AAPS News – Mar 2003

The lack of final regulations will not stay enforcement,
according to Robert G. Homchick, Esq., of Davis Wright Tremaine,
speaking at the Sixth Annual Congress on Health Care Compliance
held in Washington, D.C., Feb. 6-7. The Office of Inspector
General (OIG) likes Stark II because it’s a big target a
testament to American ingenuity in use of the law, and its
unintended consequences.

Stark I applies only to clinical laboratory services. Stark
II, for which proposed regulations were issued in 1998, applies
to referring patients for certain other designated services to
facilities in which the physician or an immediate family member
has a financial interest. The services include physical and
occupational therapy, home health, radiation therapy, and durable
medical equipment. Though a “tainted” referral is the crime, the
penalty attaches to billing.

“The breadth of the statute and its many ambiguities …have
made it a labyrinth of complex definitions and picayune
exceptions. The law invades the most basic financial
relationships involving physicians and attempts to impose static
rules on an dynamically evolving delivery system.”

For married couples, the law is a nightmare. It may mean
that husband and wife can’t practice in the same city.

Despite the complexity of the rules, only two advisory
opinions have been issued since January, 2001.

To date, most Stark enforcements have involved the False
Claims Act (FCA), which authorizes private “whistleblowers” to
sue on behalf of the government and recover part of the damages.
“Under the FCA, the government has abdicated its prosecutorial
discretion to bounty hunters.” If the violation involves a
physician and a hospital to which he regularly refers patients,
the potential liability is staggering, Homchick said.

“If anyone expected a `kinder and gentler’ environment under
a Republican administration accused of being in the pocket of big
business, forget it,” commented AAPS Public Relations Counsel
Kathryn Serkes. “In previous years, the OIG always prefaced
speeches about enforcement with assurances that the OIG was not
out to get honest doctors, and that most doctors are honest. The
new Inspector General, Janet Rehnquist, daughter of the Chief
Justice of the Supreme Court, says `we’re going to get you.’

“Health care fraud enforcement is one of the biggest money-
making schemes in government, and the agencies know it. As the
economy keeps tanking, expect more enforcement at both federal
and state levels,” Ms. Serkes concluded.

The rules of medical licensure boards on prescribing
narcotics to chronic pain patients apparently don’t matter. The
federal Drug Enforcement Administration (DEA) and federal
prosecutors have the final say on whether to prosecute doctors as
drug dealers for illegally distributing drugs, particularly
OxyContin, “outside the usual course of medical practice.”

On Feb. 11, in Myrtle Beach, South Carolina, prosecutors got
a jury verdict against three physicians formerly employed by a
pain clinic for “conspiracy to unlawfully distribute and dispense
controlled substances and conspiracy to launder money.” Federal
mandatory minimum sentences apply to these charges, so each
physician faces at least 20 years in prison. Since the jury
spared them conviction on the charge of “conspiracy to distribute
controlled substances resulting in seriously bodily harm,” they
were not eligible for a life sentence (Sun News
2/11/03). Thus, the federal Bureau of Prisons will probably not
be burdened with responsibility for their medical care in their
old age.

Drs. Michael Jackson, Deborah Bordeaux, and Richard Alerre
stated that they had no intention of violating the law but
prescribed painkillers in good faith to patients who lied about
their pain. The prosecutors alleged that they performed “little
or no medical exams” at the same time that they were doing
“unnecessary tests.” Testifying against them was their former
employer, Dr. D. Michael Woodward, who pleaded guilty and agreed
to help convict the doctors he hired in order to get his own
sentence reduced.

The prosecutors hope to “send a message,” although Eldon
Wedlock, a law professor at the University of South Carolina
doesn’t think the verdict will affect pain management.

AAPS Calendar

Sept. 17-20, 2003. 60th annual mtg, Point Clear, AL.

Oct. 13-16, 2004. 61st annual mtg, Portland, OR.

Correspondence

Prescription Writing in New York. Remember when it took
only 10 seconds to write a prescription? The DOH Medicaid
Update for October 2002 has 20 pages of instructions on the
New York State Medicaid Mandatory Generic Drug Program. A
determined physician could still order a brand-name drug if he
spends about 45 minutes filling out the worksheet, begging for
prior authorization by phone, and filing the worksheets in the
patient’s chart. Although “brand provides a superior
outcome/result over available generic agents” is an “approved
reason” for seeking a general exemption for a drug (only nine
have achieved this distinction), it is not an “approved reason”
for ordering the drug for a specific patient.

Soon there will be no need for physicians in New York. The
State appears to want to take over the practice of medicine and
use physicians only for filling out forms. Why not let the State
do the forms also? Doctors should not participate in the process
of being used and abused by the State by continuing to see
Medicaid beneficiaries.

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

Congressional Bypass. There is not enough money in the
universe to fund the Medicare monster. National bankruptcy is the
inevitable result. Congress is powerless to resist the seniors.
Mass opting out is the only way to bypass Congress.

Thomas LaGrelius, M.D., Torrance, CA

Physicians Have Two Choices: They can remain “insurance
doctors” and become burned out and bitter. Or they can stop
contracting with insurance carriers and go back to a rewarding
profession of being a patient advocate, teacher, and healer. It
can be done, but you have to have the courage to work for your
patients and not for the insurance carriers.

Kristine L. Soly, M.D., Yarmouthport, MA

The Only Answer. Fee-for-service insurance worked fine
until the federal government brought us Medicare, Medicaid, and
other entitlement programs that enabled the federal bureaucracy
to become deeply entrenched in the market, opening the way to
massive fraud, artificial price controls, waste, heavy-handed
administration, and cost-shifting. What we have is essentially a
federally mandated social insurance program disguised as private
commercial insurance.

Want to fix the system? Get the federal government out of
the equation. Things will return to normal.

Danny M. O’Grady, CLU, Midland, TX

Gatekeeper Model Backfires. When physicians found out
that the HMO kept the withhold regardless of how restrictively
they practiced, they simply referred every patient to a
specialist. Board-certified primary care physicians send
diabetics to endocrinologists, and sick patients to hospitalists.
They don’t want to be bothered or to spend time with patients.
After all, time is money. The gate is now always open. Social
engineers forgot that every system can be gamed.

Arthur H. Gale, M.D., St. Louis, MO

Sell! That’s the only advice to give about the medical
insurance industry. Physicians should be dropping all
insurance contracts. The fraud they perpetrate dwarfs Enron’s.
Humana and Prudential paid cash bonuses of $1,500 to reviewers
every time a hospital admission was denied. In addition,
professional liability insurers are forcing doctors to stop doing
procedures they were trained for. Third-party payment is a public
health hazard. The most efficient care is through Medical Savings
Accounts. If your insurance agent doesn’t know about MSAs, get
another agent; demand that your employer offer them.

Samuel A. Nigro, M.D., Guilford, OH

Avoid Triangulation. The only way to survive in today’s
complex, insurance-based medical world is to go private in every
way. Eliminate all third parties, at least those in a triangular
relationship with patients and physicians. The patient-physician
relationship has no third party in the room.

We must re-learn quickly about direct patient payment for
medical care if we are going to salvage something of value from
medicine. If one generation of doctors quits before the next is
adequately trained, it will be a sad situation for all.

The concept of old-fashioned medical care as in Doctor at
Your Door, Inc. was not easy to set in motion. But we can now say
unequivocally that it works just fine. Drop by and see us there’s
even time for a cup of coffee!

N. Bryan Smith, M.D., Knoxville, TN

Employees Prefer Benefits, but… because of moral
hazard, a dollar in after-tax benefits will only buy 70 cents
worth of medical care, about what one would have gotten from a
dollar of before-tax salary. Employees are no better off for the
arrangement, but those who can’t share in the tax dodge are 30%
worse off. The worker with employer-provided insurance, in Iago’s
words, “takes that which not enriches him, but makes me poor,
indeed” (Othello III,iii).

George Fisher, M.D., Philadelphia, PA

Conflict of Interest. The loss of ethical standards
results not from commerce but from doctors willingly signing
third-party contracts that make them de facto advocates of the
insurer. Rhetorical grandstanding cannot make them patient
advocates.

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

Legislative Alert

A New Health Care Agenda

In his January 28th State of the Union address, President
Bush focused on the intractability of the brutal dictatorship in
Iraq. But he also made his domestic priorities crystal clear:
economic growth, tax policy, and health care reform. This is no
surprise. Anyone who has been following the debate closely over
the past two years realizes that Bush, perhaps more so than any
other President, with the conspicuous exception of Bill Clinton,
has developed an extraordinarily ambitious and detailed health
policy agenda.

He has also outlined, with spare language, the general
direction of the agenda: consumer choice and free-market
competition. Bush repeated a common refrain: the American medical
system is highly productive, reflecting the skill and
resourcefulness of physicians and medical scientists,
particularly their capacity for innovation.

But then, the President said, Americans are facing serious
problems: Medical costs are going up, and too many Americans
cannot afford medical insurance.

The key policy agenda was contained in one neat paragraph of
the President’s speech: “These problems will not be solved by a
nationalized health care system that dictates coverage and
rations care. Instead, we must work toward a system in which all
Americans have a good insurance policy, choose their own doctors,
and seniors and low income Americans receive the help they need.
Instead of bureaucrats, and trial lawyers, and HMOs, we must put
doctors, and nurses and patients in charge of American medicine.”

Proposed reforms will focus on three areas:

Medicare: “Seniors happy with the current
Medicare system should be able to keep their coverage just the
way it is. And just like you, the members of Congress, members of
your staffs, and other federal employees, all seniors should have
the choice of a health care plan that provides prescription
drugs. My budget will commit an additional $400 billion over the
next decade to reform and strengthen Medicare. Leaders of both
political parties have talked for years about strengthening
Medicare I urge the members of this new Congress to act this
year.” In other words, the model for Medicare reform is the
Federal Employees Health Benefits Program (FEHBP).

Medical Tort Law: “To improve our health
care system, we must address one of the prime causes of higher
costs the constant threat that physicians and hospitals will be
unfairly sued. Because of excessive litigation, everybody pays
more for health care and many parts of America are losing fine
doctors. No one has ever been healed by a frivolous lawsuit and I
urge Congress to pass medical liability reform.”

Expansion of Private Insurance Coverage:
The President, in his budget, has proposed, again, to provide $89
billion in tax credits over the next ten years to cover those
Americans who do not get medical insurance through their job. The
Left desperately wants these folks enrolled in Medicaid. The
policy significance of the President’s proposal is that it
would radically change federal tax policy and establish the
principle of individual tax relief for the purchase of private
coverage.

Mediscare Part 1: Twisting and Shouting on Drug Coverage

Literally within minutes of the President’s address,
Governor Gary Locke (D-WA), in presenting the official Democratic
Response to the State of the Union, outlined the now well-worn
vector of attack on the President’s Medicare reform agenda, even
though no specifics of the Medicare plan had been presented in
any detail to Congress. The crucial line of attack was this one:
“Our parents shouldn’t be forced to give up their doctor or join
an HMO to get the medicine they need.” Senator Debbie Stabenow
(D-MI), within 24 hours of the President’s address, said roughly
the same thing.

This is a baseless accusation. The sheer boldness of it was
that Locke made the charge, without any evidence, before millions
of Americans on national television. Since then, it has been
repeated like a mantra by Stabenow and many others.

Neither Governor Locke nor Senator Stabenow had seen the
President’s Medicare plan. The New York Times reports on
the internal documents on the President’s plan did not bear out
any exclusive enrollment in a Health Maintenance Organization
(HMO) as the basis for securing a prescription drug coverage;
indeed, according to the Times, while internal
administration documents did list HMOs, they also listed fee-for-
service plans and Preferred Provider Organizations (PPOs). What
the President explicitly said is that his Medicare reform program
would be modeled on the FEHBP, which offers a variety of plans.
If there was the slightest doubt, the January 28 White House
summary points on the State of the Union clarified the issue
neatly: “All seniors will be given choices of a variety of health
plans similar to those enjoyed by Members of Congress.”

The facts, then, are exactly the opposite of what Governor
Locke and Senator Stabenow clumsily imply. By law, the Office of
Personnel Management (OPM), the agency that runs the FEHBP, is
authorized to contract with fee-for-service plans, including
government-wide service plans such as Blue Cross and Blue Shield,
as well as employee organization plans, such as the mail handlers
union plan and the American Postal Workers Union plan. OPM is
also authorized to contract with “comprehensive” health plans,
which are state-based HMOs. All offer prescription drug coverage,
and that coverage is generous. According to the General
Accounting Office (see GAO, The Federal Employees Health
Plans: Premium Growth and OPM’s Role in Negotiating
Benefits, December 2002), about 70% of all FEHBP enrollees,
both active employees and retirees, are enrolled in fee-for-
service plans. The GAO states: “Enrollees in these plans can
choose their own physicians and hospitals and the plan reimburses
the provider or the enrollee for the cost of each covered service
provided up to a stated limit.” GAO also notes that plans often
offer two levels of benefits, increasing the variety of choice
available to federal employees and retirees, and 11 of the 13
national fee-for-service plans had PPO networks. What about the
dreadful HMOs? Only 30% of all FEHBP enrollees choose HMOs. OPM
has recently specified that among all federal retirees, only
15.6% have chosen to enroll in HMOs. Yes, they have drug
coverage, but so do the others. The point is simple: Federal
employees are allowed to choose HMOs, just as they can choose the
APWU Health Reimbursement Account option. But no one is forced
into an HMO to get drug coverage.

Mediscare Part II: The “Privatization” Angle

Perhaps Congress should “privatize” Medicare: just flat
out “voucherize” the current benefits, and otherwise take the
federal government out of the program entirely. OK. Americans may
want to have a serious debate about that. And that is fine. And
when a senior member of Congress puts that on the table, that
debate can begin in earnest. But, excuse us, Governor Locke’s
nationally televised charges notwithstanding, that is not what
the President proposed.

This is where Locke and his leftist allies in Congress have
decided to break diplomatic relations with reality. The model for
the President’s Medicare program is not conventional
private employer-based medical insurance, which routinely
restricts choice and blocks competition. Nor is it that truly
Clintonesque model of top-heavy central planning and
administrative pricing known as the “Medicare+Choice” program,
the Congressionally created mess, in which CMS controls every
blessed aspect of private plans’ operations and then adds insult
to injury by routinely holding down reimbursement increases to 2%
a year when costs are rising at double-digit paces.

To repeat, the model for the President’s plan is the FEHBP.
Maybe the FEHBP should be a private or “privatized entity,” and
that, too, would be worth a real debate. Maybe the OPM functions
could be contracted out to a private firm. But, once again, that
proposal is decidedly not on the table. FEHBP is a government
program. It is run by the OPM, which is a government agency. The
OPM civil servants would be surprised to learn that they are
running a “private” system. Its funding, roughly $25 billion a
year for federal employees, retirees, and the other 9 million
dependents, is each year appropriated by Congress. Curious, isn’t
it, how Members of Congress do not want to have a national
discussion about the key features of their own medical program?

So, what is the point of even making the “privatization”
charge? Private hospitals get Medicare funds. So do hospitals and
clinics with religious affiliations, and physicians in private
practice. Whether the Medicare reimbursements are too high, too
low, or just right, is quite beside the point. Perhaps there is
something somehow just not right about insurers getting Medicare
funds. And that may be the key leftwing point. Third-party
payment is okay, as long as the federal government is the third-
party payer or controls every business decision of that third-
party payer. In another words, once again, it’s the structure,
stupid! So, chalk it up to an attempt to terrify senior citizens,
coupled with a reflexive leftist hostility to private insurance.

Medicare: Why Reform Can’t Wait

The President’s crucial point is that Congress has been
dithering around with this issue for years, and the delays are
going to prove very costly both to Medicare patients and the
taxpayer when 77 million baby boomers start to retire in just
eight years. If Congress does not get serious about this
issue, every one of us will face exploding costs, crushing
taxation, or savage benefit cuts, and certainly a lowering of
quality care in retirement. The President knows this; too many in
Congress do not.

Medicare’s “financial condition” may look fine on paper by
Congressionally ordained government accounting standards. The CBO
says that on paper, Medicare is running a “surplus” of $820
billion between now and 2012. But the Medicare program is being
keep afloat, as CBO continually reminds us, not by Medicare
payroll taxes or premiums, but by larger and larger drawdowns
from the general revenues. Without these infusions, CBO
acknowledges that Medicare would have a $1.1 trillion
deficit. Nevertheless, House Democrats offered a Medicare
drug benefit last year that would have cost taxpayers $800
billion over ten years and thought nothing of it.

Responsible adults in Washington policy experts at the GAO
and CBO have warned Congress, repeatedly, that they should
not repeat, not add prescription drug coverage to a
program that is already in deep financial trouble, without
serious structural reform. The Medicare trustees have also
repeatedly said that the program should be structurally reformed
and made ready to absorb the demographic challenge that is
inescapable.

Medicare lacks any serious market competition to help
control costs. However, under its bizarre system of
administrative pricing, doctors are facing an 18% pay cut over
the next three years. Small wonder that more and more doctors are
refusing to take new Medicare patients. The American Academy of
Family Physicians said last year that 17% of its doctors are not
taking new Medicare patients.

Moreover, Medicare’s managerial mess deepens with every
passing hour. Based on complex price controls and central
planning, it is governed by literally tens of thousands of pages
of rules, regulations, guidelines, and paperwork. Doctors and
hospitals are literally drowning in Medicare paperwork. There is
no flexibility in the system and no rational economic incentives
to provide the highest quality of care, including coordinated
care of very sick Medicare patients.

Medicare imposes enormous administrative burdens on doctors
and hospitals. In 2001, the American Hospital Association
estimated that for every hour of care given to a Medicare
patient, hospital officials spend at least one half hour
complying with Medicare rules and Medicare paperwork. It is
anyone’s guess how much Medicare costs are being shifted onto the
700,000 doctors that participate in the program. No one has
ever done any serious econometric analysis of the costs on
physicians. This much is certain: Every dollar spent
complying with bureaucratic red tape is a dollar less spent on
patient care.

The President seems to know that. Is Congress listening?

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