AAPS News, September 1997


Volume 53, No. 9 September


In the budget reconciliation package, Congress at last made
it clear that Medicare is indeed a voluntary program, at least
for physicians and patients if not for workers. Moreover,
physicians do not need to exclude all Medicare-eligible patients
from their practice in order to avoid dealing with the Health
Care Financing Administration (HCFA). As the late Robert
Jaggard, M.D., past AAPS President, frequently declared:
“Freedom is available.”

However, freedom has a price. Sometimes, that price is the
ultimate sacrifice, as made by so many Americans throughout our
history. The price of freedom from Medicare harassment,
restrictions, threats, and penalties is not yet that high-and
many more physicians may be willing to pay it now that the Kyl
private-contracting amendment has passed.

The federal government has no constitutional authority to
interfere with the practice of medicine. Medicare regulations,
such as price controls and claims filing and coding requirements,
are lawful, in our view, only because physicians accept them in
order to collect Medicare payment. No one is legally obligated
to accept payments from the federal Treasury.

The federal government has stated unambiguously its
intention to enforce the regulations in every instance of medical
service reimbursed by Medicare, even if payment is made to the
patient, and whether or not the patient ever pays the doctor. In
other words, the “nonparticipating” physician actually is
considered to participate in some sense each time one of his
patients applies for a Medicare benefit.

But what if the patient decides, for whatever reason, to
forego Medicare payment for a particular episode of care? Does
the patient not have the right to contract privately with the
physician of his choice on mutually agreeable terms?

Since Judge Nicholas Politan handed down his opinion in 1992
in the case of Stewart v. Sullivan, stating that he
could find no clearly articulated policy to prevent patients from
doing just that, a number of physicians have entered such
contracts, although HCFA bureaucrats and Medicare carriers assert
that they are either “illegal” or “not recognized” by the
government. Since 1994, the risk has been higher because
Medicare Technical Amendments arguably extended Medicare
regulations to any Medicare-eligible person (rather than
just to services for which a claim was made under Part B).

Senator Jon Kyl (R-AZ), believing that this amendment did
not truly reflect the intention of Congress, has been fighting
for a legislative correction since 1995. His original short and
simple bill would have guaranteed the right to contract on a
case-by-case basis, and without price controls.

This concept has the support of a broad coalition, including
Seniors Coalition, 60 Plus Association, Americans for Tax Reform,
the Christian Coalition, Eagle Forum, the Family Research
Council, and the National Right to Life Committee, who recognize
that Medicare restrictions and price controls constitute de facto
rationing, inevitably causing premature deaths. At its 1997
annual meeting, the AMA passed the following resolution:
“Resolved, That the AMA aggressively encourage HCFA to affirm
the patient’s and physician’s constitutional right to privately
contract for medical services.”

Socialism inevitably tends to demand “universal coverage”
-to allow no one to escape from an increasingly oppressive
bureaucratic regime. Given the current Congressional leadership
and the adamant opposition of the Executive Branch, it proved
impossible to attach Senator Kyl’s original 26-line bill to the
budget Act. Lest self-reliant seniors benefit personally from a
lifetime of hard work and frugality, the price of freedom had to
be raised. Even so, some Senators tried to kill the provision
under the Byrd Rule (which is designed to prevent the addition of
irrelevant or pork-barreling provisions to budget bills).

Ultimately, the provision passed with some problematic last-
minute additions that were unknown to advocates until the enacted
version appeared in the Congressional Record. (When
influential politicians cannot stop a bill, they often win the
battle by forcing changes, at the last minute and behind closed
doors, that blunt or completely reverse its effect.)

Briefly, Section 4507 provides that physicians are not
from entering private contracts with Medicare
beneficiaries if:

  • No Medicare reimbursement of any kind (including capitation
    payments) is received for the service;
  • A written contract with a number of prescribed statements is
    signed by the beneficiary; and
  • The physician has filed an affidavit with the Secretary of
    HHS promising not to receive any reimbursement from Medicare for
    two years (a last-minute surprise).

    Balance billing restrictions specifically do not apply to
    services rendered under such contracts.

    Physicians may not ask patients to sign contracts when the
    patient is facing an urgent medical situation.

    The enforcement section provides that if a physician
    knowingly submits claims in violation of his promise, no claims
    shall be paid, and 4507 no longer applies to him.

    The law goes into effect on January 1, 1998.

    We are aware of no law that does specifically prohibit
    physicians, or Medicare beneficiaries, from entering private
    contracts on a service-by-service basis. The status of such
    activities remains unchanged: risky, especially if a patient or a
    potential heir decides to demand his entitlement after all.

    For physicians who already refuse to accept government
    money, this law is very good news. Others, who fear they cannot
    survive without Medicare payments, may start to count more
    carefully the costs and liabilities of Medicare slavery.


    A 55-year-old man, who has been on Medicare, Medicaid, and
    Social Security disability for many years, was recently seen in
    consultation by a neurologist, Lawrence Huntoon, M.D., Ph.D., of
    Jamestown, NY.

    Although the man had no neurologic problem, Dr. Huntoon was
    able to arrive at an accurate diagnosis. The problem is to
    determine the correct ICD-9 code. Dr. Huntoon has written to his
    personal bureaucrat, Mr. Preston Lowen:

    “Knowing of your bureaucracy’s demand for accurate coding,
    I want your advice on this case. I am confident that the fifth
    digit should be `1′ to signify that this is a continuous problem.
    But after perusing the ICD-9-CM book at length, I have no clue
    about the other four digits.

    “The accurate diagnosis is Government Dependency Illness.
    The government has determined that this gentleman is `disabled’
    because of chronic alcoholism and has sent him a check every
    month for years to pay for this addiction. These government
    checks have allowed him to purchase a pint of good quality
    whiskey every day or two.

    “After a long counseling session, this gentleman has agreed
    to give up alcohol, but is reluctant to enter an alcohol rehab
    program because of his other more powerful addiction. He is
    afraid that if he goes to a rehab program, the government won’t
    send him his monthly checks.

    “Knowing that HCFA guidelines require physicians to code to
    the highest degree of specificity, I have determined that this
    gentleman’s main problem is not dependency on alcohol
    (he is willing to give that up), but rather dependency on Big
    Government. I have determined that Big Government has made this
    patient sick, and has actually paid to make him sick.

    “Since I do not wish to run afoul of any of HCFA’s many
    guidelines, rules, regulations, secret screens, etc., I would
    appreciate it if you would get back to me at your earliest
    convenience with the code I should use for Government Dependency


    The Budget Reconciliation Act, H.R. 2015, in its 264 single-
    spaced pages (1.12 megabytes) concerning Medicare, Medicaid, and
    Children’s Health, has some unusual wording.

    In setting up a Prospective Payment (global budgeting, price
    controls, rationing) System, the act contains no fewer than six
    occurrences of the phrase “There shall be no administrative
    or judicial review
    ” of bureaucratically determined case-mix
    groups, per-diem rates, area wage adjustments, payment units,
    classification systems, etc., applying to rehabilitation
    facilities, skilled nursing facilities, home health services,
    “religious nonmedical health care institutional services,” or
    ambulance services.

    We are aware of only one precedent for the denial of
    any type of appeal for government wage and price
    controls in any industry: the establishment of the
    Medicare Resource-Based Relative Value Scale. A challenge to
    this prohibition was threatened when HCFA summarily eliminated
    payment to physicians for hyperbaric oxygen treatments; HCFA
    immediately backed down (see AAPS News, April and May

    Congress does not generally use its constitutional authority
    to curb judicial dictatorship by limiting jurisdiction of the
    federal courts. (For example, one activist judge can force
    thousands of school children to spend hours riding on buses.)

    Now, Congress is also attempting to prevent any
    checks and balances on economic dictatorship by an executive

    As Congress purports to “save” the Medicare program by
    increasingly stringent price controls, premature deaths and much
    preventable suffering will result.

    A gastroenterologist writes that proposed cuts in allowed
    fees for endoscopy would reduce to $30 his take-home pay for
    attending a bleeding patient for hours in the middle of the
    night. Few physicians would be willing to provide this

    The only explicit relief valve for patients contained in
    this Act is to consult a physician who has filed an affidavit
    with the Secretary of HHS promising to renounce all Medicare
    payments for his services for at least two years.

    Although AAPS was told by Congressional Republicans two
    years ago that Medical Savings Accounts would permit free-market
    billing, the Act contains no language to assure this even for the
    highly limited MSA experiment. Provisions on “private fee-for
    service plans” state that the law does not prohibit plans from
    paying “some or all of the balance billing amounts permitted
    consistent with section 1852(K).” In other words, the allowed
    payment may be higher, but price controls are still in effect.

    AAPS will consider the feasibility of a court challenge to
    various aspects of this Act.


    On August 13, Jacob Lapp may go to jail for contempt of
    court. The Lapps have been ordered to meet with IRS agent Douglas
    Stelmach. He refuses to meet with them in a public setting, and
    they refuse to meet with him privately.

    The IRS demands that the Lapps sign forms saying that they
    owe the government $27,470 for employee Social Security and
    Medicare taxes. The Lapps say they cannot possibly owe that much,
    as they never paid even a fraction of the wages assumed by the
    IRS. The Lapps refuse to complete government forms because they
    say it is impossible to do so accurately and honestly (see
    AAPS News, August 1997).

    New AAPS Web Site

    By the time this newsletter is delivered, the new AAPS
    website (http://www.aapsonline.org) should be ready. The
    Medicare-related portions of the budget reconciliation bill can
    be downloaded. Be sure to check out our interactive forums.


    Eventual escape from dependence on government and other
    third parties for payment of medical expenses requires personal
    savings. The biggest barrier to savings is the confiscatory tax
    rate. However, huge sums are now wasted in paying third parties
    to “manage” small medical expenses and ration care. AAPS
    members may be able to do better: if you have not yet called
    Maginnis-KVI for a price on medical insurance that is not
    cancelled at retirement
    , call (800)621-3008, ext. 284. For an
    information packet on Medical Savings Accounts, call SEPP at

    AAPS Calendar

    Sept. 17-20, 54th annual meeting, Chicago, IL.
    Oct. 8-10, 1998, 55th annual meeting, Raleigh, NC.

    Opting Out

    I don’t know of any way of opting out of the Social Security
    system if by that you mean to stop paying.

    But I have determined that I will opt out in the following
    way: The government has stolen my money from me, paycheck by
    paycheck….I will not absolve them of their crime. I will not
    condone their actions by saying, “Oh thank you for taking care
    of me in my old age”….I am not a slave. I am a free man,
    whatever my age or health. I choose to live that way, regardless
    of cost, and regardless of any hardship it may cause me. I
    cannot stop the federal government from stealing my money. They
    have the police, the courts, the laws, and a 2-million man
    military to enforce their power to do so. So be it. But what
    they do not have the power to do is to make me take it back. They
    do not rule any man or woman to that extent. They cannot make me
    apply for Social Security benefits, they cannot make me cash the
    checks, and they cannot make me spend the tainted money….

    I am planning for my retirement and my old age as if Social
    Security did not exist. (For me, it does not.) And if that should
    prove to be insufficient, then I trust in the goodness and mercy
    of My Lord to sustain me.

    –Carl D. Alexander
    [Grapevine Publications Network, July 1997, PO 45057, Boise, Idaho 83711.]

    Tape Recordings

    Prudent physicians may want to record telephone
    conversations with potentially hostile persons as a protection
    against later misrepresentations of what was said. (If a
    government agent is on the other end of the line, you should
    assume that he is recording the conversation.)

    Unless the caller and the called party are in the same state
    (in which case only the laws of that state apply), the interstate
    call implicates three bodies of law (federal law and the law of
    both states), each of which must be obeyed.

    The federal statute covering the interception and disclosure
    of wire communications is codified at 18 U.S.C. 2511(d). It is
    the blueprint for many of the state statutes. It requires
    one-party consent and states it is not unlawful “for a
    person not acting under color of state law to intercept a wire,
    oral, or electronic communication where such person is a party to
    the communication or where one of the parties to the
    communication has given prior consent to such interception unless
    such communication is intercepted for the purpose of committing
    any criminal or tortious act in violation of the Constitution or
    laws of the United States or of any state.”

    Some states require two-party consent. These are:
    California, Connecticut, Delaware, Florida, Maryland,
    Massachusetts, Nevada, New Hampshire, Pennsylvania, Vermont, and

    [A summary of state laws (which could constitute $15,000 worth of legal research) is available at
    the AAPS web site, http:www//aapsonline.org. For a hard copy, send a self-addressed 9-by-12
    envelope with $0.55 postage.]

    Prosecutorial Tactics

    After looking up the actual Medicare rules and definitions
    concerning the use of codes, the government realized that the
    only way to get the jury to believe I fraudulently used the wrong
    codes was to let disgruntled ex-employees testify to the wrong
    definitions. Then, in recent depositions, these same key
    government witnesses testified that they did not know
    how to use the codes. I now have about 200 pages of documentation
    of perjured testimony against me.

    If the government had a true and honest case against me,
    then why NOT produce the Medicare billing rules as they stood at
    the time that I used them? Why did they NOT call the Medicare
    billing expert that I relied on, after they subpoenaed his
    records? Why did the government NOT ALLOW my personal memos to my
    administrator, stating that I was relying on him to make sure
    that the entire office staff followed all Medicare rules, to be
    introduced as evidence?

    The defendant is supposed to be allowed the protection of
    the law when he follows the advice of others in good faith; but
    the government hid the true definitions and true good-faith
    advice of my consultants. The government told the jury constantly
    that I abused the BAT (brightness acuity test), using only the
    high setting, which, the prosecutor writes, “simulates the
    brightness that a lifeguard would experience on a bright sunny
    day on a white sand beach.” The BAT manual specifically states
    that the medium setting simulates an overcast day. I asked a
    camera store to check the light brightness outside with a light
    meter; it was much greater than the equivalent footcandles of
    light put out by the BAT on high, according to the BAT
    manual….Furthermore, all three witnesses testified that they
    checked patients on low, medium, and high settings, and none
    testified that they failed to give patients time to adjust to the

    I have enclosed the testimony from the government’s own
    witnesses during my trial and the government’s pleadings in the
    most recent civil case against me, in which they flatly ignore
    the testimony of their own witnesses.

    I hope this letter will help you understand my case better.

    Jeffrey Jay Rutgard, M.D., LaTuna FPC, NM

    What Is “Assaultative Behavior”?

    Edgardo Perez-DeLeon, a former office manager, was returned
    to the Ingham County Jail for violating his probation, imposed
    after conviction for Medicaid fraud (see AAPS News Aug
    1997). Mr. Perez claimed that the Attorney General wanted him
    jailed because of his frequent Freedom of Information Act
    requests and similar vexing behavior. The pretexts were failure
    to pay restitution (rebutted with cancelled checks); perjury
    about his financial situation (dismissed for lack of evidence);
    and finally, “assaultative behavior.”

    After a court hearing, Mr. Perez returned a borrowed law
    book to Assistant Attorney General Quasarano, who accused him of
    having stolen the book. Later, the AAG complained that Mr.
    Perez’s “assaultative behavior” in the hallway caused him to
    feel afraid of being struck. Mr. Perez argued that the charge was
    not credible. He was carrying a heavy briefcase and an exhibit
    panel and incapable of flailing his arms as alleged. The court
    officer who would have been the one to restrain him as alleged
    had no recollection of the incident, and no report had been
    filed. Nevertheless, Judge Carolyn Stell sent Mr. Perez back to
    jail, stating that no corroboration of the AAG’s testimony was

    Mr. Perez had informed Mr. Quasarano of an intention to take
    him to the Attorney Grievance Commission for lack of candor in
    the courtroom.

    Mr. Perez admits that informing the AAG that he was “making
    a big grave to bury his license to practice law” could be
    construed as a threat, but this was not the behavior at issue.

    Members’ Page

    Our National Symbol. When our forefathers chose the Bald
    Eagle to symbolize our great nation, they probably had no idea
    how appropriate that choice would become. As Benjamin Franklin
    pointed out at the time, the Bald Eagle is “a bird of bad moral
    character; he does not get his living honestly; you may have seen
    him perch’d on some dead Tree, near the River where, too lazy to
    fish for himself, he watches the Labour of the Fishing-Hawk; and
    when that diligent Bird has at length taken a Fish, and is
    bearing it to his nest for the support of his Mate and young
    ones, the Bald Eagle pursues him, and takes it from him. With
    all this injustice he is never in good Case; but, like all men
    who live by Sharping and Robbing, he is generally poor, and often
    very lousy. Besides, he is a rank coward; the little Kingbird,
    not bigger than a Sparrow, attacks him boldly and drives him out
    of the District. He is therefore by no means a proper emblem for
    the brave and honest Cincinnati of America.” How aptly
    Franklin’s description of the Bald Eagle portrays our present
    federal government.
    Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

    A Voice from the Past. AAPS President John Dwyer, M.D.,
    found this note on a prescription blank from Robert Jaggard,
    M.D., who died March 4, 1993:

    Friends: Government agencies and insurance companies do not
    bother me, because they do not pay me.

    I deal directly with the patient, and only with the

    The patient gets service from me, and I get payment from the
    patient. I am not bothered by insurance company and government
    agency problems, because I do not deal with those people. I let
    the patient take all that guff and do all that hassle. I just
    practice medicine.

    Freedom is available.
    Robert S. Jaggard, M.D.

    The Good Old Days. The worst that the malpractice laws
    could do was to inflict paper (including paper money) penalties
    on you for bodily injury; now you can suffer bodily injury
    (imprisonment) for paper-work injuries. This makes million
    dollar malpractice judgments look like the Good Old Days!
    Robert Cihak, M.D., Aberdeen, IA

    Seniors Demand Freedom. From letters to Congress:

    I urge you to support the Senate Amendment by Senator Jon
    Kyl, which permits Medicare-eligible patients to contract
    privately for medical services without filing claims
    with HCFA.

    Many seniors have difficulty getting care simply because
    doctors have thrown in the towel and limit how much they want to
    bother, not with the older patients but with the hassles of
    Medicare. It’s simply not worth it!

    The level of excellence achieved in American medicine is
    based on standards accomplished prior to the meddling, tinkering,
    dictatorial federal bureaucracy. What’s next? Deciding on
    uniforms for the office staff, hours that the office should be
    open, the language spoken by the medical staff?

    Please stop this idiocy. If Medicare won’t pay for my
    choice of care, fine! I want the choice; I will pay for the
    Kathleen A. Millett, El Paso, TX

    I am adamantly opposed to the government deciding
    how and where I may spend my money. As a
    senior citizen and a voter, I have the same rights as all other
    Americans to choose my medical care and my doctor-without the
    interference of government bureaucrats.
    Wallace J. Cochran, El Paso, TX

    Dreamers Will Prevail. Almost 15 years ago, I decided to
    leave my country Mexico to come to the USA, bastion of liberty,
    free markets, and the rule of law…, which had showed the world
    the meaning of liberty and prosperity, until 50 years ago the USA
    started, with the New Deal and the Great Society, down the route
    that Mexico had taken to the extremes.
    Now Mexico is struggling to become a free-enterprise
    country. It will become a nation of laws, not privileges, with
    low taxes and high returns….The dreamers are taking over in
    Mexico….He who cherishes a beautiful vision, a lofty ideal in
    his heart, will one day realize it.
    Ricardo Valenzuela, Intermex Corp., Tucson, AZ

    What If Physicians Sent This Letter to Their Medicare
    Please picture this: You are working on your
    income tax. It is a complicated return. And you know that
    every mistake, even an honest mistake, can cost you up to $25,000
    in fines and as much as a year in prison. Even if that
    mistake is only for $10.

    Does this sound frightening? Well, physicians all over the
    country are being subjected to this very scenario, with
    Medicare….The auditors have a favorite trick. They audit 50
    charts and declare that they have found a mistake in 10%. Then
    they extrapolate that percentage to all Medicare patients seen in
    the past two years. The end result can total millions of dollars
    in fines….The agencies get much of their funding from the fines
    they collect. Rather like a traffic cop getting paid on the
    basis of the tickets he writes….

    What does this mean? With such huge penalties possible, many
    physicians will be afraid to take care of Medicare patients,
    resulting in a shortage of medical services….
    Paul B. Jones, M.D., Grand Junction, CO

    The Health Policy of the Budget Deal.

    The big deed is done. Ignore the giddy rounds of back
    slapping and the gaseous self congratulation from the
    politicians. The current Washington crowd is giving old-fashioned
    hyperbole a bad name. The President calls it the “achievement of
    a generation.” House Minority Whip David Bonior says that it
    was the product of “tough choices.” Congressman John Kasich,
    the ebullient and photogenic Ohio Republican who chairs the House
    Budget Committee calls it “a dream come true.” Sure, if one is
    sleeping through reality. The reality is mixed. Dreams. And
    nightmares. And hot air.

    The reality is that there is, thankfully, some sound tax
    policy in the Budget Bill. Not enough, but some. However, serious
    workfare requirements for the welfare system were gutted. And the
    Congressional health policy performance is a confusion of free-
    market rhetoric and Clinton-style regulation.

    The KidCare Program.

    The reality is that the Clinton Administration and its
    liberal allies on Capitol Hill are still driving the broad
    outlines of health-care policy, quickly recovering from the
    disastrous defeat inflicted on the Administration with the
    collapse of its gargantuan health care plan in 1994.

    The most significant evidence of the Administration’s
    resurrection was the emergence of the temporarily shelved
    KidCare program. What started out as a $16 billion budget
    agreement ended up as a $24 billion program.

    States will run the KidCare insurance program. They will
    have three options: they could use Medicaid, state health
    insurance programs, or a direct services program. The states will
    be responsible for developing the benefits packages for children.
    But the Congress is limiting them to five benefit options: the
    Blue Cross/Blue Shield plan now used for the FEHBP (which, by the
    way, provides health benefits for a workforce that averages 43
    years of age, along with retirees who make up 40% of the entire
    pool); state HMOs; state employee health plans; a state plan
    approved by the Secretary of HHS; or an “actuarially
    equivalent” plan of their choosing.

    E.J. Dionne, a crack political columnist for The
    Washington Post
    (August 1, 1997 edition) spells it out
    nicely: “It is the largest expansion of health coverage since
    Medicaid and Medicare. The final deal-thanks to tough negotiating
    by Clinton and Senators Orrin Hatch (R-UT) and Ted Kennedy
    (D-MA)-requires states to use the new money to insure more kids,
    not toss it into the health pork barrel. If anything in this bill
    is historic, it’s the KidCare program.”

    Thanks also goes to politically ineffective Congressional
    Republicans who could not offer a superior policy guaranteeing
    families with children control over their own money through a
    genuine system of consumer choice and competition.

    Conservatives got little bits and pieces of things they
    wanted, but overall, this year’s budget deal was a victory for
    liberal Democratic health policy. In terms of the general
    regulatory trends, the Republican Congress thus continues the
    anti-free market pattern it set for itself in the Kennedy/
    Kassebaum bill.

    Miserable Medicare Performance

    By the numbers, the Medicare program will see a net savings
    of $115 billion over the next five years, and $385 billion over
    the next ten years. According to Congressional estimates, this
    agreement will keep the Medicare hospitalization trust fund
    solvent for the next ten years. So, by the numbers, this is a
    stop-gap measure. Only serious and comprehensive structural
    reform could possibly rescue Medicare, and the Budget agreement
    stops far short of that.

    The taxpayers, including low-income working families, will
    continue to subsidize 75% of the Medicare Part B premiums for
    seniors, even for those seniors who are are millionaires.
    Medicare’s standardized benefits package is expanded: annual
    mammography screening, diabetes self management, prostate and
    colorectal cancer screening-an addition of $4 billion worth of
    new preventive benefits. This is a new chapter in the
    principles of government: when entitlement programs are facing
    serious financial trouble, the Congressional response is to
    expand them.

    The Medicare payment methodology for managed-care programs
    has been changed. In many areas of the country, managed care has
    been more expensive than fee-for-service medicine. The reason:
    the stupid administrative pricing mechanism. What the conferees
    propose: a new method of administrative pricing. Under the new
    policy, managed-care plans will receive a “blended” payment of
    local and national costs with “certain price adjustments.” A
    minimum monthly payment floor of $367 will be indexed to the
    overall fee-for-service “cost growth.” Let’s watch.

    Some Positive Notes

    Expanded Choice of Plans. Any expansion of personal
    freedom in the fraud-ridden Medicare program is in principle a
    good thing. Unfortunately, the final product is burdened with
    artificial limitations and regulations that curb both consumer
    choice and competition. The agreement creates a limited choice of
    five options–mostly managed care- which permit seniors to return
    to the traditional Medicare program if they wish.

    The choices are: “Provider” Sponsored Organizations
    (PSOs), which are basically managed-care companies run by
    doctors, hospitals and other medical “providers”; “Preferred
    Provider” Organizations, which are basically HMOs with a broader
    choice of doctors and medical services outside of the thing
    called The Network; HMOs (Republican advocates hope that “the
    agreement will spur additional growth in health plan
    membership”-say from the current 12% to 23% by 2002); private
    fee-for-service options; and Medical Savings Accounts.

    Under the Budget agreement, seniors will be allowed to pay
    their own money to purchase a private indemnity plan which offers
    benefits in addition to those offered by the standard Medicare
    plan. Of course, the private plans will have to comply with the
    new set of HCFA regulations. Plus, like the Clinton “fee-for-
    service” option, this option will be “private” in name only,
    because doctors in these plans will be still be subject to price
    controls in the form of government limits on balance billing.

    Medical Savings Accounts. The House bill originally
    proposed to allow 500,000 medical savings accounts. The Senate
    bill restricted the number of persons who could go into MSAs to
    100,000. The compromise: 390,000. In other words, approximately
    1% of the Medicare population will be able to take advantage of
    it. Under this option, HHS will make tax-free annual
    contributions into a Medicare MSA that is personally owned and
    may be used to pay for “qualified medical expenses”-whatever
    that means. As is standard with MSA options, the tax-free
    account will be coupled with high-deductible catastrophic health
    insurance policy. The MSA option is being billed as a “pilot
    project.” Because HHS-a huge fountain of government
    regulation-will be making the deposits, it remains to be seen how
    much personal freedom patients will actually have to pay
    physicians from these accounts for the specific medical services
    they want or need. Needless to say, taxpayers have reason to be
    skeptical, especially after the poor performance of Congress last
    year in loading down the limited number of MSAs with bureaucratic
    conditions in the Kennedy/Kassebaum bill.

    A Full Page of Sour Notes

    Private Contracting. In House/Senate negotiations, the
    Clinton Administration and its allies in Congress won big time.
    Senator Jon Kyl offered-and the Senate backed-an amendment
    designed to stop HCFA’s interference with the right of consenting
    adults over the age of 65 to enter into private contracts with
    their physicians without losing their Medicare Part B benefits
    or incurring arrogant threats from HCFA bureaucrats. The
    amendment would have enabled doctors and patients to contract
    privately and not submit their claims to HCFA. Nothing is more
    absurd or more restrictive of personal freedom than the
    government telling patients that they cannot spend their own
    money and interact freely with the physician of their choice,
    simply because they are over age 65.

    The House conferees gutted the Senate amendment and this is
    what emerged out of the House-Senate Conference: a doctor can
    privately contract under this provision if [and only if?] he
    agrees that no Medicare reimbursements will be made for his
    services for two years. This is apparently intended to destroy
    private contracting in the Medicare program.

    Imposing Government Standardized Health Benefits. Under
    the Clinton Plan of 1994 and the frequent variations of the
    Clinton Plan redrafted for application to Medicare, a key
    ingredient has been the government standardization of benefit
    packages for private insurance plans. The idea is to force all
    patients to have the same benefits, procedures, or treatments,
    regardless of their personal needs or wishes. Under the
    Republican “reform” provisions, all “private” plans must
    offer the current set of Medicare benefits, which is based on
    political, as well as medical, decisions over the past three
    decades. It is hard to imagine how a private market in any other
    sector of the economy would work if the government mandated that
    a set of goods and services established over 30 years must-as a
    matter of law-be offered with any new set of goods and services,
    regardless of consumer demand. Of course, the idea is absurd and
    a prescription for automatic cost increases.

    Killing Medicare Means Testing. In the House/Senate
    negotiations over Medicare policy, conservative Senate
    initiatives lost. The proposal to raise the Medicare premiums for
    wealthy couples making more than $75,000 per year was dropped, a
    second setback for means testing Part B benefits after the Senate
    retreated from the even more reasonable policy of raising the
    deductible for this same class of beneficiaries. The first Senate
    retreat did not appease the senior citizens lobbies that scare
    House Republicans-who seem to have a terminal case of
    jitters-with the same force that Halloween goblins terrify
    toddlers. The result: the Budget Agreement ratifies the social
    policy that lower-income working people, who can hardly make ends
    meet or pay their own bills, will continue to subsidize upper-
    income retirees. That’s why God made taxpayers, right?

    Killing a Medicare Home Health Care Deductible. The Budget
    negotiators agreed to transfer Medicare Part A to Medicare Part B
    to make the Part A Trust Fund look better-a Clinton
    Administration move that Senator Phil Gramm of Texas and other
    Republicans denounced as a shell game. The Senate also proposed a
    modest $5 deductible for the high cost, fraud-ridden Medicare
    home health program. Senator Ted Kennedy and the seniors lobbies
    opposed it. House Republicans followed suit. A modest deductible
    for the fastest growing component of the Medicare program?
    Forget about it. The taxpayers will pick up the extra tab.

    Killing an Age Adjustment. The Senate proposed raising the
    Medicare age of eligibility from 65 to 67, very gradually over a
    30-year period, matching Social Security eligibility. Instead,
    Congress decided to pretend that the demographic and health
    status profiles for 1935 and 1965 are applicable to the 21st

    Killing the FEHBP Demonstration Project. This program
    would have allowed seniors in 13 areas of the country to try out
    the same range of plans that are now available to Members of
    Congress and Congressional staff. Once again, key Republican
    staff and allies in HCFA managed to destroy the program in

    Building on the Kassebaum/Kennedy Fines, Penalties and Jail
    . Under the budget bill, the Secretary of HHS can throw
    any “provider” out of Medicare or Medicaid on conviction for
    any felony. Any “provider” found guilty of defrauding “any
    federal health care program” can be banished from the program
    for ten years, and three offenses trigger a lifetime banishment
    plus civil and criminal penalties.

    In related provisions, the budget bill toughens the
    penalties on the anti-kickback law; requires certain
    “providers” of certain facilities, like the home health care
    agencies, to post a $50,000 surety bond to show that they are
    legitimate businesses; and requires the government to give
    physicians binding advisory opinions to help them make “legally
    permissible” referrals of patients to facilities in which they
    may have an “ownership” interest.

    Medicare is undoubtedly plagued with fraud, and in some
    areas, the program is downright rotten. The $20 billion Medicare
    home health care program is a disaster. Federal authorities
    estimate that as much as 40% of these expenditures alone are lost
    to fraud and waste. Nevertheless, the Clinton Administration and
    the Congress do little but think up more ways to expand the
    police powers of the government, refusing to accept the fact that
    the very structure of the current Medicare system invites and
    rewards fraud.

    So why not change the structure? That would be too

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