result of a provision in the Balanced Budget Act (BBA) of 1997,
Medicare patients are legally restricted in their ability to spend
their own money as they wish on medical services that they desire.
This untenable development in a system that is supposed to ensure
that seniors and the disabled have access to good health care is
the direct result of a combination of federal law, federal
regulation, and federal court rulings. It means that--thanks to
Congress, the Clinton Administration, and the courts--Medicare
patients may not seek a medical service from a doctor of their
choice and pay for it on their own if it is already "covered" or
"paid for" by the Medicare program. There is simply no exception to
this rule for any medical service that the Medicare bureaucracy
U.S. Court of Appeals for the District of Columbia Circuit ruled in
1999 that under certain conditions, Medicare patients could enter
into the equivalent of a private agreement with a doctor.
However, this arrangement would be controlled by a bureaucratic
paperwork process established by the Health Care Financing
Administration (HCFA), the powerful agency that runs the huge
Medicare program. Under this exception, a Medicare patient could
pay a doctor privately for a medical service that HCFA considers
medically "unnecessary" if HCFA does not also think that the
service is "unwarranted." Unfortunately, the Court of Appeals did
not define what is or is not a "warranted" medical service. It
shifted that crucial responsibility to HCFA, which has not yet even
finalized its definition of "medical necessity."
While the 1999 Court of Appeals decision
did grant narrow relief to patients who seek to contract privately
with their physicians under judicially prescribed conditions, it
did not settle the fundamental policy questions or outstanding
constitutional issues raised by this unprecedented statutory
restriction on the doctor-patient relationship.
Americans would think that patients have a natural right to seek
and pay for a medical treatment of their choice. But the law on
private contracting, embodied in Section 4507 of the Balanced
Budget Act (BBA) of 1997, holds that a Medicare patient may
contract privately with a doctor only if that doctor signs an
affidavit to that effect, submits the affidavit to the Secretary of
Health and Human Services (HHS) within 10 days, and then drops out
of Medicare for two full years. This has generated concern
This statutory restriction on private
agreements between doctors and their patients is unprecedented.
There had never been a statutory restriction on Medicare private
contracting before enactment of the BBA.
No similar statutory restriction has
ever been imposed in any other government health insurance
program, including Medicaid, the Federal Employees Health
Benefits Program (FEHBP), the Department of Defense health program,
the Veterans Administration program, or the Indian Health
In two separate rulings, the federal
courts upheld this bizarre law. The restrictions of Section
4507 elicited immediate and intense opposition across the
ideological spectrum. The United Seniors Association was joined by
the Washington Chapter of the American Civil Liberties Union (ACLU)
and a number of patient and medical groups in a suit seeking to
strike down Section 4507 as a violation of basic constitutional
rights of liberty and privacy. The U.S. District Court for the
District of Columbia declared in 1998 that, on the basis of
judicial precedent, Medicare patients had no constitutional right
to privacy in their relationships with their physicians, and it
refrained from striking down Section 4507. In subsequent
litigation, the U.S. Court of Appeals for the District of Columbia
dodged the constitutional issues and ruled in 1999 that there was
an administrative avenue within the narrow confines of HCFA's
Medicare patients have limited legal
access to a private agreement with a physician only if the Medicare
bureaucracy considers that particular service uncovered or
"unnecessary" or potentially "unnecessary." It does not matter
whether the Medicare patient wants to obtain a service of a higher
quality or is willing to pay more out of pocket for the special
skills of a particular physician. As long as that service is
"covered" by Medicare, the service may not be obtained outside of
The only other officially stated
exception to the restrictions in Section 4507 is a weak privacy
exception. The Clinton Administration declared that privacy is
an exception to the statutory requirement that doctors must submit
the claims of their patients, which sometimes contain sensitive
information, to the Medicare bureaucracy. Meanwhile, the U.S.
General Accounting Office reported that Medicare's privacy
safeguards are weak and that unauthorized individuals could gain
access to confidential patient information.
Medicare patients are uniquely
disadvantaged by the restrictions in Section 4507 of the Balanced
Budget Act. Such restrictions on personal liberty and privacy
reflect the troubling transformation of Medicare into an engine of
bureaucratic control over virtually every aspect of the financing
and delivery of medical services to the nation's retirees. Congress
needs to create a new Medicare program that will serve the next
generation of retirees, especially the first wave of the 77 million
baby boomers who will begin to retire in 2011.
the meantime, Congress should clarify the right of Medicare
patients to spend their own money on the services of physicians of
their choice, regardless of how HCFA or its contractors or the
courts choose to classify them. Representative Patrick Toomey
(R-PA) has introduced the Seniors' Health Care Freedom Act (H.R.
2867) to guarantee the right of seniors to contract privately
regardless of HCFA's views. No one, least of all the government,
should decide how or when or under what circumstances American
citizens may spend their own money on lawful medical services.
Congress, under pressure from the Administration, created this
mess. And only Congress can fix it.
E. Moffit, Ph.D., is Director of Domestic Policy Studies at
The Heritage Foundation.