AAPS News March 2017 – Draining the “Healthcare” Swamp


Volume 73, no. 3  March 2017

Denizens of the healthcare swamp are beginning to self-identify in letters to the Administration, offering to “help” with programs that will preserve their interests.

A letter to President Trump and Vice President Pence, signed by more than 120 entities (http://tinyurl.com/hdnbjem), offers to work vigorously to “expand on the quality and cost saving progress made in America” and to “reach and surpass the tipping point where value-based healthcare becomes a sustainable marketplace for generations of Americans to come.” Signatories include the American Medical Association, the American Osteopathic Association, big hospital systems, and pharmaceutical companies.

Years ago, I heard a lecture by Princeton economist Uwe Reinhardt, in which he described the medical financing system with a diagram of pipes and valves. One small pipe carried funds from patients directly to physicians; this 15% was called the cause of our woes. Now only 10% flows through the direct-payment pipe, but it is still supposed to be the problem. States the letter:

“Healthcare has been operating in a fee-for-service system designed more than 50 years ago. Over the years, the regulations governing this system have grown extraordinarily complex.”

AAPS and the Association of Independent Doctors (AID) responded (http://tinyurl.com/jqa93rp): “In fact, fee for service (payment for work) is as old as economic activity, and is natural, not designed. What happened more than 50 years ago was that third-party payment for medical care replaced direct payment of the person or entity providing the service by the person receiving the service…. We need a return to value-based payment—with value determined by patients controlling their own money, not a bureaucratically dictated value set by entities that collect huge premiums in advance from patients who may or may not receive any care.”

For physicians, the Merit-based Incentives Payment System (MIPS) is a zero-sum game. The savings to the system theoretically come from “incenting” less spending on diagnostic tests and treatments for patients. Instead, money will go to the groups now having public meetings on implementing the methodology (e.g. Health Information Exchanges). These groups are awaiting money flowing from the Affordable Care Act (ACA) “to continue their work in changing and destroying medical care,” in the opinion of a physician attending one such meeting. The $100 million CMS awarded to “help small practices succeed in Quality Payment Program” does not go to small practices, just as Medicaid money does not go to needy patients but to their managed-care plan.

More than half of all “healthcare workers” are already administrators, up from one-third before ACA. For every physician, there are nine administrators (http://tinyurl.com/jbzgwqt).

It’s Deeper than ObamaCare

Replacing ACA with ObamaCare-Lite (“Retreat, Retweak, Rename, Renege”), which Republicans are reportedly concocting in secret, or even simply repealing ACA, will not fix the problem. Obama did one arguably useful thing: putting a patchwork “top hat” on the margins of the third-party payment system that has been metastasizing for nearly 75 years. He brought a share of the 25–40 million previously “uncovered” Americans into the already giant, deep, fetid third-party pool (David Stockman’s Contra Corner 2/27/17). This includes Medicare, Medicaid, tax-exempt employer-owned coverage, and now ACA.

As AAPS notes in its White Paper on repealing and replacing ACA, the legacy to be preserved is not just Obama’s, but also Lyndon Johnson’s and Franklin Delano Roosevelt’s (http://tinyurl.com/j3bplqe). Those siphoning money out of the pool they created include “providers,” labor unions, politicians, lobbyists, “innovation” grantees, Big Pharma, and countless others.

Tax Discrimination

As Stockman points out, circa 1960 total U.S. health spending was about $27 billion or 5% of GDP. That was $145 per person, of which third parties of all types paid $40 and government programs $9. In 2015, total health spending was $3.2 trillion, 17.8% of GDP. Third-party payments were $7,450, or 186 times greater, though the CPI was only 8 times higher, and the per capita GDP 18 times higher. Private health insurance, almost entirely employer provided, was up 107-fold. Total government health spending went from 0.3% of GDP to 8.5%,  530 times more per capita than in 1960. The value of the tax exclusion for employer plans—a New Deal special—is $350 billion per year. ACA is “the endgame of the 74-years-ago carve out,” Stockman writes.

The state “created massive insurance pools for an uninsurable service [routine health services are not insurable risks because both providers and consumers heavily drive the frequency and cost of service] and then invited the medical profession to morph into Washington’s greatest crony capitalist lobby.”

Most proposed subsidies are to help people buy coverage. Some want to broaden the tax exclusion—increasing the “shopping at the IRS mall” effect (http://tinyurl.com/hre452z). Some want a “Cadillac tax” equivalent—very unpopular with workers. Stockman suggests a way to remove the legacy of FDR’s dead hand that would be highly popular: Mandate as a condition of employer tax deductibility that any employee can take the insurance value of the plan in cash. Watch the stampede to catastrophic plans in a revived insurance market.

Why hasn’t this occurred to “free-market” GOP leaders?


Twice as Good as ObamaCare?

“Should Uncle Sam mandate church attendance?” asks Chris Conover (Forbes 10/31/16, http://tinyurl.com/jr2mb42). Being a libertarian, he hastens to say he doesn’t support this suggestion, but here is the rationale: The average gain in life expectancy is 7 days for each year of weekly church attendance, compared with 1 day for each year of seatbelt use, and a little less than 7 days for those who acquired health coverage because of ACA. As to the financial benefits, each American would have to pony up only 60 cents extra each year for churches to have the financial resources to totally cover the bankruptcy-reduction benefits of ACA—a cost of only $223 million per year compared with the minimum 10-year ACA cost of $1.34 trillion. And the church attendance mandate would also cover the 27 million still uninsured despite ACA, as well as illegal aliens. Conover asks progressives: Why is an individual mandate to buy costly insurance more acceptable than this?

In her essay “How to Provide Universal Health Care Using One Easy Trick,” (http://tinyurl.com/hbbvo6j), Ann Coulter writes: “There shall be a free market in health insurance.” She thinks that basic health coverage should cost about $50/month, based on monthly shares paid to health-sharing ministries. Most such ministries require regular church attendance as well as a healthy lifestyle. And the members, not the government, decide what types of needs they will share. [The sharing amount might be significantly greater than $50 but still far less than HMO premiums.] Question for progressives: Should people be allowed to benefit from their own healthy behavior, or should they be forced to subsidize unhealthy lifestyle choices by others?


“Hardship” and the Payroll Tax

ACA does not penalize people for not buying insurance if it is judged to be unaffordable for them. There are vaguely defined hardship exemptions to the individual mandate. Employees are exempt from the requirement if the cheapest coverage would cost more than 8.13% of household income for self-only coverage, after the employer’s contribution (http://tinyurl.com/j5owsoj). So how is the first-dollar payroll tax that consumes 15.3% of the worker’s earnings affordable? It pays for current retirees, and when there was a surplus it was used to conceal part of the federal deficit. There is no guarantee that current workers will ever see a benefit. There is no exemption for blindness, dependents, or poverty. This is likely the only federal tax low-wage workers may pay, so other types of tax relief will not help them. A massive payroll tax cut could benefit the median wage-earner by $7,500 annually, whereas proposed income-tax cuts would mean only about $5.75/wk for the bottom 80%.  The real weekly wages of heavily trade-impacted workers have shrunk 18% since the turn of the century (David Stockman’s Contra Corner  11/14/16, 1/2/17).


Poverty is the default state of affairs…. [G]rowing countries require the concentration of the capital [that] allows the appropriate people to invest in technology…[that creates] systems and facilities…capable of producing the wealth…. But the concentration of wealth is basically synonymous with inequality…. So the leftists’ #1 culprit is basically the same as the sensible people’s #1 hero responsible for the progress in the world…. Wealth cannot be produced by redistribution…, [which is] a negative-sum game.”

Luboš Motl, “Feynman vs. Hawking on Inequality,” 2016


Swamp Dwellers

  • Quality Definers: The Accreditation Council on Graduate Medical Education (ACGME) claims to “improve population health” by assessing education. Members include AMA, AOA, ABMS, AAMC, and AHA (http://tinyurl.com/jasvamv).
  • The Certification Industry: There are more than 2,800 “certification corporations”—a $1 billion industry. According to Maureen Ohlhausen, appointed by President Trump as new acting head of the Federal Trade Commission, unnecessary trade certification requirements block 2.85 million jobs and cost consumers $203 billion annually (http://tinyurl.com/hrormhh).
  • Physician Organizations: Attendees at the first annual HealthLeaders Media Physician Organizations Exchange took a hard look at the revenue they expected to lose if the individual mandate and Medicaid expansion end. The consequences of ACA repeal would be “gigantic for us” (http://tinyurl.com/he7s5mq).


The Debt Swamp

  • National Debt: $19,900,000,000,000
  • Mortgage Debt: $13,600,000,000,000
  • Unfunded Public Pensions: $5,500,000,000,000
  • Student Loan Debt: $1,190,000,000,000
  • Auto Loan Debt: $1,030,000,000,000
  • Credit Card Debt: $900,000,000,000
  • Other Consumer Debt: $300,000,000,000
  • Total U.S. Debt: $42,400,000,000,000 ($42.4 trillion)

Figures compiled by Craig Cantoni


Pay-Go vs. Conventional Insurance

At the time of the Great Depression, Blue Cross created a pay-as-you-go system, which has the U.S. locked into a model that prescribes central planning for every aspect of medical care. Conventional insurance pays the subscriber a lump sum in the event of loss. To ensure that it is able to meet its contractual obligations, the insurer charges a premium based on the likelihood of a loss and maintains sufficient reserves to cover losses. In contrast, the Blues created a model that pays providers as services are rendered and does not create reserves from past premiums. If a stream of future payments is required, the company is liable only for as long as the insured is enrolled. Linda Gorman explains the consequences (“The History of Health Care Costs and Health Insurance,” http://tinyurl.com/gn4t3rh).


AAPS Calendar

June 9. Thrive Not Just Survive XXVI, Cincinnati, OH.

June 10. Board of Directors, Cincinnati, OH.

Oct 5-7. 74th annual meeting, Tucson, AZ.

Oct. 3-6, 2018. 75th annual meeting, Indianapolis, IN.


Quality Compliance Traps

As the Medicare Access and CHIP Reauthorization Act (MACRA) ramps up, be aware that inaccurate quality reporting can lead to worse than loss of a bonus. For example, if a physician has a discussion with a patient about an advance care plan but uses the wrong code for recording it, that’s a false claim. If he did it deliberately, it’s fraud. The government can also allege wire or mail fraud, leading to rapid escalation of penalties. Being small does not protect against scrutiny (MPC Alert, February 2017).


Cures Act vs. HIPAA

The HHS Office of Civil Rights (OCR) is planning more aggressive enforcement of HIPAA, but at the same time the 21st Century Cures Act (http://tinyurl.com/h7uhhhu) mandates stiff penalties for information blocking. HIPAA-covered entities need to review business associate agreements for patient access requirements and check data-sharing policies (ibid.)


Freedom of Speech vs. Minitrue

  • “Mothers”: The British Medical Association has issued guidelines directing its members to call expectant mothers “pregnant people” to avoid giving offense and to “celebrate diversity.” There is one case of a “transitioning person” believed to be 4 months pregnant. It would be offensive to use the term “born woman” with respect to that person because the phrase is “reductive” and “oversimplifies a complex subject” (http://tinyurl.com/hnbggqa).
  • “Misleading Information”: In France, it is now a crime punishable by 2 years in prison and a $30,000 fine to spread or transmit allegations “liable to intentionally mislead, with the purpose of deterring [abortion].” This could be used to prosecute anyone who presents abortion in an unfavorable light, as judges and health officials define “misleading” (http://tinyurl.com/zuvbfx6).
  • “Health” Includes “Tolerance”: The expansive 1948 World Health Organization definition of health should be expanded to include tolerance, now that we have “tools to measure broad social values,” opines Robert Brook, M.D. “Hate is both deadly and contagious,” so doctors need to help eradicate it. Should you assess whether your prenatal patient is about to lead a terrorist attack? (JAMA 2/14/17, http://tinyurl.com/z4qswy2).
  • Noncompliance = Crime: An innocent error in determining who should be screened and how often could lead to a life-crushing penalty, according to an ad for a 60-minute on-line training seminar (http://tinyurl.com/jmttsoo).
  • Preserving Privacy = “Censorship”: AMA president Andrew Gurman, M.D., praised the 11th Circuit Court decision overturning the Firearms Owners’ Privacy Act on the basis that physicians’ First Amendment rights were violated by the ban on noting firearms ownership in the medical records. The AMA encourages physicians to routinely ask about guns to help prevent firearms deaths (Wash Post 2/17/17, http://tinyurl.com/jsl32u8).
  • Censorship = “Patient Protection”: Australian orthopaedic surgeon Gary Fettke has been forbidden, forever, by the Australian Medical Board to suggest to patients that they should reduce sugar intake to what are now WHO guidelines, writes Dr. Malcolm Kendrick (http://tinyurl.com/jgt8qqj).


Déjà vu: Ingenix

The Department of Justice has entered a whistleblower lawsuit against United Healthcare over “risk-fiddling for profit,” writes Barbara Duck. The Ingenix “cheating algorithms,” the subject of the class-action suit against Ingenix (now renamed Optum), are back in action. A couple years ago, CMS said it was going to re-run Medicare Advantage risk scores dating back to 2008, suspecting $70 billion in fraud (http://tinyurl.com/pjcl6wb).

United HealthCare is the largest provider of Medicare Advantage Plans. Its third-quarter revenue was $46.3 billion, up 11.6% from the same period a year ago, with most of the increase coming from billing services and data analysis for heathcare groups.

United tries to reach each of its members at least every 2 years to find additional risk-adjustment claims. It pays providers $100 for each diabetes patient for whom they document complications. Everyone is “scored and scored again,” Duck writes. According to the relator, “United’s refusal to correct errors in its risk adjustment claims is so extreme that it submits risk adjustment claims to CMS for diagnoses taken from claims that it itself refuses to pay as being fraudulent and/or abusive” (http://tinyurl.com/hoze9r2).

Andy Slavitt was CEO at Ingenix during the relevant time frame. Public-private collusion is a feature of the swamp.


Administrative Law vs. Due Process

While the U.S. Constitution protects a few substantive rights, such as freedom of speech and freedom of religion, most of the protections of our liberty are procedural, writes Philip Hamburger, professor of law at Columbia Law School and author of the book Is Administrative Law Unlawful? But in a host of agencies, administrative adjudication bypasses most of these rights.

“One of the most common and disturbing types of administrative adjudication is licensing: the requirement that one get prior permission. Prototypically, Americans are free, except where the law prohibits something harmful and the government or another plaintiff persuades a judge and jury that one has violated the prohibition. A licensing system inverts this approach. It sweepingly bars an entire category of acts and then requires one to get a license or permission before one does such things. Licensing thereby displaces more than judge and jury: it also supplants a presumption of freedom with one of restraint. As a result, licensing proceedings lend themselves to a reversal of the usual burdens of proof and persuasion guaranteed by the Fifth Amendment.”

Administrative Law Judges are supposed to be independent, but they can be demoted or have their salary docked if they reject administrative regulations as unconstitutional.  In a 1992 survey of ALJs, 15% complained of threats to their independence, with 8% saying that this was a frequent problem.  One of the ALJs for the Securities and Exchange Commission had “never, in any of his cases, failed to uphold at least one charge against a defendant—an astonishing record of fealty to his agency.”

Although one may appeal to the courts, judges also defer under the Chevron doctrine to the government’s interpretation of the law and begin their analysis with a predetermined bias in favor of the government on both the facts and the law. Victories won in the 800-year struggle for procedural rights have been greatly eroded  (City Journal, winter 2017, http://tinyurl.com/hja3qjh).



Who Called Medicare “Evil”? In 1961, Ronald Reagan warned about the “evils of socialized medicine.” People held coffee klatches to listen to his talk (http://tinyurl.com/jcod2vz) played on a record-player. Medicare is socialized medicine for the elderly and the disabled. Medicare is a giant Ponzi scheme. All Ponzi schemes are evil and hurt many people. Medicare rations care through the fee schedule. The Resource-Based Relative Value Scale is price-fixing based on Marxist labor theory. Marxism is evil. Saddling future generations with an enormous debt they did not vote to accept (Medicare financing) is evil.

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


Do Not Attempt to Comply. CMS responses to comments on MACRA could come right out of Orwell’s 1984. “CMS disagrees”: it finds that data submission to CMS entirely accessible 24/7 is not an invasion of physician and patient privacy! And by what authority does CMS have access to privately insured patients’ records? All physicians who participate in MACRA’s Merit-based Incentives Payment System (MIPS) have enslaved themselves to a behemoth data-gathering system for at most a 9% monetary reward. Doctors need to wake up and not sell their soul. Noncompliance is better—monetarily, spiritually, professionally, psychologically.

Jane Lindell Hughes, M.D., San Antonio, TX


About Data. Observational data of the first sense—“anecdotal”  —has been given a bad name. Such “data” comes to us unbidden through regular experience and is the basis for tradition, common sense, street knowledge, etc. Observational data of the second sense is collected ad hoc, as by a health ministry, and not gathered from a controlled experiment. This is not inherently wrong, but it is far too often input into statistical routines that guarantee over-certainty. People claim causation simply because they were able to quantify their data analysis. Quantification is seen as universally superior to conclusions reached from “anecdotes,” when the reverse is usually the case. Data of the second type is usually far more limited than the first type, which reflects the broad experience of many. So, data collection per se is not bad; the problem is that it is collected for the sake of collection and then quantified because that is what turns it into Science™.

William Briggs, Ph.D., wmbriggs.com/post/19591


The Point of Busywork. Agustin  Blanquez explained tactics for transforming Cuba: “Progressives kept the people preoccupied  with survival, …keeping them busy, with no energy to protest.”

Ileana Johnson Paugh,  Ph.D.


Certified Insanity. Washington seems to think that certified clicks make you healthier. I have a certified company to extract data from my certified EHR and will soon have a government-certified data-submission vendor to submit data to the government. I am still being penalized on my Medicare patients though the government database has me logged in as seeing zero Medicare patients. The standard deviation of government data is about 1,000. The only thing “simplification” is doing is making it easier to explain why medical care is so expensive. We’ve reached a point at which the best way to help the unfortunate is to unhook the Hill from the wagon, before the “healthcare” wagon tumbles right off the cliff. The system is not good for anybody who is not already at the top.

Rocky Bilhartz, M.D., bilhartzmd.com/?p=3852


Irreversible Order. I have a patient who agreed to hospice and changed her mind within hours. She is now—4 months later— recovering nicely from what was an acute illness. Medicare decided that since she went on hospice, no doctor should be paid from that time forward. We have found it virtually impossible to reverse a hospice order. The hospice is still trying to get me to sign their orders. Are they still trying to get paid?

Alieta Eck, M.D., Somerset, NJ


Once You’re in MIPS…. The blog post “The Tyranny of the MIPS Composite Score: Part Deux” (http://tinyurl.com/jthdh8g) is insightful. Jim Tate writes than when his spiritualist mother banned the Ouija Board from their home, she said, “If you open the door, you might not be able to close it.” Her crystal ball, he says, predicts that MIPS will not just nudge doctors into the “pay for quality” universe but will have long-term impacts, as on employment prospects or the price for selling a practice.

Melinda Woofter, M.D., Granville, OH


The Radical Seed. ACA ended health insurance in America, by banning affordable catastrophic health insurance and exclusions for pre-existing conditions. Policies with guaranteed issue/community rating are not insurance, but third-party financing of known conditions. The Exchanges became the equivalent of a federal high-risk pool for pre-ex enrollees, funded by 11 million Americans who buy their own unsubsidized coverage on or off the Exchanges (prices must be the same for both) and by taxpayers. Van Jones discussed how a seemingly insignificant “minimum demand” could be a “radical seed.” I think the ban on pre-ex exclusions is the radical seed for single payer. Where health insurance ends, national “health care” begins.

Twila Brase, R.N.,   Citizens’ Council for Health Freedom




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