Volume 53, No. 7 July 1997 1997


On the 32nd anniversary of the enactment of Medicare (signed into law by Lyndon Baines Johnson on July 30, 1965), it is appropriate to remember the promise that enabled its passage: no federal interference in the practice of medicine.

 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.
 1802. Any individual entitled to insurance benefits under this title may obtain health services from any institution, agency, or person qualified to participate under this title if such institution, agency, or person undertakes to provide him such services.
 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 health services.

On June 3, 1997, a press release from the Committee on Ways and Means concerning the Chairman's mark on the Medicare Amendments Act of 1997 quoted Bill Thomas (R-CA), Chairman of the Health Subcommittee: ``This legislation extends the life of our nation's much-valued Medicare program for ten years.'' It also, Thomas said, ``gives seniors more choices'' while ``building a foundation so Medicare can also be saved for the next generation.''

The text of the bill, which is about 220 pages long, can be downloaded at http://hillsourc e.house.gov/medicare.html.

Approximately $100 billion in ``savings'' comes from ``reimbursement changes to health care providers'': more stringent price controls and an expansion of the ``prospective payment'' rationing system (see 1801 and p. S1).

The new senior choices include a ``pilot program'' for medical savings accounts, for 500,000 persons or 1.3% of the beneficiaries, starting in October, 1998, and burdened by numerous reporting requirements [see 1801-3].

The government-preferred choice appears to be HMOs. According to the House press release, ``HMOs are the only private plan option presently [sic.] available to senior citizens. By committing beneficiaries to the coordinated care of pre-selected providers [see 1802], HMOs generally provide for more benefits than traditional Medicare at lower costs to patients.'' The new legislation is expected to maintain the current rate of HMO growth; enrollment is expected to increase from 4.4 million (12%) to 9.3 million (23%) by 2002.

The bill would add benefits, such as coverage of colorectal screening. Six pages are devoted to dictating exactly how and how frequently the screening may be done. Nonparticipating physicians are forbidden to charge more than the limiting charge. Furthermore, ``the Secretary shall review periodically the appropriate frequency for performing colorectal cancer screening tests based on age and such other factors as the Secretary believes to be pertinent'' [see 1801].

The bill mandates some ``outcomes research,'' directing the Secretary of HHS to request the National Academy of Sciences to study the ``short term and long term benefits, and costs to the medicare program,'' of the expansion and modification of preventive benefits. An initial report, to be submitted in two years, shall cover five items, including the ``standardization of coverage of bone mass measurement.'' [By the way, whatever happened to that ``required'' study of the impact of the Clinical Laboratory Improvement Act?]

MedicarePlus organizations must have a quality assurance program that shall ``stress health outcomes and provide for the collection, analysis, and reporting of data (in accordance with a quality measurement system that the Secretary recognizes)'' that, among other things, will enable an unidentified entity, after identifying areas for improvement, to ``establish or alter practice parameters'' [see 1801].

The ``new, tough anti-fraud and abuse efforts'' include a ``three strikes, you're out-mandatory'' and ``one strike, you're out-optional.'' Any organization will have to reimburse the Secretary for amounts paid for a service furnished, directed, or prescribed by an excluded individual. Civil monetary penalties may be imposed on an organization that arranges with (say by employment) an excluded individual or entity to provide services or items which may be paid for by Medicare (1801).

The ``modernization'' program replaces the ``outdated 50/50 rule that requires MedicarePlus plans to enroll at least 50% of their enrollees in non-Medicare plans,'' replacing this restriction with ``enhanced quality and outcome measures.''

A Bipartisan Commission on the Effect of the Baby Boom Generation on the Medicare Program is established (Cpt. 3) to consider the effect of the increase in the Medicare age group beginning in 2010 and lasting for about 25 years. Substantive changes affecting this generation are already introduced in Cpt. 4: the number of resident physicians is frozen at 1996 levels (10732), and then there is a ``phased-in limitation on hospital overhead and supervisory physician component of direct medical education costs'' (10732). Presumably, a cut in the supply (and the pay) of physicians will be accompanied by a fall in demand for their services.

Meanwhile, the Medicare Trust Fund is being tapped for more aggressive fraud prosecutions, so that it can be replenished with the lifetime earnings of the targeted physicians.

For physicians and patients alike, there is but one potential escape: Don't accept their money.

A License to Steal

``With respect to our nation's major health care programs, it is easy to understand why, historically, fraud control has not been a central issue in program design'' writes Florida Governor Lawton Chiles in the foreword to License to Steal: Why Fraud Plagues America's Health Care System by Malcolm Sparrow (Westview Press, 1996).

``[W]hen the Medicaid program came into existence, some within the medical community labeled it socialized medicine, and many physicians refused to participate.'' Payment policies were thus designed, he believes, to encourage participation.

Unlike credit card fraud, most medical insurance fraud is not ``self-revealing.'' Explanations of Medical Benefits (EOMBs) are routinely sent to Medicare beneficiaries on assigned claims only when copayment is due or payment is denied. EOMBs are not used at all in Medicaid, and have not been used in the most fraud-prone Medicare program-home health-since 1981. Senior managers don't care about the hemorrhage because ``it's not our money.'' Electronic data submission has been a bonanza for scam artists, as the book explains.

[An AAPS analysis on how to combat fraud, submitted to the Senate Finance Committee, is available on request. Also available are copies of FOIA requests by the U.S. Justice Foundation to the FBI, DEA, USPS, and Dept. of HHS, regarding guidelines for armed raids, interrogation of witnesses, detaining persons without benefit of counsel, etc. No replies have been received as yet.]

Private Pay Option

Unlike Medicare, Medicaid has a formal ``private pay'' option, under which the physician may not submit a claim to Medicaid. Physicians are advised by the Medical Society of the State of New York (MSSNY) to obtain verification in writing from the patient. However, if the Medicaid recipient participates in any Medicaid managed care plan, or the physician has a contract with any Medicaid managed care plan, this option is foreclosed (MSSNY's News of New York, May 1997).

AAPS continue to assert the informal private pay option for patients who are not Medicare beneficiaries because they decline to have a claim submitted, consult a non-Medicare provider, or receive a non-covered service. A non-Medicare provider is a person or entity that does not have a number. (G. Keith Smith, M.D., of Oklahoma City had his provider number deactivated upon request as of March 5, 1997). An example of a non-covered service is the Formal Mental Status Examination billed under code 95999, according to Kathleen Caroompas, Field Resource Representative, Upstate Medicare Division, in correspondence dated Feb. 28, 1997.

Intimidating carrier statements to the contrary, patients have a constitutionally protected right to bypass Medicare and work directly with their physicians whenever they choose-as long as they forgo the taxpayer dollars (Article I, section 10). The decision in the case that asserted this right (Stewart v. Sullivan, 816 F.Supp 281 D.N.J. 1992), brought by Lois Copeland, M.D., and five Medicare beneficiaries, was handed down on Oct. 26, 1992. Five years later, the federal government has still failed to take the action required to make the issue ripe for adjudication: an unambiguous statement by the Secretary that American citizens lose the right to use their own resources to purchase medical care upon becoming eligible for Medicare.

Few patients have chosen to exercise this right to date. However, as AAPS Director Lawrence Huntoon, M.D., points out in a letter to Ms. Caroompas: ``As more and more patients become fed up with the bungling, the meddling, the lies, and the illegal interference (1801) that the Medicare program inflicts upon them in telling them what they can and cannot have and at what price and under what conditions, more patients may opt for the legal option of cutting the Blue Bunglers out of the picture altogether.''

HCFA is making this option more burdensome. Surrogate UPINs (such as OTH000) will not be permitted after Nov. 30, 1997, so patients will not be able to obtain Medicare coverage for tests or consultations advised by their private physician.

Even liberal columnist Ellen Goodman has come to understand the advantages of not taking federal dollars, at least for abstinence-only sex education. ``Money, especially federal money, can be awfully seductive,'' she writes. ``It's hard to just say no to government dollars. But this is one time when states should practice abstinence-and not preach it.''

The proposed Medicare reform bill does have a conscience clause protecting an organization's right to restrict advice on treatment to which the organization objects on moral or religious grounds. The Constitutional protection of free exercise of religion has not yet been tested in the context of refusing to accept the fruits of legal plunder.

Third Annual Medicare Patient Freedom Day

Place copies of the enclosed patient information sheet and the Patients' Bill of Rights in your waiting room. Call Congress on July 30, and encourage patients to call: tell them the truth on managed care, and demand MSAs.

AAPS Insurance Plan and MSAs

By now, you should have received a mailing concerning the new AAPS Association plan (if not, please call us for a copy). It is possible that this plan will not at present be available in your state. State insurance departments from time to time issue new requirements, so that all insurance carriers must adjust policies and pricing to comply. They must then refile and wait for approval. One example of changing requirements is Kennedy- Kassebaum, which has set up new portability requirements that must be met.

Subscribers who already have policies continue to be insured, even if the carrier cannot write new business until properly certified by the State. We hope that delays will be short and that any problems can be overcome.

We are told, by Medical Savings of America (800-853-7321), that certain individual plans with $1500 or $2000 deductibles and the $3000 Plan A family plan for a family of two may qualify under Kassebaum-Kennedy to be combined with tax-excluded MSAs. Other companies that offer MSAs include Merrill-Lynch and USAA (800-531- 0148). And try your own bank. Due to state mandates, it may be impossible to have a qualified plan, as in Nancy Kassebaum's own state of Kansas.

AAPS Calendar

July 30. Medicare Patient Freedom Day
Sept. 17-20, 54th annual meeting, Chicago, IL.
Oct. 8-10, 1998, 55th annual meeting, Raleigh, NC.

Dr. Rutgard Faces Civil Suit

On March 6, 1997, the U.S. Circuit Court of Appeals handed down a ruling favorable on many points to Jeffrey Jay Rutgard, M.D. (see AAPS News May 1997).

On May 2, 1997, the government filed a civil action under the False Claims Act against Dr. Rutgard, using the same allegations as in its criminal case under this statute. Previously, the government had rejected the civil option, despite a motion by Dr. Rutgard's attorney citing numerous similar cases that had been resolved civilly. Dr. Rutgard has already been incarcerated for more than two years.

Although the Circuit Court vacated the order of forfeiture against Dr. Rutgard, none of his confiscated earnings are yet available either to pay an attorney or to support his wife and five children. Possibly, the Department of Justice thought that a prisoner with no assets would be unable to reply within 30 days and would thus incur treble damages on a default judgment, restoring the government's winnings, which had largely been wiped out by the Circuit Court ruling.

In the case of U.S. vs. Halper, 490 U.S. 435, 109 S.Ct. 1892, 104 L.Ed.2d 487), the Court found that ``a treble damages action under the False Claims Act against a person already criminally convicted for the conduct was punitive and therefore was barred by the Double Jeopardy Clause.''

Nevertheless, a case that is unconstitutional or frivolous could easily succeed once a defendant is without funds.

In this case, Dr. Rutgard answered the complaint pro se with a Motion under Rule 12(e) of the Federal Rules of Civil Procedure, asking for a more definite statement of the allegedly false claims:

It is well-established that allegations of fraud must be pleaded ``with particularity'' pursuant to Rule 9(b) of the Federal Rules of Civil Procedure. The plaintiff's complaint ``must allege the details of the defendants' allegedly fraudulent acts, when they occurred, and who engaged in them'' (Durham v. Business Management Assocs. 847 F.2d 1505 (11th Cir. 1988)).

The complaint against Rutgard is completely devoid of any particularity as to the ``what, where, when, and why'' of the alleged fraud. It simply alleges that the unidentified fraud occurred between ``approximately'' 1987 and 1992.

The need for compliance with Rule 9(b) in this action is of heightened significance. Most of the plaintiff's claims under the False Claims Act are barred by the applicable statute of limitations; without the requisite pleading of ``when the [fraudulent] statements were made,'' it is impossible for the Court to address and dismiss the time-barred claims.

Plaintiff's most glaring omission of particularity is its failure to ``explain why the statements were fraudulent''; if the plaintiff itself cannot plead the specific Medicare, Champus, or Railroad Retirement rule applicable to an allegedly fraudulent claim, and how defendants allegedly violated that rule, then those claims must be dismissed pursuant to Rule 9(b). It is patently insufficient under Rule 9(b) for plaintiff to allege that defendant Rutgard performed unidentified operations between 1987 and 1992, and for plaintiff to seek enormous damages, without alleging a single violation of a specific rule.

Terror in West Virginia,

On June 23, 1995, there was no bomb explosion in Mason, WV. No lives being threatened, just another busy work day. In a home- medical office, armed men and women rushed in, holding everyone at gunpoint. This kind of act you might expect to happen in a third world nation, not in the United States of America. Nothing was said for several minutes to comfort the patients and let them know that the gun bearers were not robbers or murderers, but law enforcement officers. No explanation was given to a nine-year-old child who had several guns held on him for several minutes....

Why am I reliving this? I see regularly on the news coverage of an innocent man that the government and media turned into a public enemy after a bomb exploded in Atlanta. I feel the pain each time I see his face and eyes, because our stories are not far apart....

For several months in 1996, federal grand juries were given testimony by government-selected witnesses in an attempt to bring indictments to justify their actions. Very scary to be innocent and yet a target. Imagine the feeling when a former patient comes to apologize for being involved with *** of the DEA and *** of Medicaid of WV in providing false information to a grand jury, after being told what to say and how much to say and being offered a financial reward....

Next came nearly a year and a half of constant harassment by every governmental agency available. I received lists of new patient charts, other than those taken at gunpoint earlier, and provided them. Then another agency demanded the same charts and acted as though a crime had been committed when they were not available....

It was impossible to take care of taxes because all of my records had been removed and only returned in scattered bits. I was threatened with penalties for late filings while the government held my records....

I don't think my nightmare will ever be over, and my life will never be the same. Perhaps there were some gunslinging officers here that morning who felt they were doing their job and did not know the extent of their injustice. Actually, I feel that there were because of the sincere apologies that some of them gave. Them I forgive.

But those who continue to falsely represent the facts and who instruct persons to perjure themselves should have criminal charges filed against them. Their authority should be taken immediately until they are investigated fully for their intentions and actions. I believe it is now well known how power and a desire to make a name can corrupt law-enforcement officials. And the media are frequently there, arm in arm, to exacerbate their reckless and damaging claims....

Danny R. Westmoreland, D.O., Nov. 6, 1996, Mason, WV

Dr. Burzynski Acquitted

On May 27, Dr. Stanislaw Burzynski, who was accused of violating a court order against shipping his cancer drug across state lines, was acquitted of contempt. Burzynski had been indicted in 1995 on 75 counts of mail fraud, contempt, and violating FDA rules. After his first trial ended in a hung jury, U.S. District Judge Sim Lake dismissed 34 counts, and just before trial prosecutors dropped all but one of the remaining charges. Burzynski's ``antineoplastons'' are now being tested under FDA guidelines. Patients, some of whom claimed to be cured despite a terminal prognosis from other doctors, were overjoyed. ``What [the verdict] means is medical freedom for all of us,'' stated one patient.

``It's the end of 14 years of war,'' stated Dr. Burzynski. His problems began when he started selling the drug he developed without FDA approval.

Members' Page

``Outcomes-Based Research.'' The main effect that ``outcomes-based,'' cost-effective managed care will have on cancer patients is to increase the number treated in hospices, predicted Dr. James Arsenau in a May 1997 article in MSSNY's News of New York. Cancer patients are ``cost centers'' to managed-care bean counters. Of course, the individual oncologist, under the WEDONT CARE Managed Care Bill of Rights, has the right to treat patients at his own expense-until he goes broke.

Others involved in ``outcomes-based'' research will be prosecutors. If they don't like the outcome, you simply go to jail. Having lost all of his appeals, Dr. Gerald Einaugler is heading for 52 weekends in jail on Rikers Island. I believe this is a precedent-setting case: the first time a doctor has gone to jail for a clinical mistake. Seven years ago, Dr. Einaugler mistook a peritoneal dialysis catheter for a feeding tube. He delayed transferring the patient from a nursing home to an acute care facility for about 10 hours. In the good old days, this lapse might have bought him a malpractice suit, which he likely would have lost-but his defense and the judgment probably would have been covered by insurance. In the bad new days, criminal prosecution is more politically correct.
Lawrence R. Huntoon, M.D., Ph.D.

Sending a Message. Physicians need to remember what the Irish compatriots did with Charles Boycott, the English estate manager who tried to auction off land unfairly confiscated in the 1800s. They refused to bid on the land, leaving it in the hands of the original owner.

Physicians increasingly find themselves excluded from familiar land, as the economic strategy becomes clear: spread the doctors thinner and thinner, and pay them less and less. I overheard an insurance executive blathering, ``If those doctors will work for a dollar, that is what I will pay them.'' This is sheer exploitation. Why support doctors or facilities that engage in it? Why not support only those who hold on to their ethics, even if you have to communicate by smoke signal?
Samuel H. Nigro, M.D., Cleveland Heights, OH

How Does Medicare Survive? From a letter to Dr. Huntoon, which objected to disallowing the Formal Mental Status Exam under code 95999: Although you seem to have great difficulty with the Medicare program,...it is one of the most popular of governmental programs....[T]his division processes approximately 14 million claims a year serving 20,000 providers and 1.5 million beneficiaries....The system could not persist if... many providers or beneficiaries [were] even a fraction as troubled as you are with the reality of Medicare.
Edward M. Cox, M.D., Medical Director, Upstate Medicare Division

The Fourth Party. Commenting on the statement that ``managed care is here to stay but it should not interfere with the doctor-patient relationship'' by Connecticut State Medical Society President Michael Deren, M.D.: This is wishful thinking. By definition in managed care, employers become the first party and insurance and managed-care companies the second party. The former seek to reduce their costs,...and the latter to maximize their profits. Patients are reduced to third-party status, receiving only those benefits that their employers are willing to pay for (with the employees' money). Patients such as me, who are unemployed, are by a ``gentleman's agreement'' between corporate America and the government frozen out of the ``insurance market.'' Physicians, if they have any status at all, are reduced to the level of minor fourth-party players, who get paid from the residual funds available after the insurer has taken his cut ``off the top.'' Under managed-care schemes, physician payment bears no relationship to the value of the service rendered. Most efforts by physicians to form their own managed-care companies merely represent efforts to get a ``piece of the pie'' by becoming second parties again, which reap profits off the top rather than from the value of the services rendered.

I suggest reviewing the results of managed care under National Socialism: the initial goal was supposed to be ``getting the most for our Healthcare Mark.'' My favorite question to physician- managed care advocates is: ``Was Auschwitz a better place to live because medical `selections' were done by a DR. Mengele rather than a MR. Mengele?''
Stephen R. Katz, M.D., Fairfield, CT

The Heart of the Problem. In an article entitled ``Unhealthy Trends'' (Forbes Magazine 4/17/97), Steve Forbes writes that ``we're headed for an increasingly regulated, semi-national health care system that will have us on the awful treadmill of higher costs and lower benefits.'' The political response: an array of ``patient-friendly'' regulations, with ``conservatives'' going along with ``liberals'' to show that they are not heartless. ``More and more, the Clintons must feel that they will have the last laugh on nationalized medicine.''

Forbes also says that ``We must...get to the heart of the problem: the tax code.'' Forbes calls for opening up MSAs to all takers, including those on Medicare. Critics carp that MSAs benefit only the healthy. Quite the opposite. They end up providing better coverage when catastrophes hit. A second issue underscores another perversity resulting from the tax code. Why shouldn't the growing demand for health care from an aging population be considered a plus for the economy, rather than a burden? ``Is it a crisis when people buy more cars, clothes, software, or overpriced coffee?''
Ernest J. White, Alexandria, VA

The Budget Agreement

Just before the Memorial Day recess, Congress formally committed itself to its agreement with the Clinton White House, which calls for balancing the budget by 2002. In the health field, Congress and the White House have committed themselves to a reduction of Medicare spending equal to $115 billion over the next 5 years and $434 billion over 10 years.

Under current law, Medicare spending is estimated to grow from $188.6 billion in 1997 to $288.1 billion in 2002, at an average annual rate of 8%. On a per capita basis, Medicare spending is expected to increase from $4,949 in 1997 to $7,114 in 2002, an annual growth rate of 7.5%. Under the terms of the bipartisan agreement, the solvency of the Medicare Part A Trust Fund will be extended for 10 years.

The 1998 spending reduction would equal $6.5 billion. By 2002, it would reach $40 billion. Both sides have agreed in concept to structural reforms that will allow more competing plans in Medicare, including PPOs and PSOs. Moreover, retirees would get comparative plan information from the government, just as retirees do today in the Federal Employee Health Benefits Program (FEHBP).

The Part B premium is to be maintained at 25% of Part B program costs, requiring taxpayers to fund 75%. In a shell game, home health care costs will be moved from Part A (funded by a 2.5% payroll tax) to Part B (funded by general revenues) over the next 7 years. Medicare payment to managed care organizations will be fixed; under the current system, managed care contracts cost more than fee-for-service in many parts of the country. The prospective payment system (PPS) of price controls will be expanded to home health care ``providers,'' skilled nursing facilities and ``outpatient departments.''

Even though Medicare is in serious financial straits, the Clinton White House and the Congressional leadership have agreed to expand Medicare benefits. The new Medicare benefits include: expanded mammography coverage; coverage for colorectal screening; coverage for diabetes self-management; and higher payments to ``providers''-a Washington Wonk Word for doctors-for preventive vaccinations.

The Agreement calls for Medicaid savings of $13.6 billion over the next five years. This level of savings does not reflect new funding for ``children's health care programs,''protections for legal immigrants under the trimming of welfare reform, or the extensions of veterans Medicaid income protections.

One of the key points of agreement between the Clinton White House and the Congressional leadership was the provision of new funding for ``Children's Health'': $16 billion over 5 years and $38.9 billion over 10 years to provide health insurance coverage for 5 million children by 2002. Funding methods include ``capped mandatory grants to the state'' or Medicaid expansion. No consumer choice options are even suggested in the draft that the Congressional leadership agreed to, although it makes reference to ``other possibilities'' if found to be ``mutually agreeable.'' In effect, this would give liberals veto power. Clinton Care advances another step.

On the deficit, the federal spenders, not the fiscal conservatives, won the day. In the first year of the budget agreement, federal spending will increase more than $70 billion, according to the Heritage Foundation. Discretionary spending alone will rise by close to $100 billion over the next five years. More than $50 billion worth of savings achieved by the passage of the welfare reform bill enacted last year will also disappear. One of the items in the welfare reform bill last year was to deny welfare benefits to ``legal'' aliens, as well as illegal aliens. The White House thought this was unfair and asked for a reversal of policy. They got it.

Tax relief is, to put it mildly, very modest. The agreement calls for $85 billion over the next five years. As Heritage Foundation budget analyst Scott Hodge has remarked, ``The budget deal's tax relief would return to American families just one penny of every dollar they will send to Washington over the next five years.''

By caving into the White House demands for higher federal spending, Congress will allow the deficit to jump 35%, to $90.4 billion, under the first year of the budget agreement. In fact, 72% of the deficit reduction will take place in the last two years. This amounts to eating dessert first, high in saturated fiscal fat, and promising that another Congress and another President will diet and exercise three years from now. Good luck.

Serious Medicare Reform?

After the initial euphoria surrounding the 1997 budget agreement, and the second guessing that inevitably goes with the territory among politicians and journalists alike, Washington is at least talking about progress on Medicare reform this year. Two recent items are worthy of attention.

First, Congressman Bill Thomas, Chairman of the powerful House Ways and Means Subcommittee on Health, recently released the outlines of Medicare reform within the context of the widely criticized budget agreement. The White House spin on the deal is that much or most of the reduction would come in the form of cuts in reimbursement for doctors and hospitals and other health care ``providers.'' Thomas said that Congress would instead seek genuine change in the Medicare program, opening it up to real consumer choice and competition.

Thomas has pledged to include medical savings accounts in Medicare changes. The White House signaled its opposition, raising the adverse selection arguments. Thomas settled for a ``pilot program'' limited to 500,000 out of the 38.1 million Medicare beneficiaries. This follows the Kennedy-Kassebaum formula. The Thomas plan (see p. 1) also includes ``tougher anti-fraud provisions,'' a one-year freeze in hospital reimbursement, a ban on ``gag rules'' in any private managed-care arrangement; and a $250,000 cap on ``non-economic'' medical malpractice damages.

For doctors, the medical malpractice relief looks pretty good. But what else is new? Traditional Medicare, with all of its silly rules and regulations, plus the RBRVS and DRG nonsense, stays. You get a Clinton-style choice of three different types of managed-care plans. How many flavors of vanilla can you choose?

Look for the White House to cite difficulties accompanying the relatively slow start of the Medisave accounts provided in the Kennedy-Kassebaum bill, as reported by George Anders in the May 22nd edition of The Wall Street Journal. One obvious explanation is that the Kennedy-Kassebaum bill saturated the limited number of accounts in a bitter brine of complex regulation and extra paperwork, making it unattractive for many small businesses to offer them. Time will tell.

Is FEHBP A Model For Medicare?

A major May 21st hearing before the Senate Finance Committee, chaired by Senator William Roth (R-DE), concerned whether Congress should be using the FEHBP as a model for Medicare reform. Senator John Breaux (D-LA) said that the Medicare should be changed to give the elderly security but also to make it look a lot more like a real market, with competing private insurance. Breaux noted that the current system of price controls and central planning and centralized benefit setting is outdated and inefficient, and that members of Congress are not capable of making the kinds of decisions that they are being called on to make in the reimbursement of physicians for certain complex procedures, and they should not be doing this.

The federal employee and retiree system allows millions of federal workers and retirees, including members of Congress and their spouses, to pick and choose from a menu of hundreds of private health insurance plans. If federal retirees can enjoy consumer choice and the competition in the system is effective in controlling costs, more and more members of Congress feel that a similar arrangement could be set up for retirees currently enrolled in the single-payer system that we call Medicare.

A broad range of witnesses recommended this model as the starting point for reform, including conservative Senator Judd Gregg (R-NH) and liberal Senator Ron Wyden (D-OR). Wyden noted that the Office of Personnel Management (OPM) team that administers the FEHBP, negotiates benefits, and certifies the solvency of private insurance plans, is relatively small, compared to HCFA, and that if HCFA had trouble overseeing a competitive market, then OPM staff could do it on detail. Also testifying were representatives from the liberal Brookings Institution and the conservative Heritage Foundation, strongly supportive of consumer choice in Medicare.

Most of the Senate hearing focused on ways to improve Medicare using a wide variety of private health plans. Robert Reischauer, former CBO director now with the Brookings Institution, a prominent liberal think tank, cautioned Congress about using the FEHBP model, saying that what works with federal workers and retirees may not work with the older Medicare population. He noted that there is no mechanism in the FEHBP for adjusting risk and it ``lacks a common benefit package'' (a favorite of liberal intellectuals). He did say, however, that experience with the FEHBP shows that a system based on consumer choice can be successful-that is, that competitive markets in health insurance can be stable; that participants have opportunities to pick and choose the plans they want and need; and that such a system does not require some huge bureaucracy to manage it. Much of the discussion focused on how a government contribution should be developed and applied to a future Medicare choice system; whether or not there should be a government-dictated standardized benefits package; what role HCFA should have in negotiating with private plans on different levels of benefits (OPM negotiates with hundreds of private plans each year).

Kennedy, Hatch, and The Kids

The Kidcare debate drags on, with clueless Republicans and confused conservatives being driven back, firing off ineffective volleys, throwing up patchwork defenses and barricades, and stumbling over themselves in a headlong retreat into a political cul de sac, where they will simply surrender. None of their purely defensive arguments (uninsured kids are not a ``crisis,'' etc.) have rung the victory chimes. Kennedy and pal Orrin Hatch of Utah have drafted a politically perfect bill which expands government control over the health insurance market under the rubric of Kidcare and finances the expansion with the 43 cent tax on cigarettes. Give him credit. Kennedy knows how to do it: Are you for big tobacco or little kids? Vote, my fellow Senators and Congressmen, right now, on the record.

Kennedy and Hatch put their proposal to a field test on the Balanced Budget bill in the Senate and lost. But they expected to; it was a dry run. Democrats and the Clinton Administration opposed it because it threatened the budget agreement with the Congressional Leadership. Conservatives opposed it for the ineffective reasons they have outlined, while proposing such things as a doubling of the Maternal and Child Health Bloc Grant, of all things. Next time, when Kennedy and Hatch go to the floor, they will have the Democratic leadership and the White House supporting them, not opposing them.

The Washington Post notes that 70% of respondents to a Wall Street Journal/NBC News poll back the Kennedy-Hatch proposal. As the liberal establishment's voice has noted, ``Adoption of the amendment would merely leave room in the budget resolution for the plan to be enacted later. A number of technical problems would have to be resolved, but they are well within Congress's competence. This is a vote against the harmful effects of tobacco, in favor of children's health, in favor of state deci- sion-making and in favor of fiscal discipline. How many times do they get one like that?'' (Washington Post, 5/20/97). Not often, if you accept The Post's premises, which far too many of the Washington cognoscenti do. Kennedy and Hatch will be back.

Desperately Needed: Politically intelligent conservative Congressional leadership. On the job training will do.

Federal Bankruptcy

The Consolidated Financial Statement of the U.S. Government for Fiscal Year 1995 contains a wealth of data that appear nowhere else. Because it looks at the government's total assets and liabilities, it presents a more complete picture than the budget. The report shows that as of Sept. 30, 1995, the U.S. government had a negative net worth of $4.5 trillion, an increase of more than $500 billion from the year before.

The budget deficit is not the only contributor to this picture. According to the Treasury, the federal government's total assets fell by more than $53 billion in 1995, largely due to a $73 billion fall in the value of government property, plant, and equipment (Bruce Bartlett, NCPA, 2/10/97, see http://www.public- policy.orf/~ncpa/oped/bartlett.html.

``When national debts have once been accumulated to a certain degree, there is scarce...a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has been brought about at all, has always been brought about by a bankruptcy; sometimes by an avowed one, but always by a real one.'' Adam Smith, The Wealth of Nations

``We must not let our leaders load us with perpetual debt,'' lest we be taxed ``in our meat and in our drink,'' 'til we must live on ``oatmeal and potatoes; have no time to think, no means of calling the mismanagers to account; but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow sufferers.'' Thomas Jefferson, 1816