Growing up in a small-town in Texas in the early 1950s, the practice of medicine was my father’s life. Except for the sometimes-cancelled family vacations, we never got away from it. First making rounds on my father’s coattails, I was introduced to his noble profession prior to entering the first grade. Medical terminology was my family’s second language.
“In those days, all of our family activities revolved around the hospital and my father’s obligations to his patients. If we went to the movies or out to eat, he let the hospital operator know exactly where he was. When my baby sister, Susie, and I spent time with both of our parents, the conversations often centered on my father’s patients. If his patients were doing well, his mood was good and so was ours; if not, a pall fell over the family. My father had a tiring job, and he often dozed between bites of dinner. Despite the sacrifices, he was happy. More appropriately, he was satisfied, not so much from the money—he was occasionally paid in vegetables, loaves of bread, and homespun goods—but from the respect bestowed on him by his patients.” (1)
The article by The New York Times (NYT) writer, Gardiner Harris, titled More Doctors Choose Less Hectic Schedule, highlights the sweeping changes in career choices by the emerging physician population. Telling is reference to a survey by Merritt Hawkins, a top doctor recruitment firm, that quality of life was more important to new physicians than finances. In growing numbers, they want to work fewer hours or even part time and are willing to take salaried positions to achieve their goals.
The Merritt Hawkins survey also reported that 51 percent of the positions they filled in the last year were for hospitals, almost a four-fold increase from eight years ago. Added to that were private sector positions that included income guarantees by hospitals. (2) If increasing numbers of entering and practicing physicians are working for or receive income from hospitals, what does this trend say about our profession’s battle against the corporate practice of medicine? There seems to be a contradiction when the organizations that represent physicians fight to block the corporate takeover of our profession, while more entering physicians are no longer interested in the ‘private practices’ of their forefathers.
Even more important, this shift indicates “a sweeping cultural overhaul in medicine’s ethos…from being an individual to a team sport…to the point that many patients now see doctors as interchangeable.” (2)
The resident physician highlighted in the New York Times article, Dr. Kate Dewar, who has chosen a different career path from her primary care physician father is quoted as equating his practice to the movie Groundhog Day, “in which the same boring problems recur endlessly.” She goes on to state, “I like to fix stuff and then move on.” Where in her comments does she talk about the patient instead of the malady? Is the author putting her up as our profession’s new poster child? I hope not!
Frequently I care for new patients that have been or are seeing other doctors. As part of my history, I often ask for their doctors’ names. Increasingly, they can’t recall it. Looking back, I don’t remember a single patient that my father cared for who did not know his name. It wasn’t just with my father’s patients. Back then everyone had their doctor. We are slowly losing that personalness in this profession—that sense of ownership in a relationship that is built on commitment and not remuneration.
It’s not just in medicine. Self-service gas stations, Home Depot, Wall Mart and McDonalds have changed the world. By cutting back on the personal services, these giant corporations create cost savings; some of which is passed on to their customers. The delivery of health care has become ‘big business’ controlled by the federal regulations, hospital corporations and insurance conglomerates. As referenced in the NYT’s article, in growing numbers, we, the physicians, are letting it happen because of the “sweeping cultural overhaul in medicine’s ethos.” (2)
Are these ‘new’ physicians less dedicated than their forefathers? Let’s just say they are less consumed with the practice of medicine. Medicine is not their life as it was for my father and his generation. Unfortunately, as these ‘new’ physicians put more efforts into controlling the other aspects of their lives, they are losing control, more appropriately giving up control, of their profession by legislative fiat, insurance mandates and the very corporations they willingly choose to join.
One new hope for those of us who cling to the concept of the personal side of this profession is ‘concierge medicine.’ Also referred to as boutique or retainer medicine, this concept re-introduces the personal side of the patient/doctor relationship. Although growing in popularity, it is frowned on by a large part of the medical community because of its exclusivity for those ‘chosen few’ who can afford the retainer fee. For all the criticism heaped on the physicians who select this style of practice, they are fostering a more personal relationship with their patients.
Medicare patients, Medicaid recipients and the newly insured who will be covered under the PPACA are those who are less likely to afford a ‘retainer relationship.’ Thus, there is real concern in a two-tiered delivery system: one for the haves and another for the remainder of the population.
Ironically, capitated delivery systems are ‘retainer’ type relationships by limiting patient access to just certain preselected providers. Unfortunately, because the patient does not have a choice or only limited choices, establishing a personal relationship becomes more difficult, similar to ‘pre-arranged’ marriages. The key concept is ‘free choice’ by both parties.
Other than exclusivity, the question is do these patients receive better care in a ‘retainer’ relationship? That phrase, better care, may be at the heart of the changes that we see happening today. If taken in the context of medical treatment, although one could argue that any delay in therapy can increase morbidity, the answer is probably no. If interpreted to mean ‘better caring’, the answer appears obvious if Dr. Kate Dewar’s response in the NYT’s article represents the thinking of many of today’s emerging physicians.
Recently, two members of my family underwent surgery. Both did well. The contrasting post-operative care by their two physicians was shocking. My aunt’s physician checked on her after surgery in recovery and in her room later that evening. Before she was discharged the next morning, he dropped by go over her instructions until she was scheduled to see him in the office the following week. The other physician sent by an assistant the next morning just before discharge. Both of my relatives needed suture removal at the time of their office visit. Guess which relative had her sutures removed by her doctor and which only saw the nurse. Is the growing trend of triaging through physician extenders alarming? At the very least it is adding to the depersonalization of this profession—to the concept that doctors are interchangeable, even with their assistants.
The practice of medicine must always be about the patient. If we, as physicians, put the malady first, Dr. Dewar is correct, linking her father’s practice to the movie, Groundhog Day.
My guess is her patients would disagree.
REFERENCES:
- Tenery, R., Dr. Mayo’s Boy, Brown Books Publishing Company, 2008.
- Harris, G., More Doctors Say No to Endless Workdays, New York Times, April 2, 2011.
Nursery rhymes often evolve from real life situations. Frequently, their purpose is not just to entertain, but point out truisms in the abstract. We all grew up hearing about the ‘Three Little Pigs.’ The first pig built his house out of straw. The second used sticks, and the third built his home with bricks. Not worrying that their shoddy construction might bring future adverse consequences, the first two pigs had other priorities in mind when they were constructing their houses. They just wanted to get done, so that they could go out to frolic in the fields around their homes.
The third pig had much more foresight. While his two brothers were already out playing, and with trowel in hand, he methodically shaped each layer of mortar as he laid one brick on top of the other. His progress was slow. His sweaty clothes hung heavy across his shoulders, but he persevered. The elements were against him. The overhead sun beat down parching his skin. Sometimes the intermittent rains washed away that day’s work as he dashed for cover. But when the storm cleared, he was back. Finally, one day, as the last ray of sunlight dipped below the horizon, the third pig laid down his tools and pulled the heavy door to his completed house closed behind him.
Completing his task, the third pig was now able to join his brothers to frolic in the fields around their homes. That was until the big, bad wolf appeared on the scene.
Physicians can learn from the symbolism hidden in this often-told fable. It starts with the goals of each of the three little pigs and how much they were or were not willing to sacrifice to attain their goals. Sacrifice not only in how they built their houses, but also in the amount of effort they were willing to put forth in order to reach them.
Like the pigs, those deciding which career to pursue must make sacrifices in order to achieve their goals. Those sacrifices can be equated to building their structure on a sound foundation. For physicians, the years spent in medical school, internship and residency is their foundation. The tale of the three little pigs doesn’t delve into the pigs’ skills as builders, only their goals.
Although the first pig built that his house out of straw could have been the best carpenter of the three, he was obviously more concerned about getting into the fields to play rather than preparing for any future uncertainties. There is nothing that leads us to believe he was stupid, just naïve and short sighted. His rewards were his immediate goals, not building for the future. In the original version by James Orchard Halliwell-Phillipps, this pig was eaten by the wolf after his straw house was destroyed. In a more modern rendition, he flees to the house of the other foolish brother, the one who constructed his home out of sticks.
We all know physicians that fall into this first category. They worked hard and sacrificed to earn their degree. But now, it’s pay back time. That time is now. They often abandon the conventional methods of building their practices, incorporating methods used in the business community to fill their waiting rooms. Their goals are often the trappings that come with their diploma. Taking care of the patients is frequently just a means to an end— their end. Their patients are just the vehicle to get them there. Preserving the profession is not on their agenda. Medicine is thought of as their job and not their calling.
Then there is the second pig whose house was built out of sticks. His investment in materials was more carefully thought out. Except for the extreme, the elements would not be a problem. He probably was the frugal one because he knew his first brother’s house of straw would not last. Eager to join his playful brother, we can only assume, like many doctors, he thought that unforeseen tragedy was for the ‘other guy.’ His choice to cut corners came back to him when the wolf arrived at his door. Like his naïve brother, he paid the price for his shortcomings.
Examples are many practitioners in the non-physician community whose credentials are bestowed on them by the state legislatures based more on campaign contributions than on qualifications. Or even doctors who claim expertise in areas for which they are not adequately trained. They learned the basics, but just enough to call themselves an expert. The fellowship they should have taken, but didn’t. The three-day course in Las Vegas over the weekend that made them a Monday morning expert in their new endeavor. Where is their foundation? As long as the unforeseen doesn’t occur, they muddle along. When it doesn’t, tragedy steps in. That is unless they have an arrangement with the expert in the ‘house made of bricks.’ Unfortunately, often that can be too late.
Then there is the third pig. The one who built his house out of bricks. We don’t know if he was a better builder than his other brothers. We can conclude, however, that he had the foresight to plan for the future by erecting a structure that would resist the elements. The big, bad wolf would not have him for dinner.
In the most recent version of this fable, the third pig also showed compassion toward his ill-prepared brothers by allowing them a place of refuge, even potentially putting himself in peril when he let them in.
Following this analogy, this would be the doctors who ‘stick to what they know.’ Their fortress is their knowledge base. That is not to imply that the less informed can’t expand their areas of expertise. They should. Only to point out that their foundation of knowledge must be able to support this additional responsibility.
As physicians, we learn from this nursery rhyme the importance of three virtues: sacrifice, foresight and compassion. We can see that it is not always about the doctor that knows the most. Often it is about the doctor who looks above their own needs and cares the most.
Recently, federal agents have uncovered what is claimed to be “the single largest fraud orchestrated by one doctor in the history of the Health Care Fraud Prevention & Enforcement Action Team (HEAT) and the Medicare Strike Force operations.” (1) Although there are other accomplices charged in this mammoth scheme, it is reported that a single physician in Texas wrote or authorized prescription benefits for over 10,000 patients for home health care services that they didn’t need or receive. Using cash payments, food stamps and free groceries as enticements, the accused were able to sign up individuals for home health care services that committed fraud against the Medicare and Medicaid programs for a reported $375 million from January 2006 through November 2011.
This is not an isolated incident. Federal agents recently arrested 10 people (3 medical doctors, an osteopath and a chiropractor) who operated out of two medical clinics in Flushing, New York. They have been charged with running Medicare fraud schemes that have bilked the government out of $95 million. (2)
Estimates put the dollars lost to fraud at $60 billion last year alone. Officials report fraud involves everything from marketing schemes by pharmaceutical companies enticing doctors to prescribe drugs for unauthorized uses, to selling motorized wheelchairs to people who don’t need them. (3) Since the Medicare Fraud Strike Force came into existence in 2007, the agency has charged over 1,190 individuals in cases worth $3.6 billion. It has only been recently that the Department of Health and Human Services (HHS) has been able upgrade its data evaluation process that made the discoveries of the above two schemes possible.
These egregious acts may be isolated, but more than likely they are just the tip of the iceberg. However, they do bring awareness that the current system of monitoring for fraud is broken. It is also probable that simply using better computer programs alone to ferret out the offenders is not going to ameliorate all these problems.
One wonders if other members of the medical community either suspected or knew that these schemes were occurring, especially with the enormity of the charges that were being generated. If they did, why did they not inform the proper authorities of their suspicion? Is it that they didn’t want to get involved for fear of repercussions? Or is it similar to the often-told story of New Yorkers who had become so accustomed to the local street crime in their city they just ‘looked the other way’? Fortunately, several local administrations later, the crime rate in New York City is now better. But with these recent examples, one has to question if the same is occurring in the delivery of health care.
These two stories made headlines, but what gets glossed over is the so-called ‘nickel-dime’ charges that occur daily all across the country. The cataract surgeries that didn’t qualify under the standard Medicare guidelines. The back surgeries that could have been avoided with more time to ‘cool-off.’ The CTs or the MRIs that would have not been ordered if the treatment of ‘observation’ had just been tried first. Unfortunately, there are many more examples.
A patient arrived at my office recently. Her chief complaint was that she wanted surgery for her cataracts. After a careful examination, I determined her cataracts were not advanced enough that she needed, or qualified for surgery under the specific Medicare guidelines. Obviously disappointed, she responded to my answer with, “doctor, all my friends have already had theirs removed and their vision was not as bad as mine.” She then continued with a profound observation about the medical profession, “we all know how it works.”
That patient and her friends think committing Medicare fraud is a game and their doctors should be complicit. Otherwise many will look elsewhere. This way of thinking is the antithesis of what physicians have stood for since the Oath of Hippocrates was first penned. It is also a sad commentary on the perception of today’s medical profession.
A recent Internet video revealed a grandmother, who was knowingly, but secretly, being taped as she answered questions about her health. The questions were posed by a representative of one of the health care clinics implicated in a recent HEAT team sting. Later the rouse was revealed and the representative’s written answers exposed. There was no correlation between them and what the grandmother had answered.
When physicians order tests and perform surgeries that they know don’t qualify under the payer’s guidelines or could be done in a less costly and invasive way, they are not just ‘bending the rules.’ They are committing fraud against the payer, against their patients and against their profession. Most important they are committing fraud against what they represent as physicians.
Additionally, those who sit idly by could be considered just as complicit. Maybe one of the reasons these fraudulent acts continue almost unabated is that the medical community has not been willing to expose them without fear of reprisal.
A spokesman for the Texas State Board of Medical Examiners (TSBME) revealed that state law protects the confidentiality of any party who brings complaints of inappropriate physician activity to their attention. By state law also, they are not allowed to investigate or act on any matters that are sent to them anonymously. Allegations that are more wide-sweeping, according to the TSBME spokesman, will be turned over to the proper authorities for any further investigation. (4)
The medical community must take on more responsibility to police itself. Otherwise, somebody’s grandmother will do it for them!
(1) Statement by Deputy U. S. Attorney James Cole
(2) http://cityroom.blogs.nytimes.com/2011/11/02/12-are-charged-in-medicare-fraud-schemes-said-to-cost-95-million/
(3) http://www.denverpost.com/news/ci_20062017?source=rss
(4) Interview with a spokesman for the Texas State Board of Medical Examiners
Most discontent starts as muffled undertones. A sigh. An inarticulate grunt. Those nearby might not even notice. Even if they did, it would only be the body language that might give them a clue. Nothing changes—just a level of increasing dissatisfaction.
The HIPPA regulations enacted in 1996 immediately come to mind, when doctors just sighed and turned their patients’ charts facedown. Then in 2002 with the enactment of the Balanced Budget Act of 1997, physicians have mumbled about the uncertainty of their Medicare reimbursements. The law mandates that each year the Medicare fee schedules are to be adjusted in order to be in compliance with the 1997 law of budget neutrality. Each year Congress has intervened to avert the cuts, only to promise that, sometime in the future the government will make up for the supposed over-funding since 2002. This year it almost happened— the recoupment of the extra 300 billion supposedly funded to physicians over the last ten years in order to maintain budget neutrality.
All of medical organizations that represent the physician community worked tirelessly to stop the proposed 29.4% Medicare cuts scheduled to take place January 1, 2012. So far they have only achieved a two-month delay. In the report published 1/5/12 by TrailBlazer Health Enterprises, LLC (the intermediary for the Centers for Medicare & Medicaid Services) is stated the following under Physician Payment Update:
Section 301 of the TPTCCA (Temporary Payment Tax Cut and Continuation Act OF 2011) prevents a payment cut for physicians that would have taken effect on January 1, 2012. An update of zero percent is effective for claims with dates of service January 1, 2012, through February 29, 2012. While the physician fee schedule update will be zero percent, other changes to the relative value units used to calculate the fee schedule rates must be budget neutral. To make those changes budget neutral, the conversion factor must be adjusted for 2012.
Where in this is any mention of a fix in the SGR? What is it going to take to stop the insane premise that with a growing population and exploding technology the expenditures can be budget neutral without cutting the quality of the providers, the quality of the care they provide or the amount of care given (rationing)?
With the upcoming elections in October, what happens after March 1 is anyone’s guess.
With passage of the Patient Protection and Accountable Care Act (PPACA, Obamacare) a sharp divide occurred within the medical profession. Led by the leadership in the American Medical Association (AMA), the leadership of AARP and several other medical organizations, President Obama was able to pass this landmark legislation into law.
The apparent reason that the AMA leadership was willing to put its reputation on the line and arouse heated discontent among its membership was the promise by the President that he would work to fix the flawed Sustainable Growth Rate (SGR) through the Congress. Although the President did sign the two-month TPTCCA extension, where do we see the President applying pressure not only to fix the draconian cuts laid out by the BBA of 1997 but the flawed SGR formulae?
Safely tucked away in the President’s pocket, it seems the AMA has been relegated to the sidelines as the debate over the constitutionality of the ‘individual mandate’ in the PPACA rages on. Now, brought to the Supreme Court in a lawsuit filed by the Attorney Generals in twenty states, the constitutionally question should be resolved this summer.
Even if the TPTCCA is extended, will the hold on the 29.4% pay cut for back-due Medicare reimbursements be included or will that be left to dangle over the heads of physicians along with the flawed SGR? Up to this point, one thing seems obvious—- politics is a ‘dirty’ game and the physician community, more often than not, is not very good at it.
Although there have been many pivotal points affecting the delivery side of health care like HIPPA regulations and the flawed SGR, the upcoming Supreme Court decision may be the most important yet. It’s not just because the legislation directly affects physicians’ practices, but, if and when the law is fully implemented, it seems almost impossible that the private sector health care insurance industry will survive over time. When the only option is some type of federally funded and controlled program, any freedoms physicians have enjoyed in past generations will be gone.
The growing dissatisfaction among physicians seems to have moved from mumbling to all-out grumbling. Support for a permanent fix in the SGR is now getting bipartisan support in Washington and the AMA has released what appears to be its strongest statement yet. “It’s ludicrous to continue to pay more for a policy that everyone agrees is flawed: The price to put an end to it will never be less than right now,” quoted the AMA spokesman.
All too often physicians’ voices have fallen on deaf ears. One has to question why won’t others listen. Although the answer is complex, unlike the car manufacturers and pilots’ associations to name just two, the prevailing reason boils down to doctors put their patients’ best interests above all else. The legislators know that and continue to add regulation after regulation and squeeze every dollar out of the delivery side while adding more and more bureaucracy funded with those dollars to see that doctors comply.
The Republican presidential debate on January 19, 2012 in South Carolina is a telling example of how physicians have been marginalized in the participation on issues that concern health care. Putting political preferences aside, Ron Paul MD was initially left out of the discussions on Obamacare and Romneycare by the moderator. That was until many in the audience shouted out for his opinion on the issues. The other time in the debate, he had to wave his hands wildly above his head to get the moderator’s attention, calling out “I am a doctor!” because even the audience didn’t ask for his input.
In the early part of my father’s and grandfather’s era of medicine, being right was the only defense they needed. Then the Federal programs moved in and the climate changed.
Physicians and the organizations that represented them were forced into ‘playing politics’— funding and supporting those in elected office that were supportive of their points-of-views. Even though this approach has met with moderate success over the last 50+ years, issue by issue, physicians have given up more and more control. One only has to step back and look at where health care delivery is today.
Are these continuing changes inevitable? Is just being right, continuing to pour money into our legislators campaign chests and groveling for their support enough?
The situation in malpractice liability coverage reached crisis levels in 1975 during the post-oil-shock recession. Commercial insurers left large numbers of physicians without coverage. In California, many physicians were facing doubling and even tripling of their premiums within a year’s time. Many practices closed and often the inflated premiums were passed on to the patients. In an act of desperation, physicians organized a work slow-down, only performing urgent care. Governor Jerry Brown called the legislature into an emergency session. Out of that legislature came The Medical Compensation Reform Act of 1975, known as MICRA.
Following the passage of MICRA, malpractice settlements have been 53% less than the national average in one study, while malpractice premiums have increased only 7% annually versus 17.5% per annum nationally. California internists and general surgeons pay about one-third less in malpractice premiums and obstetricians/gynecologists about one-half compared to their counterparts in New York and Florida.
In Search of Medicine’s Moral Compass. Brown Books Publishers, 2011.
Dr. Ron Paul’s loud proclamation on the stage that night, “I am a doctor!” symbolizes physicians’ growing frustrations. Mumbling, then grumbling. Let’s hope the right people are listening. If not, tumbling may be inevitable.
So, we were granted a two-month reprieve. Then what? With the annual year-end hassle over the continuing threats of cuts in Medicare reimbursement I decided that my best choice might be to get out of the program. I had read where, in increasing numbers, doctors were leaving. So, why shouldn’t I? The reason for the discontent goes back to a flaw in the Sustainable Growth Rate Formula (SGR) that increases in volume mandate decreases in individual reimbursements to order to maintain budget neutrality.
In 1997, Congress passed the Balanced Budget Act (BBA). In an attempt to control the growth rate of expenditures to doctors, the sustainable growth rate (SGR) was established. Using a fee schedule determined by relative value units (RVUs), the intended goal was to limit the total pay for doctors to not exceed the growth rate of the rest of the country. RVU units were derived using three factors: Relative time and intensity of the service, practice expenses and malpractice costs. Each of these RVU units was adjusted by the appropriate geographic practice cost index— variations in practice costs in different areas of the country. The RVU unit was then multiplied by a dollar conversation factor (CF) which was equated to the Medicare Economic Index (MEI) that was adjusted up or down based on how actual expenditures compare to a target rate set forth by the SGR. The flaw in the SGR calculations is that it does not take a realistic approach to increases in patient volume and the complexity of the science. (1) (2)
When the 1997 law first went into effect in 2002, the SGR formula called for a cut in doctors’ fees of 4.8 percent for over 7000 physician services. Congress overrode the enactment of the BBA, but claimed it was too costly to eliminate the SGR on a permanent basis. Every year since, Congress has blocked the reductions called for under the SGR. They have accomplished this by using two methods: The ‘clawback’ legislation that temporarily prevents the proposed SGR reductions, but allows for this additional funding to be taken out in future years. The other is labeled ‘cliff’ legislation that prevents the scheduled SGR fee reductions, but overrides the law that says that rate reduction cannot be more than seven percent in any year. Simply put, if the SGR is allowed to go forward, there will be a 29.4 percent reduction in payments for physician service under Medicare Part B starting in 2012. (2)
Feeling I could not afford the proposed 29.4 cut in my Medicare reimbursements, and with the growing frustration of fighting this same battle each year, I decided to look at my options. There were three: Continue to accept the fees the Congress decides to dole out to me. Become a non-participating provider. Or opt-out of Medicare altogether. Each of these latter two options has very different consequences for the physician.
Those physicians who choose to become non-participating providers must abide by very strict stipulations: They can elect to accept assignment or not accept assignment on a claim-by-claim basis. If elective surgery costing more than $500 is performed, the patient (beneficiary) must be notified in writing of the expected financial responsibility. Patients cannot be billed more than the limiting charge (set by the Centers for Medicare and Medicaid Services) on non-assigned claims, and the approved amount is 5 percent less than the approved amount for participating physicians. The beneficiary receives the payment on non-assigned claims. Mandatory claims submissions still apply. (3)
Section 1802 of the Social Security Act, amended by Section 4507 of the BBA of 1997, allows physicians to opt-out of Medicare and enter into private contracts with their patients if specific requirements are met. In this situation, no services provided by an ‘opt-out’ physician are covered and no payments are made to that physician directly or on a capitated basis. The beneficiaries or their representatives must not submit a claim for these services either to Medicare and Medigap plans, but can submit these claims to any other carriers. The patients must also agree to be responsible for the payment of these services and acknowledge that the physician is not constrained in the amount of the charges for their services. Additionally, no payments will be made to the beneficiaries for these services by any Federally funded program.
Emergency and urgent care are exceptions. Under these situations ‘opt-out’ physicians may render charges for their care, but they may not charge the patient “more than what a non-participating physician would be permitted to charge and must submit a claim to Medicare on the patient’s behalf.” (3)
For physicians not staying in the Medicare program, but deciding to leave, they “must write to each Medicare contractor to which they submit claims, advising of their termination effective January 1, 2012.” (4) This written notice (affidavit) can only be submitted during the annual enrollment period, “which generally runs from mid-November through December 31 each year…(Because of this years delay in enactment, the date has recently been extended until February 14.) The notice, preferably on the physician’s office letterhead, must be postmarked prior to January 1, 2012.” (4) For those who are already non-participants no action is necessary. CMS has extended the opt out periods to also include April 1, July 1, and October 1, and must give the carrier “a 30-days’ notice prior notice prior to sending in the affidavit with an effective date of the beginning of the next quarter.” This step must be repeated every two years to maintain the ‘opt-out’ status. (A copy of the affidavit can be obtained online @ TrailBlazer Health Enterprises) (4)
At some point there has to be a realization that the $300 billion funded for physicians’ services over and above the amount dictated in the BBA of 1997 will never be recovered without draconian cuts in physicians’ reimbursements. Those severe cuts and without a more realistic methodology in determining the future MEI will only drive more physicians out of the Medicare program and leave a growing number of our senior citizens stranded. (5)
Except for beneficiaries who are employed and allowed to continue their coverage under the umbrella health insurance of their company, there are no other options, except ‘going without’ or one of the federal subsidy plans—Medicare, Medicaid or a Medicare Advantage Plan through one of the private insurance companies. The former leaves the patient in severe financial jeopardy, while the latter will not reimburse the physicians who have opted out. And, except for urgent or emergency care, will not reimburse the patients for the costs of their care. (6) (7)
So, what happens if Physicians, in even larger numbers, drop out because they can no longer afford to be part of the Medicare program? What happens when the patients cannot afford to go without it? What happens if such a large sector of our population goes ‘uncovered’ that it is considered a threat to public health? One only has to look at the proposed legislation in Massachusetts that links state licensure to participation in The Massachusetts Health Care Insurance Reform Law of 2006 (RomneyCare) to understand how close this country has come to a total government take-over of the medical profession.
Maybe the leadership in our nation’s capitol knew it could come to this all the time.
—————————————————————————————-
(1) http://www.aapsonline.org/medicare/admin01.htm
(2) http://www.bankruptingamerica.org/2011/12/the-sustainable-growth-rate-formula-medicares-payment-to-doctors/
(3) TrailBlazer Health Enterprises, October 2011
(4) http://www.aapsonline.org/medicare/optout.htm
(5) Communication with J. James Rohack, MD
(6) www.health-insurance-carriers.com/senior-intro.html
(7) Communication with an insurance agent in Dallas, Texas
This past October, reportedly in a document obtained by NPR and Kaiser Health News, Walmart issued a ‘Request for Information’ (RFI)in an attempt to establish relationships with doctors and hospitals that would help them to become the “largest provider of primary healthcare services in the nation.” (1)
The concept of walk-in clinics by private retailers is not new. CVS pharmacies established its first of 560, called MinuteClinic, in 2000. Walgreen’s has 355 named Take Care clinics and Walmart itself already has 140 in-store health clinics. The vast majority are manned by Nurse Practitioners or Physician’s Assistants who dispense immunizations and care for ‘minor ailments.’ (2)
Reported in Walmart’s RFI is the projected ability to also provide continuing services for chronic conditions such as heart disease, diabetes, HIV, arthritis and high cholesterol through these clinics. (3) “They’re trying to target the working, middle class people who have more limited access to primary care,” quoted Jeffery Hoffman, a health care strategist with consulting firm Kurt Salmon. “Walmart may be acting on the incentive to increase the number of customers in its stores. Primary care is low margin…they would also boost sales in their stores by increasing the foot traffic,” he continues. (3)
In Walmart’s defense, with the projected, additional 30 million covered lives under the Patient Protection and Affordable Care Act (PPACA), they claim their primary goal is to drive down the cost of care in the face of the exploding demand. Dr. John Agwunobi, a senior VP with Walmart contradicts the claims that Walmart’s intent to build “a national, integrated, low-cost primary care healthcare platform,” although this statement reportedly comes directly out of Walmart’s October RFI. (3)
Nurse practitioners are registered nurses who have completed advanced training in the diagnosis and management of common medical conditions, including chronic illnesses. They provide some of the same care as provided by physicians and maintain close working relationships with physicians. (4) Physician Assistants (PAs) work in hospitals, clinics, and other types of health facilities, and exercise autonomy in medical decision making as determined by their supervising physician, surgeon or medical practitioner. (5) One message rings clear through the definitions of both the nurse practitioner and the PA— a close working relationship with a physician. That doesn’t mean a stack of charts that the physician electronically cosigns at the end of the day or having a pad of pre-signed prescriptions. It means an ongoing interaction between the physician and the individual working in any proposed clinic if there is any doubt as to the diagnosis or the proper treatment.
Walmart changed the industry when, in September 2006, it first introduced its program, where for only $4, the patient could purchase a 30 day supply from a list of 300 medications. That cost did not involve part D of Medicare or go toward the patient’s deductable. Walmart claims to have saved patients $2 billion to date. Because of their success, that program has subsequently been expanded to over 350 medications for $10 for a three months supply.
It appears Walmart has the muscle to change any market that it enters. Look at retail products, groceries and now medications. There appear to be three major reasons:
A. High volume sales with lower profit margins
B. Squeezing bigger discounts out of the manufacturers or suppliers through volume purchasing
C. Offering certain products at a greatly reduced price as a lost leader item to get the customer into their store— a practice that has been around retail sales for a long time
How does that apply to healthcare? It appears that Walmart’s $4 drug plan offers only generic choices, thus lowering their costs, even when the name brand might be clearly better. In order to stay competitive, most of the rest of the retail industry has followed suit. One has to question Walmart’s primary concern— lowering the cost of health care services to a growing population or just more customers into their stores.
There are concerns. For example, take the chronic disease diabetes. The proper treatment for diabetic patients is not just control of their blood sugar or a spot-check of a patient’s hemoglobin a1c. It often takes a team approach to properly evaluate for and treat retinopathies, nephropathies and peripheral neuropathies. Is a clinic inside a Walmart store going to offer those services even if ‘arrangements have been made’ with other providers of healthcare? If they have, is Walmart going to try to lower the payments to the providers that they have made arrangements through volume discounting?
There is an important difference between lowering and driving down the costs of health care. Lowering the costs means cutting back on the profit margin. Driving down the costs implies competition, even the possibility of coercion, and has the potential to influence quality. There is also a difference between expanding coverage to those who would otherwise not have access to those services and using patients as lost leader items. The former is an act of beneficence. The latter reduces the patient to a customer status, getting them to spend more money in their stores but on other goods. Treating healthcare services as a commodity, subject to the same influences as other consumable goods, treads on very shaky grounds. We come close to it in capitated systems.
Minor aches, pains, bumps, scratches and immunizations are one thing. The responsibility for the long-term care of diabetes, heart disease and HIV takes the concept of walk-in clinics to a much higher level.
If the individual mandate clause in the PPACA (Obamacare) is ruled constitutional by the Supreme Court, predetermined relationships such as Walmartcare may be the way to go for a large sector of the population. Let’s just hope those patients are not short-changed.
———————————————————————————————–
References:
1. http://kaiserhealthnews.org/Stories/2011/November/09/walmart-primary-care-medical-services.aspx
2. http://info.cvscaremark.com/our-company/our-businesses/minuteclinic
3. http://www.azcentral.com/business/articles/2011/11/10/2011110walmart-may-expand-health-clinics.html
4. http://www.healthcommunities.com/nurse-practitioner/what-is-nurse-practitioner.shtml
5. http://en.wikpedia.org/wiki/Physician_Assistant
There was a time when the practice of medicine was considered a calling. To some, it still is. Unfortunately, to a growing number of physicians, caring for patients is their vocation—a way to ‘make a living.’
Inferred, but not directly stated, a calling comes about though a divine influence over one’s inner soul. It is a field of endeavor where the ultimate goal of those who follow in that path is the fulfillment of a common cause beyond what they receive for their efforts. In medicine, that has been patient benefit.
What separates a calling from a vocation is often the origin of its motivation. Why do individuals choose to undergo the arduous years of sacrifice that would prepare them to take on the responsibilities of the health and wellbeing of others? Most important, what does one perceive as the reward for those efforts? If the answer to these two questions is the satisfaction of helping those who are suffering, to them, medicine is their calling. If their motivation is material benefits, it is their vocation.
Why is the distinction between a calling and a vocation important? Why does it matter that physicians are driven by beneficence rather than self-benefit as long as the results are the same?
One part of that complex answer is ‘shared vision.’ If participants in a given endeavor are more focused on a ‘common good’ rather than personal agendas, the end results usually create more benefit to their mutual goals.
In his book, The Fifth Discipline, Peter Senge, a senior lecturer at MIT, focuses on group problem solving. (1) Although his emphasis pertains to organizations, the same principles can apply to the medical profession. Extracts from his book emphasize several critical points:
- Clues to an organization’s deeper purpose can be found in founders’ aspirations and the reasons why the industry came into being.
- People see themselves as an inconsequential part of a system over which they have little influence.
- The tendency to see things as results of short-term events undermines our ability to see things on a grander scale.
- Building shared vision is a practice of unearthing shared pictures of the future that foster genuine commitment and enrollment rather than compliance.
It’s all there: Remembering the tenets upon which this profession was founded, appreciating that each physician can make a difference, understanding the ‘big picture’, and fostering commitment rather than compliance.
In increasing numbers, those entering medicine are not participating in the struggle against the many intrusions that are infecting this profession. It’s not all their fault. Although most medical schools have added ethics lectures to their curriculum, they give only faint encouragement to the obligation of working to preserve the profession—the very place where the seed of ‘shared vision’ should be planted.
Those who become part of any endeavor, in general, make a commitment to follow certain dictums of that endeavor. It might be store clerks who are expected to know their inventory and follow certain norms in dealing with customers. Most important to continue their employment, they must remember they are functioning as representatives of that store and not just their own personal agendas. This principle is one of ‘implied responsibility’ to work not just for a paycheck and their customers, but also for the success and future existence of the store that employs them. This analogy applies to physicians. Many seem to forget or were never taught that they are not an ‘island’ set apart from the rest of the profession. That it is not just about them and their patients. If they aren’t taught that principle early in their training or learn by example from other physicians, more than likely, they never will.
If our forefathers were to judge medicine today, the advances in the science would astound them. Sadly, those same icons, who established this profession, would be disappointed by the many intrusions that are infecting the profession. More important I feel they would be even more disappointed in those physicians that don’t hold on to that ‘shared vision’— those who just put in their hours, pick up their paychecks and turn their patients over to the next shift without even a look back.
The profession of medicine is in a fight for its life, and currently it is losing. One of the major reasons is that, in growing numbers, its participants have either given up the fight, don’t care as long as their immediate needs are met or were never taught their responsibilities to their profession as they take over from past generations. This goes along with the battles raging in Washington over the budget deficit, the future of Medicare and Social Security. If those freedoms (choices as to how we practice) are lost, we will probably never get them back. And the doctors who follow in our footsteps will pay the price. More important so will their patients.
——————————————————————————————————–
1. Senge, PM, The Fifth Discipline. Currency.1990.
In a recent debate of the Republican candidates for the upcoming Presidential election, Governor Rick Perry, was criticized for his executive order in 2007 mandating that twelve-year-old girls in Texas be vaccinated against the Human Papilloma Virus (HPV). Although there were claims of cronyism with the president of the large pharmaceutical company that manufactured the vaccine, Perry strongly defended his action as solely a concern for public health. For those involved parties, he inserted a provision that the parents or guardians of the child could refuse to participate—called an opt-out provision. Perry’s executive order was overturned by the Texas legislature before it was ever implemented. The outcry arose because a vocal group of individuals resented being forced to take an action, rather than exercising their own free will of silence.
With data gathered by the large pharmaceutical company, Merck, claiming up to 75% of cervical cancer and 50% of cancer of the vulva being directly linked to the HPV, there was wide endorsement for distribution of the HPV vaccine to back up Governor Perry’s executive order.
The most controversial point was not vaccination itself, but whether it should be mandated, except for special exclusions, as with some other contagious diseases or administered only with parental choice to these underage girls. An opt-out versus an opt-in.
HPV is contagious, but predominately through sexual contact. Since sexual contact is most often a choice, the same arguments, as with polio, mumps and rubella vaccines, might not necessarily apply, except when the sexual act is not consensual. But by then, it is too late to be effective.
The state of Virginia has enacted legislation in 2007 mandating HPV vaccination for girls before they enter the sixth grade. Although efforts have arisen to overturn the legislation, repeal has fallen short in their state Senate. “The opt-out in Virginia is global,” reported a top aide in the Virginia legislature. “Parents can just say no.” (1)
The same opt-out versus opt-in concerns are not new. Organ donation is an excellent example. In this country, the donor list has been relatively stationary for years, while those individuals waiting for a second chance at life continue to skyrocket. A program instituted in Austria, Belgium and France called Presumed Consent has gone a long way toward addressing the growing waiting lists seen in these countries before the program was implemented. Under this program, it is assumed that individuals consent to be donors unless they or their families register an objection. That is unless they opt-out. Even though Presumed Consent has been very successful in these other countries, so far, the organ procurement community in the United States has not pushed for similar legislation.
The results of opt-out programs indicate they are significantly more effective than opt-ins at accomplishing the desired goals of whatever that program might be. But they come at a price. Rather than being passive, those involved must take action, even by the action of saying no, or those that don’t respond will be acted upon.
There is a growing divide in this country between those parties who believe that someone or some entity other than one’s self knows what is best, then chooses to act upon that knowledge. Because of that inequality, the more ‘knowledgeable’ party then assumes control, often by default. The conflict arises when that action is mandated rather than offered. If the benefit is offered, there is still a choice. If it is mandated the circumstances change. Now the less knowledgeable party is forced to take action, even if that action is to say no. That is if that option is even available.
Does this sound familiar? What about the individual mandate in the Patient Protection and Accountable Care Act (labeled Obamacare)? Are individuals not mandated to purchase health care or have it purchased for them? Where is the opt-out clause in that legislation (although there are numerous exemptions being granted to certain interests)?
With the growing complexity of our society, issues that either affect the public health or the costs of heath care that will be incurred by others have come to the forefront. Individual prerogatives now must often be weighed as they relate to others.
Some may call the distinction between opt-out and out-in petty, but the right of self-determination was the main principle upon which this county was founded. If opt-outs still leave that principle intact, why then was Governor Perry’s executive order overturned by the Texas legislature and why hasn’t this country made the move to decrease the suffering of thousands of our citizens who are waiting for their ‘second’ chance at life?
———————————————————————————————————
References:
(1) www.huffingtonpost.com/2011/09/14/reck-perry-hpv-vaccine_n_962683.html
Growing up, our family kept abreast of the news through our local newspaper. Although most of the space was devoted to the events around our small community, news from around the state and beyond was reported too. There were instances when the reporter got the facts wrong, but when brought to the paper’s attention, they quickly posted a ‘correction’ in the next issue. Radio had also played an important part of my parents’ lives in the early part of the twentieth century, especially with news about the war, and then television news invaded our home in the 1950s.
Good news or bad, we derived comfort from knowing what was happening around us. Maybe, I was naive during my youth, but I never doubted the veracity of the newspaper reporters or the television commentators. Never did I feel they intentionally tried to mislead me.
We may never know when what is now labeled media bias started. The first I recall was during World War II when English-speaking, female, Japanese broadcasters, labeled Tokyo Rose, began putting out propaganda over the airwaves in an attempt to demoralize our troops. (1) Then there was the ‘shut-the-eyes’ approach by the media to the philandering ways of our then President John F. Kennedy. Instead of just reporting the facts, the media had begun to ‘filter’ the news as they saw it, but they had also begun to put their ‘interpretation’ into it as well.
Halfway through the first section of the only large circulation Dallas newspaper on a recent Sunday, I realized that instead of reporting what was happening on the political scene, the editors of the newspaper had decided what side of the story they wanted me to know. If a story involved an elected official, the paper put their slant on it. The Dallas paper is not alone. Media bias is epidemic in this country. The public’s trust in the media is at an all time low and a contributing factor as to why many of the country’s newspapers continue to lose readership.
Rarely is the bias expressed in the title. That would be too obvious. The editors use more subtle techniques, such as location and length of the articles on the pages. Merchandising frequently incorporates subliminal approaches such as putting the items they are most eager to sell at eye level and in high traffic areas.
Source choice is another technique to add credibility. Look long enough and any eager reporter can come up with someone or some fact that will support their premise. Even worse is quoting a source without pointing out the identity with statements such as ‘some experts say’ or ‘what one business leader called.’ These opinions could be fabrications as far as the readers know.
The papers frequently include positive statements by or about individuals whose political party they support, while reserving the negative statements for those who oppose the paper’s position. Negative statements, even if the reader agrees, tend to be a turn off, especially by those who don’t have a firm position already. Even though a reporter might attempt to put up a veil of balance through retort, the juxtaposition of a positive comment always wields the upper hand over a negative one.
The Weekly Standard makes no excuses that it is a forum for the conservative point-of-view. The Huffington Post does the same from the liberal perspective. There is very little pretence by either. Going in, the readers know upfront the stories in these periodicals are written with a bias.
My problem is with most of the other newspapers that claim objectivity, but slant their stories to fit their own points-of-view—the New York Times, the Wall Street Journal and especially our city’s Dallas Morning News to list several. Their bias is obvious to the already informed reader. However, those who are not as observant often formulate their opinions based on the newspaper’s presentation of a particular story.
The major television networks are not much better. Using the excuse of time constraint, they often only televise stories that support their positions. CBS, ABC and NBC’s purported objectivity is a farce. At least the viewers know the bias on CNBC and the majority of the time on the Fox network.
So, how does this affect medicine? Because free discourse by the medical community is often muffled unless it fits the media’s point-of-view. Often physicians are portrayed collectively as a special interest group for their own self-interests, rather than patient advocates. Although patients see their own doctors as heroes, to the far right, physician groups are viewed as in opposition to ‘big business,’ such as the insurance companies and hospital corporations. To the far left, physicians’ interests are viewed as in opposition to federal funding systems that insure equal care for all, as in ‘single payer’ models. Unlike the labor unions, physician groups collectively have no single party allegiance.
The recent enactment of the PPACA legislation is a prime example of the physicians’ voices either being excluded from the public debate or being used by a particular party to further their own agenda. The media touted the American Medical Association’s support for the President’s proposed legislation because it fit the media’s agenda. My own state medical association and many other physician organizations across the country opposed the AMA’s position.
Due to significantly less media exposure of the opposing voices in the medical community, the public and our Congress were influenced by an organization that counts less than 20% of physicians as members.
“If you don’t read the newspaper you are uninformed, if you do read the newspaper you are misinformed.” Mark Twain
—————————————————————————REFERENCES:
1. http://en.wikipedia.org/wiki/Tokyo_Rose
COMMENTARY: This is a departure from the subjects I usually discuss in my blogs. With everybody pointing fingers and my prior lack of knowledge on this subject, I chose to venture out of my comfort zone and undertake a study into the causes of the current recession that began in 2008 and, still today, continues to threaten to take this country into an even more uncertain future. We, the public, get such ‘media bias’ on both sides that the truth is more what they want us to believe, than reality.
What is real is that we live globally. What happens with the earthquake in Japan, the potential financial collapse of several European countries, the continuing wars in Iraq, Afghanistan and Libya do have effects worldwide. Just look at the August 4 plunge in stock markets around the world.
There is an alarming social divide in this country. Supporters on both sides are vying for their own solutions, often without taking the time to understand the facts or the consequences of their positions. The future of health care delivery is only a part of this debate.
Although this article was put together almost a year ago, the information has not changed and the debate in Washington has only become more divisive.
——————————————————————————
The Community Reinvestment Act (CRA) is a federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of the communities. Passed in 1977, during the Carter Administration, it was designed to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.
The Act mandated that all banking institutions that receive FDIC insurance be evaluated by Federal banking agencies to determine if the bank offers credit in all sectors of the community in which they do business. The law does emphasize that these activities be undertaken in a safe and sound manner and does not require any institution to make high-risk loans that might bring losses to the institution.
The Act was passed as a result of pressure to address the deteriorating conditions of American cities—particularly lower-income and minority neighborhoods. In contrast to previous acts that addressed discrimination in the credit and housing markets, the CRA sought to ensure the provision of credit to all parts of a community, regardless of wealth or poverty of a neighborhood.
Two other bills were put into law that have contributed to our current lending practices. In 1980, the first, again during the Carter administration, was labeled the Depository Institutions Deregulation and Monetary Control Act. It gave the Federal Reserve greater control over non-member banks. The other was the Alternative Mortgage Transaction Parity Act of 1982 and was passed during Reagan’s tenure. This legislation allowed the borrower to only pay the interest on their principle balance for the first years of their loan.
In 1989, and signed into law by President George H. Bush, Congress passed the Financial Institutions Reform, Recovery and Enforcement Act which required the appropriate Federal regulatory agency to prepare a written evaluation of an institution’s record in meeting the credit needs of its entire community. Then in 1991, through an amendment to the CRA, the Resolution Trust Corporation (RCT) would make available to any branch of any savings association located in any predominately minority neighborhood the amount of the contribution or the amount of the loss incurred in connection with donated, sold with favorable terms, or made available on a rent-free basis, which would go toward meeting the credit needs of the institution’s community and would be taken into consideration when CRA examinations were evaluated.
The Federal Housing Enterprises Financial Safety and Soundness Act passed in 1992, also under George H. Bush, required Fannie Mae and Freddie Mac, the two government agencies that purchased and securitized mortgages, to devote a percentage of their lending to support affordable housing. In October 1997, First Union Capital Markets and Bear, Stearns & Co launched the first publically available securitization of CRA loans, issuing $384 million in such securities. These securities were guaranteed by Freddie Mac and had a ‘AAA’ rating.
During the early part of the Clinton administration, his representatives pushed for changes in the CRA by cutbacks in paperwork and the costs on small business loans. The Office of the Currency moved to allow lenders, subject to the CRA, to claim community development loan credits for loans made to help finance the environmental cleanup or redevelopment of industrial sites when it was part of an effort to revitalize low and moderate-income community where the site was located.
In 1999, President Clinton signed into law the Financial Services Modernization Act that allowed banks to offer a full range of investment, commercial banking and insurance services. One of the bills’ major supporters was Senator Phil Gramm. President Clinton stated, “The Act establishes the principles that, as we expand the powers of banks, we will expand the reach of the Community Reinvestment Act.”
CRA regulations gave community groups the right to comment on or protest about banks’ non-compliance with CRA guidelines. Regulatory changes during the Clinton administration allowed these groups better access to CRA information and enabled them to increase their influence.
In the fall of 1999, Senators Dodd and Schumer secured a compromise in the Federal Deposit Insurance Act that any bank holding institution wishing to be re-designated as a financial holding institution by the Board of Governors of the Federal Reserve System would also have to follow CRA compliance guidelines before any merger or expansion could take effect.
In October 2000, to expand the secondary market for affordable community-based mortgages and to increase liquidity for CRA-eligible loans, Fannie Mae committed to purchase and securitize $2 billion of ‘My Community Mortgage’ loans. In November of that same year, Fannie Mae announced that HUD would require it to dedicate 50% of its business to low and moderate-income families. In 2001, Fannie Mae announced that it had acquired $10 billion in specially-targeted CRA loans more than one and a half years ahead of schedule, and announced its goal to finance over $500 billion in CRA business by 2010.
In 2002, a study by Kathleen C. Engel, a professor of law at Suffolk University, and Patricia A. McCoy, a professor of law at the University of Connecticut law school, noted that banks could receive CRA credit by lending and brokering loans in lower-income areas that would be considered a risk for ordinary lending practices. They also noted that CRA regulations, as then administered and carried out by Fannie Mae and Freddie MAC, did not penalize banks that engaged in these lending practices. They recommended that the federal agencies use the CRA to sanction behavior that either directly or indirectly increased predatory lending practices by lowering these banks’ CRA rating.
In early 2005, during the administration of George W. Bush, the office of Thrift Supervision (OTS) implemented new rules to ‘tweak’ the CRA ratings thresholds by allowing thrifts with over $1 billion on assets to make optional 50% of their services and investments as they wanted. Thus, freeing those funds from CRA guidelines. In April of 2005, a contingent of Democratic Congressman issued a letter protesting these changes, saying they undercut the ability of the CRA to ‘meet the needs of low and moderate-income persons and communities.’
In 2007, Ben Bernanke, Chairman of the Federal Reserve System since 2006, stated, “the CRA has served as a catalyst, including banks to enter the underserved markets.” He also stated, “the loans usually did not involve disproportionally higher levels of default.”
On September 11, 2003, the New York Times reported: The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. It was supposedly an attempt to reign in the current practices of Fannie May and Freddie Mac. In 2005, Senator John McCain, as a contender for the presidency advocated, “if Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie May and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”
Representative Barney Frank, the then ranking Democrat on the Financial Services Committee, said, “these two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
There are arguments on both sides as to whether the establishment of and strengthening of the CRA contributed to the 2008 financial crisis by encouraging lending institutions to make unsafe loans. The Federal Reserve, having examined the evidence, contends that research has not validated any relationship between the CRA and the 2008 financial crisis. Economist Stan Liebowitz published in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He also charged the Federal Reserve with ignoring the negative impact of the CRA.
A summary that seems most appropriate is found at: http://www.investopedia.com/articles/07/subprime-blame.asp. It is as follows: ‘The economy was at risk of a deep recession after the dotcom bubble burst in 2000; this situation was compounded by the September 11 terrorist attacks that followed in 2001. In response, central banks around the world tried to stimulate the economy. They created capital liquidity through a reduction in interest rates. In turn, investors sought higher returns through riskier investments. Lenders took greater risks too, and approved subprime mortgage loans to borrowers with poor credit. Consumer demand drove the housing bubble to all-time highs in the summer of 2005, which ultimately collapsed in August of 2006. The end result of these key events was increased activity, large lenders and hedge funds declaring bankruptcy, and fears regarding further decreases in economic growth and consumer spending.
Although there seems to be no universal agreement as to the factors and to what extent each played in the recession of 2008, there are three that are most often mentioned. They are the wars in Iraq and Afghanistan, the tax cuts passed in the early part of the George W. Bush presidency and the collapse of the lending market.
With respect to the two the wars that began during the George W. Bush presidency, although there were a few in Congress who were against them, our current president being one, both wars were supported by both houses. Since no weapons of mass destruction were discovered after the invasion of Iraq, there are many who regret their decision. At the time, however, most of the elected leadership in Washington, including former President Clinton, felt Iraq was a threat to stability in the Middle East.
The Bush tax cuts of 2001 and 2003, which are set to expire in 2011, have been controversial since their inception, and arguments for and against them fall along party lines. Some argue that the loss of revenue has added to the federal deficit. Most, at least on the conservative side, feel they were important in growing the economy until the onset of the 2008 recession.
The consensus is that the collapse of the lending markets was the leading cause of the recession. Although blame can be placed on both sides of the aisle, it seems clear that the start of looser lending practices and the impetus for the Community Reinvestment Act in 1977 and its strengthening in the 1990s, came from the Democrats. It only makes sense, since their base constituency centers around the inner-city and underprivileged. It appears the George W. Bush administration made attempts to reign in the out-of-control lending practices, but those efforts were rebuffed by the Democratically controlled Congress since 1995. Despite all the finger pointing, Barack Obama inherited the recession after it was well underway.
The focus should now be on solutions. How can the current recession be brought to a conclusion? The differences between the Democratic leadership, under Obama, Pelosi and Reid and the Republican recommendations are like night versus day. In the pure sense, President Obama and his fellow leadership in Congress have advocated for an approach of ‘spending our way’ out of the recession through the federal stimulus plans by borrowing on our national debt and allowing the Bush tax cuts to expire in 2011. The Republican plan is to let the existing tax breaks continue for now, hoping to move private sector revenue from the sidelines back in order to grow the economy. They argue against more stimulus money controlled by federal dictums and letting the private sector sort out some of these problems.
There is a growing divide in this country. The ‘progressives’ on the far left, who currently seem to have control of the Democratic party, appear to advocate for almost a socialist system. The ‘tea party’ on the far right is pushing the moderate Republicans to go back to the basic principles upon which their party was founded—the less government intervention the better.
On one thing there seems to be almost universal agreement: To continue to print more money and back it up by borrowing against the federal deficit will only lead to a further collapse of our monetary system resulting in a long-term shift to bigger government. The choice seems to be either ‘distribute the wealth’ by taxation and more government control or increased private sector participation.
As I recall, this country was founded and has prospered, until recently, on the latter.
September, 2010
|
|
|
