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Medicare Limits Senior Liberty

March 20, 1998

Imagine that you are diagnosed with severe depression at age sixty. You seek out the best-known psychiatrist who prescribes Prozac and long-term counseling. After time, the medical treatment and counseling appear to be working and you are quite satisfied with your psychiatrist, whom you have come to trust. For the next five years, you continue to see your psychiatrist and pay privately for your outpatient mental health services.

Unfortunately, you turn sixty-five on 1 January 1998. Effective that date, you can no longer pay privately for the psychiatrist, medical doctors, and other health care practitioners of your choice unless your doctor promises to stop seeing all Medicare patients for two years. This new Medicare regulation was included in the recently passed Balanced Budget Act of 1997 and signed into law by President Clinton on 5 August 1997.

How can the federal government enforce such a law? It is easy. The federal government automatically enrolls Americans into Medicare Part A (the part that pays for hospital care) the minute they apply to collect their Social Security payments at age sixty-five. They have no choice about the matter. For many Americans, that means they automatically become subject to Medicare rules and regulations whether they actually want to participate or not. In addition, the federal government enrolls seniors into Medicare Part B (the part that pays for doctor visits) unless they actively decline. Some Americans decline to join part B because it does not cover most self-administrable prescription drugs, such as Prozac. Medicare part B has been considered voluntary, at least until now.

Once the new Medicare law takes place in 1998, seniors will effectively be coerced into joining Medicare Part B. The reason is that most doctors are not going to drop all of their Medicare patients in order to treat a few private-paying ones. "Currently, only 9 percent of doctors do not participate in Medicare and few doctors can afford to give up their Medicare practice for the sake of those patients who wish to contract privately," says Paul Beckner, president of Citizens for a Sound Economy. That means seniors will have to join Medicare Part B if they want to see the doctor of their choice. "Ultimately, the two year exclusion makes it nearly impossible for most seniors to contract privately," stresses Beckner.

Senator Jon Kyl (R-Ariz.) wanted to include explicit language in the Balanced Budget Act that preserved the right of seniors to contract privately with the doctor of their choice. However, the two year exclusion provision was added by Representative Bill Thomas (R-Calif.) who stressed that President Clinton threatened to veto the entire Balanced Budget bill without the addition.

It is ironic that President Clinton threatened to veto the entire budget bill over a provision that would have given Americans greater health freedom. After all, just two years ago, he wrote the following to the Coalition for Patient Rights: "I do not advocate prohibiting an individual from purchasing outpatient mental health services directly from a practitioner, even if those services are also provided by the individual's health plan. Neither the Health Security Act nor my current health care proposals are meant to curtail this prerogative. I support the right of patients to receive these services without being compelled to disclose clinical records to health plans or to the government. Further, I endorse the right of practitioners to provide outpatient mental health services directly to individuals without penalty."

Like Clinton's statement about the era of big government being over--made as he expands regulations and spending-- his statement about health care choice rings hollow. 

Now that the budget threats are over, Congress has the opportunity to debate a standalone bill that would return to seniors their freedom to contract privately with the doctor of their choice. Senator Kyl introduced the Medicare Beneficiary Freedom to Contract Act of 1997 (S.1194) on 18 September 1997. The bill permits physicians and other practitioners to enter into private contracts with Medicare patients without being banned from the Medicare program for two years. Congressman Bill Archer introduced a similar bill in the house (H.R. 2497).

Not only does private contracting improve seniors' choice of doctors, but it also reduces fraud and abuse. The American Association of Retired Persons reports that 93 percent of polled respondents believe that fraud is widespread in the Medicare program. Some critics disagree with AARP's solution to the fraud problem, which is to prohibit private contracting, thereby keeping seniors locked in a system burdened with fraud and abuse. Karl Humiston, a Harvard-trained psychiatrist and member of AARP stresses that, "When Medicare was created in 1965, President Lyndon Johnson promised that nothing in the Medicare law would prevent seniors from exercising their freedom to choose their health care. But thirty years later, Medicare is preventing seniors from spending their own money on the doctors and health care of their choice. Is that not Medicare fraud and abuse?"

Do not be surprised if President Clinton threatens another veto on The Medicare Beneficiary Freedom to Contract Act in the name of preventing Medicare fraud and abuse. However, Americans must realize that the real Medicare fraud and abuse will take effect 1 January 1998 unless corrective legislation is passed to allow private contracting.

By Sue A. Blevins, president of the Institute for Health Freedom, Washington, D.C.

Originally published in Regulation, 1997, Vol. 20, No. 4. Copyright 1997 Cato Institute.