This lecture was held at The Heritage Foundation on June 30,
ROBERT E. MOFFIT:
Last August, under a veto threat from President Clinton, Members
of Congress quietly enacted a new provision of law as part of the
voluminous Balanced Budget Act of 1997. It is unprecedented in
Under Section 4507 of the Balanced Budget Act, any doctor is
free to contract privately with a patient enrolled in the Medicare
program, treat that patient on an independent basis outside of the
rules and regulations of the Medicare program, and refrain from
submitting any claims to the taxpayer for Medicare
However, Section 4507 contains a catch. A doctor who wishes to
contract privately with a patient enrolled in Medicare Part B must
first sign an affidavit to that effect, submit that affidavit to
the Secretary of Health and Human Services within ten days, and
agree to remove himself from the Medicare program and refrain from
submitting any claims to Medicare for reimbursement for a period
two full years.
In other words, a doctor could not even treat his mother in
exchange for an apple pie without dropping out of Medicare for two
years. The new law has been the subject of extensive and heated
debate in Congress. It also is becoming a subject of debate around
Since the 1997 enactment of Section 4507, a number of curious
explanations have surfaced concerning the rights of doctors and
patients in the Medicare program. As a result, we have some curious
propositions evolving not only from the law, but also from recent
After gleaning the official record, let me just share with you a
few of them. I think you'll find them intriguing, if not
Americans 65 and over who are enrolled in Medicare have no
constitutional right to privacy in their relations with their
physicians unless they are getting an abortion or securing birth
control services. Here in Washington, the federal district court
recently ruled that personal liberty and privacy are restricted to
certain fashionable-one could say politically correct-medical
conditions adjudicated by the federal courts.
Private contracts between doctors and Medicare patients were
always illegal-according to certain Members of Congress and
spokesmen for the American Association of Retired Persons, among
others-even if they were not against the law. No, I'm not making
any of this up.
Your personal freedom to spend your own money on medical services
outside of Medicare depends not on federal law or regulation made
pursuant to the law, but on whatever the Health Care Financing
Administration (HCFA) may say in communications with doctors in
something called a carrier manual.
HCFA has authority to impose rules and regulations not only on
transactions between doctors and patients within Medicare, but also
on transactions that take place outside of Medicare.
So we've learned all kinds of wondrous new things since passage
of the Balanced Budget Act in 1997.
The first of our speakers this afternoon is the Honorable Jon
Kyl, a United States Senator from Arizona. He was elected to the
Senate in 1994, after serving four terms in the House of
Representatives. He has distinguished himself as a strong proponent
of economic growth, an advocate of lower federal spending and lower
taxes, and a supporter of a balanced federal budget.
Senator Kyl is a member of the Judiciary Committee, the Energy
and Natural Resources Committee, and the Intelligence Committee. He
is an honors graduate of the University of Arizona, and also a
graduate of the University of Arizona Law School.
Our second speaker is Kent Masterson Brown. Kent is a nationally
recognized lawyer, practicing in Danville, Kentucky, and
Washington, D.C. He is a graduate of Centre College in Danville,
Kentucky, and Washington and Lee University School of Law in
Lexington, Virginia. The focus of his practice has been health care
law, with a strong emphasis on American constitutional law.
Kent Brown made history as the first attorney representing the
Association of American Physicians and Surgeons (AAPS), the
physicians group responsible for litigating the lawsuit that forced
the Clinton Administration to disclose the content and composition
of the Health Care Task Force run by Hillary Rodham Clinton. AAPS
won the case. It was the first time in history that the legal
status of the first lady had ever been addressed.
The White House generated some interesting internal documents
relating to Mr. Brown. In a March 11, 1993, memo to one of the
Clinton Health Care Task Force leaders, Carolyn Gatz, then "on
loan" from the Commerce Department, summed up Brown's professional
and political life in two nice paragraphs. According to the White
House memo, he is "extremely conservative"; he is a "Reagan
Republican"; he is prominent in the Republican Party; and he was
"mortified that President Clinton won." He is described as a "solid
guy"; he is also identified as "a smart fellow who's always well
prepared" and would make "a good Roman senator."
Our third speaker is J. Edward Hill, a family physician from
Tupelo, Mississippi. Dr. Hill was elected to the American Medical
Association's Board of Directors in 1996. He currently serves on
the Finance Committee of the AMA. He was previously President of
the Mississippi State Medical Association.
Dr. Hill's dedication to patient care has been recognized in
Mississippi and at the national level. He was chosen Mississippi
Family Doctor of the Year in 1991, and was runner up for Good
Housekeeping magazine's Family Doctor of the Year award in
SENATOR JON KYL:
I found it instructive that Bob Moffit would manage, as he
always does, to get motherhood and apple pie involved in the
broader discussion, because this is a motherhood and apple pie
It is a fundamental freedom that we're talking about here.
President Clinton's proposed health care legislation of 1993,
Section 1406, paragraph d, paragraph 2, contains a provision that
prohibits private contracting for seniors and everyone else. So the
provision that was added to last year's Balanced Budget Act is not
an aberration. As a matter of public policy, the Clinton
Administration wants all Americans to be served by a government-run
health care program and for this government-run program to be the
only way in which they can get medical care. In the case of senior
citizens, it's either Medicare or no care.
How did this happen? It started out with a confusing HCFA
policy, as Bob noted. HCFA policy resulted in physicians being
unsure whether or not they could engage in private contracting,
even though there was nothing in the law that prohibited it. Why?
Because they were receiving missives from HCFA that suggested they
would be prosecuted for fraud if they did not submit their bills to
Medicare in all cases.
The Congressional Debate
In order to ensure that there was no longer any question about
this, and to deal with some anecdotal situations which patients had
brought to my attention, I decided to help. These patients had not
been able to receive care from physicians who were no longer
accepting Medicare patients because of these HCFA missives. We got
an amendment passed, as part of the Balanced Budget Act of last
year, which explicitly enabled people to contract privately.
The Clinton Administration threatened to veto the entire
Balanced Budget Act if the Kyl Amendment stayed in. As a result,
unbeknownst to me, very late one night, two representatives-one
from the House and one from the Senate-compromised with the
Administration over this provision and inserted a poison pill. They
didn't want to directly attack the right of senior citizens to
contract privately, so they went at it another way. You can
contract privately, they said, if you can find a doctor who is
willing, in advance, to dump all of his Medicare patients for a
two-year period. Then, and only then, can you privately contract
with a doctor. That, of course, makes the provision essentially
Since then, we have been trying to find a way to get this
restriction out of the law. At the end of the session last year, we
attached a repealer of the two-year limitation to one of the
appropriation bills. Our colleagues in the House of Representatives
didn't have the stomach for it because of opposition by the
American Association of Retired Persons (AARP). The Senate
leadership was willing; the House leadership was not. So that
attempt didn't succeed.
We began this year with hearings in the Senate Finance
Committee. There are not enough votes to get it out of the Finance
Committee because two Republicans, Senator John Chafee and Senator
Jim Jeffords, are not willing to support the effort. The chairman
is a little questionable on it as well.
And since congressional Democrats are uniformly against private
contracting in Medicare, we are not likely to be able to pass
legislation that Representative Bill Archer has sponsored in the
House (with 194 cosponsors) and that I've sponsored in the Senate
(with 49 cosponsors). That means we have to find some other
mechanism. The Public Health Service Act reauthorization and two or
three appropriation bills could be used as vehicles to get this
The problem is that in the Senate, we probably will need to have
60 votes to go to cloture and take a vote on the amendment. That
means we have to do better than the 51 votes that we got on the
sense of Congress resolution that passed on April 1 of this year
(51 to 47). That was a non-binding amendment to the budget
resolution that seniors should have the freedom to contract.
Going on Record
Why did we promote that budget resolution amendment? To get
people on record the second time. Remember, they had already gone
on record once with a majority vote in the Senate to approve the
provision on private contracting. In fact, we got 64 votes that
time. We knew that in this situation, with the Clinton
Administration now firmly against it, we would be lucky to get the
majority. But we got 51 votes.
The problem with an amendment is getting the 60, and without the
ability to get 60 votes, we're not likely to get an amendment
attached to one of these appropriation bills. The concern is that
this is an election year, and the AARP and the Clinton
Administration are against this. Since the Administration would
veto the amendment if we passed it, why go the extra mile, stick
our necks out, and get whacked again at election time? That's the
politics of it. That's what we are up against in Congress.
I'll conclude by saying that I don't think there's anything more
fundamental to American freedom than the ability to provide for
yourself or your loved ones when your health or your life are at
risk. It seems to me that when Bob Moffit talks about the doctor
treating his mother in exchange for an apple pie, he puts it in
very stark and personal terms. If you can't take care of your loved
ones, except through the government monopoly health care program,
then you've lost a basic freedom. And if we don't fight for this
freedom, we are likely to find ourselves on a slippery slope toward
losing similar freedoms.
Given this Administration's desire to continually expand the
coverage of the government entitlement health care programs, they
will eventually turn an entitlement into a monopoly program. It
won't be just senior citizens; eventually, it will be everybody.
That is the kind of government control that the 1993 Clinton health
care bill would have established.
Whether we're talking about taking care of mom for an apple pie
or providing for ourselves in any other case in which our health or
the health of our loved ones might be at stake, this principle is
worth fighting for. Conservatives have to work together to carry
the message out to the hinterlands.
This issue is a very popular one. Just this weekend, I appeared
at a couple of events, and people-a lot of people-came up to me and
talked about this matter of Medicare private contracting. My Senate
colleagues tell me the same thing every Monday or Tuesday after
they've been out talking to their constituents as well.
So this is an issue that is well understood by the people of
America. And it's also probably well understood by the Clintons.
That is why they are so desperate to hold onto what they have
temporarily won-and why we have to take it back.
KENT MASTERSON BROWN:
Before I go into my brief remarks, let me publicly thank you,
Senator Kyl, not only for your courage in this fight, but also for
your wisdom in it. This is a moral issue. There is serious denial
of care out there. People who are on Medicare understand that this
is not an issue just for wealthy Medicare beneficiaries who want to
go out and get so-called Cadillac care. This is an issue that
affects every single Medicare beneficiary, across the board and
across the country.
I represent the United Seniors Association as special counsel. I
represent that organization for the purpose of filing an action and
prosecuting an action challenging the constitutionality of Section
In any lawsuit, a court must find that there is true case or
controversy before it will address constitutional issues. It only
addresses real, live issues, not imaginary ones. It doesn't render
advisory opinions. In any lawsuit of this magnitude, therefore, one
has to show that this is a live issue; that there is a serious
problem, case, or controversy which the court must address. We have
been able to demonstrate, in this case, the serious denial of care
in the Medicare system. Let me just explain it to you in everyday
Medicare was enacted in 1965. When it was enacted, the law had
several preamble provisions: Sections 1395, 1395(a), and 1395(b) of
Title 42. Those preamble sections simply said that Medicare would
guarantee the choice of provider to every Medicare beneficiary;
that it would guarantee even the choice of insurance coverage-that
beneficiaries could get any insurance coverage they wanted, even
self coverage; and, finally, it would guarantee that the United
States government would not interfere in the practice of medicine,
even with the compensation of health care providers.
Big Medicare Changes
As we all know, in the years since 1965, things have changed
and Congress has repeatedly amended the Medicare law. Principally
in 1986, it amended it in a staggering way.
When first enacted, Medicare was nothing more than any other
insurance program. There were certain "excluded services" that
Medicare would not cover under any circumstance. They are small in
number: some physical exams, orthopedic shoes, things like cosmetic
surgery. Everything else was considered a "covered" service.
Medicare would reserve the right to adjudicate whether or not it
would pay for these services.
Those have all been codified in the Current Procedural
Technology (CPT) codes used to categorize medical procedures for
billing purposes. There are some 7,400 CPT codes, each covering a
different medical service across the entire spectrum of medical
specialties. Medicare will cover those, but only when Medicare
thinks they are "reasonable" and "necessary." That determination is
made only after a claim is filed. These 7,400 services are services
that every one of us in this room would potentially want if we
became ill or if we were hurt.
The United Seniors Association, in this lawsuit, has
concentrated its attack here because here is where we see the
denial. One might ask, "Well, where is the denial? If Medicare
doesn't want to cover a service, I guess it's okay." Up until 1986,
if Medicare did not actually pay for a service it covered, and said
it was "unnecessary," the physician could simply bill for it and be
paid by the beneficiary for it.
In 1986, however, Medicare changed. The statute was changed by
Congress to read as follows: If a physician provided a service that
Medicare ultimately determined to be unnecessary, the physician
then would have to reimburse the patient. If he was a
"nonparticipating" physician, he billed the patient directly. If he
was a participating physician, then the physician was barred from
billing that patient unless the physician had what was called an
Advanced Beneficiary Notice (ABN). The patient had to sign off on a
sheet that, in effect, said, "The doctor told me this is likely not
to be considered necessary. I agree to pay for it myself." If it is
executed in that manner, then the patient can pay the doctor.
You might say-as HCFA has repeatedly said-that "If a service is
found to be unnecessary, they can always get an Advanced
Beneficiary Notice." Well, can they? The answer is, you cannot use
Advanced Beneficiary Notices routinely. And the reason for that is
that Medicare reserves the right-in three different instances-to go
after the physician who performs services that Medicare deems to be
You might think that if Medicare is deeming all these services
to be unnecessary, maybe they ought not be done. But Medicare's
standards for medical necessity are not the same as the standards
of care physicians use across the board.
Let me give you an example. A patient wants a prostate screen, a
prostate specific antigen (PSA) test. Can a patient go into a
physician's office and have the physician recommend that this test
be done to him every year? No. Why? Because Medicare won't pay for
it every year. Can patients go in and get diabetes tests? Serum
glucose tests? Tests for all sorts of other diseases of aging? No,
they cannot, because Medicare won't pay for them under those
circumstances. Only when there are symptoms will Medicare pay.
Yet physicians across the board routinely recommend that
patients get these tests in order to protect their lives and their
health. It has gotten so bad with respect to screening and
laboratory tests that the Office of the Inspector General of HHS
issued a warning as of March 7, 1997, in which the IG said that,
even though physicians and beneficiaries want screening laboratory
tests, physicians who perform them without diagnoses will be
subject to civil monetary penalties. After the 1996 enactment of
the Kennedy-Kassebaum Bill, a physician could be fined up to
$10,000 per instance.
In the face of all of this, is a physician going to perform
these services? Absolutely not.
The plaintiffs in this case have averred that they want these
kinds of tests for hyperthyroidism, hypothyroidism, diabetes,
prostate specific antigen tests, the whole gamut of them, as well
as other medical services, and they want them in a manner that the
doctor is free to give them. Their physicians have testified that
they cannot give these tests, and they cannot give other services
as well, because if a physician performs a service that Medicare
deems unnecessary-even though he may have had an Advanced
Beneficiary Notice-if he performs it again, it is considered
possible fraud, even though that physician believes it is medically
There is the denial. The denial is serious and demonstrable.
We have challenged Section 4507 because it violates the very
liberty interests that Senator Kyl was talking about. These are
embodied in the First, Fourth, Fifth, and Ninth Amendments to the
Constitution of the United States. This liberty is as fundamental
as any right there is: your right to deal directly with a doctor.
What other rights are worthwhile if you are sick? This has to be
the most fundamental of all your rights.
Does Congress have the power to legislate in this field? Does
Congress have a police power? No. Congress only has powers
enumerated under Article 1, Section 8, of the Constitution.
Historically, the Supreme Court of the United States has said that
if any entity is to regulate health care, it is the states.
So we allege that Article 1, Section 8, and the Tenth Amendment
are being violated by Section 4507 of the Balanced Budget Act of
1997. Further, we allege that it denies seniors equal protection of
the laws. The reason: If you are 65 years old, you cannot get a
physician to perform one of these services and have him bill you
directly. Yet, if you were 64 years and 11 months old, you
We filed a lawsuit (United Seniors Association v. Shalala) on
December 30 of last year after a vigorous briefing schedule. The
initial case was argued before federal judge Thomas Hogan in the
United States Court House here in Washington. We lost, and are
appealing the decision.
But in his ruling, Judge Hogan finds certain interesting things.
First of all, in his opinion of April 14, he says that both
parties-HCFA and United Seniors Association-substantially agree
that the two-year restriction on physicians who enter into
contracts represents "a substantial barrier to the receipt of
contracted services." So he finds there is harm.
He also finds that Medicare is the only primary health insurance
available to seniors. And, of course, it is. Who else can compete
with the federal government program when it's subsidized to the
extent of 80 percent of its expenses? Practically speaking, seniors
have no choice.
He then finds that the regulations and interpretations by HCFA
further limit patients' rights not only to services, but also to
the physicians of their choice. This is denial.
But then he says that the Supreme Court has declined to extend
the right of "autonomous decision making" beyond certain limited
contexts involving child-rearing, education, family relationships,
procreation, marriage, contraception, and abortion. This federal
district court, he says, is not inclined to create any "new areas
of Constitutional protection" because it thinks that the lower
courts should not be in a position to do that.
Is this a new area of constitutional protection? I hardly think
so. Like Senator Kyl, I think it is the most fundamental of all
rights embodied in the Constitution, and it was reserved to us, the
people of the several states, when we ratified that
What's next? We filed an appeal to the United States Court of
Appeals for the District of Columbia Circuit. Many disparate
groups, I am proud to say, are filing briefs amicus curiae in
support of the plaintiffs, and other medical specialty societies
are considering filing briefs in support of the plaintiffs and the
appellant in this major case. The case obviously is going to get
hotter as it goes higher. But we have every intention to take this
all the way to the end.
J. EDWARD HILL, M.D.:
On behalf of the American Medical Association's 300,000
physician and medical student members, I want to thank The Heritage
Foundation for this opportunity to talk about ensuring physician
choice for our nation's seniors. I hope my comments will help clear
the air about what is at stake in this Medicare freedom to contract
First, private contracting is about physicians and patients
mutually agreeing not to submit a claim for Medicare covered
services. Why is this a problem? Because HCFA has consistently
interpreted Medicare law as requiring physicians to submit claims
for all Medicare services provided to patients. In so doing, HCFA
has historically taken the position that our Medicare patients were
to be prohibited from entering into private contracts with
physicians, unlike participants in every other federal health
HCFA officials have very recently claimed that physicians have
never been required to submit a Medicare claim if the patient
simply refused to authorize a claim-for example, where a patient
does not want information about mental illness or HIV/AIDS
disclosed to anyone. However, there were no official Medicare
instructions stating this policy until carrier instructions were
issued early in 1998, and even those are far from clear.
Physicians cannot afford to take risks as to what is and is not
HCFA's policy. In fact, Medicare instructions since 1991 said that
physicians who fail to submit claims "are subject to sanctions,
including civil monetary penalties of up to $2,000 per violation
and exclusion from the Medicare program."
Senator Jon Kyl tried to remedy this problem by offering an
amendment to the Balanced Budget Act of 1997 that would have
permitted private contracts if certain conditions were met.
Unfortunately, this language was changed in the conference
committee to read that if even one Medicare patient privately
contracts with a physician, then that physician cannot see any
other Medicare patients for two long years.
The AMA believes that this law is unfair to patients,
discriminates against seniors, and ought to be changed. We believe
the Medicare Beneficiary Freedom to Contract Act is the answer.
This bipartisan patient-choice legislation, introduced by Senator
Kyl and Representative Bill Archer, would repeal the two-year
lockout. But opponents of the bill are using scare tactics and
making misleading statements about the new legislation.
It has been alleged that private contracting will create a
two-tiered system as physicians and the more affluent elderly opt
out of Medicare, leaving regular Medicare a welfare program for the
elderly. The truth is that the Medicare system is already
multi-tiered. For example, due to Medicare's hodgepodge of payment
rates, some beneficiaries have access to much richer plans than
For the poor elderly, access to service differs from state to
state due to variations in Medicaid payment rates. Congress, in the
Balanced Budget Act, partially addressed the first of these
problems. But the Balanced Budget Act actually worsened the second
problem by gutting the requirement that state Medicaid programs pay
the Medicare co-payments for these "dual-eligible" beneficiaries.
Ironically, the same groups now professing concern about two-tiered
medicine declined to join the AMA in its battle against this
misguided dual-eligible provision.
Experience with Medicare's risk-contracting program has shown
that seniors are good health-care bargain hunters. The popularity
of point-of-service plans shows that many people are willing to pay
more in order to receive care from the physician of their
In the same way, some patients just entering Medicare might want
to continue treatment with a physician who has chosen not to
participate in the Medicare program. Others, faced with a
threatening medical condition, may want to seek care from a
recognized expert who does not accept any new Medicare patients.
Under current law, these choices would be impossible.
Fictional "Fraud" Scares
Here's some more fiction: Private contracting will result in
confusion, double billing, and outright fraud. Well, here's the
truth: The Kyl-Archer legislation includes important patient
protections which would ensure that seniors understand the
obligations they are entering into.
Any private contract would clearly identify the professional
services to be covered; it would have to be in writing and signed
by both parties. Potentially fraudulent billing practices could be
detected and punished through a combination of specific provisions
in the Kyl bill and existing fraud and abuse laws. The bill, for
example, also requires physicians to supply information to ensure
that Medicare makes no payments for services provided under a
private contract. If Medicare did pay for services covered by the
private contract, the patient would receive an explanation of
Medicare benefits and could notify Medicare's fraud hotline.
The bottom line is: Put patients back in charge of their health
care by giving them the choice to spend their own money if and when
they see fit. In a country whose founding principle is individual
liberty, the AMA believes the answer for our Medicare patients is
the Kyl-Archer legislation.
QUESTIONS AND ANSWERS
I manage a medical equipment company that serves the entire
Washington, D.C., metro area. When doctors prescribe equipment in
the home, families often are surprised to find out that they might
have to pay for the equipment because Medicare may not cover it. A
lot of people just can't afford this equipment and say they don't
Who really is calling the shots, doctors or patients who have no
means of paying for this equipment? We have a lot of citizens
withering away at home. Are there any provisions to make changes
here? I hate to get off track, but when we're talking about
Medicare reform, we have to address these issues as well.
This is an area where there is a demonstrated denial; it's
called self-denial. It happens every day. It happens across the
country. But there are really two aspects to the denial.
One is when the physician tells the beneficiary, "I don't think
Medicare is going to pay for this, but you can sign an ABN and pay
for it yourself." Many patients say, "Well, I just don't want it."
On the other hand, there are circumstances where the
physician-and this is very difficult to show in a hearing-feels
that Medicare will deem something unnecessary even though he may
believe it is appropriate for the patient. He doesn't bring it up
because if he did, he would have to ask the patient to sign an ABN,
and he already had a couple of ABNs signed like this the week
before. Is this doctor now going to be subject to civil monetary
penalties of up to $10,000 per instance for having yet another one
Frankly, the private contract, where both parties feel much
freer, is the answer. We're never going to stop somebody from
saying, "I don't want it because I don't want pay for it." But we
can at least free up the doctor to say, "Listen, I think you ought
to get this service or medical treatment."
Do we have a problem with HCFA's telling people different
things, depending upon which argument they wanted to win on a
Yes, and let me underscore this. I think one of the greatest
benefits of this entire dispute is that it has drawn HCFA's way of
doing things out into the sunshine more so than ever before.
Let me give you a great example. I was part of the legal
challenge to open up private contracting in Medicare in the 1992
case of Stewart v. Sullivan. There, the federal court judge found
that he could not find any "clearly articulated policy prohibiting
private contracting." Consequently, we declared victory, and Dr.
Lois Copeland, my client, and her patients began to contract
In 1993, HCFA decided to amend its massive Medicare Carriers
Manual by putting in Section 3044, an ambiguous provision-I can't
even figure it out-that is supposed to say something about private
contracting. HCFA has tried to let everybody know that because of
that provision, you cannot privately contract and "you have never
been able to."
In 1995, Thomas Ault, the Director of the Bureau of Policy
Development of HCFA, wrote a letter to James Pyles, a lawyer friend
of mine here in Washington. Pyles had made a direct inquiry on
behalf of a medical specialty society: "Can my physicians privately
contract with their Medicare beneficiaries?" Thomas Ault, in August
1995, responded emphatically that if a beneficiary does not want to
file a claim, a beneficiary does not have to, and you can privately
In August 1997, however, when the Kyl Amendment was being
considered, this same Thomas Ault came along and said, "Private
contracting has always been prohibited." When I was arguing the
case of United Seniors v. Shalala, the Justice Department responded
that we weren't addressing the congressional history of it. "The
hell with the congressional history," I said. "Here's a good
example: Do you believe Thomas Ault in '95 or do you believe Thomas
Ault in '97?" The problem is that HCFA will say whatever it wants
to say, depending upon the audience.
In the Stewart v. Sullivan case, we noted that the Medicare
carriers-the private insurance companies that contract with HCFA to
administer the program-were sending out bulletins threatening
physicians who entered into private contracts with fines and
penalties. Seeing all these bulletins, which all read alike in
every region of the country, we filed for a declaratory judgment,
asking the federal district court in New Jersey to declare our
rights. Did we have the right or not?
HCFA, through the Justice Department lawyers, orally told the
court that they had no idea where these bulletins had come from.
They disavowed any knowledge of being behind the publication of
those bulletins. The federal district court said as much in the
If you think this is confusing to the people who study this
issue all the time, imagine the fear of the doctor out there in the
middle of the country taking care of a lot of Medicare patients.
He's seeing 30 or 40 people a day, trying to take care of patients
and trying to interpret the directives from the Medicare carrier,
which often are contradictory.
That inspires tremendous fear among physicians, because they
don't know what they're supposed to do or not supposed to do under
all these unclear statutes. Doctors should not need to spend their
time worrying about how to interpret these complicated
Dr. Hill, is there a serious amount of denial of service?
Looking at it from a standpoint of principle, I think even one
case of denial is serious. But I don't think it's rampant out
Let me add an important point. The other side in this debate
argues two contradictory things: One is that allowing Medicare
private contracting will destroy Medicare, and two is that there is
no problem. You can't have it both ways.
The truth is that there has not been much of a problem in the
past, but if we continue current Medicare policies, there will be a
pretty big problem in the future. That's because of three things.
Number one, the Medicare reimbursements to the doctors are going
down. They are not keeping pace with what the doctors need to cover
their real cost. Number two, the bureaucratic paper work
requirements for Medicare patients are substantial now. Number
three, there is the real prospect of criminal prosecution in the
event that you don't dot your i's and cross your t's properly.
There's a lot of confusion concerning the various coding
requirements, and these complex statutes really create an
atmosphere of fear among physicians, as Dr. Hill pointed out. So
the reality is that more and more physicians, particularly
specialists, are less and less inclined to take on new Medicare
patients. I think it will increasingly become a problem. That's why
private contracting is going to be a much more important right in
the future than it has been in the past.
Gentlemen, let me just add one more observation. The baby boomers
are looming. They are 77 million strong. The generation that
brought you "sex, drugs, and rock and roll' is not likely to put up
with all of the bureaucratic edicts coming from HCFA. On that
score, the future is bright.
Bob, congratulations for finding Section 4507 buried in the
Balanced Budget Act. When the United Seniors began talking about
what could happen the way the law is written, HCFA started
translating the law to satisfy everyone, to shut them up and pacify
them. Who knows how HCFA would have interpreted Section 4507 if
United Seniors and various groups hadn't complained? Can the actual
law apply to all Americans as it is written?
No, it's specific to Medicare. That's where it rests.
I want to go back to the earlier question about denial of care.
As I told Senator Kyl, this is one of these things that's hard to
demonstrate in a congressional hearing. First, most patients don't
know, and second, the doctor hasn't said anything, obviously. No
patient is going to get up there when he "self-denies." So, in
those two circumstances which form the bulk of this problem, we
really don't see the thing demonstrated in front of your face.
When I was asked to file this case, some 52 active members of
the United Seniors Association wanted to be plaintiffs. After some
discussions, I narrowed the group down to four people. I had never
met them, and I asked them some serious questions about their
health and what they wanted.
All of them indicated to me that they wanted certain explicit
screening tests to be done every year. They were in varying states
of health, from very good to very poor. One of them is a cancer
patient. And when I asked them about that, they all said, "Yes, we
want all those screens because we've seen some of our family die of
diabetes. We know that when it is finally discovered, it's usually
too late. We want to make sure that we catch it very early."
Then I got on the phone with all their physicians, also people I
had never met. They were scattered all over the country, from
Washington State to Florida. And I asked them, "Doctor, this lady,
who is your patient, has authorized me to talk on her behalf and
she wants these screens. Will you give them?" Every one of them
said, "I'm afraid."
That shows a serious problem, but I think it's a potentially
difficult one to demonstrate, or to show its magnitude, because of
the way in which the system functions or the way in which doctors
remain silent simply for fear. But here, every one of the nine
physicians who handled those four patients said, "I'm afraid."
Of what, specifically, are they afraid?
They are afraid to give the diagnostic screens without having
an explicit symptomology for fear of being sanctioned.
Can anyone on the panel comment on what the impact will be on
malpractice issues if you don't do the screen and somebody comes up
I assume you could be sued for malpractice.
You can't say, "Well, HCFA told me I couldn't do it?"
Imagine that defense. It's a non-defense. The doctor is faced with
a Hobson's Choice. That's why in many instances, the doctor just
doesn't say anything.
Mr. Brown, your opponents argue that seniors do have a choice;
they can dis-enroll in Part B and then privately contract. I'm
wondering how you view the statutory language defining a Medicare
beneficiary for purposes of Section 4507. Is it someone enrolled
with Part A or Part B?
A lot depends on how HCFA wants to interpret that. Until HCFA
actually tried to clarify this after the debate became hot, HCFA
could have tried to interfere even with doctors performing
Your view is that there really isn't a practical alternative to
Medicare because there isn't a private health care market for
So it's a hollow argument, anyway. But does the argument hold
up at all if, in fact, HCFA interpreted the language of the law to
say, well, sure you can dis-enroll from Part B, but if you're still
in Part A, you're still covered?
Sure, you're covered by Medicare. You're absolutely covered by
Medicare. Part A is mandatory, and Part B is almost mandatory in
the sense that you have to go through some incredible hoops to get
out of it.
Suppose that a beneficiary could just opt out of Part B and then
did so in order to contract privately. Believe it or not, HCFA has
already advanced that argument. The problem, as Judge Hogan noted,
and as we've argued, is that is no option. To say to a patient, or
to any person, that you have to give up the only benefit that is
available in this country for coverage in order to privately
contract is not a choice at all.
Not a court in the land-and there have been multiple cases where
they have talked about standing-would say there is no harm where
one is forced to give up a benefit like this in order to do
something. Every court has thus far interpreted that to be a denial
serious enough that they could get to the merits of the case. So,
in that case, it's a denial because it's the only thing
Senator Kyl, you said the resolution of this issue is
important to the future of the country. In terms of the private
contracting issue itself, did I interpret you correctly as saying
that this debate represents the ability of one side or the other to
use the federal entitlement system to control things that they
otherwise could not control under the Constitution?
Yes. My concern is that this is literally the camel's nose under
The federal government has created an entitlement to health care
for a group of Americans. Then, after they become part of the
system, it dries up any other alternatives for a Part B coverage,
for example. It then creates a monopoly, and the bureaucracy says,
"Well, it's not only that you are entitled to take advantage of
this government program if you are a senior, but now we decree that
it is this program or no program. It's Medicare or no care." And
then they say, "By the way, we're going to invite everybody from a
certain age to become part of it." The Clinton proposal is to add a
new class of eligibility, starting at age 55.
Please recall, I quoted the section from the Clinton health care
proposal of 1993 that does in fact expand this type of restriction
to everybody in the country. So I think you will see the gradual
application of this same principle to every other government
entitlement program. That is why it is so important to nip this in
the bud right now.
Congress has acknowledged the economic trouble of Medicare. There
is also this fear of erosion of Medicare. How does that play into
the politics of this?
Probably the biggest argument against Medicare private
contracting, after the fraud argument, is that the net result could
be the erosion of Medicare. There are virtually no physicians
denying anybody care. This is just not something for us to worry
Then our opponents say that this will ruin Medicare because, as
soon as doctors figure out they can do this, they're going to tell
every one of their patients with any money, "Sorry, I can't treat
you under Medicare, but if you'll privately contract with me, I'll
be happy to take your money." Therefore, Medicare will be
destroyed. There won't be any more Medicare program, and the doctor
will have effectively created a direct fee-for-service, private
That's the concern-after they cite the GAO study that says that
this is not a problem. That GAO study does note that there are hot
spots in the country where this is a problem. So I think they try
to have it both ways. But to answer your question, that's what our
opponents say will happen if this right to privately contract
The way the Medicare program is going, with the many problems
that the government has created for the participants in the
program, it wouldn't surprise me that more people are going to want
to privately contract. The obvious answer, of course, is to clean
up the program. Private contracts then would simply be a safety
valve, in effect, for people to use if they needed to.
I'd like to know if we could ever get an accurate accounting
of the hundreds of millions of dollars that Medicare spends just
adjudicating these medical "necessity" claims.
Let me give you an example. One of our plaintiffs in the case of
United Seniors Association v. Shalala was a cancer patient from
Seattle, Washington. Several years ago, her lymphoma was
discovered-using an asymptomatic screen by her internist, by the
way, which is why she's still living.
There is a history of cancer in her family, and she wanted a
mammogram. This is before Congress had amended the benefit. She
wanted a mammogram, but she had had one less than a year before.
Her doctor, an old friend, said, "Well, it's probably going to be
determined unnecessary, but I'll go ahead and give it to you."
They filed a claim, as HCFA demands. The claim was filed with
the Medicare carrier in Fargo, North Dakota. The Medicare carrier
wrote to the patient and to the physician, as the statute requires
them to do, telling them that the service rendered was "medically
unnecessary" and that the patient should not pay the doctor. The
doctor was a "participating" physician.
The patient got upset and wrote back to the Medicare carrier in
Fargo: "How can you possibly tell me to do that? This man has saved
my life more than once. I believe in him. I believe I need it."
They wrote a letter back saying, "I'm sorry you feel that way, but
you are not to pay that doctor." They managed to get a big heap of
correspondence going between Fargo, North Dakota, and Seattle,
Washington, where the service was rendered.
Finally, after multiple conferences back and forth and a written
statement by the doctor, Fargo consented. If this is happening to
one person-and by the way, this has happened in multiple
circumstances with this husband and wife who are plaintiffs-with
this carrier, think of the 38 million Medicare beneficiaries across
About 24 percent of all Medicare Part B claims are denied
Many, if not most, of these are denied as "medically
The point of Senator Kyl's bill is that it shouldn't matter. If
a doctor wants to provide the service and the patient is willing to
pay for it, Medicare should be delighted, just as a private
insurance carrier would be delighted that it's off the hook.
Instead, we are spending untold millions of taxpayers' dollars
denying claims and then trying to pursue the doctor for providing
I've been involved in at least 42 of those kinds of cases, and
never once in my experience has a doctor ultimately been found
guilty of providing a service that's unnecessary. Doctors are good
people, generally speaking. They do have the best interests of
their patients in mind. And when push comes to shove, they