AAPS News – Mar 1995


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

Volume 51, No. 3 March 1995


After Judge Lamberth dismissed the case of AAPS v.
on grounds of mootness, a most remarkable complaint
came from the White House: Magaziner had been denied a chance to
“clear his name” in a civil trial.

The White House filed the motion for mootness after deciding
to unveil thousands of pages of Health Care Task Force documents
at the National Archives. At the time, Department of Justice
attorneys were well aware of Judge Lamberth’s opinion that
granting their motion would also moot the AAPS motion for civil
contempt against Magaziner. (In March, 1993, Magaziner had sworn
that the Interdepartmental Working Group was made up wholly of
federal employees. This assertion was plainly not correct; not
even the Dept. of Justice was willing to defend its accuracy.)

The White House was apparently stunned when the Judge
referred the matter for criminal investigation (see AAPS
, Feb 1995).

They were possibly even more astonished when the Judge
immediately granted Magaziner’s wish for civil proceedings. He
also gave Magaziner a week to reconsider, while attorneys for
both the White House and AAPS were gagged.

By the end of the week, during which he no doubt got intense
legal counseling, Magaziner had changed his mind. His private
criminal attorney, Charles Ruff, announced that his client would
follow criminal procedures to dispute the “wild allegations” by

Ruff apparently thought it unwise to risk full
discovery by AAPS, which would have resulted in subpoenas to top
officials, including Mrs. William J. Clinton. Also, by
testifying Magaziner would have waived rights to remain silent in
a criminal trial.

Magaziner’s fate was thus placed in the hands of U.S.
Attorney Eric Holder, who was at the time said to be under
consideration for a Clinton appointment to the U.S. Circuit
Court, a stepping stone to the U.S. Supreme Court. (White House
Counsel Mikva subsequently denied this report.)

However, on February 2, all Republicans on the House
Judiciary Committee demanded that Attorney General Reno appoint
an independent counsel. Their letter cites a conflict of
interest on the part of U.S. Attorney Holder because his
department vigorously defended Magaziner in the lawsuit.

“Indeed, the court has already determined that government
officials engaged in misconduct defending that suit,” the letter
stated. Magaziner surely had help in drafting his affidavit.
And Department of Justice lawyers referred to it in oral
arguments before the U.S. Circuit Court of Appeals, the day after
attending a White House reception where Mrs. William J. Clinton
thanked more than 1,000 regular “participants” (not just 340 as
in Magaziner’s affidavit). Top lawyers who were involved with
the case-and might have helped to draft the unsigned memo on how
to meet with the President without triggering open-meetings laws-
included Bernard Nussbaum, Vince Foster, Webster Hubbell, and
Mrs. Clinton.

Additionally, the Congressmen stated, there was a “polit-

ical conflict of interest in protecting the President’s `Health
Care Czar’…from further legal and political embarrassment.”

The letter was signed by Congressmen Henry J. Hyde, Bob
Barr, Fred Heineman, Michael Flanagan, Bob Inglis, George Gekas,
Bill McCollum, Ed Bryant, Steve Chabot, Lamar Smith, Steve Buyer,
Sonny Bono, Elton Gallegly, Charles Canady, F. James
Sensenbrenner, Carlos Moorhead, Bob Goodlatte, Martin Hoke, Steve
Schiff, and Howard Coble.

Attorney General Reno was asked to respond in 30 days.

In the meantime, AAPS researchers are nearing the end of
their review of boxes of documents at the Archives. The floppy
disks promised since September have finally been produced. Of
the 243 disks, 17 were found by the Archives to be blank or to
have irretrievable read errors-an outstanding record for a Task
Force bent on computerizing every patient record in America.
Both disks provided by Lois Quam were useless. (Quam, who is
Vice President of United Health Care Corporation and former
Chairman of the Minnesota Health Care Access Commission, was
leader of Working Group 2 of Cluster Group 1, on “Managed Care”
and “Special Issues in Purchasing Cooperatives.”) In addition
to problems identified by Archives staff, AAPS has found numerous
other defects, such as files that are truncated or saved in
incompatible formats.

The most interesting materials are Department of Justice
memoranda on how to forestall court challenges to the intended
legislation and how to force state compliance without triggering
Tenth Amendment problems.

AAPS also has reason to believe that materials of some
Working Group participants were withheld from the Archives.

“A full-blown investigation of the Task Force would make
Whitewater look like a speeding violation,” stated Thomas
Spencer, Counsel for AAPS. The Association will press for such
an investigation by congressional committees.

Already, Task Force documents clearly reveal this
Administration’s intention to assume dictatorial control over all
aspects of American medicine and to bulldoze any obstacles,
including the legislative and judiciary branches of government.

Editorial: The Law and Private Contracts

There are some who take a very negative view of private
contracting with Medicare beneficiaries and who believe that H.R.
5252 (text enclosed) vindicates their position.

However, there are certain things that Medicare still
declines to say, despite various provocations: (1) To
physicians: you must take government money (from our
bankrupt and hemorrhaging Treasury). (2) To patients: you
are forbidden to spend your own hard-earned money to buy a
medical service without our involvement

Treating Medicare beneficiaries outside the Medicare program
may be a risky (and not very lucrative) business. But is it

The answer to that question depends on which lawyer you ask.
There are certainly ambiguities.

AAPS takes H.R. 5252 very seriously. Some believe that it
comes within one sentence of dictating every fee for every
medical service in the United States (but it stops short).

The AAPS Board of Directors passed a motion stating that
“any member of the Board, when speaking or publishing about
private contracting, is to make it clear that he is speaking for
himself and not for the Association.”

Your editor speaks for herself also. Here are a few
observations: (1) We now seem to be developing a government of
men, not of laws. (2) The government may ruthlessly target
“troublemakers.” (3) The government routinely violates its own
laws. (4) If you take their money, you waive your rights. (5)
Patients (or their families) may want to abrogate a contract to
obtain government money. (6) To the best of our knowledge, no
physician has yet been sanctioned for private treatment of a
patient enrolled in Medicare Part B. (Private treatment means no
Medicare payment for the service, none.) I have
submitted no Medicare claims ever, and my patients have submitted
none since September, 1990.

What are we going to do now, in the land of Patrick Henry?
Will we all ask “Mother, may I?” every time we wish to take one
baby step in the exercise of our inalienable rights as American

Or will some say, “Here we are, Ms. Shalala, giving and
receiving medical services, without asking you for money. We
think this is perfectly within our rights and have a court
decision to support us. What is your policy, in plain
unvarnished English?”

AAPS is exploring legislative, legal, and public education
avenues to reinforce the right to practice (and receive) private
medical services.

Jane M. Orient, M.D., Private Physician

How to Disenroll from Medicare Part B

To disenroll requires a form, which may be requested from
the Social Security Administration, 800-772-1213. In about one
month, the government will stop deducting $46 per month from the
Social Security check of the former beneficiary.

Persons may re-enroll only during the period between January
1 and March 31, and enrollment does not become effective until
July. Upon re-enrollment, the beneficiary faces a financial
penalty for the rest of his life: 10 percent times the number of
years he was out of the program.

Is disenrollment affordable?

Patients should look at how much they spend for their
“supplemental” policies, then ask what that policy really
covers. One patient who had a coronary artery bypass found out
that the total benefit she received in that catastrophic year was
less than the annual premium! In a good year, a disciplined,
healthy person could set aside as much as $552 plus the
supplemental premium as self insurance. If a hospitalization were
needed, the hospital bill-which is the truly catastrophic risk-
would be covered by Part A. Should a chronic illness develop,
re-enrollment in Part B is an option. And if enough people were
to opt out, a market for a decent private alternative to Part B
could develop.

How Much Should Your Copayment Be?

Many patients believe they need supplemental insurance
because hospital copayments can be extremely burdensome. What if
you spend a night in the hospital, and the bill comes to an
astonishing $15,000?

Medicare is supposed to pay 80 percent of the amount it
approves, and the patient is to pay the remaining 20 percent.
Sounds simple, and for doctor bills it works that way. Medicare
tells the patient exactly how much it has paid the doctor. Not
so with hospitals, as journalist Phil Willon discovered.

Medicare sent his wife a statement saying that it had
approved a hospital bill (that the patient had never seen) for
$15,000 and had paid $12,000. The patient’s share was $3,000. In
reality, Medicare had only paid $1,600. The hospital, of course,
knew this, although it didn’t tell the patient. It “keeps its
arrangements with Medicare confidential.” It expects to collect
$4,600, more than half from the patient or the secondary insurer
(Los Angeles Times 12/14/94).

Do we have a right to truth in government?

Are the Uninsured Freeloaders?

One argument for mandating insurance coverage is that the
costs of caring for the uninsured are shifted onto others. The
Congressional Budget Office (CBO) estimates that uninsured people
pay only 30% of the cost of their medical care. They received
about $15.2 billion in “uncompensated” hospital care in 1991,
plus $10.2 billion in “uncompensated” physicians’ services.
After some adjustments, it appears that the uninsured caused
$20.3 billion to be shifted to paying patients.

No one knows how much cost shifting occurs, and other
estimates are lower than the CBO’s. But even if we accept these
estimates, uncompensated care for the uninsured is only 2.9
percent of the nation’s annual medical bill. For comparison, bad
debts are about 2.4 percent of sales in the economy as a whole.

On the other hand, the uninsured do not receive the tax
subsidies that can equal as much as half the cost of employer-
provided health insurance. On the average, an uninsured family
pays about $1,018 more in federal tax each year. The uninsured
pay $17.1 billion more in federal taxes, and an additional $1.9
billion in state and local taxes.

Thus, the uninsured are arguably paying their own way. But
in any event, they are responsible for only 24.3 percent of
uncompensated medical care. The biggest sources are Medicaid
(42.6 percent) and Medicare (33.0 percent).

[Source: Brief analysis #120, August 10, 1994, National Center
for Policy Analysis, 12655 N. Central Expressway, Suite 720,
Dallas, TX 75243, (214)386-2672.]

Can Medicare Beneficiaries Be Private Patients?

AAPS members frequently ask about the current status of
Medicare law regarding private contracting with patients who are
enrolled in Medicare Part B-particularly after the midnight
passage of the Medicare Technical Amendments in H.R. 5252 (see
AAPS News, Dec. 1994). These extend limits on balance
billing to all persons enrolled in Part B, rather than
applying them to “services paid for under this part.”

The question becomes increasingly urgent for patients also.
Medicare beneficiaries, even wealthy persons willing to pay their
own bills in full, are being denied certain treatments because
Medicare reimbursement does not cover the costs and the physician
is afraid to accept private payment.

AAPS asked four attorneys to review Judge Politan’s opinion
in the case of Stewart v. Sullivan, H.R. 5252, and
instructions from Medicare carriers. Here is a brief summary of
the salient points in their analyses:

Michael Jonson, Seattle:

The effects of Stewart v. Sullivan and H.R. 5252
appear to be as follows:

(1) Medicare (at the time of the judge’s decision) had no
policy regarding contracting; (2) Standing alone, the policies
of Medicare’s regional carriers that prohibit contracting are not
enforceable. There must be, in addition, a policy of the
Secretary [also see National Medical Enterprises v.
851 F.2d 291 (9th Cir. 1988), AAPS News, Aug
1993 — Ed.]; (3) No ruling has yet been made on the question of
whether the claims submission requirement prohibits contracting;
(4) H.R. 5252 seems to contemplate that contracting will occur;
(5) H.R. 5252 purports to make all contracting subject to
Medicare’s price controls.

Does language now present in the Carrier’s Manual constitute
a “policy”? It will take a lawsuit to find out.

Even with a ruling that contracting is permitted, there is
still the problem of the price controls imposed by H.R. 5252.
Does the freedom to contract mean anything with price controls in

Are these price controls constitutional? This is a
complicated constitutional question; and unless a lawsuit were
won on constitutional grounds, its effect could quickly be
reversed with legislation.

Although the law is far from clear, Medicare could begin an
enforcement program at any time, with sanctions ranging from a
slap on the hand to a criminal charge. Partners of targeted
physicians could also be held responsible for sanction- able

Andrew L. Schlafly, New York:

It would be pointless to reopen Stewart v. Sullivan
without being certain that the ripeness requirement has been met.
It is not clear that H.R. 5252 makes the case ripe. It merely
authorizes sanctions against physicians who use certain
billing practices; it does not compel the Secretary to
act. There continues to be ambiguity about how the Secretary
would articulate and implement policies on private contracting.
Correspondence from Medicare official Kathleen Buto discourages
attempts to bypass Medicare guidelines but cleverly refrains from
articulating a clear policy.

Provoking an actual sanction by HHS would satisfy the
ripeness requirement. Such a sanction would probably be
relatively mild. However, it is not clear that HHS would
actually impose such a sanction. The agency is now quite
sensitive to its vulnerability to litigation once the ripeness
hurdle is overcome. It may prefer to tolerate a few trouble-

makers in preference to jeopardizing its entire policy.

Thomas R. Spencer, Jr., Miami:

In Stewart v. Sullivan, lawyers representing the
government could provide no basis upon which carriers could
articulate a prohibition against private contracting.

However, H.R. 5252 has imposed government price controls
upon all persons enrolled in Medicare Part B. It is now
unfortunately well established that government price regulation
does not constitute an unconstitutional taking of property where
the regulated group is not required to participate. Physicians
are not compelled to serve Part B enrollees. In contrast, because
public utilities are under statutory duty to provide service on
demand, regulators must provide reasonable compensation.

There are several reasons to undertake litigation. (1) The
very fact that a group attacks the statute would provide a
meaningful defense to the concept of a willful violation. (2)
Well-publicized litigation would provide impetus to a legislative
solution. (3) The Court may at some point be ready to effect a
limitation on the power of Congress. Justice Scalia has an
“original intent” concept of substantive due process, but he
has yet to obtain a majority.

Robert E. Mack and Timothy M. Schellberg, Seattle:

H.R. 5252 exempts all persons from liability for
payments in excess of the limiting charge for services provided
to persons enrolled in Medicare Part B. Physicians who collect
such an excess are required to refund it within 30 days, although
they may probably be entitled to offset amounts owed by patients
for copayments.

If a physician who is not in solo practice is sanctioned
under Medicare, fines may be levied against his partnership as a
whole. Based on general partnership law, all partners are liable
on contracts made within the scope of the partnership business.

Our research indicates a reluctance on the part of the
courts to favor individual rights over the express mandates of
Congress. In Whitney v. Heckler, the physicians’
challenge to Medicare fee freezes as an unconstitutional bill of
attainder was rejected on the grounds that the Medicare Act did
not fall within the historical meaning of a legislative

In Stewart v. Sullivan, the court ruled that
“[n]either the statutes nor the regulations expressly address
the issue of whether disenrollment on a partial or service-by-
service basis is acceptable under the Medicare program.”
However, there is a procedure for disenrollment, and it makes no
provision for patients to disenroll on a case-by-case basis.

The time may be right for legislation that recognizes that
patients know what is best for their individual needs and should
be allowed to contract with physicians on mutually agreeable

The Law of the Land

Article I, Section 10. No State shall…pass any…law
impairing the obligations of contracts….

Amendment X. The powers not delegated to the United States by
the Constitution, nor prohibited by it to the States, are
reserved to the States, respectively, or to the people.

Members’ Page

Blue Bungler Update. Letter to Mr. Preston Lowen, HCFA
Representative, Medicare Part A:

Recently, we were told that Upstate Medicare was going to
phase out their old electronic bulletin board system in favor of
a new one with expanded capabilities -things like E-mail and
online chat groups…as if we had nothing better to do than sit
and swap war stories with other similarly abused providers….an
idea from a reality-starved bureaucrat….The old bulletin board
was fairly easy to use to transmit our claims, unlike the new one
where one must wade through multiple questions about E-mail and
whether or not we want to join an on-line social chat
group…“abused solo, non-Par providers from the Southern Tier

Today, we called up “Bonnie” at Upstate Medicare who told
us that in order to use the new bulletin board system, we would
have to be assigned a new password, and would therefore have to
talk to Joanne, who wasn’t working there today….It reminds me
of the time they killed off one of my Medicare patients in their
computer, and they could not simply give her her name and
Medicare number back. Instead, Medicare had to sign her a new
name and number (true story)….

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

CLIA Prevents Another Lab Test. It is with deep regret
that I have stopped doing microscopic examinations of stool for
pus, as this has not been approved by the CLIA, even though it
has been reportedly been recommended to be approved as a
“labile” substance, and therefore possibly suitable to be
looked at through the microscope by physicians….I cannot afford
the draconian penalties if we are unable to pass the “medium”
complexity laboratory requirements….I hope [that sometime] in
the future…mere physicians will [be allowed to] look at what
laboratory technicians are allowed to look at with much less

Frank F. Martin, M.D. (gastroenterologist), Charleston,

Physicians Should Stand Up. My heartfelt thanks [to
AAPS] for such a fine effort on behalf of the American

It would be interesting for the AAPS to next reveal what
malice and illness of spirit lies behind the push to make us all
“executive physicians,” to join the organizations with the
obvious profit motive behind their doomsday bawlings….

I believe we must all become militant and aggressive about
our Bill of Rights guarantees, and to point constantly to our
shabby and illegitimate judiciary, which has put us in such a
position as we are in America today.

Of course, what is happening in medicine is simply a
microcosm of what is going on in the world and U.S. society; it
is nice to have the reference point that one professional group
will stand against such decadent behavior.

Albert D. MacDade, M.D., Fort Smith, AR

A Patient Advisory on Insurance and Managed Care

(1) Q: Why doesn’t the insurance industry
promote high-deductible “choice” (conventional) insurance
policies, which are much less costly per dollar of coverage?

A: It would mean fewer premium dollars for a profit-
oriented industry. Medical savings accounts combined with high-
deductible insurance allow unspent monies to be returned to
individuals instead of insurance administrators like U.S.
Healthcare’s CEO, who is paid $10 million per year or the CEOs of
Blue Cross with seven-figure salaries.

(2) Q: Why do people let their employers buy a
type of insurance that they don’t really want?
Because of tax-law discrimination: When the employer spends
$4,500 on insurance, he spends pre-tax dollars. If you buy
$4,500 worth of insurance or medical care, you have to earn about
$7,000 because you are spending after-tax dollars.

(3) Q: How does managed care lower costs?
A: You can be sure that people are getting just as sick.
Cost is lowered by decreasing quality and quantity of care.
There is a worrisome trend of downsizing and layoffs in many
hospitals. They replace nurses with less qualified personnel and
buy cheaper materials. Primary care doctors are coerced into
shortening stays and avoiding referrals to specialists. Some
patients just give up and pay for service outside their HMO
because of the bureaucracy; they end up paying twice for care
while preserving corporate profits.

(4) Q: Why do doctors go along? A:
Doctors are forced to go where the employers have forced patients
to go. Most doctors still care about their patients and take the
loss-and the heat. But at some point, they will either yield to
corporate pressure or be forced out of the medical care system.
We are in a deceptive honeymoon period with managed care.
Doctors unwillingly tolerate this inferior and corrupt system.

Managed care is really managed cost and damaged

Dennis Gabos, M.D., Pittsburgh, PA

Society for the Education of Physicians and Patients

AAPS Calendar

May 6 Regional meeting, Boise, ID: A Free-Market Solution to
Health Care Price Distortion and the Corporate Socialized
Medicine Managed Care Malignancy. Call 800-635-1196 for

Oct 11 Board of directors meeting, Falls Church, VA

Oct 12-14 52nd Annual Meeting, Falls Church, VA

Legislative Alert

The State of The Union

The President’s long speech to the Congress and the
nation was more popular with the public than the pundits, who
dismissed it as much too long and not thematic enough. He
returned to the theme of health care reform, and reminded
Congress what everybody knows: the problems with the system,
including the problem of uninsurance, will not go away by
themselves. But the President seems quite prepared to let Senator
Robert Dole and Congressman Newt Gingrich take the initiative on
this one.

By huge margins, according to initial surveys, the public
approved of the President’s speech. Not surprising. The
President is a terrific communicator. And how about that snazzy
“New Democrat” rhetoric? About three quarters of Clinton’s
speech could have easily been given by former President Ronald
Reagan, complete with props, heros and heroines among ordinary
Americans, seated prominently in the House gallery. But Americans
have heard all of this stuff before. Clinton talks the talk, but
can he walk the walk?

Here Comes Corrections Day!

Under a new procedure to be introduced by the new
Speaker of the House, Congressman Newt Gingrich of Georgia,
inspired by a suggestion of Governor John Engler of Michigan, the
House of Representatives will put aside one day each month to fix
its mistakes and abolish stupid government programs. Under the
new Gingrich House rule, an expedited process like the
“suspension calendar” will be used to get rid of dumb
government programs or schemes. A bill can be brought to the
floor for limited debate and be passed quickly with a two-thirds
vote. Most of these are voice votes, not roll- call votes. Right
now, under the House suspension calendar, bills are passed to
establish or adjust government programs. Under this new
arrangement, bills will only be passed that repeal government

Gingrich told the American Hospital Association (see below)
that he wants input from the medical profession on getting rid of
dumb things, and indicated that he will make arrangements with
his counterparts in the Senate to make sure that they clear the
same language in advance so the repeal measures can be greased
for the President’s desk.

The Message from Speaker Gingrich:

Radical Rethinking and Overhauling Medicare

In our previous Legislative Alert, we reported that
vouchers for the Medicare program, a radical restructuring of the
system, had been picking up support in Congress; that Members are
struck by the idea of literally creating a consumer choice system
out of the old, bureaucratic Medicare system. So, you read it
here first.

Gingrich wants to overhaul the Medicare program and
dramatically reduce the regulatory power of the Health Care
Financing Administration (HCFA). In his January 30th speech to
the American Hospital Association (AHA) meeting here in
Washington, interrupted continuously by enthusiastic applause,
Gingrich outlined an ambitious program for reform. He also
announced a new Congressional Task Force on Medicare to be headed
by Congressman Bill Archer of Texas, Chairman of the House Ways
and Means Committee and Congressman Bill Thomas of California,
the new Chairman of the House Ways and Means Subcommittee on
Health (formerly the “Stark Subcommittee”).

Gingrich spoke of opportunities, not just problems. “They
now fill up a 747 every weekend to fly from Tokyo to Minneapolis
to shop at the Mall of the Americas. People who go that far for
sneakers will go an immense distance to get the best liver

Gingrich advised the medical industry to junk established
ways of thinking: “I was astonished over the last few years to
have the AHA take the following position: We are currently
cheated by the federal government, we are cheated by the federal
government on Medicare, we’re cheated by the federal government
on Medicaid. Therefore, in order to improve our situation, let us
extend government control to the rest of the health care so that
the federal government can equalize out its cheating.”

In Gingrich’s view, the thinking that dominates much of the
Washington lobbying establishment, claiming to represent doctors
and hospitals, only leads to the collapse of a productive system :
“… They will steal from the producers. And you know that they
will keep transferring power away from you towards the Health
care Financing Administration, and you know that that kind of
structure means more and more bureaucracy, more and more red
tape, and that the people who know less and less make more and
more decisions; so that the closer you are to a real patient the
less influence you have, and the further away you are the more
influence you’ll have, that ultimately people who have never seen
a patient will make all the decisions-and that’s absolutely the
system we currently have. I have never understood the short-term
thinking that led the AHA to adopt a position which in the short
run sounds good until you get honest about how it will work. And
so I would literally ask you, suspend every proposal you
currently have and rethink from the ground up along with us.”

What applies to the American Hospital Association (AHA) also
applies to the American Medical Association (AMA): “I went to
the AMA a year ago. I told them I was against the Clinton Plan.
They gave me a standing ovation. I then stopped them, and I said,
`Wait a second. You have to understand….We’re not going to have
a half-government, half-private system rigged so that the
producers can remain guilds. It’s not going to happen. You’re
either going to go to a government-dominated, bureaucratic,
centralized structure or you’re truly going to re-establish
marketplace environments and you’re going to truly give
information to individuals. You can’t have it both ways. You’ve
got to choose.”

While many prominent policy experts in Washington have seen
medical technology as a “problem,” Gingrich sees it’s enormous
potential to “collapse costs.” We do not do very well
“controlling costs,” he says, but we have done exceedingly well
in “collapsing” them. “Look at the cost of iron lungs prior to
Jonas Salk. You saw the polio vaccine collapse the cost of
treating polio because it collapsed polio.”

As for the Medicare program itself, Gingrich wants to
overhaul the entire thing, and he set this challenge for the
American Hospital Association: “Think about a world without the
Health Care Financing Administration.”

“It’s actually harder than you think. If were going to
rethink Medicare to improve the quality of medical care for our
senior citizens, to give them a greater range of choices, then
it’s not just a question of saying what’s wrong with the current
structure; it’s a question of thinking through at the vision and
strategies level, what would be right about the replacement? How
would it work? What would it do?… The goal of Medicare, which
is to ensure that all of our parents and grandparents have
medical care and do not have to live their later years in fear,
is a powerful and legitimate goal. “But the current highly
centralized bureaucratic structure offering one menu for
everybody in a monopolistic manner is the opposite of how America

The First Mistake

The House rules have been changed for the better. The
Balanced Budget Amendment has passed the House. Of all of the
measures endorsed by Gingrich and Company, this is perhaps the
most important and most symbolic component of change on Capitol
Hill. Labor Secretary Robert Reich is, perhaps inadvertently,
doing all he can to advance the case for a Balanced Budget
Amendment by complaining that it would “tie the hands of
government.” Say that again, Bob?

A bill to limit unfunded mandates has also passed the House
of Representatives and is quickly working its way through the
process over in the Senate, Senator Robert Byrd of West Virginia
notwithstanding. Think about what this means for the Medicaid

Not surprisingly, public approval of Congress-an oxymoron
normally-is reaching higher levels than anyone could have
believed possible. Americans are feeling positive, for the first
time in a long time, about the direction of the country.

Nonetheless, there is danger in the details of Congressional
management, particularly personnel management. Most Americans are
coming to realize the extraordinary power and influence of
Congressional staff. Yet it appears that some Congressional
leaders are bound and determined to repeat in the Legislative
Branch the worst mistakes of the Carter, Bush, and Clinton
regimes in the Executive Branch: Not getting the right people in
the right jobs at the right time.

The first big mistake is the continuing paralysis over
picking the Director of the Congressional Budget Office (CBO), a
critical job for budget scoring, as well as for the econometric
analysis of health care policy. Robert Reischauer, the current
occupant of the position, has done a creditable job, especially
in playing straight with Congress and the public on the true
costs of various health care proposals. But Reischauer is still
Reischauer, and he doesn’t fit the high profile as the new
scorekeeper of the conservative Republican Revolution.

Professor June O’Neill, a conservative economist at Baruch
College of New York has been on the short list to succeed
Reischauer, as is Marvin Kosters of the American Enterprise
Institute, a prominent conservative think tank. The House
leadership seemed to be favoring O’Neill, but certain senior
Senate Republicans are balking. These Senate Republicans seem
prepared to wait until the 1995 Congressional budget process is
complete before making a change at CBO. These guys have thus
created their own gridlock on perhaps the most important senior
Congressional staff position. Not good.

Perhaps even more potentially damaging is the strange
personnel management problem created by Congressman Robert
Livingston of Louisiana, the new Chairman of the House
Appropriations Committee. Livingston is retaining the experts of
the ancien regime in senior staff positions, stating
that he needs staff with the “expertise” or the institutional
knowledge in the myriad of complex government programs overseen
by the panel. The obvious problem is that the old, established
staff have dedicated their entire careers to building up,
preserving, and expanding federal government programs and
spending. Now, entire bureaus and agencies are on the chopping
block, and Livingston may find himself being savaged by leaks in
the press, or besieged by the innumerable Establishment special
interest groups who seem to have advanced warning. He may
relearn a terrible lesson: Personnel is policy.

Senate Musings

The thinking in the upper house ranges from the cool and
the cautious to the brassy and the bold. The new man at the
cerebral center of Senate policymaking on health care is Senator
Robert Bennett, the tall, lanky junior Senator from Utah. Bennett
is the man to watch.

First, pay attention to the federal deficit. Whatever is to
be done must occur within the broader context of deficit
reduction. Many members (like Senator Nickles of Oklahoma and
Senator Hatch of Utah) are committed to a comprehensive tax
credit approach, and think it makes good sense in both economic
theory and practice to remake the medical system into a consumer
choice system. But the climate is problematic for anything too
grand, especially if generous tax credits would be partially
“financed” by cuts in Medicare and Medicaid.

It is not likely that we will see a single omnibus bill come
out of the Senate. But rather a series of very specific measures,
like expanded deductibility for the self-insured or medical
savings accounts, very carefully crafted and fully debated.

Rewriting History-Again

You will recall that over the Christmas Holidays, the
President returned to the theme, now a refrain by Administration
officials building into a chorus whine, that his huge health care
reform plan was defeated because it was “mischaracterized” as a
government-run health care system. Blame the bumpkins, Yahoos and
assorted malcontents in the medical profession, nimbly playing
upon the public fears and working the Rubes along the Midway. In
other words, the Clintons are the innocent victims of a vast
national misunderstanding.

The latest twist on this theme is Hillary’s recent reported
confession: “I was Dumb and Naive.” This can’t be Hillary’s own
line. This has got to be manufactured by some public relations
dunce in the White House. Really. Hillary wowed the Blow Dry
Brigades on Capitol Hill. And bowled over the Big Burley Guys
(Rosty and Big John Dingell), who are not normally given to
obsequiousness. Miss Hillary was mistress of The Details: Ira’s
gigantic socioeconometric jigsaw puzzle, tightly tied together
section by section with the most terribly turgid prose and
brainsplitting lawyerly logic imaginable, far beyond the mental
exertions of us minor mortals.

Dumb? Nobody could believe that. Except Dummies.

“After all, we currently have a program of national
health insurance that is mandatory, imposes community rating,
establishes a standard benefit structure, provides guaranteed
renewability, prohibits preexisting condition exclusions, and
dictates price controls. It’s called MEDICARE. Our `private’
health care system cannot be sustained indefinitely in a half-
free, half-socialized state.”

Tom Miller

CEI Update, January, 1995

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