Health Reform Updates - The Views of Donald J. Palmisano, MD, JD, President of AMA, 2003-2004, and President and CEO of Intrepid Resources, Inc, a risk management firm.

July 21, 2011 - I recommend my readers regularly consult DJP Update, a daily blog written by Donald J. Palmisano, MD, JD. He has over 250 physician leaders on his e-mail list. His reports give a crisp, clear, and compelling picture of what’s on the mind of physicians regarding health reform.

In recent blogs, Dr. Palmisano questions the value of a President Obama appointed Independent Payment Advisory Board (IPAB) working in conjunction with Patient-Centered Outcome Research Institute (PCORI) and dismisses the Obama administration’s “mystery shopping” initiative as another bad idea.

He has long championed health savings accounts, tax credits for all Americans, private contracting with physicians by Medicare patients, and comprehensive tort reform.

I am indebted to Doctor Palmisano for two reasons.

One, he wrote the following words of praise for my new book, The Health Reform Maze; A Blueprint for Physicians (Greenbranch Publishing), which will available for sale in August, 2011.

This is a must read collection of essays that gives the good, the bad, and the ugly of the new healthcare law, PPACA. Dr. Reece shares a balanced approach of proponents and opponents of the law and gives hope for a better way to reform the system.

Two, last year he granted me the following interview , which appeared in Modern Medicine on April 27, 2010, but was conducted before passage of PPACA on March 23, 2010.

Health Care and Medical Liability Reform: Perspectives from a Doctor-Lawyer - Interview with Donald Palmisano, MD, JD, former AMA President and Founder of Intrepid Resource

Donald Palmisano, MD, JD, a physician and attorney, is perhaps organized medicine’s most articulate spokesperson and one of the few who equally grasps medicine and the legal issues that surround it. Recently, he and two other former AMA presidents wrote a widely quoted Wall Street Journal article offering up “…Better Ideas to Increase Coverage for the Uninsured.” He is Founder and President of Intrepid Resources, a medical risk management and patient safety company. Dr Palmisano discusses health care reform in America and how independent physicians in small practices can succeed.

• We have reached what has variously been called a tipping point, a sea change, and inflection in the health system. Have we reached a watershed moment in American health care?

• Yes, we have reached a critical moment because government and third-party intervention are disconnecting the patient from the physician and the decision making from the patient’s best interest. The ideal system is one where patients own their health insurance and make decisions with the doctor as trusted advisor.

• What system do we have now?

• Currently we have third parties telling doctors which treatment will be allowed and not allowed. We have government taking away the right of private contracting between patients and physicians. With Medicare, doctors must accept what government pays because if you do a private contract the physician is removed from Medicare for 2 years. Unfortunately, we are moving towards more government control, a system that will not lower costs, and one in which physicians are being paid less than the cost of delivering care.

Consequently, a patient’s Medicare or Medicaid card does not guarantee that the patient will find a physician in his or her hour of need. Fewer and fewer doctors accept Medicare or Medicaid patients because federal and state government pays less than the cost of delivering care. Price fixing has never worked in the history of the world, and it is not going to work in medicine.

•Is it fair to say that you’ve been opposed to the House and Senate bills?

• Let me correct you. The system needs to be fixed. We have the best care in the world, but the financing of the system needs to be fixed immediately. The bills that came out of the House and Senate have disaster in the details. I’ve written about this disaster in the October 5, 2009 Wall Street Journal with two former AMA presidents and in the May 12, 2004 issue of JAMA with two PhDs.

I recommend expanding coverage through tax credits, consumer choice, market enhancement, low cost health savings accounts, individual ownership of insurance, extending subsidies to those who need financial help, the right to privately contract between patients and doctors, and purchasing insurance across state lines.

These are free market principles and would take care of the monopsony power of health insurers and what they allow patients to receive and what they pay the doctor.

• Can independent doctors in small practices do anything to change the dynamics?

• That’s an important group of physicians because they represent 80% of practices. They deliver most medical care, rather than those giant clinics you hear so much about. They should not just sit around the coffee pot and grouse. They have to be engaged in the political process by contacting their representatives in Congress and their two Senators and telling them how adversely this interference is affecting their practice. They should encourage their patients to do the same. Otherwise folks in Washington will remain in their bubble. They don’t hear enough about what’s happening in the actual practice of medicine. They are just listening to talking heads and think tank wonks.

• What do you think about the information coming out of Washington?


• The public is being given bad information. When the President of the United States says a physician would amputate a leg to get $50,000 rather than treating the patient medically, he must be getting bad information from his advisors. When he says a doctor will do a tonsillectomy rather than treating a child for tonsillitis, it is not appropriate. Such statements do not resolve anything, and it they don’t lead to positive solutions. They make people angry and uncertain. People are saying, “Can I trust anything that’s being said in Washington?” or “Can I trust my doctor?”

We need to get the real facts. I love Aldous Huxley’s quote, “Facts don’t cease to exist because they are ignored.” Let’s make sure we have the real facts, not opinions or theories. Louis Pasteur, another person I admire, said, “Imaginations should give wings to our thoughts, but we always need decisive experimental proof.”

Doctors in small practices need to say, “We don’t need a big experiment on America.”

• What difficulties do you see facing those who are looking for reform?


• What we need to do is identify what the problems are:

First, some health insurers ignore patients and physicians. Their misplaced monopsony power allows them to dictate terms that are not necessarily in the best interest of the patient. We fix that by competition across state lines.

Second, we need to get insurance for people with pre-existing conditions. We can do that with voluntary purchasing cooperatives so people can get together in groups of 10,000 or more. Everybody can be accepted when they have the options of getting bids on large groups, just as in a large company like IBM.

Third, then there’s Medicaid recipients. Why should people on Medicaid have less than ideal access to care? Convert Medicaid into a defined contribution. Give them the same advantages as people in the Federal Employee Health Benefits (FEHB) Program. Give them a voucher, and allow them to choose from an array of choices.

Government should not assume the American public is not smart enough to make their own decisions. We need to give the patients more control, with the same tax advantages for every American.

• You use the phrase “disaster in the details.” One of the details ignored in the House and Senate bills is that more doctors are choosing not to accept new Medicare patients, or opting out of Medicare altogether. How does Congress address that issue?

• That’s the natural consequence of price-fixing. When you price-fix, you get decreased availability of a product or service. Price-fixing never works. The main concept in the book, Economics in One Lesson written many years ago by Henry Hazlitt, can be summarized in one sentence: You have to look at the long-term consequences of any action rather than just the immediate consequences.

If you reduce physician Medicare fees by 21%, as now being proposed, you will save money in the short term, but what are the long-term consequences? You will get lack of access to doctors. Doctors will say, “I can’t afford to see these patients. I won’t be able to buy my medical liability insurance. I won’t be able to pay my staff, so I will have to stop seeing Medicare patients.”

This is even more dramatic in Medicaid. With this government plan, we will end up with Medicaid-for-all, long waiting lines, and no doctors to treat them. Physicians will do something else. They will limit their practice, or switch to concierge or cash practices and directly contract with patients.

They will get out of Medicare, Medicaid, and all insurance programs. That’s not good for anybody. Suppose after you finish this interview, you go for a walk, and a car veers off the road and hits you. You will be taken to the ER, and there may be no specialist there to treat your head injury, your broken bones, and your internal injuries.

• Do you see any lessons we can learn from other countries?


• The answer is, when the government decides some group needs help, it gives them an indemnity payment or a voucher, and the patient and doctor privately contract. I just returned from Australia, where I lectured on my book On Leadership: Essential Principles for Success.

Here’s how it works there: The Australian government encourages people to get off the government system and onto a private system. They do that by giving a 30% subsidy for the purchase of private insurance. They also allow what they call “negotiating the gap,” where the patient and doctor can negotiate the difference between what the government and private insurer pays.

• You’ve been a big advocate of “private contracting” between doctors and patients. What’s the status of that?

• It’s not available in any of the bills. It’s not available in Medicare or Medicaid. I presented this to the AMA out of Louisiana in 1993 as a resolution. It was passed and has been reaffirmed multiple times. It restores the right of liberty—the right of private contracting. This is not a new idea. It’s like when you go to buy a car, you can negotiate the price of the car.

• You’ve started a company called Intrepid Resources—a risk management and patient safety enterprise. You often say the current liability system has a “hidden cost.” Is one of those costs limited access to care? How significant is that?


• It’s a real problem, which I’ve mentioned in my AMA inaugural address and in my 2004 Thomas B. Ferguson talk before the Thoracic Surgeons. Unwarranted liability increases cost. When I was AMA president, the costs of medical liability in Dade and Broward Counties in Florida for obstetricians were $249,000 per year.

Just imagine who suffers from that exorbitant cost. The doctor cannot make enough money delivering babies to pay that cost, so the doctor leaves that community. In Texas, legislators passed a tort reform law in 2003 and changed the state constitution to allow caps on noneconomic damages. Premiums promptly dropped 17%, and the Texas Medical licensing board had to add staff to handle the flood of out-of-state doctors wanting to practice in Texas. \

In Texas, legislators—both Democrat and Republican—passed that law because patients were angry, upset, and at risk because they couldn’t find a doctor for emergencies. People were dying or having to care for themselves. One woman, a nurse, had to deliver her own baby along the side of the road. Medical liability is not only about increased costs. It’s about patient safety.

Then there are defensive medical costs. Someone hits their head, and if there’s a delayed or occult subdural hematoma, and if you haven’t ordered a CAT scan, you’re liable. As a result, everybody who hits their head gets a CAT scan, whether it’s indicated or not, whether or not neurological signs are present.

The Congressional Budget Office says the cost of defensive medicine is $54 billion for 10 years, and it’s probably much more than that. I testified about this before the House Ways and Means Committee in 1975, and I recently spoke about it before the American Enterprise Institute. We passed a reform law in Louisiana in 1975, but not all states gets the message. A good example is Illinois, who’s Supreme Court declared a cap on damages as unconstitutional.

• How important has your legal training been in putting medical issues in context?

• It’s been very helpful. I went to law school when I was a busy surgeon. My five partners were generous in covering for me while I was in law school. I paid them back hour-for-hour on the weekends.

I’ve found my legal training helpful in 3 ways:

One, it helps me understand how the courts analyze the law.

Two, it taught me legal research and how this can help physicians avoid errors and learn more about legal jargon.

Three, it exposes me to a lot of wonderful lawyers all over the country, who I can call upon for resources.

• The conventional wisdom is that the trial lawyers of America, who are huge contributors to the Democratic Party, have effectively kept tort reform out the House and Senate bills. Is that true?

• Absolutely; it is true. Howard Dean, the doctor from Vermont and Democratic stalwart, said the people who wrote the bills in Congress “did not want to take on the trial lawyers.”

President Obama says we will study tort reform. That’s like saying we will form a committee and then do nothing.

The big driver for trial attorneys is the contingency fee. Doctors don’t say “I will treat you if you give me 20% of your earnings for life.” If you have a patient in the ER hemorrhaging from a ruptured spleen, you don’t say, “If you die I won’t charge you, but if you live you’re on the hook for part of your lifetime earnings. I only want 20%, not the 33.3% or 50% you take.”

What do you say? I used this example in a debate with a lawyer on TV, and he went ballistic. Why do we differentiate between legal and medical ethics? Lawyers will tell you the contingency fee is the key to the courtroom door. We could say a contingency fee is the key to saving your life, but we don’t.


• Let’s end this interview with a conversation about the AMA. Last October in the Wall Street Journal, you and two former AMA presidents took exception to the AMA’s endorsement to the House reform bill. The AMA is in trouble with doctors and only about 15% of practicing physicians now pay membership dues. What can the AMA do to regain the confidence of America’s physicians?

First of all, let me say I believe the AMA is a wonderful organization. It does much good. It has terrific scientific journals. It has a council on ethical and judicial affairs.

But I do criticize AMA’s health system reform decision endorsing the Obama administration’s stance. They wanted to have a seat at the table. They were concerned if they didn’t have that seat, they would be cut out of the negotiation.
What the AMA should have said is, this is our policy: medical liability reform, the right to privately contract, defined contributions. If you put those things in the bill and you don’t insist on more government control, we will support the bill, rather than saying, now that we have a seat at the table, we will work to change it. The AMA made a serious mistake.

• So what can the AMA do?

• I think at the AMA House of Delegates, physicians ought to get somebody other than board members to run for President. Somebody from the floor ought to be elected. That would send a strong message for change, just like the message in Massachusetts.

AMA ought to be open in their board meetings, with the proceedings being on the equivalent of C-Span. AMA members could put in their membership number and watch video clips at any time of the day or night. This would help doctors decide who they want to vote for in the next election to the House of Delegates.