AAPS News – Oct 2000

Volume 56, No. 10 October 2000

SAVING MEDICINE

“Feed me,” bleats the little carnivorous plant plaintively
in the off-beat movie Little Shop of Horrors. As it is
fed, it grows. And as it grows, it demands, in an increasingly
stronger and harsher voice, to be fed more and more. Eventually,
it becomes huge, with an insatiable appetite.

“The metaphor goes only so far,” editorializes the
Calgary Herald of May 31, 2000. “Public health care in
Canada is not a malevolent entity. It was founded on the best of
intentions.”

Carnivores aren’t malevolent either; they act according to
their nature. The first persons to feed the plant, when it was
small, benign, and pitiful, presumably had good intentions.

The U.S. private variety of the OPM (Other People’s Money)
poppy was planted in World War II and nurtured by wage and price
controls. The public variety flowered in 1965 with the passage of
Medicare. It continues to send up branches, most recently the one
called SCHIP or State Children’s Health Insurance Program, part
of the Balanced Budget Act of 1997.

The two varieties are in competition. As the enrollment of
eligible children in public programs increased from 10% to 14%
between 1996 and 1999, enrollment in employer-sponsored coverage
decreased from 72% to 66%, and the percentage uninsured remained
around 20% (WorldNetDaily 7/2/00).

The “low-cost” [to families] SCHIP program covers about 2.6
million children for $24 billion (about $10,000 each). Al Gore
proposes expanding it to another 1 million children for $42
billion (or $42,000 each) (WorldNetDaily 8/18/00).

While expanding public insurance, as by adding a
prescription drug benefit to Medicare, politicians talk in the
same breath about the need to “save” it-that is, to feed it more.
Since 1966, Medicare Part A has resulted in 36 tax increases, and
the beneficiary share of Part B has dropped from 50% to 24%.
Clinton-Gore and most Congressmen propose to dump huge portions
of the projected but dubious future budget surpluses (resulting
from massive tax increases) into Medicare.

For those who actually provide medical care, of course, a
stricter diet of price controls is in the works.

In 1960, 75% of national medical spending was financed by
the private sector, and 48.7% was paid out-of-pocket. By 1998,
the private sector share had decreased to 54.5% (and out-of-
pocket to 17.4%), while the government share increased to 45.5%.
The Clinton-Gore objective of finishing the job and nationalizing
the whole enterprise has not been forgotten; the campaign has
shifted to the states. Gore has his sights set on Maryland.
MedChi will consider an endorsement of “universal” care at its
annual meeting on September 9.

One must ask: why should we want to save-and grow-
a ravenous carnivorous plant? Its nature is becoming obvious,
even to Canadians, who are now hiring more health care cops
instead of urgently needed doctors and nurses. The answer can
only be that people do want to save medical care, but have it
confused with Medicare or another “healthcare plan.” Because of
the demographic bomb, Medicare is probably unsalvageable. It is
clearly impossible to save both medicine and
Medicare.

It is imperative that we begin to starve the carnivore, and
turn our attention to financing medical care with private
savings [not OPM], rather than government
takings.

There is plenty of opposition, of course, not the least from
insurance agents. But as agent/broker Joe Pugh has pointed out,
“Agents are like frogs caught in a muddy rut in the road and
unable to get out-until a Mack truck approaches.” Politicians are
probably like that too.

Potential sources of savings abound:

1. Reduce takings by government and health plans.
This requires tax code changes to stop rewarding the shift from
direct (out-of-pocket) payment to third-party payment (with OPM).
The Medical Savings Account trial needs to be expanded, but also
changed to permit more flexibility and higher deductibles,
preferably increasing yearly as savings grow. Consumers should
demand MSAs that are unencumbered with the equivalent of claims
processing. Expenditures need review only if the deductible is
exceeded and an insurance claim is to be filed. It is imperative
that younger persons start MSAs now that can carry over into
retirement to avoid dependency on the bankrupt Medicare welfare
system-and that government allow the investment of the so-called
Medicare premium in a personally owned insurance and savings
product.

Regulatory takings also need to be reduced by the repeal of
insurance mandates as well as other costly requirements such as
the Clinical Laboratory Improvement Act. It is very difficult to
estimate the total regulatory burden; Peter Ferrara of the Cato
Institute makes a conservative estimate of $1 trillion per year-
around $4,000 for every man, woman, and child.

2. Encourage technologic innovation that empowers
consumers. We must not permit government and special
interests to curb the power of the internet to reduce transaction
costs and facilitate competition on the basis of both quality and
price (see p. 3).

3. Encourage thrift by demanding responsibility. The
OPM-induced entitlement mentality starts a vicious circle. The
ready, nonstigmatized availability of a safety net creates more
need for it. It is feared that people will waste their earnings
(if they are not taken so the government or health plan can waste
them)-and they do. Craig Cantoni estimates that the average
American could save $300,000 over a lifetime by buying a
moderately priced car for cash instead of credit, keeping it for
10 years, and investing the savings. MSAs could help overcome a
broad and serious cultural/educational problem.

If we do not want the whining, bleating, ever-hungry and
pathetic socialist monster to devour us, we have to recognize its
evil nature and stop indulging it.

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Single Payer Updates

Brain Drain. For every 20 doctors and 15 nurses who
leave Canada for the U.S., only one of those professionals heads
in the other direction. CMA President Dr. Hugh Scully reports
that 50% of Canadian medical school graduates emigrate within 10
years of graduation, and an additional 25% within 15 years,
primarily because of lack of resources to do their jobs. And
medical school spaces were recently cut by 17%. There is an
urgent shortage of specialists such as radiologists, and even
family doctors can be hard to find. Up to 42% of family doctors
are refusing new patients (Calgary Herald 5/31/00).
Canada is accused of “pillaging” less-developed countries such as
South Africa for physicians (Lancet 7/14/00).

Canadian Medicare Revisited. Federal and provincial
government payments now cover only 69.4% of Canadian medical
expenditures, with private insurance and out-of-pocket payments
picking up the cost of outpatient prescriptions, dental care,
rehabilitation, home health, nursing homes, extra-duty nurses,
and other noncovered items.

Public support is eroding as the system shows clear signs of
deterioration. The policy of restricting supply as the main
method of controlling expenditures is having “unforeseen
consequences” (Iglehart JK, N Engl J Med 2000;342:2007-
2012).

Fundamental design flaws must be corrected, and innovations
such as medical savings accounts are needed. But politicians and
the public are “Operating in the Dark,” states the Atlantic
Institute for Market Studies (www.aims.ca). Although the present
system is unsustainable, “any deviation from command-and-control
is condemned as an attack on Canada’s core values (Ottawa
Citizen, 7/16/00).

Debate Obsolete. The internet is a “direct threat to
universal public health care,” writes John Ibbitson. “As free
trade always does, it will expose the inefficiency and state-
sanctioned corruption of our centrally planned and publicly
funded system.” (Globe and Mail 1/18/00).

British NHS Heading for Ruin. As a result of more than
20 years of underfunding, more than half of intensive care and X-
ray machines need replacement; many are at risk of catastrophic
breakdown. Surveys show that Britons prefer private to NHS
hospitals 99 to 1. A visiting British journalist thought that DC
General was better than any public hospital in Britain, as it was
bright and clean with a competent, motivated staff supported by
new technologies. British physicians and nurses complain of being
drowned in a sea of paperwork that stifles initiative and
innovation (Grace-Marie Arnett).

School-Based Fraud

According to the Government Accounting Office (GAO), some
school districts took in only $7.50 of each $100 they were
supposed to get for Medicaid school-based health programs.
Consultants such as Deloitte and Touche may receive up to 25% of
the Medicaid take under contract with a school district. HCFA’s
oversight is “weak.” GAO investigators found that “some school
districts…under the guidance of outside firms [committed] willful and intentional violations of the law.” In Michigan, for
example, $28 million in improper payments were made during a
period in which Deloitte and Touche was providing billing
services. (BNA’s HCFR 4/19/00).

Reports on Medical Savings Accounts

MSAs Thrive in South Africa. One-half of private
policyholders in South Africa, which allows much more freedom
than the U.S. in program design, have chosen an MSA. The health
of MSA holders is no better than that of the general population.
While the average MSA holder spends about half as much on
outpatient services as those with traditional plans, there is no
evidence that they skimp on primary care in ways that lead to
higher hospital costs later on (NCPA, 6/20/00).

MSAs Good for Poor, Sick. Economists at the RAND
Corporation used a behavioral simulation model to predict the
choices made by people in a small-group environment. They
concluded that MSAs would be chosen by persons who had higher
risk and less income than those choosing HMOs. [Is that called
adverse selection?] (See Goldman et al. HSR: Health Services
Research 2000 (April) 35:1 Part I, 53-74.)

MSAs Attractive to Employers, Employees. A survey of
“health-care leaders” in PricewaterhouseCoopers HealthCast 2010
report shows that 60% expect that “most employers will offer MSAs
as an option” by 2010.

A Zogby poll conducted July 14-17 showed that 86% of 890
likely voters want the option to purchase an MSA (of Republicans,
88%; Democrats, 84%; whites, 81%; hispanics, 90%; and blacks,
87%).

Selling Points. “It’s hard to convince people used to
shopping around in an HMO/PPO world that higher deductibles and
copays are good,” writes John Hood, President, John Locke
Foundation. “I say don’t bother right now. Just free up rules on
MSAs and Flex Accounts and let people get used to them. They’ll
figure out on their own…that raising deductibles and
restricting insurance to catastrophic events is in their
interest.”

Two companies-Medical Savings Insurance Co. and Golden Rule-
offer a hospital indemnity rider for a one-time fee. This is like
decreasing term insurance for the first 16 months of coverage,
which pays the difference between the deductible and the amount
that should be in the MSA if maximum contributions had been made.

Conflicts of Interest on Vaccines

The Majority Staff Report of the House Committee on
Government Reform chaired by Rep. Dan Burton issued a scathing
report on vaccine policymaking. The August 21 report can be
downloaded from
www.house.gov/reform.

“Conflict of interest rules employed by the FDA and the CDC
have been weak, [and] enforcement has been lax.”

A detailed account is given of the rotavirus vaccine
approval. As of the time of the report, the Fact Sheet on the CDC
web site had not been updated and asserts that no association has
been made with bowel obstructions.

Liaison representatives do not have to disclose conflicts.
Committee staff uncovered numerous significant financial ties
between vaccine manufactures and the AAFP, AAP, AMA, ACOG and
other organizations with liaisons to ACIP.

AAPS Calendar

Oct. 25-28, 2000. 57th annual meeting, St. Louis.

Oct. 24-27, 2001. 58th annual meeting, Cincinnati.

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AAPS Files Amicus in Napster Case

In the Napster case, more is at stake than the ability of 22
million users to share music. The question is whether a web site
providing a peer-to-peer information distribution network can be
shut down by government if some may be using it for an unlawful
purpose such as copyright infringement.

In a case brought by the Recording Industry Association of
America, a very broad preliminary injunction by Judge Marilyn
Hall Patel is under appeal in the Ninth Circuit.

Article I, section 8, clause 8 of the U.S. Constitution
states that Congress shall have the power to “promote the
Progress of Science and useful Arts, by securing for limited
Times to Authors and Inventors the exclusive Right to their
respective Writings and Discoveries.” Copyright law protects an
important intellectual property right. It has, however, key
exceptions for fair use, without which scholarship and research
would be seriously impeded. Additionally, courts have established
that ideas cannot be copyrighted, and that misuse can invalidate
a copyright (as in Practice Management Information vs.
AMA, concerning the AMA’s abuse of its CPT coding monopoly-
also a Ninth Circuit decision, which is likely to be revisited if
Napster loses). Copyright of information needed to comply with
the law is also being contested in Veeck v. SBCCI (see
AAPS NewsMay 2000).

RIAA fears that its profits-and its control over the
distribution of music-are threatened by the internet. In fact,
all entities that depend upon central control, secrecy, and
suppression of dissent or competition are imperiled.

The intention of the Founding Fathers to promote arts and
sciences could be turned on its head by applying misdirected
copyright laws to the internet. Freedom of speech and association
could also be destroyed by the unprecedented governmental
intrusions required to enforce such laws.

In a brief arguing that Judge Patel erred in applying
standards for copyright infringement, the Digital Media
Association stated that: “A new policing obligation on media
management software developers would be impossible to manage,
impose extraordinary burdens and liability on DiMA members, and
is classic legislation by the judiciary.” Moreover, “if copyright
laws serve to deter the development of breakthrough technologies
with tremendous possible benefits to society and consumers,
merely because some are using that technology improperly, we will
never realize the full benefit of the amazing developments
occurring throughout…the world.”

In support of Napster, AAPS and the Eagle Forum Education
and Legal Defense Fund argue that the injunction was overbroad in
that it quashes many indisputably lawful associations through
Napster. A Napster precedent could jeopardize any web site that
brings individuals together, or points them elsewhere, and might
thereby facilitate an unlawful activity. Moreover, plaintiffs
misused the copyrights they seek to enforce by engaging in price-
fixing schemes.

The directory service utilized by Napster is not radically
different from technology used very widely on the internet, with
the potential for dramatic benefits to the entire economy by
reducing transaction and distribution costs. Such innovation will
also promote the creation and consumption of music, probably
bringing an overall increase in revenues to composers and
musicians though possibly harming the middlemen.

“Congress has weighed the benefits to the public of an
unregulated internet against the costs that technological change
imposes on existing interests, and Congress has consistently
chosen to keep the internet unregulated in all relevant respects-
and this Court should do likewise,” states AAPS.

In particular, Congress has refused to pass the “Collections
of Information Antipiracy Act” (H.R. 354), which would allow the
assertion of an ownership interest in database listings against
alleged “pirates” such as Napster. The bill is supported by
numerous established interests, including realtors and the AMA
(trying to reverse the Practice Management decision).
(See
www.databasedata.org/hr354/hr354.html
for links to relevant documents and testimony, and AAPS
News May 1999).

Most importantly, the First Amendment applies even if a
special interest is harmed thereby. AAPS is especially concerned
about potential censorship of medical information. For example,
the government could cite the Napster injunction as precedent to
shut down any web site that facilitates discussions of drugs not
approved by the FDA. Or criticism of an approved treatment, such
as Ritalin for ADHD, might be silenced. “Ritalin” is a registered
trademark, and some of the official information is copyrighted.
The owner might try to assert intellectual property rights by
demanding that web sites only provide authorized links.

The threat of costly litigation over copyright infringement
is already being used to chill criticism (as of the Church of
Scientology, see
www.xenu.net) or to prevent public access to CPT codes to
facilitate price comparisons for medical treatments (see Wall
St J 8/25/00, p. A1).

“Court-ordered strangleholds such as the Napster injunction
create multimillion dollar monopolies for special interests,”
stated AAPS Public Relations Counsel Kathryn Serkes. “This
injunction should be reversed.”

The AAPS press release and brief are posted at
AAPS Online. The amicus
brief was funded by the American Health Legal Foundation.

Delicensure for Speaking Out?

The Federation of State Medical Boards held an invitational
event in Washington, DC, September 6-7 to discuss national
licensure standards. Although proposed model legislation (see
www.fsmb.org) is already
largely incorporated into the Medical Practice Act of the several
States, a number of provisions bear careful watching:

Disruptive Behavior. This could be very broadly
defined. What is an “aberrant behavior pattern” that creates a
hostile environment or “could threaten the delivery of quality
health care”? Could it meant objecting to a Clinical Pathway?

New Ethics. Unprofessional conduct could include
anything that could bring “the medical profession into
disrepute,” including “violation of any provision of a national
code of ethics acknowledged by the Board.”

Standard of Proof. “The Board should be authorized to
use preponderance of the evidence” [51%] as the standard.

Electronic Communications. If a communication that
crosses state lines is found to constitute the practice of
medicine without an appropriate license issued by the Board, the
physician “should be deemed guilty of a felonious
offense.”

Punishments. The range of disciplinary actions
extends beyond deprivations of the privilege of licensure and
includes free public service, medical or nonmedical; fines;
monetary redress; and assessment of disciplinary costs.

All members should be vigilant about proposed amendments to
the Medical Practice Act by their state legislatures, and keep
AAPS informed.

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Members’ Page

“Quality” Measures. Our JCAHO surveying physician told
us that next time the Joint Commission comes to our hospital it
will expect to see more Clinical Pathways and more outcomes-based
statistics. With the Orix initiative, JCAHO will do more
“benchmarking”-comparing hospitals with each other and with
national statistics-and be more aggressive in looking at
“indicators,” such as the number of C-sections.

I always travel well-armed with AAPS materials in my black
bag, and at the medical staff meeting I showed the JCAHO
physician the pamphlet on Total Quality Management by Gerry
Smedinghoff. He actually stood there and read the whole pamphlet.
He said he agreed with it and that it was “stupid” (his word) to
pick arbitrary numbers for C-sections. Nevertheless, since
compliance with “cookie-cutter” and “one-size-fits-all” medicine
(his words) was measurable, JCAHO would be demanding
more of it for accreditation.

It’s one of those Emperor’s New Clothes situations: Everyone
(even the surveyors) seems to know that there’s nothing of
substance here, and yet dutifully nods his head in agreement with
the “quality work” that is being done.

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

Information Overload. Economics explains the antiquated
state of information management in hospitals: they are required
to process an enormous amount of useless data (Social Security
numbers, patients’ place and length of employment, DRGs, CPT
codes, ICD-9 codes, Medicare regulations, and so on ad nauseum)
in an enormous number of incompatible ways for an enormous number
of useless purposes. This excess data is called “noise” and is
pure waste. Compare this with the amount of data you need to
exchange with a vendor to buy a computer, rent a car, or fly
cross country. All this is good for consultants who charge by the
pound for their reports, which result in making it more difficult
for the average employee to get to the doctor he needs and wants
to see.

Gerry Smedinghoff, Wheaton, IL

Boat Race. An American and a Japanese auto company had
a competitive boat race on the Detroit River. The Japanese won by
a mile. American corporate management set up a Continuous
Measurable Improvement Team of executives to recommend
appropriate action. They found that the Japanese team had 8
people rowing and 1 person steering, whereas the American team
had 1 person rowing and 8 people steering. After some billions of
dollars, the consultants concluded that that “too many people
were steering and not enough rowing.” Management structure was
changed to 4 Steering Managers, 3 Area Steering Managers, and 1
Staff Steering Manager, and a system of incentives was set up to
empower and enrich the rower for becoming a six sigma performer.
The next year the Japanese won by two miles. The American
corporation laid off the rower for poor performance, sold the
paddle, cancelled capital investments, halted development of a
new canoe, gave awards to the consulting firm, and distributed
the savings as bonuses to the senior executives.

Apocryphal, sent by Charles Heller, Tucson, AZ

Forms. We took our nine-year-old son to the Emergency
Room for a fractured elbow, the result of a spill off a
skateboard. The forms we had to sign included the Medicare
Secondary Payer Screening, Advance Directives for Health Care
Decisions, and (the crŠme of bureauspeak) “Patient Rights.” My
favorite is Right #11: “The patient has the right to have access
to a public telephone.” Isn’t that in the Miranda warning? The
patient also “has the right to exercise other civil rights and
religious beliefs.” But when I tried to exercise Right #5,
“medical records will be released to the patient with written
consent,” by taking my son’s x-ray to the orthopedic surgeon, the
apparatchik behind the counter demanded the name of the surgeon.
I told her it was none of her business what I did with the x-rays
I had paid for; she was welcome to keep a copy for the hospital.
Besides the spirit of distrust created by this red tape, the most
disconcerting aspect is that most Americans do not think there is
anything peculiar about this way of doing business. Thus, my
focus is now on reforming education.

Craig Cantoni, Scottsdale, AZ

A Public Health Crisis. The epidemic of AMA-sanctioned
pseudoscience is the Death Star of public health crises.
Pseudoscience (outcome studies, “quality” measures, politics,
alchemy, insurance economics, eugenics, etc.) is counterfeit
science with all the power of the real thing. Historically,
pseudoscience inflicts a heavy toll on societies that foolishly
invest in its mystical and mischievous claims. Pseudoscience
kills. Because physicians are no longer taught to distinguish it
from true science, the substance of the profession is being lost.
Dumbing down the physician leads to confusion and loss of
resolve: a deadly, soon-to-be-irreversible trend.

True science informed by freedom of speech, the Oath of
Hippocrates, intact property rights-and individual physicians
free from third-party coercion-are necessary to have the best
medical care in the world instead of the most corrupt system.

Robert L. Kimber, M.D., Atlanta, GA

Fairness. If an IRS audit reveals that you overpaid
your taxes, you get a rebate. With HCFA, undercharges are
disregarded while you have to refund the gross total of all
overpayments.

Paul B. Jones, M.D., Grand Junction, CO

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Legislative Alert

Presidential Prescriptions

The debate on the future of Medicare has intensified by
several notches. Governor George Bush of Texas has unveiled his
long-awaited Medicare reform proposal, including prescription
drug coverage. Dogged by Al Gore and press critics for not
offering details, Bush dumped a Washington wonk’s wastebasket
full of them on a mentally overloaded media corps. It is one of
the most detailed Presidential campaign proposals ever, far more
so than the famous Clinton health care proposal of 1992, which
was not finalized in its 1,342-page legislative form until
October 22, 1993, after the Clinton Health Care Task Force spent
months in secret sessions trying to calibrate the right federal
subsidies for syringes in the vaccinations for left-handed
Lithuanian people of color enrolled in the boldly envisioned
regional alliances to be set up in South Louisiana.

OK, already, so candidate Bush falls short of the Clintonian
passion for detail that sank the Clinton health plan. But it is
indeed far more than we would have expected, and probably far
more than is good for Bush. Does the Bush plan cover weight
management? Does the sliding scale slide enough? Is the
progressive scale progressive enough? Did he get the subsidy
right for this individual here? Does his plan cover that family
over there? What about the special health needs of X, and the
special problems of Y? If the subsidy covers a couple who makes
$19,750, what impact does it have on the widowed mother of 7
children whose income is $19,999? Former Senator Bill Bradley,
who, before Bush’s Medicare reform issuance, outlined perhaps the
most detailed health care proposal of any other Presidential
candidate, can advise the Texas Governor on the wisdom and the
danger of sharing the details of health-care proposals with
anybody.

Bush cannot be accused of ducking the kind of precise
formulations that politicians normally avoid like the plague. As
for the Vice President, the Gore Plan is little more than a
variation of the Clinton proposal, which, curiously, is now going
just about nowhere very fast on Capitol Hill, even among the
Democrats in Congress. There is a reason: an abiding, and largely
undiscussed concern about the, yes, details of the Clinton plan,
how it would affect delivery of drugs and what kind of regulatory
requirements and litigation it would surely invite. Curiously,
Congressional Democrats are busy crafting or developing
alternative proposals.

Two observations, before we touch upon the proverbial nitty
gritties that millions beyond the Beltway allegedly have been
awaiting breathlessly. First, the Bush proposal draws heavily
from the policy work done by the National Bipartisan Commission
on the Future of Medicare chaired by Senator John Breaux (D-LA)
and Rep. Bill Thomas (R-CA)-more than 18 months of hearings,
meetings, testimony, special sessions and working groups. There
were presentations by CBO, GAO, the Lewin Group, the Progressive
Policy Institute, the Mayo Foundation-you name it. It is a huge
and impressive body of data and details. Recall that the basic
model of the reform was the Federal Employees Health Benefits
program (FEHBP), which covers Members of Congress, Congressional
staff, the White House, and millions of federal employees and
retirees. Not a perfect system, but a huge improvement over
today’s Medicare program in virtually every respect. Second, Bush
has decided to make the bureaucratic inefficiencies of Medicare,
the waste and inflexibility, an issue. He has spoken about the
inflexibility of administrative pricing, how it undermines access
to medical technology, and how the enforcement of Medicare rules
has gone so far as to throw dying patients out of hospice. For
analysts who have thought that the debate should be about the way
Medicare actually works, rather than simply how much it costs,
the Bush proposal is a refreshing change.

Bush’s Nitty Gritties

The Bush plan would increase Medicare spending by about
$158 billion over a ten-year period. Of that amount, he would
earmark $110 billion for Medicare modernization-structural change
and the establishment of a new system of private plans for
retirees-and roughly $48 billion for state assistance plans to
provide quick subsidies for low-income elderly who need
prescription drugs. Bush also said he would appoint a bipartisan
commission to oversee the implementation of this proposal. Here
are the main features:

• Every senior will remain entitled to current Medicare
  benefits. This, in effect, is was a proposal that accompanied the
  Bipartisan Commission majority recommendations.
• Retirees would have access to a broad choice of health
  plans, including prescription drug packages. Again the basic
  model for this system is the FEHBP.
• Retirees would get coverage for catastrophic costs at
  $6000 for all medical expenses. The catastrophic limit, in other
  words, is not confined merely to prescription drug costs. The
  lack of catastrophic coverage is the major reason why Medicare is
  such a poor product as an insurance package; it is not real
  insurance, as the term is commonly understood. The requirement of
  such coverage is similar to that which is normally found in FEHBP
  plans.
• Low-income retirees would be fully funded for the costs of
  the average premium. In the Bush proposal, the full costs of
  Medicare premiums for all seniors at 135% of poverty (incomes at
  or below $11,300 for individuals or $15,200 for couples) would be
  covered. According to Bush spokesmen, this would affect an
  estimated 6 million seniors nationwide. Under the Bipartisan
  Commission proposal, low-income seniors would also be fully
  subsidized.
• Sliding scale subsidies for the drug costs of near poor
  families. The Bush plan would subsidize the cost of drugs on a
  sliding scale between 135% and 175% of poverty (between $14,600
  and $19,700 for couples). Bush spokesmen say that this would
  affect an estimated 5 million people.
• Drug discounts for all retirees. The Bush plan calls for a
  25% discount of premium costs for all seniors at or above 175% of
  poverty, a provision broadly similar to that found in the Breaux-
  Frist Senate proposal. The Bipartisan Commission did not include
  such a discount.
• Immediate assistance to state elderly programs to help
  low-income seniors get access to prescription drugs. Former HCFA
  Administrator Gail Wilensky, currently advising the Bush
  campaign, is saying that this approach is the fastest way to get
  help to low-income seniors. Bush envisions this program being
  quickly enacted before his major Medicare reform fully kicks in.
  The $48 billion would be used to cover all costs of prescription
  drugs for those at or below 135% of poverty, and part of the cost
  for those who have incomes between 135 and 175% of poverty, and
  catastrophic costs over $6000. No such proposal for fast tracking
  assistance was included in the recommendations of the Bipartisan
  Commission.
• Establishes a unified Medicare trust fund, combining Parts
  A and B. This provision is also similar to that of the Bipartisan
  Commission.
• Retains the age of eligibility at 65. A proposal to raise
  the eligibility age to 67, tracking changes in the Social
  Security system, failed during the Balanced Budget Act debates in
  1997. So, the age of eligibility will be fixed in accordance with
  Social Security’s old standard, which was set in 1935, when the
  average life expectancy was 62. Bush has clearly decided that a
  change is either a bad idea on its merits, or that this fight is
  simply not worth it. It should be noted that this is a break with
  the majority recommendations of the Bipartisan Commission, which
  would have raised the age of eligibility to 67.

Avoiding Detailed Confusion

Clinton and Gore share a common proposal with some minor
differences. Senators John Breaux (D-LA) and Bill Frist (R-TN)
have a proposal. The House Republicans have already passed their
proposal in the House. And the Congressional Democratic
leadership has a proposal. The details are confusing, and the
similarity of provisions across party lines is surprising. What
the Administration, the Bush proposals, and leading Congressional
proposals have in common is hardly shocking: they are all
promising universal access to prescription drug coverage; they
are all providing a sliding scale of subsidies to Medicare
patients; they all fully cover the premiums and drug costs of
low-income Medicare patients married and single, with ranges of
subsidy for people at or below $11,000 for individuals to roughly
$19,000 for couples; and, not surprisingly, they all call for
additional Medicare spending. Over ten years, Gore wants to spend
an additional $250 billion; Bush, $158 billion; and the Medicare
Commission, $61 billion. Official cost projections, however, are
likely be wrong. The Clinton drug proposal started out at $118
billion over 10 years, and in six months, it jumped 35% to $160
billion.

Notice how the Medicare debate has changed. You’d hardly
recognize it. It is no longer about dollars and cents, or even
trust funds. All of the Medicare debates in 1995, 1996, 1997 -how
to stop excessive spending-seem to have been either forgotten or
put on hold. Part of the reason is the looming federal budget
surplus, and the general desire to use it, if and when it
materializes in real money, to offset Medicare costs. This, of
course, can be a tricky business. A “risky scheme” even. Most of
the money is not in the treasury, or under Alan Greenspan’s
pillow; it is just supposed to be coming. It’s out there,
somewhere. Like the Truth in the X Files.

Those who depend on tomorrow’s surpluses are like folks
betting the farm on tomorrow’s winnings at the race track. The
projections look great, but they can change. A downturn in the
stock market, a slowing of the economy, a sour quarter, an
unforseen change in federal spending, and we could all be
swimming once again in red ink. But politicians are feeling good,
sippin’ on those surplus projections, just like a bunch of good
old boys around the still, and with all that money coming in even
that baggy old bureaucracy could get all gussied up in fancy new
benefits. So, forget all that stern fiscal conservatism of the
past, the worries about Medicare spending zooming out of control.
It feels good to think positive. And part of the reason is that
the reimbursement reductions in the notorious Balanced Budget Act
have frightened Congress away from spending reductions,
particularly with the closure of home health agencies, the
screaming from hospital administrators, and the threatened
bankruptcy of nursing homes. Cuts are now “bad”; more spending is
now “good.”

The debate seems to be revolving around benefit additions,
but more importantly, Medicare’s structure. And that is where
they all differ-big time. Consider, for example, the design and
delivery of the drug benefit. For Clinton-Gore, the benefit is
added as new part of the old program. It is not insurance at all.
Moreover, it is to be administered by a private contractor, a
legalized, geographically based monopoly-the worst of all
possible worlds for a consumer-just like the Medicare carriers
administer other Medicare benefits today. For the Bipartisan
Commission, the drug benefit is integrated as a necessary
component of a real private health insurance package, within the
framework of a new competitive health insurance market. Likewise,
for Bush, the drug benefit would be part of comprehensive reform.
Consider also the financing of the drug benefit. For Clinton-
Gore, a second Medicare premium for seniors is added. There is no
deductible. Taxpayers assume all of the risks. For the Bipartisan
Commission, drug premiums are integrated into insurance premiums-
a single premium that would include catastrophic coverage.
Deductibles would vary with plans. As with the FEHBP, competing
health insurers, not taxpayers, assume the risks. For Bush also,
the drug premium would be integrated into the overall premium.

The Real Issue: Control

The needs of the senior population are diverse, and the
access problem is not universal; two-thirds of seniors have drug
coverage, according to the Kaiser Family Foundation. For those
with insurance, drug costs account for 1% of their income; for
those without insurance, it is about 2%. Gail Wilensky notes that
the average annual drug costs for seniors run between $300 and
$350 per year. A small proportion of seniors with high costs need
help. But the real issue is not money, nor the level of
subsidies, nor whether candidate Bush can out-promise candidate
Gore. The real issue is control. And here there is a profound
difference. Under a system based on patient choice and market
competition, you can have a broad range of drug and insurance
coverage, and you can choose the coverage that you think is best
for you. You are in control. If the federal bureaucracy controls
the financing and delivery of the drug benefit, the bureaucracy
will control what drugs you get, how you get them, when you get
them, and under what circumstances you will get them. If
Medicare, as it is constituted today, covers a benefit, you can
only get the benefit under the terms and conditions set by
Congress or the Medicare bureaucracy. If you don’t like those
terms and conditions, that’s tough. Go complain to your
Congressman. That’s the real issue before the country.

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