"Thou shall not commit charity." So decrees the federal government, under the 1996 HIPAA and other laws and regulations.
In Western Civilization, ethical requirement for personal fulfillment once included charity and charitable action.
How did this ethic get turned on its head?
Once again, incompletely-considered intentions have gone awry. And this particular awryness goes back at least 40 years,
when the federal government got into the business of paying for medical care big time, with the Medicare and Medicaid
In addition to politicians garnering political points, votes and political campaign contributions, another intention was to help
older Americans get medical and hospital coverage.
These government officials have been worried that doctors might inflate charges for patients covered by Medicare. So, the
bureaucrats and Congress made rules limiting what doctors could charge for services rendered to Medicare recipients.
Government bureaucrats only allowed the small fries (such as doctors and hospitals) to collect their lowest price for goods and
From the beginning, doctors had trouble keeping up with government regulations and filling out the claim forms. This
paperwork is like having to fill out an individual income tax return to the IRS for every patient.
The doctor is responsible for coming up with politically-correct patient information, code numbers, modifiers and other
minutiae lest he be convicted of insurance fraud and sent to jail for five years.
Oh, I almost forgot to mention, the degree of fraud has to be significant, defined as at least $100, under the 1996 HIPAA
In the late 1960s, Dr. James Baker of Aberdeen WA charged $8.00 for a standard office consultation. But when a patient on
blood pressure medicine came in to have blood pressure checked, Dr. Baker couldn't justify charging the full $8.00 so he
charged a more charitable $4.00 instead.
Because the government had to get the best price, the Medicare bureaucrats informed the doctor that as far as the Medicare
program was concerned his fee for his standard office consultation was actually $4.00, not $8. So, the government would pay
him or reimburse patients the usual 80 percent, or $3.20.
Oh, yes, and he better try really hard to collect that other 80 cents or the government would conclude that his usual fee was
actually only $3.20, and the government would pay 80 percent of that, or $2.56; the formula spirals downward from there.
So, if a doctor charitably charged less to poor patients, the government paid the doctor no more than the fee paid by these
Some doctors became charity cases themselves.
Of course, there could be exceptions, if you knew your way through the Magic Code Book and kept bureaucratic-style
records meeting the bureaucratic requirements du jour.
If some doctor or hospital was rash enough to treat charity patients for free, the government would conclude that was the usual
fee and pay nothing for services rendered to government patients.
Indeed, this seems to be the approach to several charity hospitals that had the gall to continue their charitable mission. They get
into trouble when they only give charity to human beings and not to Medicare apparatchiks.
This is exactly happened to the 161 bed Deborah Hospital in New Jersey. The hospital never charges patients for medical
services. But the hospital did collect from Medicare when patients had Medicare coverage.
As medical lawyer Madeline P. Cosman, Ph.D., writes "the U.S. Department of Health and Human Services prosecuted
Deborah over the course of four years because Deborah accepts Medicare payments without requiring patient copayments
and therefore violates a slew of civil and criminal laws.
"By following its own three-quarter-century-old mandate to never charge patients, Deborah Hospital was accused of granting
incentives for referrals, submitting false claims to the government, unfairly competing with community and other specialty
hospitals, and generally flouting White Coat Crime laws ... Medicare has no obligation to pay for hospital care that the patient
gets as a free gift."
The "false claims" charge alone carries a $10,000 fine, per incident, plus triple damages. Each patient charge can be
prosecuted as a separate false claim. "Deborah's refusal to violate its free care mandate that defies medical law nearly forced
the generous doors and charity operating rooms to close shut. In 2003, Deborah Hospital finally got a reprieve, a waiver
enabling them to continue their tradition of not charging copayments" writes Cosman.
Deborah Hospital was presumed guilty, until proven innocent or granted a waiver from the boss.
So, in order to keep government prosecutors at bay, doctors and hospitals who have contracts with Medicare or private
insurance companies are essentially forced to charge their highest fees so that the government can't accuse them of cheating.
These fees are like the "rack rate" room charges posted in hotel rooms. In our experience, these posted hotel charges are
always a lot higher than what you actually pay and are apparently posted because of some "consumer protection" regulation.
Just as individuals, travel agents and businesses negotiate lower rates for hotel rooms, insurance companies and individuals
negotiate lower rates for hospital rooms, at least with some hospitals.
At least this bureaucratic inversion of charity is now coming to public attention.
The Robert Wood Johnson Foundation paid for a study of 6,600 physicians that found that 68 percent of doctors now say
they deliver any free or discounted assistance to low-income patients. This is down from 76 percent a mere 10 years earlier
according to Donald Devine, former director of the Federal Employees Health Benefits and Civil Service Retirement programs
in an article published in the Washington Times two days after April Fools Day.
It took a study to find out what doctors have been experiencing for several decades.
Although Devine "had managed the largest employer health insurance plan in the nation and written often on health matters" this
problem had escaped his notice, he writes. "When one reads about doctors being hauled off to jail for fraud, odds are this is
the cause: Guilty not of fraud but of charity."
Editor's Note: Robert J. Cihak wrote this week's column