Cash for Medical Services
by Steve Lilienthal

"Imagine having your car insurance cover oil changes. Just think of how much more expensive it would be."

Dr. Lawrence Huntoon, the editor of the Journal of American Physicians and Surgeons, said that line while explaining to the COCL UPDATE the philosophy driving a return to cash-for-medical services.

The Association of American Physicians & Surgeons is an organization representing 4,000 physicians that advocates a return to cash payments for medical services. When AAPS was founded in 1943 talk of socializing medicine was in vogue and the organization's mission then, and now, has been to advocate for maintenance of a free-market in medicine. Since AAPS's formation, third party payers, including the government-run programs of Medicaid and Medicare have come to dominate the practice of American medicine.

Several reasons are driving this "back to the future" movement of cash payments in lieu of third parties; economics, of course, is a chief reason. Dr. Huntoon says "it costs more to file a claim with Medicaid than the physician gets paid for the office visit." The effect of third party programs is that it distorts the price and has also served to cushion the patient from sticker shock because the patient does not end up digging into his or her own pocket. However, as Medicaid and Medicare slash fees, that could serve to drive more physicians out of participating in the programs.

"Ten years ago," explains Dr. Huntoon, an ultrasound procedure would draw a reimbursement of $100. Now, it is less than $10."

This assertion was verified when Senator Robert Bennett (R-UT), the Chairman of the Joint Economic Committee, stated at an April hearing on "Consumer Directed Doctoring" that "low reimbursement rates require physicians to increase the number of patients they see and shorten the length of office visits. They must also shoulder the burden of increased practice costs, time-consuming paperwork, and rising medical liability premiums…"

That helps to explain the physician's side of why it makes sense to return to cash payments whenever possible. Consumers have reason too.

Patient privacy provides another important reason for patients to seek cash payment medical treatment.

The Hippocratic Oath has the physician swear: "What I may see or hear in the course of the treatment or even outside of the treatment in regard to the life of men, which on no account one must spread abroad, I will keep to myself, holding such things shameful to be spoken about."

However, the new government regulations of medical privacy, the Health Insurance Portability and Accountability Act (HIPAA), allow the government to access records without a warrant. Furthermore, the storage of information in electronic databases is likely to be quite useful in facilitating ease of locating vital information about patients in cases of emergencies but it also make the information vulnerable to hacking and to be easily passed on without authorization.

One activist, Dawn Richardson, who harbors concern about vaccines, explained a few years ago the new rules: "What I say to my and my children's physician or other health care providers and the details of my and my children's health history or treatment that is recorded in our medical files can now be reviewed by an unlimited number of officials without a warrant and can also be used for unconsented research on us. This deters me from seeking medical care in some situations and being frank in talking with my health care providers."

AAPS filed a suit to block HIPAA regulations only to have it dismissed. However, the reasons for the suit are likely to strike a responsive chord with COCL UPDATE readers who care about protecting privacy and constitutional liberties.

The brief states that the Federal Government's Privacy Regulations emphasize the expectation of privacy by patients only to then note that they "simultaneously allow government virtually unrestricted access to those same records without a warrant…The Privacy Regulations require physicians to aid and abet government governmental searches of patient medical records in violation of the Fourth Amendment rights of the patient."

Furthermore, the brief argued, "The Privacy Regulations contradict the professional Oath of Hippocrates and are in violation of the First Amendment rights of the patient and physician to speak confidentially about the treatment."

Placed in eternal jeopardy by the current system is the trust between patient and doctor. Bureaucrats and government officials have access to the medical records of patients.

That is why AAPS member, Dr. Robert Berry, the President and CEO of PATMOS (Payment at the Moment of Service) EmergiClinic, a non-profit clinic in Greeneville, Tennessee that concentrates on providing care to the uninsured, explains that his cash for services clinic enables him to deliver his soundest advice to patients, undistorted by concern over high overhead and regulations that he would have to be mindful of if he dealt with Medicare and Medicaid programs. Dr. Berry told the Joint Economic Committee that the system of cash payments "engenders a trust not currently present when a bureaucrat is allowed to intrude into the doctor-patient relationship -- one that many Americans today still consider second in importance only to family."

Implementation of the privacy regulations involving medicine will hasten the day when patients will become more concerned about protecting privacy according to Dr. Huntoon. "Many people right now are willing to trade privacy for reimbursement of their medical care. If patients begin to figure things out, will they be willing to be candid with their doctor? It may not become an issue until a teenage hacker gets hold of many people's medical records or a movie star's treatments are posted on the Internet."

Dr. Mark Schiller, the President of the AAPS, an Assistant Clinical Professor in neuropharmacologic psychiatry at the University of California / San Francisco, does not participate in third party payer plans and his website clearly states that he believes medical care is truly a process between physician and patient and there should be no place for third parties. "[T]he federal HIPAA statute gives government officials access to all of a physician's patient records if a physician submits electronic claims. That is unacceptable to me, and I'm sure is unacceptable to many of my patients."

Dr. Schiller is able to avoid taking insurance because he has less than ten employees and does not utilize electronic billing, which qualifies him for what is called "the country doctor exclusion" under Medicare. [An AAPS lawsuit established the "country doctor" exemption from HIPAA.]

"What I do is ask a patient to pay me in cash and if they want to use insurance I give them a bill and ask them to submit it to the insurance company. That cuts out the paperwork on my end but the patient will learn how difficult it is to deal with the insurance companies, and it allows me to spend more time seeing and treating patients. It also provides the bonus of teaching the patient about the difficulties of working with insurance companies."

Given the nature of his practice, Dr. Schiller thinks privacy is a concern of his patients in seeking out his services but not necessarily a commanding one. "I do know people who have sought out physicians who don't participate in insurance networks based on privacy considerations," he said.

Sue Blevins, President of the Institute for Health Freedom, says that the cash system has a limit given that catastrophic care will require insurance given the cost of modern medical care but the cash system does makes sense for consumers for two reasons; the first, of course, is that the consumer has more control and responsibility over their care. But privacy matters too and she notes that just relying on cash for small transactions is good preventive medicine.

"When you can pay cash, even for smaller medical transactions, you are reducing the possibility of theft of your Social Security number and protecting your medical information. The fewer people that see your information and process it, then the less likelihood there is of ID theft and invasions of privacy." There are instances where a person might not want it widely known that they are seeking professional help, citing the use of a psychologist in providing marriage counseling.

Even Robin Kaigh, an attorney who has worked in the past in alliance with AAPS and IHF, questions how realistic it is for patients to simply rely on cash for medical services in this day and age. Kaigh says that while paying cash could potentially improve patient privacy, the most sensitive procedures are often the most expensive. Even so, Kaigh harbors concern about HIPAA. "Before HIPAA, a patient had to be asked for his consent to let someone else view their records in most instances. Now, HIPAA enables the Federal Government to decide for us who should be able to look at our medical records. The difference between consent and notice is enormous," says Kaigh, a critic of HIPAA who sees the new regulations distorting the medical system by turning doctors from healers into revealers.

She raises counterintuitive questions about the proponents' claims about the wonders of electronic records that will be shared among health care providers. According to HHS and President Bush, a physician having the medical history is always necessary and useful, but Kaigh points out that there are times that a patient can be best served by not disclosing a prior physician's impressions. For example, when faced with a serious diagnosis and poor prognosis, a patient may want a fresh look without being influenced by a prior doctor's opinion. (This happened in the case of her father who had a serious cancer in the days before HIPAA and electronic records. By not transferring the medical records, he was able to receive treatments not offered by his first physician and was able to live for four years instead of the three months that had been originally predicted.) In addition, if a patient had a malpractice, misdiagnosis or personality conflict with a prior physician, he may wish to start over with a clean slate with a new doctor, and not have that information follow him forever in his electronic medical record.

"There's a presumption on the part of the government that the American citizen is not able to provide his prior medical history or that we need Big Brother to look after us by forcing us to have an electronic trail. There is also a presumption that the government rather than the patient should decide who should have access to his medical record, that is counter to the Hippocratic Oath," Kaigh says.

It is not just AAPS members who are moving away from participating in Medicare, Medicaid and other third party programs. Reportedly there is a list of physicians who have opted out of the Medicare program maintained by the Centers for Medicare and Medicaid Services (previously called HCFA: the Health Care Financing Administration). If the list were public, it would he helpful for those patients actually seeking to locate physicians who are concerned about providing quality, lower-cost care without the hassles of paperwork and greater privacy protection. AAPS has filed a FOIA request to obtain it but expects the bureaucracy to be recalcitrant in promptly fulfilling the request.

While the Centers for Medicare and Medicaid Services fails to respond to the public interest, physicians and hopefully more patients are coming to recognize the need for more privacy protection. The AAPS on July 4, 2004 issued "The Physician's Declaration of Independence" that includes the assertion that a physician's duty is to "Assure that all information [between patient and physician] be kept strictly confidential."

The cost of medical insurance programs, including government-administered Medicare and Medicaid, comes with significant markups in terms of time and cost. Privacy is also a cost because bureaucrats are free to butt in to what should be the confidential relationship between patient and physician. Plus the electronic filing of medical records renders them vulnerable to hacking or improper access. It's time patients and physicians band together to tell the bureaucrats to butt out and one way that demands serious scrutiny by wise consumers of health care is to consider the system of cash for medical services.

Steve Lilienthal is Director of the Center for Privacy and Technology Policy at the Free Congress Foundation.