Democrats Push Tough Health Care Standards

The Clinton administration, seeking to strengthen the hand of consumers when managed care plans deny them treatment, is seriously considering measures that would not only set tough federal standards for every health insurance plan in the country but also establish an independent appeals process to enforce the standards.

The measures, included in draft legislation written by House and Senate Democrats, would follow through on President Clinton’s call for a patients’ “bill of rights” in the new era of managed health care.

More controversial still, the draft legislation would allow consumers to sue for damages under state law if a health plan’s improper denial of care resulted in death, injury or economic loss. Clinton has not determined whether to support this provision, which is vehemently opposed by the managed care industry and the nation’s employers.

“The president is extremely encouraged that the Democrats are working together on a consumer protection bill, and he looks forward to reviewing the final legislation,” said Chris Jennings, assistant to the president for health policy.

The legislation, which is to be introduced when Congress returns from its Presidents Day recess next week, is aimed particularly at managed care plans, many of which control costs by limiting access to medical specialists and expensive tests and treatments. Managed care plans, which include health maintenance organizations, now serve as many as 75% of Americans who have health insurance.

Current law sets only minimal standards for many employer-provided health plans and virtually shields those plans from paying damages in lawsuits for harmful medical decisions.

Managed care plans and employer groups are up in arms over the Democrats’ draft legislation, particularly any loosening of today’s strict limits on legal liability. They fear the results would be higher health care costs, frivolous lawsuits and congressional micro-management of health policy.

“Do you want to spend money on lawyers or on health care?” said Julie Cantor-Weinberg, associate director of employee benefits for the National Assn. of Manufacturers. “These [health care] decisions could be appealed until the cows come home.”

At the heart of the debate is what recourse a patient should have when a health plan refuses to pay for a treatment, especially when the refusal results in death or injury.

The 1974 Employment Retirement Income Security Act (ERISA), which now covers the employer-based health plans of 125 million people, bars a wide variety of patients’ claims for the consequences of denied treatment. And for consumers who want to appeal coverage decisions, the law provides only for an internal grievance procedure, a process that can sometimes take weeks when medical emergencies cannot wait that long.

The law, which was intended to enable companies operating in many states to offer the same health insurance plan to all employees without having to cope with a multiplicity of state laws, initially applied to only a handful of employers’ health plans, and managed care had barely peeked over the horizon. Now managed care plans dominate the marketplace.

Plan for a Speedy Appeal Process

The portion of the Democrats’ draft bill that could have the greatest effect on consumers is the guarantee that patients would have recourse to a speedy independent appeals process that would assure consumers that disagreements with their health plan would be reviewed by experts with no connection to the plan.

“The one thing you hear from constituents is that they are interested in having the right to appeal their health plan’s decisions,” said Sen. Joseph I. Lieberman, (D-Conn.) “They want to know there is somebody up above who, if they are denied care, will hear their argument.”

The Medicare program for the elderly has such an appeals system for participants in managed care plans, and only a tiny number of participants appeal their health plan’s decisions.

At most, there is an average of 2.5 appeals per 1,000 members per year at a cost of 50 cents per member per year, according to David A. Richardson, Jr., president of the Center for Health Dispute Resolution, which runs Medicare’s appeals program. Of the complaints that are appealed, about one-third are decided in favor of the patient, Richardson said.

“There are literally millions of decisions that get made about these benefits all the time, so there are going to be mistakes,” Richardson said. “We’re not trying to second-guess anybody, but we try to provide a way to correct what is often a random event,” he said.

As managed care has proliferated for the elderly, the number of appeals has risen sharply, although still only a tiny percentage of decisions ever reach Richardson. Now the rest of the population is clamoring for a similar option.

Beyond appeals, the key issue is how consumers can seek redress when treatment is denied and damage results. While ERISA bars most claims for such injuries based on state law, it does offer a very limited right to sue the health plan in federal court.

But because ERISA allows recovery only of the value of the denied treatment, the federal right gives little satisfaction to injured patients. A woman who is improperly denied a mammogram and later develops breast cancer, for example, can recover only the cost of the mammogram.

Court Finds Plaintiff Had ‘No Remedy’

Congress is hearing horror stories about helpless individuals caught in a system whose critics say has made the bottom line more important than patients’ health.

Take the case of Florence Corcoran, a Louisiana woman who had a high-risk pregnancy for which her doctor prescribed hospital bed rest during her eighth month. Her first child, a healthy girl, had been delivered safely after a similar regimen.

But her United Health Care insurance plan refused to pay for hospital care and instead offered 10 hours a day of home care. At a time when no nurse was on duty, the fetus went into distress and died before it was born, according to court papers.

Corcoran and her husband sued. The U.S. 5th Circuit Court of Appeals sympathized with her but said it was powerless.

“The Corcorans have no remedy, state or federal, for what may have been a serious mistake,” the court said in its 1992 opinion. “Moreover if the cost of compliance [with medical standards] need not be factored into companies’ cost of doing business, bad medical judgments will end up being cost-free to the plans,” the court said.

Managed-care companies argue that, given the tens of millions of people covered by plans, these cases are anomalous. They also point out that doctors in traditional fee-for-service medicine make mistakes too. The difference is that fee-for-service doctors are liable for their decisions.

“In any health care setting, things go wrong, and it’s tragic when that happens,” said Karen Ignagni, president of the American Assn. of Health Plans. “But the tort system doesn’t do a very good job of consumer protection.”

Some judges have become so alarmed, however, that they have departed from the usual judicial posture of staying aloof from the legislative process. Powerless to help victims of health plans’ policies, they have called on Congress to change the law.

Federal District Judge William G. Young in Massachusetts wrote this about a case in which the denial of medical care appeared to have contributed to the suicide of the father of four children:

“This case is extraordinarily troubling, but even more disturbing is the failure of Congress to amend a statute . . . that has gone conspicuously awry from its original intent. Does anybody care?”

Many say they do. Sen. Edward M. Kennedy (D-Mass.) and Rep. John D. Dingell (D-Mich.) are the lead authors of the legislation to establish federal standards for health insurance plans and an independent appeals process to enforce them. Sen. Richard Durbin (D-Ill.) added the provision to make the plans liable under state law, and Rep. Charlie Norwood (R-Ga.) has 200 sponsors for a separate bill to accomplish the same thing.

But many Republican lawmakers argue that the Democrats’ position is unrealistic.

“Cost is a very real issue,” said Sen. Don Nickles (R-Okla.). “We don’t want prices to rise; I don’t think families can afford it. . . . Higher prices and more uninsured Americans does not sound like better quality to me.”

The White House is keeping its options open. “We believe that the consumer protections should have meaningful enforcement, but we haven’t determined what is the best way to give that,” Jennings said.

Meanwhile, the Labor Department has argued in court papers that ERISA should be interpreted so that state laws governing medical malpractice apply to physicians and the managed care plans they work for. If treatment is delayed or denied through decisions based on what is or is not covered by the plan, however, the Labor Department acknowledges that ERISA would preempt state laws.

Doctors in managed care plans, some of whom are facing malpractice lawsuits for decisions that they say are driven by the health plans they serve rather than by their own medical judgment, are lobbying hard to make the plans bear the liability.

“If the managed care companies are held accountable for their medical decisions as doctors and hospitals are, they will no longer just look at the bottom line in terms of saving money, but also in terms of the quality of care,” said Durbin, a former medical practice lawyer who has represented both doctors and patients.

Business Group Calls Bill ‘Wrongheaded’

Business groups worry that not only the health plans but also the employers could be sued.

“No rational employer would expose his or her business to that liability,” said Neil Trautwein, manager of health care policy for the U.S. Chamber of Commerce. “Employers most likely could not withstand the increase in health premiums that will come as a result of additional liability against health plans. . . . We think it is wholly wrongheaded.”

Even some supporters of boosting patients’ rights agree that opening plans to lawsuits, at the very least, creates enormous uncertainty for the business community.

“From a cost perspective there would be a huge unknown if there were this risk of lawsuits,” said Nicole Tapay, an assistant professor of health policy at Georgetown University. “But right now patients face injuries or even death with little or no opportunity for redress.”

Consumer groups say that employers and health plans inflate the potential costs of liability. “Maybe it means there will be less malpractice,” said Judy Waxman, director of government relations at Families USA, “because the plans will be more conscious of enforcing quality.”