Pete Stark

Mr. STARK

Mr. STARK. Mr. Speaker, I would like to take this opportunity to recognize Sgt. Edward D. Cardoza upon his retirement from the Milpitas Police Department which is located in Milpitas, CA, in California's 13th Congressional District. Sgt. Cardoza began his career in law enforcement in 1968 after receiving an honorable discharge from the United States Air Force and attending college. On October 27, 1969, he was transferred to the Milpitas Police Department. He was promoted to corporal in 1974 and then to the rank of sergeant in 1982. During his 29 years with the Department, Sgt. Cardoza served in many different areas. He showed interest early in his career in the K-9 program. He was a K-9 officer for several years before becoming the coordinator of the K-9 Department where he has served as coordinator for the last ten years. He was a patrol sergeant for several years. In this capacity he was responsible for supervising other police personnel in their response to the needs of our citizens. He also worked in the detective bureau and the youth service bureau and was instrumental in starting the police reserves program. For the past 3 years, Sgt. Cardoza has been serving as a traffic sergeant. In this capacity he has worked closely with city traffic engineers to help reduce the traffic accident rate for the city of Milpitas. Recently he was instrumental in the conception, design, and implementation of the Department's DUI enforcement trailer which will be used to assist in the reduction of the incidence of drunk driving. Sgt. Cardoza has also been an active member of the community--through his service on the youth service bureau of the Department, he became involved in many of our community's youth programs. He coached PAL baseball, YBA basketball, and little league. He has also served on the board of directors for Santa Clara PAL, Milpitas PAL, and treasurer for BMX. During his years of service, Sgt. Cardoza received over 70 letters of appreciation and commendation from the citizens of Milpitas and from numerous branches of government. Mr. Speaker, on January 30, 1998, Sgt. Cardoza will be honored by family, friends, colleagues, and members of the community on the occasion of his retirement from the Milpitas Police Department. I applaud him for his 29 years of distinguished public service to our community. His dedication and commitment will be sorely missed and I wish him luck in all of his future endeavors.

Mr. STARK

Mr. STARK. Mr. Speaker, I introduced H.R. 2726 which directs the Secretary to contract with certain hospitals for the provision of certain surgical procedures and related services under the Medicare Program. The Agency for Health Care Policy and Research's (AHCPR) October 1997 article, ``Study Reaffirms Link Between Angioplasty Outcomes and Hospital and Physician Experience,'' adds to the list of reasons why the bill should become law. The article states that: ``In the largest study of its kind to date, researchers have once again found that elderly patients undergoing coronary angioplasty are well advised to have the procedure done in hospitals that perform 200 or more angioplasties each year and by physicians who perform 75 or more angioplasties each year. These patients suffer fewer complications and deaths than similar patients who undergo angioplasties at hospitals and physicians who perform the procedure less often'' The article confirms that Medicare contracting with certain high volume, high quality hospitals will save money and deliver better health care. One could say it is a two-for-one: saves money while improving quality. Mr. Speaker, the sooner we pass H.R. 2726, the sooner we start saving lives and saving dollars.

Mr. STARK

Mr. STARK. Mr. Speaker, my bill H.R. 337 establishes consumer protections in managed care plans--just like many other bills currently pending before the Congress. One unique feature in H.R. 337, however, is the requirement that when a managed care plan enrolls a person, they must soon do a health profile or work-up on that person. Medicare and private insurance plans pay an HMO hundreds of dollars a month to ``maintenance'' an enrollee's health. But how can the HMO provide maintenance or preventative care (such as immunizations, mammograms, etc.), unless it sees the enrollee and establishes a health benchmark on the person? My legislation is designed to ensure that HMOs really do maintain people's health. By scheduling an appointment and the collection of basic health data, the HMO can truly begin to provide managed care health. It can determine whether the person is a smoker, overweight has high cholesterol, is diabetic, is facing glaucoma, etc. Once these benchmarks have been established, the HMO can begin the counseling or the other services needed to ``maintain'' or improve health--thus fulfilling the promise of managed care. The November 5, 1997 issue of the Journal of American Medical Association (JAMA) contains an article, ``The Relationship Between Patient Income and Physical discussion of Health Behaviors,'' which states, ``Although unhealthy behaviors were common among all income groups, physician discussion of health risk behaviors fell far short of the universal risk assessment and discussion recommended by the US Preventive Services Task Force. We conclude that the prevalence of physician discussion of health risk behaviors needs to be improved.'' If physicians would do more to counsel their patients especially the lower income, these individuals could receive adequate and informative health care advice. As the JAMA article said, ``Physicians also need to be more vigilant in properly identifying and counseling low-income patients at risk. Increasing the prevalence of physician discussion of health risk behaviors could greatly affect productivity, quality of life, mortality, and health costs in the United States. If the nation is truly interested in health improvement, a multifaceted approach is required to diminish the social gradients in health related to education, income, housing and opportunity, including a more effective national system for preventive services (Papanicolaou tests, breast examinations, immunizations) as well as improved discussion of health risk behaviors.'' For instance in the case of smoking the JAMA article states: ``Our data indicate that 49% of all patients with whom behavioral discussions occur attempt to cut down or quit smoking based on their physicians' advice and 49% of those who report attempting to change behavior no longer smoke. . .increasing the prevalence of physician discussion of smoking by 50% would result in a 6% decrease in the prevalence of smoking. Based on mortality and cost estimates of smoking, this reduction in smoking could potentially result in 24,000 annual deaths delayed and a $3 billion annual cost savings to our society.'' The December 3, 1997 issue of JAMA, contains an article, ``Cost- effectiveness of the Clinical Practice Recommendations in the AHCPR Guideline for Smoking Cessation,`` which states that ''Tobacco use has been cited as the chief avoidable cause of death in the United States, responsible for more than 420,000 deaths annually, Despite this, physicians and other practitioners fail to assess and counsel smokers consistently and effectively.'' Again, an HMO would be the ideal setting to help a person stop smoking, but they can't do it if they don't see the patient--and that's why we need H.R. 337. As we start to pay HMOs thousands of dollars a year for maintaining health, let's make sure that they at least see the individual and do something to earn these payments. If the premise of managed care is correct, then H.R. 337's early profiling and subsequent counseling will save the HMOs money in the long run by avoiding future expensive acute care services.

Mr. STARK

Mr. STARK. Mr. Speaker, the January 9th Federal Register contains the regulations implementing the 1993 Physician Referral laws, designed to reduce or eliminate the incentives for doctors to over-refer patients to services in which the doctor has a financial relationship. Study after study after study has shown that when doctors have such a financial relationship, they tend to order more services and more expensive services. The Physician Referral laws try to stop this form of fraud, waste, and abuse. Members may hear complaints about the law and regulations from some physicians. Following is a portion of an amicus brief filed in the case of Thompson v. Columbia/HCA December 12, 1996 by three of America's most distinguished and illustrious physicians--Dr. Arnold Relman, Dr. C. Everett Koop, and the late Dr. James S. Todd, former Executive Vice President of the American Medical Association. The amicus explains eloquently why this law is needed to help ensure the trust of the American people in their physician community. I hope Members will keep in mind the important ethical and moral issues described by these three outstanding doctors. Statement of Interest Amicus, Arnold S. Relman, M.D., is Professor Emeritus of Medicine and of Social Medicine at the Harvard Medical School, Cambridge, Massachusetts. Dr. Relman is also the Editor in Chief Emeritus of the New England Journal of Medicine, the official organ of the Massachusetts Medical Society, which has been published continuously since 1812. For more than fifteen years, Dr. Relman has written extensively on the ethical, social, and practical implications of physician self-referral, compensation, and ownership arrangements of the type described in the present Complaint. Amicus, C. Everett Koop, M.D., served as the United States Surgeon General under Presidents Reagan and Bush from 1981 to 1989. After the completion of his government service, General Koop has maintained an active role in the national debate on healthcare policies, priorities, and perspectives. Amicus, James S. Todd, M.D., recently retired as Executive Vice President, American Medical Association. Doctors Relman, Koop, and Todd have no personal financial interest in this litigation. Their desire to participate as amici curiae arises instead from their deeply felt concern for the implications that physician self-referral and compensation arrangements may have on the delivery of medical services to the American people and the ethical issues arising from those arrangements. Amici steadfastly maintain that a physician's economic self interest must remain subordinate to his or her primary, unalloyed obligation as a patient's trusted advisor, agent, and healer to place the patient's interests above all others. The self-referral and compensation arrangements at issue in this case threaten to erode traditional medical ethics, undermine public trust, and create irreconcilable conflicts of interest at a time when the public at large will be ill- served thereby. They offer a unique perspective on the consequences to physicians, their patients, and the system of healthcare in this country that are threatened by self- referral and compensation arrangements such as those described in this suit. Summary of Argument The fundamental ethical precept, upon which the system of medical practice has been founded, is that the patient's interests must take precedence over all other considerations, and certainly, over any financial or other personal interests of the patient's physician. Patients in need of medical care turn to their physicians to act as their agent in deciding what is needed. The patient must trust and depend upon the physician to serve only the patient's interest above all others. The self-referral and physician compensation arrangements described in the United States' Complaint threaten to undermine this fundamental principle of medical ethics. Doctors who associate themselves with healthcare corporations as employees, contractors, or limited partners with financial ties to healthcare businesses have an unavoidable conflict of interest. The type of business arrangements described in the Complaint threaten to obscure the separation between business and professional aims. No longer are physicians the trustees solely for their patients' interests; they become in addition agents for a corporate enterprise which regards patients as customers. Economic incentives to withhold services, to overuse them, or to choose particular medical products are inconsistent with the duty of the physician to act as an unselfish trustee and agent for the patient. Both the Medicare Anti-Fraud and Abuse Act and the Stark Acts are bulwarks against the continued erosion of the physician`s fiduciary obligation in the face of increasing economic temptation. Physicians cannot ethically serve in the capacity of their patients' fiduciary or representative in selecting services offered by the healthcare industry, where they also have the type of financial interests in that industry as described in the United States' Complaint. Self-referral has a demonstrable practical dimension beyond its ethical aspects. A growing body of evidence reveals that self-referral often leads to the overuse of services and excessive costs. Statistical studies buttress the commonsense conclusion that self-referral and compensation arrangements can result in the inappropriate utilization of services for the physician`s economic benefit. To the extent that those services are submitted and paid under Medicare, they are also to the United States' detriment.

Mr. STARK

Mr. STARK. Mr. Speaker, the AARP Public Policy Institute issued a paper in December of 1996 by Dr. David Nash, entitled ``Reforming Medicare: Strategies for Higher Quality, Lower Cost Care.'' It is a excellent paper on a number of ways to improve and extend the life of Medicare. One proposal in Dr. Nash's paper is the ``centers of excellence'' concept, in which Medicare can contract with certain hospitals to provide a high volume of complicated procedures in exchange for a lower global payment. The results of Medicare's ``demonstrations'' of this concept shows that Medicare can save money while increasing quality for beneficiaries. Following is Dr. Nash's discussions of the Heart Bypass Center Demonstration. The Administration had proposed legislation in the FY 97 Budget Reconciliation bill to implement this type of proposal nationwide. The House passed the proposal, but it was dropped in Conference. I hope that Congress will revisit this issue in 1998 and enact this concept. It is not just a matter of dollar--it is a matter of lives. Medicare, like most private insurance, has historically paid hospitals and doctors separately. Since 1983 with the introduction of the Prospective Payment System (PPS), Medicare has paid hospitals a fixed price for most care based on the patient's diagnosis. Doctors, whose medical decisions still affect nearly 80 percent of hospital costs, continue to be reimburse on a fee-for-service basis that rewards them for doing more, not less. The Medicare participating Heart Bypass Center Demonstration project is an experimental project implemented by Medicare in early 1992. Two primary events drove the planning for this important demonstration project: namely, the results of numerous studies showing a strong correlation between relatively higher volume, lower cost, and better outcomes in open heart surgery services, and unsolicited proposals from individual hospitals willing to provide coronary artery bypass graft (CABG) services for a fixed price. This demonstration project was implemented to answer four basic questions: 1) Is it possible to establish a managed care system with Medicare Part A and Part B payments combined, including all pass throughs for capital, medical education, etc., and pay a single fee to the hospital for treating patients? 2) Would it be possible to decrease the Medicare program's expenditures on CABG surgery while maintaining or improving quality? 3) What is the true relationship between volume and quality in CABG surgery, and can hospital procedure volume be increased without decreasing the level of appropriateness? and 4) What is involved at a hospital operational level--can such a program be sustained over a period of time without draining financial resources and dragging the organization down? Preliminary results evaluating the Medicare participating Heart Bypass Center Demonstration project, I believe, strongly support its immediate national expansion to appropriately realign the incentives between hospitals and their physicians. By creating a strong financial incentive to be more cost effective in their use of resources, hospitals and doctors will be able to implement the tools of continuous quality improvement, practice guidelines, critical pathways, and the nonpunitive feedback of information about performance. In a word, they will utilize many of the tools mentioned throughout the body of this report to improve quality and lower costs. For example, the seven experimental heart surgery site institutions have reported numerous operational changes resulting in lower costs and improved quality as a result of the HCFA demonstration project. Quick transfers out of intensive care, shorter patient stays after surgery, fewer laboratory and radiology tests, and the use of care management and critical pathways, are some of the cost cutting measures being employed at each of the participating institutions. Expensive consultations with other physicians were also targets for cost saving. Participating institutions report a nearly 20 percent decrease in the use of consultation with no demonstrable changes in overall case out-comes. At four demonstration sites, doctors and administrators together are challenging long-standing patterns of care and scrutinizing the use of everything from $5 sutures to intensive care unit beds at $800 per day. At St. Joseph's Hospital, in Atlanta, Georgia, neurologists were charging between $364 and $1,676 for a neurologic consultation before the program began; now the hospital pays them a flat rate of $371. In the post-operative period, physicians are removing particular chest drainage tubes in certain patients within 24 hours rather than waiting the customary 48 hours, a strategy that even may foster quicker healing. Physicians describe the demonstration project as making them rethink each step along the patient care continuum. If each step is not supportable on a scientific basis, and is not in the patient's best interest, it is removed, and, as a result, costs are reduced. Of course, many managed care organizations and some specialty practices have often charged a global fee for procedures or for a specified time period of care such as one calendar year. A growing number of managed care companies have negotiated special package price deals for expensive or high-tech procedures including organ transplantation, maternity care, and cancer care. The Medicare program should proceed quickly with preliminary plans to expand the participating Heart Bypass Center Demonstration project and begin a `National Centers of Excellence'' program on other high-cost, high-volume procedures. The literature is clear that practice makes perfect and an expansion of this program, which would realign incentives, reduce costs, and inevitably improve quality, ought to be implemented quickly. Finally, consideration should be given to expanding the current prospective payment system to include outpatient care. Studies ought to be undertaken to link inpatient and outpatient claims for particular procedures and particular diagnoses such as congestive heart failure, pneumonia, diabetes and other high-cost, chronic illnesses. With the availability of improved outpatient case mix systems, HCFA has an opportunity to provide national leadership and use its evaluative capacity to realign incentives between doctors and hospitals.

Mr. STARK

Mr. STARK. Mr. Speaker, today, I am introducing legislation to stop the use of taxpayer funds from subsidizing the U.S. defense industry at international air and trade shows. Prior to 1991, the Federal Government avoided direct military involvement in air shows and arms bazaars. Aircraft were leased to U.S. companies by the Department of Defense [DOD]. The leasing fee covered the cost of insurance, ramp fees, transportation to and from the show, and payment for Government personnel needed to watch the aircraft. In June 1991, the Secretaries of Defense and Commerce changed the Pentagon practice of leasing U.S. aircraft to industry at air shows. The new practice allows for the loan of DOD aircraft to industry free of charge. This results in the U.S. taxpayer paying for the cost of industry participation at air shows and arms bazaars. In 1992, taxpayers were forced to absorb the cost of a Marine aircraft that crashed on its way back from an airshow in Singapore. This crash came with the price tax of $18.9 million to American taxpayers. In response to the Singapore incident, Congressman Howard Berman sponsored an amendment to the fiscal year 1993 DOD authorization bill which limits the Government's ability to engage in future air shows. It requires the President to notify Congress 45 days in advance of any proposed participation in airshows. It also requires the President to certify that participation is in the interest of our national security and to submit a cost estimate. In order to circumvent the intent of the Berman amendment, DOD adopted a new standard of sending aircraft carriers to the sites of airshows on so called training missions. This practice allows the aircraft on display to do overflights of the airshow off the deck of the carrier under the guise of a defense authorized training mission. It also puts the U.S. military crew in close proximity to fraternize with prospective buyers. The Clinton administration has been drastically underreporting the involvement and cost of the United States in these airshows by excluding transportation costs. The Pentagon is able to classify shows as training missions in order to avoid reporting the real costs incurred. As a result, the costs reported by the Pentagon to Congress are 15 to 20 times less than the actual costs, and the American taxpayer pays the bill. One of the many examples of this practice is the transfer of a B-2 bomber to France to do a demonstration flight at the Paris Air Show in 1995. This flight involved at least a 24-hour round trip at $14,166 per hour to operate the plane, for a total cost of more than $330,000--all at the taxpayer's expense. However, the cost report for the entire airshow submitted to Congress by the Pentagon was only $342,916. The bill I am introducing today, the Restrictions on Foreign Air Shows Act bans direct participation of the defense personnel and equipment at airshows. It prohibits planes, equipment, weapons, or any related materials from being sent to exhibits on training missions unless the contractor has paid for the expenses incurred by DOD. The legislation prohibits training missions from involvement or contact with concurrent airshows. It requires contractors to lease the equipment covering insurance costs, transportation costs, ramp fees, salaries of Government personnel needed to watch the aircraft, and all other costs associated with these events. If contractors are making a profit by showing U.S. aircraft, then they should be required to pay for the advertisement of the aircraft. Additionally, the bill bans the availability of military personnel--either on site at the airshows or at nearby training missions--to assist the contractors in their sales unless the contractor pays for their services. This bill does not outlaw the use of U.S. equipment in foreign airshows or trade exhibitions. It merely takes the financial burden off of the American taxpayer and puts it where it belongs--on the contractor. I urge my colleagues to support this bill.

Mr. STARK

Mr. STARK. Mr. Speaker, on October 7, I introduced H.R. 2633. to require the Secretary of HHS to develop and require the use of standard forms by which physicians certify that a course of home health or hospice care is necessary and appropriate. Today, doctors just sign for such services without a clear statement that the patient qualifies or is eligible for the course of treatment. Often a doctor is nagged into approving the course of treatment by the family or patient, and I know that many doctors would like to be able to explain to patients why they cannot casually certify an expensive Medicare benefit, but instead, various conditions of medical need must be met. A clearer, consistent statement of CMN can help reduce fraud. For example, there is the complaint of the United States versus Joseph Ari Kirschenbaum, filed this October 14 in the U.S. District Court for the Northern District of Illinois (Eastern Division), No. 97 CR 702. In the grand jury's charges and in the complaint, Mr. Kirschenbaum is charged with defrauding Medicare of millions of dollars by providing --or not providing--hospice benefits to Medicare beneficiaries. Following is one of the many charges from the grand jury. It is important to note that Doctor K and the other doctors mentioned in this charge are not--to my knowledge--being charged with the hospice owner. A reformed and strengthened CMN system, as provided in H.R. 2633, would help ensure that doctors would not casually sign such stacks of paper, and if they did, would be liable for false certification. 58. It was further part of the scheme that defendant KIRSCHENBAUM hired a Medical Director for Samaritan Care who, in exchange for a modest salary, was willing to sign every patient certification form that was presented to him without examining the patients or reviewing the patients' medical records. This Medical Director, referred to in this indictment as ``Doctor K,'' had no involvement in the hospice other than signing his name to patient forms every two weeks at the Samaritan Care office. Often the patients had been receiving hospice care for several days before Doctor K first learned of the patients when he received the certification forms to sign. Kirschenbaum never informed Dr. K of the extensive responsibilities of the Medical Director as set forth in the Policies and procedures, and Dr. K did not fulfill these responsibilities. Kirschenbaum later employed other Medical Directors at modest salaries who signed certification forms without seeing patients or reviewing their medical records.

Mr. STARK

Mr. STARK. Mr. Speaker, following is a letter from the National Council of Senior Citizens spelling out why the Kyl-Archer amendment is bad for seniors and the disabled and for the Medicare Program. I urge Members to oppose this amendment. As the public begins to understand what this amendment would do, they will overwhelmingly reject this proposal and the Members who vote for it. National Council of Senior Citizens, Silver Spring, MD, October 30, 1997. Dear Senator: The National Council of Senior Citizens strongly opposes any legislation which would reopen the Balanced Budget Act (BBA) for the purpose of limiting or repealing the two-year bar to any Medicare billings after a doctor enters a private payment contract with Medicare- eligible person. Passage of H.R. 2497, the Medicare Beneficiary Freedom to Contract Act of 1997, would decimate the Medicare program by removing cost protections while reducing the supply of doctors serving the needs of the overwhelming majority of Medicare users. NCOA opposed, and continues to oppose, the inclusion of the original Kyl Amendment to the Medicare program. Such a provision, allowing a doctor to contract privately for medical care payments outside of the Medicare program, promises to shred three decades of essential quality, consumer, and financial protections which have been incorporated into Medicare. As enacted, the Kyl Amendment did include the provision barring for two years other Medicare billings subsequent to an agreement for privately-paid Medicare-covered services. Clearly, this could inhibit widespread utilization of the private contract option by many doctors who have not heretofore, in large numbers, declined Medicare payments. Removal of this bar would open the Medicare program to opportunities for many doctors to coerce patients into giving up their Medicare protection in the name of ``freedom to contact.'' Fewer than 5% of all doctors decline to treat Medicare patients, and only 1% of Medicare beneficiaries have trouble finding doctors. The current doctor-patient Medicare market works well, with no shortage of physicians willing to accept Medicare payments. H.R. 2497 will allow doctors to legally pick and choose patient-by-patient, service-by-service, and dictate payment levels to vulnerable persons needing professional services. Instead of freedom, this would cripple Medicare's ability to hold down health care costs and would put elderly and disabled citizens at serious financial and medical risk. We pledge every effort to defeat H.R. 2497 or any similar bill and to restore Medicare to its responsibility to cover the costs of an essential set of quality medical services provided by competent doctors and institutions on a uniform and universal basis. Sincerely, Steve Protulis, Executive Director.

Mr. STARK

Mr. STARK. Mr. Speaker, ``should the child of a poor American family have the same chance of avoiding preventable illness or of being cured from a given illness as does the child of a rich American family?'' That is the question. That is the question brilliantly posed in the following essay by Uwe Reinhardt from the Journal of the American Medical Association's November 5 issue. It is a profoundly moral and religious question. America's answer to the question is, I am sad to say, no. Unlike other advanced industrial societies, America is saying no to millions of its children and their parents. In many ways, we really are not a nation or a society. We say we are, but we are practicing the social Darwinism of every man, woman, and child for himself. We do not love all our children. [From the Journal of the American Medical Association, Nov. 5, 1997] Wanted: A Clearly Articulated Social Ethic for American Health Care (By Uwe Reinhardt) Throughout the past 3 decades, Americans have been locked in a tenacious ideological debate whose essence can be distilled into the following pointed question: As a matter of national policy, and to the extent that a nation's health system can make it possible, should the child of a poor American family have the same chance of a avoiding preventable illness or of being cured from a given illness as does the child of a rich American family? The ``yeas'' in all other industrialized nations had won that debate hands down decades ago, and these nations have worked hard to put in place health insurance and health care systems to match that predominant sentiment. In the United States, on the other hand, the ``nays'' so far have carried the day. As a matter of conscious national policy, the United States always has and still does openly countenance the practice of rationing health care for millions of American children by their parents' ability to procure health insurance for the family or, if the family is uninsured, by their parents' willingness and ability to pay for health care out of their own pocket or, if the family is unable to pay, by the parents' willingness and ability to procure charity care in their role as health care beggars. At any moment, over 40 million Americans find themselves without health insurance coverage, among them some 10 million children younger than 18 years. All available evidence suggests that this number will grow. \1\ America's policymaking elite has remained unfazed by these statistics, reciting the soothing mantra that ``to be uninsured in these United States does not mean to be without care.'' There is, to be sure, some truth to the mantra. Critically ill, uninsured Americans of all ages usually receive adequate if untimely care under an informal, albeit unreliable, catastrophic health insurance program operated by hospitals and many physicians, largely on a voluntary basis. Under that informal program, hospitals and physicians effectively become insurance underwriters who provide succor to hard-stricken uninsured and who extract the premium for that insurance through higher charges to paying patients. The alarming prospect is that the more effective the techniques of ``managed care'' will be in controlling the flow of revenue to physicians and hospitals, the more difficult it will be to play this insurance scheme otherwise known as the ``cost shift.'' It can be expected that, within the next decade, the growing number of the nation's uninsured will find themselves in increasingly dire straits. --------------------------------------------------------------------------- Footnotes appear at end of article. --------------------------------------------------------------------------- But these straits have never been smooth for the uninsured, notwithstanding the soothing mantra cited earlier. Empirical research must have convinced policymakers long ago that our nation rations health care, health status, and life-years by ability to pay. It is known that other socioeconomic factors (such as income, family status, location, and so on) being equal, uninsured Americans receive, on average, ony about 50% of the health services received by equally situated insured Americans. \2\ This appears to be true even for the subgroup of adults whose health status is poor or only fair.3 Studies have shown that uninsured Americans relying on the emergency departments of heavily crowded public hospitals experience very long waits before being seen by a physician, sometimes so long that they leave because they are too sick to wait any longer.4-6 Studies have found that after careful statistical control for a host of socioeconomic and medical factors, uninsured Americans tend to die in hospitals from the same illness at up to triple the rate that is observed for equally situated insured Americans 7 and that, over the long run, uninsured Americans tend to die at an earlier age than do similarly situated insured Americans.8 Indeed, before the managed care industry cut the fees paid physicians sufficiently to make fees paid by Medicaid look relatively attractive to physicians and hospitals, even patients insured by that program found it difficult to find access to timely care. In one study, in which research assistants approached private medical practices pretending to be Medicaid patients in need of care, 63% of them were denied access because the fees paid by Medicaid were then still paltry relative to the much higher fees from commercial insurers.9 If the champions of the uninsured believe that the assembly and dissemination of these statistics can move the nation's policymaking elite to embrace universal coverage, they may be in for a disappointment. The working majority of that elite not only are unperturbed by these statistics, but they believe that rationing by price and ability to pay actually serves a greater national purpose. In that belief they find ample support in the writing of distinguished American academics. Commenting critically on the State Childrens' Health Insurance Program enacted by Congress in August 1997 as part of its overall budget bill, for example, Richard Epstein author of the recently published Mortal Peril: Our Inalienable Right to Health Care?,10 warns darkly that the new federal plan ``introduces large deadweight administrative costs, invites overuse of medical care and reduces parental incentives to prevent accidents or illness.'' Summing up, he concludes: ``We could do better with less regulation and less subsidy. Scarcity matters, even in health care'' (italics added).11 Clearly, the scarcity Epstein would like to matter in health care would impinge much more heavily on the poor than it would on members of his own economic class, as Epstein surely is aware. In his view, by the way, Epstein finds distinguished company in former University of Chicago colleague Milton Friedman, the widely celebrated Nobel laureate in economics, who had proposed in 1991 that for the sake of economic efficiency, Medicare and Medicaid be abolished altogether and every American family have merely a catastrophic health insurance policy with a deductible of $20,000 per year or 30% of the previous 2 years' income, whichever is lower.12 Certainly, Epstein and Friedman would be content to let price and family income ration the health care of American children. They rank prominently among the ``nays.'' In his book, Epstein frames the debate over the right to health care as a choice between the ``maximization of social wealth'' as a national objective and the ``maximization of utility,'' by which he means human happiness. ``Under wealth maximization,'' he writes, ``individual preferences count only if they are backed by dollars. Preferences, however genuine, that are unmediated by wealth just do not count.'' \10\ One implication of resource allocation with the objective of wealth maximization is that a physician visit to the healthy infant of a rich family is viewed as a more valuable activity than is a physician visit to the sick child of a poor family.\13\ If one does not accept that relative valuation, then one does not favor wealth maximization as the binding social objective. Although conceding that wealth maximization does imply a harsh algorithm for the allocation of scarce resources, Epstein nevertheless appears to embrace it, even for health care. Establishing positive legal rights to health care regardless of ability to pay, he argues, could well be counterproductive in the long run, because it detracts from the accumulation of wealth. ``Allowing wealth to matter [in the allocation of health] is likely to do far better in the long run than any policy that insists on allocating health care without regard to ability to pay. To repeat, any effort to redistribute from rich to poor in the present generation necessarily entails the redistribution from the future to the present generation.'' \13\ Applying his proposition to the question posed at the outset of this commentary, the argument seems to be that poor children in one generation can properly be left to suffer, so that all children of future generations may be made better off than they otherwise would have been. One need not share Epstein's social ethic to agree with him that, over the long run, a nation that allocates resources generously to the unproductive frail, whether rich or poor, is likely to register a relatively slower growth of material wealth than does a nation that is more parsimonious vis-a-vis the frail. \10\ Nor does one need to share his social ethic to admire him for his courage to expose his conviction so boldly for open debate. Deep down, many members of this nation's policymaking elite, including many pundits who inspire that elite, and certainly a working majority of the Congress, share Epstein's view, although only rarely do they have the temerity to reveal their social ethnic to public scrutiny. Although this school of thought may not hold a numerical majority in American society, they appear to hold powerful sway over the political process as it operates in this country. \14\ In any event, they have for decades been able to preserve a status quo that keeps millions of American families uninsured, among them about 10 million children. At the risk of violating the American taboo against class warfare, it is legitimate to observe that virtually everyone who shares Epstein's and Friedman's distributive ethic tends to be rather comfortably ensconced in the upper tiers of the nation's income distribution. Their prescriptions do not emanate from behind a Rawlsian \15\ veil of ignorance concerning their own families' station in life. Furthermore, most well-to-do Americans who strongly oppose government- subsidized health insurance for low-income families and who see the need for rationing health care by price and ability to pay enjoy the full protection of government-subsidized, employer-provided, private health insurance that affords their families comprehensive coverage with out-of-pocket payments that are trivial relative to their own incomes and therefore spare their own families the pain of rationing altogether. The government subsidy in these policies flows from the regressive tax preference traditionally accorded employment-based health insurance in this country, whose premiums are paid out of pretax income.\16\ This subsidy was estimated to have amounted to about $70 billion in 1991, of which 26% accrued to high-income households with annual incomes over $75,000.\17\ The subsidy probably is closer to $100 billion now--much more than it would cost for every uninsured American to afford the type of coverage enjoyed by insured Americans. In fairness it must be stated that at least some critics of government- financed health insurance--Epstein among them--argue against this tax preference as well.\10\ But that untoward tax preference has widespread supporters among members of Congress of all political stripes, and also in the executive suites of corporate America. This regressive tax preference would only be enlarged further under the medical savings accounts (MSAs) now favored by organized American medicine. Under that concept, families would purchase catastrophic health insurance polices with annual deductibles of $3000 to $5000 per family, and they would finance their deductible out of MSAs into which they could deposit $3000 to $5000 per year out of the family's pretax income. In terms of absolute, after-tax dollars, this construct effectively would make the out-of-pocket cost of a medical procedure much lower for high-income families (in high marginal tax brackets) than it would for low-income families. It is surely remarkable to see such steadfast support in the Congress for this subsidy for the well-to-do, in a nation that claims to lack the resources to afford every mother and child the peace of mind and the health benefits that come with universal health insurance, a privilege mothers and children in other countries have long taken for granted. Unwittingly, perhaps, by favoring this regressive scheme to finance health care, physicians take a distinct stand on the preferred distributive ethic for American health care. After all, can it be doubted that the MSA construct would lead to rationing childrens' health care by income class? Typically, the opponents of universal health insurance cloak their sentiments in actuarial technicalities or in the mellifluous language of the standard economic theory of markets,\18\ thereby avoiding a debate on ideology that truly might engage the public. It is time, after so many decades, that the rival factions in America's policymaking elite debate openly their distinct visions of a distributive ethic for health care in this country, so that the general public can decide by which of the rival elites it wishes to be ruled. A good start in that debate could be made by answering forthrightly the pointed question posed at the outset. footnotes \1\ Thorpe KE, The Rising Number of Uninsured Workers: An Approaching Crisis in Health Care Financing. Washington, DC: The National Coalition on Health Care; September 1997. \2\ Behavioral Assumptions for Estimating the Effects of Health Care Proposals. Washington, DC: Congressional Budget Office; November 1993; Table 3: viii. \3\ Long SH, Marquis MS. Universal Health Insurance and Uninsured People: Effects on Use and Costs: Report to Congress. Washington, DC: Office of Technology Assessment and Congressional Research Service, Library of Congress; August 5, 1994; Figure 1:4. \4\ Kellerman AL. Too sick to wait, JAMA. 1991;266:1123-1124. \5\ Baker DW, Stevens CD, Brook RH. Patients who leave a public hospital emergency department without being seen by a physician. JAMA. 1991;266:1085-1090. \6\ Bindman AB. Grumbach K, Keane D, Rauch L, Luce JM. Consequences of queuing for care at a public hospital emergency department. JAMA. 1991;266:1091-1096. \7\ Hadley J, Steinberg EP, Feder J. Comparison of uninsured and privately insured hospital patients. JAMA. 1991;265:374- 379. \8\ Franks P, Clancy CM, Gold MR. Health insurance and mortality: evidence from a national cohort. JAMA. 1993;270:737-741. \9\ The ultimate denial: rationing is a reality. Issue Scan: Q Rep Health Care Issues Trends From Searle. 1994;4(2):5. \10\ Epstein RA. Mortal Peril: Our Inalienable Right to Health Care? New York, NY: Addison-Wesley; 1997. \11\ Epstein RA. Letter to the editor. The New York Times. August 10, 1997:14. \12\ Friedman M. Gammon's law points to health care solution. The Wall Street Journal. November 12, 1991:A19. \13\ Reinhardt UE, Abstracting from distributional effects, this policy is efficient. In: Barer M, Getzen T, Stoddard G, eds. Health, Health Care, and Health Economics: Perspectives on Distribution. London, England; John Wiley & Sons Ltd; 1997; 1-53. \14\ Taylor H, Reinhardt UE. Does the system fit? Health Manage Q. 1991;13(3):2-10. \15\ Rawis J. A Theory of Justice. Cambridge, Mass: Harvard University Press; 1971. \16\ Reinhardt UE. Reorganizing the financial flows in American health care. Health Aff (Millwood). 1993;12(supp);172-193. \17\ Butler SM. A policymaker's guide to the health care crisis, I. Hertiage Talking Points. Washington, DC: The Heritage Foundation; February 12, 1992:5. \18\ Reinhardt UE. Economics. JAMA. 1996;275:1802-1804.

Mr. STARK

Mr. STARK. Mr. Speaker, following is a letter from the National Council of Senior Citizens spelling out why the Kyl-Archer amendment is bad for seniors and the disabled and for the Medicare Program. I urge Members to oppose this amendment. As the public begins to understand what this amendment would do, they will overwhelmingly reject this proposal and the Members who vote for it: National Council of Senior Citizens, Silver Spring, MD, October 30, 1997. Dear Senator: The National Council of Senior Citizens strongly opposes any legislation which would reopen the Balanced Budget Act (BBA) for the purpose of limiting or repealing the two-year bar to any Medicare billings after a doctor enters a private payment contract with a Medicare- eligible person. Passage of H.R. 2497, the Medicare Beneficiary Freedom to Contract Act of 1997, would decimate the Medicare program by removing cost protections while reducing the supply of doctors serving the needs of the overwhelming majority of Medicare users. NCOA opposed, and continues to oppose, the inclusion of the original Kyl Amendment to the Medicare program. Such a provision, allowing a doctor to contract privately for medical care payments outside of the Medicare program, promises to shred three decades of essential quality, consumer, and financial protections which have been incorporated into Medicare. As enacted, the Kyl Amendment did include the provision barring for two years another Medicare billings subsequent to an agreement for privately-paid Medicare-covered services. Clearly, this could inhibit widespread utilization of the private contract option by many doctors who have not heretofore, in large numbers, declined Medicare payments. Removal of this bar would open the Medicare program to opportunities for many doctors to coerce patients into giving up their Medicare protection in the name of ``freedom to contract.'' Fewer than 5% of all doctors decline to treat Medicare patients, and only 1% of Medicare beneficiaries have trouble finding doctors. The current doctor-patient Medicare market works well, with no shortage of physicians willing to accept Medicare payments. H.R. 2497 will allow doctors to legally pick and choose patient-by-patient, service-by-service, and dictate payment levels to vulnerable persons needing professional services. Instead of freedom, this would cripple Medicare's ability to hold down health care costs and would put elderly and disabled citizens at serious financial and medical risk. We pledge every effort to defeat H.R. 2497 or any similar bill and to restore Medicare to its responsibility to cover the costs of an essential set of quality medical services provided by competent doctors and institutions on a uniform and universal basis. Sincerely, Steve Protulis, Executive Director.

Mr. STARK

Mr. STARK. Mr. Speaker, I am today including in the Congressional Record the rough draft of a bill which represents several years of hard work within the kidney disease community on how to improve the quality of care for our Nation's nearly 250,000 kidney disease patients. I am asking that the bill be printed in the Record in the closing hours of this session of the 105th Congress, so that interested parties can study the proposal over the next several months and offer suggestions and changes. I will be working on the bill over the coming months to develop a consensus on this effort to improve the quality of life of the Nation's kidney disease patients, and I hope to introduce it formally, with appropriate changes, when the second session meets in January. Basically, the draft bill would create a continuous quality improvement [CQI] program that requires all providers treating end- stage renal disease patients under Medicare to provide data on the outcomes and quality of life of their patients, and to seek to improve that quality. Those who achieve outstanding quality outcomes will be recognized for their special contributions. Those who fail to meet agreed-upon quality standards will be counseled and worked with to improve. Patients in most communities where there is more than one dialysis provider will be empowered to switch to centers which provide the better outcomes and quality. All the care givers, including the doctors, will be part of the new effort of measurement and improvement. The result should be improved mortality and morbidity rates, improved energy levels, improved rates of return to work, and of transplantation. Mr. Speaker, for over 23 years Medicare has been paying for the catastrophic expenses of treating end-stage renal disease, through three times a week life-giving dialysis, through transplantation, and through all the extra hospitalizations, tests, and pharmaceuticals needed by these citizens. The cost per patient per year is, counting everything, estimated between $50,000 and $60,000. The program has been a tremendous success. It has saved enormous numbers of lives and in many cases provided a good quality of life for decades in which people have continued to contribute to their communities and loved ones. Yet, after 23 years experience, we can and should do better. There are enormous differences between dialysis centers. After adjusting for every imaginable factor, scholars continue to find that some dialysis centers have death rates much higher than the average. To be blunt, some dialysis centers should be avoided as dangerous to one's health. Some dialysis centers seldom or never refer patients--on whom they make some money--to transplantation so that they will never again need dialysis. Some centers' patients spend many more days per year in the hospital than the ``best practice'' centers. Some centers are able to get their patients back to work; in others, a lifetime of disability and welfare becomes the norm. And as the GAO reported to Congress on September 26, the number of appropriate lab tests given to ESRD patients vary enormously among centers, raising questions of quality and of fraud and abuse. With Medicare--not total--expenditures on ESRD patients likely to be about $9 billion in the coming year, we need to do better. We need to reduce the hospitalization rates and the unexplained death rates. We need to increase the opportunities for transplantation and for the return to work and a full range of normal activities. The draft bill would--I believe--help patients and providers work together to achieve these goals. Finally, managed care has become a fact of life for most Americans, but most ESRD patients are not in managed care. Indeed, currently there is a prohibition on patients who reach ESRD status joining a managed care plan--although a person already in a managed care plan who reaches ESRD can stay in his or her plan. The fear has been that a managed care company could so cut access to services and quality care for these very vulnerable patients that it could lead to greatly increased patient death and illness. Until we have strong quality standards in place and know how to measure ESRD outcomes, it is dangerous to place these patients in systems designed to reduce utilization. The CQI legislation I am introducing will help ensure that for those few ESRD patients in managed care, there is a guarantee of quality. The lessons learned from this legislation will help permit the day when we could confidently entrust this population to disease management programs. I want to thank all of the rental and patient associations who have been working with HCFA to improve quality and who have been offering suggestions for CQI legislation. In particular, I want to thank the Renal Physicians Association. This draft legislation builds on many of the ideas that are already underway in the renal community and at HCFA, and I believe it is a bill that can achieve consensus support throughout the renal community. To repeat, I welcome additional suggestions and refinements to this proposal--and hope it is legislation that we can move forward in 1998.

Mr. STARK

Mr. STARK. Mr. Speaker, I rise in opposition to H.R. 2676 which is before the House today. Though it is true that certain provisions in the bill are good--the Taxpayers Bill of Rights and the electronic filing of tax returns-- there is not enough good in this bill to warrant support for it today. Some provisions are repetitions of current law or can be accomplished without change in law. However, there are some serious flaws included the bill which prevent it from achieving the underlying goal of modernizing the IRS and improving taxpayer service. oversight board The creation of the IRS board is most troublesome. The Government should seek the expertise of private sector individuals in advisory capacity; however, private sector individuals should not make key decisions on critical aspects of IRS management, operations, and taxpayers service. The IRS must be directly accountable to the administration with strict oversight by the Congress. The board adds a layer which reduces accountability, not enhances it. This board is not only unwise but likely to be ineffective. A private sector board meeting once a month and without ability to hire staff of its own will not ensure a better managed IRS, or a more accountable IRS. There is a peril to privatization without clear rules on conflict of interest and ethics but that is what we have before the House for consideration today. I challenge my colleagues to explain how the union representative is supposed to navigate the conflict of interest laws; how can one person vote on key management decisions while continuing to represent workers on a daily basis? During committee consideration, I offered an amendment to impose clear prohibitions on private sector board members so that they could not represent a client against the IRS and so the one year post- employment restrictions would apply to board members. The committee rejected this clear amendment in a roll call vote of 14 to 23. The language on ethics and conflicts of interest that miraculously appears in the bill today is unclear and vague in its requirements for private sector board members. As a criminal provision, it is grossly inadequate. burden of proof The shift in the burden of proof is an idea that sounds taxpayer friendly but will result in a far more intrusive IRS. Former Republican Commissioner Fred Goldberg stated before Ways and Means that ``of necessity, the IRS would be forced to resort to far more aggressive techniques in auditing taxpayers and developing cases.'' This change is a bad idea which will result more record keeping requirements, more revenue agents, more audits, more tax litigation. influencing IRS Audits Lastly, it is intriguing that the bill imposes criminal sanctions on the President, Vice President, and Cabinet officials for requesting that the IRS conduct or terminate an audit of a specific taxpayer. My Republican colleagues stated that they knew of no such abuse by the executive branch but they failed to apply the same criminal laws to Members of Congress. Did my Republican colleagues want to reserve the right to ask for audits--or pull the plug on audits--with impunity? Mr. Speaker, the flaws in this bill are too serious to merit its enactment into law. I urge my colleagues to vote no on H.R. 2676.

Mr. STARK

Mr. STARK. Mr. Speaker, last week, the Congressional Budget Office made public its analysis of the budget impact of the Kyl-Archer amendment which will make it much easier for doctors to charge Medicare beneficiaries anything they want, anytime they want. The Kyl-Archer amendment effectively ends Medicare insurance. There is no insurance if you never know whether the doctor is going to reject your Medicare card and ask you to pay the whole bill out of your pocket. CBO describes a scary Halloween trick for the Nation's seniors and disabled. Doctors will be able to hold sick patients hostage for higher payments, fraud will increase, total national health care spending-- already by far the highest in the world--will increase. It will be a treat for doctors, but the end of insurance peace of mind for seniors. The full CBO letter analysis follows: U.S. Congress, Congressional Budget Office, Washington, DC, October 30, 1997. Hon. Bill Archer, Chairman, Committee on Ways and Means, House of Representatives, Washington, DC. Dear Mr. Chairman: At your request, the Congressional Budget Office (CBO) has reviewed H.R. 2497, the Medicare Beneficiary Freedom to Contract Act of 1997, as introduced on September 18, 1997. (S. 1194, an identical bill, was introduced in the Senate on the same day.) Direct contracting allows beneficiaries to make financial arrangements with health providers outside of the established Medicare payment rules. The direct contracting provision in current Medicare law, enacted in the Balanced Budget Act of 1997 (P.L. 105-33), requires providers contracting directly with patients to forgo any Medicare reimbursement for two years. Under that condition, CBO expects that direct contracting will almost never be used. H.R. 2497 would eliminate the two-year exclusion period, allowing health providers to contract directly with their Medicare patients on a claim-by-claim basis. For example, a physician could bill Medicare for an office visit while directly contracting with the patient for an associated test or procedure. Enactment of H.R. 2497 would affect Medicare outlays. Because of uncertainties about the number of claims that would be separately contracted and about the effectiveness of the regulatory oversight of those contracts by the Health Care Financing Administration (HCFA), however, CBO cannot estimate either the magnitude or the direction of the change in Medicare outlays that would ensue. With Medicare's restrictions on balance billing--which limit the amount beneficiaries must pay for services covered by Medicare--providers may in some cases receive lower payments than what their patients would have been willing to pay out of pocket. The bill would allow physicians and other health care providers to increase their incomes by negotiating direct contracts that included prices in excess of Medicare's fees, effectively bypassing the limits on balance billing. For some services, CBO believes that such contracting would not be very widespread because few beneficiaries would be willing to pay the entire fee (not just the difference between the provider's charge and what Medicare would have paid). For other services--such as those where the need for timely medical treatment might increase patients' willingness to pay--direct contracting could become much more common. If direct contracting continued to be rarely used, there would be no changes in benefit payments, no additional difficulties in combating fraud and abuse, and no major new administrative burdens placed on HCFA. If direct contracting were extensively used, however, Medicare claims could be significantly reduced. At the same time, HCFA's efforts to screen inappropriate or fraudulent claims could be significantly compromised because it would be difficult to evaluate episodes of care with gaps where services were directly contracted. Furthermore, HCFA would be unlikely to devote significant administrative resources to the regulation of direct contracting. HCFA's efforts to administer other areas of Medicare law, including many of the new payment systems envisioned in the Balanced Budget Act, will continue to strain the agency's resources. Without adequate regulatory oversight, unethical providers could bill Medicare while also collecting from directly-contracted patients. Although the impact of H.R. 2497 on the federal budget is uncertain, the bill would almost certainly raise national health spending. Even if direct contracts were rarely used, payments made under those contracts would probably be higher than what Medicare would have paid, and Medicare's efforts to combat fraud and abuse would probably be hampered to some extent. If you have any questions about this analysis, we will be pleased to answer them. The CBO staff contact is Jeff Lemieux. Sincerely, June E. O'Neill, Director.

Mr. STARK

Mr. STARK. Mr. Speaker, following is a memo from a staffer at the for-profit insurance lobby demonstrating how the Republican leadership is soliciting money to defeat consumer protections designed to provide a minimal floor of quality and protection for America's families. Once again, those who profit off of insuring only those who are healthy and who resist any effort to provide minimal consumer protections reveal their cynical hand. Undoubtedly we will be flooded with literature in the coming months trashing proposals to require insurers to comply with simple rules against gagging what doctors can tell their patients and others, minimal consumer protections. Health Insurance Association of America memo Date: October 22, 1997. To: Michael Fortier. From: Melody Harned. Subject: Government Run Healthcare. The message we are getting from House and Senate Leadership is that we are in a war and need to start fighting like we're in a war. Republican Leadership is now engaged on this issue and is issuing strong directives to all players in the insurance and employer community to get activated. Earlier this week, I met with Keith Hennessey (Sen. Lott) along with the NFIB coalition. Hennessey will be working with House and Senate leadership to coordinate the advocacy effort. Senator Lott is well aware of the issue of mandates, incremental health care reform, etc., and is very concerned. Lott told Senator Jeffords that he could not introduce his ``Quality Bill'' this session and was advised to work less with Sen. Kennedy and more with his fellow Republicans on the Senate Labor Committee. Sen. Lott has also spoken with all Republicans on the Senate Labor Committee and told them to get involved and express their concerns. Sen. Lott also said that Senate Republicans need a lot of help from their friends on the outside, ``Get off your butts, get off your wallets''. Keith Hennessey believes that it is critical that employer/insurer grassroots occur during recess (Nov & Dec) so that Members are prepared when they come back to town in January. At the NFIB Coalition meeting today, Mark Isokowitz (NFIB) informed the group that he had been summoned to the Hill by Missy Jenkins (Rep. Gingrich), Dean Clancy (Rep. Armey), Stacey Hughes (Sen. Nickles) and Keith Hennessey (Sen. Lott). Staff gave him four directives to take back to the coalition: (1.) Hold a briefing for Republican health LAs in 2 weeks; (2.) Implement heavy grassroots during recess; (3.) Meet with groups of Senators (e.g., Sen. Coverdell health care coalition) to report on what each organization is doing to fight these bills; and (4.) Write the definitive piece of paper trashing all these bills. Mark Isokowitz's overall impression from the meeting was that the Leadership was looking for signs of serious commitment on our part before they go out on a limb.

Mr. STARK

Mr. STARK. Mr. Speaker, following is an article from the October 16, 1997, Dallas Morning News regarding the Harris Methodist Health Plan's financial incentives restricting what doctors prescribe for their patients. I'm glad I'm not in that plan--and if I were in it, I'd sure get out if I could. The plan's financial incentives on doctors not to prescribe violate the spirit, if not the letter, of the Medicare law limiting the type and amount of financial incentive that a plan can place on a doctor to withhold care. This Texas example is a classic of why we need managed care consumer protection reforms--ASAP. [From the Dallas Morning News, Oct. 16, 1997] HMO Fines Angering Physicians; State Regulators Examine Harris Prescription Policy (By Charles Ornstein) A growing number of Fort Worth- and Arlington-area doctors are accusing Harris Methodist Health Plan of penalizing them for writing too many prescriptions, and the controversy is drawing the attention of state insurance regulators. The doctors say the health maintenance organization has fined them thousands of dollars this year because they exceeded a predetermined pharmacy budget, which is included in their contracts with Harris. They contend that the company's policy, enforced for the first time this year, places the financial bottom line above the patients' best interest. ``My concern is that one day, I or another physician may withhold some care for financial reasons,'' said Dr. J. Mike White, a family practitioner in Joshua, south of Fort Worth, who had to repay Harris $28,000 this year. ``That's inappropriate and that's unethical.'' Harris officials defended their system Wednesday but said they will increase the allowable pharmacy expenses next year in response to the doctors' concerns. The officials said the network's 6,600 physicians should work harder to cut their costs. ``I think we are in a situation where we are not doing things as efficiently as possible and we need to change our practice patterns,'' said Dr. Ramiro Cavazos, chairman of Harris Methodist Select, the network's exclusive physician group. `The problem is that we have a premium, and we have to live within that premium.'' The Texas Department of Insurance said Wednesday that it has begun a review of Harris' incentive policies. Spokesman Jim Davis said he does not know how long the review will last but said it comes after a physician complained to the state. ``Whenever questions are raised about the operations of HMOs or insurance companies in Texas, it's our job to look into the situation,'' Mr. Davis said. ``This is nothing really special.'' The Texas Medical Association board has said that it has serious concerns about the effect of the prescription limits on patient care. ``Our concern is that the financial incentives and disincentives appear to be really too severe in the sense of encouraging doctors to provide necessary care,'' said Rocky Wilcox, general counsel of the state medical group. ``Nobody has really looked to see whether these patients were provided with unnecessary medication or whether they really needed it.'' Last week, the 18-doctor Fort Worth Clinic joined a lawsuit against Harris that was filed in August by physician Richard Hubner. Dr. Hubner, who practices in Springtown, in Parker County, settled his claims against Harris last month after officials agreed to stop penalizing him for writing too many prescriptions. The clinic's court petition alleges that the health network provides an incentive for doctors to deny care and reject sick patients, which would be a violation of state law. ``I don't think that you would want your doctor to think about whether it would cost him money personally if he prescribes medicine that you need,'' said David Humphrey, the clinic's administrator. ``We think it's wrong, and we've been advised that it's illegal.'' Under Harris' contracts with its physicians, the company pays doctors a set monthly fee to provide all necessary care to each Harris HMO patient. That fee, which is a percentage of each member's premium, ranges from $11.87 to $15.19 per month. In addition, doctors are entitled to spend 9.6 percent of each premium dollar on prescriptions. If they exceed that budget, the contract requires them to pay Harris 35 percent of the additional cost. If they spend less than the budget allowed, they receive a bonus. Harris has awarded $338,000 in bonuses during the last quarter, Dr. Cavazos said. He didn't disclose the amount of fines assessed to doctors. According to a confidential memo obtained by The Dallas Morning News, Harris doctors exceeded their pharmacy budget by more than 26 percent last year. Internists, who generally treat sicker patient, surpassed their budget by 46 percent, the memo says. ``I've been amazed at the number of people who have been suffering and paying this in silence,'' said Robin Weinman, executive director of the Tarrant County Medical Society. ``I don't know how they're surviving, quite frankly.'' Internist Karen Spetman said she was billed $10,000 by Harris in July for exceeding her pharmacy budget during the first six months of the year. That accounts for about 15 percent of the fees she has received from Harris, she said. ``Nobody works for free,'' she said. ``But right now, that is what I'm doing. I'm not even working for free--I'm working for a negative number. I am paying money for the privilege of practicing medicine.'' Dr. Spetman, the only Harris internist in the Fort Worth suburb of Willow Park, said she has met repeatedly with Harris representatives to explain her problems. When she reviewed her patient charts and prescriptions with a Harris pharmacy director, she was told that she was making the correct medical decisions, she said. Harris officials did not contest Dr. Spetman's claims. But they said doctors in the system need to realize that increased efficiency and short-term sacrifices will eventually lead to long-term savings. ``When you get a bill, you're hopping mad,'' said Harris spokeswoman Lisa O'Steen. ``But if you look at it in the long term, because Harris has such a high retention of patients and doctors, this is a savings you see over a long period of time.''

Mr. STARK

Mr. STARK. Mr. Speaker, I rise today to commend my colleagues, Mr. Markey, Mr. Gilman, and Mr. Cox, for their bipartisan efforts to shed light on China's pending nuclear nonproliferation certification in this morning's Washington Post. These distinguished gentlemen present us with the facts on China's most recent and egregious nonproliferation violations. Now it's up to President Clinton to face the facts and deny certification to China as a responsible member of the international nonproliferation community. The Central Intelligence Agency released its biannual report to Congress this past summer and listed China as one of the two biggest nations to export nuclear materials to Iran and Pakistan. Now, less than 4 months later, China is pledging to limit its exports to Iran and end nuclear cooperation with the rogue nation. This agreement arrives at the dawn of ``new and improved'' United States-China relationship. As a nuclear weapons state and party to the Nonproliferation Treaty, China is obligated to promote ``the fullest possible exchange of equipment, materials and scientific and technological information for the peaceful uses of nuclear energy.'' If China can break its pledge made in an international treaty, it certainly has the capability of breaking its pledge made to the Clinton administration. What evidence does the United States have that China will keep its promise to curb sales of nuclear materials to its largest consumers? None. China's Government has denied accusations of selling nuclear technology and material to rogue nations. It has been barred from receiving United States technology for over 10 years for these transactions and now we're supposed to believe that China will reverse its current policy. I hope the Clinton administration doesn't expect Congress to buy this bogus change of heart. The administration has delinked human rights from trade and now it wants to ignore its own intelligence reports on nuclear proliferation. If the United States agrees to sell nuclear technology to China, it will open up the nuclear arms market to Iran and Pakistan. This is irresponsible, unacceptable, and goes beyond a policy of engagement. China has not given any substantive signs of changing its current nuclear sales to Iran, yet the administration acquiesces on all requests for cooperation. China's leader, Jiang Zemin, insisted upon a fanfare welcome from the United States and his request was granted. However, compliance of the warm welcome should not set the tone for the upcoming discussions between the two leaders. President Clinton must send a clear, firm message regarding U.S. nuclear nonproliferation policy. The United States must lead by example and show China--and the world--that we are not open to sending nuclear technology to Iran via China. The following article appeared in today's Washington Post: China and Nuclear Trafficking (By Edward J. Markey, Benjamin A. Gilman and Christopher Cox) During Chinese President Jiang Zemin's visit this week, President Clinton is expected to activate a 1985 Nuclear Cooperation Agreement with China. American companies would then be authorized to start selling nuclear reactors and fuel to a country that has been identified by the CIA as ``a key supplier of most destructive arms technology'' to rogue regimes such as Iran's. We believe that providing access to American technologies that could end up assisting Iran's nuclear weapons programs would constitute an intolerable risk to U.S. national security. When the Nuclear Cooperation Agreement was finalized in 1985, Congress placed conditions on the resolution approving it that required the president to certify that China had become a responsible member of the international nonproliferation community before the agreement could go into effect. No U.S. president, not Regan, not Bush and until now not Clinton, has made such a certification. A glance at the record quickly shows why. Communist China's nuclear, chemical, biological and missile proliferation has made it the Wal-Mart of international nuclear commerce. Consider the following list of only the worst and most recent of China's nonproliferation violations: In February 1996 the People's Republic of China was discovered to have sold 5,000 ring magnets to Pakistan for use in Pakistan's secret uranium enrichment facility, though it publicly denied doing so. In May 1997 the State Department cited seven Chinese entities for exporting chemical weapons technology to Iran. In June 1997 Time magazine reported that China had not only transferred nuclear-capable missiles to Pakistan but was also helping Pakistan build missiles of its own. In July 1997 the CIA identified China as being ``the most significant supplier of Weapons of Mass Destruction (WMD)- related goods and technology to foreign countries.'' In August 1997 Israeli intelligence reports confirmed that China is supplying long-range nuclear missile technologies to Iran. In September 1997 the U.S. Navy reported that China is the most active supplier of Iran's nuclear, chemical and biological weapons programs. This record speaks for itself. China has continually assure the United States that it would stop providing technologies for weapons of mass destruction to countries such as Iran and Pakistan. China has continually failed to live up to its promises. Before implementing the 1985 agreement, we need to be certain that this time the promises are for real. The 1985 agreement requires the president to certify that China has made sufficient progress in halting proliferation. President Clinton, however, seems to believe that China's past proliferation record is irrelevant, and that we should blindly trust the vague and untested promises China has made to implement its own export controls and regulations. China has yet to make a tangible demonstration of its commitment to cease its sales of WMD technologies. Implementation of the Nuclear Cooperation Agreement is profoundly ill advised, at least until the following criteria are met: (1) China must join the Nuclear Suppliers' Group (NSG). The NSG members have agreed not to sell nuclear technologies to any country that does not allow international inspections of all of its nuclear facilities all of the time, a criterion known as ``full-scope safeguards.'' A 1993 statement by then Secretary of State Warren Christopher calls the NSG ``a fundamental component of the international nonproliferation regime,'' and says that ``the United States has been a strong proponent of requiring full-scope International Atomic Energy Agency safeguards as a condition for significant new nuclear supply commitments.'' Christopher's first statement remains true, but the Clinton administration is considering reversing itself on the second. Why should countries such as Canada and Switzerland, both NSG members, be held to a higher nonproliferation standard than Communist China? (2) China must cease all proliferation of weapons of mass destruction, including missiles and chemical and biological weapons. A promise to cease nuclear proliferation without similar assurances to cease the proliferation of other mass destruction technologies is a lot like an alcoholic's swearing off scotch without bothering to stop drinking beer or wine. (3) China must follow through with its promise to implement an export controls system, but it must be proved to be effective. This can be accomplished only through the passage of time. With such a long legacy of transgressions and broken promises, we need to see evidence of true reform before moving forward with certification. President Clinton has an opportunity, as well as an obligation, to require that the People's Republic of China demonstrate its compliance with global nonproliferation norms (as opposed to mere promises) by resisting pressure from the Chinese government (and the American nuclear industry). But if the president certifies China as a nonproliferator, despite the record we have outlined and without a demonstrated change of behavior on the part of Beijing, he will have eviscerated U.S. nonproliferation policy and compromised U.S. national security.

Mr. STARK

Mr. STARK. Mr. Speaker, following is the testimony of Immunex Corp. from an October 21, 1997 hearing before the Senate Approrpriations Subcommittee on Labor-HHS-Education. It describes why a proposal by a number of drug manufacturers to extend the patent exclusivity on their drugs is a bad deal for consumers and America. Everyone is for increased research on the cure to illnesses--but charging sick people more for existing medicines while the corporations pocket most of the monopoly windfall for profits is a lousy deal. The end of a Congress is a dangerous time, when last minute sweetheart deals get added to ``must pass'' legislation. The last time a pharmaceutical company tried this was an anonymous amendment to the Kennedy-Kassebaum law to provide special patent protection to Lodine. the result was a national outcry and special action to strip the ``gift'' out of the bill. Keep your eyes open everyone--we may be facing the same robbery attempt again. Statement by Scott Hallquist, Senior Vice President and General Counsel Immunex Corporation, Before The Subcommittee on Labor, Health and Human Services, Education, Committee on Appropriations, U.S. Senate October 21, 1997. Mr. Chairman and Members of the Subcommittee: On behalf of the employees and stockholders of Immunex Corporation, I am grateful to the Subcommittee for affording me the opportunity to present Immunex's views about the proposed demonstration project to fund biomedical research through extensions of market exclusivity for approved drugs. If implemented, this proposal would deprive our company of the ability to provide an important cancer drug to patients. Using this drug as an example, I will illustrate for the Subcommittee the punitive and anticompetitive impact of the proposed demonstration on private sector research, health care expenditures, the federal Medicare budget, and patient access to affordable drug therapies. Immunex is a research-based biopharmaceutical company headquartered in Seattle, Washington. We have approximately 900 employees throughout the U.S. Our mission is to develop innovative treatments for patients with serious medical needs. Since the company was founded sixteen years ago, we have spent $483 million on research and development-- approximately one-half of the company's revenues over that same period of time. In 1996, our total research investments exceeded $100 million. Immunex markets seven products in the U.S. All are used in the treatment of cancer or to temper the side effects of cancer therapy. As one example, we received FDA approval to market a chemotherapy drug called Novantrone for the 80,000 men who suffer from advanced hormone refractory prostate cancer. Until Novantrone received clearance, there were few treatment options for these patients. In addition to the development of innovator drugs like Novantrone, Immunex has developed a generic form of paclitaxel, a chemotherapeutic agent used to treat metastatic ovarian and breast cancers that have not responded to first line therapies. We intend to market this drug as soon as the exclusivity period granted to Brisol-Myers Squibb for its brand, Taxol, expires. Thus, we are able to consider the proposed demonstration project from a unique perspective--that of a company that is fiercely committed to research and development, that develops and markets innovator drugs, and that also has an interest in generics. In our view, the proposed demonstration runs counter to sound public policy and would not achieve its stated objectives. Proponents of the demonstration offer two principal justifications: 1) five years of market exclusivity is not sufficient to provide adequate incentive for companies to conduct research to develop new drugs; and 2) the demonstration would provide a source of revenue needed to maintain support for NIH research. Unfortunately, the proposal fails on both counts. Perhaps there should be a reexamination of the purpose and effect of the Waxman-Hatch market exclusivity law. But the appropriations process is not the proper forum for that debate. It requires the same level of scrutiny and consideration that was applied when the law was first adopted. This is particularly true in light of the anti- competitive nature of the demonstration and its likely adverse impact on patient access to lifesaving therapies. Moreover, the proposed demonstration does nothing to incentivize new drug development since it would extend, by up to five additional years, market exclusivity for existing drugs only. It actually would deter research to develop new formulations of drugs that qualify for the additional protections. Simply put, other companies that otherwise might produce new versions with fewer side effects, easier delivery systems, or greater efficacy would be unable to receive approval and would have no incentive to conduct the research necessary to achieve these kinds of breakthroughs. Depriving patients in this way goes well beyond current market exclusivity policy. The projected revenue stream to NIH is another fallacy. As illustrated in the Taxol example below, the cost to the government of extending exclusivity periods under this demonstration would far exceed the projected $750 million of new revenue for NIH. It also is important to note that the proposed ``royalty'' would not be absorbed by the pharmaceutical companies but would be passed on to patients, private insurers, and government health care programs in the form of higher prices for drugs that are shielded from competition. A tax on sick and dying patients is an inappropriate and unnecessary way to fund biomedical research. Conservatively, at least 21 drugs would receive protection under the demonstration. But one drug, Taxol, presents the most egregious case study on why the demonstration would be a horrible investment for taxpayers and a setback for cancer patients. The active ingredient in Taxol is the anticancer compound paclitaxel. It was discovered, formulated, and introduced into human clinical trials by the National Cancer Institute using federal funding. As a result of a cooperative research and development agreement, or CRADA, Bristol-Myers Squibb was granted exclusive rights to the NCI paclitaxel research, continued the clinical trials of Taxol, and obtained FDA approval in December 1992. In return for its investment, Bristol received five years of marketing exclusivity under the Waxman-Hatch Act. This term of exclusivity is scheduled to expire on December 27, 1997. Taxol is an expensive drug. A basic treatment costs a cancer patient more than $2,000. Taxol pricing was the subject of a negotiated agreement between NIH and Bristol following a House subcommittee hearing in 1991 at which a senior Bristol executive testified that the drug ``is neither patented nor patentable; therefore, we do not have exclusive intellectual property rights to Taxol.'' Taxol's high price and five years of marketing exclusivity were part of the bargain that Bristol struck with the government. The bargain paid off for Bristol. Bristol does not separately report U.S. Taxol sales, but the market research firm IMS America estimated U.S. Taxol sales for 1996 alone to total $519 million. Other firms have estimated them to be as high as $590 million. In August of this year, Bristol reported worldwide Taxol sales of $813 million and sales in the first half of 1997 of $444 million. Taxol is well on its way to becoming a billion dollar drug and certainly needs no additional legislative preference to ensure its success. Four years ago, Immunex began working with paclitaxel. We have a supply arrangement with an innovative Colorado company, Hauser, Inc., that pioneered paclitaxel manufacturing processes when NCI research on paclitaxel first began. Immunex and Hauser each have invested heavily to prepare stockpiles of bulk drug for formulation and sale. Hauser also has developed a manufacturing process based on renewable biomass that can assure continued supplies of paclitaxel. In undertaking this effort, we relied upon the Waxman-Hatch law and have every intention of introducing on the market a competitive paclitaxel product in the U.S. upon the expiration of Bristol's initial exclusivity period for Taxol. Several other companies have expressed the same intent. The positive impact of generic competition to Taxol is occurring in Canada where Immunex has introduced a competitive paclitaxel injection product. The prices for Taxol in Canada are already declining as the market adjusts to competition. Whereas a breast cancer patient in the U.S. pays $183 for a vial of Taxol, her Canadian counterpart is able to obtain the competitive product for less than $100 (U.S. dollars). NCI has indicated its expectation that generic competition for Taxol will occur upon the expiration of Bristol's initial term of exclusivity. In a letter to Senator Ben Nighthorse Campbell, dated February 26, 1997, Alan Rabson, Deputy Director of NCI, discussed the Bristol CRADA and stated, ``. . . [N]ew anti-cancer indications for paclitaxel that hopefully will arise from research under the extended CRADA may increase market opportunities for generic manufacturers of paclitaxel once they are able to enter the market in January, 1998.'' Nevertheless, Bristol continues to pursue efforts to obtain extensions of its Taxol exclusivity. At one point, Bristol was seeking a two-year extension. To better understand the economic impact of such an extension, Immunex commissioned a study by an independent economic research firm, National Economic Research Associates (``NREA''). NERA estimated that a two-year extension would cost the U.S. health care system in excess of $1 billion and would cost the Medicare program alone $288 million. The proposed demonstration would provide not two, but five years of additional exclusivity to Bristol for Taxol. In exchange, NCI would receive a mere three percent royalty. Based upon the approximately $500 million in U.S. sales now recorded by Bristol, NCI would receive about $15 million in royalties in the first year. Comparing the estimated Medicare cost impact of a two-year extension with two years worth of royalty payments under the demonstration, taxpayers would spend an extra $10 on Medicare for every $1 invested in the demonstration. When one considers the over $1 billion in added costs to all federal health programs and private sector plans, the taxpayer cost balloons to nearly $30 for every one dollar spent with regard to Taxol alone. The numbers are even more astounding when all drugs covered by the demonstration are taken into account. The sweeping protections granted to certain drugs under the proposal actually would deter other companies from researching and developing new formulations of paclitaxel or new methods of using and administering this anticancer compound, since any drug application relating to this active compound (even new drug applications directed to uses, indications, or formulations that are not researched or developed by Bristol or included in Taxol labeling) would be frozen for five years. Thus, the proposed demonstration actually would cost the federal government billions of dollars that otherwise could have been dedicated, at least in part, to NIH research. It would discourage important research, deny patients access to lower-cost drugs, impose a hidden tax on the sick, and adversely impact companies that have made significant investments in researching new uses for drugs that are reaching the end of their exclusivity periods.

Mr. STARK

Mr. STARK. Mr. Speaker, following is an editorial from the October 13, 1997, ``Modern Healthcare.'' I wish I'd said it first. As Government Caves, Providers Make Their Own Antitrust Policy When the government sets antitrust policy for a particular industry, you would hope the policy is being driven by the concerns of buyers who are wary of the potentially anti- competitive market clout of sellers. Not so in healthcare. As evidenced by numerous events over the past several years, it's clear federal antitrust policy as it pertains to healthcare providers is guided by providers themselves and their well-paid lawyers and economists. In other words, the sellers are setting their own rules of competition with the full acquiescence of federal lawmakers. The providers' sole justification? Trust us, we know what we're doing. We know what's best for patients. In fact, the provider industry is so brazen and so confident it expects special treatment under the federal antitrust laws. For a definition of brazen, read Mary Chris Jaklevic's coverage of the deal between the two largest hospitals in Grand Rapids, Mich., which merged despite not having final clearance from the Federal Trade Commission, or Charlotte Snow's story on how the only two acute-care hospitals in Greensboro, N.C., outwitted the FTC and the North Carolina attorney general's office to obtain their monopoly (Oct. 6, pages 2 and 14, respectively). The hospitals in both cases have promised to limit price increases and pass along millions of dollars in economic efficiencies to consumers. Why shouldn't providers act with such bravado? The government has caved in to virtually all their demands: In 1993 the FTC and the U.S. Justice Department release the first-ever antitrust enforcement guidelines for providers that created six ``safety zones,'' or categories of business transactions that won't be subject to federal antitrust scrutiny. In 1994 the two agencies revised the guidelines and added two more safety zones. In 1996 the agencies released more lenient antitrust standards for reviewing physician networks. Federal judges have thrown out the agencies' last three antitrust lawsuits against merging hospitals. In a time when hundreds of deals are being put together, the government has only one pending case against merging hospitals and one against a physician network. Despite all this, Sen. Orrin Hatch (R-Utah), who heads the Senate Judiciary Committee, recently said special antitrust rules for not-for-profit hospitals may be in order after he heard testimony from hospital executives, their lawyers and their consultants. Earth to Sen. Hatch. Where are the buyers in this debate? The managed-care plans? The employers? The patients? Somehow, they've largely been left out of the antitrust policy reviews. At first, newly consolidated hospitals and physicians will find it easy to generate economic efficiencies given the excess capacity and duplicated services in many markets. Only time will tell if they pass those benefits along to the public or use their power to stifle new competition. Let's hope somebody with influence is watching.

Mr. STARK

Mr. STARK. Mr. Speaker, along with over 20 original cosponsors, I am introducing the Health Care Worker Protection Act of 1997. This bill is designed to reduce the risk of health care workers from accidental needlesticks. The legislation would ensure that the necessary tools-- better information and better medical devices--are made available to our frontline health care workers in order to reduce the injury and death which may result from accidental needlesticks each year. Although needlestick injuries are considered to be widely under reported, health care workers report more than 800,000 needlesticks and injuries from sharp products each year. According to the Center for Disease Control and Prevention [CDC] there have been at least 52 actual and 111 possible documented cases of HIV seroconversions among U.S. health care workers resulting from occupational exposures since 1994. Needlestick injuries caused by hollow-bore needles accounted for 86 percent of all reported occupational HIV exposures. Of the needles involved in the reported injuries, 2 percent or roughly 16,000 are likely to be contaminated by the HIV virus. Imagine what someone must go through when accidentally pricked with a used needle device. Tests must be conducted to determined if the blood on the device contained an infectious agent. If so, the health care worker must undergo tests to see if they have been infected. If the blood contained the HIV virus, one could not be sure for up to 1 year whether an infection occurred. While you can't put a dollar figure on the psychological toll of a needlestick, if only one employee becomes HIV positive, the direct cost to treat a needlestick injury can average $2,809 even if there is no infection. If an infection occurs, direct and indirect costs can total more than $500,000. The Health Care Worker Protection Act of 1997 requires hospitals and hospital-owned facilities to use safe and approved hollow-bore needle devices as a condition of participation in the Medicare Program. Hospitals would be required to use safe needle devices as approved by the FDA in consultation with an advisory committee comprised of representatives from consumer groups, frontline health care workers, industry representatives, and technical experts. To enhance compliance, $5,000,000 would be provided for education and training in the use of safety devices. Support for this bill has come from all quarters: the American Nurses Association, the American Association of Occupational Health Nurses, the Service Employee International Union, American Federation of Teachers, Lynda Arnold's National Campaign for Healthcare Worker Safety, Association of Operating Room Nurses, American Association of Critical-Care Nurses, many product researchers and manufacturers, and most importantly, health care workers. Supporters of the bill share the opinion that this legislation will provide important protections for health care workers in the workplace. Better information and better devices are the key to reducing injuries from needlesticks. Hospitals must be encouraged to substitute existing needlestick products with products proven to be safe. Nurses, doctors, and other frontline health workers care each day for those individuals we love. They shouldn't have to risk their lives to save lives. I urge my colleagues to support this bill.

Mr. STARK

Mr. STARK. Mr. Speaker, too bad Dante isn't still alive. He would surely write a special place in Hell for the vultures who prey on seniors with false and alarmist mailings, demanding money to save the seniors from some phony threat. A more immediate punishment would be fines and imprisonment for postal fraud by the U.S. Postal Service. Following is a letter I have sent to the U.S. Postal inspectors regarding the recent mailings by United Seniors Association and the Seniors Coalition and their misrepresentation of the Kyl amendment issue. U.S. Postal Service Inspection Service, Fraud Division, Washington, DC. October 27, 1997. Dear Sirs: Pursuant to 18 U.S.C. 1341 which reads, in part ``Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises . . . for the purpose of executing such scheme or artifice . . . places in any post office . . . any matter or thing whatever to be sent or delivered by the Postal Service . . . shall be fined under this title or imprisoned not more than five years, or both'' I wish to report a postal fraud by United Seniors Association, 3900 Jermantown Road, Suite 450, Fairfax, VA 22030 and urge your immediate action to impose appropriate penalties. Enclosed are two mailings from the United Seniors Association (USA) urgently asking for money on the basis of false pretenses and representations. The USA letter contains innumerable inaccuracies and errors of fact. It is so blatantly wrong that it cannot be a simple act of stupidity, but is a calculated scheme to frighten Medicare beneficiaries out of money. In particular, in the letter of September 22, 1997, the paragraph on the first page which reads ``Here's what this appalling new law does: if you are a Medicare patient and you want to personally pay for a treatment which Medicare does not want to cover--it will be nearly impossible to do so. . . .'' This statement, repeated in numerous ways throughout the mailings, is false. Medicare beneficiaries have always been able to contract privately with doctors for services which Medicare does not cover. Nothing in any law has changed that right. Under certain conditions, the new law actually extends that ``right'' to services which Medicare does cover--a new right to be billed more than the Medicare payment rate by physicians, which did not exist before. See enclosed memoranda. I also urge you to investigate for fraud the enclosed recent Seniors Coalition mailing (11166 Main Street, Suite 302, Fairfax, VA 22030). This mailing calls for ``an emergency contribution'' to help fund a lawsuit on the private contracting issue. The cover letter is rather extraordinary in that it asks people to send money to help fight something for which the writer has ``no time to explain.'' The statements in the letter over Mary Martin's signature is false: ``your health care will be rationed in a Clinton HMO.'' The enclosed news articles contain numerous errors and misrepresentations. I believe that this mailing may also be a mail fraud because it uses false statements in the cover letter and inaccurate or incomplete statements in the news articles to scare people into sending money to support plans for a lawsuit. I know of no such lawsuit or any grounds for it, and I ask your investigators to determine whether there is in fact such a planned use of the money bilked from the public. Congressional offices report receiving numerous letters and calls expressing concern and confusion as a result of these two mailings and therefore I assume that a number of Medicare beneficiaries have been defrauded out of some money as a result of these alarmist misrepresentations. Before additional harm is done to Medicare beneficiaries, I urge an immediate investigation and fines and/or the return of money to the beneficiaries. The issue of private contracting and Medicare payment rates are complex and worthy of a rational debate. These two mailings are false, alarmist, and destructive to public debate while frightening beneficiaries out of money ``by means of false or fraudulent pretenses, representations, promises'' etc. Thank you for your review of these mailings. Sincerely, Pete Stark.

Mr. STARK

Mr. STARK. Mr. Speaker, on behalf of Representative Becerra and myself, I am today introducing legislation which will save Medicare money--and save the lives of many of its beneficiaries. The bill we are introducing passed the House in the Budget reconciliation bill (H.R. 2015) and was known as the Centers of Excellence proposal. CBO scored the provision as saving $300 million over the 5 years and $800 million over 10 years. To quote from the Department of Health and Human Service's justification: The Center of Excellence proposal originated as a result of a demonstration conducted in the early 90's under which certain facilities, referred to as ``Centers of Excellence,'' were paid a single fee to provide all of the facility, diagnostic and physician services associated with coronary artery bypass graft [CABG] surgery. The facilities were selected on the basis of their outstanding experience, outcomes, and efficiency in performing these procedures. Medicare achieved an average of 12 percent savings for CABG procedures performed through the demonstration. The House provision would have made the Centers of Excellence program a permanent part of Medicare by authorizing the Secretary to pay selected facilities a single rate for all services, potentially including post-acute services, associated with a surgical procedure or hospital admission related to a medical condition. As with the CABG demonstration, selected facilities would have to meet special quality standards and would be required to implement a quality improvement plan. The amendment was dropped in conference because of resistance from the Senate. Some Senators from States where no hospitals were designated felt that the program tended to cast into doubt the quality or excellence of non-designated hospitals. Mr. Speaker, the name of this program is not important--what is important is that it can save money and by encouraging beneficiaries to use hospitals that have high volume, quality outcomes, it can save lives. Therefore, I am dropping the term ``centers of excellence'' and just using the phrase ``contracting entities.'' Like Lake Wobegon, where all the children are above average, it is human nature for all Members of Congress to want their local hospitals to be above average. But not all hospitals are above average--and this is a serious matter. In fact, it is a matter of life and death. Hospitals which do large volumes of a certain type of procedure tend to have better outcomes and quality. Indeed, really good health policy in this Nation would prohibit hospitals from doing sophisticated procedures if they do not do a certain volume per month. This principle is applied to liver transplants, for example, and ought to be applied to some other procedures as well. We may all have pride in our local hospitals, but the fact is: some of them are killing people because they do not do enough of certain types of procedures and therefore are not skilled in those procedures. Medicare should be able to contract with certain hospitals for quality and volume--both to save money and to deliver better health care. We are about to begin a commission to make recommendations for the long-term survival of Medicare. Many on that commission will want to cut back benefits and ask beneficiaries to pay more--but before they do, they should explore every possible cost saving in the system. This bill is a two-fer: it saves money while improving quality. I regret this provision was not included in this summer's budget bill. I hope it will be included in the next Medicare bill that moves through Congress. As further explanation of why this legislation makes great sense, I am including below ``Extracts from the November, 1995 Research Report'' on the Centers of Excellence Demonstration. Centers of Excellence Demonstration--Extracts from November 1995 Research Report Rational for the Demonstration: Physicians operate under different payment incentives than hospitals, so hospital managers have difficulties Implementing more efficient practice patterns. A global fee that includes physician services aligns incentive and encourages physicians to use institutional resources in a more cost effective. Design of the Demonstration: Under the demonstration, Medicare paid each of the hospitals a single global rate for each discharge in DRGs 106 and 107 bypass with and without catheterization. This rate included in all impatient and physician services. The standard Medicare hospital passthroughs were also included, i.e., capital and direct medical education, on a prorated basis. Any related readmissions were also included in the rate. Pre- and post- discharge physician services were excluded except for the standard inclusions in the surgeon's global fee. All four hospitals agreed to forego any outlier payments for particularly expensive cases. The hospitals and physicians were free to divided up the payment any way they chose, Medicare Savings under the Demonstration: From the start of the demonstration in May 1991 through December 1993, the Medicare program saved $15.3 million on bypass patients treated in the four original demonstration hospital. The average discounted amount to roughly 14 percent on the $111 million in expended spending on bypass patients, including a 90-day post0-discharge period. 90 percent of the savings came from HCFA -negotiated discounts on the Part A and B inpatient expected payments. 8 percent came from lower-than-expected spending on post- discharge care Beneficiary Savings under the Demonstration: Beneficiaries (and their insurers) saved another $2.3 million in Part B coinsurance payments. Total Savings under the Demonstration: Total Medicare savings estimated to have been $17.6 million in the 2.5 year period. Also included is an article from the October 23 Washington Post entitled ``Turning to a Specialist [Hospital] to Curb Rising Health Care Cost.'' It is an excellent explanation of how contracting with quality hospitals for a high volume of services can help both the Medicare trust fund and the patient. Turning to a Specialist to Curb Rising Health Care Costs (By Steven Pearlstein) Legal Sea Foods. The Cap. Federal Express. Nucor Steel. One of the things common to all of these successful companies is focus. Rather than try to be all things to all people, they do one thing and do it very well. And by virtue of their high volume and specialization, they have raised quality and lowered prices for their consumers and made a nice profit beside. But will the same formula work in health care? In small way, it already has. At the Shouldice Hospital in Toronto, which performs only hernia operations, the average price of $2,300 was more than a third less than the cost of the same operation at the typical general hospital in the United States. And yet despite the lower cost, only one-half of 1 percent of Shouldice patients need to have the procedure repeated, compared with 10 percent of patients at general hospitals. And at surgeon Denton Cooley's famed Texas Heart Institute in Houston, a coronary bypass operation cost $26,000, compared with a national average of $30,000. More than 90 percent of Cooley's patients lived five years beyond their surgery; patients elsewhere didn't do nearly as well. According to Regina Herzlinger, a professor at the Harvard Business School who collected the statistics, these early moves toward specialization are almost sure to be replicated as market forces continue to reshape the health care industry. Herzlinger notes that a dozen or so medical conditions now account for as much as two-thirds of the nation's health care bill--things such as heart disease, depression, asthma, diabetes, arthritis, cancer and pregnancy. That means that if ways can be found to shave even 15 percent off the cost of treating those conditions, the nation's health care tab could be reduced by $100 billion each year. Specialization, of course, is nothing new to medicine. There have long been mental hospitals and children's hospitals, rehab centers and eye and ear infirmaries. But for the most part, these centers have specialized in the hardest- to-treat cases, coupling care with medical research and training in ways that have tended to raise costs rather than lower them. The new genre of speciality facilities--``focused factories,'' Herzlinger calls them--tend to be much more entrepreneurial, hoping to leverage their lower prices and higher quality to win contracts from big insurers and health and maintenance organizations. In a sense, these facilities represent the second phase of the effort to rationalize the nation's health care system. In the first phase, competition forced doctors and nurses and hospital administrations to accept higher workloads and less pay while patients were forced to accept less choice and convenience. Now, that process has pretty much reached its limit. In the next phase, experts say, the way in which doctors and hospitals go about delivering care will be reengineered, disease by disease. Hospitals and doctors that come up with standard treatments that generate the best medical outcomes at the lowest prices will become the preferred providers of the big health care plans. And look for these specialists to roll out their successful model nationwide, driving local suppliers out of the business in much the same way that Subway has trounced the local sandwich shop and Home Depot the local hardware store. The high-volume specialists will gain some advantage from the fact that they can buy sutures more cheaply or because they can better afford the cost of sophisticated medical equipment. But more important, according to Herzlinger, is that by doing the same thing over and over again, they gain expertise and efficiency. At Shouldice Hospital, for example, each surgeon performs an average of 600 to 700 hernia operations each year. That means Shouldice surgeons do more hernia operations in two years than most of their counterparts do in a lifetime. So promising are these results that big HMOs, such as Oxford Health Plans in the New York area, are working with specialists and hospitals to put together their own focused factories in key markets. General hospitals look at all this with some apprehension. Right now, the ``profits'' they earn from high-volume procedures such as heart bypasses and baby deliveries are used to make up for ``losses'' they suffer or running emergency rooms and neonatal units. But if the profitable business is taken away by the lower-cost specialists, hospital administrators warn that they will have no choice but to raise the price of the services they are left with. James Bentley, vice president of the American Hospital Association, warns that what appears at first blush to be cost saving may, in the end, turn out to be nothing more than cost shifting. But a Georgetown University Medical Center, Kenneth D. Bloem, the new chief executive, believes that the trend toward specialization is inevitable--and that general hospitals like his will have to begin preparing for it. That might require Georgetown to develop one or two focused factories of its own, he said, while closing down some of its departments that cannot achieve minimum economies of scale. Or it might involve a new arrangement under which management of Georgetown's departments--the coronary surgery unit, say-- is turned over to one of the specialty companies. Right now, says Bloem, officials at a hospital such as Georgetown still think of it as more like a medical department store. In the future, he says, it may have to operate more like a mall made up of a number of market-tested specialty boutiques. In a small way, that process already has begun. The coffee cart in the lobby of the hospital is run by Starbucks.

Mr. STARK

Mr. STARK. Mr. Speaker, I thank the gentleman for yielding me this time. Mr. Speaker, we have heard words here this morning about labor unions and bureaucracy and liberals, and I am willing to stipulate to my colleagues on the other side of the aisle that I am a liberal. More than half of the families in my district have a labor union member in their household. They work with their hands; they work on their feet, something that many of my colleagues on the other side of the aisle have had very little contact with in their lifetime. They work hard and they make very little money. They are in the vast majority in this country, and they are not getting any benefit from this bill. Let us leave education aside. Many of them, a majority of them, they send their children to parochial schools, wish they had the money to send them to private schools if they could find scholarships. But the fact is that less than 6 percent of the wealthiest Americans will get anything out of this. So it is those labor union people, those hardworking public schoolteachers, who the Republicans would turn their backs on and cut their salaries and deny them increased funding, that I am proud to support. I am proud to support the working Americans in this country who are getting nothing out of this except to have their hard-earned dollars drained so that the very rich Republicans, and if that is class warfare, let it be. Because it is when the class wakes up who is paying the freight for these huge deductions for the millionaire, billionaire Republicans who are getting the benefits that they are going to understand that the people in charge of this House are stealing the money from the hardworking Americans and frittering it away to the idle rich. So if my colleagues are rich enough to have inherited money, if they are rich enough to have never had a real job in their life, if they know nothing, I hear all these guys talking about the market and free enterprise. Most of them have been at the public trough all their lives and never had a job in public industry. So I say I am proud to be a liberal, proud to represent the working men and women of this country who will get no benefit from this bill.

Mr. STARK. There is approximately a $2.5 billion cost, but the true cost, if the gentleman will yield, is actually over $5 billion. There is a gimmick in here, strictly for budget purposes. The bill is sunset at the end of 5 years. If the Members can name a tax loophole that has ever been allowed to sunset, then I would say he could make the point, but the fact is if this goes on, the 10-year cost approaches $5 billion, money that we could use to rebuild schools across the country and use for every American child, not merely the 2\1/2\ billion that is in here. So not only is it heading in the wrong direction, there is a subterfuge here that understates the cost by a great deal. I thank the gentleman for his observations.

Mr. STARK. Mr. Speaker, the gentleman, and far be it from me to even presume to correct the distinguished gentleman from Texas, but I think he suggested that this might cost $2 or $3 billion.

Mr. STARK. Mr. Speaker, will the gentleman yield?