HOW DID THIS HAPPEN?
As
the above analysis demonstrates, Medicare patients are uniquely
restrained by the federal government from benefiting from the
availability of health care choices in today's market. The
judicially determined exception to the restriction preventing them
from spending their own money to have a doctor perform a lawful
medical service that they want--if that service is covered under
Medicare--can be obtained only through an arcane administrative
process governed by HCFA. This stranglehold on the doctor-patient
relationship is the result of a combination of legislative,
regulatory, and judicial decisions.
During the summer of 1997, under the
threat of a veto, the House-Senate conference committee on the
Balanced Budget Act of 1997 added Section 4507 as an alternative to
an amendment offered by Senator Jon Kyl (R-AZ). Senator Kyl offered
his amendment to clarify the rights of seniors enrolled in Medicare
to contract privately with their physicians.
Clinton Administration officials and their
supporters in Congress attempted to portray Section 4507 as an
exception to a HCFA "policy" against private contracting, which
HCFA had invoked even though a federal district court said, in the
case of Stewart v. Sullivan (1992), that it could
find no such "policy." As John Hoff and
others have noted, however, Section 4507 was promoted as an
exception to what was in fact a nonexistent "policy." During litigation
on the provision, the Administration's lawyers conceded that
Section 4507 was not a real "liberalization" of private
contracting, but rather a statutory construction that made such
private doctor-patient agreements virtually impossible.
After the BBA was enacted, the
conservative United Seniors Association filed suit in the U.S.
District Court for the District of Columbia to strike down
Section 4507 as an unconstitutional violation of fundamental
liberty and privacy rights. In April 1998, the court, while
expressing grave concerns about HCFA's regulatory power to limit
Medicare patient choices, nonetheless upheld the constitutionality
of the statute. Judge Thomas Hogan declared in his ruling that
The
Court does not pass judgment on Congress's wisdom in passing
Section 4507. The Court's role here is solely to determine whether
the United States Constitution confers a fundamental right on
individuals to contract privately with their physicians. The
Court finds that it does not.
Surprised by this decision, several
medical societies and patient groups, as well as the Washington
Chapter of the ACLU, joined the United Seniors Association in
appealing the case (United Seniors Association Inc. et al.
v. Donna Shalala) to the U.S. Court of Appeals for the
District of Columbia Circuit. The plaintiffs and their amici
curiae argued that Section 4507 was a profound violation of the
right of Americans to obtain "wanted medical treatment." The ACLU
and the other amici observed in their legal brief that this
"right is so fundamental that it has not been previously
questioned, nor has it required articulation."
Oral
argument in the appellate case was heard on October 23, 1998. The
Court of Appeals decision clarifying the conditions under which
doctors and patients may make private agreements was rendered July
16, 1999.
Practical Consequences of the Judicial
Intervention.
The Court of Appeals, while not addressing the broader question of
the constitutional right of citizens to make such private
agreements with doctors, did specify in 1999 a set of conditions
under which such arrangements could be made. After months of
controversy and confusion, generated primarily by the clumsily
drafted statute and HCFA's tortuous policy agenda, the Court of
Appeals ruling provided some relief to doctors and patients who
wish to enter into private agreements.
The
Court clarified that legal restrictions apply only to covered
services, that doctors and patients could use a regulatory process
to secure private agreements where Medicare might not pay for a
service, and that doctors using it would be free of fraud and abuse
sanctions. Says attorney John Hoff,
The
Court's decision thus permits Medicare beneficiaries and their
doctors to privately contract where Medicare will not pay, but
under a cumbersome process that still holds some risks. HCFA's last
minute weaving and dodging has again avoided a knockout of its
policy, but it has suffered more of a body blow than previously.
A
Cautionary Word.
Doctors and patients, and taxpayers in general, should not read
into this Court of Appeals decision more than is there. As a matter
of law and as a matter of fact, American senior citizens still do
not enjoy the right to make private agreements with their
physicians freely the way all other Americans do. Worse, they have
less personal freedom in Medicare than their British counterparts
have in the British National Health Service (NHS). Although they
manage and finance an explicit system of socialized medicine
established in 1948, British officials at least recognize the
legitimacy of private contracts outside of that system as a normal,
noncontroversial exercise of fundamental personal liberty. In the
unique case of the Medicare system, American officials do not.
The Administration's Arguments
During oral arguments in the case before
the federal Court of Appeals on October 23, 1998, Thomas Bondy, the
Clinton Administration's lawyer, was subjected to intense and even
hostile questioning by the three-judge panel. Remarkably, in spite
of the fact that the plaintiffs had challenged the
constitutionality of Section 4507, the Administration did not
attempt to meet the constitutional objections. In his presentation,
Bondy simply ignored--as the Court of Appeals pointedly noted in
its questioning--the fundamental challenge posed by the senior
citizens. Indeed, under the
Court's interrogation, Bondy was at a loss to cite any
constitutional basis, either in the Commerce Clause or in the
spending power, for a congressional intervention such as this one,
which prevents Medicare enrollees from spending their own funds on
medical services outside of Medicare.
In
defense of Section 4507, counselor Bondy, like the Administration's
lawyers in the federal District Court case, advanced ideologically
driven and logically contradictory arguments on two fronts.
The Case for a Closed System.
The Clinton Administration's first argument in the appeals case
was that the Medicare law was designed by Congress in 1965 to
prevent a "two tiered" system of medical care for senior citizens.
In effect, the Administration argued, Congress had intended all
along to set up a single-tiered system of medical care for the
elderly in which all would get the same treatment, presumably the
same medical care, regardless of their willingness to go outside of
the system and pay privately for medical services.
This
argument is, however, incorrect. With the historic exception of
Section 4507 of the Balanced Budget Act of 1997, there is no
statutory obstacle to private contracting between doctors and
Medicare enrollees and nothing explicit in the Medicare law that
supports Medicare's construction as a closed, single-tiered system.
The opposite is true. In 1965, among politicians and policy
analysts on the left, Medicare was envisioned as the first
installment of a "single-tiered," national system of government-run
health insurance; but the law, with its limitations and
modifications, fell far short of that objective.
As
Jane Orient, M.D., executive director of the American Association
of Physicians and Surgeons, has argued, Medicare would never have
been enacted if Americans thought for one moment that its enactment
would mean not simply help for the elderly, but a system of
"compulsory dependency" on a government health care program in
which retired Americans would be legally forbidden from spending
their own money on "medically necessary" services. In fact, the
original Medicare law explicitly forbids the federal government to
exercise "supervision" or "control" over the practice of medicine,
and Medicare patients are explicitly protected in their right to
purchase medical services and the insurance to cover those
services. As far as private
contracting is concerned, notes Hoff, "Private contracting in
effect took place from the earliest days of Medicare but was not
considered a problem."
Not
surprisingly, the Court of Appeals greeted the Clinton
Administration's single-tiered system argument with palpable
derision. Citing the common example of Americans, including senior
citizens, who obtain better seating from airlines by paying more
for those services, the court told the Administration's lawyer that
it did not want to hear this ideological argument for a
single-tiered Medicare system again, and the Administration backed
off.
The Paperwork Process.
The second legal argument advanced by the Clinton Administration
was that doctors and patients could resort to an Advanced
Beneficiary Notice (ABN), a form given by the doctor to the patient
notifying him that Medicare is not likely to pay for the medical
service, and by which the patient agrees to pay the doctor
privately if Medicare does not. This use of an ABN would enable
doctors and patients to circumvent the restrictions imposed by
Section 4507, restrictions that otherwise would force a doctor to
drop out of Medicare for two full years.
Curiously, the Administration's argument
for the viability of an ABN as a means to secure a doctor-patient
agreement on private terms was a logical contradiction of its
collectivist plea that the Medicare system was, and was intended to
be, a single-tiered health care system in which the undeserving
"rich" would be forbidden to buy medical services on their own.
Attorneys for the United Seniors
Association and their amici, including the Washington
Chapter of the ACLU, argued that resorting to an ABN was no
protection for a private doctor-patient agreement because routinely
resorting to ABNs for medical services that Medicare deems
"unnecessary" had been grounds for Medicare to charge doctors with
fraud and abuse for dispensing "medically unnecessary" services.
Thus, the plaintiff's attorneys noted, if a doctor were to resort
routinely to using an ABN, he would risk prosecution for fraud and
ruination of his professional career.
The Administration's Regulatory
Retreat.
During the October 23, 1998, interrogation by the Court of
Appeals, the Clinton legal team put even more reliance on the ABN
approach to ward off the plaintiff's arguments that the
restrictions would deny seniors "wanted" care. On November 2, 1998,
10 days after the oral arguments inUnited Seniors
Association et al. v. Shalala, the Secretary of HHS
promulgated new regulations to clarify the use of the advanced
beneficiary notice.
The
November 1998 HCFA regulations accomplished two policy objectives.
First, they confirmed ex post facto the second major
argument advanced by the Administration's legal team in the federal
Court of Appeals: that physicians henceforth could rely on an ABN
process to secure private payment for medical services under
certain specified conditions. Second, they led the court to say
that physicians previously threatened by prosecution for fraud and
abuse for the routine use of ABNs should no longer worry; the
Clinton Administration could not recommend that doctors use ABNs
and then use this against them in fraud and abuse
investigations.
In
the preamble to their November 2, 1998, regulations, HCFA officials
state that the physician may use an ABN wherever the doctor
"believes that the service will not be covered by
Medicare." This was a serious
clarification; it formalized a subjective standard of the doctor's
belief as the legitimate basis for using the ABN. The regulations
also clarified another key point: The use of an ABN will neither
require a doctor to drop out of Medicare for two years nor invite
punitive action against the doctor for fraud:
Physicians and practitioners should not
hesitate to furnish services to Medicare beneficiaries when the
physician or practitioner believes that those services are in
accordance with accepted standards of medical care, even when those
services do not meet Medicare's particular and often unique
coverage requirements.
This
was a remarkable development. As Kent Masterson Brown, attorney for
the plaintiff United Seniors Association, remarks, "This is the
first admission ever by the Secretary that the Medicare program's
bureaucratic dictates do not necessarily represent accepted
standards of medical care for the provision of health care services
to the elderly."
THE APPELLATE COURT'S DECISION
The Good News
In
the Appellate Court litigation, opponents of Section 4507 sought,
but did not get, general relief from that law through judicial
review. But United Seniors Association members Toni Parsons, Peggy
Sanborn, and Ray and Margaret Perry did seek and receive specific
relief from the limitations of Section 4507. They argued that they
were, in effect, being denied medical services because HCFA would
threaten doctors with sanctions for providing certain medical
services, such as screening and laboratory tests, that HCFA or its
contractors deemed "medically unnecessary."
Moreover, they argued, physicians who
provided "medically unnecessary" services to Medicare patients
would be subject to government sanctions, such as prosecution for
fraud and abuse and the penalties associated with that prosecution.
As attorney Brown noted,
Screening laboratory tests--those
performed without symptoms--were held by the Secretary's Inspector
General to be always "not reasonable and necessary." Doctors were
warned not to order them even though many of the killer diseases
afflicting the elderly, such as diabetes, hyperthyroidism,
hypothyroidism, prostate cancer and the like, often have very long
asymptomatic periods. If Medicare beneficiaries could not contract
privately with their doctors for such services, they would be
denied them altogether.
Thus, by virtue of their draconian
restrictions on doctors' ability to contract privately with their
patients, HCFA's policy and Section 4507 together constituted an
obstacle to these seniors getting the care they wanted.
Confronted with the seniors' argument, the
lawyers for the Administration backtracked, promised to clarify the
legitimacy of an administrative avenue for these seniors to get
medical services privately, and thus secured their right to pay
doctors privately for screening laboratory services and certain
other medical services. In this process, noted counselor Brown, the
HHS Secretary "surrendered" on her previous policy of threatening
to sanction doctors who provided such services routinely through
this administrative process. This was a significant policy change.
In its July 16, 1999, decision, the Appellate Court in effect
clarified the view that routine use of ABNs will no longer form the
basis of fraud and abuse investigations.
While the issue of Medicare private
contracting will continue to be debated in Congress and elsewhere,
seniors should understand the key findings of the Court of
Appeals:
- Section 4507 restrictions on private
contracting in Medicare apply only to services paid by
Medicare. The language of Section 4507 says that its
restrictions apply to "any item" or medical service and suggests,
at least on its face, a broader regulatory reach. The court took
note of the plain language of Section 4507 and observed that the
vagueness and ambiguity of that language justified the skepticism
of the plaintiffs in the case and the critics of Section 4507. Said
the court:
Plaintiff's skepticism is not unjustified.
The meaning of Section 4507 is hardly plain on its face. Moreover,
because HCFA did not promulgate formal regulations on the Section
until ten days after oral argument in this case, its own
interpretation could only be gleaned from memoranda issued to
Medicare carriers and testimony delivered to Congress, of which
Medicare beneficiaries may well have been unaware.
The court went on to argue that, on the
basis of U.S. Supreme Court precedent, it is the custom to defer to
an enforcing executive agency's "reasonable interpretation"
whenever a statute is ambiguous. In this case, the court affirmed
that the Secretary's interpretation--in the face of the vagueness
of the statutory language--was a "reasonable" one, and thus
deferred to it. In this case, the terms of Section 4507, affirmed
by the Court of Appeals, applied only to services paid for under
the Medicare program.
-
If a doctor believes that Medicare will
not pay, whether or not the service is categorically excluded, or
for some other reason, he can enter into a private arrangement with
a Medicare patient and not file any Medicare claim at all. This
avenue for private contracting would hold even if the service was
one for which Medicare requires the doctor to file a claim with the
Medicare bureaucracy.
-
Under certain circumstances, physicians
can avoid Section 4507's requirement to drop out of Medicare for
two years and treat a patient privately through the use of advanced
beneficiary notices without--on the basis of the court's
construction--fear of bureaucratic retaliation. The court,
while conceding that "HHS's past pronouncements have not been
perfectly clear," accords deference to the Clinton Administration's
view, articulated in the oral argument, on the use of the advanced
beneficiary notices. In other words, if a medical service is a
"covered service" but payment might be denied because Medicare does
not consider that service to be "medically necessary or
appropriate," then a doctor and a patient may use an ABN. In using
the ABN, by giving the patient notice in this way, the doctor does
not have to enter into the restrictive private contract specified
by Congress in Section 4507 and drop out of Medicare for two years
if the Medicare claim is denied.
-
In using an ABN under these defined
circumstances, doctors are not only free of the two-year opt out
rule, but also free of the Medicare bureaucracy's bizarre price
controls. Again, a doctor must believe that a service will not
be covered by Medicare because it is not officially medically
necessary. The court, deferring to the Administration's promised
set of regulations issued 10 days after the oral arguments
in the case, declared:
At oral argument, counsel for the
Secretary advised that HCFA was planning to issue formal
regulations incorporating the above stated views. Those regulations
were published on November 2, 1998. See 63 Fed. Reg. at 58, 901.
Consistent with the position recounted above, the explanatory
preamble states that "the private contracting rules do not apply
to...services that Medicare does not cover."' Id. At 58,850. It
further states that when a physician "`furnishes a service that
does not meet Medicare's criteria for being reasonable and
necessary, and the physician has furnished the beneficiary with an
ABN...there are no limits on what the physician may charge the
beneficiary...and the act of providing an ABN does not then
require that the physician opt out of Medicare...." Id at
58,851.... On the basis of our examination of HCFA's announced
views, we conclude that the agency has consistently interpreted
section 4507 and its opt out rules as applying only to contracts
for services that Medicare itself would reimburse.
In this respect, the Court's ruling is
indeed novel.
On
the private payment issue, it is worth noting that HCFA officials
previously have stated that even if a Medicare beneficiary gets
medical services outside of the Medicare program, the doctor
would still somehow be subject to Medicare's price controls. No statute explicitly says
any such thing. In any case, however, this
federal judicial decision and the regulations promulgated in
November 1998 upon which the decision is based amount to a
reversal, or at least a clarification, of HCFA's old "policy" on
the question.
The Bad News
Although the federal Court of Appeals
decision gives doctors and patients a way around Section 4507, it
does not by any means settle the broader policy questions raised by
the provision. Very bad policy is still in place. For example:
- The federal Appeals Court dodged the
fundamental constitutional issue of Medicare patients' liberty and
privacy. In its opinion, the court observed that
The district court found the statute
constitutional and granted summary judgment for the Secretary of
Health and Human Services. We affirm the grant of summary judgment
without reaching the constitutional questions because the
Secretary's recently-clarified interpretation of Section 4507, to
which we must defer, eliminates the injury that is the basis of the
plaintiff's constitutional attack.
Senior citizens who are enrolled in
Medicare still have no constitutional right of privacy in their
relationship with their physicians. Thus, they and their doctors
are left with a legal and moral paradox.
The personal decision to spend one's own
money and refrain from making a claim on the tax dollars of one's
fellow citizens through an entitlement program is a serious one.
Under the terms of the court's decision, a Medicare patient may
contract privately with a physician for a service that is
"categorically excluded" by law from coverage under Medicare. A
Medicare patient may also contract privately with a physician for a
service that is never deemed to be "medically necessary" by the
Medicare bureaucracy or its contractors. A Medicare patient may
also contract privately for medical services that are "covered" by
Medicare but not deemed "medically necessary" in a particular case
and through a prescribed administrative process. But a Medicare
patient is not allowed to contract privately for any medical
services that are covered by Medicare but deemed medically
"necessary." Thus, every Medicare benefit expansion also becomes,
in and of itself, a loss of patient control over the delivery of
medical treatment.
This is ludicrous. Imagine the application
of Medicare's new "patient choice" principles to education policy.
Imagine a teacher who teaches in a public school and also wants to
help children after school through private tutorials. A mother, for
example, with a child in a public school would be legally forbidden
to spend her own money to send her child to that tutor to learn
math and English if the local public school already "covered" math
and English, even if she was morally certain that the trusted tutor
with an excellent reputation could privately provide her child with
superior teaching and better coursework. Moreover, the legality of
the mother's spending her own money on a tutor in a private setting
would be totally dependent on the public school bureaucracy's
determination that the tutor's private coursework was "unnecessary"
or might be unnecessary or was never covered in the public school
curriculum.
In general, such a tutor would be allowed
to provide only "unnecessary" instruction. In any case of doubt,
the tutor would be required to give the parent a form, an "advanced
pupil notice," to the effect that the privately provided coursework
is something that might not be provided or paid for in the public
school setting. In the meantime, the tutor would have to make sure
that any private coursework given to the child was not going to be
judged "unwarranted" by the public school bureaucracy. A constant
occupational hazard for the tutor under such a bizarre system would
be running afoul of the public school bureaucracy's confusingly
complex determinations of "necessary" and "unnecessary" studies or
"warranted" and "unwarranted" coursework.
Applied to medicine, this odd policy will
invite more controversy. For example, Dr. Jane Orient, executive
director of the Association of American Physicians and Surgeons,
observes that, under this appellate ruling, a patient is forbidden
to spend her own money for medically necessary and even
"life-saving" medical services, and Medicare patients must accept
them on "any terms" the Medicare bureaucracy sets for their
delivery. This includes Medicare's complex and cumbersome price
controls or "oppressive regulation," even if those terms include
"lengthy waits" for medical treatment, the use of "outdated
procedures," or being subjected to the skills of "second rate
surgeons."
Medicare patients, now and in the future,
will legally be stuck with only the "quality" of care in the
provision of medical services that the federal bureaucracy gives
them, simply because Medicare "covers" those services. In that
respect, Medicare patients and their doctors are in a far worse
legal position than their private-sector counterparts who are
subject to the contractual restrictions and abuses of substandard
HMOs. The reason: Private patients in HMOs can contract privately
outside of the HMO without legal hindrance.
Therefore, unless they are granted
congressional relief, Medicare patients may not privately seek and
pay for higher quality medical services if those services are
already "covered" by Medicare. They can do so only if the doctor
providing those services were to sign an affidavit and drop out of
Medicare for two full years under the literal terms of Section
4507, which is highly unlikely. Seniors should realize that such
relief is not likely to come through the federal courts. For any
federal court to remedy such a problem, future plaintiffs would
have to show that any denials of a right to seek higher quality
medical services would have to rise to the level of a denial of
constitutional dimensions; and that would be most difficult to
prove.
- The federal Court of Appeals decided to
rely not on congressional intent or on the plain language of the
statute, but on the promises of a federal agency to issue future
regulations to reinterpret the meaning of the law. In trying to
discern the limits of private contracting, at least as understood
by the Clinton Administration, the appellate court decided to rely
on "assurances" made by HCFA in a number of formal and informal
ways, including communications and transmittals, testimony before
Congress, and future promises of regulatory clarification.
This raises an intriguing problem. HCFA is
engaged in an all-out campaign to stop fraud and abuse in Medicare,
and it is targeting physicians and other practitioners who provide
services that they deem "medically unnecessary." In the reliance on
the ABN process, notes John Hoff, the Court of Appeals is telling
the medical community "not to worry" because HCFA officials are
telling doctors to use the process and they cannot, apparently,
also be readying sanctions against doctors who do so:
The Court has used one policy of HCFA to
blunt another. HCFA may not agree with this formulation of its
policy. However, the Court has provided at least a defense against
HCFA sanctions for fraud and abuse. Even then, however, would the
defense be of much use against a Department of Justice
prosecution?
Until Congress eliminates these
conundrums, members of the medical profession labor under a cloud
of uncertainty.
TROUBLING ISSUES REMAIN
Since August 1997, in the debate on
Medicare private contracting, the public has been treated to a
series of bizarre and confusing propositions advanced by HCFA and
its allies. Much of the
confusion can be attributed to desperate attempts to justify a
confusing policy forged behind closed doors in the midst of a major
budget battle, which backfired in the media. As the Court of
Appeals noted during oral arguments in United Seniors
Association et al. v. Donna Shalala, the Administration
misrepresented the case of the opponents of Section 4507 while conceding
that the Medicare patients had no real options outside of the
program for their primary coverage.
In
allowing HCFA to interpret Section 4507, the Court of Appeals
deferred to an agency that for years, as the American Psychiatric
Association has shown, has been a veritable font of misinformation
and logical contradictions on the subject of private contracting. Moreover, in a
remarkable turn of events, the court, apparently to avoid striking
down an act of Congress as unconstitutional, sought to rely on
HCFA's own interpretation of the law even before that cleverly
evolving interpretation was formalized in regulations--which was
not until 10 days after the oral arguments in the appellate
case, almost 11 months after the law went into effect, and over 16
months after enactment of the Balanced Budget Act of 1997. Even
then, the court relied on the preamble to the regulations, not on
HCFA's regulations themselves.
Doctors, patients, and taxpayers in
general should be deeply troubled by the legal status afforded to
doctors and patients in the Medicare program as a matter of
policy. For example:
- The limited liberalization of the right
of private contracting is largely the result of the
Administration's regulatory retreat to avoid a court ruling on the
constitutionality of Section 4507. In initial arguments, the
Administration's legal team and its allies in Congress insisted on
the need to prevent the emergence of a "two tiered" system of
medical care for American retirees. In its zeal to impose a
single-tiered health care system on seniors and to protect Section
4507 from a direct constitutional challenge, the Clinton
Administration resorted to an administrative remedy that
simultaneously undercut its own argument against a two-tiered
health care system. As noted, in the area where a medical service
may or may not be covered--what is often referred to as "an
otherwise covered service"-- private contracting through the ABN
process outside of the restrictions of Section 4507 becomes a real
option. As a result of the Court of Appeals decision clarifying
this limited private contracting option, Medicare is in effect a
judicially ratified "two-tiered" system, both in law and in
fact.
Faced with a direct attack on its broader
health care policy agenda and the constitutionality of Section
4507, the Administration beat a tactical regulatory retreat to
protect its strategically restrictive Medicare policy. What can be
done by regulation--even if such regulation is ratified by a
federal court--can be undone by regulation. Regrettably, seniors
also should realize that the Court of Appeals legitimized a new
regulatory weapon for HCFA to use against doctors and patients who
wish to contract privately: a determination of whether a medical
service is "warranted." Thus, Medicare patients are still at the
mercy of HCFA and do not yet enjoy statutory protection in the
exercise of their rights.
- The Medicare process for determining
"medical necessity"--the source of so much trouble between HCFA and
doctors--remains unchanged. The doctor who uses the ABN process
to make a private contract does so on the grounds that Medicare is
not likely to pay for the medical service because HCFA or its
contractors think the medical service is not medically necessary.
Of course, HCFA has never finalized regulations defining "medical
necessity" in the Medicare program, and doctors and patients are
subjected to an arbitrary process whereby such decisions are being
made by HCFA's contractors all over the country. In the meantime,
the doctor obviously cannot bill the patient until Medicare has
turned down the claim. As John Hoff notes, the doctor "must wait
for months and then bill the patient, who by that time may have
forgotten the commitment to pay and may also be less inclined to
pay when he receives Medicare's statement that the service was not
reasonable and necessary."
Although taxpayers are rightly concerned
that private-sector insurance executives have been making
determinations about what is or is not medically necessary and
appropriate for patients in managed care plans, they should also be
aware that the Medicare bureaucracy and its contractors routinely
tell Medicare patients that the services their doctors have
provided are not "medically necessary" or appropriate. Based on
1997 statistics, 19 percent of all Medicare Part B claims have been
denied for reasons of "medical necessity," and if one excludes
claims denials grounded in statutory exclusion, that figure rises
to 45 percent. If one is a doctor
treating Medicare patients, a substantial part of the price of
taking Medicare patients is to have one's professionalism
questioned and thus be periodically insulted by HCFA or its
contractors.
Curiously, congressional concern over the
inappropriate use of the "medical necessity" restrictions on
doctors is confined to private managed care plans. The U.S. House
of Representatives, for example, recently enacted the Bipartisan
Consensus Managed Care Improvement Act (H.R. 2723), popularly known
as the Dingell-Norwood bill. The effect of this law is to shift the
bulk of the authority for defining what is or is not a "medical
necessity" to members of the medical profession rather than
insurance executives in the private sector. Remarkably, Members of
Congress generally have demonstrated no interest in making the same
changes, which would reinforce the professional authority of
physicians in the Medicare program. Thus far, there is
a notable congressional double standard in the treatment of private
and public insurance programs, reinforcing the perception that
Medicare patients have "second class citizenship."
- The court has affirmed yet another
undefined standard governing medical practice in Medicare; services
may be warranted or "unwarranted," as well as "medically necessary"
or "medically unnecessary." According to the Court of Appeals,
a doctor may resort to the ABN process for the private provision of
medical services to Medicare patients that the Medicare bureaucracy
says are unnecessary or may be unnecessary; but the Court also
holds, following HCFA's November 2, 1998, issuance of regulations,
that a doctor may not legally use that process for medical
procedures that are "unwarranted." In other words, under the
court's ruling, a doctor legitimately could perform "unnecessary"
procedures that are fully "warranted." Likewise, a doctor
conceivably could provide medically "necessary" procedures for a
Medicare patient, but these would be illegally delivered and thus
logically "unwarranted" services simply because they were provided
under the terms of a private agreement. Says the Court of Appeals:
"Needless to say, billing patients for unwarranted procedures may
well be subject to sanction...." At this
point, what constitutes an "unwarranted" medical service is
anybody's guess.
The new standards for medical practice
suggested in HCFA's November 1998 regulations and reaffirmed by the
Court of Appeals will doubtless invite further litigation, and
lawyers and judges, rather than medical professionals, will
doubtless make the key determinations about which services are
"warranted" and "unwarranted" under the terms of exception provided
by the ABN. According to Kent Masterson Brown, although the
difference between "unwarranted" and "unnecessary" as a standard of
medical practice in Medicare is unclear, the court unquestionably
has raised the bar for the imposition of government sanctions so
that doctors should be free to provide medical services to Medicare
patients without fear of bureaucratic retaliation. As John Hoff notes,
Although the Court did not consider it
further, this formulation implies that there is a difference
between services that are not "reasonable and necessary" and those
that are "unwarranted." Thus, it further implies that HCFA does not
pay for some services that are warranted. No one knows what the
difference between "warranted" and "reasonable and necessary" is.
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The federal government has made the
complicated Medicare billing process even more cumbersome and
confusing. Based on the appellate court decision, doctors are
to use the ABN process if they contract privately with a Medicare
patient. At the same time, HCFA says that a doctor does not have to
submit a claim to Medicare on behalf of a patient if Medicare
"never" pays for a particular medical service. But the doctor must
still give the patient an ABN. "Thus the doctor," Hoff observes,
"will be put in the strange position of telling the patient that
Medicare may not pay a claim that he is not going to submit. And
when does the doctor bill the patient in that circumstance?"
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The status of a senior citizen's right
to contract privately with a physician for reasons of privacy is
unclear. Thrown on the defensive early in the debate on Section
4507, congressional supporters of the new Medicare restrictions,
taking their cue from HCFA, said that senior citizens could always
refrain from authorizing a doctor to submit a claim to Medicare for
reasons of confidentiality, citing such cases as treatment for AIDS
or psychiatric disorders. No such exception is contained in Section
4507, and no confidentiality exception has been cited by HCFA or
its congressional allies in current Medicare law.
Worse, on the broader issue of patient
privacy, the federal court declared that there was no
constitutional right of privacy in the relationship between a
Medicare patient and his doctor. Through various communications,
HCFA simply gave "assurances" to Congress, the U.S. General
Accounting Office, and others that this was the case. Indeed, in
one relatively recent formulation of the privacy exception, HCFA
stated that a Medicare patient could simply refuse to authorize a
doctor to submit a claim to Medicare "for reasons of his or her
own."
Members of Congress should realize that in
declaring the legitimacy of a limited form of private contracting
in the case of United Seniors v. Donna Shalala, the
Court of Appeals never mentioned the patient privacy issue. Of
HCFA's assurances that there is a privacy exception to the rules
against Medicare private contracting, Hoff observes that
This in theory provided a privacy
exception that would permit a patient to privately contract where
he did not want Medicare to know of the treatment. It is unclear
how much weight should be given to this administrative assurance in
light of the fact that the Court did not adopt it as it did other
assurances.