Medicare, the nation's most important health financing institution for America's seniors, was altered by the Balanced Budget Deal, perhaps not for the better. Effective as of the January 1, 1998, is a provision that limits dealings between Medicare patients and their doctors.

The crux of Section 4507 of the Balanced Budget Act is that doctors who treat Medicare patients for Medicare money may not charge patients for any treatment or test that Medicare does not cover, even if the patient is willing to pay for the treatment out of his or her own pockets. Doctors who opt out of the Medicare system altogether will be allowed to charge for such uncovered tests and treatments, but only a few will be able to.

One of the features of the comprehensive healthcare reform proposed by the President in his first term was a similar provision that would have denied Americans and their doctors to decide on a test or a course of treatments that was not covered by the national healthcare plan. That was one of the features that killed the Clinton healthcare plan.

The plan is not completely without merit, however. The fear is that unnecessary tests and treatments that are not covered by Medicare will be fraudulently "sold" to seniors by unscrupulous doctors, what economists call "supplier induced demand." I will be the first to admit that it happens. Some people are duped by unscrupulous doctors, just as some lawsuits are filed by unscrupulous lawyers, and some mechanics change out perfectly good parts.

But what we should keep in mind is that there may be some reason for a doctor to follow a course of testing or treatment in a particular case that may not be covered now (or in the future, because of Medicare budget tightening, may not be covered). The doctor and the patient are in better positions to make decisions about treatments and tests than Washington bureaucrats and politicians.

Fraud is best fought with laws against fraud, and we have plenty of legislation against fraud. Taking testing and treatment decisions out of the hands of patients and their doctors and making one-size-fits-all decisions in Washington to prevent fraud is a case of "throwing the baby out with the bath water." It reminds me of the title of a movie from several years ago, "Whose Life Is It, Anyway?"

And what about Clinton's new Medicare proposal?

As part of the President's tactic to pass his failed healthcare reform measure piece by piece, he has just come out with a proposal to extend Medicare coverage to those seniors who are 62 to 65. With premiums of approximately $300 per month, the President's budget analysts project a small cost to the nation's treasury, one that they claim can be paid for by unspecified reductions in Medicare fraud and abuse. But are these budget projections accurate?

With slightly more than 13% of those in this age group uninsured, the projections assume that only those currently uninsured will choose to become new Medicare patients. On C-Span last week, Senator Gramm of Texas noted the error of these assumptions is that many of those insured in that age category are likely to become Medicare patients, because either its a better deal, or they will choose to retire early.

Any early retirements induced by extended Medicare coverage will also impact Social Security, leading to more retirees supported by fewer workers, and with the worker-to-retiree ratio projected to be just two to one by the year 2013, we should do nothing to encourage early retirements.

Such factors were not in the President's budget projections, perhaps because it is probably impossible to predict how many will retire early or switch to Medicare. Remember, it was from just such careless projections that caused Medicare to cost many times more than it was originally predicted to cost.