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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 51, No. 8 August 1995
IS FREEDOM AN OPTION?
On July 31, 1995, more than 200 physicians have pledged to
challenge the Medicare regime, which attempts to impose its rule
on every person who has a statutory entitlement to Medicare
On Medicare Patient Freedom Day, these physicians will
refuse to file HCFA forms or to accept Medicare money. This much
is unquestionably acceptable to the federal government, whose
officials have repeatedly said, ``You don't have to treat these
But many physicians will continue to serve their Medicare-
eligible patients on a private-contract basis. For purposes of
this event, physicians will set the 30th Anniversary Memorial fee
of $1, simply to establish the existence of a patient-physician
contract. The patient is, like all customers, free to accept or
reject the offer of service at this price. (Our attorney
suggested a price of $1 or the Medicare-established copayment,
whichever is lower. And those who fear an antitrust complaint
from colleagues might want to treat established patients only.)
Many physicians and their consultants believe that it is
illegal to care for a Medicare-eligible patient without filing a
claim and saying ``Mother, may I?'' Their belief is based on
statements in the Medicare carrier manual and numerous
intimidating communications from carriers. Their fears are not
groundless. We know of at least three physicians who have been
scrutinized by HCFA for providing charitable services, although
as far as we know, no one has been punished for providing
nonreimbursed services (even if privately paid).
All physicians who accept government money are subject to
audit. At best, an audit is a frightening and disruptive
experience. At worst, it can result in demands of payment of
huge sums of money or even criminal prosecution (see p. 3). We
doubt that there is a single physician who would be found
blameless in the eyes of a determined auditor armed with myriad
For some AAPS physicians, every day is Medicare Patient
Freedom Day (see p. 2), except that their nonreimbursed fee is
probably not $1.
AAPS believes that the activities of Medicare Patient
Freedom Day are perfectly lawful. First, the Law of the Land (the
U.S. Constitution) states: ``The enumeration in the Constitution
of certain rights shall not be construed to deny or disparage
others retained by the people'' (Ninth Amendment) and ``The
powers not delegated to the United States by the Constitution,
nor prohibited by it to the States, are preserved to the States
respectively, or to the people'' (Tenth Amendment). The
Constitution does not enumerate or deny the right of any citizen
to purchase private medical care, nor does it delegate power to
regulate private medical treatment.
Furthermore, the Medicare statute signed into law by
President Johnson in 1965 states:
§ 1801. Nothing in this title shall be
construed to authorize any Federal officer or employee to
exercise any supervision or control over the practice of medicine
or the manner in which Medical services are provided, or over the
selection, tenure, or compensation of any officer or employee of
any institution, agency, or person providing health services; or
to exercise any supervision or control over the administration or
operation of any such institution, agency, or person.
§ 1803. Nothing contained in this title
shall be construed to preclude any State from
providing, or any individual from purchasing or
otherwise securing, protection against the cost of any
Although the courts approved federal government regulation
of medical services funded by the federal Treasury, in the case
of AAPS v. Weinberger in 1975, the imposition of
Medicare regulations on services not reimbursed by
Medicare has never been adjudicated.
In a June 14 certified letter to Bruce Vladeck, AAPS counsel
informed HCFA of the Anniversary event. Physicians will state
their position that private contracting is essential to
the protection of patients' rights. The Secretary of HHS is
invited to state her position and to advise AAPS ``in
the unlikely event that your administration wishes to pursue
enforcement actions against these physicians.'' No response has
been received as of July 9.
At this time, Congress is considering many ``options.'' Most
of these involve a ``choice'' of managers, with heavy involvement
by government and government-favored corporations. The would-be
managers and decisions-makers are even insinuating themselves
into a role in Medical Savings Accounts. As Plans proliferate,
patients' personal plans and personal needs are in danger of
Various forces, especially managed care, threaten to wash
away patients' and physicians' independence. In a free economy,
we believe these waters will recede. But to survive the flood,
we must establish a bulwark of freedom: the undisputed legal
right of patients and physicians to contract with each other
outside any third-party system.
AAPS will petition Congress to pass legislation guaranteeing
the right to private contract. Media events are planned to
inform the public of the need to assert our freedom.
It is not too late for you and your own patients to
participate. For a copy of the Pledge and physician information
sheet, by FAX on demand, call 703-716-3404 and follow the
If you love wealth greater than liberty, the tranquility
of servitude greater than the animating contest of freedom, go
home and leave us in peace. We seek not your council, nor your
arms. Crouch down and lick the hand that feeds you; and may
posterity forget that you were our countrymen.Sam Adams
How I Contract with Medicare Patients
I recently became aware of a colleague's disapproval of my
private contracting arrangements with Medicare patients. While I
feel no need for his sanction (he does not need to concern
himself with my opinion of his billing methods), I will try to
explain my method more completely.
I have considered private contracting with Medicare patients
since Dr. Lois Copeland, President of AAPS, was featured in the
summer 1993 issue of Policy Review. I have recently met
several physicians who have never filed a Medicare claim, having
contracted privately with patients since the inception of
Medicare. In its pure form, the patient must agree to pay a
certain price for the physician's service. The physician is free
to set the price at $0 if the patient is destitute or may charge
his regular fee. If a patient wishes to use his Medicare
benefits, the physician refers him to someone who will work with
the patient on this basis. In anesthesia practice, this last
step could mean extreme inconvenience for patients and surgeons,
so I have developed a hybrid form.
I prefer to think of my fee as an honorarium. In Roman
times, attorneys were paid by honorarium, depending upon the
clients' ability to pay and their satisfaction with the service.
This method gives me great flexibility and tremendous incentive.
I have been truly amazed by the number of patients who have paid
me, by the absence of complaints (with one exception, from a very
wealthy patient), and most importantly by the change in my own
attitude. There is not an anesthesiologist I know who does not
look at his schedule and say to himself (and occasionally to
others), ``Another damn Medicare patient.'' Those days are gone
for me. I can now look patients in the eye and say, ``I'll send
you a letter explaining why I can no longer deal with your
insurance. Pay me what I suggest, part of it or none of it.'' I
also tell these patients I would rather give their anesthetic for
free than deal with Medicare....
The only hope I have of being paid is to control the one
variable under my control: Provide absolutely the best
anesthetic care that I can, as the agent of the patient in a
completely uncontaminated way. All of these patients understand
my frustration with Medicare. The patients have been victimized
by their insurance even more than we have.
I have lost money since deciding to contract rather than
file claims. Many patients exercise the ``pay nothing'' option,
and others are not mentally or emotionally capable of
understanding the concept. I find it more gratifying to provide
my service free of charge than to submit an assigned Medicare
claim, knowing that 75 percent of the Medicare money I would
receive has been wrenched from the taxpayer at the point of a
gun. The decision to contract was not made in the interest of
lining my pockets, extorting money from patients, or avoiding tax
liability. I was simply no longer content with thinking of
patients as yet another ``damn Medicare patient.'' It is not
their fault that they are insured by a rationed, socialized
scheme. Jettisoning Medicare is the most liberating act of my
practice to date. I only regret that I did not do this sooner.
G. Keith Smith, M.D., Edmond, OK
AAPS Member Helps to Defeat License Surcharge
Tucked away in Wisconsin Governor Tommy Thompson's 1995
budget were an array of new fees and hidden taxes, including a
$300 surcharge on medical licenses. As part of an attempt to
provide property tax relief, the money would have gone into the
state's general fund.
The Governor tried to sell the idea to physicians by
promising an increase in Medical Assistance payments if they
would accept the surcharge. The Wisconsin State Medical Society
lobbied against the surcharge. The Wisconsin Academy of Family
Physicians assumed a passive role in the battle, stating that the
surcharge was a ``done deal'' and that the Academy should
concentrate on preserving the funding of family practice
residencies. The Chairman of the Academy's Legislative Affairs
Committee warned against becoming vocal on a ``pocketbook'' issue
and said that there could be retribution from the Governor if
physicians did not cooperate.
Albert L. Fisher, M.D., obtained from AAPS copies of a
report detailing HCFA's effort to recoup $450 million in Medicaid
overpayments from nine states that had violated the rules
concerning provider taxes. He distributed the reports to members
of the Joint Finance Committee. In the days before the vote, a
change in momentum was detected by organized medicine's
lobbyists. To everyone's surprise, what had been considered a
``done deal'' was eliminated from the budget by the Joint Finance
``This proves that harebrained legislation can be
derailed,'' stated Dr. Fisher.
Nominating Committee Report
The Nominating Committee, chaired by Donald Quinlan, M.D.,
proposes the following slate of officers to be elected at the
annual meeting, October 12-14:
President: Dr. Don Printz of Lilburn, GA
President-Elect: Dr. John Dwyer of Chicago, IL
Secretary: Dr. W. Daniel Jordan of Atlanta, GA
Treasurer: Dr. R. Lowell Campbell of Corsicana, TX
Immediate Past President: Dr. Lois Copeland of NJ
Directors: Drs. Claud Boyd, Jr., of GA, Curtis Caine of MS,
Charles McDowell, Jr., of GA, and Michael Schlitt of WA.
To be considered at the 52nd annual meeting, October 12-14,
Resolutions must be received by September 12. Send to
Resolutions Committee Chairman Don Printz, 354 Arcado Rd Suite 4,
Lilburn, GA 30084.
Sept. 16. Health Care Reform and You: the Rest of the Story
New Brunswick, NJ, Hyatt Regency Hotel, cosponsored by the
Freedom in Medicine Foundation and Affordable Health,
featuring Drs. John and Alieta Eck, Louis Keeler (MSNJ
President), Robert Moffit of Heritage, Lois Copeland,
Merrill Matthews of NCPA, John Lanzalotti, and Nino Camar-
dese. Mark Hiepler, Esq., will discuss the $89 million
verdict against HealthNet, and Mayor Bret Schundler of
Jersey City will discuss the MSA program he instituted for
city employees. For information, call Affordable Health,
Oct 12-14. 52nd annual meeting, Falls Church, VA.
Oct 21-25. American Society of Anesthesiologists meeting in
Atlanta. AAPS will have a display (F-40), and AAPS members
(Drs. Nahrwold, Schlitt, and Orient) will present a panel on
Alternatives to Managed Care.
Oct 10-12, 1996. 53rd annual meeting, La Jolla, CA.
Michigan Appeals Court Rules that Criminal Intent Necessary
for Health Care Fraud
On April 21, 1995, the Court of Appeals for the State of
Michigan upheld the felony conviction of Victor Premen, D.D.S.
(No. 152049, LC No. 91-003744). The defendant had billed Blue
Cross/Blue Shield of Michigan for applying amalgams to the teeth
of children when in actuality he had applied sealants, which were
not a covered benefit.
One dental assistant testified that Dr. Premen looked over
the claims before signing them, and another testified that she
was instructed to use the code for amalgams when sealants were
applied. On this basis, the jury determined that Dr. Premen had
``knowingly'' committed fraud, although he contended that there
had simply been a clerical error.
The Court found the Health Care False Claims Act [MCL
752.1003(3); MSA 28.547(103)(3)] to be constitutional. Dr.
Premen had argued that it was unconstitutionally vague because it
failed to provide fair notice of proscribed conduct and conferred
unlimited discretion on the trier of fact.
Importantly, the Court held that health care fraud under the
statute is a specific intent crime. In other words, the
defendant must know that his behavior is a crime. A
footnote to the opinion reads: ``The magistrate's erroneous
conclusion that health care fraud is not a specific intent
crime is rendered harmless by the sufficiency of the
evidence of intent presented at the preliminary examination''
Conviction for a general intent crime simply requires
proving that the defendant submitted a claim intended to result
in payment and that he ``should have known'' the claim to be in
violation of the rules.
Highlighting the importance of this distinction, the
Attorney General of Michigan took the unusual step of petitioning
for rehearing, even though the decision was a victory for the
This erroneous interpretation [that fraud is a
specific intent crime] will thus negatively impact the
efforts of the Department of Attorney General to carry
out its function as a Medicaid Fraud Control Unit to
investigate and prosecute instances of fraud under the
Medicaid False Claims Act.
The interpretation has a critical bearing on the appeal of
former office manager Edgardo P‚rez-DeLeon, who spent one year in
the Ingham County Jail (see AAPS News July & Oct 1994, and
Feb and May 1995) for Medicaid fraud. The jury received
instructions pertaining to a general intent crime.
In contrast to the Premen case, prosecutors of Mr. P‚rez-
DeLeon presented no proof of misrepresentation of material fact
or of any intent to defraud anyone. According to an appeals
brief prepared by Andrew Schlafly (with the support of the
American Health Legal Foundation): `` [D]efendant P‚rez-DeLeon
meticulously and accurately represented the exact nature of the
services performed, all of which were essential to the well-being
of his patients.''
Furthermore, ``no matter how great the problem of health
care fraud may be-the prosecutor frequently alluded to a
perceived crisis-the holding in Premen prevents
attacking such problem by transforming mere billing
disputes...into felony crimes.'' This means that ``the statutory
and constitutional rights of defendants cannot be trampled upon
in the name of public policy.''
Schlafly cites the case of Cheek v. United States
(498 U.S. 192 (1991), in which a felony conviction for tax fraud
was overturned due to lack of specific intent, even though the
defendant's offense was egregious and his misinterpretation of
the tax code was not objectively reasonable:
The Cheek holding applies with particular
force to the case at bar. Here defendant P‚rez-DeLeon,
a Spanish-speaking office manger dedicated to serving a
Spanish-speaking community, was faced with the task of
interpreting complex and confusing health care
regulations....[H]e was convicted despite an absence of
proof of specific intent. Defendant P‚rez-DeLeon's
purported misinterpretations were certainly more
reasonable than those made by the defendant in
Cheek; defendant P‚rez-DeLeon's conviction
must be overturned as well.
Fraud Hotline Announced
At a July 7 public meeting about the Medicare crisis, Sen.
John McCain (R-AZ) announced that a new hotline (800-368-5779)
has been opened by the HHS Inspector General for reporting
Medicare fraud. Seniors were urged to examine their Medicare
billings and report possible overcharges. Sen. McCain proposes
to return a portion of the take to the informant.
HCFA Responds on Medicare Exclusion
``I actually got a response to my letter,'' reports Lawrence
Huntoon, M.D., of Jamestown, NY (see letter to ``Dear Comrade
Vladeck,'' AAPS News July 1995). Thomas Ault, Director of
the Bureau of Policy Development, writes:
``Dear Dr. Huntoon:
``Administrator Vladeck asked that I thank you for your
letter regarding the Medicare program. Please excuse the delay
in my reply.
``I can surely understand your concern about physician
participation in the Medicare program. In this regard, we are
making increasing use of staff members in our regional offices
who are often in the best position to be of assistance to the
people in their area. Therefore, your inquiry has been referred
to the officials in our New York Regional Office for further
action. Thank you for bringing this matter to our attention.''
Bring Harry and Louise to Your Radio Station
Harry: Hi, Honey, what's the matter?
Louise: Well, I've been looking for a job with good health
care, and it just doesn't exist. Why is health care tied to our
Harry: You know we wouldn't have to worry about it if we
could write it off like our bosses.
Louise: What would that take, an act of Congress?
Harry: I don't know, but I'm going to call my Congressman
and find out.
Louise: Good idea.
Announcer: This has been an announcement from...(your name
This skit puts forth the crucial but seldom mentioned fact
that medical insurance is linked to employment because of federal
tax policy. Cassette or reel-to-reel tape is available for $10
from Bert A. Loftman, M.D., 105 Collier Rd, Suite 5030, Atlanta,
GA 30309. Ask your radio station to run it as a PSA.
Administrative Simplification. When we submitted our
claims on paper, we were told that the Medicare carrier couldn't
help making all those mistakes because they were simply human.
So in 1990, when the carrier offered ``free software'' to bypass
their ``simple humans,'' like bumpkins falling off a hayrack we
said ``sure, we'll try it.'' This was very expensive. The
initial versions provided no way to correct typographical errors
without redoing all of the claims in a 50-claim batch. Last
year, like good ducks flying in government formation, we
``migrated'' to the National Standard Format. The only thing
faster about this format is that the Medicare carrier is able to
delete our claims faster. Numerous times, our carrier has
deleted all of our claims (as in erased, all
gone) or portions of our claims (as in ``we can't process
your claims because of incomplete information'' -information the
Blue Bunglers erased).
When I complained to my Congressman, a secretary of the
Deputy to the Deputy Assistant Secretary for Health Policy in HHS
called to say that I might have violated the Privacy Act by so
doing. She also asked: given all these problems we have with
Medicare, why do I continue to see Medicare patients at all? I
take that to mean that HHS fully recognizes the adverse and
bungling nature of the bureaucracy, and that their official
position is to suggest that physicians stop treating Medicare
patients as a way to avoid constant hassles.
Lawrence R. Huntoon, M.D., Jamestown, NY
Administrative Complication. As I do ``high
complexity'' testing in my office lab, CLIA regulations demand
that I prepare 27 policy and procedure manuals, maintenance and
quality control logs. Maintaining these manuals and logs
consumes more than 30 percent of my technicians' time, serving no
purpose other than satisfying government inspectors. Just to
perform simple urinalyses and cultures in his office, a urologist
must jump through innumerable hoops. When it was unreasonable to
do quality control on a particular test, one physician simply
created a fictitious log. CLIA forces honest and productive
citizens to cheat or evade in order to survive.
When underworld thugs force businessmen to pay protection
money so they can continue in business, it is called extortion.
Is the CLIA fee to continue doing what we have done for years any
different? The costs to my small family practice amounts to
about $9000 per year in inspection fees, proficiency testing,
extra reagents, equipment, and labor to comply with regulations.
It is no mystery why at least ten family physicians in our small
community have ceased to provide laboratory services.
CLIA inspectors willfully violate our Fourth and Fifth
Amendment rights....This bad law should be repealed.
Richard D. Fisher, M.D., Sun City, AZ
After the CLIA inspectors invaded and spent 3 hours in my
office, I had bills in the thousands of dollars to make
modifications. Equipment I had never needed in 35 years of
practice suddenly became mandatory if I were to continue to
provide lab testing. Patients used to be able to find out their
potassium 30 minutes after a fingerstick; now it takes a
venipuncture and at least 24 hours. Not the least to mention is
the embarrassment caused me by the inspectors' ill manners. The
experience was reminiscent of an IRS audit.
C. J. Kienzle, M.D., Scottsdale, AZ
In 1950, Dr. Harvey Blank traveled to France and brought
back the Tzanck smear, a quick and inexpensive method of
diagnosing certain herpetic skin infections. Dr. Blank, Chairman
of Dermatology at the University of Miami, taught me to do the
test and had me teach laboratory technicians. Now I can no
longer do the test without special certification from CLIA,
costing more than $900. In an average year, my total income from
the test (not deducting overhead) might be $200.
It does seem odd that those who originally introduced the
procedure must now be certified by those who learned from them,
and at their own expense.
Philip M. Catalano, M.D., Bradenton, FL
To Members of the Health Care Task Force: I am
responding to an article by Dr. Jeffrey Morris (``What They
Didn't Tell You About Health Care Reform'') in Review of
Ophthalmology, May, 1995. It is clear that the ``Task
Force'' was a blatantly illegal attempt to seize control of a
sixth of the U.S. economy. Most of the advisors had special
interest agendas....Especially ominous is the role of the Robert
Wood Johnson Foundation in this and reform efforts in many
states. Kentuckians are already victims of this. I wonder how
Dr. Morris feels about being an advisor to ``an anonymous and
amorphous horde,'' as the Task Force was called by the Justice
Department in trying to explain why the Federal Advisory
Committee Act was ignored.
Gerald E. Sullivan, M.D., Bowling Green, KY
Equal Protection of the Laws. If I waive the Medicare
deductible and copayment, that's considered fraud. However, the
Medicare HMOs advertise that their patients do not have to pay
the deductibles. They are a substitute for Medicare and
Medicare supplements. Can I be a substitute?
Bruce Schlafly, M.D., St. Louis, MO
Legislative AlertMedicare and the Battle of the
House and Senate conferees have agreed to the first
balanced budget in 25 years. The Fiscal Year 1996 Concurrent
Resolution will balance the budget in seven years by reducing the
rate of the growth in federal spending to 3 percent annually.
This means spending would increase from $1.5 trillion in 1995 to
$1.875 trillion in 2002. The Department of Commerce is to be
eliminated. The Budget Resolution outlines the spending
decisions of the Congress, and it cannot be vetoed by the
While the major focus of the Budget effort has been to
reduce spending or the growth in spending, the House and Senate
Conferees have also agreed to tax law changes. But tax reductions
will only occur after the authorizing committees of the Congress,
the panels with specific jurisdiction over certain program areas,
have reached their reduced spending targets.
Under the Concurrent Resolution on the Budget, Medicare will
grow from $178 billion in 1995 to $274 billion in 2002. In
percentage terms, this means that Medicare spending will grow at
an annual rate of 6.4 percent, rather than the current 11
percent, delaying bankruptcy of the Medicare Trust Fund from 2002
to 2005. Once the fund is depleted, there is no authority to pay
hospitalization costs for the elderly.
The Trustees report that an additional payroll tax of 3.9
percent (an additional $1,760 from a worker earning $45,000 per
year) would be required to pay Medicare Part A expenses if the
Trust Fund goes in the red.
Outside of the federal government, no serious economist
thinks that Medicare's spending rates are sustainable. Many
Members of Congress are desperately searching for a way to
restructure Medicare in a fundamental way, to redirect the
incentives that are currently driving it into bankruptcy.
In an attempt to slow annual growth rates in Medicaid from
10.5 percent per year to 4 percent by 2002, the House-Senate
conference agreement would make block grants to the states.
In his State of the Union message, Bill Clinton told
Congress and the American people that while he favored spending
restraints, he would ``protect'' Medicare and other entitlement
programs from any budgetary changes, and thus initially submitted
a federal budget proposal in February that provided for
substantial deficits for as far as the eye could see. After
hesitations and reversals, he finally submitted a proposal for
balancing the budget in ten years instead of seven.
Clinton's proposed cut in the Medicare growth rate is
actually a percentage point deeper than that of Congress, but it
is being called only half as deep. The Administration started
from a different baseline.
The Clinton proposal only angered liberals in Congress, who
had planned to repeat on Medicare the effective ``School Lunch''
strategy (``they are taking food from the mouths of starving
The White House may have made another political calculation,
not only on the budget, but on Medicare. The American public is
for a balanced budget. Furthermore, the politics of Medicare may
be changing. The old calculation is that Medicare, like Social
Security, is the Third Rail of American politics. (If you touch
it, you're politically dead.) This may no longer be true. The
reason: the word of the fiscal crisis in Medicare is seeping out
into the consciousness of Middle America, including the Baby
Boomers who are fearful of their future retirement prospects and
the Twenty Somethings, who are coming to age and wisdom about the
future taxes they are going to have to pay to keep the current
crop of old folks and the 77 million Boomers in the style to
which they are accustomed. As P. J O'Rourke says about the Twenty
Somethings, they should quit whining, turn their baseball caps
around, and get a job. But when they do, they are not likely to
be happy with the Awesome Rip-Offs they've got coming to them in
The Seniors Lobby
Focus groups of senior citizens conducted in Maryland by
Citizens for a Sound Economy showed that, not surprisingly, most
old folks don't know that Medicare is on the edge of bankruptcy.
They feel that if there really is a crisis, Congress will simply
do something about it, out of fear of losing seniors' votes.
They think that waste, fraud, and abuse are the major reasons why
the Medicare system has financial problems, and that the blame
for this rests on doctors and hospitals.
In the meantime, the heretofore fearsome AARP lobby is being
regularly questioned by Senator Allen Simpson of Wyoming about
what they are doing with all of that federal tax money anyway.
AARP normally pushes Congress around; now Congress is pushing
AARP around. Things have really changed on Capitol Hill this
Consumer Choice Proposals
The most encouraging factor is the emergence of a variety of
consumer-choice proposals to reform Medicare.
The libertarians over at the Cato Institute are pressing the
envelope of change. They argue that most of the proposals for
Medicare reform being discussed on Capitol Hill miss the point
and are bound to fail to reduce spending. The Cato answer is to
raise the Medicare deductibles, lift the caps on reimbursements
for doctors and hospitals, set up Medisave accounts and gradually
transform the Medicare system into a back-up system of
catastrophic insurance. Give the elderly a chance to get out of
Medicare, says Cato, and raise the age of eligibility for
Medicare along with the age of eligibility for retirement.
The bipartisan Committee for a Responsible Federal Budget,
headed by former Congressman Robert Gaimo and Former Senator
Henry Bellmon, strikes another political chord: ``Anyone who
opposes reducing spending for Medicare and Medicaid as part of
the effort to balance the budget (no matter which baseline growth
path is used) is surreptitiously arguing for multiple future tax
Along with others, Senator Robert Packwood of the Senate
Finance Committee, between appearances before the Senate Ethics
Committee on sexual harassment charges, is trying to make the
Clinton Administration officials come clean on fixing the
Medicare Trust Fund. Congressional Republicans want to compel the
Medicare Trustees to make specific recommendations to assure the
Trust Fund's fiscal solvency. The Clinton Administration has been
steadfastly saying that it knows the Trust Fund is in trouble,
but Medicare should be reformed as part of a broader health care
reform, like the one that Hillary and the Task Force came up with
in 1993. In other words, go along with us on regional alliances,
the national health board, price controls, new reams of rules or
regulations, or Medicare ``buys'' it. But this stance by the
Administration once again ensures that they will be standing on
the sidelines of Congressional reform efforts.
The AMA is entering the fray with a rather comprehensive
reform of the Medicare system. This would allow the elderly to
stay in the traditional Medicare system if they wish to do so,
but alternatively they may be able to pick and choose private
health care plans, for which they will be reimbursed up to a
dollar amount. A Medisave option would be included.
The Heritage Foundation has also unveiled a comprehensive
proposal along similar lines. This would establish a voucher
system, coupled with a Medisave option and catastrophic coverage.
Like the AMA plan, the Heritage plan would switch Medicare from a
defined benefits system to a defined contribution system similar
to the Federal Employee Health Benefits Program. The FEHBP offers
a range of plans at a range of prices. Beneficiaries can choose
leaner plans and pocket the difference in price.
Heritage also proposes some other short-term budgetary fixes
for the Medicare system, including means-tested subsidies.
Heritage would restore the premium paid for Part B to its
original 50 percent match. (Currently, senior citizens pay 30
percent of the Part B premium; the permanent level is projected
to be 25 percent.) In a June 27 briefing for the Washington
press corps, Heritage spokesmen said that if Congress fails to
undertake fundamental reform, it will be left with only two
alternatives: a dramatic reduction in the quantity or the quality
of Medicare coverage, or sharply higher taxes for already
overtaxed middle class families. There's no way out.
It is difficult to calculate the savings to be realized from
allowing seniors to benefit from cost-conscious decisions
concerning their medical care. A plan proposed by J. Patrick
Rooney, chairman of Golden Rule Insurance Company, was calculated
to save about $250 billion over seven years, according to a study
by Milliman and Robertson, a Seattle consulting firm.
Rooney's plan would make the elderly responsible for the
first $4,000 of medical bills, in exchange for placing $2,000
into a Medicare Reserve Account for each enrollee. Funds in this
account would accumulate tax-free and could be used to pay
routine costs, including those that Medicare does not cover, such
as prescription drugs. If people dropped their Medigap policies
and applied the average cost of $1,000 toward direct payment,
their remaining exposure of $1,000 would be only about half of
what they now pay out of pocket (see Investor's Business
CLIA Repeal Languishing
Congressman Bill Archer (R-TX) has introduced legislation
(H.R. 1386, the Clinical Laboratory Act Amendments of 1995) to
exempt physician office laboratories from CLIA, unless they
engage in the interpretation of Pap smears. At present, the bill
is not making much progress. Congressman Thomas Bliley (R-VA),
Chairman of the Commerce Committee, has not yet scheduled
hearings. A number of AAPS members have sent letters to Mr.
Bliley urging him to hear this bill (for samples, see p. 4), with
carbon copy to Andrew Shore, legislative aide to Mr. Archer, 1236
Longworth Bldg, Washington, DC 20515.
Do we have your FAX number? If you have not received recent
Action Alerts, you are not on our FAX network, possibly because
we repeatedly received ``invalid media'' messages. Please FAX
your number to (520)326-3529.
Medical Savings Account Bill Gaining
On June 13, House Ways and Means Chairman Bill Archer
introduced bipartisan legislation to provide for Medical Savings
Accounts. Key provisions of the Archer-Jacobs bill:
- Employers, or individuals without employer-provided medical
insurance could make contributions to an MSA, which would be
excluded from taxable income.
- The maximum MSA contribution would be the amount of the
catastrophic insurance deductible, subject to an overall
maximum of $2,500 for individuals and $5,000 for families.
- MSA funds used to pay for medical expenses would be excluded
from workers' taxable income; funds withdrawn for other
purposes would be taxed, and an additional 10 percent
penalty would be assessed on such withdrawals.
Savings to accrue from widespread adoption of Medical
Savings Accounts have been calculated to range from 10 percent to
40 percent per year. The low value is an extremely conservative
estimate made by the American Academy of Actuaries. According to
the Council for Affordable Health Insurance, the actuaries
understate both administrative cost savings and decreases in
consumption. A 1992 study by the National Center for Policy
Analysis estimated that if everyone switched from traditional
third-party insurance to MSAs, medical costs would decrease by
about 30 percent. A Cato Institute study estimated that if MSAs
were adopted widely enough to reduce third-party coverage to
about 25 percent of medical spending, national medical costs
would be decreased by 40 percent per year (see Peter Ferrara,
NCPA Brief Analysis No. 164, June 26, 1995, 12655 N. Central
Expy, Suite 720, Dallas, TX 75243, 214-386-6272).
The Archer-Jacobs bill is gaining cosponsors and is said to
be on a fast track out of committee.
[Further information on MSAs: Stephen Barchet, Medical
Savings Accounts: A Building Block for Sound Health Care,
the Evergreen Freedom Foundation, PO Box 552, Olympia, WA 98507,
360-956-3482, $15; Michael Tanner, ``Medical Savings Accounts:
Answering the Critics,'' Policy Analysis #228, Cato
Institute, May 25, 1995, 1000 Massachusetts Ave., NW, Washington,
DC 20001, 202-842-0200, $4; Peter J. Ferrara, ``More than a
Theory: Medical Savings Accounts at Work,'' Policy
Analysis # 220, Cato Institute, March 14, 1995, $4.]
Regulatory Reform Act of 1995
On June 28, Senator Dole announced the completion of a
bipartisan package of regulatory reforms, S. 343. This includes
risk assessment, cost-benefit analysis, judicial review, and
congressional review. It substitutes for the Delaney Clause the
provision that federal agencies may not refuse to approve a
substance on the basis of safety when the product ``presents a
negligible or insignificant foreseeable risk to human health
resulting from its intended use.'' For further information,
contact Project Relief, 818 Connecticut Ave. NW, Suite 1100,
Washington, DC 20006, 202-496-0791.