Despite all the controversy surrounding the president's proposed Health Security Act, nary a word has been heard about the significant new civil and criminal penalties included in the act. These new crimes and penalties both raise significant issues in their own right and belie the administration's claims that its plan relies on market incentives and choice.

The Health Security Act federalizes a broad range of routine crimes and torts previously dealt with by the states. Most notably, the act creates two broad new categories of federal crime, dubbed "federal health care offense" and "Health care fraud" (Sec. 5402[d]; 5401). "Health care fraud" includes, among other things, any effort to defraud a "health plan" (i.e., a private insurer, health maintenance organization or self-insured employer) or "any . . . other person" in connection with the delivery or payment of health care benefits, supplies or services. Thus the act federalizes mundane fraud cases merely because they are perpetrated on an organization that provides health care.

There will undoubtedly be shortages and waiting lists for procedures, and bribes might provide patients with a life-saving short cut. On the other side of the table, medical students, their options to enter the specialty of their choice limited by the act's quota on specialists, might seek to ensure their desired career through a well-placed gift. In a plan that ignores markets, bribery and influence peddling will be the natural result. The criminal and civil penalties in the act roll on and on. A health Insurer, HMO or self-insured employer that fails to pay daims "promptly" may be fined up to $1 million for repeat "offenses" (Sec. 5206).

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