[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
PATIENT PROTECTIONS IN MANAGED CARE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
APRIL 24, 2001
__________
Serial No. 107-14
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Health
NANCY L. JOHNSON, Connecticut, Chairman
JIM McCRERY, Louisiana FORTNEY PETE STARK, California
PHILIP M. CRANE, Illinois GERALD D. KLECZKA, Wisconsin
SAM JOHNSON, Texas JOHN LEWIS, Georgia
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota KAREN L. THURMAN, Florida
PHIL ENGLISH, Pennsylvania
JENNIFER DUNN, Washington
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
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C O N T E N T S
__________
Page
Advisory of April 17, 2001, announcing the hearing............... 2
WITNESSES
American Medical Association, Richard F. Corlin, M.D............. 22
Association of Trial Lawyers of America, and Robinson, Calcagnie
& Robinson, Sharon J. Arkin.................................... 9
National Association of Manufacturers, and Ashland, Inc., Michael
J. Toohey...................................................... 38
National Partnership for Women & Families, Judith L. Lichtman.... 32
Patient Access Coalition, American College of Cardiology, and
Indiana University School of Medicine, Douglas P. Zipes, M.D... 41
______
SUBMISSIONS FOR THE RECORD
American Psychological Association, statement.................... 73
National Council on Disability, Marca Bristo, letter and
attachments.................................................... 73
Self, Thomas W., San Diego, CA; Linda P. Self, San Diego, CA; and
Miles J. Zaremski, Chicago, IL; joint statements............... 79
Zaremski, Miles J., Highland Park, IL, letter.................... 81
PATIENT PROTECTIONS IN MANAGED CARE
----------
TUESDAY, APRIL 24, 2001
House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:08 p.m., in
room 1100 Longworth House Office Building, Hon. Nancy Johnson
(Chairwoman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
April 17, 2001
HL-5
Johnson Announces Hearing on
Patient Protections in Managed Care
Congresswoman Nancy L. Johnson (R-CT), Chairwoman, Subcommittee on
Health of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on managed care and how to ensure
quality, affordable care is available to America's patients. The
hearing will take place on Tuesday, April 24, 2001, in the main
Committee hearing room, 1100 Longworth House Office Building, beginning
at 2 p.m.
Oral testimony at this hearing will be from invited witnesses only.
Witnesses will include experts on health plan liability, financing
health benefits for employees and delivering timely and appropriate
health services. However, any individual or organization not scheduled
for an oral appearance may submit a written statement for consideration
by the Committee and for inclusion in the printed record of the
hearing.
BACKGROUND:
In response to rising health care costs and more limited benefits
through a fee-for-service system, many employers have turned to health
maintenance organizations (HMO's) and other managed care arrangements.
While managed care has been helpful in moderating costs, and may have
helped reduce the number of uninsured, many believe the pressure to
constrain costs has squeezed health providers and has inserted
insurance managers into the doctor-patient relationship.
In 1998 and again in 1999, the House passed the Patient Protection
Act and the Bipartisan Consensus Managed Care Improvement Act
respectively to protect patients enrolled in managed care plans and to
ensure timely access to covered benefits. However, both pieces of
legislation failed to become law.
Earlier this year, President Bush issued principles to guide
legislators as Congress crafts a patients' bill of rights. Those
principles state that new protections should apply to all Americans,
patients should be allowed to go to Federal court after an independent
medical review, and should include appropriate employer protection with
caps on damages.
In announcing the hearing, Chairwoman Johnson stated: ``The time to
enact a real patients' bill of rights is long past due. I am encouraged
by the principles President Bush issued, which strike the right balance
between appropriate accountability and costs. I think there is
significant agreement on both sides of the aisle on the underlying
patient protections, such as access to OB/GYNs, access to specialists,
prudent layperson standard for emergency rooms, and disclosure of plan
information. This hearing will enable Members to assess whether
consensus has emerged on these issues and how we might best resolve the
more vexing issue of accountability for health plans.''
FOCUS OF THE HEARING:
The hearing begins the Subcommittee's consideration of Patients'
Bill of Rights legislation. Witnesses on the panel will explore patient
protection provisions including allowing access to specialty care,
internal and external review and various proposals to expand health
plan liability. Witnesses will explore the adequacy of current plan
review procedures and whether new external review processes should be
established and exhausted prior to any new liability.
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Any person or organization wishing to submit a written statement
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Means, U.S. House of Representatives, 1102 Longworth House Office
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noted above.
Chairwoman Johnson. Good afternoon everyone. Today's
hearing begins the Subcommittee's examination of issues related
to the Patients' Bill of Rights. When we started exploring
legislative solutions to protect patients from bad actors in
the health insurance market, there was much disagreement
regarding what the Federal legislation should look like. There
was even a large degree of uncertainty as to whether Congress
should enact any Federal protections.
I am happy to say that after 8 years of examining managed
care reform legislation, there is now a great deal of consensus
as to what a Federal patient protection bill should encompass.
There is also strong bipartisan agreement that Congress should
act quickly to extend patient protections to all Americans.
I hope we can achieve this goal this year, and promptly,
but time to enact a real Patients' Bill of Rights is long
overdue. In response to rising health care costs and the desire
to provide more preventive care, many employers have turned to
health insurance maintenance organizations and other managed
care arrangements.
While managed care has been helpful in moderating costs and
may have helped reduce the number of uninsured, many believe
the pressure to constrain costs has squeezed health providers
and inserted insurance managers into the doctor-patient
relationship.
In 1998 and 1999, the House passed legislation to protect
patients enrolled in managed care plans and to ensure timely
access to covered benefits; however, both pieces of legislation
failed to become law. Earlier this year, President Bush issued
principles to guide legislators as Congress crafted a Patients'
Bill of Rights.
Those principles stated that new protections should apply
to all Americans. Patients should be allowed to go to Federal
Court after exhausting an independent external medical appeals
process, and there should be appropriate employer protection
with caps on damages.
I am encouraged by President Bush's principles which I
think strike the right balance between accountability and
costs. I think there is significant agreement on both sides of
the aisle on the underlying patient protections, such as access
to OB/GYNs, access to pediatricians for children, access to
specialists, the prudent standards for emergency room care, and
disclosure of plan information.
However, I am concerned about some proposals that would do
real damage to employer-provided health care and could increase
the number of the uninsured.
Some are advocating additional unlimited lawsuits as a
panacea to better quality health care. We have seen the effect
of unlimited lawsuits on health care providers with malpractice
insurance premiums increasing dramatically. Just yesterday, the
Philadelphia Inquirer reported that hundreds of doctors will
shut down their offices today and go to Harrisburg to lobby
their State representatives to grant them relief from soaring
malpractice insurance premiums. The problem has gotten so
serious, 11 percent of doctors have left the State to escape
high premiums.
I don't believe we can sue our way to better care.
Ultimately and foremost, we should be trying to ensure that
patients get the medical care they need, when they need it. A
strong, independent, external appeals process conducted by
doctors will ensure patients get that care.
Health plan enrollees should also be required to exhaust
the medical review process prior to pursuing court remedies.
Why establish an external review process which utilizes medical
experts if that process can be circumvented?
In an attempt to develop a consensus on the issue, today we
will hear from the major interest groups on their protections
in managed care reform.
The Patient Access Coalition, which collectively represents
more than 300,000 physicians, will stress the underlying
patient protections that Congress has been debating for a
number of years.
The American Medical Association, which also represents
about 300,000 physicians, and the Association of Trial Lawyers
of America will emphasize their belief that an ERISA plan
should be exposed to unlimited liability.
Finally, we will hear a consumer perspective; and from an
employee representing the National Association of
Manufacturers, providing the viewpoint from someone paying for
health care and trying to do what is right for their employees.
But the time is ripe for Congress to act. We spent too much
time stressing our differences, rather than trying to build on
common ground. The President has indicated his willingness to
sign a real Patients' Bill of Rights. It is up to us to deliver
legislation to his desk. It is also up to us to be coldly
realistic, not only about what our intended consequences might
be of legislation, but what the likely unintended consequences
of legislation will be as well; because day by day, it is
becoming ever clearer, if you listen carefully, that if we
manage this situation wrong, if we solve this problem wrong, we
will push the current employer-provided insurance system from a
defined benefit system to a defined contribution system.
That would be a terrible disservice to every working person
in America who has employer-provided insurance, because over
time it would steeply erode that benefit.
So what we do in solving this very real problem of
patients' rights will determine access to insurance and the
quality of coverage American workers enjoy in future decades.
I believe that the issue of unintended consequences is far
more evident now than it was 2 years ago when this first hit
the floor of the House, and every day it is more serious as the
costs of drugs and the costs of other procedures push premiums
up on their own.
So I look forward to the testimony of our witnesses, and
thank you for your preparation and for your attendance.
[The opening statement of Chairwoman Johnson follows:]
Opening Statement of Hon. Nancy L. Johnson, M.C., Connecticut, and
Chairwoman, Subcommittee on Health
Today's hearing begins the Subcommittee's examination of issues
related to a Patient's Bill of Rights. When we started exploring
legislative solutions to protect patients from bad actors in the health
insurance market, there was much disagreement regarding what the
federal legislation should look like. There was even a large degree of
uncertainty as to whether Congress should enact any federal
protections.
I am happy to say that after eight years of examining managed care
reform legislation, there is now a great deal of consensus as to what a
federal patient protection bill should encompass. There is also strong,
bipartisan agreement that Congress should act quickly to extend patient
protection to all Americans. I hope we can achieve that goal this year.
The time to enact a real patients' bill of rights is long past due.
In response to rising health care costs and the desire to provide
more preventative care, many employers have turned to health
maintenance organizations (HMO's) and other managed care arrangements.
While managed care has been helpful in moderating costs, and may have
helped reduce the number of uninsured, many believe the pressure to
constrain costs has squeezed health providers and has inserted
insurance managers into the doctor-patient relationship.
In 1998 and again in 1999, the House passed legislation to protect
patients enrolled in managed care plans and to ensure timely access to
covered benefits. However, both pieces of legislation failed to become
law.
Earlier this year, President Bush issued principles to guide
legislators as Congress crafts a patients' bill of rights. Those
principles state that new protections should apply to all Americans,
patients should be allowed to go to Federal court after exhausting an
independent, external medical appeals process and there should be
appropriate employer protection with caps on damages.
I am encouraged by President Bush's principles, which I think
strike the right balance between appropriate accountability and costs.
I think there is significant agreement on both sides of the aisle on
the underlying patient protections, such as access to OB/GYNs, access
to specialists, prudent layperson standard for emergency rooms, and
disclosure of plan information.
However, I remain concerned about some proposals, which would do
real damage to employer provided health care and could increase the
number of uninsured. Some are advocating additional, unlimited lawsuits
as a panacea to better quality health care. We have seen the effect of
unlimited lawsuits on health care providers, with malpractice insurance
premiums increasing dramatically. Just yesterday, the Philadelphia
Inquirer reported that hundreds of doctors will shut down their offices
today and got to Harrisburg to lobby their state representatives to
grant them relief from soaring malpractice insurance premiums. The
problem has gotten so bad, 11 percent of doctors have left the state to
escape high premiums.
I don't believe we can sue our way to better care. Ultimately and
foremost, we should be trying to ensure that patients get the right
medical care when they need it. A strong, independent external appeals
process conducted by doctors, not lawyers or laymen, will ensure
patients get that care. Health plan enrollees should also be required
to exhaust the medical review process prior to pursuing court remedies.
Why establish an external review process which utilizes medical
experts, if that process can be circumvented by lawyers?
In an attempt to develop consensus on the issue, today we will hear
from the major interest groups on their perspectives on managed care
reform. The Patient Access Coalition, which collectively represents
more than 300,000 physicians will stress the underlying patient
protections that Congress has been debating for a number of years. The
American Medical Association, which also represents about 300,000
physicians, and the Association of Trial Lawyers of America will
emphasize their belief that ERISA plans should be exposed to unlimited
liability. Finally, we will hear a consumer perspective and from an
employer representing the National Association of Manufacturers,
providing the view from someone paying for health care and trying to do
what's right for its employees.
The time is ripe for Congress to act. We have spent too much time
stressing our differences rather than trying to build common ground.
The President has indicated his willingness to sign a real patient bill
of rights. It is up to us to deliver legislation to his desk.
Chairwoman Johnson. Mr. Stark.
Mr. Stark. Thank you, Madam Chair, for holding this hearing
on the question of patient protections in managed care. I only
regret that we are having a hearing instead of sitting in the
Rose Garden, signing the bill which has passed the House. And
my sentiment is that when you have got Dr. Corlin and Ms. Arkin
sitting as close together as they are here and agreeing, we
better drop the gavel and say that we have got a pretty good
bill.
My theory on legislation in this town is that if you got
anybody in the room smiling, somebody is getting away with
something and you ought not to; but when everyone is looking a
little grumpy, like our witnesses, that means that everyone has
to contribute a little and we have got the right mix.
There isn't much disagreement. We had, I think, 60
Republicans, and I am sure that you have beaten up on some and
knocked a few off the bill since we passed it, but it is
strictly over the issue of liability.
The CBO came out today and said that it is going to cost
one-tenth of a percent more, due to the liability portions of
the right to sue. The doctors understand that if they are
negligent in malpractice in--in a negligent fashion, they are
apt to be sued--and rightfully--why should a health plan escape
having those same penalties?
I cannot understand for a moment the rationale of letting
health plans off free. We find that in the State of Texas,
where a famous politician comes from, that they indeed have not
had a decrease but an increase in the number of employer-
sponsored insureds after their Patients' Bill of Rights has
been in effect, I guess, now several years.
So I would say let us get on with it. Let us hear
everybody's complaints about the egregiousness of the trial
lawyers, and let us have the AMA tell us that they ain't so
bad, or if they've got to suffer, so should everybody else, and
let us get this bill signed.
The American public wants it, 60 Republicans joined with
the Democrats--Senator Nickles stalled it in the Senate, I
think as long as he reasonably can--and let us get this bill
passed, get it to the President's desk and see if he chooses
not to sign it. I can't believe he won't.
We will have protected an awful lot of Americans from
capricious actions by the few irresponsible managed care plans
who do negligently and wantonly withhold or deny needed
coverage.
Thank you.
[The opening statement of Mr. Stark follows:]
Opening Statement of Hon. Fortney Pete Stark, M.C., California
Madame Chairwoman, thank you for holding a hearing on the important
topic of patient protections in managed care. I only regret that this
is a hearing rather than a signing ceremony. I fear we are ``hearing''
this issue to death. In the last Congress the House overwhelmingly
passed the Patients' Bill of Rights only to be stymied during the
conference with the Senate. We don't need more hearings on this topic,
what we need is to get meaningful patient protection legislation signed
into law.
At this point in the game, there is broad agreement on the patient
protection provisions of a real, effective patients' bill of rights.
There is also widespread agreement in the House that the set of
protections need to apply to each and every person in private health
insurance. That has been a point of contention with certain colleagues
in the Senate, but here in the House there is agreement that a
patients' bill of rights needs to afford a basic set of protections
that act as a floor in each and every state and for each and every
person in private insurance.
There is also vast agreement that we must have a strong,
independent appeals process in order to assure that patients get the
care they need and have paid for with their premiums and that are
guaranteed under the new law.
However, at this point we come to the giant chasm in philosophy
that has stymied ultimate agreement for too long. I hope some of our
witnesses here today have a solution.
That chasm is the issue of liability. Why shouldn't plans be
accountable--i.e. held liable--if their negligence harms or kills a
patient? If someone suffers personal injury or death as a result of a
decision made by their health plan, shouldn't that health plan be held
liable in the same way his/her doctor would be? If a doctor commits
medical malpractice, there is no question that you can sue that doctor
under personal injury law. The same is true of a hospital. However,
under today's laws, a health plan is often protected from any liability
even if it was the direct action of the plan that caused the patient's
harm or death.
I don't want courts deciding what is appropriate medicine any more
than my colleagues on the other side of the aisle. I want health plans
providing the appropriate care up front so that patients are not forced
to go through the appeals process or to court. But, if a health plan
inappropriately withholds or delays needed care, I want a patient to
have access to an independent appeals process that will work.
The only way that an appeals process will be an effective means of
resolving disputes with health plans is if there are REAL
consequences--which means real financial consequences--for health plans
not going along with the determination of the independent appeals
entity.
Without a strong, effective liability component in the legislation,
health plans will continue to deny appropriate care, delay treatment,
and continue many of today's abusive practices that result in
substandard care for patients because it will continue to be in their
financial interest to do so.
Including effective liability provisions in the legislation isn't
just about enforcement. It is also about providing people with real
remedies when they are injured or killed by a plan's bad decision. The
liability system must be one to which consumers will have adequate
access. That is why maintaining liability at the state court level is
so important. The federal courts are overloaded, they lack the
expertise in tort cases, and they are difficult for consumers to
access. The state courts have always been the venue for medical
malpractice and personal injury cases and they are the appropriate
venue for the vast majority of managed care cases as well.
So, that is the rub. We agree we need a bill, but we absolutely
disagree on what is the best venue for people to enforce their rights
and get remedies if they are injured or killed by a plan's action or
inaction. I am tired of passing legislation at the federal level and
sending out press releases saying we've solved the problem--when our
solutions haven't worked. We passed CHIP, but still have more than 10
million uninsured children. We passed HIPAA and people are still denied
health insurance coverage through the use of exorbitant premiums that
price people out of the coverage. We have an opportunity here to pass a
bill that will really assure patients of better quality care--and
redress if they don't get the quality care they deserve and have paid
for with their premiums. I urge my colleagues to join with me in
seizing that opportunity.
Of course, we have a strong bipartisan bill that has been
introduced this year, H.R. 526, the Bipartisan Patient Protection Act
of 2001. In the last Congress, the House overwhelming passed a
patients' bill of rights with broader liability protections. We've
modified the liability section of the new bill in order to address
concerns that have been raised. This new legislation has the support of
a majority of the U.S. Senate--where our actions were stymied last
year. And just yesterday the CBO confirmed yet again that we can afford
to guarantee strong patient protections and accountability. The bottom
line is that providing the all of protections in the Bipartisan Patient
Protection Act, including accountability, will cost employees less than
$1.25--less than a gallon of gas or a loaf of bread--per person per
month.
During this debate, independent surveys have shown repeatedly that
a strong majority of both patients and employers are willing and able
to cover these costs. This legislation is a strong model for reform and
I urge my colleagues to take a close look at it.
I look forward to hearing from the distinguished panel of witnesses
before us today and expect that the question and answer session will be
quite lively. Thank you again, Madame Chairwoman, for addressing this
important issue. I hope our next meeting on this topic will be to take
long overdue action on the problem.
Chairwoman Johnson. It is a pleasure, before the panel
begins, to welcome the Chairman of the Ways and Means
Committee, Chairman Thomas, former chairman of this
Subcommittee, really remarkable mind on this subject. And I am
very glad, Bill, that you have been able to join us for at
least part of this hearing. I hope you will be able to hear the
whole panel.
Ms. Arkin.
STATEMENT OF SHARON J. ARKIN, PARTNER, ROBINSON, CALCAGNIE &
ROBINSON, NEWPORT BEACH, CALIFORNIA, AND MEMBER, ASSOCIATION OF
TRIAL LAWYERS OF AMERICA
Ms. Arkin. Thank you. My name is Sharon Arkin. I am a
partner with the law firm of Robinson, Calcagnie & Robinson,
and I am a Member of the Association of Trial Lawyers of
America. First, I greatly appreciate being invited to speak
here today and that we have been permitted to express our views
on these incredibly important issues.
When ERISA was originally passed, it had a very positive
intent: Congress was trying to protect employees and their
benefits. Over the intervening years, because of interpretation
by the Supreme Court, because of the change in the medical care
delivery system in this country, ERISA now actually hurts
employees because it provides an unwarranted immunity to the
managed care health system and allows that system to operate
without control, without recourse. If they act negligently, if
they act unreasonably, and even more frightening, if they act
deliberately to ration and withhold care, they can hurt people
and not be affected by it.
If injuries are caused by the wrongful conduct of a person,
the damages for those injuries should be borne by the person
who acted improperly. Those damages should not be borne by
society. They should not be borne by the taxpayers, and they
should not be borne by the person who was victimized, the
person who got injured.
We are not talking unlimited liability here. We are not
talking caps, I will get to that later. But liability of a
wrongdoer in the civil justice system is always limited by the
amount of harm they actually cause to people. And punitive
damages are always limited by the jury's sense of what is
appropriate and what is right, and by the trial court's sense
of what is appropriate and right and by the appeal court's
sense of what is appropriate and right. They are always limited
to what is appropriate for the case. It is never unlimited.
It is a fact of human nature that people who can profit by
doing wrong will continue to do wrong. We need to deter the
managed care industry from putting profits over people. They
accept premiums, they promise services, and they should be held
to their bargain.
Speaking of unintended consequences, the tragedy is that
that is what we are dealing--that is what we are trying to fix
now. When Congress passed ERISA, the result was unintended
consequences and giving immunity to an industry that has
people's lives in their hands, literally.
I want to emphasize that I do support a fair, prompt,
unbiased, external review system. I think that that is very
important. I think it can help people enormously, but it can't
cure the problem that ERISA has created by itself. It will get
more people more care faster, and frankly, that is what we are
after here. We are not after more lawsuits. If there was never
another lawsuit in the HMO industry because HMOs were doing
what they were supposed to do, believe me, I wouldn't starve, I
would be happy. I would find something else to do with my time.
But until that happens, we have to deal with this problem. We
have to deal with this issue.
ERISA limits the liability of a managed care company to
providing benefits and possibly having to pay attorney's fees.
The external review process does exactly the same. It doesn't
compensate people who are injured before they get to the
external review process, or even after the external review
process.
The written testimony that has been submitted by several
different people demonstrates that there will not be a
limitation on access to care. There will not be an increase in
costs that is untoward or unable to be absorbed by employers or
employees. And that is no reason--given the limitation on the
costs, it is no reason to strip people of their right to obtain
damages when they have been hurt.
The industry is not really afraid of frivolous lawsuits.
They like to say that frivolous lawsuits will result, but the
reality is they are afraid of meritorious lawsuits. That is
what the industry is worried about, and that is why they are
fighting so hard. If frivolous lawsuits are a problem, then let
us deal with frivolous lawsuits, but don't take away the rights
of people who have legitimate claims to get their damages.
The States have traditionally been the areas to supervise
regulation of medical care and insurance and that should
remain. I see I am out of time.
Chairwoman Johnson. You are out of time, and I did not--I
did neglect to lay that out clearly for the panel at the
beginning. We do have a 5-minute rule. You have lights in front
of you. You can see them from your side, can't you? Yes. Green,
yellow, and red. And we would appreciate it if you could stay
within that time limit so we have more time for questions.
But since I didn't tell you, Ms. Arkin, if you have a
closing sentence, you're welcome to make it.
Ms. Arkin. Thank you. I just wanted to close by saying that
damage caps actually hurt the civil justice system and they
hurt the people who have the most egregious cases. The people
who are hurt the worst are then victimized again by damaged
caps, and that should not be permitted. Thank you.
Chairwoman Johnson. Thank you, Ms. Arkin.
[The prepared statement of Ms. Arkin follows:]
Statement of Sharon J. Arkin, Partner, Robinson, Calcagnie & Robinson,
Newport Beach, California, and Member, Association of Trial Lawyers of
America
TO THE HONORABLE MEMBERS OF THE COMMITTEE:
A. Introduction and Case Histories
My name is Sharon Arkin. I am a partner in the law firm of
Robinson, Calcagnie & Robinson, and I am a member of the Association of
Trial Lawyers of America. I thank you both personally and on behalf of
ATLA for inviting us to testify for you here today. I was chosen to
represent ATLA in this hearing because I have extensive experience in
litigating actions against health maintenance organizations and managed
care entities. Additionally, I was co-litigation counsel in the case of
Goodrich v. Aetna US Healthcare of California, in which a San
Bernardino County, California jury awarded $116 million in punitive
damages (that is punishment for egregious misbehavior) against an HMO
for its failure to provide adequate care to its patient. Because of my
experience in litigating HMO cases, I am personally acquainted with the
devastation and tragedy that have resulted from the fact that HMOs are
not legally accountable to their members when they breach their
contractual agreement to provide care, when they substitute their
judgment in place of a patient's physician, and when they violate their
members' trust.
Examining the facts from cases that I have personally been involved
in will help you understand why the issue of managed care
accountability is so important and compelling:
Mrs. B., a 42-year-old mother of three, was diagnosed with
colon cancer. After treatment, she was forced to enroll in a
large HMO because of the decision by her husband's employer to
change benefit plans. A few months later, the cancer indicators
in Mrs. B.'s blood tests signaled a recurrence of her cancer.
Without even bothering to find out where the metastasis was--or
whether it was treatable--her health plan oncologist told her
nothing could be done except to make her ``comfortable.'' In
reality, there were several options, but the oncologist--who
was also the head of the utilization review committee for the
medical group--threw roadblocks up at every turn and
considerably delayed her treatment. Ultimately, the cancer
metastasized to her liver and her lungs and then her brain.
Mrs. B. underwent several rounds of experimental chemotherapy
in a desperate effort to live long enough to see her children
grown. She did not succeed and died in July 1997.
Mrs. A enrolled in a senior care health plan. Because she
lived in an isolated, mountainous area with only very
rudimentary health care services available, she specifically
questioned the health care plan's sales representative about
the availability of air-lift transport in case of a serious
illness or injury that the local hospital could not handle.
Mrs. A was assured that such transport would be provided
whenever needed. When Mrs. A had a mild heart attack, however,
and the emergency room doctor in the local hospital--which had
no critical care or cardiac care unit--repeatedly requested
airlift transport to the nearest medical center, it was denied.
Mrs. A died of cardiac arrest several hours later, in the
small, unequipped rural hospital.
Mrs. S., an elderly lady, enrolled in a large managed care
plan. She went to the primary care physician assigned to her by
the HMO, complaining of joint pain. The doctor told her she had
degenerative arthritis and referred her for physical therapy.
Despite the physical therapy, her pain worsened and her health
steadily deteriorated. She returned to the doctor time and time
again. Each time, the doctor shrugged off her complaints.
Finally, a year and a half after her first visit, and after
incessant demands by her family to know what was going on, the
doctor admitted that Mrs. S. had metastatic cancer--which, the
records show, he had known all along. Mrs. S. died a week
later. Her cancer had never been treated.
Mrs. R. also enrolled in a large managed care plan. She
began having bladder discomfort and went to her primary care
physician. The doctor referred her to a urologist, but the
first available appointment was nearly three weeks away. In the
meantime, Mrs. R. began bleeding from her urinary tract. She
went to the emergency room. The ER doctors wanted to admit her
to the hospital and called for authorization from the HMO.
Authorization was denied. Mrs. R. went home. She returned to
the ER the following day, bleeding even more heavily. Again,
the ER doctors requested authorization to admit her. Again, it
was denied. Mrs. R. went home. The following day, when Mrs. R
went to the emergency room, she was bleeding so heavily that
she had to walk with bath towels between her legs. Again the
HMO refused authorization to admit her to the hospital.
Finally, in desperation, Mrs. R.'s son took her to another
hospital. The doctors there discovered a tumor the size of a
grapefruit in Mrs. R's bladder, admitted her on an emergency
basis and rushed her to surgery. Because of the loss of blood
over the preceding days, Mrs. R. suffered a heart attack during
the surgery. Although she survived, her health has been
seriously compromised.
David was a highly-respected and well-liked career deputy
district attorney enrolled in the health care plan purchased by
the county. After he collapsed one day in court and was
transported to the hospital, he was diagnosed with a rare form
of stomach cancer. The plan oncologist admitted that the type
of cancer was beyond his scope of experience and ability and
requested referral to UCLA--an out-of-plan facility. After
battling with the plan and its administrative review
organization, the out-of-plan referral for consultation was
finally approved, but by the time approval for the actual
treatment was obtained, the cancer had metastasized. Then, when
another therapy was recommended by another out-of-plan
treatment center--and was specifically requested by and
approved by the primary care physician and the plan
oncologist--the treatment was denied. The HMO denied the
treatment despite the fact that the head of the HMO's
technology assessment department actually recommended that
David receive the treatment. David's death left his wife
bereft--and nearly $750,000 in debt.
Mr. L. was diagnosed with lung cancer. His plan oncologist
told him that the tumor was too close to his heart and that he
could, therefore, only be treated with radiation therapy. After
the health plan refused Mr. L.'s request for an outside
consultation with a surgical oncologist and because the plan
did not have a surgical oncologist available, Mr. L. paid for
his own consultation with a USC specialist. The USC specialist
told Mr. L. that the tumor was, in fact, operable, although it
would be a very delicate and tricky operation. The surgeon also
told Mr. L. that the surgery was his only chance for survival
because radiation therapy simply could not eradicate the tumor
and, in addition, was likely to damage his heart. Even more
frightening, the surgeon also informed Mr. L. that the tumor
was growing very fast and could double in size within 30 days.
As such, it was imperative that the surgery occur as soon as
possible. Mr. L. then had to start the referral and review
process within the HMO to get approval. He had to go back to
his primary care physician for a referral to the in-plan
oncologist and then had to go to a consultation with the in-
plan oncologist. The in-plan oncologist concurred that surgery
was the best possible treatment and that it had to be done
immediately, but that the plan had no surgeons qualified to
perform the surgery. Thus, the oncologist recommended, the plan
should authorize the out-of-plan treatment. The plan denied the
treatment. That process, alone, took one week. Mr. L. simply
did not have the luxury of waiting for the plan's internal
grievance process to review the issue and he certainly did not
have the time to have an external review process deal with the
issue. He had to have the surgery immediately. He disenrolled
from the health plan the next day and the day after that had
the surgery--which was paid for by Medicare. He is still alive
and well, four years later.
The horror stories coming out of the managed care industry are
legion. The truly horrible part is that they are not the tortured
imaginings of a fevered plaintiffs' bar. They are real. They are about
real people. And there are thousands of them.
B. Why Legal Accountability is Necessary for Managed Care Insurers
The civil justice system in this country is predicated on two
guiding principles: (1) For every wrong there is a remedy; and, (2)
When the wrongful misconduct of one person causes injuries to another,
the wrongdoer must be legally accountable to the injured person and
must compensate for the injuries their misconduct has caused. There
are, in fact, two underlying public policy purposes for these
principles. The first, of course, is to assure that injuries are
compensated by the person who caused the injuries so that neither
society nor taxpayers through their government is forced to bear that
financial burden. The second underlying purpose is akin to one of the
goals of the criminal justice system: Deterrence. If wrongdoers,
whether criminal or civil, know that they will face no consequences,
they have no reason to stop their wrongdoing--especially if their
conduct is financially rewarding. Forcing civil wrongdoers to
compensate their injured victims for the harm they cause removes any
financial incentive that might exist for engaging in that wrongdoing.
ERISA, as it is presently structured and as it has been interpreted
by the Supreme Court in Pilot Life v. Dedeaux, lacks this deterrent
effect. Under ERISA, an HMO can deliberately and purposely deny a claim
which it knows is covered under the plan. The most that can happen to
the HMO if the member sues is that the HMO will have to pay for the
wrongfully-denied benefit and may possibly have to pay some attorneys'
fees to the patient. That's it. If the denial is for life-saving
treatment and the patient dies without obtaining that treatment, the
HMO is completely free of any potential liability: It will never have
to pay for even the treatment because the treatment was never received
and the family cannot sue for wrongful death. That, of course, builds
in an incentive to the HMO to deny care and take the chance that the
patient will never sue and, tragically, may not be alive to do so.
1. Market Forces Cannot Correct the Problem
Some would say that employers and employees would never choose an
HMO that wrongfully denied claims and that market forces would put
those companies out of business. That is simply not the case. First,
remember that in the majority of private sector employment situations,
most employees do not have a choice--their employer selects one plan
and the employee must take it or leave it. Second, even when more than
one plan is provided as a choice, the consumer/employee and even the
employer often have little or no information on which to base a
selection, at least with respect to these issues. That is because HMOs
are ``graded'' on the way they handle routine care rather than the way
they handle more serious care requests. When accrediting organizations,
like National Committee for Quality Assurance (``NCQA'') or URAC,
assess HMOs, they generally do it on the basis of how well the HMOs
meet standards regarding processes and structure, not whether the HMO
determines individual claims fairly and properly. And while both
entities rely on customer service surveys in formulating their
accreditation criteria, those surveys generally focus, again, on
routine services--which most HMOs perform well. Since, fortunately,
many HMO patients do not require more than routine services, they are
unaware of the problems they may encounter when a health care plan
decides that its own financial well-being takes priority over a
patient's medical well-being.
Additionally, NCQA's own survey shows that, traditionally, patients
rely on family and friends when choosing a health care plan. (See
www.ncqa.org/Pages/Programs/QSG/reportcards.htm.) Obviously, this
information source has the least likelihood of providing accurate
information about how HMOs respond when care beyond the normal routine
care is needed.
Perhaps the most telling statement on the distinction between the
standard of care an HMO provides with respect to routine care and that
provided with respect to other types of care comes from the primary
care physician who treated David Goodrich in the Goodrich case. Dr.
Wang encountered David's wife in the hospital waiting room while David
was receiving an MRI that had been denied by his HMO. When Mrs.
Goodrich asked Dr. Wang--who had requested the MRI--how Aetna could
deny that test, Dr. Wang's response tells the whole story: ``HMOs are
good if you don't get sick.''
Thus, neither employers nor patients/employees have a good means of
determining whether a particular HMO's decision making is going to
become problematic once significant or expensive care is needed.
Because of that, ``market forces'' cannot function well to control or
limit the abuses.
2. Case Law Evolution Cannot Correct the Whole of the Problem
Further evidence that market forces cannot--or, at least, do not--
factor into this problem is the fact that the federal judiciary has
become a catalyst in an attempt to ameliorate the harshness of the
ERISA rule. As a whole, federal judges are not activists and are
unwilling to step on Congressional prerogatives. But the problems
created by ERISA's liability limitations have driven even the most
conservative judges to frustration and dismay. For example, J. Spencer
Letts, a very conservative judge of the United States District Court,
Central District of California, has undergone an epiphany regarding the
risks and dangers to insureds where an insurance company decides and
administers benefits under its own policy where that policy is part of
an ERISA plan. (Dishman v. UNUM), 21 Empl. Bene. Cas. 2941 (C.D. CA
1997). Judge Letts' commentary provides a compelling and insightful
demonstration of the type of insurer conduct that occurs because ERISA
provides a disincentive for insurers and HMOs to provide promised
benefits:
``This Court has always strongly believed in preserving the
remarkably successful balance of competing interests struck by
Congress when it enacted ERISA. . . .
``However, the facts of this case are so disturbing that they
call into question the merit of the expansive scope of ERISA
preemption. UNUM's unscrupulous conduct in this case may be
closer to the norm of insurance company practice than the Court
has previously suspected. This case reveals that for benefit
plans funded and administered by insurance companies, there is
no practical or legal deterrent to unscrupulous claims
practices. Absent such deterrents, the bad faith denial of
large claims, as a strategy for settling them for substantially
less than the amount owed, may well become a common practice of
insurance companies.
* * *
``Insurance companies do not have the same practical
incentives as employers to administer benefit plans in good
faith. For self-administered and even self-insured plans,
employers are motivated to act in good faith not only in order
to comply with the law, but by the practical considerations of
maintaining employee loyalty and morale. . . . For many
employers, trying to hold down the costs of employee plans
through unscrupulous practices may undermine employee morale
and loyalty even more than not having an employee plan at all.
* * *
``Without these practical incentives, there is no counter-
balance to insurance companies' interests in minimizing ERISA
claims.
* * *
``The fact that most people in the Dishmans' situation would
have had to capitulate is the most troubling aspect of this
case. The need to deter insurance companies from behaving in
this manner is why bad faith liability exists under almost all
state laws. ERISA preempts all such laws. Under ERISA, no
matter how unfounded the denial of a claim may be, the only
recovery permitted to the claimant is the amount of the
benefit.
``As this case demonstrates, the reform of shifting the
attorney's fees to the insurer is not enough to deter this type
of conduct. UNUM's bad faith acts placed pressure on the
Dishmans because they were deprived of monthly income which
they needed to live. A lump sum benefit after a lawsuit, even
with interest and free from legal expense, did nothing to
alleviate the pressure upon them at the time the claim was
denied and during the course of the litigation. UNUM was not
deterred by the prospect of paying the Dishmans' attorneys'
fees, because it had every reason to believe that the economic
straits in which it had placed the Dishmans would force a
favorable settlement long before any substantial fees had been
accumulated.
* * *
``[W]ithout any statutory or other legal deterrent it is
entirely predictable that insurers will go overboard to
minimize claims.'' (Emphasis added.)
A similar, though far more lengthy and scholarly, analysis was
conducted by District Court Judge William Young of the United States
District Court, District of Massachusetts. Writing in a health care
case, Andrews-Clarke v. Travelers Insurance Co., 984 F.Supp. 49 (1997),
Judge Young issued a stinging indictment of ERISA's preemptive effect.
After summarizing the tragic facts of the case and the prior procedural
history of the action, Judge Young explained:
``Travelers and Greenspring promptly removed [the widow's]
case to this Court and then, just as promptly, asked this Court
to throw her out without hearing the merits of her claim [on
the basis that the wrongful death claim was preempted by
ERISA].
``This, of course, is ridiculous. The tragic events set forth
in Diane Andrews-Clarke's Complaint cry out for relief.
* * *
``Under traditional notions of justice, the harms alleged--if
true--should entitle Diane Andrews-Clarke to some legal remedy on
behalf of herself and her children against Travelers and Greenspring.
Consider just one of her claims--breach of contract. This cause of
action--that contractual promises can be enforced in the courts--pre-
dates the Magna Carta. It is the very bedrock of our notion of
individual autonomy and property rights. It was among the first
precepts of the common law to be recognized in the courts of the
Commonwealth and has been zealously guarded by the state judiciary from
that day to this. Our entire capitalist structure depends on it.
``Nevertheless, this Court had no choice but to pluck Diane
Andrews-Clarke's case out of the state court in which she sought
redress (and where relief to other litigants is available) and then, at
the behest of Travelers and Greenspring, to slam the courthouse doors
in her face and leave her without any remedy.
``This case, thus, becomes yet another illustration of the glaring
need for Congress to amend ERISA to account for the changing realities
of the modern health care system. Enacted to safeguard the interests of
employees and their beneficiaries, ERISA has evolved into a shield of
immunity that protects health insurers, utilization review providers,
and other managed care entities from potential liability for the
consequences of their wrongful denial of health benefits.'' (Andrews-
Clarke, 984 F.Supp. at 52-53.)
The judiciary has not only vocally expressed its dissatisfaction
with ERISA's effect on the rights of private sector employees to obtain
compensation for their damages, they have begun to chip away at its
application. Although it is generally held--in the context of a health
care plan subject to ERISA preemption--that contract and tort claims
arising from an HMO's refusal to provide approval for referrals, tests
and/or treatments (i.e., a denial of benefits) are preempted, the
courts have carved out an exception and have held that malpractice
claims against an HMO are not preempted by ERISA.
The lead case on this issue is Dukes v. U.S. Healthcare, 57 F.3d
350 (3rd Cir. 1995) in which the court determined that the HMO should
properly be subject to vicarious liability for the medical negligence
of the medical providers arranged for by the HMO under the plan and
that such medical negligence is not preempted by ERISA. Essentially,
the Dukes court's analysis turns on a distinction between the existence
of coverage for the treatment and the quality of the treatment itself.
In other words, if the HMO denies requested care because the treatment
is not covered, e.g., the treatment falls under the plan's experimental
exclusion, the claim is subject to ERISA preemption because it deals
with coverage for benefits. If, on the other hand, the treatment is
covered under the terms of the plan, but the doctor or the HMO want to
provide a less effective treatment (usually for reasons of cost) and
that injures the patient, it is not preempted because, in fact,
benefits were provided, but the benefits were simply of poor quality.
The Dukes court pointed out that ERISA was only designed and intended
to assure that the promised benefits are, in fact, provided and was
never intended to operate beyond that threshold or go into the realm of
examining the quality of the benefit provided. Thus, the court
concluded, state law acts in that context.
One of the most telling examples of the shift in the courts towards
easing the impact of ERISA's remedy preemption is that of the Fifth
Circuit. In Corcoran v. United Health Care, Inc., 965 F.2d 1321 (5th
Cir. 1992), cert. denied 113 S.Ct. 812, 121 L.Ed.2d 684 (1992), the
Fifth Circuit held that a wrongful death action based on claims of
malpractice brought against the HMO was preempted by ERISA. Seven years
later, in Giles v. NYLCare Health Plans, 172 F.3d 331 (5th Cir. 1999),
the Fifth Circuit upheld the district court's order remanding the
action to the state court on the grounds that the malpractice action
raised a state-law claim not completely preempted by ERISA.
The Fifth Circuit, however, never addressed the merits of the
Corcoran issue at all--i.e., does ERISA preempt the malpractice claims.
Rather, the court fashioned its analysis around the procedural question
of jurisdiction, and dodged the Corcoran issue by expressly stating
that ``restraint and comity indicate we should reserve the issue [of
whether ERISA does, in fact, preempt the state law claims of
malpractice] for resolution in the first instance by the state court.''
That the Fifth Circuit would utilize a procedural vehicle to avoid
a conflict with its Corcoran decision on the merits of the substantive
issue of preemption of malpractice claims provides a telling
demonstration of how far the courts will now go to avoid sacrificing
victims' remedies on the altar of ERISA preemption.
Even the United States Supreme Court has expressed a growing
dissatisfaction with the consequences resulting from the breadth of
ERISA preemption and has retrenched to some degree on that issue. In a
series of decisions, the Court began to narrow and limit ERISA's
preemptive effect: New York State Conference of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 115 S.Ct. 1671, 131
L.Ed.2d 695 (1995); De Buono v. NYSA-ILA Med. and Clinical Servs., 520
U.S. 806, 117 S.Ct. 1747, 138 L.Ed.2d 21 (1997); California Div. of
Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S.
316, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997).
More importantly, in the specific context of insurance and managed
care benefits, the Supreme Court has indicated that ERISA preemption
should not be so broadly applied. In UNUM Life Ins. Co. of America v.
Ward, 526 U.S. 358 (1999), the Court held that a state law claim which
might otherwise relate to an ERISA plan is saved from ERISA preemption
where the relevant state law regulates the business of insurance. And,
even more recently, the Court held in Pegram v. Herdrich, 530 U.S. 211,
120 S.Ct. 2143 (2000) that ``mixed'' decisions by a managed care doctor
that implicated both medical judgment and administrative concerns do
not constitute fiduciary actions subject to control under ERISA.
The ``sticking point,'' however, with these judicial efforts to
chip away at the devastating effect of ERISA preemption in the
insurance or health care context is the second half of the Court's
opinion in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549
(1987). In the first half of the opinion, the Court held that state
tort law of general application was not saved from ERISA preemption.
Further, the Court noted, the tort law at issue in that case,
Mississippi's bad faith law, was a tort law of general application and
was not restricted in its application to the insurance industry. It was
not, therefore, saved from ERISA preemption.
In the second half of its opinion, however, the Court went on to
express reservations about whether a state law which did, in fact,
regulate insurance would still be saved from ERISA preemption. The
Court's concern centered around the issue of whether any state law
which provided remedies other than those set forth in the ERISA statute
should be permitted in light of Congress's apparent intent that all
such plans be given similar administrative regulation and protection,
even if that state law would otherwise be exempted from ERISA
preemption. It is that portion of the Pilot Life case which remains
intact and which has not been readdressed by the Court since that
decision. And it is that portion of the decision which necessarily
hampers any other court from imposing damages against an HMO or health
insurance company, no matter how outrageous or egregious the
misconduct. It is that portion of the decision which must be
addressed--and fixed--by Congress.
C. Accountability Will Not Increase Either Costs or the Number of
Lawsuits
Opponents of permitting liability lawsuits against irresponsible
HMOs or health insurers raise two common objections. First that
liability provisions will increase costs and that in turn, will require
an increase in premiums and a resulting decrease in the number of
people who can or will be insured. Second, that public outcry for
legislation that would give patients the legal right to hold the HMO
industry accountable is somehow nothing more than an attempt by trial
lawyers to have another basis for bringing ``frivolous'' lawsuits.
Neither of these criticisms has any merit.
1. Fear of Increased Costs is Unfounded
The first thing to keep in mind, of course, is that ERISA has
granted the managed care industry an extraordinary immunity--absolute
immunity from legal accountability for the injuries and deaths their
decisions may cause. No other industry has that. Indeed, even the
Federal government has not given itself such broad immunity. And there
is simply no justification for this immunity. HMOs and insurers are in
business just like every other industry. They have been making profits
just like every other industry. Despite some massive losses for not-
for-profit HMOs, the managed care industry expects profits of more than
$3 billion in 2000, a 60 percent increase over 1999 profits, according
to a study by the Corporate Research Group Inc., New Rochelle, New
York, as reported in the May 2000 edition of Healthcare Finance
Management. Revenues are expected to increase about $14 billion to $176
billion this year. Because HMO enrollment will rise only about 1
percent in 2000, most of the increase in industry revenues is expected
to come from higher rates, according to the study.
More importantly, the claim that costs would increase, that
premiums would increase and that the number of uninsured Americans
would increase are simply not supportable, either logically or
empirically.
First, premiums are already increasing, in part, because premiums
during the last decade have been artificially depressed. In addition,
huge increases in the cost of prescription drugs are driving medical
inflation according to a September 2000 survey by Kaiser Family
Foundation and Health Research & Educational Trust.
Second, costs should not increase at all as the result of HMO
accountability legislation. If an HMO is providing the care it is
contractually required to provide--and is acting in good faith--it will
not be sued. Indeed, the best way to avoid litigation is to provide
quality services and products that do not endanger the health and
safety of consumers. Texas is a good example. In 1997, when the Texas
Legislature passed an HMO accountability law, 24.5 percent of Texans
had no health insurance. By 1999, the percentage of Texans without
health insurance decreased to 23.3 percent according to the U.S. Census
Bureau. (Data available online at: http://www.census.gov/hhes/hlthins/
hlthin99/hi99te.html.) Clearly, in Texas, fears of increasing the
number of uninsured were unfounded.
Third, if medical costs increase, it will only be because HMOs
start paying for services they were contractually obligated to provide,
but for which they were unreasonably denying claims. That means that
they were receiving a windfall--getting premiums for benefits they
previously were not providing. The fact that they will now be providing
the benefits for which they have been receiving premiums should not
increase costs--since, in fact, they were receiving premiums for those
benefits all along. If the cost of providing those promised benefits
does drive up premiums, that could only be the result of the fact that
the HMOs were deliberately deflating the premiums in order to obtain
market share--a very common occurrence during the mid-to-late '90's.
None of that economic theory, however, justifies immunizing this
particular industry from its own wrongdoing when the health and the
lives of Americans are at stake.
That premium costs should not be impacted as the result of the
advent of liability provisions is confirmed by empirical analysis as
well. In a study conducted by the Kaiser Family Foundation prior to the
enactment of California's new HMO liability law, patterned on the Texas
legislation, it was estimated that additional liability exposure should
have an extremely minimal impact on premiums--on the order of
approximately 17 cents per member per month or $2 a year.
2. The Contingency Fee System Deters ``Frivolous'' Lawsuits
ATLA and the plaintiffs' bar do not support the inclusion of
accountability provisions in order to generate lawsuits for their own
sake. We support it, and patients and their families support it,
because they want people to receive the care they have been promised
and be protected from, not exposed to, serious illness, injury, or
death. Our society does not make bank robbery illegal because we want
to fill up the jails with prisoners. We make bank robbery illegal
because we want people to stop robbing banks. The same is true here. We
do not want liability provisions because we want to fill the courts
with law suits. We want to make HMOs accountable because we want HMOs
to fulfill their contractual promises to provide quality care to the
patients who are paying premiums.
Most plaintiffs' attorneys are in reality small business people. No
lawyer--especially a contingency fee lawyer, who is paid and reimbursed
for expenses only if he or she wins for the client--will take a case
that has little merit or a case where it is a ``close call'' as to
whether the HMO's denial of care was unreasonable. It simply does not
make financial sense for the lawyer to do so. Thus, if the HMOs provide
the benefits they are supposed to provide, costs will not increase as
the result of damages imposed in litigation--because there will be no
litigation. And if the HMOs do not provide the care they are supposed
to provide, what justification is there for protecting them--unlike
anyone else--from the consequences of that misconduct? Again, Texas is
a good example. Although no government entity in Texas officially
tracks the number of lawsuits brought under the HMO statute, only 10
lawsuits have been brought against managed care entities even though 4
million Texans are covered by managed care plans.
If frivolous lawsuits are a concern, then that is the concern that
should be addressed. The rational approach is to punish lawyers who
file frivolous claims. State court and state bar associations already
have mechanisms in place to punish such lawyers. It is never a wise
public policy to deal with frivolous lawsuits by taking away the legal
rights of people who have been injured through no fault of their own.
D. External Review Cannot Solve the Problem
The industry asserts that the problems of abuse by the industry can
be rectified by the use of the external, or independent, review
process. I have several comments with regard to that proposal.
First, in a perfect world, an external review system that is truly
fair and prompt could eliminate many--though not all--of the problems
engendered by the health care benefits industry's pattern and history
of misconduct. And to the extent that even an imperfect system may
help, I whole-heartedly support it. But it cannot be embraced as the
cure-all for the problems faced by managed care patients. And there are
several reasons why:
Because any exhaustion of remedies requirement is
necessarily a limitation on access to justice, it should be as
narrow as possible. This issue is of particular concern with
respect to the suggestion that an external review process be
binding. Essentially, such a provision would deny patients
their 7th Amendment right to a jury trial in cases where an HMO
has made a incorrect medical decision that results in injury or
death. That is contrary to 225 years' of jurisprudence in
America. The American jury is a uniquely democratic
institution. The more than five million Americans called for
jury duty each year still serve as the conscience of the
community. And it is the only governmental body that is truly
neutral, unswayed by electoral pressure, financial self-
interest, and blind ambition.
There is no proof that an external review process would not be
biased, complicated, or otherwise impose a hardship on a sick patient
or a family that has already suffered a loss. I also fear that there
would be unfairness at the internal review stage of the process. At
both stages, most patients likely would not have counsel to assist them
in preparing their case for review or in presenting their case. The
HMOs, of course, would have counsel on staff for just that purpose.
Thus, many patients would be placed at an immediate disadvantage.
Similarly, most patients at that stage do not have either the access
to, or the funds necessary to obtain, expert medical opinions in
support of their claims. Again, the HMOs would and do have those
resources. The system is thus skewed in favor of the HMO going in.
These problems, of course, raising serious due process concerns for
patients.
A major concern would be the issue of who conducts the reviews. In
my experience as a litigator dealing with purportedly ``experimental''
procedures, and denials of care based on that exclusion, I have
observed a distinct disparity in the opinions of equally-qualified
experts, depending on the nature of their practices. The clinicians--
the doctors who actually treat patients as opposed to merely studying
them--tend to be on the cutting edge of medical practice. They are
aware of the alternative treatments, what their likelihood of success
may be and what the downside risks of the treatment are. More
importantly, they are willing to let their patients decide whether they
are willing to undergo that treatment in the hope of obtaining relief
from illness or disease. These doctors see, up close and personally, on
a daily basis what works and what does not.
On the other hand, academics, who may have virtually no hands on
experience with real live patients with real health problems, tend to
be far more cautious and conservative. They are more tied to the
scientific method than they are to the practice of medicine as a
healing art. They require stringent standards of scientific proof that
may not be realistic when dealing with a particular patient's illness.
This disparity in the way that clinicians versus academics view
cutting edge treatments can have a significant impact on the outcome of
an external review evaluation process. And the question is, who should
resolve that dispute? If the external reviewer deciding the case is a
clinician, the HMO may claim the process is not fair. If the reviewer
is an academic, the patient may claim the process is not fair. If the
process is binding, without recourse to a jury to resolve that dispute,
there is no way to assure fairness at all.
These due process and fairness concerns, in fact, led California to
provide that its external review process not be binding. Thus, a
patient can proceed through the external review process and, even if
the reviewer decides that the care need not be provided, the patient
still retains his or her Constitutional right to a jury trial to
correct the injustice of the HMO's denial of benefits.
For many people, an external review process simply cannot
help. In the case history examples provided at the beginning of
this testimony, for example, external review could achieve
nothing. For Mrs. A, the lady who died of a heart attack in a
rural hospital because the HMO would not authorize an air lift
for her to a medical center, external review could not bring
her back to life or restore her to the bosom of her family. In
that context, then, if the only remedy were external review, it
would continue to give HMOs the incentive to deny necessary,
life-saving emergency care because there would be no
consequences resulting from that denial. Similarly, in the case
of Mrs. R--who had the tumor in her bladder and needed
immediate surgery--external review alone could not help her get
the care in time. Moreover, it could do nothing to compensate
her for the heart attack she suffered as the result of the
HMO's delay in care. And what about Mrs. S--who was diagnosed
with cancer, but never told about that diagnosis until shortly
before she died? What good would external review do her? Or her
family?
External review without legal accountability is a sham. As these
examples illustrate, the fundamental problem with external review is
that it leaves the same loophole as ERISA itself. Where death or injury
has already occurred, where damage is imminent or has already happened,
external review provides no remedies. All it can do is what ERISA does
now--tell the HMO to provide the care it should have provided to begin
with. How will that give HMOs the incentive to provide the care
willingly, and without forcing patients to go through yet another
process? It cannot.
Thus, while external review may be an important adjunct to the
liability provisions, it cannot, by itself, solve the problems that
have resulted from the HMOs' abuse of ERISA immunity.
E. State Law Should Apply to Control HMO Misconduct
1. Insurance Law has Historically been Regulated by the States
Once it is decided that adequate remedies should be included in
ERISA, the question becomes whether those remedies should be federally
mandated or controlled by state law. The history of insurance
regulation and the regulation of health and safety mandate that this
issue be controlled by state law.
Many of the courts which have followed the Dukes line of cases have
reasoned that malpractice-type claims or ``quality of care'' claims
against HMOs should be governed by state law and not preempted by ERISA
on the basis of the standard ``police powers'' analysis. In other
words, the Constitution, and the cases interpreting and applying it,
have been very clear that states can and should regulate and control
issues relating to the health and safety of their citizens. Thus, where
an HMO makes a determination that impacts the health or safety of a
state's citizens, principles of federalism mandate that the state
controls the remedies that are to be afforded those citizens.
In addition, the McCarran-Ferguson Act leads irrevocably to the
same conclusion. When anti-trust legislation was being passed by
Congress in the 1940's, the insurance industry lobbied for and obtained
an exemption from that regulation for itself. In the McCarran-Ferguson
Act, Congress expressly declared ``that the continued regulation and
taxation by the several States of the business of insurance is in the
public interest.'' (15 U.S.C. section 1011.) As such, under that Act,
no federal legislation of general application is permitted to preempt
state regulation of the business of insurance.
And that HMOs are, in fact, in the business of insurance cannot
seriously be challenged. The Ninth Circuit, the Wisconsin Supreme
Court, the California Supreme Court and the California Legislature have
all made express findings to that effect. (See Washington Physicians
Service Ass'n v. Gregoire (9th Cir. 1998) 147 F.3d 1039, 1045-1046;
Sarchett v. Blue Shield of California (1987) 43 Cal.3d 1, 3, fn. 1;
McEvoy v. Group Health Cooperative of Eau Claire (1997) 213 Wis. 2d
507, 570 N.W.2d 397; California Civil Code section 3428, 1999 ch. 536,
section 1.)
Since HMOs are in the business of insurance, and since the
McCarran-Ferguson Act--obtained through the insurance industry's own
efforts--mandates that state regulation of insurance is in the public
interest, state regulation of HMO conduct is demanded.
State regulation of HMO conduct also makes sense on other levels.
Each state already regulates HMOs and even nationwide HMOs, like Aetna,
incorporate separately in each state. Additionally, state-based
regulation of HMOs allows local community standards regarding
appropriateness of damages--both as to type and extent--to prevail.
State regulation also puts government employees and private sector
employees living in the same community on precisely the same footing.
As it now stands, the rights and remedies of employees of local and
state governmental agencies are regulated by state law while a next-
door-neighbor who is a private sector employee is subject to ERISA's
limitations. A teacher at a public school who suffers precisely the
same injury as a result of an HMO's decision as a private school
teacher has a remedy under state law. But the private school teacher
has no remedy. If state control of ERISA-based remedies is permitted,
both citizens are afforded equal treatment.
2. Federalizing HMO Claims Wastes Limited Judicial Resources
There is nothing magical about federal court. Federalizing managed
care liability denigrates legitimate states' rights. Throughout
American history, state courts have always been the arbiter of medical
malpractice claims and related lawsuits. Federalization duplicates the
work of state courts and wastes limited judicial resources. Since the
mid-1990s, the federal civil dockets have been severely backlogged as
the result of unprecedented number of judicial vacancies and the
increasing federalization of state and local criminal drug laws. Chief
Justice Rehnquist has repeatedly asked Congress not to expand the
jurisdiction of the federal judiciary. Federalizing HMO suits only
ensures that such cases will go to the back of the line of the federal
docket, creating unreasonable delays for injured patients. In contrast,
state courts' civil dockets move with much greater speed due to a
smaller caseload and greater experience with state-law based injury
claims.
Managed care insurers often prefer the federal court system because
they have found that it allows them to delay the resolution of claims--
and thereby earn investment income on even the most meritorious
compensation--and blame the ``empty chair''--the doctor or the
hospital--for the patient's injuries. Since only managed care insurers,
and no other potential defendants, would be under the jurisdiction of
federal court, successfully blaming the empty chair lets HMOs off the
hook.
In addition, federal court can be extremely expensive, time
consuming and inconvenient for patients, who may live hundreds of miles
from the nearest federal courthouse. In some of the larger, western
states, for example, injured patients often live hundreds of miles from
the nearest federal courthouse while the local state court is likely
just across town.
Proponents of federal jurisdiction argue that federal regulation of
ERISA remedies is necessary in order to assure administrative
consistency and efficiency of ERISA plan administration. The reality is
that--even under ERISA as it is presently structured--every HMO already
operates under both state and federal regulation simultaneously. This
is because the vast majority of commercial HMOs offer plans to both
private sector employers and government employers. Any time a
government or church employee is covered, the entire panoply of state-
based regulations--and state remedies--is automatically triggered. That
necessarily requires the HMO to be attuned to and prepared for that
state regulation. Indeed, state regulation of HMO remedies under ERISA
will ease HMO compliance requirements because each HMO in each state
will be required to comply only with that state's regulatory scheme and
will not be burdened with a continuing dual system of both state and
federal regulation.
Thus, for both historical, constitutional reasons and for
practical, procedural reasons, state regulation of HMO liability simply
makes the most sense.
3. Caps on Damages are Unnecessary and Unfair
Congress should not federally mandate limitations on damages. A
federal mandate would again abrogate and violate the state's interests
and the principles underlying the McCarran-Ferguson Act. The issue of
limiting damages and whether, in a particular state, such limits are
warranted should be left to each state and its legislature, consistent,
of course, with state and federal constitutions. A Washington-knows-
best philosophy in an area of the law that has historically been left
to the states has no place in our system of government.
Non-economic damages compensate injured patients for very real
injuries--such as the loss of a limb or sight, the loss of mobility,
the loss of fertility, excruciating pain, and permanent and severe
disfigurement. They also compensate for the loss of a child or a
spouse. Caps on non-economic damages discriminate against those
patients who are not in the workforce--children, seniors, homemakers--
and who cannot show substantial economic loss, such as lost wages or
salary. There is no reason why the injuries of a stay-at-home mom
should be valued less than the same injuries of a corporate executive.
Experience at the state level shows that damage caps have virtually
no impact on health care costs. An arbitrary and inflexible cap is
inconsistent with the completely unpredictable nature and extent of
injuries caused by a managed care insurer's negligence. Fairly
compensating victims is not a ``one-size-fits-all'' proposition. Rather
jurors, who are sitting in the courtroom, are in a better position than
Congress to determine what damages are justified in cases involving
differing injuries and circumstances.
Caps on non-economic damages punish those with the most severe,
devastating injuries and do nothing to address concerns regarding
frivolous claims. (As I have stated previously in my testimony, if
frivolous lawsuits are a concern, then that is the concern that should
be addressed--but not by penalizing someone who has been injured.) Caps
on damages reward the person or company which caused the injury by
limiting liability, while further harming the injured patient by
denying full compensation determined by a citizen jury.
I understand there is some confusion over Texas' law on non-
economic damages. Texas does not cap non-economic damages in personal
injury cases. The only non-economic damage cap in Texas applies in
statutorily created medical malpractice actions for wrongful death.
That cap is adjusted for inflation and the 2000 cap amount is
$1,410,000. This cap does not apply to a cause of action against a
managed care insurer.
While non-economic damages are designed to compensate injured
patients for very real injuries, punitive damages are very rare and are
designed to punish wrongdoers for egregious misconduct. While some
states limit or do not recognize punitive damages, that is not the case
in California. Indeed, as the California Supreme Court noted, one of
the most important factors in determining whether an award of punitive
damages is excessive is the wealth of the company: Too small an award
will not have the effect of deterring the misconduct while too large an
award may risk permanent damage to the company's operations. (Adams v.
Murikami (1991) 54 Cal.3d 105.) Clearly, a rote formula of three times
compensatory damages or an overall cap cannot fulfill either the
ameliorative deterrent purposes of punitive damages or the protective
effect of assuring that the award will not cause excessive harm to the
defendant. States which have reached this conclusion--and which have
done so on the basis of reasoned logic--should not be hamstrung by a
federal mandate limiting the effectiveness of the state's regulation of
its businesses.
F. Employers Need Not Fear Accountability Provisions Aimed at HMO or
Insurer Activity
Employers and employer groups are necessarily concerned about
potential imposition of liability provisions on them. It is not
intended that the current ERISA protections be abrogated with respect
to them--so long as they are not the entities making the health care
benefit decisions. The practical reality is that once an employer or
employer group purchases an HMO or health insurance policy for its
employees, the employer is literally ``out-of-the-picture'' with
respect to the benefit determinations. There is simply no reason to
impose liability on an employer or employer group when it has fulfilled
its ERISA obligation to provide benefits through the purchase of an
independent plan or policy. Legislative language limiting employer
liability unless there is direct participation in a benefit decision
effectively addresses employers concerns.
Opponents of managed care reform seem to forget that employers can
be held liable under the current ERISA statute for breach of fiduciary
duty. The mere handful of cases in this area occur in situations where
the employer deducts a portion of the employee's pay for insurance
premiums, but fails to turn that premium over to the insurer,
effectively rendering the employee uninsured. In these sorts of
situations, employers should continue to be held accountable.
One note of warning must be sounded here. I have been involved in
litigation in which the employer purportedly provided the benefits
directly with the assistance of a ``third party administrator'' which
was, in fact, an HMO. Under the operative contract, the employer
maintained a checking account which the administrator could draw on in
order to pay benefits and the contract provided--at least nominally--
that the employer had the final right to determine claims. Under normal
circumstances, this situation would not impose additional liability on
either the employer or the administrator under current ERISA reform
proposals. But the reality in the case I litigated was vastly different
from the appearances and creates a potential loophole that could be
abused by HMOs or health insurers if ERISA is amended to protect
patients.
The reality of this case was that, although final coverage
decisions were ``reserved'' to the employer, that was a subterfuge. The
employees were issued plan booklets by the HMO that were identical to
those issued by the HMO to employees of plans that had been purchased
by employers; the exact same health care provider network was
established and used by the ``third-party administrator;'' the claims
were administered in precisely the same way as in all the other plans
and the net effect of the operation was that the HMO, as the ``third-
party administrator,'' in fact, made all the claim determinations and
the employer had no actual input into that process, even though the
final decision was ``reserved'' to the employer under the
administration contract.
It can be expected that, if HMO liability provisions are amended
into ERISA, that this type of subterfuge will be attempted, and it
should be made clear that even where the HMO is purportedly operating
only as a third-party administrator, it may still be liable for unfair
claim decisions. This will protect both the patient and the employer.
G. What Standard of Conduct Should Be Applied?
Once Congress agrees that patients and their families can be
protected only if HMOs are--like every other industry and even the
government--held accountable for their misconduct, the next concern is
the standard of conduct to be applied.
Some may suggest that HMO decisions which implicate medical
considerations should be measured against a medical malpractice
standard, i.e., the standard of care in the medical community. I would
vigorously disagree with that proposal, and I will give you an example
provided by a gynecologist to explain why.
I was attending an ERISA seminar in which a gynecologist spoke
regarding her experience with the HMO system. She had been practicing
for several years in Phoenix, which has a very high HMO penetration.
She had, however, just moved to Boise, Idaho, which has very little HMO
activity, for the express purpose of escaping HMOs and the problems
they bring to the practice of medicine. She explained this situation as
one example of why she moved.
The doctor's patient was a woman in her late 30's who had been
diagnosed with non-invasive cervical cancer. This type of cancer is
very treatable and usually curable. The first treatment of choice is a
cryosurgery, in which the cervix is frozen with liquid nitrogen. The
freezing destroys the cancer cells and does not impair the woman's
fertility. The treatment was provided to this patient without incident.
Approximately two years later, however, tests showed a recurrence of
the cervical cancer. The cancer was still non-invasive, but a
recurrence was, of course, worrisome. The medical standard of care at
that point offered two alternatives: Either another cryosurgery or a
hysterectomy. The woman was now in her early 40's, had three children
and was not interested in having any more. She elected to have the
hysterectomy. Her health plan, however, refused to authorize a
hysterectomy and forced her to accept the less expensive cryosurgery.
Two years later, she was diagnosed with invasive cervical cancer,
requiring a complete hysterectomy and other follow-up treatment, long-
term care and monitoring and engendering the risk of metastatic cancer.
All because the HMO wanted to save money.
The point here is that the medical standard of care permitted
either procedure. But the HMO's obligations go beyond what the medical
standard of care provides. The HMO contractually obligated itself to
provide any medically necessary care needed by the patient. When
marketing themselves to employers or employees, HMOs never disclose to
those potential purchasers that they intend to provide the minimal care
needed, or the least expensive care needed and that they reserve to
themselves the exclusive right to make these life-and-death decisions.
To the contrary, HMOs market themselves as providing comprehensive care
of the highest quality.
When a patient has the choice between two accepted and medically
appropriate treatment options, it should be left to the patient to
choose what treatment he or she will undergo. That is not a choice that
should ever be made by an HMO, let alone a choice made by an HMO solely
on the basis of cost.
So, it is not the medical malpractice standard of care that should
be applied to an HMO's benefit decisions. Rather, a simple test of
reasonableness--the standard test for negligence--should apply. Was the
HMO's denial of benefits reasonable under the circumstances? If an
HMO's decision is based on monetary self-interest, that should, by
definition, be considered unreasonable.
This standard has the further benefit of being a common standard
for liability in every state and involves a well-developed body of law
which can be applied in this context.
H. Conclusion
The ERISA ``experiment'' of total tort immunity is a dismal
failure. People have suffered and died as a direct result. It is time
to call a halt to this unwarranted and unprecedented immunity and to
restore balance to the system.
Something must be done about ERISA's remedy limitations. And the
need is not just the ``superficial'' one of fulfilling the fundamental
principle of equity that ``for every wrong there is a remedy.'' The
need runs much deeper. As noted by Judge Young:
``A further cost of this near absolute immunity is its pernicious
effect on our democratic system. Whenever Congress extinguishes a right
which heretofore has been vindicated in the courts through citizen
juries, there is a cost. It is not a monetary cost. It is a cost paid
in rarer coin--the treasure of democracy self.'' (Andrews-Clarke, at p.
63, fn. 73.)
Chairwoman Johnson. Dr. Corlin.
STATEMENT OF RICHARD F. CORLIN, M.D., PRESIDENT-ELECT, AMERICAN
MEDICAL ASSOCIATION
Dr. Corlin. Thank you, Mrs. Johnson. My name is Richard
Corlin. I am the President-Elect of the American Medical
Association and a practicing gastroenterologist from Santa
Monica, California.
As Chairman Johnson has observed, virtually everyone now
agrees that patient protection legislation must include certain
basic patient rights. We are strongly encouraged by this and by
President Bush's principles for a bipartisan Patients' Bill of
Rights which include these protections.
A core issue remains: How can patients hold health plans
accountable for their decisions? It is about the patient. This
is a crucial point for everyone to understand. If a managed
care organization makes a negligent medical decision that harms
or kills a patient, it must take the responsibility. Is it fair
to grant a shield of immunity to managed care organizations, a
shield which is not given to any other private business entity?
We don't think so. Neither do a vast majority of Americans.
But why is this even an issue? ERISA was never intended to
apply to managed care. There is no sound policy reason why this
law should leave patients who are injured by negligent health
plans with no real remedy.
The judiciary agrees with this point. Numerous Federal
judges have called on Congress to amend ERISA. In one instance,
a Federal judge had to throw out a case, and he complained
that, quote, the tragic events set forth in this woman's
complaint cry out for relief; nevertheless, this court has no
choice but to slam the courthouse doors in her face and leave
her without any remedy. This is truly an issue of fundamental
fairness.
I think many of us here would agree that health plans need
to be held accountable. So what is the best solution for this
problem? The best solution must reflect the relative strengths
of the different courts and levels of government.
Under principles of federalism, the States retain powers
not delegated to the Federal Government. Historically, the
States have retained jurisdiction to govern the practice of
medicine and the delivery of health care.
We support a split cause of action. If a patient is injured
by a negligent health plan, the patient must have a legal
remedy in either the State or the Federal court, but not both.
Because States retain jurisdiction to govern the practice of
medicine, if the case involves medical judgment, the case
should go to State court.
Federal courts should hear cases that have traditionally
been decided under ERISA, the eligibility of benefits claims.
An acceptable patient protection bill should in a targeted
fashion remove certain ERISA preemptions allowing State laws to
continue to govern the delivery of health care.
The bill should also provide an adequate Federal remedy for
patients injured when a plan makes a negligent nonmedical
decision.
Our proposal is in no way arbitrary. The Judicial
Conference of the United States, headed by Chief Justice
Rehnquist, has expressed support for this view by stating,
quote, the State courts have significant experience with
personal injury claims and would be an appropriate forum to
consider personal injury actions pertaining to health care
treatment.
He also urged Congress, and again I quote, to provide that
in any managed care legislation, the State courts be the
primary forum for the resolution of personal injury claims
arising from the denial of health care benefits.
This solution would also protect the rights of States and
their citizens. Every State legislature has passed laws
governing the delivery of health care services. In addition to
existing common law rights, States have passed laws granting
their citizens a cause of action against negative health plans.
We urge Congress, therefore, not to pass a ``Federal-only''
cause of action that would destroy these State laws. The
insurance industry continues to claim that making health plans
accountable in this targeted way will open a Pandora's box. The
gloom and doom predictions by the insurance industry have not
come about.
President Bush has repeatedly stated that the patient
protection laws in Texas are working well. Despite the
insurance industry's claims, accountability has not caused
health care costs to skyrocket. Employers have not suddenly
dropped health benefits and the courts have not been overrun by
participants filing frivolous lawsuits.
In closing, the patient protections we support, including
accountability, closely reflect President Bush's principles. A
Federal Patients' Bill of Rights must ensure that every person
enrolled in a health plan enjoys strong patient protections,
with deference given to State laws.
Madam Chairman, and the entire Committee, thank you for
inviting me to participate today, and we look forward to any
further discussions.
Chairwoman Johnson. Thank you, Dr. Corlin.
[The prepared statement of Dr. Corlin follows:]
Statement of Richard F. Corlin, M.D., President-Elect, American Medical
Association
Madam Chairman and members of the Subcommittee, my name is Richard
F. Corlin, MD. I am the President-Elect of the American Medical
Association (AMA), and formerly served as the Speaker of the AMA's
House of Delegates. I am a practicing gastroenterologist from Santa
Monica, California. On behalf of the three hundred thousand physician
and medical student members of the AMA, I appreciate the opportunity to
comment on patient protections in managed care.
Close to Agreement
The AMA firmly believes that virtually all patient protections are
interrelated. Ensuring that patients have information about accessible
grievance and appeals procedures, for instance, would mean little if
the standards that the review entities would apply are arbitrarily
defined by the plans. Similarly, guaranteeing that patients have access
to specialty care, would be virtually meaningless if plans could
arbitrarily determine that the specialty treatment was not medically
necessary. And even though we may discuss only one or two patients'
rights in a particular forum, we should realize that it would be
inappropriate to barter or trade one set of patient rights at the
expense of other legitimate patient rights. Patients deserve to have
protected all of the rights which fairness and justice require.
The good news is that, as Chairman Johnson has said, there truly is
``significant agreement on both sides of the aisle on the underlying
patient protections, such as access to OB/GYNs, access to specialists,
prudent layperson standard for emergency rooms, and disclosure of plan
information.'' Virtually everyone now agrees that any patient
protection legislation considered by Congress should include certain
basic rights which all patients deserve and want. Even the details of
those rights in most of the various competing bills are extraordinarily
similar. We are strongly encouraged by this progress and by President
Bush's Principles for a Bipartisan Patients' Bill of Rights, which
include these protections.
Allow us to focus, therefore, on what--as Chairman Johnson has
called--the ``more vexing issue'': how to ensure that health plans can
be held accountable for their decisions.
An Issue of Fundamental Fairness
The Employee Retirement Income Security Act of 1974 (ERISA)
established an elaborate regulatory system intended to ensure that
employees receive the pension benefits which their employers have
promised them. The statute was enacted in response to widespread
allegations of pension fund mismanagement and fraud. In addition to
preventing these abuses, the statute sought to create uniform
regulatory requirements that would govern the administration of pension
and benefit plans, thereby encouraging employers to offer employees
these benefits. The intention of the bill's sponsors therefore was to
ensure that employers doing business in more than one state could
design financial benefits plans that could operate nationwide and would
not face conflicting state requirements. To override then current state
laws that sought to regulate pension plans, Congress incorporated broad
preemption language into ERISA.
Most of the remedies included in ERISA were also geared toward
protecting plan assets. ERISA's appeals procedures and civil
enforcement mechanisms were all directed at ensuring that plan
fiduciaries handled plan funds properly and prudently for the plan
participants' benefit. The drafters of ERISA never anticipated or
intended the bill to protect plan participants who sought to access
services, such as medical care, as part of a health care benefits
package.
The drafters of ERISA also could not have anticipated the eventual
effects of ERISA and its preemption provision because of the dramatic
changes the health care market itself has undergone. In 1974, the
health care delivery system was entirely different from today's market.
Over the last several decades, we have seen a transformation in
employer-sponsored health care plans from traditionally insured or
``fee-for-service'' to managed care. This transformation has given rise
to new types of arrangements and relationships for financing and
delivering health care that were not foreseen by the framers of ERISA
in 1974.
A Matter of Fundamental Fairness
In the era of managed care, health plans increasingly make
decisions that directly affect the care that patients receive.
Illustrations of these practices include: inappropriately limiting
access to physicians through restricted networks (blocking patient
access to specialists); refusing to cover or delaying needed medical
services (transplants, transfusions, therapies); drawing treatment
protocols too narrowly (patients discharged from a hospital
prematurely); offering payment incentives or creating deterrents to
care (disciplining physicians who refer patients for necessary medical
care); and discouraging physicians from fully discussing health plan
treatment options (gag rules and gag practices).
These non-financial functions were never intended to be covered or
regulated by ERISA. Instead, the states typically have regulated the
practice of medicine and, more generally, the delivery of health care.
Even the federal courts have repeatedly noted that the regulation of
quality of care has traditionally been a matter of state law, and that
quality of care standards should be enforced in state courts.
Nevertheless, under many circumstances, ERISA currently preempts
state-based causes of action, thereby preventing injured patients from
recovering against health plans that have acted wrongfully. As a
result, ERISA's federal preemption of state liability actions leads to
harsh consequences for many patients harmed by their health plans. The
federal judiciary has also observed the incongruity and inherent
unfairness resulting from ERISA preemption, with several federal judges
calling on Congress to amend ERISA. One case involved a 41-year-old
father of four who went on a drinking binge and committed suicide.
After his death, his widow said that the health plan had refused to
approve a detoxification program after an earlier suicide attempt.
Unable even to look at the merits of the case, the U.S. District Judge
threw it out of court, saying that ERISA gave the health plan a
``shield of immunity.'' The judge went on to say that ``the tragic
events set forth in Diane Andrews-Clarke's complaint cry out for
relief. . . . Nevertheless, this court has no choice but to . . . slam
the courthouse doors in her face and leave her without any remedy.''
\1\ According to Judge Young, ``the shield of near absolute immunity
now provided by ERISA simply cannot be justified. . . . Even more
disturbing to this Court is the failure of Congress to amend a statute
that, due to the changing realities of the modern health care system,
has gone conspicuously awry from its original intent.'' \2\
---------------------------------------------------------------------------
\1\ Andrews-Clarke v. Travelers Insurance Co., 984 F. Supp. 49, 64-
5 (D. Mass. 1997).
\2\ Id.
---------------------------------------------------------------------------
Allowing plans to continue to escape liability for negligent
decision-making through this statutory loophole leaves patients in
serious jeopardy. If ERISA plans know they can avoid liability due to
ERISA preemption of state law, they have no incentive to act
responsibly and provide needed and contracted for medical care.
Consider, for example, some evidence presented in a lawsuit against
one of the nation's largest insurance companies last year. The case
involved a deputy district attorney, Mr. Goodrich, who died of stomach
cancer after trying for 2\1/2\ years to get his insurance company to
approve the cancer treatment that the insurance company's own
physicians had recommended. During the trial, a training video of the
insurance company was admitted into evidence. The training film showed
one of the company's attorneys instructing claims handlers, and telling
them ``[a]s a practical matter, you really may have to do more on a
non-ERISA plan to protect against some of the legal exposure we're
talking about.'' \3\
---------------------------------------------------------------------------
\3\ January 27, 1999, Los Angeles Times, B. 7.
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The bottom line is that patients who receive health benefits
through ERISA plans are currently denied the same rights and remedies
as patients in non-ERISA plan. This is a simple question of fairness.
It is also a matter of the public's will and desire. A vast majority of
Americans believe that health plans should be legally accountable for
negligent decisions that injure or kill patients.\4\ We strongly agree.
---------------------------------------------------------------------------
\4\ A national public opinion poll conducted by Penn, Schoen &
Berland showed that seventy-seven percent (77%) of Americans support
changing federal law to allow patients to sue a managed care company
when they are injured by negligent decisions or cost containment
actions. May 7, 1998, APA News Release. Henry J. Kaiser Family
Foundation, Harvard School of Public Health survey conducted on January
25, 2001, found that seventy-five percent (75%) of Americans support
patient protection legislation, including the right to sue health
plans. Fifty-three percent (53%) of Americans favor legislation making
it easier to sue managed care plans that make negligent decisions which
cause injury or harm to patients. Harris Poll #56, September 29, 1999.
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While some courts continue to view ERISA as preempting all state-
based causes of action against health plans, many courts have allowed
injured patients' complaints against health plans to survive ERISA
preemption scrutiny. In fact, most ERISA experts acknowledge a definite
trend in federal courts whereby the courts are deciding that causes of
action against health plans based on medical decisions or ``mixed''
medical-eligibility decisions are not preempted by ERISA. In other
words, injured patients or the estates of deceased patients may
increasingly pursue legal remedies in state courts under state law.
Legislative ERISA reform, however, is necessary to ensure that all
patients are protected.
A Developing Trend
Because of the existing ``preemption'' provision of ERISA, patients
enrolled in ERISA plans lack the remedies currently available to
patients participating in non-ERISA plans. Many courts have recognized
this problem. In Corcoran v. United Healthcare,\5\ for instance, a
patient who had a high-risk pregnancy was advised by her physician to
be hospitalized as she approached her due date. The plan, however,
denied the request and instead authorized nursing home care. When the
patient was at the nursing home and the nurse was off-duty, the fetus
went into distress and died. The woman sued the plan alleging that the
plan was negligent in not hospitalizing her. The federal court,
however, decided that because the woman's claim involved a decision
about the availability of hospitalization it was actually a
``benefits'' decision, and consequently preempted by ERISA. As a
result, the woman could only proceed under ERISA, which provides as the
woman's sole remedy the benefits sought--in this case pre-delivery
hospitalization. The woman therefore could obtain no real legal remedy
under either ERISA or state law.
---------------------------------------------------------------------------
\5\ 965 F.2d 1321 (5th Cir. 1992).
---------------------------------------------------------------------------
Several other federal courts, however, have taken the position that
ERISA was never intended to preempt injured patients from suing managed
care plans for negligence simply because the plans contract with
private employers or unions. These courts have looked to the preemption
doctrine as articulated in the Pilot Life Insurance Co. v. Dedeaux \6\
and Metropolitan Life Insurance Co. v. Taylor \7\ cases, and then
focused on the Dukes v. U.S. Healthcare, Inc. \8\ case. In Dukes, the
Third U.S. Circuit Court of Appeals acknowledged a previously
identified distinction between ``quality of care'' decisions and
``quantity of benefits'' claims, and found that state law claims
addressing the quality of care that the enrollees received were outside
the scope of ERISA remedies and were not preempted.
---------------------------------------------------------------------------
\6\ 481 U.S. 41 (1987).
\7\ 481 U.S. 58 (1987).
\8\ 57 F.3d 350 (3d Cir. 1995), rev'g Visconti v. U.S. Healthcare,
857 F. Supp. 1097 (E.D. Pa. 1994), and Dukes v. United States
Healthcare Sys. of Pennsylvania, Inc., 848 F. Supp. 39 (E.D. Pa. 1994),
cert. denied, 116 S. Ct. 564 (1995).
---------------------------------------------------------------------------
After the Dukes case, a federal court in Connecticut found in
Moscovitch v. Danbury Hospital \9\ that a claim against an ERISA plan
in which the enrollee challenged the medical and psychiatric decisions
of the plan administrator was not preempted by ERISA, despite the
plan's allegations to the contrary. The enrollee had on two occasions
attempted suicide and was hospitalized both times. Determined to be
suicidal on a third occasion, the patient was again hospitalized.
Deciding that hospitalization was no longer medically necessary, the
plan administrator on this occasion transferred the enrollee from the
hospital to a treatment center, where he committed suicide.
---------------------------------------------------------------------------
\9\ 25 F. Supp. 2d 74 (D. Conn. 1998).
---------------------------------------------------------------------------
Similarly, federal and state courts in Pennsylvania, Missouri, and
Illinois, in the Tiemann v. U.S. Healthcare, Inc.\10\ and Pappas v.
Asbel,\11\ Harris v. Deaconess Health Services Corp.,\12\ and Crum v.
Health Alliance-Midwest, Inc.,\13\ respectively, all found that plan
participants and beneficiaries could bring their negligence claims
against the health plans in state court--ERISA did not preempt them. In
Harris, a plan participant had sought authorization for
hospitalization, for what he thought was appendicitis. The plan denied
him admission and his appendix ruptured. The participant suffered
permanent physical injury as a result. In the recent Pappas case, a
managed care plan physician denied one of the plan enrollees permission
for admission to a spinal cord trauma center. The patient now suffers
from permanent quadriplegia resulting from an abscess compressing his
spine. The Pennsylvania Supreme Court found that the plan's decision
which determined where and when the patient's epidural abscess would be
treated, constituted a ``mixed eligibility and treatment decision'' and
was not preempted by ERISA. In Crum, a plan participant believed that
he may be suffering a heart attack and sought admission to an emergency
room. The plan's advisory nurses twice denied him permission for
emergency room services, and he died of a heart attack.
---------------------------------------------------------------------------
\10\ 93 F. Supp. 2d 585 (E.D. Pa. 2000).
\11\ 2001 Pa. LEXIS 687. See also, Lazorko v. Pennsylvania
Hospital, 2000 U.S. App. LEXIS 33792 (3d Cir.) (finding that a managed
care plan physician's decision not to rehospitalize an enrollee for
treatment of depression and schizophrenia constituted a ``mixed
eligibility decision'' which implicates the quality of care the patient
could receive, and the patient's claim must therefore be decided in
state court).
\12\ 61 F. Supp. 2d 889 (E.D. Mo. 1999).
\13\ 47 F. Supp. 2d 1013 (C.D. Ill. 1999).
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As we have stated, however, this trend remains in its nascent stage
and without clear leadership from Congress, the court rulings will
remain inconsistent and unpredictable. Many patients will continue to
have no legal remedies when their health plans act negligently and
cause them injury or death.
A Complementary Solution
Under the principle of federalism, the federal and state
governments maintain a complementary relationship; the states retain
all powers not delegated to the federal government. The Tenth Amendment
of our U.S. Constitution reiterates this principle by assuring that
``the powers not delegated to the United States'' nor prohibited to the
states ``are reserved to the states respectively, or to the people.''
The political theory underlying this judicial philosophy was that
the local or state governments were best equipped to address the needs
of their citizens. The Founders were also generally concerned about an
excessively powerful, excessively centralized national government. As a
result, many of the Founders sought to ensure that the national
government would be empowered to legislate only in those areas in which
the separate states were incompetent.
Historically, the states have retained jurisdiction to govern the
practice of medicine and, more generally, the delivery of health care
for their citizens. The states, for instance, retain virtually sole
authority to license and regulate health care professionals and
institutions, as well as to provide remedies to citizens who are harmed
by the negligent acts of those practicing medicine. When health plans,
insurance companies, or even employers, make medical treatment
decisions--and in essence, practice medicine--they should therefore be
held accountable under state law, in state courts.
Recent statements by the Judicial Conference of the United States,
which is headed by Chief Justice Rehnquist, prove instructive on this
issue. In a March 2000 letter to the Chairman of the conference
committee on managed care legislation passed in the 106th Congress, the
Judicial Conference stated that: ``Personal injury claims arising from
the provision or denial of medical treatment have historically been
governed by state tort law, and suits on such claims have traditionally
and satisfactorily been resolved primarily in the state court system. .
. . The state courts have significant experience with personal injury
claims and would be an appropriate forum to consider personal injury
actions pertaining to health care treatment.'' (Emphasis added).
The Judicial Conference urged Congress ``to provide that, in any
managed care legislation agreed upon, the state courts be the primary
forum for the resolution of personal injury claims arising from the
denial of health care benefits.'' (Emphasis added).
Recent federal case law reflects the Judicial Conference's policy
favoring state court jurisdiction over cases regarding medical
judgments. The Supreme Court in last year's Pegram v. Herdrich \14\
case stated that health plan coverage decisions often involve medical
and administrative components which are ``inextricably mixed,'' and the
``eligibility decisions cannot be untangled from physicians' judgements
about reasonable medical treatment.'' The Court expressly declined to
find a ``fiduciary malpractice claim'' under ERISA, and noted that
permitting such a cause of action would create the unattractive
possibility of ERISA preemption of state medical malpractice laws. The
Supreme Court's reasoning therefore supports the contention that state
courts remain the appropriate forum for holding health plans
accountable. Many lower federal courts have made similar statements,
acknowledging that states retain ``their traditional police powers in
regulating the quality of health care.'' \15\
---------------------------------------------------------------------------
\14\ 530 U.S. 211.
\15\ (Corporate Health Insurance Inc. v. Texas Department of
Insurance, 5th Cir., June 20, 2000, No. 98-20940, 215 F.3d
526; 2000 U.S. App. LEXIS 14215).
---------------------------------------------------------------------------
Not only does the federal judicial branch--including the U.S.
Supreme Court--recognize the importance of states retaining
jurisdiction over the practice of medicine, the states also are trying
to exercise their authority over the regulation of medical care. Every
state legislature has passed laws governing the delivery of health care
services to its citizens, whether pertaining to external appeal rights,
utilization review, access to emergency services, or some other patient
protection. Eight states have passed laws expressly authorizing
statutory causes of action against health plans, in addition to the
state ``common law'' actions already recognized by their courts.
Texas, for instance, in 1997 passed a statute that creates a new
state cause of action against health insurance carriers, HMOs, and
other managed care entities who breach their duty to exercise ordinary
care when making health care treatment decisions, and the breach causes
harm to the patient. An additional seven (7) states--Arizona,
California, Georgia, Louisiana, Maine, Oklahoma, and Washington--have
passed similar health plan accountability statutes.
We strongly urge Congress therefore to recognize the legitimate
authority of states and incorporate a bifurcated cause of action into a
bipartisan patient protection bill. Such a bill would need to remove
ERISA preemption in a targeted fashion, permitting states to pass or
retain their own legislation which would protect the legitimate
interests of their citizens. Additionally, removing ERISA preemption in
this manner would preserve prior federal court decisions that have
recognized state common law causes of action.
The ``split'' between the federal and state causes of action must
be made according to whether the plan exercised medical judgment when
making its decision. The judiciary has repeatedly relied on that
criteria, and so should Congress. When a health plan intervenes in the
medical decision-making process, and imposes its medical judgment on
the patient, the plan is engaging in the practice of medicine and
should be held accountable under state law. If the plan has not made a
medical judgment and has made simply an eligibility decision, the claim
should be brought in federal court.
Because of the gross inadequacy of ERISA remedies, an acceptable
patients' bill of rights must modify ERISA to also permit a meaningful
federal cause of action when an enrollee has been injured by a health
plan's decision that did not involve medical judgment. As we mentioned
above, ERISA was enacted to protect pension plan and other employee
benefit financial assets. ERISA needs to be updated to reflect the
current managed care market and protect plan participants and
beneficiaries when their group health plans act negligently and cause
them harm.
Some advocates of plan accountability have suggested that patient
protection legislation should provide only a federal cause of action. A
federal cause of action alone however would wipe out those state
statutes as well as state common law rights which have provided
citizens with state law remedies against health plans for negligent
medical decision-making. Additionally it would prevent forty-two (42)
other state legislatures from passing similar patient protection
legislation in the future. The AMA firmly believes that Congress should
not override the will of the states by passing a federal-only cause of
action.
Creating solely a federal remedy for health plan and employer
misconduct would also violate the most basic principles of federalism.
Chief Justice Rehnquist has warned that ``Congress should commit itself
to conserving the federal courts as a distinctive judicial forum of
limited jurisdiction in our system of federalism. . . . [M]atters that
can be adequately handled by states should be left to them. . . .''
\16\ (Emphasis added).
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\16\ Remarks of Chief Justice William H. Rehnquist at the American
Law Institute Annual Meeting, May 11, 1998.
---------------------------------------------------------------------------
To provide all patients with adequate remedies, Congress must enact
federal legislation permitting patients to seek legal recourse against
managed care plans under state law when the plans' negligent medical
decisions result in death or injury.
Controlling Litigation
A bifurcated cause of action would grant all Americans who receive
employer-based health benefits an extremely important patient
protection, which they both need and desire. This protection could, and
should, be coupled with other critical patient rights that would
directly benefit patients while both directly and indirectly benefiting
health plans.
As we have noted, many federal courts have begun to allow injured
patients to bring causes of action against health plans in state
courts. The pleadings and legal theories for these cases will
increasingly mimic the pleadings and theories of those cases that have
successfully withstood ERISA preemption scrutiny. As a result, managed
care organizations will most likely become increasingly subject to
liability--despite ERISA--for improper claims decisions that result in
patient injury or death.
When patients have been successful in bringing legal actions
against ERISA plans, current law provides few protections for the
plans. In many jurisdictions, patients would be able to proceed
directly to court without appealing internally or externally, and
theoretically, could proceed against their employers, as well. Critical
to any acceptable patient protection bill, therefore, are provisions
granting employers protection against unwarranted liability and
independent external appeals provisions that would eliminate
unnecessary litigation. With these provisions, health plans and
employers would also certainly benefit from the bill.
Restricting Negligence Actions
Crucial to an acceptable patients' bill of rights are a grievance
system and an internal and independent external appeals provision.
Without a grievance system, disgruntled patients with legitimate,
though perhaps minor, complaints against their health plans would be
required to go to court to resolve their disputes. And patients who are
seeking medical care and have serious coverage disputes with their
health plans, need and want timely coverage determinations and medical
treatment, not lengthy and expensive litigation.
We therefore consider it essential that a patient protection bill
provide patients with access to a grievance system and an internal and
independent external appeals process, which would effectively eliminate
any need for litigation.
An acceptable bill, for instance, could require patients first to
appeal coverage denials directly to reviewers selected by their plans.
The plans could control whether an internal review would be conducted,
but their decision would have to be timely and account for the medical
exigencies of the specific case. If the plan chose not to waive this
requirement, the patient would be obligated to complete the internal
review before proceeding to an external appeal.
External appeals should be independent, binding on the plan, timely
and conducted by qualified physicians (MDs/DOs) of the appropriate
specialty. To ensure that their decisions are truly independent, plan
definitions of ``medically necessary'' and ``investigational and
experimental treatment'' must not be binding on the external reviewers.
An effective independent appeals process would resolve virtually all of
the egregious cases--like Corcoran--without the need for litigation. We
firmly believe that with access to efficient, effective, and truly
independent external appeals entities, patients will rarely need to go
to court.
Employer Liability
The insurance industry and some other opponents of patient
protection legislation have alleged that a patient protection bill
would place employers in jeopardy. They claim that by holding health
plans accountable for their own negligence, the legislation would
somehow expand employers' liability. These concerns, though
understandable, can easily be addressed and remedied in a bipartisan
patients' bill of rights.
A patient protection bill can offer real and meaningful protection
to employers and other plan sponsors. The bill for example could
expressly state that it does not authorize a cause of action against an
employer or other plan sponsor, and only an employer or plan sponsor
that directly participates in making an incorrect medical determination
for an individual claim decision could be held accountable.
Consequently, only if an employer or plan sponsor directly participated
in making an incorrect medical decision for an individual claim
decision under its group health plan, and that decision resulted in
injury or wrongful death, could it be exposed to a state law claim.
Even then, to recover, the injured patient would have to prove: (1)
that the employer directly participated in making an incorrect medical
determination on that particular claim for benefits, (2) that
individual decision caused the patient's injury or death, and then (3)
that the employer's conduct also met all elements of an applicable
state law cause of action.
Some opponents of patient protection legislation have spuriously
alleged that employers will be held liable for simply selecting the
plans, under this scenario. We therefore believe that the bill should
explicitly state that employers and other plan sponsors cannot be held
liable for fulfilling their traditional roles as employers and plan
sponsors. The bill should provide ``safe harbors,'' for instance, for
the following activities: (I) any participation by the employer or
other plan sponsor in the selection of the group health plan or health
insurance coverage involved or the third party administrator or other
agent; (II) any engagement by the employer or other plan sponsor in any
cost-benefit analysis undertaken in connection with the selection of,
or continued maintenance of, the plan or coverage involved; (III) any
participation by the employer or other plan sponsor in the process of
creating, continuing, modifying, or terminating the plan or any benefit
under the plan, if such process was not substantially focused solely on
the particular situation of the participant or beneficiary; and (IV)
any participation by the employer or other plan sponsor in the design
of any benefit under the plan.
Additionally, because many employers and other plan sponsors seek
to advocate for their employees during the review and appeals
processes, an acceptable patient protection bill should explicitly
protect employers and plan sponsors functioning as patient advocates as
well.
Some advocates of patient protection legislation have suggested
that a federal bill should mirror the Texas ``accountability'' statute.
In fact, the provisions we have identified would provide employers the
same if not greater protection than what is offered in the Texas law.
Both our principles and the Texas statute protect employers, but
neither specifically excludes from liability employers who ``play
doctor'' and improperly intervene in medical decisions. We note,
though, that our proposed principles also expressly protect employers
functioning as employers.
We anticipate that some employer advocacy groups will continue to
allege nevertheless that employers would, despite these employer
protections, still be exposed to liability under such a bill.
Interestingly, in our many discussions with many of these
organizations, we and the sponsors of several patients' rights bills
have explicitly requested alternative language that the employer groups
believe would adequately address their concerns. In every instance,
these organizations have failed even to propose such language. After
our repeated and diligent efforts to arrive at an agreement, we have
begun to think that some of the organizations are not genuinely
interested in solving what they claim is a potential problem.
We acknowledge that if an employer ``plays doctor'' and directly
participates in making an incorrect medical determination on a
particular claim for benefits, the employer could potentially be held
liable in state court. In such an extraordinarily rare situation of an
employer directly interfering in a specific medical treatment decision
and injuring a patient, should it not be exposed to liability?
President Bush apparently thinks so, since he stated in his Principles
for a Bipartisan Patients' Bill of Rights that he would hold those
employers accountable ``who retain responsibility for and make final
medical decisions.''
Exhaustion of Remedies
In order to ensure that the external appeals process can
effectively reduce litigation while encouraging timely coverage
decisions, patients must be required to utilize the appeals process.
Patients should therefore have to exhaust all appropriate
administrative remedies before going to court.
The purpose of the appeals process is to ensure that coverage
disputes may be resolved in a timely fashion, so that patients may
obtain the medical treatment to which they are entitled before they
unnecessarily suffer harm. If, because of the health plan's conduct,
they suffer serious and irreparable harm or die, they or their estates
should not be required to exhaust all administrative appeals. At that
point, the patient is no longer seeking the medical treatment, but
instead desires and needs court protection. Consequently, the patient
or the patient's estate should not be required to spend additional time
and money unnecessarily in an appeals process. To complete the external
appeals process under those circumstances would be futile. The patient
should at that time be allowed access to the court system.
Texas law includes a very similar exception in its appeals process.
Under Texas law, a person is permitted to bypass the independent review
if harm has already occurred.
The AMA recognizes the current controversy regarding the extent to
which exceptions to an exhaustion of administrative remedies
requirement are appropriate. As with various other specific provisions
of patient protection legislation, the AMA is willing to work with this
Subcommittee to find new ways to address the various parties' concerns
with an exhaustion requirement and any applicable exceptions.
Cost
In the past, many opponents of health plan accountability have
alleged that federal patient protection legislation would cause health
care premiums to skyrocket. Although no cost reports are presently
available for pending federal patients' rights legislation, the fact
remains that if plans were forced to accept responsibility for their
decisions, costs would not be significantly affected.
We are aware for instance that in Texas, the first state to adopt
managed care accountability legislation, this issue was hotly debated.
Milliman and Robertson completed an actuarial determination of the cost
of the Texas liability legislation to a Texas-based HMO and set the
cost at only 34 cents per member per month. A study prepared by William
M. Mercer, Inc. and the AMA demonstrates that managed care
accountability legislation would only increase premiums between .5% and
1.8%.
In fact, the American Association of Health Plans (AAHP) and the
Health Insurance Association of America (HIAA) surveyed their HMO
members in Texas and ``could not find one example'' where the Texas
patient protection law forced Texas HMOs to raise their premiums or
provide unneeded and expensive medical services.\17\
---------------------------------------------------------------------------
\17\ September 28, 1999, Washington Post.
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Other representatives of the insurance industry have also publicly
admitted that holding plans accountable will not significantly drive up
health care premiums. Jeff Emerson, the former CEO of NYLCare, stated
in a July 11, 1999, Washington Post article that he is ``. . . not
going to make the argument that it's going to be a lot of money.''
Aetna/USHealthcare spokesman, Walter Cherniak, stated in the same
Washington Post article that ``we would charge the same premium to a
customer with the ability to sue as we do those who do not have the
ability to sue.'' Why? ``Those judgments to date have been a very small
component of overall health care costs,'' according to Cherniak.
In fact, the four-year-old Texas law that allows HMOs to be sued
for their negligent medical decisions has prompted little litigation--
approximately ten lawsuits out of the 4 million Texans in HMOs. Texas
State Senator David Sibley, a Republican, stated two years after this
bill was enacted, that ``those horror stories'' raised by the HMO
industry ``just did not transpire.'' President George W. Bush, who was
then the Texas Governor, has repeatedly affirmed that he thinks this
law has worked well in Texas.
Some opponents of HMO accountability have alleged that employers
would drop their health benefits if ERISA preemption is removed. In
many industries, however, companies provide additional incentives to
attract and keep quality employees or else lose them to competitors,
and one of the basic corporate benefits is full or partial health care
coverage. It is therefore very unlikely that companies will eliminate
health benefits simply because health plans are held accountable for
the coverage and medical decisions they make.
Tort Reform
The issue of liability caps has been raised frequently in recent
discussions of health plan accountability in patient protection
legislation. Within the context of medical malpractice, the AMA has
long supported tort reforms, including reasonable caps on damages. In
recent years, we sought the passage of tort reform legislation, which
passed the House of Representatives but has consistently failed in the
Senate. A number of Senators from both parties have opposed reasonable
limits on non-economic damages.
When discussing caps in a patients' bill of rights, several issues
must be addressed. What would be considered ``reasonable'' caps for
damages? What type of damages would be capped? Would a federal bill
permit state tort reform laws to remain intact? Would the caps apply
only to federal causes of action? Would a disparity between state and
federal caps create undesirable and unnecessary forum-shopping? Would
caps applicable to health plans also apply to all other health care
providers?
The AMA fully recognizes the complexity of these and various other
issues associated with tort reform, and we believe that tort reform
must be addressed. With that said, we question whether adequate support
exists in the Senate to pass meaningful tort reform in the context of
patient protection legislation. If sufficient votes are not present, we
would urge Congress to pass an acceptable patient protection bill at
this time and then continue to push for meaningful tort reform. The AMA
remains fully committed to both issues, but recognizes that coupling
them together, could kill both.
Conclusion
We appreciate the Committee's interest in addressing the issue of
health plan accountability and the respective state and federal roles.
As we have indicated, the AMA strongly believes that ERISA must be
reformed to permit injured patients or their estates to recover against
negligent health plans. The most sensible solution to this problem
parallels the traditional roles of the state and federal governments,
allowing states and their courts to continue to govern the practice of
medicine while the federal courts adjudicate strictly benefits
decisions under ERISA. Without this type of ERISA reform, any patient
protection or health care quality legislation would not fully ensure
fairness for all patients.
The AMA understands that several patient protection bills will be
or are being considered, and we are committed to working with both
Congress and the President to reach agreement on a bipartisan patient
protection bill that can be enacted into law this year. We thank the
Chairman and this entire Subcommittee for the opportunity to discuss
this critical issue.
Chairwoman Johnson. Ms. Lichtman.
STATEMENT OF JUDITH L. LICHTMAN, PRESIDENT, NATIONAL
PARTNERSHIP FOR WOMEN & FAMILIES
Ms. Lichtman. I am Judith Lichtman, President of the
National Partnership for Women and Families. The national
partnership is a nonprofit, nonpartisan organization that has
worked for over 30 years on issues critical to the success and
health of America's women and our families.
We are also leading a coalition of more than 300 health
care and consumer organizations supporting passage of a strong
patient protection legislation. I appreciate this opportunity
and would appreciate my longer testimony being inserted into
the record.
Over the past decade, our health care system has changed
considerably, especially in the movement toward managed care.
Managed care has great potential. It can save money and provide
better quality care through better coordination of services and
a strong emphasis on preventive and primary care.
As the primary consumers of health care and the primary
health care decisionmakers for their families, women have much
at stake and much to gain from managed care done right.
While managed care holds much promise, its potential has
been overshadowed by fear that concerns about costs will
compromise quality. It is for this reason that meaningful
patient protections are needed to restore a sense of trust in
our system.
Congress has come a long way in its understanding of
America's need for patient protections. We are encouraged by
the view that there is now general agreement on many of the
patient protections that must be included in a bill. But there
are still key issues that must be resolved.
My written testimony highlights a number of those concerns
regarding the scope of the bill and the patient protections
that have to be included. Central among these is the issue of
accountability. What rights would consumers have to ensure that
health plans can be held accountable? Issues of trust and
accountability lie at the very heart of this debate, and for
that reason, we believe that meaningful patient protection
legislation must include access to a speedy and genuinely
independent external review and must also include expanded
legal responsibility.
Access to timely and independent reviews by a neutral third
party are critical to assure consumers that there is a fair
process for resolving disputes with their plan. True
independence from the plan means that the managed care plan
cannot select the external review entity.
It also must ensure that the reviewer has no financial or
business relationship with the plan, and the external reviewer
must be free to make its own determinations regarding medical
necessity and should not be bound by the plan's definitions.
The process should not contain unnecessary barriers like
short time frames to bring an appeal, or financial thresholds
that would keep consumers from exercising their right to
appeal.
Finally, the external appeals process should not be used to
diminish the right to seek judicial recourse. Consumers who
have already been injured should not be required to complete
the external review process before seeking review in court. An
external review's decision should not foreclose a consumer's
right to judicial remedy.
The second criteria to achieve real patient protection is
expanded legal authority. Because of an anomaly in ERISA,
health plans offered by private employers, unlike any other
business, are often immune from accountability for their
actions, even if individuals are hurt as a result.
If we agree that companies that make tires for our cars or
toys for our kids should be accountable when people are hurt,
then why should we treat those who are entrusted with our
health any differently?
In the recent case of the Firestone Tire recall, none of us
challenged the rights of consumers to seek remedy when they
learned that the cars they were driving were unsafe. In fact,
central to American sense of fair play is the belief that when
a company causes injury, they should take responsibility for
the consequences. Yet, there are far too many examples of
patients who are left without redress with the tragic results
of health plans' decisions to delay or deny care.
As Congress continues to debate these issues on the--in the
coming months, we will be evaluating new proposals to measure
whether they meet the needs of women and families.
We strongly encourage Members of Congress to consider these
principles and to pass a strong Patients' Bill of Rights
without delay. The health of women and families hang in the
balance.
Thank you. I am happy to answer any questions you may have.
[The prepared statement of Ms. Lichtman follows:]
Statement of Judith L. Lichtman, President, National Partnership for
Women & Families
Good afternoon, Chairwoman Johnson, Congressman Stark, and other
distinguished members of the Subcommittee. I am Judith L. Lichtman,
President of the National Partnership for Women and Families. Thank you
for convening this important hearing and for the opportunity to testify
today about patient protections in managed care. The National
Partnership is a nonprofit, nonpartisan organization that uses public
education and advocacy to promote fairness in the workplace, quality
health care, and policies that help women and men meet the dual demands
of work and family. Founded in 1971 as the Women's Legal Defense Fund,
the National Partnership has grown from a small group of volunteers
into one of the nation's leading advocates for women and families. We
are also a leading member of a coalition of more than 300 health care
and consumer organizations supporting passage of strong patient
protection legislation. One of the Partnership's key priorities is
ensuring that American women and their families enrolled in health
insurance plans, particularly ``managed'' health plans, receive the
highest quality health care.
Over the past decade, our health care system has undergone
unprecedented changes, most notably in the movement towards managed
care. These changes affect every one of us, and women in particular
have a tremendous stake in the outcome. Women are the primary consumers
of health care services in this country, as well as the majority of
managed care enrollees. They make up the majority of those on Medicare
and the overwhelming majority of adults on Medicaid--programs that are
also increasingly turning to managed care. Women are also the primary
health care decisionmakers for their families--from choosing the family
health plan to weighing different treatment options, women are the
primary payers of our health care dollars. As both consumers of care
and guardians of their families health needs, women's lives are
dramatically affected by the rise of managed care.
Women have a real stake in how health care services are delivered
for other reasons as well. They have unique health care needs that
include, but are not limited to, their reproductive capacity. Some
diseases (such as osteoporosis and eating disorders) are more prevalent
in women, and others (such as heart disease) are too often ignored,
misdiagnosed, or mistreated. Moreover, women and men with the same
underlying disease do not always have the same symptoms, nor do they
have the same risk factors. Cutting-edge research continues to shed
more light on these gender differences. And finally, differences in
social roles and behaviors can have significant implications for
women's health. For example, women, much more than men, are victims of
domestic violence in our society. To appropriately diagnose and treat
women, health care professionals--and the health plans that
increasingly determine the care they provide--need to understand the
substantial impacts of gender and be specifically trained to provide
health care to women.
Managed care has great potential. Its promise is to save money and
provide better quality care through better coordination of services and
a strong emphasis on preventive and primary care. Managed care plans
are also uniquely positioned to educate millions of women and men about
how to get and stay healthy. Women, especially, stand to benefit from
managed care done right. A quality managed care plan can make it easier
for women to learn about and obtain services, such as mammograms, Pap
smears, and prenatal care, and take advantage of health-promoting
benefits, from smoking-cessation classes to discounted health club
memberships. In addition, a good relationship with a well-trained
primary care provider can give women a chance to get answers to health
questions that might otherwise go unasked. But providing quality health
care is about much more than just delivering preventive services.
Over the past few years, managed care's potential has been eclipsed
by concerns that for some it may do more harm than good. The American
people, including American women, have become increasingly worried that
the legitimate interest in controlling costs could compromise the
quality of care managed care plans provide. Concerns about emergency
treatment not being covered, restrictions on direct access to Ob/Gyns
or pediatricians, and limits on participation in clinical trials on
breast cancer or other life-threatening illnesses that could save
women's lives have marred women's experiences of managed care. These
and other concerns have helped to fuel the groundswell of public
support for improved patient protections aimed at righting managed
care's balance between quality and cost. Meaningful patient protections
must ensure high quality, affordable health care and restore a sense of
trust and accountability to our system.
Congress has come a long way in its understanding of Americans'
need for patient protections in the nearly seven years that these
issues have been debated. While we are heartened to hear the
Chairwoman's view that there is now general agreement on many of the
patient protections that must be included in a bill, there are still
key unresolved issues that must be addressed to ensure that the bill
will really help women and families. Central among these issues is the
issue of accountability: what new rights will consumers have to ensure
that health plans can be held accountable?
Issues of trust and accountability lie at the heart of this debate.
Many consumers have lost trust in their health plan because they fear
that their health plan will deny them the care they need when they need
it most. A recent Kaiser Family Foundation survey of managed care
consumers suggests this concern is grounded in real experiences. Of
those surveyed, half reported having some problem with their managed
care plan, a third of which involved either a delay or denial of needed
care--one in five with problems reported that their difficulties
resulted in declining health.\1\ As managed care has increasingly
blurred the distinction between medical and insurance decisions,
consumers worry that the current system gives too much power over
medical treatment decisions to those who now have a financial incentive
to deny care. This sense of mistrust is only deepened by consumers'
growing awareness that there are few protections in place to hold plans
accountable for their decisions. This absence of true accountability is
unacceptable--a parent whose child has been injured by an HMO insurance
company's decision deserves the same access to remedies as a parent
whose child has been injured by a defective toy. These are critical
issues of concern to women and families, and issues that must be
addressed in any patient protection legislation being considered by
Congress.
---------------------------------------------------------------------------
\1\ Kaiser Family Foundation National Survey of Consumer
Experiences with Health Plans, June 2000.
---------------------------------------------------------------------------
My testimony today will highlight key considerations relating to
the need for greater accountability, focusing on external review and
expanded legal responsibility. I will also briefly discuss two other
main areas of concern: the scope of the bill and the key patient
protections that are needed to ensure a strong and enforceable
patients' rights bill.
External Review
Independent, external review procedures are an essential component
to restoring consumers' trust in the health care system. Although
internal review protections that allow the plan to conduct its own
timely review of the dispute are also important, a timely independent
review by a neutral third party outside of the plan is critical to
assure that an individual will get a fair decision that is based on
their specific medical needs. External review is now required in
thirty-five states, making it a firmly established principle of
business for many health plans and insurers. Experience in the states
also shows that consumers are not abusing these rights by overusing the
system. Despite its prevalence in the states, a federal law is still
needed to ensure that all consumers have access to these important
protections.
Strong patient protection legislation must ensure that patients
have access to a speedy and genuinely independent external review. True
independence from the plan means that the managed care plan cannot
select the external review entity. It also means there must be ample
standards to ensure the reviewer has no financial or business
relationship with the plan or other parties involved in the appeal that
could bias the decision. In addition, the external reviewer must be
free to make its own determinations regarding medical necessity and
should not be bound by the plan's definitions.
With respect to the process of bringing an appeal, the external
review process should be fair and open, without unnecessary barriers
like short time frames to bring an appeal or financial thresholds that
could keep consumers from exercising their rights to appeal. Some
important aspects of the external appeal process deal with the
relationship between the right of appeal and the right to judicial
review. While individuals should be required to complete the internal
and external appeal process before they may seek judicial review,
consumers who have already been injured should not be required to
complete the external review process before seeking review in court.
This is the model that applies for Medicare beneficiaries and is
consistent with general principles of administrative law, which do not
require an individual to exhaust administrative remedies when it would
be futile. In this context, the patient is no longer seeking the
benefit she was denied, but is seeking redress for her injury, which
cannot be given through the external review process. Finally, the
external reviewer's decision should not be given the same weight as a
judge's opinion, and should not foreclose a consumer's right to a full
and fair review in court that includes all of the evidentiary rules and
discovery protections.
The external review scheme should also build on, not replace,
states' expertise in this area and allow states flexibility to provide
a stronger appeal process where they choose. Any federal rights that
are created should establish a floor, not a ceiling, of protections for
consumers.
While these protections are essential to ensuring a fair process
for resolving benefit disputes with the managed care plan, they do not
replace the need for additional legal responsibility.
Expanded Legal Responsibility
Health plans are protected against liability for many of their
decisions today because of an anomaly in the law that was created by
the Employee Retirement Income Security Act of 1974 (ERISA). Some
background on ERISA and its interpretation by the courts is important
to understand the current legal baseline that Congress will affect with
any new patient protection legislation.
When ERISA was passed, it included a provision that preempted state
laws that ``relate to'' private job-based benefit plans, including
health plans. In 1987, the Supreme Court issued a landmark decision in
Pilot Life Insurance Co. v. Dedeaux in which it held that ERISA's
preemption of state law meant that state law suits that relate to
private job-based health plans' benefit decisions are barred.
Individuals seeking redress for a plan's decision could only bring an
action under ERISA for the benefit that should have been provided--no
compensation for injuries would be available. Since the mid-1990s, a
trend in federal caselaw has developed that has carved out an area from
ERISA's general preemption--cases involving medical malpractice have
been found not to be preempted by ERISA. These cases established a
distinction between suits involving the quality of medical care and
those involving a benefit decision--cases involving medical quality
issues could now be brought in state court; but those involving a
benefit decision were still preempted by ERISA.
Many believe that state law liability has been expanded even
further under a unanimous decision issued by the Supreme Court last
year in Pegram v. Herdrich. In their opinion in Pegram, the Supreme
Court suggested that cases involving a benefit decision that also
involved a medical treatment issue should be pursued under state law,
not under ERISA. Under the Court's rationale, only cases that involved
what the Court referred to as ``pure eligibility'' decisions--decisions
that involve coverage issues like whether an individual was a member of
the plan or whether a waiting period under the plan had elapsed--were
still subject to ERISA's preemption of state suits. This is a major
shift in the courts' view regarding ERISA preemption and one that could
greatly expand the types of cases that can now be brought in state
court. The new legal baseline after the Pegram case allows individuals
to hold most health plans accountable in state court for decisions
involving medical treatment issues.
Although Congress is considering legislation at a time when
remedies may be greatly expanding, there is still a need for action to
expand legal accountability. First, it is unclear how federal courts
will interpret the Court's suggestion in the Pegram decision--settling
this issue could take many years, depriving individuals of greater
certainty. Second, it is important to remember that the Court's
decision did little to address the need for greater remedies for cases
involving what the Court called a ``pure eligibility decision''--a case
that only involves the plan's interpretation of its own coverage
policies. Without addressing this area, individuals will not be able to
have any redress when their plan makes a mistake regarding enrollment
or determining whether a benefits is covered, or wrongly interprets a
waiting period requirements. However, the recent expansion of liability
also creates a new baseline that Congress must consider in establishing
new rights. The courts have already established a precedent that allows
individuals greater access to meaningful remedies--whatever new
accountability Congress creates should not curtail these rights.
ERISA's preemption of much state law liability has created a
situation in which health plans offered by private employers have
become outliers in our legal system--unlike almost every other business
entity, they are often immune from accountability for their actions,
even if individuals are hurt by their actions. Other businesses in the
health care and other industries are legally accountable for their
actions as a generally accepted principle of public policy. If we agree
that companies that make tires for our cars or toys for our kids should
be accountable when people are hurt, then why should we treat those who
are entrusted with our health, our most precious commodity, any
differently? This immunity from suit also further perpetuates an
imbalance of power between patients and their plans--a real patients'
bill of rights will tip the balance back to empower patients.
Real people are hurt by the absence of meaningful accountability.
Health plan denials can jeopardize the quality of patients' care as
well as their financial security. In a Kaiser Family Foundation survey
of consumers' experiences with managed care, those who had experienced
delays or denials of care suffered tangible harms including a quarter
reporting physical injuries or lost school or work time, and forty
percent reporting financial losses. There are also too many examples of
those who are left without redress after the tragic results of a health
plan's decision to delay or deny care. The parents who lost their baby
after their health plan refused to authorize round-the-clock hospital
monitoring during the mother's high-risk pregnancy despite two doctor's
recommendations. The man who committed suicide after his health plan
denied him admission to a health plan's alcohol rehabilitation program,
despite his desperate need for help and the plan's stated coverage of
the services. These are the real faces behind the need for health plans
to be accountable for these decisions, not only to address the inequity
of these tragic losses, but to deter bad decisions that can lead to
them.
The costs of expanding accountability are low. According to
estimates prepared by the Congressional Budget Office evaluating the
effect of the Bipartisan Consensus Managed Care Improvement Act (H.R.
2990), the cost of expanding liability to allow all suits to go to
state court is minimal--a total increase of one percent of premium for
job-based health plans per member per month, approximately $2.50 per
month for the average individual. And practical experience in the
states where there is now expanded liability shows that there will not
be a flood of litigation--in Texas, where a bill expanding HMO
liability was passed four years ago, only nine suits have been brought.
Even if there is some additional cost, public opinion surveys gauging
Americans' support for patient protections have consistently shown that
a majority of Americans are willing to spend a little more to ensure
they have these strong protections.\2\
---------------------------------------------------------------------------
\2\ Kaiser Family Foundation Public Opinion Update, February 2000.
---------------------------------------------------------------------------
In response to charges that this increased cost will cause
employers to drop coverage, it should be noted that health care costs
increased last year at a rate from two to three times the estimated
cost of the entire Bipartisan Consensus Managed Care Improvement Act,
and census data shows that employer coverage actually increased. In a
recent survey of employers, when asked what they would do in the face
of projected increases of up to 12% or more in the coming year, almost
half said they would either absorb the costs themselves or do nothing--
the other half said they would pass some costs on to consumers.\3\ No
one responded that they would drop coverage. Another survey of smaller
employers showed a vast majority of small employers support patient
protection legislation and a majority would maintain coverage if
patient protection legislation passed, even if their share of premiums
rose by as much as $20 per month.\4\
---------------------------------------------------------------------------
\3\ Actual cost increases for the year 2000 were 8.1%; estimated
cost increases for the year 2001 are 10-12%--these are respectively two
and three times the amount of CBO's 4.1% estimated cost increase
associated with the Bipartisan Consensus Managed Care Improvement Act.
Mercer/FosterHiggins National Survey of Employer-Sponsored Health Plans
2000, April 2001.
\4\ Kaiser-Harvard National Survey of Small Business Executives on
Health Care, June 1998.
---------------------------------------------------------------------------
Expanding accountability for managed care consumers is a practical,
common sense answer that will neither break the bank nor disrupt our
health care system--the majority of Congress has supported these rights
in the past and the overwhelming majority of Americans support them as
well. The time has come for them to be enacted.
Scope
Any patient protection bill must apply to all Americans with
private health insurance. This includes those covered by private-sector
group health plans, individual health plans, and fully-insured state or
local government plans. Proposals that only cover those in private job-
based plans, or only those that are in self-insured job-based plans do
not meet the mark--all Americans need and deserve the same protections.
Some versions of these bills would apply key protections to only those
in self-insured job-based plans, leaving out as many as seven in ten
Americans with private health insurance coverage who need and deserve
the same rights.
Patient protections should apply a uniform federal floor of
protection of everyone, regardless of what type of plan covers them.
The certification of state laws that meet or exceed the Federal minimum
standard should be determined and enforced by a federal body. States
should not be provided with loopholes, such as having limited
penetration of managed care in their state or allegations of premium
increases, which allow them to easily opt out of the Federal minimum
standard.
Patient Protections
In addition to these other components, a strong patient protection
bill must guarantee a variety of other comprehensive patient
protections that are essential to women and families. These include
access to emergency rooms, Ob/Gyns, prescription drugs, clinical
trials, pediatricians and other medical specialists including those
outside of the network if the network providers are not adequate.
Patient protection legislation must also assure that medical judgments
are made by medical experts, patients with a special medical condition
receive continuity of care, patients have a choice of a full range of
health providers, and patients are provided with full and
understandable information about their health plan. Health care
professionals must be protected against retaliation when they advocate
on behalf of patients' needs or to improve health care quality. And
``gag clauses'' that prevent medical professionals from providing
patients with full information about their treatment should also be
barred.
As Congress continues to debate these issues in the coming months,
we will be evaluating new proposals to measure whether they meet the
needs of women and families. We strongly encourage members of Congress
to consider these principles and to pass a strong patients bill of
rights without delay--the health of women and families hang in the
balance. Thank you--I am happy to answer any questions you might have.
Chairwoman Johnson. Mr. Toohey.
STATEMENT OF MICHAEL J. TOOHEY, DIRECTOR, GOVERNMENT RELATIONS,
ASHLAND, INC., ON BEHALF OF THE NATIONAL ASSOCIATION OF
MANUFACTURERS
Mr. Toohey. Good afternoon, Madam Chairman, and Members of
the Committee. My name is Michael Toohey and I am director of
government relations for Ashland, Incorporated. I am pleased to
appear on behalf of the National Association of Manufacturers.
Though I usually wear a government relations cap, I am here
also to tell you that I am a perfect example of the great
success of employer-provided health care.
In 1994, I was diagnosed with leukemia. My employer said go
wherever you need to go, do whatever you need to do, don't
worry about anything. And I am here to tell you Ashland stood
by me when I didn't have many people standing with me. I never
had to worry about one thing, not about the costs.
Bone marrow transplantation was not totally accepted at
that time as a treatment for leukemia, and Ashland didn't even
have a problem with qualifying me, or any of our other
employees.
The good news is it worked. My trial lawyer sister was my
donor, and I have been symptom free ever since, but I have been
in the hospital five times for pneumonia. I had two cataract
procedures as a consequence of chemotherapy treatment. Ashland
has stood up and every time been there for me.
I am very concerned that we may lose this benefit if we
open up employer-provided insurance to litigation costs, and I
would urge you to tread lightly as you consider new
legislation. Above all else, please don't make it more
difficult for employers to continue to provide the excellent
health care that they do to so many Americans.
A good managed care reform bill will provide the additional
protections and ensure procedural fairness that are needed, but
don't add to the costs of employers in trying to solve the
problem of a Patients' Bill of Rights.
We believe that H.R. 526, the Bipartisan Patient Protection
Act, does not achieve, even closely, our tenet of what a good
managed care reform bill is. Indeed, by exposing employers
directly to Federal and State health care liability, and
indirectly to the downstream costs of Federal and State HMO and
insurer liability, the Ganske-Dingell bill and similar
legislative initiatives will greatly increase health coverage
costs and inflate the roles of uninsured Americans because
people like me will not be able to obtain insurance, except
through my employer. And if the costs go up significantly to
defend themselves, they simply will not continue to provide
this voluntary benefit.
Expanded health care liability helps no one. Not one of the
bills, in our view, shields the health care purchaser, whether
employer or individual, from the increased costs of coverage
due to HMO or insurer liability. And in NAM's view, there is no
good or acceptable expanded health care liability.
We, too, would like to see this issue go off Congress'
agenda, Mr. Stark. However, the NAM is unwilling to gamble the
future of an employer-based health care system which provides
coverage for 172 million Americans. We hope you will join us in
first protecting what works well today, employer-sponsored
health care.
Chairwoman Johnson. Thank you, very much, Mr. Toohey.
[The prepared statement of Mr. Toohey follows:]
Statement of Michael J. Toohey, Director, Government Relations,
Ashland, Inc., on behalf of the National Association of Manufacturers
Madam Chairwoman, my name is Michael J. Toohey and I am director of
government relations for Ashland, Inc. I am pleased to appear before
you today on behalf of our more than 14,000 fellow members of the
National Association of Manufacturers. I would like to commend you for
beginning the subcommittee's consideration of patients' rights
legislation with a focus on our existing health care system, both in
terms of what works and what needs improvement.
Though I usually wear a governmental affairs cap, I am here to
testify as a beneficiary of Ashland's health plan, without which, I
might not be alive today. Let me tell you a little of my story.
In April of 1994, I went to the doctor to check on a persistent
cough. I was diagnosed with CML, which is a chronic form of leukemia.
My life expectancy at that point was six years.
Fortunately for me, I work for Ashland, which voluntarily sponsors
a health plan. With their support, I entered the Fred Hutchinson Center
in Seattle, one of the top leukemia research facilities in the country.
I underwent a bone marrow transplant and have been symptom-free ever
since. I owe my life to Ashland's health plan.
I would be in big trouble if that health plan ever disappears.
Given my history, I probably could not afford coverage in the
individual health insurance marketplace, even if I were to find someone
willing to offer it to me. The coverage that Ashland provides me is
irreplaceable, just as it is for the 172 million Americans who receive
their health coverage through the workplace. I hope you will tread
lightly as you consider new legislation and, above all else, don't make
it more difficult for Ashland to provide my coverage. It is already
hard enough.
The cost of health coverage for the NAM's 14,000 members (including
10,000 small and mid-sized manufacturers) is once again increasing at a
double-digit rate (12-13% on average). In light of this renewed health
care inflation, the NAM urges Congress to be wary of adding additional
costs to health coverage costs. We can't afford to price both employers
and employees out of health coverage.
A good managed-care reform bill will provide additional protections
and ensure procedural fairness to beneficiaries without adding much in
the way of additional costs. H.R. 526, the so-called ``Bipartisan
Patient Protection Act'' introduced in the House by Reps. Ganske and
Dingell does not come even remotely close to meeting this definition.
Indeed, by exposing employers directly to federal and state health care
liability and indirectly to the downstream costs of federal and state
HMO and insurer liability, the Ganske-Dingell bill (and similar bills)
will greatly increase health coverage costs and, consequently, will
inflate the rolls of uninsured Americans.
Expanded health care liability helps no one but the trial bar.
Ganske-Dingell and similar bills purport to shield employers from
liability, but, in fact, they all still ensnare employers in potential
health care liability through clever drafting (e.g., ``discretionary
authority'' and the definition of ``direct participation''). Employers
will be forced to bear the time and expense of litigating over the
extent of their participation and authority exercised over the disputed
benefit determination.
Further, not one of these bills shields the health care purchaser--
whether employer or individual--from the increased cost of coverage due
to HMO or insurer liability. Even the Texas Health Care Liability Act--
which clearly and unambiguously says one may not sue an employer-
sponsor of a health plan--fails to protect employers from the
downstream cost of HMO and insurer liability. In the NAM's view, there
is no good or acceptable expanded health care liability.
We, too, would like to see this issue off Congress' agenda.
However, the NAM is unwilling to gamble the future of the employer-
based health care system--which provides coverage to more than 172
million Americans. We hope you will join us in first protecting what
works best in health care today: employer-sponsored health coverage.
Health Plan Accountability
A persistent myth in this debate holds that HMOs and other health
insurers can only be held accountable by the threat of health care
liability. The NAM strongly disputes this unfounded conclusion. The
best means to health care accountability, in our view, lies in a well-
structured independent external review procedure that binds both the
plan and the beneficiary. A quick, timely review--first internally by
the plan and then by independent physicians in the external review
procedure--will help ensure that patients receive what they desire
most: good quality health care on a timely basis.
Health care liability punishes both good and bad actors--almost
without distinction--and will threaten coverage for the 172 million
Americans who receive their coverage through the workplace.
Manufacturers and workers alike will bear the aggregate cost of
expanded health care liability--a cost we believe has been greatly
underestimated in the past--which is of great concern in an environment
of double-digit health care inflation.
The greater concern is that employers will be forced to defend
themselves from direct health care liability, an expensive and time-
consuming proposition, at a minimum, and potentially a business-killing
prospect. Any possible positive effects of health care liability are by
far outweighed by its negative consequences, which are unnecessary
given the availability of binding external review to hold health plans
accountable. The NAM remains strongly opposed to expanded health care
liability.
Employer Liability
Another persistent and insidious myth in this debate has been that
the Ganske-Dingell, the old Dingell-Norwood and other patients' rights
bills do not expose employers to direct liability. This is simply not
the case.
As noted earlier, the Ganske-Dingell bill relies on clever drafting
to ensnare employers.\1\ The very term ``direct participation''--upon
which the sponsors rely in arguing that, unless an employer ``directly
participates'' in the decision to deny benefits, he or she won't be
liable--is defined as including the ``actual exercise of control'' over
the decision. Like the earlier ``discretionary authority'' standard,
the ``direct participation'' standard implicates ERISA's fiduciary
responsibility duty. At the very least, employers will be forced to
litigate the extent of their ``direct participation'' or ``actual
exercise of control.'' The Ganske-Dingell bill, like the Dingell-
Norwood bill before it, exposes employers directly to liability.
---------------------------------------------------------------------------
\1\ Sec. 302 Availability of Civil Remedies
Sec. 302(a) creates a new federal cause of action under new
subsection (n) of Section 502 of ERISA.
Paragraph (4) of the new subsection (n) is entitled Exclusion of
Employers and Other Plan Sponsors.
Paragraph 4(A) Causes of Action Against Employers and Plan Sponsors
Precluded.--Subject to subparagraph (B), paragraph (1)(A) does not
authorize a cause of action against an employer or other plan sponsor
maintaining the plan . . .
But,
Paragraph 4(B) Certain Causes of Action Permitted.--
Notwithstanding subparagraph (A), a cause of action may arise
against an employer or other plan sponsor . . .
L(i) . . . to the extent there was direct participation by the
employer or other plan sponsor (or employee) in the decision of the
plan under section 102 of the Bipartisan Patient Protection Act of 2001
upon consideration of a claim for benefits or under section 103 of such
Act upon review of a denial of a claim for benefits, or
L(ii) . . . to the extent there was direct participation by the
employer or other plan sponsor (or employee) in the failure described
in such clause.
And
Paragraph 4(C) Definition of Direct Participation--
L(i) Direct Participation in Decisions--. . . the term ``direct
participation'' means . . . the actual making of such decision or the
actual exercise of control in making such decision or in the conduct
constituting the failure.
---------------------------------------------------------------------------
Employers and Health Care Liability
Some have sought to downplay the risk of employer liability, citing
the lack of employers willing to state publicly their intention to drop
coverage rather than face expanded health care liability. The danger of
these proposals isn't only in the number of employers who would drop
coverage; there is also a real risk that expanded liability would force
many employers to reduce benefits or increase employees' share of
coverage costs--strategies already well under consideration due to the
present double-digit health care inflation. A worker who cannot afford
the coverage his employer offers is just as uninsured as a worker whose
employer no longer offers coverage.
It is no surprise to us that most companies are reluctant to
publicly state that they will drop coverage. Both employees and
investors are likely to react adversely to a premature declaration,
making polls and surveys a valid and safer way to gauge employer
concern. In our most recent poll of small manufacturers, nearly 60
percent said they would seriously consider dropping coverage in
response to expanded liability.\2\ In our view, we can neither afford
to increase the number of uninsured Americans (43 million) nor reduce
the number of Americans with employer-sponsored coverage (172 million).
---------------------------------------------------------------------------
\2\ NAM Survey of Small Manufacturers, February 2001. 58.82 percent
of respondents said they would ``seriously consider dropping
coverage.''
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Additional Patient Protections
Although there is broad consensus on the subject matter to be
covered (e.g., external review, pediatricians as primary care
physicians, direct access to OB/GYNs, emergency room treatment), there
remains considerable disagreement on the specifics of these proposals.
Last Congress's conference committee on managed care reform discovered
this, much to its ultimate frustration. For our part, the NAM urges
Congress to proceed carefully and with an awareness of the high and
increasing cost of coverage. The most trivial of mandates becomes
important if it becomes the straw that breaks the camel's back and
prices the worker and his family out of coverage.
We urge your particular attention to the question of what standard
will govern the external review panel's examination of a disputed
benefit determination. It makes sense to us that the health plan's
terms--particularly its definition of medical necessity--should govern.
After all, the plan's terms are what we design or purchase. Many
patient protection proposals have taken the position that the review
should be made de novo, without regard to the plan's terms and
definitions. In our view, this approach will create as great a
potential for increased costs as would expanded health care liability.
The better approach would allow the plan's enumeration of covered
benefits to govern and would give substantial deference to the plan's
definition of medical necessity.
Conclusion
The NAM strongly opposes the Ganske-Dingell bill and similar bills
that will expand health care liability for employers, HMOs and other
health insurers. We urge Congress to adopt a more limited patient
protection bill that relies on binding independent external review to
resolve disputes over benefit determinations, instead of costly and
wasteful litigation. President Bush also has indicated he favors a more
limited approach.
It is more important than ever that we build on the strength of our
employer-based health care system to expand coverage, rather than
expand the rolls of uninsured Americans. I thank the Subcommittee and
will welcome your questions.
Chairwoman Johnson. Dr. Zipes.
STATEMENT OF DOUGLAS P. ZIPES, M.D., PRESIDENT, AMERICAN
COLLEGE OF CARDIOLOGY, AND PROFESSOR OF MEDICINE, INDIANA
UNIVERSITY SCHOOL OF MEDICINE, ON BEHALF OF THE PATIENT ACCESS
COALITION
Dr. Zipes. Madam Chairman and distinguished Members of the
Subcommittee, I am here today on behalf of the Patient Access
Coalition, a national organization representing nearly 70
organizations. Collectively, the Coalition's Member
organizations represent more than 1 million patients, 300,000
doctors, and 300,000 nonphysician providers across the country.
I am a practicing cardiovascular specialist and
Distinguished Professor of Medicine at Indiana University
School of Medicine, and I also serve as president of the
American College of Cardiology.
The Coalition was formed in 1993 in the context of
congressional debate over comprehensive health system reform to
ensure that any resulting legislation would contain the
guarantee that every patient would be able to choose the kind
of medical treatments and services they needed.
The Coalition was the first national organization of
patient and provider groups to call for Federal patient
protection legislation, and for nearly 8 years we have stood
united in our concern that the focus of health care in this
country must be on patients and quality of their medical care.
Throughout the years, the Coalition has not deviated from
its strongly held belief that all patients in managed care
plans must have health care choice and access and that health
plans must be held accountable. That is why we believe that all
patients should be guaranteed basic protections from health
plan practices that could negatively affect medical outcomes.
Two of the Coalition's chief principles are patient access
to a point-of-service option and timely access to specialty
care. Patients must be allowed treatment by their health care
provider of their choice.
A point-of-service option at the time of enrollment is the
ultimate patient protection against poorly managed health care
plans. This choice could be offered with no additional cost to
the employer.
Direct access to specialty care is essential for patients
in both emergency and nonemergency situations for patients with
chronic and temporary conditions, as well as those with
unexpected acute care episodes. Specialty care must be
available for the full duration of the occurrence and must not
be limited by the number of visits.
Furthermore, any routine costs incurred for items and
services furnished in connection with participation in clinical
trials must be covered by the health plan.
In addition to ensuring choice and access, barriers that
impede access and put patients at risk must be eliminated. Any
legislation must include a ban on health plan financial
incentives and gag clauses and require full disclosure of
health plan information to patients.
The patient protections of access and choice that I have
outlined have limited value unless the managed care plan is
held accountable for its actions.
One of the most consistent complaints against managed care
plans is that when the providers or patients appeal a decision,
health plans are slow to act. Because decisions about patients'
care can be a matter of life and death, managed care plan foot
dragging can have profound consequences.
To protect patients and give them a meaningful right to
appeal, sound and timely internal and external appeal processes
are critical. In the case of external appeals, the review must
be de novo and genuinely independent, and the review panel's
decision must be binding on the health plan.
The external reviewers must have clinical expertise in the
area in which the review is being conducted, and the findings
of the external reviewers must not be constrained by the health
plan's definition of medical necessity.
Decisions on urgent or emergency cases must be made within
the expedited time period. These enhanced internal and external
review processes will assist consumers in obtaining access to
appropriate services in a timely fashion, thus maximizing the
likelihood of positive health outcomes.
These principles, if incorporated into Federal legislation
in a meaningful way, will go a long way toward protecting
patients in managed care plans and ensuring that patients get
the care they pay for and deserve.
Most importantly, and without exception, these protections
must be guaranteed to all patients in managed care plans to the
extent that they are not already enforced through stronger
State laws. Medicare and Medicaid beneficiaries, as well as
Federal employees, already have many of these protections.
We are aware that the debate on the issue of accountability
has centered on the patient's ability to bring suit against
health plans. This debate has been complicated by the many
variables associated with liability. Because of the
divisiveness of this issue and the various positions held by
individual organizations within the Coalition, we have not
taken a position on liability. However, we strongly believe it
is time for Congress to finish its work and pass legislation
this year to make patient protections apply to all managed care
enrollees.
Madam Chairwoman, the Patient Access Coalition firmly
believes that enactment of its patient protection principles
will ensure that patients will have real choice and timely
access to quality health care. Our approach is straightforward
and comprehensive, and places nonintrusive reasonable
requirements on the health insurance industry.
We look forward to your leadership and want to work with
you to see that enactment of these patient protections occurs
this year.
I thank you for allowing me the opportunity to speak before
you and your Subcommittee.
Chairwoman Johnson. I thank you, and thank you, Dr. Zipes.
[The prepared statement of Dr. Zipes follows:]
Statement of Douglas P. Zipes, M.D., President, American College of
Cardiology, and Professor of Medicine, Indiana University School of
Medicine, on behalf of the Patient Access Coalition
Madam Chairwoman and members of the subcommittee: I am here today
on behalf of the Patient Access Coalition--a national organization
representing nearly 70 organizations dedicated to fighting for the
enactment of comprehensive and meaningful patient protection
legislation. Collectively, the Coalition's member organizations
represent more than one million patients, 300,000 doctors, and 300,000
non-physician providers across the country. I am a practicing
cardiovascular specialist and Distinguished Professor of Medicine at
Indiana University School of Medicine. I also serve as president of the
American College of Cardiology.
The Coalition was formed in 1993 in the context of congressional
debate over comprehensive health system reform to ensure that any
resulting legislation would contain the guarantee that every patient
would be able to choose the kind of medical treatments and services
they needed. The Coalition was the first national organization of
patient and provider groups to call for federal patient protection
legislation. And for nearly eight years, we have stood united in our
concern that the focus of health care in this country must be on
patients and the quality of their medical care.
Throughout the years, the Coalition has not deviated from its
strongly held belief that all patients in managed care plans must have
health care choice and access, and that health plans must be held
accountable. This is why we believe that all patients should be
guaranteed basic protections from health plan practices that could
negatively affect medical outcomes.
Choice
Two of the Coalition's chief principles are patient access to a
point-of-service option and timely access to specialty care. Patients
must be allowed treatment by the health care provider of their choice.
A point-of-service option at the time of enrollment is the ultimate
patient protection against poorly managed health care plans. This
choice could be offered with no additional cost to the employer.
Direct access to specialty care is essential for patients in both
emergency and non-emergency situations, for patients with chronic and
temporary conditions, as well as those with unexpected acute care
episodes. Specialty care must be available for the full duration of the
occurrence and must not be limited by the number of visits.
Furthermore, any routine costs incurred for items and services
furnished in connection with participation in clinical trials must be
covered by the health plan.
Access
In addition to ensuring choice and access, barriers that impede
access and put patients at risk must be eliminated. Any legislation
must include a ban on health plan financial incentives and gag clauses,
as well as full disclosure of health plan information to patients.
I want to take a moment to elaborate on what we mean by prohibiting
financial incentives. Financial incentives should not interfere with
medical judgement. For instance, health plans must be prohibited from
establishing arrangements where the gatekeeper has a financial
incentive not to refer patients. We need to protect patients from
under-referral for financial gain.
Accountability
The patient protections of access and choice that I have outlined
have limited value unless the managed care plan is held accountable for
its actions. One of the most consistent complaints against managed care
plans is that, when the providers or patients appeal a decision, health
plans are slow to act. Because decisions about patients' care can be a
matter of life and death, managed care plan foot-dragging can have
profound consequences.
To protect patients and give them a meaningful right to appeal,
sound and timely internal and external appeals processes are critical.
In the case of external appeals, the review must be de novo and
genuinely independent, and the review panel's decision must be binding
on the health plan. The external reviewers must have clinical expertise
in the area in which the review is being conducted, and the findings of
the external reviewers must not be constrained by the health plan's
definition of medical necessity. Decisions on urgent/emergency cases
must be made within an expedited time period. These enhanced internal
and external review processes will assist consumers in obtaining access
to appropriate services in a timely fashion, thus maximizing the
likelihood of positive health outcomes.
These principles, if incorporated into federal legislation in a
meaningful way, will go a long way toward protecting patients in
managed care plans and ensuring that patients get the care they pay for
and deserve.
Most importantly and without exception, these protections must be
guaranteed to all patients in managed care plans to the extent that
they are not already enforced through stronger state laws.
In 1996, the Coalition's efforts, working with this committee, led
to the only set of federal patient protections ever to be signed into
law. Those patient protections were enacted as part of the Balanced
Budget Act of 1997 and apply to Medicare and Medicaid beneficiaries
enrolled in managed care plans. It has been four years since Medicare
and Medicaid beneficiaries were guaranteed these basic and fundamental
protections.
We are aware that the debate on the issue of accountability has
centered on the patient's ability to bring suit against health plans.
This debate has been complicated by the many variables associated with
liability. Because of the divisiveness of this issue, and the various
positions held by individual organizations within the Coalition, we
have not taken a position on liability. However, we strongly believe it
is time for Congress to finish its work and pass legislation this year
to make basic patient protections apply to all managed care enrollees.
Madam Chairwoman, the Patient Access Coalition firmly believes that
enactment of its patient protection principles will ensure that
patients have real choice and timely access to quality health care. Our
approach is straightforward and comprehensive and places nonintrusive,
reasonable requirements on the health insurance industry. We look
forward to your leadership and want to work with you to see that
enactment of these patient protections occurs this year.
Madam Chairwoman, I thank you for allowing me the opportunity to
speak before you and your subcommittee.
[Attachments Are Being Retained In The Committee Files.]
Chairwoman Johnson. As one who believes that the goal of
this legislation should be to return control of health care to
physicians, I absolutely agree with you that the board must be
independent and the decision must be binding. And I appreciate
your comments about the definition of medical necessity.
The benefits that are laid out, the rights that are laid
out in this bill, access to an obstetrician, a pediatrician, to
a specialist, access to a point-of-service plan, so no American
can be in a plan that didn't offer them some choice of
physician, those things are extremely important in my mind, as
is a consistent national appeals process that can turn around
appeals promptly, rapidly, actually reducing the need to go to
court. Most of the examples Ms. Arkin gave in her written
testimony were cases that never would have become malpractice
cases or cases against the plans if we had had a timely appeals
process in place.
If we were able--if we are not able to get agreement on the
issues of suit because of the complex impact on employer
participation, as well as costs, would it be worth it to pass
the patient protections and the national appeals right with a
mandatory binding decision by the physician panel?
Dr. Zipes. That is addressed to me?
Chairwoman Johnson. Yes.
Dr. Zipes. The Coalition, as I said, has taken no stance on
liability. We feel that the patient protection items are of the
utmost and extreme importance. We have in the past supported
these items in the bills that had and did not have liability
clauses, and conceivably that could happen again. But most
importantly to us, the patient protection provisions must come
forward and be approved.
Chairwoman Johnson. Yes.
Mr. Toohey, it is a special pleasure to welcome you here.
For my colleagues and the Subcommittee, I would tell you that
Mr. Toohey was the staff director to the House Public Works and
Transportation Committee when I was a freshman Member of
Congress, and taught me a lot I know about the legislative
process.
And I bring that up because he has long experience in
legislating and in watching the impact of laws that we pass.
You now have had a lot of experience in the private sector.
And I wonder what your judgment is--would be as to the impact
of a Patients' Bill of Rights that included a right to sue,
recognizing that there is no way to fully protect employers
from exposure to suit under ERISA, no matter how carefully we
try.
Mr. Toohey. I think it would be devastating. And the reason
it would be devastating is because publicly held companies like
mine would face the dilemma of rising costs to defend
themselves in litigation. And shareholders are saying why are
you providing a voluntary benefit that costs so much?
We, at Ashland, for example, last year spent $80 million
for 52,000 people's health care. That is $1.10 a share. We made
$4 a share. And so when you promise the shareholders a return,
you have got to control your costs.
Chairwoman Johnson. So you're reducing the----
Mr. Toohey. Litigation doesn't add one dime to medical
treatment.
Chairwoman Johnson. It is--I do want to correct the record,
as I understand it, Mr. Stark, that CBO has now said that the
liability provisions will increase costs 8 percent, not 1
percent, and the Barrett's Group also has come to that
conclusion.
Mr. Stark. .8.
Chairwoman Johnson. .8 percent as opposed to 1 percent.
Mr. Stark. So it is less?
Chairwoman Johnson. But it is a lot more than their
original estimate which was 1.1 percent. We are talking about 1
percent versus 8 percent. I was right to begin with.
Mr. Stark. No; .8, Madam Chair. It is less.
Chairwoman Johnson. Sorry, .8. But it is----
Mr. Stark. It is a 10th of a percent less, down.
Chairwoman Johnson. The Barrett's Group has under their
studies found that it would increase costs anywhere from 2.7 to
8.6 percent, which would increase the number of uninsured,
without question at all. A survey by the Chamber of Commerce
indicates that 65 percent of employers would terminate their
health plans if liability expansion is enacted.
In that regard, Dr. Corlin, I just want to ask you whether
or not you would support a change in the language from the
suit--the exposure to suit by someone who directly participates
in employee's health care, to limiting that exposure to suit to
a ``dedicated decisionmaker,'' because the language ``directly
participates'' can be far more inclusive than a dedicated
decisionmaker.
If we are going to try to narrow the liability and control
the costs, we believe and many Members believe that we can
achieve this goal in part by narrowing the right to sue to the
right to sue the dedicated decisionmaker, and that that would
in some degree insulate the employer.
Dr. Corlin. Mrs. Johnson, it has never been our intention
to hold accountable and make eligible to be sued an employer
whose total involvement is to pay the premium and provide the
plan. The only circumstances--and these are virtually unheard
of--where employers would be liable would be in cases where the
employer was directly involved in making the decision that
denied or affected the medical care.
Our concern is the decisions that are made--affecting care,
which are made virtually every--in every circumstance by the
health plan.
If there is some specific language that we can participate
with you to develop to make that point more clear, we are
absolutely willing to do so. It is not our intent that
employers who just pay the premium should be accountable.
And if I may, I am thrilled with Mr. Toohey's description
of the excellent results of his medical care. It rings a
particular ring with me, since in that same year, 1994, one of
my partner's wives also developed acute leukemia, and she had a
bone marrow transplant, and she is today cured and doing well.
But I think he makes the case better than I could, the
issue--he made the statement that in 1994, bone marrow
transplant was not fully accepted, yet his employer said go
anywhere and get it. Imagine the circumstance of where would we
be and where would he be, if instead a health plan had said,
that still is experimental, we are not going to approve it, and
held it up for 12 or 18 months. I don't think we would have the
same hearing with the same participants. And that is the
circumstance which is all too real that we are concerned about.
Chairwoman Johnson. I appreciate that. It is also true that
if we had a timely appeals process and the panel of physicians
ruled that it was medically necessary, they would have gotten
the right that Mr. Toohey got, and that is I think what is
important to remember. We are talking about patients' rights
and physician control.
And a strong appeals process guarantees physician control
of a medical process, whereas if you don't have exhaustion you
do end up having lawyer control of what should be a medical
process.
So let me yield--because my time is expired, and I also am
controlled by the clock, let me recognize Mr. Stark. I have no
time.
Mr. Stark. Thank you, Madam Chair. Mr. Toohey, I am going
to ask you some questions because you seem to be the only
witness who is against this bill. And the--I want to find a
little about Ashland here.
You said that you spent 80 million bucks last year to
provide insurance to 52,000 people. You got about 25- or 26,000
employees, so I assume you are adding in there families and----
Mr. Toohey. Retirees and families.
Mr. Stark. That would have meant that it would have cost
you $12 a year, according to the CBO estimate of your costs
going up to eight-tenths of a percent, to cover the added costs
of this liability portion of the bill which is at issue.
Mr. Toohey. I wish I could foresee the future as well as
they do.
Mr. Stark. I am just telling you that is their estimate. I
just want to get it into focus here, because it is interesting
that you mention $80 million.
Now, that is the same amount that Ashland has been charged
with in the Lockheed litigation where there were five trials
involving 130 plaintiffs, and these were verdicts against
Ashland, including 75 million of that 80 was punitive damages
for personal injuries resulting from chemicals sold to Lockheed
and inadequately labeled by Ashland.
Now, it is interesting also that you got insurance--44
insurance companies who are going to pick up that 80 million
bucks. So that ain't going to put Ashland out of business, is
it, paying $80 million for hurting 130 people? You are going to
survive that one, aren't you?
Mr. Toohey. We are not the only defendant in that case. And
that case is on appeal. And----
Mr. Stark. You are going to survive it, aren't you?
Mr. Toohey. I don't know, sir. You are asking me to
speculate.
Mr. Stark. Your report to the SEC says it is not going to
cost you anything. I hope you are not telling the straight
skinny to the SEC. That is not considered good taste. Also in
1998----
Chairwoman Johnson. If they appeal it and win it, however,
it is evidence of frivolous suits pushing up costs.
Mr. Stark. The U.S. Department of Justice and the EPA
announced that Ashland had agreed to spend more than $32.5
million to settle allegations of illegal discharge of
pollutants and various violations at your refineries in
Kentucky, Minnesota and Ohio. Now, that $32 million would
cost--in 1 year, I guess, it would cost about $1,200 per
employee. That isn't going to force Ashland to quit paying for
health insurance or close up shop, is it?
Mr. Toohey. It hasn't yet.
Mr. Stark. And one would think that a company like Ashland
that takes that good care of its employees wouldn't really miss
12 bucks a person per year. Do you think? If they can spend $32
million for environmental infractions, and if they can spend
$80 million for improperly labeling chemicals that only hurt
130 people, wouldn't you think that a company that has the
interests of all mankind at heart, as Ashland obviously does,
would be able to find that 12 bucks a year to take care of
their employees?
Mr. Toohey. Congressman, your premise is built around a CBO
gaze into the future, but in one of the testimonies presented
today in the written record, there is discussion of one case in
California where the award was $126 million. That is more than
we spent on health care.
Mr. Stark. That is chump change to guys who are polluting
and mislabeling chemicals. That wouldn't even--if that were
right, Ashland could swallow that one, could they?
Mr. Toohey. That is an unfair characterization----
Mr. Stark. Look, I am just--it is not my characterization.
These are SEC reports, Ashland's own statements about what is
going to happen, and I presume that if you can insure yourself
against the loss because of environmental infractions or
because of improper labeling and the liability thereto, you
could also insure yourself against any--if I am wrong, and if
the CBO is wrong--the CBO is run by the Republicans now, I want
to point out, not me, and if they are saying that it is only
going to cost you 8/10 of a percent increase in your premium--
let's say they are wrong by an order of 10. Let's say it is
going to cost you----
Mr. Toohey. I don't think it is fair to risk 127 million
people's employer-provided health care on a CBO report which
may say this or may say that when we don't even know what----
Mr. Stark. What kind of a risk do you take when you
mislabel chemicals or dump stuff into the water? Is that a fair
risk?
Mr. Toohey. Those events occurred during World War II----
Mr. Stark. Those events occurred during 1998.
Mr. Toohey. I understand.
Chairwoman Johnson. Mr. McCrery.
Mr. McCrery. Thank you.
I am tempted to get into a discussion with my good friend
from California about the tort system, but I won't. We will do
that privately maybe, but suffice it to say that the goal of
the tort system shouldn't be to put companies out of business.
Companies do commit errors, and we have a judicial system that
is designed to compensate victims, but the goal should not be
to force companies out of business.
Mr. Toohey, is Ashland self-insured?
Mr. Toohey. Yes, it is.
Mr. McCrery. For health insurance?
Mr. Toohey. Yes, sir.
Mr. McCrery. So you don't have any insurance companies
involved?
Mr. Toohey. No. What we do is we have a contract with Blue
Cross/Blue Shield to manage our program, and then we have an
employee review panel that handles the few reviews and appeals
that we get under this plan. So we are involved, in other
words.
Mr. McCrery. The employer exemption, then, that Dr. Corlin
speaks about would not apply to Ashland.
Mr. Toohey. Or most other employers----
Mr. McCrery. There are a great many large companies that
are self-insured, at least to some extent, and therefore are
directly involved in the decisions. So I think the employer
exemption really is not much cover for very many employers, and
when good lawyers get ahold of it, I suspect it won't be much
good to anybody. So we really ought to talk about the cost to
the employer community, whether it is .8 percent or 8 percent.
There is going to be some cost increase, and employers will
bear that cost, either directly or indirectly.
Dr. Corlin, last year when we were debating the Patient's
Bill of Rights, the AMA was adamant in opposing attaching
medical malpractice reform to the Patients' Bill of Rights,
because it was said by the AMA President Clinton would veto the
bill if medical malpractice were attached, and that you all
were interested in making law, not making a point. This year we
have a President who I suspect would sign a bill with medical
malpractice reform attached to it. What is the AMA's position
this year on medical malpractice reform?
Dr. Corlin. Thank you. If I may--thank you, Mr. McCrery. If
I may, I will give a bit of an expanded answer first.
Mr. McCrery. Sure.
Dr. Corlin. I have spent most of my time as an officer of a
medical association and got my start in 1975 fighting the good
lady to my right on tort reform issues. I was instrumental in
dealing with MICRA and, in almost every year since then, in
defending MICRA. It is an issue that is close to my heart.
It has been our belief, and, at the moment, the analysis
continues to be our belief, that no matter how much we want
tort reform at the Federal level, which we sincerely do, that
the act to both get this bill to the President's desk and get
it signed as a combined two-step process, it was our opinion
last year that that would not be possible if tort reform were
attached to it.
It is our opinion this year that that would be the same
circumstance. I would love very much to give you a different
answer.
I find the whole issue ironic, not in your question, which
is very valid and sincere, but in this issue being raised in
this context, and the reason is we now have the health plans
coming forth and saying, oh, we can't do this, that or the
other thing because we don't have tort reform. Yet 5 years ago
when the medical association was here before this very body
seeking Federal tort reform, which we got passed through this
House, and we are approximately four votes short of getting
passed through the Senate, we turned to the American
Association of Health Plans and to their executive director and
said, please help us get tort reform. It will help us all. They
ignored us. She refused, didn't even bring the issue to her
board, and no help was coming, and we lost the opportunity to
get tort reform, which, had we had it, would have taken that .8
percent probably down to .3 percent.
So the short answer to your question is we would maintain
our present position. We are always open to reevaluating it in
discussions. We want still to get this bill through two Houses
of Congress and get it signed by the President. We would love
to have tort reform. If putting tort reform in----
Mr. McCrery. So if I might----
Dr. Corlin. Excuse me?
Mr. McCrery. I think I get your point. And my time has
expired, but I sure do want to ask you a few more questions
when we get the second round.
Chairwoman Johnson. Mr. Johnson?
Mr. Johnson OF TEXAS. Thank you, Madam Chairman.
Dr. Corlin, you state that patients should exhaust
administrative remedies before going to court, and then state,
if patients alleged irreparable harm, or if the patient dies,
their estate should be able to go straight to court. Under this
standard a patient, under my view, must only allege harm and
then could circumvent the entire appeals process, which is
based on medical experts making medical decisions. If a patient
has already died, what harm does it do to require independent
medical experts to examine a case and the medical circumstances
that surround it before you throw it into court, you know, when
you have people that have no medical training at all? Can you
answer that?
Dr. Corlin. Yes. Thank you for raising that issue, and I
think this issue, probably more than any other, is the one that
we would very much value some private discussion to get this
issue clarified. I think that there is some confusion about it.
I think it can be readily clarified to both our satisfactions.
The concern if a patient has died obviously has to do with
urgent needs that the family may have, given the circumstances.
I think that if we were able to assure a very significantly
expedited appeals process, that might resolve that problem. We
need to recognize that proof of a claim has to start with
allegation of a claim. We also need to recognize the opposite
side, that every damage that is alleged is not real. We fully
recognize that.
But that damage can be--can occur on more than one
occasion. There can be consequences to the remaining family
after a death, and in all probability, I think of all of the
points of difference, at least from our perspective, this is
the one that probably could be most readily resolved with some
language change.
Mr. Johnson OF TEXAS. OK. Also, you say that
approximately--in about 20 of your 22-page testimony, you
focused on liability for health plans. Can you explain why the
premiere physician group, which you represent, would focus
nearly all your attention on litigation and none on appropriate
patient care, the primary intended result, I would think, of a
Patients' Bill of Rights? And could you also tell me how many
Members of AMA there were 10 years ago, and what is your
Membership today?
Dr. Corlin. OK. Our membership now is down somewhat from 10
years ago. We are 290 something thousand now. To be honest with
you, Mr. Johnson, I don't know the exact number of what it was
10 years ago.
With regard to the issue of the emphasis placed in the
testimony on health plan liability as opposed to quality of
care issues, health plan liability is, in our view at least,
one of the major items, if not the major item, on which we have
to have some closure for legislation to move. So we
concentrated on that as representing the major open issue.
Nobody wants to hold health plans accountable for things that
they are not responsible for; but similarly, I don't want to
see physicians or hospitals or other people in the health care
delivery system be held accountable for things that they are
not responsible for. I believe that people should be held
accountable and responsible for the decisions that they make,
and we have an anomaly in that our health care delivery system
has changed to the point that the insurers are no longer simply
premium collectors and claims processors, but they are involved
in the decision-making stream of health care, and they are the
only people involved in that entire stream who are immune from
liability for the consequences of their actions.
Mr. Johnson OF TEXAS. OK. In your proposal, Expanding
Health Care Insurance, you endorse the concept of health marts,
I believe.
Dr. Corlin. I am sorry, sir. I didn't hear you.
Mr. Johnson OF TEXAS. In your proposal, Expanding Health
Care Insurance, the AMA proposal for reform, you endorse health
marts, I believe. Health marts create an alternative in
insurance plans and exempt those plans from State regulations;
is that true?
Dr. Corlin. Well, we do endorse voluntary health marts as
buying cooperatives. With regard to--my understanding and view
of that is that they would not be the health plans themselves,
but would be an organization similar to the FEHBP whereby
Federal employees are given a choice of being able to select
what plan they wish, and within the choices offered by the
health mart would be each and every one of the plans that were
approved by a mechanism at least broadly similar to that
whereby plans get approved for the FEHBP.
Mr. Johnson OF TEXAS. Yeah. But under those conditions, you
allow them to have Federal patient protection standards, and
yet, on the one hand, you ask for State jurisdiction. On the
other hand, you are saying you like Federal jurisdiction. I
mean, I am a little confused, but our time is up.
Dr. Corlin. May I respond, Madam Chairman?
Chairwoman Johnson. Very briefly.
Dr. Corlin. OK. Yes. We recognize that there are two types
of decisions to be made. One are medical necessity-type
decisions, which we believe should remain in State courts. The
other are coverage-type decisions under ERISA so that we are
separating out the two types of decisions, one which we would
wish to have handled in State court, one which we would wish to
have handled in Federal court, but it would not be a
circumstance that for any given type they would have a choice
of one or the other. One type goes one place; one type goes the
other place.
Mr. Johnson OF TEXAS. Thank you.
Dr. Corlin. Thank you.
Chairwoman Johnson. Ms. Thurman.
Mrs. Thurman. Thank you, Madam Chairman, and thank you all
for joining us today and discussing the different views here.
It has been somewhat enlightening, and I appreciate that.
Mr. Toohey, let me ask you just a question. Are you
familiar with the article that was written on April 12th, 2001,
in the Washington Post that had done some interviews with some
of the signatories on who was in favor of or against the
Patients' Bill of Rights and the way that you have expressed it
for the employer-based part of it?
Mr. Toohey. No, I am not aware of that article.
Mrs. Thurman. Well, just so you will know, basically what
they have said is that they have not found any of those
companies who have said that they would actually drop those
plans, I mean, basically is the gist of the article. So, I
mean, I don't want to use scare tactics, because I think all of
us are really trying. Just the idea of the Patients' Bill of
Rights in itself is such a good piece of legislation in helping
the health care in this country, so to say that, I think, is
misleading at best.
Second, you know, I also find it interesting, and I don't
know where your company or what has happened, but, you know,
you talked about the CBO and what could happen in the future,
but, yet, you know, we are sitting here passing tax packages
based on CBO numbers in the next 10 years, too. So, you know,
if we are not right here, then we may not be right in the
other. So maybe we ought to slow down on all of it.
So I don't know where you all were on that, but I would
just suggest we need to be careful how we flip numbers out here
on both sides of the aisle, because if it is not good for one,
it shouldn't be good for the other. So I would just caution.
Let me ask you a question, because we have heard of, Mr.
Toohey, and we have understood--or Dr. Corlin or Dr. Zipes.
Tell me, can you give me examples where we needed this law to
have a hammer behind it? Because if you can't, I will.
Ms. Arkin. Well, included in my written testimony are
several cases that I actually litigated. Because they were
either private insurance, government employees or Medicare
insurance, they weren't subjected to ERISA limitations. These
people could get relief. The problem is that other cases--and I
see dozens of them in a month. Other people are just as
severely hurt, just as badly damaged, and they don't have
recourse. The types of cases are the same, whether it is the
government employee or not a government employee, and the
circumstances often--several of the cases I have disclosed in
my testimony: Mr. Levy, who needed a tumor removed from his
lung, and it was too close to his heart, he had to have that
surgery immediately. He couldn't even wait for a review process
any longer. He went through the internal review process of the
plan, and that took over a week, and the doctor told him his
tumor was going to double in size in 30 days. He couldn't wait
any longer. He had to go ahead. He had to--he had to save his
own life, and he couldn't wait for the plan or an external
review process or a court to make that happen for him. He had
to take care of the problem, and then he had to go and try and
get the financial aspect of it fixed. He had to sue later
because he was forced to take care of his own life.
The same thing with the lady I have identified as Mrs. R.
She had a bleeding tumor in her bladder that the health plan
refused to deal with. She had to go get it fixed. She had to
save her own life. The external review process couldn't help
her. The external review possess is designed to get people
their care. If that is its goal--and that is a spectacular
goal--it can't help people who can't wait that long. It can't
help people who die in the meantime, like Mrs. A. She needed--
she--she had 3 hours to get to the right kind of care, and no
review process is fast enough for that, and she died. Going
through review process after she died wasn't going to help her,
wasn't going to help her family. It wasn't going to get her the
care she needed, and it wasn't going to compensate her family
for the damages that you wanted.
Mrs. Thurman. And, Dr. Corlin, what happens to doctors who
are in these networks where--where, in fact, they have been
denied--you have recommended or somebody has recommended care,
they have been denied, and they die because they didn't get it?
Do you become responsible for that? Who becomes responsible for
that?
Dr. Corlin. The existing tort process winds up with
everybody else getting sued except for the insurance plan.
Mrs. Thurman. Who might have been the person making the
decision?
Dr. Corlin. That is correct. And there were--there have
been cases that have been--the Pappas case in Philadelphia is
one such case. A gentleman who had an abscess near his spinal
cord and needed specifically to go to one hospital in
Philadelphia where they had this particular service and this
particular neurosurgical expertise available, and the plan had
to contract with another hospital a couple of miles away. Now,
the couple miles is not the point, but the point is that the
care was denied, and the gentleman was rendered a quadriplegic,
when, had he gotten timely service, he might have--might well
have avoided that.
And the most significant part of that, in addition to the
individual tragedy to one family, is that there can't be a
specific timeframe put on an expedited review. In some cases,
an expedited review taking 60 days would be fine. In some
cases, an expedited review would have to be done in 7 days. In
some cases, an expedited review has to be done in minutes,
depending on the specifics of the medical indication involved,
and those are the concerns that we have.
Mrs. Thurman. Thank you.
Chairwoman Johnson. Dr. Corlin, are you aware that our bill
requires--allows only 72 hours for an expedited review? That
would have solved most of the problems that all three of you
have pointed to.
One of the things that has to be remembered as we consider
this bill is that an expedited review is fast and free, maybe
$25. Going to court is expensive and long. Now, when you say
there will be very few cases, do you think about that every--
the fact that every State, at least Connecticut does and I
believe most States, have panels that malpractice cases have to
go to--go through in order to be allowed to go forward? There
is no such provision in the Patients' Bill of Rights. So every
case that wanted to be brought could be brought, and that is
why I bring you back briefly to clarify your answer to Mr.
Johnson.
This issue of exhaustion of the appeals process is
extremely important, because if you don't exhaust it, you don't
get four physicians' opinion on the record. Now, if you want--
if you are a trial lawyer, you probably don't want those three
physicians on the panel, their position on the record. But if
you want physicians to regain control of our health care
system, you want the physician's opinion, the caring physician,
the physician for the patient. You want his physician to be--
excuse me, his recommendation for care to be reviewed by
physicians, and you want the physician opinion on the record,
and you want it binding. If you can have a binding position, a
binding decision in 72 hours by physicians reviewing a
physician, aren't you better off, and isn't the fact that that
will serve everyone, not just those who can find themselves in
a position to go to court, isn't that good?
Dr. Corlin. Ms. Johnson, I thought I said earlier--I meant
to say in response to Mr. Johnson's question to me, yes, I
think this is something that with discussion we can resolve the
concerns about exhaustion of remedies, probably more easily
than anything else. And----
Chairwoman Johnson. Specifically, though, to my question,
you did mention some aspects of this, but this issue of the
patient alleging, you know, alleging is not a high standard,
and that would stop the appeals process and eliminate the
requirement to exhaust. Don't you think that is not in
physicians' interests or patients' interests?
Dr. Corlin. I think we can come to agreement on that. I am
not prepared to read the specific language today, but----
Chairwoman Johnson. Appreciate that, and I don't expect you
to.
Dr. Corlin. But with recognition of some concerns, I agree
with you, usually 72 hours is enough. We could probably fashion
language we are both comfortable with to cover those
circumstances, and there are few where medically 72 hours would
be too long. We can deal with that very easily, I am sure.
But I would like, if I may, Madam Chair, to put it in one
bit of perspective. In Texas where this law has been in effect
for 3 or 3\1/2\ years, there have only been a total to--what we
have been able to find--10 lawsuits filed in that entire time.
Now, one----
Chairwoman Johnson. I have another question for you, sir. I
don't want to go into----
Dr. Corlin. One may be too many, but 10 lawsuits in 3\1/2\
years in a jurisdiction the size of Texas is not a, if you will
pardon----
Chairwoman Johnson. I know that the new law takes a while
to get the regulations on the books and that the Texas law
schools now have pages and pages of courses in how to sue
health plans. When that law was first passed, there was no
educating of lawyers in how to do this. So you will, without
question, see an increase in the number of suits.
But let me bring you back to the Ganske-Dingell bill which
will permit an agent of a health plan to be sued--the agent to
be sued for failing to exercise ordinary care.
Now, who is the agent? The agent is anyone who is making a
claims decision or is performing a duty under the terms and
contract of the plan. Physicians are performing a duty under
the terms and contracts of the plans. They are not only
performing a duty toward the patient, but they are carrying out
typical contract-related administrative duties. So physicians
will be liable as well as others under the very broad language
of the Ganske-Dingell bill, and I hope this is also something
that you would be willing to discuss with us, as our language
about who can be sued is very much narrower, only the dedicated
decisionmaker, so that the plan is held accountable, but not
for administrative issues or for carrying out typical
responsibilities under a plan. But there is very broad language
about agent, that the agent can be sued for failing to exercise
ordinary care, and that an agent is anyone who makes a claims-
related decision--a claims decision related to eligibility,
coverage or cost-sharing, or in performing a duty under the
terms and contracts of the plan.
So it is very broad, and don't believe for a minute that
physicians aren't going to be defined as being someone who is
performing duties under the terms and contracts--terms of the
duties of the--conditions of the contract.
So my time is expired, but I did want to get that on the
record, because this is the nature of my concern. This is what
gets back to Mr. Toohey's concern. Any small employer in their
right mind cannot expose themselves to being an agent. And if
you look at employers' concerns about liability in general,
small employers can't run the risk. They just need to know it
would be possible, and they are out of there.
Ms. Arkin. Madam Chair, would it be possible for me to
address that issue?
Chairwoman Johnson. Sorry.
Mr. Camp. I am sorry.
Mr. Camp. Thank you, Madam Chairman, and my first question
was going to be along the lines of the comment you made that I
do think if we can agree on a final decisionmaker exposure as
opposed to just a--someone who--an employer who just
participates in their employees' health care should be liable
might be a direction we can go. But my question is for you,
Doctor.
Last year there was a significant push on the antitrust
legislation, even though there was no Senate bill introduced.
There was virtually no chance of any legislation passing the
Senate or even going to the President for signature, and so
even--and so even there there was a significant push by the AMA
on behalf of that legislation, and I am having trouble
reconciling your view that because tort reform is unlikely to
be enacted, that there shouldn't be an effort made here in the
House on that legislation. Can you help me with that paradox?
Dr. Corlin. The difference between the two, at least in our
view, is that with regard to antitrust reform, that was an
issue in and of itself, and we either could or couldn't get it.
We obviously were able to get it through one House of Congress.
We could not achieve any measure of success at all in the other
House of Congress. The assessment with regard to issues of tort
reform were not just could or couldn't we get it by itself, but
what was the assessment as to attempting to get it as part of
the Patients' Bill of Rights, and how would it affect the
ability to get that Patients' Bill of Rights. It was the
collateral effect on the other legislation.
You know, if you were to ask me, do you want PBR, I would
say, absolutely. If you were to say, do you want tort reform,
absolutely; and if we were of the belief that we could get them
together, we would attempt to do that. The best information we
have been given to this point is that trying to link the two of
them would hurt the more achievable one at the present time. I
don't like that answer any more, I suspect, than you do, but we
have been told that that is the reality of the--of the issues
as we find them.
Mr. Camp. All right. Ms. Arkin, under the bifurcated
Federal-State liability approach in H.R. 526, what would
prevent a plaintiff from suing simultaneously in State and
Federal court alleging the same denial, alleging, you know,
failure on both the medical and nonmedical areas?
Ms. Arkin. Theoretically when a health plan denies a claim,
the health--the health plan actually bets to control which end
of the spectrum the patient is going to go. If the health plan
denies a claim because it is not medically necessary, because
it is experimental, under the statute's own definitions it has
to go to State court. The problem is health plans often give
several grounds for denial, and they may include administrative
reasons for denying the plan. You have put the patient on the
horns of a dilemma when the health plan does that. So the
health plan--or the patient is then forced to try to decide, do
I go to State court because they have denied on experimental
grounds, and do I also have to go to Federal court because they
have denied on administrative grounds? The control of that
issue is not in the hands of the patient. It is in the hands of
the health plan and the way the health plan frames the denial.
If a patient gets a denial based only on experimental or
medical necessity grounds and sues in Federal court, their very
first motion that is going to be made by the health plan is a
dismissal, because it is not appropriately a Federal case, and
the plaintiff--the patient will then have to go back to State
court. The patient doesn't control that.
Mr. Camp. All right. I have one other quick question for
Mr. Toohey. First of all, thank you for testifying and
representing the employer and employees that you represent. And
I know that it has been brought up by another member of this
panel the number of unrelated cases against your employer, and
I think those are topics for another hearing in another
committee.
But my question to you is, do you believe employers should
be held liable for providing health benefits to employees?
Mr. Toohey. No, I do not.
Mr. Camp. And why not?
Mr. Toohey. That is a voluntary benefit. We are not
required to provide it.
Mr. Camp. All right. Thank you.
Thank you, Madam Chairman.
Chairwoman Johnson. Thank you.
I had started a second round of questioning, and then Mr.
Camp arrived for his first round, and before the Chairman
leaves, he would like to ask a few questions. Mr. Thomas.
Chairman Thomas. Thank you very much, Madam Chairman.
I just want to clarify a couple of points so that I can
understand the positions that are currently being advocated.
Dr. Corlin, you earlier, in response to a question, indicated
that you had at one time been urging health plans, I believe,
to support the idea of med mal, and they weren't willing to do
it. Now, it was noted that you are sitting next to the trial
lawyers, and you are very comfortable with the trial lawyers'
position.
Dr. Corlin. That, sir, is an alphabetical coincidence.
Chairman Thomas. I understand that, but the health plans
are consistent, and the trial lawyers are consistent. So I just
think it underscoring the fact that politics sometime make
strange bedfellows, because you are the only ones that have
shifted in terms of the position. And I understand your
argument about wanting med mal, but not being interested in
trying to figure out a way to bring it about.
In response to a question about the size of your
membership--and I have got two physician groups here, so I do
want to clarify who is speaking for whom--you indicated that
the current membership of AMA is somewhere below 300,000?
Dr. Corlin. 290-something thousand.
Chairman Thomas. Yeah. And you didn't know for sure how
much it was 10 years ago?
Dr. Corlin. No. It was slightly larger. I don't know what
the number was.
Chairman Thomas. So it has gone down over the last decade,
but you are somewhere under 300,000.
Dr. Zipes, no one has asked you a question, so I will ask
you a question. You represent the Patient Access Coalition. Is
that all physicians, or is it made up of other groups?
Dr. Zipes. It is made up of multiple groups, and the list
is part of my submission.
Chairman Thomas. Thank you. I will double-check that.
How many physicians are in the group?
Dr. Zipes. Approximately 300,000.
Chairman Thomas. So you are approximately larger than the
American Medical Association in terms of the number of doctors
you represent?
Dr. Zipes. I don't know how many they have, but we have
approximately 300,000.
Chairman Thomas. They are south of 300,000.
Dr. Zipes. And we are larger.
Chairman Thomas. The point I want to make is that I read
your testimony, and I saw all of the usual concerns about
patients and getting coverage. The point was made--I examined
the AMA's testimony, and it was 20 of 22 pages on an unfettered
attempt to garner unlimited liability against a particular
group, which I find somewhat interesting in terms of the thrust
of the testimony.
I guess I would tell you, Dr. Corlin, that you might think
about the idea that unlimited liability on employers is
probably as unacceptable to some people as malpractice is to
others, and that if you will examine how far we came in the
conference last year on very timely internal and very
meaningful external appeal, that if, in fact, that structure
was supported, ultimately leaving a court remedy, but with all
of the particulars that have been discussed, we wouldn't have
to turn to Texas as an example of how few cases got to court.
We would have, in fact, a Federal program with limited
liability in defined circumstances for employers who choose to
be participants.
The difficulty is, if you read legislation that has been
proffered, most recently on the Senate side, the McCain-Kennedy
language, it has all kinds of loopholes in which employers will
still be held liable.
So in terms of additional discussions that we need to have,
what you need to do is to go back to whoever informed you that
med mal didn't have a chance to go into this product, because
from my perspective, the obvious political solution that would
be a winner would be limited liability on health plans and
employers under a review procedure, which is pretty close to
what we have got, including limited liability in terms of the
medical professionals as well. That would be a coalition that
would move legislation fairly rapidly. The AMA is currently
standing in the doorway opposed to it on record in terms of
malpractice reform.
My time is running out. Ms. Lichtman, I would like to ask
you a question about your testimony. Let me ask her first, and
then you can respond. I have noticed you have consumed a lot of
Members' clocks, so you can answer as soon as I ask Ms.
Lichtman.
On page 4 of your testimony, top paragraph, quote,
consumers who have already been injured should not be required
to complete the external review process before seeking review
in court. This is the model that applies for Medicare
beneficiaries.
Ms. Lichtman. That is right. I am not sure I understand
what your question is. The model of already injured persons not
having to exhaust a remedy which at that point is totally
meaningless is a system that is already in place.
Chairman Thomas. So you are not saying Medicare
beneficiaries have a right to go to court?
Ms. Lichtman. No. I am saying that they don't have to
exhaust remedies that for them at that point are meaningless if
they have already been injured.
Chairman Thomas. Well, that agent--but you are not saying,
then, that they have a right to go to court? You are not saying
that.
Ms. Lichtman. I actually wasn't speaking to that in that
sentence, and so I was not saying that there.
Chairman Thomas. Okay. But they don't have a right----
Ms. Lichtman. I wasn't----
Chairman Thomas. To go to court.
Ms. Lichtman. Asserting that they do.
Chairman Thomas. And that would be a question, as the
Chairman indicated, the timeliness of review under extreme
circumstances and a panel of doctors on the external review. We
are not looking at a particular bill. There is no bill in front
of us, but there is a matrix to the solution, and, Doctor, I
would ask you to go back to whoever it is that told you that
med mal is an absolute no-go in resolving the concern, because
if you are looking for some additional political bedfellows to
support you on limited liability, they are going to be
available if you folks are interested in moving a package which
includes med mal and the limited liability. But if you are
seeking the liability in your testimony, that increases the
chances of not making the law this year. That is my personal
observation. So do you want to respond?
Dr. Corlin. Yes, if I may.
The AMA has been consistent in its positions with regard to
tort reform. Trying to characterize what we are doing now as
affiliating with the trial lawyers on this issue is incorrect.
We are not attempting to hold the employer community liable,
and indeed, the language in the bill would make----
Chairman Thomas. Which bill? You keep saying the bill.
There is no bill.
Dr. Corlin. Language which we have proffered would indicate
that employers who simply pay the premium and choose a plan and
are not involved in the decision-making process regarding
health plans are not liable and are not to be held liable.
What we object to is the people who are not here today who
actually have surrogate defenders, which is the health plans.
Health plans are both good and bad, as are doctors, hospitals,
Congressmen, businesses and everybody else. The good health
plans are wonderful. Bad health plans make decisions that hurt
patients, and they do it with impunity. We want them to not be
able to do that. That is what we are here for.
Chairman Thomas. I understand that, and what I am doing is
telling you there is an area for compromise in which we have
limited liability in that regard with a very good internal/
external review and that we can include med mal. Do you want to
participate in that endeavor?
Dr. Corlin. We certainly will participate in that
discussion, absolutely.
Chairman Thomas. Endeavor and discussion are two different
things.
Dr. Corlin. We will----
Chairman Thomas. I understand. I understand what you are
saying. You want to discuss. We want to make law.
Dr. Corlin. We want to see law made, too.
Chairman Thomas. OK.
Dr. Corlin. I am not here today with the total authority,
number one, to make the decision.
Chairman Thomas. I understand that.
Dr. Corlin. Nor am I here with the background and
experience that our staff in Washington have. I would like
nothing better than to be able to be told after I go back to
1101 Vermont and said, yes, we absolutely agree that everything
that Chairman Thomas said is the way it will go, and if we
adopt that position, we can get a bill, I will be back here
waving the flag for that tomorrow, but I have got to go back to
the people who have done the analysis for us, as I am sure you
understand.
Chairman Thomas. Dr. Corlin, let me suggest that one of the
reasons the AMA has gone down in membership may very well be
the fact that you never mentioned going to your rank and file,
but rather you decided to go to the professionals who have made
a history of not necessarily representing the rank and file.
Because I have got a fellow over here who has got more members
than you do who has said liability is not that great a concern,
focusing on patient protections ought to be the primary goal.
So perhaps you might want to go beyond that Vermont address and
take a look at your rank and file in terms of where they are
for med mal and where they are for moving a resolution of this
sooner rather than later.
Thank you, Madam Chair.
Dr. Corlin. We go to our rank and file twice a year on this
topic, Mr. Thomas.
Chairwoman Johnson. Thank you, Mr. Chairman.
Mr. Stark.
Mr. Stark. Well, I am under the impression that at least
this Member has been referring to the Ganske-Dingell or
Dingell-Ganske bill, which is a reintroduced iteration of the
Norwood bill, and the current one has maybe 110 to 150
cosponsors or whatever they have got, and that is the bill.
Chairman Thomas. Do you want, briefly--do you know how many
Republicans or cosponsors of that bill?
Mr. Stark. I guess a half a dozen. How many?
Mrs. Thurman. In the Senate?
Chairman Thomas. No, no. The House.
Mrs. Thurman. In the Senate, for your information, there
are five.
Chairman Thomas. And I think there are two over here,
Ganske being one of them.
Mr. Stark. My guess would be half a dozen, but I am not
aware. In any event, it is a bill that is similar in many
respects, although it has been compromised to move toward the
Republican position that got 60 Republicans or thereabouts to
vote when it passed the House.
Now, be that as it may, it is a bill that has passed here
and has been in the conference meetings a bill of discussion.
It was my understanding that the witnesses were advised
that we wanted to talk about the liability issues today. Is
that correct?
Ms. Lichtman. Yes.
Mr. Stark. Is there any witness who had any other--that was
the thrust of the testimony today; was it not? So for those of
you who have been--suggested that you are not doing your duty
by not talking about liability, that is why I thought I was
here, and I would presume that that is why the witnesses were
here, which is a good topic.
Now, I want to apologize to Mr. Toohey for--Mr. Toohey
actually is here representing the National Association of
Manufacturers, and Ashland Inc. probably would have given him
the week off if they thought I was going to bring up all this
past history about him.
But you do mention, Mr. Toohey, and I don't know the
numbers, but I have a hunch when you talk about the fact that
health insurance ought to be voluntary, I think as a practical
matter--and I am going to just guess, and you may know better
than I do, or somebody else may have the numbers, but I am
going to bet that half of the people who have--who have
employee insurance or get it from their employers get it as a
result of bargain plans through their union. Does that sound
about right to you? I don't know. Maybe it is only a third, but
it is a large percentage of those----
Mr. Toohey. I honestly think it is less, but I don't know
the answer.
Mr. Stark. Okay. And is it also standard reason that where
a union has negotiated or contractually gets health insurance,
that it would be the rare company that would not provide it to
its nonunion employees? That would make good sense from labor
relations, bargaining and just from good human resources; would
it not?
Mr. Toohey. Well, sure.
Mr. Stark. So that the voluntariness of health insurance,
absent a short supply of employees, as we have today--right now
probably every business in the country is--wouldn't think about
cutting back on their health insurance, just because it is hard
to find good employees, but in a----
Mr. Toohey. If I could answer?
Mr. Stark. Sure.
Mr. Toohey. The question I was answering over here, I
thought, was that should employers be sued for providing health
care, but why would you want to sue somebody for providing a
voluntary benefit?
Mr. Stark. Mr. Toohey, you are getting right to the point.
If you could--if you were assured by your company's attorney
that the company could not be sued, would you have objection
then to the liability provisions in this bill?
Mr. Toohey. Yes, I would.
Mr. Stark. Why?
Mr. Toohey. Because you have to realize----
Mr. Stark. Wait a minute. If the company could not be sued,
if you could be guaranteed that, why would you then object to
the idea of your--of the liability provisions?
Mr. Toohey. Well, at the end of the day, it is the
corporation that is going to pay the costs, and so if the plan
is sued----
Mr. Stark. Under any circumstances, if the company weren't
liable, you would still oppose the bill?
Mr. Toohey. We are opposed to employer liability, and when
you provide this voluntary benefit and you get sued for it, no
matter who is the manager of it, whether it is----
Mr. Stark. Whoa, whoa, whoa. Let's talk about this perfect
world. I am just saying that if you could be assured that your
company could not be sued, then would you object to the bill?
Mr. Toohey. Yes, in its current form.
Mr. Stark. That is what I thought. Thank you.
Chairwoman Johnson. Mr. McCrery.
Mr. McCrery. Well, Mr. Stark, if I were the CEO of Ashland
Inc. or some company, any company, and my lawyer came to me and
said, you can't be sued, I would fire the lawyer.
Mr. Stark. That is probably why you are not a CEO of a
large company.
Mr. McCrery. Well, but I am a lawyer, and I have a
confession to make. I was with a plaintiffs' firm. I practiced
plaintiffs' law, and I was also on the other law practicing on
the defense side. So I have been on both sides, so I know a
little bit about the practical nature of our judicial system.
And the fact is that if you write a law that says you can't be
sued, you can still be sued. Somebody can name you in a
lawsuit, a lawyer--a good lawyer will name you in the lawsuit,
even though he may know eventually you are going to get thrown
out of the lawsuit. That means you are going to have to hire a
lawyer, and you are going to have to go to court to get thrown
out of court. That is going to cost you money.
Mr. Stark. That is where we are now.
Mr. McCrery. That is where we are now.
Mr. Stark. So what is new?
Mr. McCrery. Nothing yet. That is what we are talking
about, what might be new. What might be new is that you won't
get thrown out of court, but you will not only be faced with
the cost of going to court, but you will be faced with damages.
And it is a legitimate discussion.
Look, I am proud of being at one time a plaintiffs'
attorney. I defend plaintiffs' attorneys with some of my
friends occasionally in the medical profession and in the
business world. Plaintiffs' attorneys, by and large, like
doctors by and large, are honorable people doing a good job for
their patients or clients, and they play an important role in
this Nation and in our judicial system and in getting
compensation for people who are damaged because of somebody
else's negligence or wrongful actions.
So I happen to think that ERISA is in need of reform. I
think ERISA is not--does not provide sufficient remedies.
There. I have said it. But the very reason that the AMA has
steadfastly been for medical malpractice reform, and they still
are, even though I am disappointed that they are not out front
pushing for medical malpractice reform to be attached to this
bill so that we can have uniform liability across the health
care system, and I am very disappointed in that, and I think
you are wrong, and I think you should be, but you have
steadfastly been for medical malpractice reform. And before I
give my opinion as to why you are, let me ask you, Dr. Corlin,
why is the AMA for medical malpractice reform?
Dr. Corlin. We are for medical malpractice reform because
we have seen the consequences of what happens when it gets
enacted and what happens when it doesn't get enacted, and we
are in a circumstance where in the absence of medical
malpractice reform, the circumstance amounts to an unfunded
mandate. Premiums drive people out of practice. They do not
provide anything in the way of added patient safety. Well, we
are here today, Mr. McCrery--and I----
Mr. McCrery. No, no, no, no. I don't want to get you----
Dr. Corlin. All right.
Mr. McCrery. I want you to answer my question. Are you
through answering my question about why you are for medical
malpractice reform?
Dr. Corlin. Yes.
Mr. McCrery. So you are--if I can restate, you are for
medical malpractice reform because you have seen systems which
have it and systems which don't, and in those systems which
don't have reform, doctors are worried about the costs that are
imposed upon them, and it drives some of them out of practice.
Is that----
Dr. Corlin. Well, it is not just physicians. The costs go
up inordinately, and they are passed along to everyone.
Mr. McCrery. Right.
Dr. Corlin. Not just doctors, but they are passed along in
fees by physicians, hospitals----
Mr. McCrery. Right.
Dr. Corlin. And everyone else in the health care delivery
system.
Mr. McCrery. Right. So what?
Dr. Corlin. It is a cost that is----
Mr. McCrery. Why is that bad? Because you have injured
patients who deserve compensation, unlimited compensation, so
why is that bad?
Dr. Corlin. OK. The costs go up out of proportion in
benefit, number one, and number two, patients are not denied
compensation in the presence of tort reform. We have never
advocated a system that would not deny patients----
Mr. McCrery. I didn't say compensation. I said unlimited
compensation.
Dr. Corlin. I made a mistake when I said--we have never
advocated a system that would deny injured patients
compensation for their injuries. I never said that.
Mr. McCrery. But you are for a system which denies
unlimited compensation for patients who are injured.
Dr. Corlin. Under circumstances, yes, particularly in the
noneconomic damages area, which are very, very subjective.
Mr. McCrery. Right. And why is that, in your opinion,
necessary in the medical--field of medical practice to have
those caps on damages and other tort reforms for medical
malpractice?
Dr. Corlin. Because in our opinion, the circumstances were
getting to be so subjective and so irrational that they could
no longer be sustained, that the cost of maintaining the
insurance, which is a legal requirement--it is not an option.
The cost of maintaining the insurance, which is a legal
requirement, has driven people out of practice and reduced
access to care in certain areas and increased the costs as
those costs are passed along to the end users, as are the costs
of everything that all of us in this panel do.
Mr. McCrery. Madam Chair, I have further questions, but I
will give the other Members a chance to ask.
Chairwoman Johnson. Congresswoman Thurman.
Mrs. Thurman. Thank you, Madam Chairman.
Dr. Zipes, we need to clear up some stuff here, because I
actually looked at your testimony and all the people who are
actually a member of your coalition, and I have to say to you,
maybe as a group they have taken this step where they have said
that they support this year's based on principles. Last year it
was my understanding--and correct me if I am wrong--but that
this group also endorsed the bill last year, the Dingell-
Norwood, Norwood-Dingell, whoever, bill. And second, as
individual groups, there are many, many on this list that have
come out in support of Dingell-Norwood or whatever it is this
year. Is that correct?
Dr. Zipes. As I indicated in my response to the very first
question that I got from the Madam Chairwoman Johnson, the
Coalition has supported the provisions of the bills that
advocate those things that we feel are so important for patient
protection, whether or not they included issues about
liability, and we continue to do so.
Mrs. Thurman. Well, but you could tell me, too, when I look
at this list that individually there are groups on this list
who have, in fact, supported, outside of the Patient Access
Coalition, the Norwood-Dingell bill with the liability standard
in it?
Dr. Zipes. Yes, ma'am. As I also testified, there was not
unanimity among all the members; and, therefore, we felt it
best to not take a position on liability, but to strongly
support the patient protection issues.
Mrs. Thurman. Thank you. I just needed to clear that up,
because it seemed to get kind of foggy out there for a minute,
and I think this Committee wants the best information
available.
You know, Mr. McCrery, one of the things that I find
interesting is that I, quite frankly, on the liability issue
would like to see the States do what they have been doing,
because I think Dr. Corlin would tell you that we probably had
more success--Dr. Zipes would probably tell you that we have
had more success in dealing with medical malpractice at the
State level, is that correct, over the years?
I mean, Ms. Arkin, you could tell me. You have to say yes,
because we have to get you on the record. For some reason, it
doesn't do that. Is that----
Ms. Arkin. That is true. In various States in response to
specific insurance crises within those States, individual State
legislators have dealt with it on a State basis, and that is
the appropriate way to deal with those----
Mrs. Thurman. As they have, quite frankly, with the
Patients' Bill of Rights.
Ms. Arkin. In large respect they have--the States have
attempted to deal with the ERISA problem through State
legislation, and it is still an open question if that is going
to be successful.
Mrs. Thurman. And that is where we come in as to why we
have to do that.
Ms. Arkin. Correct.
Mrs. Thurman. So what we don't need to be doing up here is
setting up whole new review panels, doing that. But let me ask
you all, you know, I have been trying to listen to this
conversation going on up here, and quite frankly, I was really
taken back by--a little bit by our Chairman Mr. Thomas, that it
is this way or no way. Quite frankly, I don't consider that to
be compromised, and I certainly don't see that as kind of--I
take offense of somebody trying to cram something down my
throat, and I wish he was here to hear me say that, but I was
somewhat taken back when, in fact, last year this was passed--
or in 1999 this was passed on the floor of the House with a
majority of both Democrats and Republicans, sent over to the
Senate, sat in conference, many times motions to the Committee
to get this bill out. So to say that this is only the way
something can happen I think is a little misleading to the
public.
And the other thing I would say is, who have we forgotten
in this? What is this all about? This is about patients who are
all only asking for access to their health care, and if, in
fact, they go through an internal and an external process, that
they have some remedy. I would say to my colleagues, in every
bill that has been introduced into this Legislature over the
last several years, there has been some remedy or some tried to
get to a remedy. Some have imposed civil fines. I mean, there
has been a multitude of ways to do this, but the bottom line
is--so I don't know what we are stuck on--that this liability
issue, no matter what we look at, or if you like it or don't
like it or are just opposed to it, the fact of the matter is
there is a remedy in every bill to hold them accountable.
Now, why, I ask the question, would we back off from a
system that every other person has the opportunity to--I think
Mrs. Lichtman said that. If you have a toy that is broken, you
go to the manufacturer, and you have liability. If you are
responsible, why would you abrogate that responsibility? And my
time is up.
Chairwoman Johnson. I think it is significant that the
system that States have adopted for malpractice liability is
really quite different, and very few States have adopted
liability in the Patients' Bill of Rights situation because of
the complexity of setting up that and the fine line between
malpractice and suing of the employer. So we do want to be sure
that people have appropriate rights, and particularly that
patients have rights to medical care, and physicians are in
charge of that decision.
Mr. McCrery. Excuse me. Dave had----
Mr. Camp. Thank you, Madam Chairman.
I would just say to my colleague from Florida one of the
problems that we have had is the exposure of employers to
lawsuits simply because they have a health plan, and I think
that is one of the real troubling aspects of this. We have a
system--and Mr. McCrery touched on this--where everybody can
sue anybody about anything. That is our legal system. And so it
is the exposure, and in the business world the employers--and
small business and large--cannot take the risk.
And last, multistate employers, particularly looking at 50
different standards in 50 States, they are looking for
uniformity, something that will be ultimately administered. But
my question is this for Ms. Arkin: The Rand Corporation study
that happened--and their studies said that between half and
two-thirds of medical malpractice claims are brought with no
apparent indication of negligence, and, in other words, the
current medical malpractice system demonstrates that just
because the correct decision was made, it doesn't mean you are
going to avoid a lawsuit. So given that statistic, I would ask
your comment on the expansion of liability and whether that
would serve as an effective deterrent for alleged wrongful
behavior or negligent behavior, and would that promote better
decisionmaking?
Ms. Arkin. Well, first, obviously, I take issue with the
Rand study. I don't believe it is correct, and the Institute--
--
Mr. Camp. Do you have any reason why you don't believe it
is correct?
Ms. Arkin. The Institute of Medicine study has determined
that medical malpractice does result in massive injuries,
massive deaths, and that something needs to be done about the
system.
And if you look at the Institute of Medicine study, they
are very adamant that there are systems corrections that can be
made that will eliminate malpractice, and they actually
advocate liability as one of the tools to help control
malpractice.
Additionally, I want this Committee to understand that the
trial lawyers do not want to impose liability on employers,
where the employer simply goes out and buys a plan, small
employers, large employers. An employer that doesn't involve
itself in the decisionmaking process should not be liable.
If they just go and buy a plan for their employees, and the
plan is making the medical decisions, it is the plan that
should be held liable, not the employer.
Mr. Camp. Right. I saw Dr. Corlin shaking his head at part
of your answer. I don't want to cut you off, but I think the
point also is--on that broad principle, we probably have
consensus--the issue is in the real world, that won't
necessarily mean that there is protection. But I wanted to get
Dr. Corlin's comment as well before my time ran out.
Dr. Corlin. The Institute of Medicine study dealt with the
issue of medical errors. And I would characterize them as
medical errors, not malpractice. There has been a great deal of
data, a lot of it carried in several articles of the New
England Journal, that indicates even those cases where there
are settlements and/or judgments on retrospective review, only
between 1 in 4 or 1 in 5 involve negligence as opposed to other
items. So that is that particular issue.
Mr. Camp, with regard to the second thing that you asked,
it is nobody's attempt, and, you know, if we have the trial
lawyers and the AMA agreeing with each other, well, we both are
going to have to live with that, but neither one of us is
interested in creating one penny of liability to the employer
who buys and selects and pays for a plan, even if it is through
a TPA and they are--in effect they are self-insured and they
are not involved in the decisionmaking process with regard to
medical decisions.
We ask, please, for the Committee's help in coming up with
some language that will achieve that goal, because that is our
decision. What we are concerned about are the actions of the
health plans, not the actions of the employers who in good
faith provide money to pay for health insurance for their
employees. They are not our target. We want to exempt them as
much as they want to be exempted.
Mr. Camp. I appreciate that, and I appreciate the sincerity
of your comment there. I am not taking issue with that. I think
beyond the people in this room, the system is such that the
lawsuits would occur whether they are successful or not; but
just the cost of defending, and the risk, the exposure of those
lawsuits, to test that legal principle that we might all agree
on and we might put in an iron-clad way in a bill, in fact just
putting the language there, I think as others have committed,
would invite the litigation.
It is not just whether you would prevail in the litigation,
it is whether you would be subjected to the litigation that is
a problem. And, again, you know, I think there have been some
instances where certainly wrongs have been righted in our legal
system.
But the idea that expanding the circle of lawsuits would
bring a higher level of patient care I think is an issue.
Obviously, the way that we have tried to work on this is to try
to find a way for immediate and internal and external
independent review and fines in civil matters.
Ultimately, if those remedies are exhausted, where we are
at is, is there going to be an ability to go to court and how
would that occur? So I appreciate both of your comments. And I
realize my time is expired. Thank you.
Ms. Arkin. Well, Madam Chair, I would like to finish my
response to that question. I never had a chance to give the
other half of my response.
Chairwoman Johnson. You may proceed.
Ms. Arkin. Thank you. I don't believe that any responsible
attorney is going to sue an employer where it is clear that the
employer is free from liability. That is not to say that there
aren't some irresponsible attorneys out there, and Mr. McCrery
obviously has experience with those.
But the point is there are facilities, there are remedies
within our judicial system to take care of those irresponsible
attorneys, both through State bar disciplinary proceedings,
malicious prosecution actions, sanctions for a frivolous case;
but the fear of frivolous actions should not strip people with
legitimate claims of their right to reap compensation when they
have been harmed. That is not a good public policy to engage
in.
The reality is there aren't going to be a lot of frivolous
lawsuits. There very well may be meritorious lawsuits until the
industry comes to realize they can't continue this conduct and
they have to change their behavior, and that is what lawsuits
do.
Mr. Camp. Thank you. Thank you, Madam Chairman.
Chairwoman Johnson. Would you like--do you have any further
questions?
Mr. Stark.
Mr. Stark. No.
Chairwoman Johnson. Mr. McCrery.
Mr. McCrery. Ms. Thurman, my good friend from Florida, I
don't disagree with anything that you said.
Mrs. Thurman. I like that.
Mr. McCrery. So you don't need to talk again. I thought you
made some excellent points, and I thought I made some of the
same points. But I was on the conference committee last year,
and I can tell you that we could have passed a bill and sent it
to the President real quickly if some had been willing to
compromise on the issue of liability.
We certainly could have gotten one on the President's desk
if some in the Senate would have agreed to the patient--the
patients' rights section of the bill without liability.
Mrs. Thurman. Will the gentleman yield?
Mr. McCrery. Sure.
Mrs. Thurman. I think we had a lot of those kinds of bills
last year.
Mr. McCrery. I know we were on that conference, and I know
we offered and the offer was rejected. Just so you will know,
we could have had these patient protections in law.
Ms. Arkin, you are right, there are some irresponsible
attorneys out there practicing law, as there are probably
irresponsible doctors practicing medicine. But there are also
good attorneys out there who, in good conscience and to avoid
maybe malpractice suit against them, would name employers if
there is any question that that employer exercises any control
over the decision. And particularly with TPA or third-party
administrators, there is going to be a question. And even if
you wall off the employer as best as you can, and then you are
going--I think you are going to have a hard time finding a
third-party administrator to administer that plan for a small
employer. They are going to be scared to death of being sued
because they do exercise control.
So you know, even with that, I am still willing to
establish a cause of action under ERISA. I think ERISA, as I
said, provides an insufficient remedy to patients who are
injured as a result of decisions, wrongful decisions of health
plans. That is not at issue.
But getting back to Dr. Corlin's explanation of why the AMA
is for medical malpractice reform, the sum and substance of
your argument, Dr. Corlin, is that unlimited damages in the
field of medical malpractice is bad for the health care system.
It inhibits the ability of people to get health care, because
it discourages physicians from practicing, it runs them out of
practice. It drives up costs for everybody.
There is a higher national purpose, which is to make sure
that the greatest number of people get the best quality of
health care we can give our society. Therefore, it is
necessary, even though as a Republican, philosophically I am
opposed to damages--to caps on damages, limiting lawsuits, I do
think there is in the field of health care particularly, a
higher purpose to be served than individual rights to sue for
unlimited damages.
You have made the point. The point, Dr. Corlin, and others,
though, is the same for health plans. If you allow unlimited
damages against health plans, you will have the same problem.
You will drive up costs in the health care system. You will
inhibit employers and health plans and certainly third-party
administrators from engaging in the delivery of health
benefits, and it will be bad for our society.
So why don't we compromise, Ms. Arkin; create a Federal
cause of action under ERISA, which you want and which the AMA
wants and Dr. Zipes group probably wants, and put caps on
damages and other reasonable tort reforms in place for health
plans--liability of health plans. And then, if we could, also
for physicians. Yes.
Mr. Stark. Will you yield for a question, the gentleman
from Louisiana?
Mr. McCrery. Sure.
Mr. Stark. Would it not be possible if this--if it was the
Ganske-Dingell bill, or some iteration of this liability plan
in the other bills, and it passed, for the States still to
impose tort limits on a State-by-State basis?
Mr. McCrery. That is unclear, but certainly if it is a
Federal cause of action that we create, it is possible that
States could not limit the damages under that Federal cause of
action.
Mr. Stark. But under any State action, they could?
Mr. McCrery. Yes, sir. And, in fact, if we don't do--create
a Federal cause of action, my guess is the courts are going to
continue to expand access to the justice system for these types
of cases, and then obviously State tort reforms would affect
those cases.
But that should not relieve--even if we knew that States
could do that, it shouldn't relieve us of our responsibility as
policymakers to impose the best liability regime we could, in
the best interests of all of the people, to receive not only
their individual rights and cause of actions when they are
injured, but also to receive the highest quality of health care
for the most people in our society.
And if we do that, I think there is a balance here that we
could reach, and I would urge those of you who have seen that
for years and years to be out front and urge us to do the right
thing, not the expedient thing, not the thing that you think we
can do just to get you what you--part of what you want, but be
for the right thing across the board, and that would be medical
malpractice reform and liability for health plans under the
same regime.
Mrs. Thurman. Madam Chairman----
Chairwoman Johnson. Mrs. Thurman.
Mrs. Thurman. I am going to do something very quickly. I
would just suggest, because it seems like we tried to put the
doctors and the lawyers altogether in one, I think it is unfair
to the public and to this record not to recognize that there
are hundreds of groups out there that in fact are supporting
the Patients' Bill of Rights. And it is not just doctors and
lawyers. It is also people like Families USA, it is League of
Women Voters, Mental Health. I mean, there are a series of
groups in this country that are supporting this with the
liability. Thank you.
Chairwoman Johnson. There are certainly many groups out
there supporting it. There are also many groups opposing. And I
will have to say, I have been meeting with the doctors
throughout my district in small groups. I have been meeting
with small businessmen. I have not met a small business group
that isn't literally panicked at the idea of the liability
provisions in the Dingell-Norwood bill.
I have gone through with them the liability provisions in
the Shadegg bill, which is at least drawn more narrowly. At
least you have to exhaust the appeals process, so you have the
virtue of four physician opinions on the record, and you can
only sue if you have been harmed. They are still panicked.
The law doesn't have to make them liable. It only has to
make them think they are liable, and then you will see action.
Now, I am concerned with what has--the statements of both
Ms. Arkin and Dr. Corlin that you don't want to see employers
held liable, not a penny of liability. I have sat for a whole
year, hours and hours and hours of discussion of the bill that
passed the House. There is no way you can protect employers
from liability.
It is only a question of whether we can sort of contain it,
so that the insurance the company has to buy for the directly
responsible party can at least be limited. Because under ERISA,
I as an employer have a fiduciary responsibility, so that means
that any plaintiff could argue that the discretionary acts of
the insurance company or the third-party administrator could be
imputed to me, the employer, as acts of an agent.
This contention would have solid common law basis and is
commonplace in personal injury litigation. What we do here is
not in isolation. So what I say to my small employers is, it is
true, I can't totally protect you.
I have never heard, and I have sat for many hours with
lawyers on both sides of this issue, not one of them when you
really get down to it will claim that under the fiduciary rules
of ERISA, you can totally protect the employer. That is why we
came up with the designated decisionmaker. Because as I read to
you, the language in the bills allows even the physicians to be
an agent.
The language in the bills allows even just an allegation to
stop the exhaustion of the appeals process. The physicians will
not have control of this system, not if a mere allegation turns
control over to the lawyers.
So really, folks, if you don't want to hold lawyers liable,
you have got to be much more serious about the language of this
bill. And, in fact, if you want to provide physician-control of
health care, you have to guarantee physician decisions on the
record.
Let me just say, 40 cents, remember 40 cents of every
dollar paid to litigate is paid to victims, 40 cents. The rest
goes to the costs of the process, the lawyers, the courts, and
everybody else.
Second, 80 percent of all medical malpractice suits--and
remember, we are talking medical malpractice, we are not
talking exactly the same, but it is very similar and that is
what employers are afraid of, they will be held accountable for
medical decisions over which they not only have no control, but
no knowledge.
Eighty percent of all medical malpractice claims did not
involve a negligent adverse event.
So if we narrow this bill to those patients that are
harmed, we help--we eliminate all of those suits that are not
about medical harm. That is a good thing. That will reduce
costs. That will prevent an explosion of litigation, the costs
of which we have seen drive up health care premiums through the
physician sector.
The average costs to defend a provider--and remember, you
see, you don't have to be liable under this bill. The suit can
be brought anyway. The suit can be brought against the
employer, and then he has to prove that he was not directly
involved.
The costs of that kind of suit is roughly $20,000. A suit
was just heard in Texas on March 1st, and not only did it cost
$20,000 to defend, but it was so outrageous--I am not a lawyer
so I have to hustle around here for the wording--it was
dismissed with prejudice. In other words, it was such an
outrageous suit, it was so clear that the plan did not provide
the benefit, that the judge dismissed it without any right to
ever bring it again in any venue.
Now, to maintain that there won't be suits under this bill,
that they won't be frivolous, that they won't be without
medical harm or without medical costs, is simply to fly in the
absolute face of experience. Now----
Ms. Arkin. That is not what I said, Madam Chairman.
Chairwoman Johnson. Because I believe in this so
passionately, does that mean that I don't think patients ought
to have a right to sue? No. I think that patients who are
harmed by a negligent decision by an insurer that denies them
medically necessary care ought to be held accountable.
And under every example you have given in your testimony,
Ms. Arkin, our 72-hour appeals process would have gotten them
the care they needed and they would have been whole medically,
without any one expenditure for a trial lawyer.
Ms. Arkin. Well, that is not true, Your Honor.
Chairwoman Johnson. We will talk about that afterward,
because you must not understand our appeals process, but I am
shocked at your insensitivity to the breadth of the language in
these bills. What it will do----
Ms. Arkin. Ms. Artery had to have transport to a medical
center within 3 hours or she would have died and did die from
her heart attack. External review couldn't help her.
Chairwoman Johnson. No, the emergency room provisions under
the patients' rights would have.
Ms. Arkin. No, she was already dead. It wasn't going to
help her.
Chairwoman Johnson. The minute she came into the emergency
room, that would have been taken care of. She would have had to
have all stabilizing care and so on and so forth. They could
not have ignored her and they could not have not treated her.
Ms. Arkin. That is not true, ma'am.
Mr. McCrery. Will the Chairlady yield?
Chairwoman Johnson. I would be happy to yield.
Mr. McCrery. I think both of you are right. I think for the
few cases in which someone is injured prior to availing
themselves of the review, we could create a liability for that.
That is not a problem.
I think it is a reasonable thing to do. So I think--I don't
think there is a problem there.
Mrs. Thurman. Madam Chairman, could I ask a question? In
the case that you were citing, was it the judge said that the
benefit was not covered, so it was over a benefit or a
procedure?
Chairwoman Johnson. It was so clearly not covered by the
plan----
Mrs. Thurman. So it was actually on the benefit part of it,
not necessarily whether there was any problem with the service
delivery?
Chairwoman Johnson. That is right. But you see, under--one
of the things that is hardest about writing this legislation is
to prevent suit over----
Mrs. Thurman. That is if you were harmed. That is if you
were harmed, not necessarily because of what is in the benefit
plan.
Chairwoman Johnson. No. There are two different issues,
though. One is how do you prevent suit over things that are
clearly not covered, and that is harder to do in legal language
than you might think.
And the second thing is that if it is covered, then you
still should be able to sue if you suffered medical--you should
be able to sue if you suffered medical harm.
Mrs. Thurman. Just to take that, if that could be--Mr.
Toohey there says his plan had decided, or the company--because
I understood you to say that Ashland, because I guess they are
self-insured, actually, made that determination, but if they
had said no----
Mr. Toohey. It was already a covered benefit under our
plan.
Mrs. Thurman. If it had not been a covered benefit.
Mr. Toohey. Then our employee review panel could have
covered it, yeah.
Mrs. Thurman. Could have covered it?
Dr. Corlin. Madam Chairman----
Chairwoman Johnson. I'm sorry, we do have to wind this up.
We've got a lot of healthy differences of opinion, and those
are the kinds of things that have to be worked out.
But I did really want to get on the record that these
statements that are flying--because this happens in the House,
too--about protecting employers, and I have many colleagues of
mine stand up and say, I don't want to have employers sued.
Let me tell you, there is not a bill that is going to open
ERISA that will protect all employers, you cannot do it under
the fiduciary concept. But you can control it. You can--there
are things you can do to reduce the liability--the
vulnerability to suit and make it responsible.
There are broad differences in language between the
Dingell-Norwood bill or the Dingell-Ganske bill and the Goss-
Shadegg bill on these specific issues about employer liability
and about who has the right to sue. If we could narrow those
down, we have some hope of passing the whole bill and some hope
of controlling costs.
Health care costs are rising at 8 to 10 percent a year.
Employers are going to be struggling with those costs. If we
are not careful about what we do here, we will move our health
insurance system the same direction we have already moved the
pension system, from a defined benefit plan to a defined
contribution plan.
If you talk to retirees, this is not a happy circumstance.
If you talk to health people who in the future will have the
$5,000 to buy a plan, but won't be able to--the employer won't
provide it, which you would see he has no liability, it is a
no-brainer. So that is the relevant fear is that we will hurt
employees who currently have coverage.
Now, I want to get--to return the system to the control of
doctors; that is why exhaustion is essential, no matter what
the circumstances. It doesn't mean that you can't get the care
earlier, but still you need the panel's decision on the record.
These are the kinds of things we will have to talk about in
more detail, and I thank the panel for their tolerance and the
Members for their interest, it is rare that we have.
Ms. Lichtman. May I--one point of personal privilege? In my
answer to Chairman Thomas, I wanted to make clear that indeed
in a ninth circuit case called Artery versus Aetna, I have been
advised that indeed Medicare recipients do have a right for a
judicial remedy. And I didn't want to leave the incorrect
impression, even though my testimony was not talking about
that, I didn't want to leave the suggestion that there wasn't.
Chairwoman Johnson. I appreciate that on the record.
I thank the panel. The hearing is adjourned.
[Whereupon, at 4:21 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of American Psychological Association
Madame Chairwoman and members of the subcommittee, the American
Psychological Association (APA) writes to clarify our understanding of
the position of the Patient Access Coalition on the subject of legal
accountability. The APA alone represents within the Coalition more than
half of the individuals who are non-physician providers, and we have
served on the Coalition's steering committee for many years. In this
capacity, we feel it necessary to clarify that the Coalition has never
taken any position on the issue of legal accountability other than
neutrality.
We believe that the Coalition's testimony will be misinterpreted as
the Coalition is critical of liability and could live without it. This
is not the position of the Coalition. The position of the Coalition is,
and has always been, neutral on the subject of legal accountability due
to the differing opinions of our member organizations and their
different priorities.
In fact, many individual members of the Coalition--including the
APA--do indeed strongly support the inclusion of liability protection
in the Patients' Bill of Rights. We believe that reform must embody
both internal and external appeals rights to ensure that patients are
able to obtain quality and timely health care. The vast majority of
disputes between managed health plans and patients should be resolved
without the need for judicial intervention through a strong,
independent external appeals process.
Although a strong and independent appeals process is essential, it
will not always suffice. Even under an expedited appeals process, such
as a 72-hour deadline, patients can sustain injuries that warrant
appropriate compensation. Consider the following scenarios where an
appeals process alone would not prevent the negligent denial or
delivery of treatment:
A patient is admitted to a community hospital complaining of
paralysis and numbness in his extremities. The hospital
concludes that the gravity of the patient's neurological
condition is beyond the scope of the hospital's expertise,
necessitating his immediate transfer to an academic hospital,
which the hospital promptly arranges. The health plan, however,
denies authorization for transfer to the selected hospital and
instead recommends three others that are part of the health
plan's network. By the time one of the health plan's hospitals
accepts the patient three hours later, the patient has
sustained permanent quadriplegia.
A patient with major depression is actively threatening
suicide. Her treating psychologist recommends immediate
hospitalization, which the managed care plan denies and
continues to deny after an internal appeal. The psychologist
immediately requests expedited external review of the managed
care plan's denial. While the review is pending, the patient
kills herself, leaving behind a surviving spouse and two
children.
The incidents described above can and do occur in real life.
Consequently, we believe that reform must include the ability of a
patient injured as a result of negligence by a health plan to seek
redress for his or her injuries in a court of law. We also believe that
the deterrent effect of health plan legal accountability will lead to
better, more appropriate care up front, thus reducing the possibility
of lawsuits.
National Council on Disability
Washington, DC 20004-1107
April 25, 2001
The Honorable Nancy L. Johnson
Chairwoman, Subcommittee On Health, House Ways and Means Committee
U.S. House Of Representatives
Washington, DC 20515
Dear Madam Chairwoman:
On behalf of the National Council on Disability (NCD), I want to
thank you for your leadership in issues related to care-giving and
health care reform and for the April 24, 2001 hearing on these issues.
Your work to ensure an equitable system of health care in this nation
is essential for many of our nation's citizens, particularly people
with disabilities who need either short or long-term care.
NCD is an independent federal agency mandated to make
recommendations to the President and Congress on issues affecting 54
million Americans with disabilities. In keeping with our mission to
advise the President and Congress on public policy that affects people
with disabilities, NCD has taken an interest in the ability of
Americans with disabilities to fully participate in and equally benefit
from a comprehensive health care bill, including one that address
patients' rights. I want to inform you of our activities and to offer
our expertise to you and your staff as you move forward with your work
on this all-important issue.
NCD requests that the attached statement be entered into the
Committee record of testimony. It outlines ten key principles on
equitable health care and background information from our studies and
reports over the past eight years, as evidence of consumers' and
advocates' support for the enactment of comprehensive and enforceable
legislation that also protects patients' rights. We hope that the
information will be useful to you and your colleagues on the Health
Subcommittee. Further, we would offer the expertise of the members of
NCD and would welcome the opportunity to meet with you and your staff
at some time in the near future to further explore ways that our
leadership can be of assistance to you as you move forward with
legislative inquiry and proposals that impact all Americans, including
people with disabilities.
Sincerely,
Marca Bristo
Chairperson
Enclosure
Patients' Rights Principles
Scope: A patients' bill of rights should cover all 161 million
Americans with private insurance.
Access to Specialists: All patients, especially patients with
disabilities and chronic conditions, should have timely access to
specialty physicians, providers, and facilities.
Point-of-Service Option: Health plans that only cover services if
they are obtained through a closed network of providers should be
required to offer enrollees a ``point-of-service option'' at the time
of enrollment which includes reasonable cost sharing.
Continuity of Care for Patients with Ongoing, Chronic Conditions:
In order to minimize disruption in service, consumers should have the
right to an appropriate transitional period (such as 90 days) from the
date of a provider's termination from a network plan, with limited
exceptions. This transitional period should be further extended to
include enrollees with terminal illnesses, pregnancies, or those who
are receiving institutional or inpatient care at the time of the change
in providers.
Timely and Accurate Comparative Information: All patients,
particularly persons with disabilities, should have access to accurate,
easily understandable information to assist them in making informed
decisions about their health plans, professionals, and facilities.
Right to Participate in Treatment Decisions and to Refuse
Treatment: Patients should be fully informed about treatment options,
told about risks and benefits, and participate to the maximum extent
possible in decisions that impact their mental and physical health
care. Patients should have the right to refuse treatment.
Elimination of ``Gag Clauses'': Physicians and other health care
professionals must not be restricted from advising a patient on his or
her health care options, regardless of whether the patients' health
plan covers such treatment or the treatment is expensive. Financial
incentives designed to limit communication between the patient and
provider should also be prohibited.
Access to Clinical Trials: Patients with disabilities and chronic
illnesses should have access to the full range, and all phases of,
federally approved clinical trials. Any routine patient costs incurred
for items and services furnished in connection with participation in a
clinical trial should be covered by the health plan.
Strong Grievance Procedures: All consumers, including persons with
disabilities, should have access to a fair, unbiased, and timely
internal appeals process as well as an independent external appeals
mechanism to address health plan grievances and to help govern
decisions about medically necessary treatments. Health plan liability
provisions should strike a balance between holding plans accountable
for the medical decisions they make and not creating significant
increases in insurance premiums.
Emergency Room Protections: Patients should have a right to visit
the closest emergency room in an emergency situation, according to the
``prudent layperson'' standard, without prior plan authorization.
Drug Formularies: Health plans should be required to disclose to
providers and beneficiaries formulary restrictions and provide
exceptions when a non-formulary drug alternative is medically
indicated. In addition, plans should include physicians and pharmacists
in the development of drug formularies.
Position Paper on Patients' Bill of Rights Legislation
March 30, 2001
Introduction
The National Council on Disability (``NCD'') is an independent
federal agency that advises the President and Congress on issues
affecting 54 million Americans with mental and physical disabilities.
NCD's overall purpose is to promote policies, programs, practices, and
procedures that guarantee equal opportunity for all individuals with
disabilities, regardless of the nature or severity of the disability;
and to empower individuals with disabilities to achieve economic self-
sufficiency, independent living, inclusion, and integration into all
aspects of society.
NCD has been engaged in the issue of improving access to and the
quality of health care for people with disabilities for many years. NCD
has prepared several reports in the past that address these important
issues. These reports include:
Sharing the Risk and Ensuring Independence: A Disability
Perspective on Access to Health Insurance and Health-Related
Services. March 4, 1993. This report identifies the major
issues of access to health insurance and health-related
services for people with disabilities.
Making Health Care Reform Work for Americans with
Disabilities. July 26, 1994. This report summarizes the
identified health care priorities of over 130 witnesses and
hundreds of participants in five ``town meetings'' held by NCD
during March and April of 1994.
Achieving Independence: The Challenge for the 21st Century.
July 26, 1996. Achieving Independence is the follow-up report
to NCD's 1986 report Toward Independence. It offers an
assessment of the nation's progress in achieving equal
opportunity and empowerment for people with disabilities in the
last decade.
From Privilege to Rights: People Labeled with Psychiatric
Disabilities Speak for Themselves. January 20, 2000. In this
report, NCD develops ten core recommendations for improving the
care of people with psychiatric disabilities.
National Disability Policy: A Progress Report. May 15, 2000.
This report is a series of public policy recommendations
designed to advance the inclusion, empowerment, and
independence of people with disabilities.
As part of its health care agenda, NCD has long supported the
enactment of a comprehensive and enforceable patients' bill of rights.
As far back as 1996, NCD argued that ``all managed care plans,
including those that service only privately insured persons, should be
required to meet federal standards to ensure access to specialty care,
adequate grievance and appeals procedures . . . and equitable
utilization review criteria.'' Achieving Independence (July 1996).
People with disabilities and chronic illnesses are often high users of
health care services and devices and, as such, are a litmus test for
assessing the effectiveness of patient rights legislation. In other
words, if a patient's bill of rights protects people with disabilities,
it is bound to adequately protect the rights of all health care
consumers.
NCD has identified the aspects of a patients' bill of rights that
are most important to people with disabilities and chronic illnesses.
NCD does not endorse any specific legislation. Rather, NCD supports any
approach that meets the principles that are identified and described in
this document. It is our hope that members of Congress and their staff,
other federal and state policymakers, and people with disabilities view
this position paper as a valuable tool as Congress continues to debate
this important issue.
NCD Managed Care Reform Principles
Scope of Application of the Law
People with disabilities and chronic conditions have historically
faced major hurdles in obtaining and maintaining private health
insurance. However, NCD's 1993 report Perspectives on Access to Health
Insurance and Health-Related Services, found that while private health
insurance is difficult to obtain and keep for many in the disability
community, particularly in the individual insurance market, it is still
the major source of coverage for people with disabilities.
A patients' bill of rights, therefore, should cover all 161 million
individuals with private health insurance in order to ensure that its
protections apply to all people with disabilities. Application of the
patients' bill of rights to all privately insured persons will have the
added benefit of establishing a uniform set of protections on which all
privately insured Americans can rely, regardless of their employer or
the state laws in which they reside. This includes the 48 million
Americans who receive group health coverage from their employers who
self-insure as well as the additional 113 million Americans whose group
or individual health coverage is subject to state law.
Timely Access to Specialty Care
The health care needs of people with disabilities and chronic
conditions are best met when the focus is on maintenance of function,
rather than on acute or post-episodic care. People with disabilities
often require ongoing access to specialist physicians, specialty
facilities, and other specialty health care providers to maintain the
functional ability required to be independent, participating members of
society. In addition, the debilitating impact of many primary and
secondary disabilities could be reduced or even avoided if specialty
services and supports were available to people with disabilities on a
routine basis.
NCD recognized in its 1996 report Achieving Independence: The
Challenge for the 21st Century the importance of federal
standards to ensure access to specialty care for people with
disabilities in managed care health plans. In fact, improving access to
specialty care is the highest priority for the disability community in
the patients' bill of rights. NCD reiterates its belief that all
patients, especially individuals with disabilities, should have timely
access to specialized medical services if they need them. Health plans
should ensure that the specialist is appropriate to the specific
condition of the patient. If an appropriate specialist is not available
within a plan's network of providers, the plan should be required to
refer the patient to an appropriate specialist outside the provider
network for no additional cost to the patient.
Point-of-Service Option
NCD's 1994 report ``Making Health Care Reform Work for Americans
with Disabilities'' detailed the challenge people with disabilities
face when seeking appropriate medical care. Many adults with
disabilities and parents of children with disabilities have testified
that it takes them years to locate medical professionals who are
competent in treating a particular disability. Any ``closed panel''
managed care plan should be required to offer a ``point-of service
option'' to all enrollees, thereby permitting a person with a
disability or chronic condition to access the patient's specialist of
choice with reasonable cost sharing. The availability of a point-of-
service option is especially important to people with disabilities and
chronic illnesses, since the specialized medical care they require is
often not available within the existing network of a plan's providers.
Continuity of Care
All health plans should be required to ensure the continuity of
care for patients with ongoing, chronic conditions. This can be
achieved by permitting an enrollee to continue to visit his or her
network of providers for a reasonable period of time after a health
plan discontinues operations in a particular geographic region or
disrupts its provider network in other ways. In order to minimize the
impact of these disruptions, consumers should have a right to an
appropriate transitional period (such as 90 days) from the date of a
provider's termination from a network plan, except in cases where a
provider is placing patients in harm's way through poor quality care.
This transitional period should be further extended for enrollees with
terminal illnesses, pregnancies, or those who are receiving
institutional or inpatient care, through death, birth and discharge
respectively.
Standing Referrals
Finally, consumers with complex or chronic conditions who require
frequent specialty care should have the right to ``standing referrals''
without having to continually return to their primary care physician to
secure approval. Standing referrals can be made as part of a treatment
plan developed by the specialist, primary care provider and patient,
and approved by the health plan. Timely, and in some cases, direct
access to specialty care will help foster higher quality, more
efficient, and cost-effective health care of people with disabilities
and chronic conditions.
Timely and Accurate Comparative Information
In a market-based health care system, reliable and useful
information is critical to effective decision-making. NCD strongly
believes that all health care consumers, particularly people with
disabilities, must have access to accurate, easily understood
information to assist them in making informed decisions about their
health plans, professionals, and facilities. All consumer-directed
information should be available in alternative formats that meet the
accessibility and communication needs of people with disabilities so
that they are able to fully participate in this decision-making
process. Health plans and providers should be required to disclose
whether their facilities and operations are in compliance with the
Americans with Disabilities Act of 1990.
Health plans and providers should be required to provide certain
information upon enrollment and additional information upon request of
the plan enrollee. Plans should provide information such as covered
benefits and exclusions, lifetime and annual limitations in benefits
and cost sharing requirements. Health care providers and facilities
should provide information including experience rates in treating
specific illnesses or injuries and accreditation status. Health care
professionals should provide information including education and board-
certification status. Health plans should also be required to disclose
to providers and consumers drug formulary restrictions as well as
exceptions when a non-formulary drug alternative is medically
indicated. In addition, plans should include physicians and pharmacists
in the development of drug formularies.
Right to Participate in Treatment Decisions and to Refuse Treatment
NCD believes that all patients should be respected and afforded the
opportunity to fully participate in decisions related to their health
care or the care of a person under their legal guardianship. Patients
should be provided with easily understood information on all
appropriate treatment options and should be told about the risks and
benefits of each treatment, including mental health services. All
patients should also have the right to refuse treatment. Finally,
health plans should establish specific policies assisting people with
sensory, mental and other disabilities in order to maximize the degree
to which they are active participants in the decisions related to their
health care, including training health care providers to be aware of
how to communicate with people with developmental, psychiatric and
sensory disabilities.
Elimination of ``Gag Clauses'': NCD believes that health plans
should be explicitly prohibited from restricting patient-provider
communications in any manner. Providers should be allowed to inform
patients of all medical options, not just the least expensive, without
retribution from the plan. In addition, financial incentives designed
to restrict patient-provider communications should be prohibited.
Providers should also be permitted to advocate on behalf of their
patients, without retribution from the health plan.
Emergency Room Protections
Like all health care consumers, people with disabilities and
chronic illnesses are in need of emergency room services on occasion.
NCD supports a patients' bill of rights that gives patients the right
to visit the closest emergency room in an emergency situation,
according to the ``prudent layperson'' standard. In other words, if a
``prudent layperson'' without medical training believes that he or she
is experiencing an emergency medical condition and visits an emergency
room, the health plan should be required to pay for this care. Prior
authorization for emergency room care under the prudent layperson
standard should be prohibited and the patient should pay no more for an
out-of-network emergency room visit than if the emergency provider were
in the plan's network. Emergency room patient protections should extend
to crisis intervention and emergency mental health services provided to
people with acute mental illness.
Access to Clinical Trials
The Medicare program recently announced that it would pay for the
routine costs associated with a beneficiary's participation in a
clinical trial. ``Routine'' costs include items and services that
Medicare would normally pay for, such as room and board during a
hospital stay and health care services to treat the side effects and
complications of the clinical trial regimen.
NCD believes that this benefit should be extended to all patients
who are covered by private insurance. Patients with chronic illnesses
must have access to the full range, and all phases of, federally
approved clinical trials. Therefore, individuals with life-threatening
or serious illnesses for which no standard treatment is available
should be allowed to participate in clinical trials. Any routine
patient care costs incurred in connection with participation in the
clinical trial should be covered by the health plan.
Strong Grievance Procedures
All patients, including people with disabilities, should have
access to a fair and timely internal appeals process as well as an
independent, unbiased external appeals mechanism to address health plan
grievances and to help govern decisions about medically necessary
treatments. Health plans should be held responsible for providing
patients with timely, understandable notice of decisions to deny,
reduce, or terminate treatment and the reasons for these decisions. All
information about the grievance process should also be made available
in alternative formats so that effective communication with enrollees
with disabilities is ensured. NCD also believes that patients should
have access to a binding independent external review process after they
have exhausted the plan's internal appeals processes, except in cases
of urgently needed care.
Health Plan Liability
NCD is aware that the health plan liability issue has confounded
Congress for several years and has led to an unacceptable delay in
enacting a comprehensive and enforceable patients' bill of rights. On
the other hand, as stated in its recent Progress Reports, NCD believes
that without adequate remedies, there will be no meaningful patient
rights. Health plans should be held accountable for the medical
decisions they make, especially when those decisions harm patients or
lead to the patient's death. However, the remedies within the patients'
bill of rights should instill accountability in the system without
leading to sharp spikes in the cost of health insurance, thereby
increasing the number of uninsured Americans. Therefore, NCD will
support any thoughtful, balanced approach to health plan liability that
holds plans accountable for medical decisions without excessively
driving up plan costs.
Patient Rights that Require Additional Attention
There are a number of issues that impact the disability community
significantly but have not been included in the patient rights debate
to date for a variety of reasons. While NCD is very interested in
seeing a patients' bill of rights signed into law at the earliest
possible opportunity, the following issues are of such great importance
to the disability community that NCD will continue to work for their
inclusion in the short and long term:
Benefits/Medical Necessity Definition
One of the greatest threats to the quality of health care of people
with disabilities is the restrictive trend in the breadth of most
health plans' benefit packages. This trend can be seen in two primary
ways: The imposition of limitations and exclusions in benefits and the
way in which the term ``medical necessity'' is defined by the health
plan. All of the major patients' rights bills completely omit this
important issue. NCD believes that any definition of ``medical
necessity'' should include the concept of not only improving, but
maintaining the functional capacity of the patient, taking into account
consumer choice, consumer lifestyle, and the long-term effectiveness of
the intervention, service, or device under consideration.
In addition, Medicare and Medicaid provide for in-home services
critical for people with disabilities, such as physical, occupational,
and speech/language therapy, as well as home health aides. Such
coverage is often absent or inadequate in private health insurance.
Also, most private health plans do not provide coverage for assistive
technologies, which are crucial in helping people with disabilities
return to work, improve their functional abilities, and live more
active and independent lives. Finally, private health plans should be
no more restrictive of mental health benefits than they are for
physical health benefits. Private health plans should include these
kinds of benefits for them to be truly responsive to the needs of all
people with disabilities.
Privacy and Confidentiality of Medical Records
NCD believes that patients should be able to communicate with their
health care providers in confidence and should have the confidentiality
of their individually identifiable health care information protected.
Patients should have unfettered access to their own medical records and
be able to request amendments to their records to correct mistakes.
ADA Application to Health Plans
NCD believes that health plans and providers with rare exception
are subject to Title III of the Americans with Disabilities Act
(``ADA''), including the requirement to provide reasonable
modifications to their policies, practices, and procedures under Title
III of the ADA. In addition, private health plans and providers that
receive Medicare and Medicaid funds for the treatment of these
beneficiaries are required to meet the nondiscrimination provisions of
the Rehabilitation Act of 1973, which apply to federal contractors and
recipients of federal funds. Full implementation of these laws by
health plans and providers could significantly improve access to and
quality of health care for people with disabilities and chronic
illnesses.
Statement of Thomas W. Self, San Diego, California; Linda P. Self, San
Diego, California; Miles J. Zaremski, Chicago, Illinois
Dear Members of the Subcommittee on Health of the Committee on Ways
and Means:
We hope that our remarks will be able to be part of your record of
the hearing that will occur on patient protections in managed care,
scheduled for April 24, 2001. While we have endeavored to communicate
with several of you, either by letter, phone or by in person
conferences with you or your staff over the last several months, we
feel our individual, yet collective, wisdom on the underpinnings of
this area before you is critical and important. Two of us have a unique
experience not shared by other health care providers in our country.
The other has considerable expertise based on experience and writings
on managed care liability, what our courts have done with ERISA
preemption, and what is likely to be done in the future by our judicial
system. [One final introductory remark: while this letter comes from
the three of us, we refer to each of us in the third person.]
Our plea is not as Democrats, Republicans or members of other
political parties. Our plea comes to you as a physician, a nurse and a
lawyer. Our plea comes to you as people who are deeply and passionately
concerned about the quality and delivery of health care for our
patients, all patients, and the legal and legislative efforts to do the
right thing--insure fairness and accountability for patients by those
delivering health care.
To quote a famous line from a motion picture of some years back,
the battle cry of patients is, ``We are mad as hell and we are not
going to take it anymore!'' Patients and providers alike should not be
subject to the grave inequities foisted upon them by what managed care
has done to the delivery of health care. Linda and Tom Self are
fitting, and perhaps, unfortunately, unique examples of what has to
occur before managed care moguls will listen.
As a doctor who ran afoul of managed care and was actually fired
for spending ``too much time'' with his patients, Dr. Self is unique in
that he fought back against the medical group that fired him and won a
three month court battle. This jury victory is the first of its kind in
the nation, and was profiled by ABC's ``20/20'' on August 6, 1999.
Dr. Self's experience, where managed care profit motives
infiltrated and contaminated the professional ethics of his medical
group, shows clearly the murky and often brutal influences wielded by
HMOs which have only profit, not quality of care, as their goal. In
this scenario, patients become ``cost units'' and doctor is pitted
against doctor, undermining the very foundation of medicine and
throwing to the winds the Hippocratic axiom, ``first of all do no
harm.''
With the art and science of medicine controlled by managed care
forces, it is not surprising that the number of patient casualties
continues to soar. The ability of a clerk with no medical training, in
the employ of a payor thousands of miles away, to overrule the medical
decisions of a trained physician is allowed in no other profession, but
is the standard of practice under managed care! Futhermore, this type
of employee and also the managed care entity which acts as the
puppeteer behind the clerk are completely immune from any
accountability when their faulty medical decisions cause patient harm.
Amazingly, that this situation is allowed to continue is also unique to
the medical profession. This is unfair and inequitable!
As an experienced diagnostician with a reputation of being thorough
and careful, Dr. Self was criticized and ultimately fired under managed
care as a physician who ordered ``too many costly tests'' and as a
``provider'' who ``does not understand how managed care works.'' Sadly,
this situation continues nationwide as more and more experienced
doctors are unjustly censored, dropped from managed care plans or fired
from medical groups anxious to conform to managed care dictates,
leaving their needy patients feeling confused, frightened and
abandoned.
This pillage and waste of medical resources (under the yoke of
managed care which destroys the very quality and continuity so
necessary for a positive outcome from medical treatment) is running
rampant in America. Dr. Self and his wife have put their lives and
their careers on the line to combat the wrongs caused by the health
care delivery system called managed care. Now, representing, in
microcosm, all health care providers, they turn to you as lawmakers,
representing all past, present and future patients, to stop the horror
and carnage by the HMOs by voting for S. 283 (McCain-Kennedy Bill) and
restoring quality, decency and humanity to health care for the American
people.
Linda Self, a registered nurse, is, like her husband, a healer.
Always active in charitable activities, Linda returned to nursing full
time 4 years ago to work with her husband when he was fired. After
being away from nursing for many years, she realized that her
compassion and love for the art of healing was now even stronger,
especially after raising two children, one of whom had a serious
illness. Devoted to caring for children with chronic diseases and
giving support to their families, she was shocked and unprepared for
the massive de-emphasis on patient care that had been fostered by the
health plans. Linda realized that her commitment to people had not
changed nor had the needs of sick children--what had changed, and
changed for the worse, was the indifference to patient suffering held
by the managed care system. Linda realized that in order to care for
sick patients and their families in the 90's, there is, and was going
to be, a constant battle with the managed care bureaucracy involving
patient referrals, treatment authorizations and, above all, the daily
need to appeal treatment plans denied patients by their health plans.
As if in microcosm to what other private medical practitioners
face, this office ``busy work,'' in addition to the requirements of
providing necessary medical support to sick patients, has created
enormous frustrations among health care providers as well as increasing
the costs of running a practice. Conversely, the reimbursements from
the health plans have steadily diminished, regardless of the severity
of the patient's illness or the increased amount of physician and
nursing time expended.
Also, in her dual role as nurse and office administrator, Linda
works daily to insure that patients receive the appropriate medical
care they need and deserve without suffering the indignity and
humiliation of having their health plans ignore, delay, or deny health
care that is not only medically necessary, but for which the patient
has already paid insurance premiums. This endless paper shuffle
mandated by managed care with its cost cutting mentality further
decreases the amount of time that a nurse can devote to patient care.
This dilemma has driven competent and caring paraprofessionals from the
medical field in droves, thereby further weakening the overall quality
of medical care needed by patients nationwide. The resulting upswing in
poorly trained, undedicated office personnel hired to replace the
nursing flight has created a hemorrhage in medical care delivery which,
if not stopped, will hasten the demise of American medicine as far as
any vestige of quality of care which still remains.
Meanwhile, Linda has continued to fight side by side with her
husband, not only during their lengthy legal battle and during a three
month trial, but to preserve the quality of their practice against the
current tide of managed care. Her recent experiences with managed care
atrocities have been etched in her memory and will be forever carried
as emotional scars. Linda fervently believes that no physician or nurse
should ever be faced with the ordeal that she and her husband have had
to endure to insure quality of care for patients.
Patients must not be considered as commodities to be bartered by
HMOs; payors must be held fully and judicially accountable wherever
their pressures on physicians to curtail tests, delay or deny treatment
plans, or by clogging the wheels of medicine with mountains of
paperwork cause patient harm. Therefore, Linda Self, speaking as a
mother, a patient, and a nurse brings her experiences to your
Subcommittee (through this Statement) and adds her plea to those of Dr.
Self and Mr. Zaremski to bring dignity and salvation to the practice of
medicine. Those in your Subcommittee, listen, as we have done for
years, to the voices of the grass roots populace when they cry out for
help and relief from a medical system that harms, not heals.
Additionally, the three of us have seen and heard the disingenuous
of opponents of what patients really need and which is embodied in the
McCain-Kennedy bill as introduced earlier this year. We have heard that
lifting the ERISA preemption will cause employers to terminate health
plans for their employees, that lifting this so-called shield will
cause premiums to increase and that trial lawyer will gain an avenue to
sue. To all of this, and with all the passion we can muster, we bellow,
``absolutely not!''
First, the ERISA law that was enacted in 1974 had nothing to do
with shielding managed care plans from accountability for their medical
decision-making process. There has never been anything in the
legislative history on ERISA having to do with this subject. Further,
the ERISA preemption was court created, and those same courts are
peeling away at an ever rapidly pace, on a case-by-case basis, what was
never intended in the first place by the ERISA law.
Next, allowing for accountability by health plans to patients, as
contained in S. 283, provides for real equity in distributing
responsibility to all those persons and entities involved in the
medical decision-making process.
As for increased litigation, the status quo of what plans know
their exposure to be now will not change in any significant way. Please
know that our courts are continually eroding the ability of health
plans to escape exposure by finding valid legal theories known as
ageny, breach of fiduciary duties, even using the Americans With
Disability Act.
Also, realize that S. 283 provides for accountability and
responsibility of health plans in state court according to state laws.
This jurisdiction is where this area of responsibility and
accountability for health plans should reside. For example, if your
state has caps on the amount of money that an injured person could
receive, such as in California, then those caps would equally apply to
exposures faced by health plans.
And if the Texas state statute on holding HMOs responsible is any
example, fears of increased litigation are totally without any basis in
fact. In three plus years, there have been a handful of cases filed
against health plans in that state. Also, nine states have now passed
legislation recently, providing that HMOs can be held accountable for
their medical decision-making. Moreover, the U.S. Supreme Court, with
its Travelers Insurance Company and Herdrich cases, opines the
proposition that medical professional liability cases, like ones plans
are involved in, belong in state court.
In conclusion, we implore each and every one of you to do the right
thing. Consider your conscience and critically think about each and
every American who has been, or will be, a patient in our health care
delivery system. Remember that a person's health is unlike anything
that can be bought, traded, negotiated or sold. Don't hold hostage
human sickness and injury to a ``bottom line'' mentality. Or, as a
colleague in medicine wrote Dr. Self after his jury verdict, ``The
rewards of being a doctor are largely measured in identifying what is
best for the patient and then having to do what one believes is correct
and best for the patient.'' Finally, recall a quotation by Margaret
Mead; ``Never doubt that a small group of dedicated people can change
the world. Indeed, it is the only thing that ever has.'' In supporting
a bill like S. 283, each one of you will heed this message, and,
conversely, insure that the tendrils of greed in managed care will not
be able to find fertile soil in which to take root and grow.
Thank you for allowing this statement to be presented to your
Subcommittee.
Highland Park, Illinois 60035
April 23, 2001
The Honorable Nancy L. Johnson (R-Ct.)
Chairwoman, Subcommittee on Health
Committee on Ways and Means
United States House of Representatives
1102 Longworth House Office Building
Washington, DC 20515
Attn.: Allison Giles
Re: April 24, 2001 hearing on Patient Protections in Managed Care
Dear Chairwoman Johnson:
Please take that which follows as a written statement I would like
to be included for the printed record of the hearing. Thank you.
On your website's ADVISORY page, Chairwoman Johnson is quoted as
being encouraged by the principles President Bush put forth to guide
legislators in order to enact a real patients bill of rights. One of
the those principles was to have patients go to federal court after an
independent medical review, and should include appropriate employer
protection with caps on damages.
While not an attorney who represents injured patients, I am someone
who has tolled for 28 years in the health care law field. I also am an
author, lecturer, law school teacher, and leader/participant within
medicolegal organizations. I have also studied and researched issues
within patient rights legislation for a couple of years now,
particularly the liability features; consequently, I believe I come to
you with sufficient credentials to say what I am about to state.
With all due respect to our President, his ``principle'' of having
disputes involving health plans resolved in a federal forum is fanciful
thinking, a waste of millions of taxpayer dollars, and not in touch
with judicial reality at all. Let me articulate.
Cases in which health plans would be involved are of one of three
types: those strictly involving a plan benefit, i.e. whether the
contract that an enrollee has covers a procedure or treatment or not;
(2) whether the issue is ``mixed,'' that is, whether there are
questions of eligibility and medical treatment decisions; and (3)
whether the issue involves solely medical decision making in which the
plan participated. The first of these three options is easy to resolve:
its adjudication remains in federal court, as it has since the ERISA
law was enacted back in 1974. The other two types of accountability
belong in state court according to state law. Why? Because the United
States Supreme Court has provided nearly explicit statements to this
effect. In both the Travelers Insurance Co. and Herdrich decisions, the
high court has stated, respectively, that ERISA does not preempt state
law that regulates the provision of adequate medical treatment, and
that an HMO's mixed eligibility and treatment decision implicates a
state law for medical malpractice, not an ERISA cause of action for
fiduciary breach.
And, on April 2, 2001, the Pennsylvania Supreme Court came down
with its decision in Pappas v. Asbel, 2001 Pa. Lexis 687. This is the
first state supreme court that has decided health plan liability in
light of the Herdrich and Travelers decisions. The Pennsylvania court
held that a ``mixed'' case as presented by the facts there was not
preempted by ERISA.
Next, how could any person in Congress condone litigating a
noncoverage matter against a health plan in federal court, knowing that
such cases belong in state court (per what the Supreme Court has
already stated), but also realizing that everyone else involved in the
very same medical decision-making process as the plan, like the
hospital, doctor and nurse, for example, remains culpable in state
court according to state law. Do you really want to ``tie up'' precious
federal judicial resources when state courts have been adjudicating
these type matters for at least a couple of centuries and when state
courts will still be needed to adjudicate claims against the doctors,
hospitals, nurses, and so forth. The ``principle'' that President Bush
has announced about a federal forum would also mean that for every
occurrence involving a health plan and medical decision-making, there
would have to be two suits, not just one!
Finally, from what I have read in the press about employer
liability, the thought of the ``boy crying wolf'' comes to mind. If
anyone reads the language in the pending bill in the Senate, the
employer group is cloaked with almost absolute immunity--the only
exception is when that employer makes medical decisions just like a
plan would . . . or even a physician. Moreover, from my review of the
legal literature/cases, there is not one reported legal case in which
an employer has been held liable for medical malpractice.
Thank you for listening. I trust the Subcommittee will find that
which is contained herein informative and useful to what it ultimately
decides to do.
Sincerely,
Miles J. Zaremski
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