or advancing personal freedom in the process, Medicaid
expansion is another policy disaster.

A universal Medicare drug entitlement will accelerate the
movement toward price controls, while the discount cards, like
HSAs, generate dynamics in the opposite direction. A competitive
environment in which price is transparent will prove to be the
best way to control costs. Dr. Adam Smith would break out the
champagne, and so should we all.

Then there is the unfinished business of Medicare cost
control. The Medicare Modernization Act creates an “early-
warning” system that reflects the financial activities of all
parts of Medicare. General revenue covers about 35% of Medicare’s
costs today. If the Medicare trustees find that general revenue
will cover 45% of spending at any time in two straight seven-year
periods, the Medicare law requires that the President must submit
legislation to deal with Medicare financing. But that’s it. The
rest is up to Congress, which has already shown a cavalier
attitude toward federal spending, and of course, Congress is
required to do precisely Nothing. Which is often better than
doing something, which often makes matters worse.

Joseph Antos, former Assistant Director of the Congressional
Budget Office, warns that Congress could use the meat-axe
approach, brainless across-the-board spending cuts, without
addressing the perverse incentives that govern entitlement
spending. Antos suggests a payment mechanism like the one used in
the FEHBP, which sets the amount it will contribute to premiums.
Details are available in a series of papers available at
heritage.org/research/healthcare/issues2004.cfm.

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