Thanks to NPR for this summary, which was reproduced by the American Health Lawyers Association

Congress is at an impasse over how to fix a perennial problem in Medicare.

Just about every year a formula glitch threatens to cut payments to doctors who treat seniors and the disabled. And just about every year Congress cancels the cut. This year lawmakers are complaining about the bill because it's not paid for. But, despite what both Republicans and Democrats are claiming, that's nothing new.

Permanent Fix Falls Short

Rather than do another one or two year patch for the Medicare doctor pay cut problem, Senate Democrats had wanted to fix the problem permanently. But their bill couldn't even make it to the Senate floor--it fell short on its first procedural test last Wednesday by 13 votes. The reason cited by virtually every opponent was that the bill's $250 billion, ten-year cost wasn't paid for with other spending cuts or increased taxes.

New Hampshire Republican Senator Judd Gregg is among the opponents of the bill. "We've only done yearly fixes in this area, the doctor fix, because it's a pretty difficult number to always pay for, but we have always paid for it," he said on CNN last Sunday.

Except that Congress hasn't always paid for it. In fact, when Republicans were in charge, they did cancel the Medicare cuts to doctors, but rarely paid for them. Just before turning control of Congress back to the Democrats at the end of 2006, Republicans actually tucked legislation to cancel the next year's doctor pay cut into a catch-all tax bill that wasn't paid for either. And then-Senate Budget Committee Chairman Judd Gregg was one of the people who complained the loudest.

"You just have to ask yourself how we, as a party, got to this point, where we have a leadership which is going to ram down the throats of our party the biggest budget buster in the history of the Congress under Republican leadership," said Gregg back in 2006.

Bipartisan Memory Loss

But Republicans don't have a lock on short-term memory problems. Here's how White House Press Secretary Robert Gibbs responded when he was asked about the issue last Thursday: "The cut in payments to doctors is something that is to be implemented every year; and gets fixed every year for the past six years. The president included in his budget fixing for and paying for that fix," said Gibbs.

Except Gibbs was only half-right. President Obama's budget does propose to fix the payment problem in that it would cancel next year's Medicare cut for doctors and cuts into the future. But it doesn't propose to pay for the added costs.

In fact, back in March, White House Budget Director Peter Orszag testified before a House Committee that the proposed fix could cause the federal deficit to be as much as $400 billion higher over the next decade.

The uneasy alliance between the AMA and Senate Democrats is starting to look a bit frayed.  Apparently, Senator Reid took the “doc fix” legislation to a vote based on what he understood to be assurances from the AMA that there were enough Republican votes to get it through.

Oops.  Apparently, the AMA thought it made it clear that there were Republican votes for general health care reform legislation, NOT that particular piece of legislation.  The “doc fix” legislation went down in flames.

Stay tuned as the sitcom continues.

All About Strips                                               Stewart Farnell, Ph.D, CFP®   Boulder, CO  

Bonds called Treasury Strips have buttressed many portfolios during the recent stock market downturn. As fear replaces greed as the driving force in the market, panicked investors are seeking safety, and one of the safest investments is a U.S. Treasury bond. Investors compete to buy these bonds, driving up their price. This is normal when the economy is moving toward deflation. A key reason for owning Treasury Strips is to protect portfolios in deflationary times. 

Strips are modifications of regular Treasury bonds. Regular Treasuries consist of two components. The principal component is a promise to pay a fixed sum at a fixed maturity date (e.g., to pay the bond’s owner $10,000 on May 15, 2024). The interest component is a promise to pay a fixed amount of interest every six months until the bond matures. Treasury Strips are regular Treasuries whose principal and interest components have been split and sold separately. For example, if you want a $10,000 Treasury Strip, you can buy just the principal component of a regular $10,000 Treasury bond. The interest components will be sold to other investors. Think of a Treasury Strip as a regular Treasury bond with its interest components “stripped” away. 

Thus Treasury Strips pay no interest. The buyer of a $10,000 Treasury Strip gets only a promise of $10,000 at a certain date, backed by the full faith and credit of the U.S. Treasury. In the absence of interest payments, buyers of Strips benefit from a reduced purchase price. You might buy a $10,000 Treasury Strip maturing in 2024 and pay only about $6,200.  

Treasury Strips provide safety of principal: the U.S. Treasury has never defaulted on a bond obligation, and Treasury securities are generally considered safer than AAA-rated corporate bonds. They are inexpensive to buy, and once bought, there is no further cost, assuming you hold the Strip to maturity. 

For retirees, Treasury Strips can fill the gap between expected income and expected expenses. If you expect to retire in 2014 with annual expenses of $52,000, along with Social Security and pension income of $42,000 per year, you can buy Treasury Strips maturing every year for 15 years, each with a maturity value of $10,000. The $10,000 per year from your maturing Strips, plus the $42,000 from your Social Security and pension, will cover your expenses. 

Because Treasury Strips pay just the principal amount at maturity, covering this income gap costs less with Strips than with regular Treasuries. Strips sell at a discount to their value at maturity so a portfolio of 15 Strips, one maturing in each of the next 15 years for $10,000 each, would currently cost about $119,000. A ladder of regular Treasury securities with the same maturity dates would cost far more because they pay periodic interest as well as the return of principal. 

Strips can pose one tax complication. Although they don’t pay interest, the IRS treats them as if they do. According to the tax code, the spread between what you pay for the Strip and what you receive at maturity—your profit—is really interest in disguise. So each year you must report a portion of that profit as if it were income. For this reason, many ACA members advise their clients to hold Treasury Strips in retirement plans like traditional IRAs and 401(k)s, which shelters the income received from taxation every year. The tax is payable on the taxable value only when it is withdrawn from the account. 

U.S. Treasury Strips aren’t right for everybody. But for many clients of ACA members, Strips can be a reliable way to close the income gap in retirement. And with enough years of Treasury Strips in their portfolio, investors can afford to wait for their equity investments to recover, reducing the chance of having to sell them at a loss.

                   It has been a long time coming, but I have finally completed my training, and have registered with the State as a Registered Investment Advisor.  My new firm, Pennsylvania Physician Advisors, Inc., will focus on the unique financial issues faced by Pennsylvania physicians.  I feel that personal financial planning for physicians will mesh very nicely with my law practice, which concentrates on the legal representation of physicians.

          Physicians are working harder to make less.  They are exposed to increasingly aggressive plaintiffs’ attorneys, diminishing returns from health insurers, and mounting demands from bottom-line oriented hospital administrators.  Because of the time constraints they work under, they frequently do not have adequate time to assure that their financial health is protected.

With an appropriate financial plan, physicians can rest assured that their income and assets are protected, and that their financial goals will be met.

Physicians simply do not have time to educate themselves about the intricacies of tax planning or asset protection.  They frequently fall prey to commissioned salespeople eager to sell products, who do not have their best interests at heart.  Because of the rapidly evolving health care environment and their advisors’ general lack of knowledge about their specific problems, the financial health of physicians is rarely as good as it should be or could be.

Physicians need a trusted advisor with all relevant information about them.  In this way, a holistic approach to their financial health can give them peace of mind and allow them to focus on the practice of medicine.

          I will meet extensively with each physician to understand his or her individual situation, and to review insurance, taxes, estate planning, and investments on a holistic basis. 

          To learn more about this process, please visit www.PaPhysicianAdvisors.com

Pardon the personal entry – the weeks’ events just needed  reporting somehow.

          My wife, in the spring, asked me if I thought a beach vacation would be a good idea.  She found a ‘cheap’ place that looked just perfect.  Since I knew we were spending a week in DC and Colonial Williamsburg AND a week in the Adirondacks, I said that maybe next year would be better.

          The next report on the topic was that she had booked the place.  For a week.  It is always nice to have input into these decisions.

          I was concerned about a few items.  First, three weeks out of the office is a lot for me.  Second, she breezily informed me closer to the time to pack up that the house was not air-conditioned.  However, the internet ad assured us that bay breezes and many fans made the place comfortable.  This struck me as somewhat fanciful in the middle of July.

          The appointed hour to leave came, as I was hot and heavy into a 4 inch offering memorandum for a client physician organization considering buying into a hospital.  I dutifully toted it along, together with my laptop, printer, and other implements of destruction.

          We arrived to quite a rustic cabin right on the beach, a really nice location.  On the ride down my wife mentioned that the tap water “had iron in it,” so we may want to bring potable water.  I believe the true element in the water is sulfur – an almost overpowering aroma of rotten eggs accompanies any use of the tap water.  Showers become an interesting experience indeed.

          We arrived Sunday evening in time to take a dip in the bay with the kids while my wife went out on a grocery run.  A truly beautiful location.

          Monday I woke everybody up to view the sunrise over the bay – everybody agreed it was neat, and told me not to wake them up for another one.  I took a dip in the bay with the kids, and got several hours work on reviewing the documents for the hospital deal.  A nice day, altogether.

          Tuesday morning, a dip in the bay.  Kids are now bored, since we don’t let them watch TV.  We decide to drive to Lewes to take a head boat out on a 3 hour sand shark fishing trip designed for kids.  I was relieved to see that the name of the boat was NOT the Minnow.  Kids had a great time, caught a few fish, and even Mom and Dad brought a few in (between baiting hooks for the princes and princess, who could not touch the icky clam bait).

          During the whole trip, my eyes were watering intensely, and my nose was running like a faucet.  I attributed those symptoms to sunscreen in my eyes, but when we got to the dock, I was whipped.  I could barely crawl to the car, and was very hot to the touch.  The old Marine training kicked in, and I announced myself a heat casualty.  Got back to the house for an invigorating cold rotten egg shower, and made Gatorade from the lemonade we had with salt stirred in.  My son John helpfully agreed to sleep with me that night, to make sure I didn’t get worse from the heat.

          In the morning, I still felt weak and sick.  The suspicion began to emerge that my problem wasn’t the heat, since my wife, 2 10-year olds and a 7 year-old had not felt even especially warm on the water.  By now, I was hacking and looking a lot more like somebody with a bad cold.  I ended up sleeping all day Wednesday and most of the day Thursday.

          Friday, I didn’t feel ready to tackle client work, but I did go out in the bay with the kids for several hours.  I felt like I had completed a marathon when I was done.  Friday night we went out to dinner, and John started to snort and cough.  Heat exhaustion isn’t contagious, but a cold sure is.

          Saturday is our last full day at the beach.  I’m ready to call it another excellent vacation.  Only one sick kid is probably a victory of some sort.

          Thank God, we only have one more of these refreshing breaks scheduled!

A registered nurse has filed a class action lawsuit in the Southern District of New York claiming that certain provisions of the American Recovery and Reinvestment Act (“ARRA”) (the new stimulus legislation enacted in February) violate the privacy rules laid out in the Health Insurance Portability and Accountability Act (“HIPAA”) and the federal Privacy Act.

Beatrice Heghmann of Durham, North Carolina claims that, pursuant to ARRA, the White House Office of Health Reform is working with the Department of Health and Human Services (“HHS”) to design a new system that would create electronic health records for millions of Americans by 2014. According to Heghmann’s complaint, this planned system poses a major threat to individual privacy: she claims individuals’ personal health information (“PHI”) could be just a “mouse click away from being accessible to an intruder.”

Heghmann takes issue with ARRA’s provision allowing HHS to determine what constitutes the “minimum necessary” amount of PHI allowed to be disclosed under HIPAA, as well as how best to implement “de-identification” of protected information. According to Heghmann’s complaint, HHS Secretary Kathleen Sebelius is “empowered to totally vitiate the privacy provisions under HIPAA and link medical information contained in Plaintiff’s personal health record directly to Plaintiff and all others similarly situated.” Heghmann argues that the $22 billion earmarked for the electronic registry is merely a vehicle to obtain access to this confidential health care information.

Heghmann is seeking certification for a class of similarly situated individuals and is requesting an injunction to prevent the government from disbursing the $22 billion budgeted for the Electronic Health Records System.

Thanks to Ann Bittinger, of the Bittinger Law Firm, for this summary of highlights of today's session at the American Health Lawyers Association's annual meeting in Washington, D.C.   

"Kathleen Sebelius, secretary of the Department of Health and Human Services, addressed the attendees this morning.  I wanted to share with you key points from her address, for informational purposes only.  No political message, in support or opposition, is intended.  

Calling for urgent change, Secretary Sebelius said "the status quo is not only unsustainable and unacceptable, it is unconscionable."  She said she expects that Congress will pass healthcare reform before its mid-August recess.  The bill would then go through conferencing committees between the two houses to reconcile differences in each house's bills, and would be on the President's desk, ready for signature, in early October.  "This is a very aggressive schedule," she said.

She said the main principles of reform are:

* "Costs have to come down. We have to address the cost curve."
* "Every American needs, at the end of the day, to have access to
coverage."
* She said we need to build on the current system and need to
strengthen employer-sponsored health insurance. She said the
administration does not support taxing employer health benefits because
it will "destabilize the private sector."
* "Significant changes in private health insurance" are needed,
she said.
* Pre-existing condition exclusions will have to be eliminated.
* A public insurance option must be available for individuals,
self-employed and small business owners, Sebelius said. She said that
she knows from her days as insurance commissioner that the
government-sponsored insurance must be priced so as not to skew the
market place.
* Erratic quality must be addressed, she said.

"The process is messy," she said.  She assured the lawyers that Congress is very much involved in learning how the health care system works.  An "unprecedented amount of education" is occurring on Capitol Hill, she said.  She said that President Obama does not want his healthcare reform plan to mirror the failed plan that the Clinton Administration wrote without Congressional teamwork:  "They (legislators) did not own it;
they didn't write it, and they didn't vote for it." 

Sebelius also updated the lawyers on the administration's preparation for a possible H1N1 flu pandemic.  She said the administration is partaking in "massive surveillance" to monitor the flu's outbreak in the
Southern Hemisphere, currently, as the strain is mixing with the seasonal flu.  She said the flu is targeting younger people, but it is not nearly as lethal as initially thought when it first hit Mexico.  

The Secretary said there are 1 million H1N1 cases in the United States currently.  She said preparation is underway should a massive vaccination effort be needed.  She said that because the flu seems to
target young people, a massive cooperation with schools to disseminate a vaccination may be in the future.     

She suggested that practitioners and hospitals prepare for a surge in hospital admissions and doctor's appointments and to be ready when the "worried well" show up at the hospital emergency department."

I always get crazy when I am involved in a deal with a hospital.  The following is for your edification, and to keep me from losing my mind.

Hospital Rules for Negotiating With Physicians

1.     We are in a great hurry.  There is a deadline of _________.

2.     It is unreasonable for the physicians to change anything – that will slow the deal down.

3.     Every time the physicians do change something, we must take a week or two to get it through legal. 

4.     When it comes out of our legal, the physicians must respond immediately.  See #1.

5.     The fraud and abuse laws prevent us from _______ (fill in the blank).

6.     If you had a real attorney, s/he would know that the deal must be 100% the way we want it.  See #5.  If the physician attorney disputes that simple fact, it is proof the poor fool does not know Stark.

7.     Our legal fees will be paid from the pot.  The physician’s legal fees MUST be paid by the physicians.  See #5.

8.     We are a not-for-profit.  Therefore, everything we do is for the community benefit.  If the physicians need something out of the deal, it is because they are greedy.

What have I missed?