AAPS News October 2011 – We Can’t Fix the Titanic


Volume 67, no. 10 October 2011

Everywhere we hear that “our health care system is broken.” But there is deep denial of the fact that the social welfare state is just plain broke. For some politicians, the crisis—framed as a threat that Republicans will break Medicare—is just another power-grabbing opportunity. Sen. Patty Murray, Democrat co-chairman of the deficit reduction super committee, is said to be working to stop any effort to reform Medicare because “Mediscare” is the “biggest advantage we’ve had as Democrats for some time” (Tevi Troy, Commentary, September 2011).

The tenth anniversary of “9/11” was a time to reflect on Mark Steyn’s words about Ground Zero in After America: “9/11 was something America’s enemies did to us. The hole in the ground a decade later is something we did to ourselves.”

And the height of a World Trade Center tower was much less than that of a pile of $100 bills representing the unfunded federal liabilities of Medicare, Social Security, and military and civil servant pensions (usdebt.kleptocracy.us).

The Sinkable Ship
History’s two supposedly unsinkable ships, the Titanic and the Andrea Doria, both sank after colliding, respectively, with an iceberg and another ocean liner. The U.S. medical financing system and its monetary system, both fundamentally unsound, are on a collision course with the consequences of violating natural law.

Third-party payment and fiat money both permit and reward deception and thievery. These are key features of socialist redistribution of wealth under centralized government control.

Since the U.S. embraced the fundamental axiom of socialism during the regime of Franklin D. Roosevelt, federal spending grew from 3% of GDP in 1930 to a high of 44% when he died in office, and is now between 20% and 25%. When we had a gold standard, the total debt-to-GDP ratio was limited to about 150% for 200 years. Since Nixon closed the gold window in 1971, breaking a promise to our creditors and calling them “global speculators,” it has grown steadily and is now close to 400%. The acknowledged U.S. federal debt alone, more than $14 trillion, is approaching 100% of the U.S. GDP and 20% of the GDP of the entire world. The debt ceiling has been raised 79 times (McAlvaney Intelligence Advisor, September 2011).

We cannot plug the hole by “asking the rich” to pay “a little more” or “their fair share.” An upper bound to the fair share is not defined; apparently it is greater than the 50.1% of personal income tax receipts collected from the 3% of tax filers with an adjusted gross income (AGI) above $200,000. But even if we could seize an extra $200,000 from all 4 million people earning that much or more in a year we’d have only $800 billion, not enough to cover a single year’s deficit, the only part of the iceberg that politicians usually acknowledge.

One problem with this approach is that millionaires are going missing. The number of returns reporting an AGI greater than $200,000 decreased by 13% between 2007 and 2009 (WSJ 8/17/11).

With the constant draining of resources from the productive to the unproductive, it seems remarkable that the American economy has not yet collapsed. That’s because, McAlvaney writes, the New American Socialism allows private profits to entrepreneurs who work on behalf of the system. (None dare call it fascism.)

The Fixers
Those entrepreneurs are part of the coalitions of experts trying to re-engineer the system. Their initiatives, which included global budgets and prospective payment (DRGs), were based on Roemer’s Law, writes Greg Scandlen: Greedy doctors needlessly hospitalized innocent patients, and all could be set right through effective management of physicians by bureaucrats and business executives. Decades and tens of millions of dollars after the Robert Wood Johnson Foundation (RWJF) conference described by Scandlen, RWJF has announced still another “new” program, bragging about its 40 years of involvement in health systems reform (Business Wire 8/31/11). Its website, www.careaboutyourcare.org, has the familiar content: concerns about “gaps” (we need “Quality/Equality”), and calls for electronic records (we need public reports of “health care performance”), “value exchange,” and “transformative change.”

The fixers aim to go beyond the medical and public health models, to the “social determinants of health” model to enhance “population health,” which “may require a wide range of strategies, including redistribution of wealth” (Robert H. Brook, JAMA 6/28/10). “Comparative effectiveness” research needs to include “behavioral economics and change” and “comprehensive interagency, multisectoral” strategies (JAMA 8/25/10).

To get doctors integrated into the program, UnitedHealth Groups, a huge player along with RWJF on the Clinton Task Force on Health Care Reform, is simply buying doctor groups. Deals are carefully structured to comply with government rules (WSJ 9/1/11). And if ObamaCare ACOs (see p 2) seem too difficult for physicians and hospitals, UnitedHealth (“United for Reform”) is there with “value-based contracting strategies” to fill the gap (www.uhc.com).

At some point, doctors need to decide whether to head for a lifeboat, or keep their well-appointed state room while working on compliance with the deck-chair rearranging program. Maybe they will even jettison DRGs, CPT, ICD-10, ACOs, CER, and ACA.

ACOs: ObamaCare’s Magic Bullet

Accountable care organizations (ACOs) are the showpiece of the Affordable Care Act (ACA). Their Shared Savings Program is supposed to improve coordination and quality of care while reducing costs. Many see them as a form of organized care, like HMOs, but attorney John S. Hoff argues that they are “more like a vessel for Centers for Medicare and Medicaid Services (CMS) statisticians and health gurus to work their craft” (Heritage Backgrounder 2592, 8/11/11).

While they are supposed to be responsible for the care of a certain population, ACOs have no way to know which patients are in the population. Patients do not join an ACO, nor do they know whether they are in one. Beneficiaries are “attached to ACOs via non-voluntary retrospective bookkeeping entries.” There may be substantial changes in membership from year to year. CMS wants ACOs to treat all Medicare beneficiaries as if they were members.

CMS will be on the look-out for ACOs that attempt to “avoid” risky members, though the regulations do not define “avoidance.” Hoff writes: “Beneficiaries may be puzzled by visits from government investigators asking why they exercised their right to seek care outside the ACO to which they did not know they had been assigned.”

CMS must approve any communications that ACOs use to notify beneficiaries about the ACO or the Shared Savings Program—even telephone calls.

After the first two years, if ACO expenditures are greater than CMS projections, the ACO will have to refund payments—and must provide CMS with adequate assurance that it will be able to do so, such as a surety bond or escrowed funds.

ACO participants must take the equivalent of a loyalty oath to the program’s goals, including evidence-based medicine and a “quality assurance clinical integration program.”

Hoff predicts that the effort to impose this favored method of delivery will fail, but only after much angst and wasted resources of money and brainpower. “ACOs as defined by ObamaCare are fatally flawed and cannot be fixed.”

Michael Riesberg, M.D., also points out that 25% of any savings bonus can be withheld for 3 years, and will be forfeited if the ACO disbands or withdraws, or is found to be out of compliance with meaningful use or inaccurate in reporting the 65 criteria. The ACO must employ a compliance officer (who is not legal counsel) to submit proof of compliance, and an accuracy officer.

CMS estimates a start-up cost of $1.7 million.

Are 70,000 Codes Enough?

Doctors are spending thousands of dollars to comply with the new ICD-10 system, which increases the number of diagnostic codes from 14,000 to 70,000. CMS states that the new system will provide better data for quality measurement, designing health care delivery systems, and tracking public health risks. There are 312 animal codes (e.g. macaw, turtle, goose—but not cougar or Mexican grey wolf), and hundreds of locations where an injury might have occurred (e.g. prison kitchen, bathroom of mobile home, art gallery, chicken coop—but not cave, rodeo, circus, stadium, or shopping mall). Millions of transactions are happening, and this is “an opportunity to mess them all up,” said Jeremy Delinsky of athenahealth (WSJ 9/13/11).

The Electronic Panacea

Privacy Breaches. Since 2009, when breach notification requirements went into effect, nearly 8 million patients had their records exposed in more than 30,000 episodes (Modern Healthcare 9/7/11).

Not on the Menu. Dr. Adam Dorin warns that computer screen platforms could exclude drugs or treatments, or bury them ten clicks away, greatly restricting choice. (AmericasMedicalSociety.com 9/5/2011)

Duplication Increased. Although computerized provider order entry (CPOE) and clinical decision support (CDS) are supposed to reduce medication errors, duplication errors increased more than three-fold with CPOE (JAMIA 7/29/11).

Effectiveness. Electronic records can “help clinicians adhere to guideline-based care,” but there is little evidence that they improve outcomes or efficiency (JAMA 8/24-31/11).

Socialism Can’t Be Fixed

Wisdom from the late Leonard Read:

“Socialism depends on material achievements that socialism itself can never create…. Socialism takes and redistributes wealth, but it is utterly incapable of creating wealth.”

“[S]tatism is but socialized dishonesty; it is feathering the nests of some with feathers coercively plucked from others on a grand scale…. [T]he practice of dishonesty is evil…. Every evil act commits us to its retribution” (Market Update, mid-August 2011).

Equality-in-Quality in the ACA Era

The ACA pays too little attention to disparities in its focus on quality, write M.M. Davis and J.K. Walker. They cite an expansion of the Rawls theory of “justice as fairness” as “framework and justification for how to distribute societal resources, including the social determinants of health and health care.” For monitoring the success of disparity-reduction efforts, “accurate, timely monitoring is not optional” (JAMA 8/24-31/11).

The next article in the same issue of JAMA concerns health literacy’s importance for quality. More than half of the currently uninsured have “below basic” or “basic” literacy, and 90 million Americans are unable to understand and act on health information. There was no advice on how to redistribute literacy.

AAPS Calendar

Sep 28-Oct 1. 68th annual meeting, Atlanta, GA.
Oct 4-6, 2012. 69th annual meeting, San Diego, CA.

“A baited banker thus desponds,/From his own hand foresees his fall
They have his soul who have his bonds/’Tis like the writing on the wall.”

Jonathan Swift, “The Run Upon the Bankers” (1720)


Have you seen the documentary Sick and Sicker? We have bought AAPS members a copy of this important film. Learn more and claim your DVD at http://eepurl.com/eXd1g.

Court Dodges Constitutional Issue on ObamaCare

The Fourth Circuit Court of Appeals vacated the ruling by District Court Judge Henry Hudson that the ACA violates the U.S. Constitution. It did not reach the constitutionality issue, stating that Virginia did not have standing to sue.

The individual mandate “does not directly burden Virginia” or “threaten Virginia’s sovereign territory,” ruled the court. A state may not litigate on behalf of its citizens because such a suit “usurps this sovereign prerogative of the federal government and threatens the ‘general supremacy of federal law.’”

“The Fourth Circuit tied itself in knots to find a reason not to rule on the legal matter central to Virginia’s lawsuit: whether the federal government has unchecked power to command the populace or not,” writes Benjamin Domenech of Heartland Institute.

The Court also ruled that a case brought by Liberty University should be dismissed for lack of subject matter jurisdiction.

Criminal HIPAA Penalties

Virginia physician Richard Alan Kaye, D.O., could face up to 5 years imprisonment and a fine of up to $100,000 for unauthorized disclosure of protected health information (PHI). The physician cited a concern about a potential threat to others; there is no guidance for physicians about disclosures under such circumstances (MPCA 8/22/11).

There are very complicated rules pertaining to disclosure of a minor’s PHI to parents, particularly if related to reproductive or mental health. The issue is likely to come up when the child is covered under parents’ health insurance (ibid.).

CMS Auditing Recipients of EHR Incentives

More than 55,000 practices have signed up for incentives to install electronic health records (EHRs). Payments can be recouped if meaningful use criteria are not met. Audits are done by “bounty hunters,” and a noncompliance finding could open the practice to a much bigger audit. Documents supporting attestation and quality measures should be kept at least 6 years (ibid.).

Prosecutions Up 85%

Health care fraud prosecutions in 2011 are reportedly on track to be 85% higher than in the last fiscal year—and up 881% compared with 1991 (TRAC Reports). Note that the performance of “unnecessary medical procedures” can lead to a criminal case.

As part of the “massive anti-fraud effort,” about 750,000 Medicare physicians will be asked to revalidate their enrollment (see AAPS News, September 2011). Physicians must wait until their carrier sends them a request. Contractors must process 27,000 new enrollments and 30,000 changes per month, and the revalidation requirement will add thousands of forms to their workload each day. Backlogs could occur. Even if the contractor loses the application, enrollment will not be backdated, and Medicare will not pay for visits during the gap (amednews 8/29/11).

Our extremely efficient Medicare program, which allegedly pays $49 billion per year in fraudulent claims, will start using predictive algorithms, like credit card companies, but may stop because of burdens on legitimate providers (Health Care News 9/11, page 9).

Non-compete Clause Voided

A South Dakota court has found that a non-competition clause in an employment agreement violates the state’s prohibition against the corporate practice of medicine (Joann E. Ormand , M.D. v Sanford Clinic, Circuit Court of South Dakota, Second Judicial Circuit, Lincoln & Minnehaha Counties, CIV-08-3674).

The clause “results in the abrupt termination of an ongoing physician-patient relationship…. In this way [it] effectively supplants the physician’s judgment concerning the diagnosis and treatment of his or her patients.”

The “ruling gives more freedom to doctors,” read the headline on the front page of the Sioux Falls newspaper (Argus Leader 8/18/11). “People lose when a doctor’s ability to practice is restricted for no reason aside from the bottom line,” stated John Hughes, lawyer representing the plaintiff.

Dr. Ormand, a gastroenterologist, was terminated after she complained about quality of care and unnecessary tests.

The decision “strikes a major blow against…hospitals and clinics that seek to gain market share and control the practice of medicine at the expense of doing what is best for patients,” writes AAPS past president Lawrence Huntoon, M.D., Ph.D.

How to Opt Out of Prescription Data Mining

The AMA provides a method for physicians to partially opt out of prescription data mining used in pharmaceutical marketing campaigns: the Physician Data Restriction Program (PDRP).

The AMA does not collect, license, or sell prescribing data, but it does make a great deal of money licensing physician demographic data from its Physician Masterfile. Data miners such as health care information organizations (HIOs) combine AMA data with prescription data and sell it to pharmaceutical companies.

Go to www.ama-assn.org/go/prescribingdata to register to opt out. Pharmaceutical companies are required to check the opt-out list periodically and could lose access to AMA data if they do not honor the opt-out requests. The PDRP does not restrict use of prescribing data by managed-care organizations or pharmacy benefit managers; they have their own proprietary data.

Liability for Care Denial

Democrat congressional leaders Pelosi and Reid, and chairmen Baucus and Harkin filed an amicus brief in the U.S. Supreme Court in the Maxwell-Jolly cases, arguing that beneficiaries have a private right to sue states that cut Medicaid provider payments.

These same leaders enacted the ACA, in which §3403 denies both judicial and administrative review of decisions of the Independent Payment Advisory Board. The provision was added despite warnings from the Medicare actuary that cutting provider payments would likely cause severe access problems. That is “precisely the issue the Democrat leaders cited as providing justification for Medicaid beneficiaries to sue,” writes Christopher Jennings, Health Policy Analyst, Republican Policy Committee.
Courts now struggle with finding managed-care organizations liable when utilization review denies care, if it might involve an eligibility rather than a medical decision. If the U.S. adopts a single-payor system, patients injured by denial or delay of care may have no recourse, writes Benjamin Saunier (IL&M, summer 2011).


Why Have a Limit? Finally, a Democrat comes forth and tells the truth. It was on the front page of the Buffalo News. Rep. Louise Slaughter, whose “Slaughter Rule” helped to pass ObamaCare, says that instead of extending the debt limit, she’d just eliminate it. Why should we have to have a debt ceiling at all? “There isn’t any other country in the world that has to do this.”

In other words, why shouldn’t Congress be able to spend like drunken sailors with no limit? After all, Greece does it, like everybody else in the world.
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY

A Corollary to the Individual Mandate. If we have an individual mandate, we must have guaranteed access to catastrophic insurance. As I understand it, this means that after someone runs up X in costs in some time period, someone else must pay.

Two questions: 1. Will there be any lifetime cap on the amount that an individual can have other people promise to pay? 2. How much is X?
Linda Gorman, Ph.D., Independence Institute, Golden, CO

Family Doctors Attack Wrong Target. A wider gaps exists between Part A and Part B Medicare payments than between primary care and specialist compensation. Hospital facilities collect significantly higher fees for the same physician services and ancillary tests performed in an outpatient facility or private office—with no difference in risk or quality. Between physician specialties, there are differences in education, risks, liability insurance premiums, and so on. If the AMA were a good advocacy organization, it would attack the fact that highly paid passive middlemen are skimming off the system. Why do we attack each other while supporting a system that is out of whack?
Michael Riesberg, M.D., Pensacola, FL

About the Invisible Hand. As Adam Smith taught us 200 years ago, the self-interest of producers and sellers generally works to our benefit—except when they are facilitating access to discretionary benefits. Consider health insurance. Once we pay premiums, the money is in a pool with everybody else’s and is no longer ours. And the only way to get benefits is to spend the money on medical care. If we want to “bend the cost curve,” we must not let people draw from the common pool to pay for discretionary choices. Those should be paid from a health savings account. Almost all primary care and almost all diagnostic testing should be paid for from that account.
John Goodman, NCPA, Dallas, TX

Three Card Monte? A “bundled” payment implies a bundle of services, but since not every patient will need every service, it would seem to be cheaper to pay only for what is consumed—unless, of course, the bundle does not actually pay for a good portion of what the average patient needs. Then there would be a strong incentive to omit items from the bundle of services so that it will more closely match the bundle of payments.
Greg Scandlen, Hagerstown, MD

“Insurance” Is the Problem. Health insurance rates keep going up while doctors’ payments keep going down. Insurers (Pushers) get the money, then blame doctors. It distorts the market because the consumer (patient) is not paying directly for the service. The present system favors giantism—this results in doctors becoming employees or serfs, and the true physician is fated for extinction. Despite what the Pushers say, insurance doesn’t make one healthy, and coverage doesn’t guarantee access to good physicians.
Frank Polidora, M.D., Hazleton, PA

No More Service. Remember when gasoline pumps were called “service stations,” where personal service was expected, not extra?

In our increasingly “drive-through” culture, health “care” has morphed into what can only be called health “acts.” To call them “services” would suggest that patients were being treated as customers. The customer, the one paying the bill, is a third party.

The idea of performing major surgery on a patient one never expects to see again is completely foreign to me. But it seems to be a growing trend as physicians develop a shift-worker mentality.
Robert Sewell, M.D., Southlake, TX http://www.spiritofhealthcare.com

Why Doctors Quit. The reason doctors quit Medicare is not the payment, but the criminalization of medicine through the coding system. Organized medicine should stand for “Simplify, Deregulate, Decriminalize,” and support free markets without shame. Third-party payments should be illegal. Patients should be reimbursed. This would end cost fraud and abuse.
Jaime Durand, M.D., Arlington, TX

Tools of the State. Could American physicians, like Germans, become complicit in barbarism? Hitler invented the term “social correctness,” and his regime promoted the treatment of human beings as cogs in the system, subject to judgments about their value or usefulness. Physicians are social animals, and “consensus science,” which is a derivative of the herd instinct, is very strong in professional and academic life. We don’t like conflict and desire success and group approval—a compromising thing.
John Dale Dunn, M.D., J.D., Fort Hood, TX

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