AAPS News – Oct 2002


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

Volume 58, No. 10 October 2002


In the appendix to 1984, George Orwell explained
the principles of the simplified language Newspeak: “The purpose
of Newspeak was not only to provide a medium of expression for
the world-view and mental habits proper to the devotees of
Ingsoc, but to make all other modes of thought impossible.”

Many words were eliminated altogether, and all had a rigidly
limited meaning. Telescoped phrases like “Recdep,” “Minitrue,”
and “Thinkpol” echoed the mode of 20th century totalitarian
regimes that coined “Gestapo” and “agitprop.”

The final adoption of Newspeak was delayed until 2050
because of the huge task of translation. No book written before
1960 could actually be translated as a whole. The Declaration of
Independence would be simply rendered as “crimethink.”

The task of HIPAA-expressing all PHI [protected health
information] in supposedly unambiguous standardized terms from a
defined set-is not as difficult as translating Shakespeare or
Milton into Newspeak. Nuance removal (simplification) is easily
accomplished by replacing words with numbers. Thus, a shorter
deadline is considered achievable: October 16, 2003.

In fact, since that task will be accomplished-for
it must be, by law-the National Committee on Vital and
Health Statistics (NCVHS) is moving forward on a broader front:
PMRI [Patient Medical Record Information] Terminology.

The AMA, which avowedly seeks to become an essential part of
every practitioner’s life, is in the forefront on PMRI. On Aug.
28, Michael Beebe, Director of the AMA’s CPT Editorial and
Information Services, testified before NCVHS:

“[T]erminology supporting PMRI should be comprehensive and
include all clinical terms used by all members of the health care
team involved in record writing.” Moreover, there should be “only
one terminology per [discrete, nonoverlapping functional] area.”
Health plans and providers must not be permitted to “interpret
medical data code sets as they see fit.” Instead, constant AMA-
approved “education” will be necessary.

As yet, there is no federal legislation mandating PMRI
standards. The AMA wants the government role limited to broad
recommendations, “with the specific code sets maintained by the
private sector.” Having achieved “market acceptance” of its CPT
codes, through HCFA’s forcing them on all Medicare providers, the
AMA is the leading choice for this lucrative job.

A spinoff of control of the language would be effective
control of medical practice, without the need for enactment of
unpopular bans on nonapproved treatment or new technology. Now, a
procedure that has no code might still be done; if not in the
third party’s lexicon, patients can pay out of pocket. As much as
$40 billion is spent on “complementary and alternative” medicine
each year. This drains off precious resources-as does “futile” or
“unnecessary” care. The way to total control is through a “single
payer” and a single integrated data base of PMRI. Such an
administratively simplified system could ultimately make
uncodable items or forbidden code combinations just as
unthinkable as liberty in Orwell’s Oceania.

For a decade, the Institute of Medicine (IOM) has advocated
a computerized patient record (CPR) with “convergent reference
terminology” serving as a “central knowledge structure” for
“transportable decision support.” The “common language” will
include codes “required for administrative, financial, billing,
epidemiological, or governmental reporting,” to meet “the needs
of society and healthcare administration.”

In Oldspeak, this means that centralized PMRI will permit
central control of medicine, to achieve governmental objectives.

The system is still “fragmented,” and, as HHS has asserted,
HIPAA in itself does not create a national data base of PMRI. It
merely enables and facilitates this ultimate goal. Already,
insurers have access to information on 16 million Americans
through the Medical Information Bureau (see


Essential to the system’s public acceptance is the pretense
of protecting privacy. The AMA and its Federation continue to
follow the lead of HHS in using the Newspeak, doublethink term
“Privacy Rule” for what is obviously an Unprivacy Rule.

“If Enron or Worldcom executives had distorted the truth the
way HHS officials have about this … rule, they would probably
be charged with false advertising,” stated Sue Blevins, President
of the Institute for Health Freedom.

The final final Rule, published in the Federal Register of

August 14, 2002, removes the consent pretense (AAPS
, Aug 2002), in what HHS
Secretary Tommy Thompson calls a “common sense balance” of
“personal privacy protections and access to high-quality care.”
HHS does not acknowledge that the intolerable administrative
barrier to access resulted from a provision demanded by the AMA:
requiring written consent to use information that had
already been lawfully disclosed with patient consent (

While Thompson and the AMA may consider PMRI to be the key
to cost-effective, high-quality care, New York attorney Robin
Kaigh wants the right to “start fresh with any new doctor by
simply not approving the transfer of the medical record”
(WorldNetDaily 8/28/2002). A personality conflict with a
prior doctor is only one possible reason. An old-fashioned
physician might actually prefer to interview the patient without
being biased by the old PMRI. Past diagnoses, even if printed out
from a computer, can be false or misleading.

In 1984, it was possible to construct a blasphemous
sentence such as “Big Brother is ungood,” but Newspeak did not
have the words needed to defend it.

Big Brother needs HIPAA-speak, the Unprivacy Rule, and
centralized PMRI to destroy medicine. He also needs you.

Doctors have a choice: be a noncovered entity-or become an
unphysician ally of the therapeutic State.

HIPAA Escape Stirs Controversy

The AAPS “country doctor escape route” was prominently
featured in the Aug. 22 CMA Alert. In warning its
members about AAPS “misconceptions,” it is actually the
California Medical Association that misrepresents both the AAPS
position and the facts about HIPAA (see

for CMA and AAPS statements).

“The Federation, including the CMA, is in deep denial about
the costs and severe penalties of the Unprivacy Rule, as well as
its destructive effect on confidentiality,” stated AAPS Executive
Director Jane Orient, M.D.

CMA’s HIPAA experts stress that “only people intent on
violating HIPAA’s confidentiality requirements or who seek to
profit by doing so risk incarceration.” However, Congressman
David Hobson (R-OH) felt the need to write to Secretary Tommy
Thompson to ask for a phase-in of fines and penalties instead of
hitting doctors with them on April 15, 2003.

While the CMA may be correct in asserting that “there
is no … [national computer] data base into which all
patients’ records will be put if their health care provider is
covered by HIPAA,” AAPS warns that there will be such a
data base. The only way to protect your patients against having
their private information included is not to file insurance
. Each patient will have to decide whether the trade-
off is worth it.

The same issue of the CMA Alert advertises a CME-
accredited HIPAA compliance workshop: $495 for members/ $950 for
nonmembers. A compliance kit on CD-ROM is also available for a
mere $495.

IRS Violates Privacy

By law-Section 6103 of the tax code-an individual’s tax
return is supposed to be private. However, in July, the IRS
publicly disclosed the names of hundreds of citizens engaged in
what amounts to tax planning, simply because they were clients of
KPMG, which is under investigation for allegedly offering illegal
tax shelters. “Perhaps post-Enron, the tax man feels as if he can
once again get away with anything, even harassing honest
Americans” (Wall St J 7/1/02).

AAPS Members Run for Congress

We know of three AAPS members running for Congress in 2002:
Drs. Ron Paul, John Cooksey, and Andre Minuth.

Ron Paul, M.D., an obstetrician who has been an AAPS
member since 1966, is serving his third term representing the
14th District in Texas. Dr. Paul is the one member of the “Gang
of 535” who votes no on all unconstitutional laws. See

After three terms in the House representing Louisiana’s 5th
District, John Cooksey, M.D., faces an Oct. 5 primary
seeking to be the Republican candidate for the U.S. Senate. Dr.
Cooksey is an eye surgeon who has been an AAPS member since 1990.
See www.cookseyforsenate.com

A nephrologist and AAPS member since 1998, Andre Minuth,
, of Fresno is the Republican nominee facing 6-term
incumbent Calvin Dooley in the 20th District of California. Key
points of his platform include accelerated regulatory relief;
free choice of doctor and insurer; and full financial disclosure
to patients of itemized costs including advertising, litigation,
and cost shifting. Dr. Minuth does not accept PAC money. See

HIPAA Triggers

From Section 1173(a) of HIPAA, the list of categories that
trigger the application of the Privacy Rule when data are
exchanged electronically comprises the following: (A) Health
claims or equivalent encounter information; (B) Health claims
attachments; (C) Enrollment and disenrollment in a health plan;
(D) Eligibility for a health plan; (E) Health care payment and
remittance advice; (F) Health plan premium payments; (G) First
report of injury; (H) Health claim status; (I) Referral
certification and authorization.

Note that a physician cannot avoid becoming a covered
entity by delegating electronic claims filing to a billing
service or clearinghouse.

National Health Information Infrastructure

From “Information for Health: a Strategy for Building the
National Health Information Infrastructure,” a report from the
NCVHS to HHS, Nov 15, 2001 (

“Along with the HIPAA … transaction standards, a
comprehensive set of … (PMRI) standards can move the nation
closer to a healthcare environment where clinically specific data
can be captured once at the point of care with derivatives of
this data available for meeting the needs of payers, healthcare
administrators, clinical research, and public health….

“Some private-sector provider organizations have already
made the strategic move toward fully integrated systems. For
example, Kaiser Permanente is investing $2 billion for a Web-
based system that includes a nationwide clinical information
system,… online guidelines and protocols for providers, and all
administrative functions….

“Several foundations are funding important research into
areas touching the personal health dimension of NHII, including
the California Healthcare Foundation [and] the Robert Wood
Johnson Foundation….”

Kaiser Solicits for Doctors of Death

Although physician-assisted suicide (PAS) is legal in
Oregon, many physicians are reluctant to kill their own patients.
According to Wesley J. Smith, a Kaiser executive recently sent an
e-mail to 800 Kaiser physicians seeking volunteers to implement
PAS either for their own patients or for members who are not
their patients. If PAS becomes routine, HMOs could save a lot of
money (NRO 8/19/02).

AAPS Calendar

Sept. 18. Board of Directors meeting, Tucson, AZ

Sept. 18-21.
59th annual meeting, Tucson, AZ.

Sept. 24-27, 2003. 60th annual mtg, Point Clear, AL.

Psychiatrist Jailed for “Unnecessary” Treatment

After an unblemished medical practice of 30 years, Daniel F.
Ward, M.D., Ph.D., age 58, will report to Leavenworth for 5
months imprisonment. His crime: providing what he calls “sensory-
based therapy” to nursing home residents and billing Medicare
under the code for “interactive group psychotherapy.”

The prosecutor claimed that the treatment, which included
sing-alongs, constituted “entertainment,” for which Medicare does
not pay. Dr. Ward states that Medicare had approved the code he
used. “I am guilty of accepting at face value the assurances of
all those involved in the process,” he said (Kansas City

With therapy, Dr. Ward observed improvements in the mood
disorders that often accompany cognitive decline, and a reduction
in need for medication and staff interaction. While imposing the
sentence, Judge Howard Sachs stated: “I understand that you have
a legitimate belief that the … program … was helpful to

Impecunious after 6 years of investigation and character
assassination, Dr. Ward entered a guilty plea when the public
defender told him a jury trial would almost surely result in
prison time, with a potential sentence of 60 years. After his
plea agreement, he learned that the Bush Administration had
quietly reversed a policy of denying service to patients with
Alzheimer’s disease, but he was unable to withdraw his plea.

“I was not aware of the government’s prosecutorial zeal,” he
writes to AAPS. “The public is asleep at the wheel while my
colleagues and I are being driven off to prison and ruin.”

While a few colleagues are supportive one-on-one, “most have
avoided me altogether. Everyone, I assume, has been intimidated
by the government’s endless interference.”

Dr. Mitrione Granted a New Trial

On August 23, Judge Jeanne Scott vacated all but two counts
of the convictions of Robert Mitrione, M.D., and his wife Marla
DeVore (AAPS News June 2002)
because a key government witness, Deanne Statler, gave testimony
that was “false to a dramatic degree.”

If the prosecution declines to retry the case, the accused
will be sentenced on October 31 on the remaining counts of
billing for a therapist who provided services other than the drug
and alcohol counseling for which he was licensed.

Amicus Filed in Peyton Sham Peer Review

In an amicus brief filed in the case of Richard R.
Peyton, M.D., v. Johnson City Medical Center
, No. #E2001-
02477-COA-R3-CV (Ct. App. Wash. Co. Tenn.), AAPS opposes the
application of immunity under the Health Care Quality Improvement
Act (HCQIA) to “sham peer review,” or peer reviews motivated by
economic or other improper factors rather than genuine concern
about patient care.

Out of fear of competition from a free-standing radiation
therapy facility that Dr. Peyton was founding in its referral
area, the hospital aggressively undertook to ruin his reputation
by summarily suspending him from the staff in 1994. Dr. Peyton
was not apprised of the charges against him and was even locked
out of his own office so that he could not access the records
necessary for his defense. The hospital’s own Medical Executive
Committee exonerated him in a vote of 11-3 before the hospital
applied improper pressure. No credible case could be made for
imminent patient danger justifying such a draconian measure. For
support, the hospital relied on an allegation of “disruptive
behavior,” which consisted of a few oral disagreements without
any hint of bodily harm, although its own bylaws do not permit
summary suspension for such behavior. “Virtually no physician
would still be practicing if the cited quotidian spats could
justify summary suspension. This rationale is purely pretextual,”
writes Andrew Schlafly, General Counsel for AAPS.

In debate on HCQIA, House Subcommittee Chairman Henry Waxman
(D-CA) stated: “We fully agree that we cannot
tolerate abuses of the peer review system, and that H.R. 5540
[HCQIA] was never intended to protect any such abuses… whether
the concern is with anti-competitive activities, with actions
based on race, or any other prejudicial or
discriminatory factors.” Precedent, as in Brown v.
Presbyterian Health Care Serv.
, 101 F.3d 1324 (10th Cir.
1996), cert denied, 520 U.S. 1181 (1997) established
that immunity is unavailable to hospitals whenever they fail to
satisfy any of the HCQIA requirements, including
adequate notice and hearing procedures.

With medical costs skyrocketing, the chilling effect of
retaliatory peer review on competition is unacceptable. Injurious
actions against physicians like Dr. Peyton send a signal to all
other potential competitors. If the hospital prevails in its
argument that it should have immunity for destroying the career
of a physician competitor, the casualties will include all
patients who must endure inflated costs.

This brief was funded by the American Health Legal

Tip of the Month: Every doctor facing an unfair peer
review encounters the same barrier: immunity for the reviewers
under the Health Care Quality Improvement Act (“HCQIA”). The
federal Court of Appeals for the 1st Circuit recently emphasized
limits on that immunity. “HCQIA immunity only covers liability
for damages. It does not shield covered defendants from suit and
other forms of relief.” Singh v. Blue Cross/Blue Shield of
Massachusetts, Inc.
, 2002 U.S. App. LEXIS 17717, *49 (Aug.
27, 2002). There is no HCQIA immunity from claims to be
reinstated-hence consider including demands for injunctive relief
in peer review lawsuits. Also, unlike other forms of immunity,
HCQIA immunity is a purely factual issue dependent on what was
objectively reasonable. The Court emphasized that “there is less
reason under the HCQIA to exclude the jury entirely from
involvement with the dispositive determinations” than other forms
of immunity. Id. at *20.

Court Rebuffs DoJ, Citing Frequent Lies

The secretive court that oversees the Foreign Intelligence
Surveillance Act and must approve spying on terror suspects
refused to grant the Department of Justice broad new powers under
the U.S. Patriot Act. Judge Royce Lamberth signed the decision,
citing 75 misstatements and omissions in applications for wiretap
authority, one signed by former FBI Director Louis Freeh. The
ACLU accused the DoJ of attempting an “end run around the Fourth
Amendment” (NY Times 8/23/02).

“All liberty consists … in the preservation of an
inner sphere exempt from state power. That reverence for
conscience is the germ of all civil freedom, and the way in which
Christianity served it. That is, liberty has grown out of the
distinction (separation is a bad word) of Church and

Lord Acton


Self-Protection. If you had suggested to me 25 years
ago the extremes to which I would be going for self protection, I
would have thought you were completely crazy. But the evidence
required to prove one’s innocence requires extreme measures. I
have been studying the law on professional misconduct to make
sure I leave no openings for attack.

On more than one occasion, our hospital’s medical director
has warned physicians at medical staff meetings that they should
be wearing their badges whenever they are in the hospital. Many
doctors just brushed it off. What he did not tell them was that,
according to New York Education Law (Sec. 6530 (37)), “failing to
wear an identifying badge, which shall be conspiciously displayed
and legible, indicating the practitioner’s name and professional
title … while practicing in a hospital” is considered
“unprofessional conduct” and could be grounds for delicensure.
Beware of giving administrators any pretext for ridding the
hospital of politically incorrect targets.

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

“End-of-Life” CME Requirement in California. Before
December, 2006, all California-licensed physicians, except
pathologists and radiologists, are required to have 12 hours of
accredited CME on pain management and the treatment of terminally
ill patients. I am a board-certified oncologist, in practice
since 1982, and am already expert in pain management and terminal
care. Why should I have to spend $200 to $300 on a course given
by persons with less expertise than my own? I have asked the
Department of Consumer Affairs of the Medical Board of California
how and why such a requirement came to be. Does the Board receive
a kickback or some other benefit from the expensive courses we
are required to take?

The weekly journal club I already attend, sponsored by
UCLA/VAH, is trying to include these new requirements.

CME requirements should be abolished. Drug companies send
“CME” credit courses by mail on subjects related to their drugs.
I don’t mind this and appreciate the information, but doesn’t
that defeat the supposed purpose of the rules?

Linda W. Wilson, M.D., Culver City, CA

Criminalizing Dissent. The Federation of State Medical
Boards will issue a set of standards that it will encourage each
state to adopt: yet another way to persecute and criminalize
physicians who “deviate” from “guidelines” to follow their own

John H. Boyles, Jr., M.D., Dayton, OH

Cost Drivers. A study by the Council for Affordable
Health Insurance (CAHI) identified four key factors driving up
insurance costs in the individual market. Cost-shifting increases
costs by 15-50%; mandated benefits, by 5-45%; restrictions on
underwriting, by up to 100%; and comprehensive instead of basic
benefits, by up to 30%. Employers, consumers, and especially
legislators are responsible for these pressures. See the July
issue of Issues & Answers,

Ernest J. White, Alexandria, VA

The Myth that Socialism Lowers Costs. The facts on
government v. private education speak for themselves. The
student:administrator ratio in the Philadelphia public school
system is 204,851:906 or 1:226; in the Philadelphia Archdiocese
school system, it is 100,000:15 or 1:6,666. In Scottsdale, it’s
1:189 for the public schools and 1:4,538 for the diocese.

The September issue of AAPS
impressed me, but I would add that the cost of private
insurance is higher than it needs to be because it is not truly
insurance but a prepayment plan for minor expenses. If the
patient wrote the doctor a check, that would be the end of the

Craig Cantoni, Scottsdale, AZ

Are the People Too Dumb? Many intellectuals still do
not believe that citizens who are productive enough to pay for
their own medical care are capable of making medical decisions in
their own best interest. But I believe that empowering people,
through a competitive marketplace, is the best arbiter of
efficacy, quality, and price.

Roger Beauchamp, D.D.S., Escanaba, MI

Who Should Be in Charge? The system needs to be given
back-not to doctors, but to patients. Doctors, nurses,
chiropractors, ambulance companies, hospitals, etc., can all be
efficient and responsive when provided the right incentives. All
respond to the demands of the payer. If the payer is anyone other
than the patient (the government, the employer, the insurance
company), the patient becomes just the raw material, the puppy
dog at the vet’s.

Greg Scandlen, Frederick, MD

Don’t Take the Bait. It is too bad that the simplicity,
purity, and safety of opting out of all third-party interference
is too often lost in the frantic rush to comply with absurdity.
By restructuring the medical practice to be a private patient-
physician encounter, in which the entire transaction takes place
between the patient and the physician, we can retake our
profession and live by the Oath of Hippocrates. Anything less
seems to be an economically driven cop-out. That economic
pressure is exactly what the government wants the doctors to
feel. Once physicians fear for their cash flow, they are willing
to surrender almost anything.

Michael Harris, M.D., Traverse City, MI

Legislative Alert

Fast Forward to a Feverish Fall

The August recess is over. Congress is back.
Appropriations bills are stacking up, and big-ticket items like
Homeland Security and welfare reform are awaiting Senate action.
But medical issues are not far behind. Late in September, the
Census Bureau will again release its numbers on the state of the
nation, and you can bet big bucks they will show an uptick in the
number of the uninsured, setting off another round of
congressional reform rhetoric. Moreover, the prescription drug
bills that crashed and burned in the Senate in July are likely to
come roaring back in the Fall. The “patients bill of rights”
legislation, enacted by the House and Senate in very different
versions, continues to languish and may never recover.

Rising medical costs are likely to be accompanied by a
significant increase in the uninsured. Whatever the Census Bureau
number released at the end of this month turns out to be, it will
pour more fuel on the debate, and the debate is going to
intensify for the rest of our lives.

America is experiencing a return of double-digit medical
cost increases. And within 10 years, America’s total medical
spending will double. This huge growth will be fueled by the
intensifying demand for medical services among a rapidly aging
population, the availability of advanced medical technology, new
and better pharmaceuticals, and the application first fruits of a
biomedical research industry. With this growth in the size of the
medical sector of the economy, all of the current problems of
access to care, the cost and quality of care, and the proper role
of physicians and patients will take on a new urgency. The big
question for Congress and the Administration is this: are the
current federal tax and regulatory policies that created the
existing medical insurance market any longer viable? Most
conservatives on Capitol Hill and elsewhere think not.

The Senate: Back on Drugs?

It is hard to imagine how the Senate could fail to take up
the issue of prescription drug coverage. The House has passed its
version of the legislation. Senate Majority Leader Tom Daschle
(D-SD) has said that he would enact a drug bill, though thus far
he has done nothing. But there is a change in the congressional
climate, more significant than the fall in the Fall temperatures.
The big difference between the July session, when four Senate
drug plans failed, is that at midnight on September 30 the
Senate budget rules disappear. Right now, any bill that exceeds
the Senate budget standards requires 60 votes to waive the budget
rules and bring that bill to the floor
. When the fiscal year
ends in September, 51 votes on any bill will pass it. Look for
conservatives to ready some changes in the tax laws, including a
permanent end to the death tax. Senators will brush off their
various Medicare drug bills, and go for it. All bets are off.

Readers of this column know that structure is the
key issue in every facet of the medical policy debate, not money.
Money really isn’t everything after all. It is the structure
of the policy that determines the levers of power and
control. At the end of the day, either individuals and families
or government officials and their contractors will have control
over the levers of power. Who will manage benefits and services?
Who will control the flow of dollars in the system?

The recent-and future-Congressional Medicare drug debate is
once again proof of that. For example, the House of
Representatives, following the leadership of House Ways and Means
Committee Chairman William Thomas (R-CA), enacted The Medicare
Modernization and Prescription Drug Act of 2002 (H.R. 4954),
which would rely on price competition and private plans to
deliver the drug benefit to senior citizens. Likewise, The 21st
Century Medicare Act (S.2), also known as the Tri-partisan Plan,
would establish a system of drug coverage based on private
insurance companies. The Medicare Rx Drug and Discount Act of
2001 (S. 1239) would rely on pharmacy discount cards in a
competitive market. In sharp contrast, leftists in Congress
generally favor reliance on the traditional Medicare program as
the vehicle for drug coverage. This means that the Medicare
bureaucracy and its contractors would manage and enforce detailed
regulations in the financing and the delivery of the prescription
drug benefit.

As Washington Post reporter Helen Dewar noted, the
Medicare drug debate exposed “deep philosophical and political
differences” between Democrats and Republicans.

Another big policy question surfaces: If Medicare is going
to manage a prescription drug benefit, isn’t it fair to discuss
Medicare’s management of its current responsibilities? The
Medicare management issue is crucial and often overlooked. The
General Accounting Office (GAO), the fiscal watchdog arm of
Congress, has observed that Medicare is an “inherently difficult
program to manage.” In size, Medicare ranks second only to Social
Security. Medicare covers about 40 million beneficiaries, and has
contractors that annually process about 900 million claims
submitted by nearly 1 million hospitals, physicians, and other
providers. Medicare’s management team comes into contact with
these 1 million providers; it almost never comes face to face
with any of the 40 million Medicare patients. The Medicare
bureaucracy drives doctors crazy, but their patients are largely
insulated from the regulatory regime. That partially explains the
distance in opinion between doctors and patients on the Medicare
program and how it works.

Medicare, according to survey data, is enormously popular
with taxpayers and senior citizens. But these data also show that
the program is not broadly understood. In a comprehensive 1998
survey of public attitudes on the Medicare program, the Kaiser
Family Foundation and the Harvard University School of Public
Health found that only 4% of all Americans and 6% of seniors said
that they knew “a lot” about the Medicare program; 50% of all
Americans and 43% of all seniors conceded that they knew “only a
little”; and 25% of all Americans and 20% of seniors said they
knew “nothing.”

Ironically, while government reform efforts since World War
II have attempted, with varying degrees of success, to import
private-sector management innovations into federal management,
many in Congress believe that Medicare’s bureaucracy would do a
better job than competitive private-sector plans. But even among
federal agencies that are often considered sluggish by private-
sector standards, the GAO, as noted in its 2001 report on
Medicare Management, ranked CMS dead last in
terms of the percentage of managers who reported having key
performance measures for their work. And GAO ranked CMS next to
last in having a measure for customer service and for having a
management team that was held accountable for results.

With drug coverage, Medicare’s management is not merely a
technical matter. If the government agency manages the drug
benefit, in effect, the agency controls it. Medicare patients
might at first think that this is just peachy keen. But any
senior citizens who share Congressional leftists’ faith in the
superiority of the Medicare bureaucracy’s management will, if
leftists are successful this Fall, soon endure a test of that
faith. Once again, we say, it’s the structure, stupid!

The Bush Administration’s Agenda on Medical Policy

The Senate has refused to act on Bush’s tax credit proposals
for the unemployed. But the Bush team has been busy while
Congress has been out on recess.

HHS Secretary Tommy Thompson has announced 33 new private
plans in 23 states to serve an estimated 11 million Medicare
patients as part of a new demonstration project. Under this
initiative, Preferred Provider Organizations, or PPOs, will have
more flexibility than Medicare HMO plans. The new plans will
include prescription drug coverage, will vary on the basis of
cost sharing and deductibles, and will allow a wider choice of
doctors than available under HMOs. Thompson said that if the
Congress won’t act on serious Medicare reform, he will take the
administrative steps necessary to broaden choice and improve the

On the problem of the uninsured, Thompson also recently
announced approval of New Mexico’s request for a Health Insurance
Flexibility and Accountability (HIFA) waiver to use Medicaid
funds to expand private coverage to an estimated 40,000 uninsured
New Mexico residents. HIFA is a Bush Administration initiative to
broaden private coverage for low-income populations, rather than
relying upon government programs such as Medicaid and the State
Children’s Health Insurance program (SCHIP). New Mexico, instead
of expanding Medicaid, will use unexpended SCHIP funds to
subsidize private medical insurance for low-income persons.
Employers could also contribute to the plans. With a combination
of government subsidies from existing government programs and
employer contributions, HHS estimates that eligible low-income
employees will be paying about $25 to $35 per month in insurance

The GAO, among others, has been critical of the Bush agenda
on this, noting that SCHIP money is only meant to be spent on
children, not adults. The Bush legal team has a different view.
The ideological hostility on the Left to private insurance plans
is palpable. Let’s see who is ready to offer that amendment to
strip the newly insured of their private coverage. Keep watch.

That Generous COBRA Option

Do not, under any circumstances, forget the bitter 2002
debate over the economic stimulus package, and Bush’s proposal of
refundable tax credit options for unemployed workers. Recall that
on February 14, the House of Representatives passed the Bush
package, with $13 billion in tax credits for unemployed
individuals and families that could be used for a private medical
plan of their choice. It was blocked in the Senate, the second
time that a stimulus package with a medical insurance provision
(enacted on December 20th) had been blocked in the Senate.

Recall that the Senate leadership had a different idea; they
proposed instead that any federal subsidies for private medical
insurance for the unemployed should be limited to COBRA coverage.
(Under the Consolidated Omnibus Reconciliation Act of 1986, a
former employee can buy into a former employer’s medical
insurance plan and pay 102% of the premium.) Under the Senate
option, those not eligible for COBRA, which includes the
employees of small businesses, would be enrolled in Medicaid and
learn to like it.

Curiously, it turns out, according to a recent Commonwealth
Fund study, only 23% of those workers eligible for COBRA would
continue that coverage
. The main reason: COBRA coverage,
mostly available in large employer plans, is just too expensive.
If these unemployed workers would get a 75% premium subsidy to
cover the cost, the Commonwealth survey said that 59% of eligible
workers would retain it. Among low-income workers, only 16% would
retain COBRA coverage, and 37% would take it if they got the
federal subsidies. The Commonwealth study also found that only
44% of those surveyed felt that they could get “high quality
health care” from employers.

Next Time Your Publicity-Seeking Congressman Is Loading
Seniors into a Bus for Canada.

Share with him the latest news from Paradise. The Fraser
Institute, a prominent Canadian think tank, has just released a
study that compares the performance of the Canadian system with
other countries. Among the key findings: Canada is the only
country in the industrialized world to outlaw private, parallel
medical coverage for all of its citizens. This, in itself, is
remarkable. For the ordinary Canadian, it’s government care or no
care, unless you travel South and escape over the Border to
American doctors and clinics. (This is similar in spirit to the
American Medicare policy that effectively restricts a specific
class of American citizens in the spending of their own money on
lawful medical services, unless their doctor opts out under the
Balanced Budget Act of 1997.)

Curiously, while Canada ranks first in spending among
OECD countries with government-run medicine, Canada ranks 17th in
the number of doctors per 1000 population; 17th in MRI machines
per million persons; and 16th in access to CT scanners
According to the Fraser Institute, only 37% of Canadian patients
reported a waiting time of less than one month for non-
emergency surgery, compared to 63% in the United States. Paradise
has its problems.

(The Fraser Institute study is available at

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

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