Searching for a Cure to What Ails Managed Care System

The House of Representatives, barely letting the ink dry on a California law regulating managed care, is preparing to vote this week on a comparable bill extending patients’ rights to millions more Americans.

Many of them are in California itself. The new state law does not apply to the 2 million Californians who are in self-insured health plans--those where the employer pays for its workers’ health costs directly, rather than using an insurer to shoulder the risk. The new federal law would.

And the California law might not survive a court test. A federal judge in Texas has voided that state’s managed care law on grounds that a much weaker federal law prevails. The California law is subject to the same attack, although the Texas ruling may be overturned on appeal.

Perhaps the most far-reaching feature of the bill that the House will debate this week is its requirement that patients be able to appeal to an independent review board when their health plans deny, delay or modify the treatment they seek.

The new California law includes a similar provision. But many states require independent appeals only in limited circumstances, and 20 states have no such requirement at all.

One of the states guaranteeing only a limited appeal process is North Carolina, where tiny Anna Jarnagin is battling a rare protein allergy--and her parents are battling their health maintenance organization.

Because Anna’s allergy leaves her unable to keep down breast milk or soy formula, her doctors put her on a special formula made of amino acids. But a month’s supply costs about $550 and United Health Care, which runs her parents’ HMO, refused to pay for what it called a food supplement.

Experts regard the Jarnagins’ case as a textbook example of why an independent system is necessary. If an independent board denied their appeal, the Jarnagins would at least be confident that the opinion had not been tainted by the board’s financial stake in the insurer. And if the Jarnagins won, that might cause the insurer to take a hard look at its policies.

“External review is very good for the gray areas,” said Samuel Warburton, a family physician at Aetna/US Healthcare.

Interest in independent appeals has mounted in lock step with the managed-care industry, which has grown in the 1990s because it promised to arrest soaring medical costs. Increasingly, consumers have wondered if managed-care plans make decisions, not to enhance their patients’ well-being, but to cut their own costs.

Twenty years ago, most patients got whatever treatment their doctors recommended. When insurers refused to cover a treatment or service, it was after the fact. If there was an issue between patient and insurer, it was over how much the patient would have to pay, not whether the treatment would be delivered.

Today’s managed care plans try to control costs at the front end--before people receive treatment. At worst, patients may be permanently injured or even die because they fail to get treatment ultimately deemed medically necessary.

This system has sent consumers’ anxiety soaring. In a 1998 survey by the Palo Alto-based Kaiser Family Foundation and Harvard University, 59% of Americans said they worried that their health plans would put their own bottom lines ahead of the health of their patients.

“Giving people an independent appeal gets at the heart of what people are worried about in managed care: The doctor thinks a treatment is medically necessary and the plan says no and the patient has nowhere to turn,” said Larry Leavitt, a senior policy analyst at the nonprofit Kaiser Foundation.

The independent appeal boards in the 30 states that require them typically have overturned treatment denials in one-third to one-half of the cases that have reached them. But many consumers in these states do not know that they can appeal, according to Karen Politz, a senior policy analyst at the Institute for Healthcare Policy and Research at Georgetown University.

Those who appeal “are often confused about what they are supposed to do,” she said. “And generally they are already sick, so they don’t have much energy.”

American health-care providers and consumers now face a baffling maze of governmental regulations. One purpose of the federal legislation is to bring some sense to today’s crazy quilt.

About 48 million consumers nationwide work for employers that self-insure and are governed solely by federal law, which does not require an independent appeal process. Most consumers are not even aware of whether they are in self-insured plans. There are at least 2 million such consumers in California and, despite the new California law, they will have guaranteed access to independent review only if Congress changes federal law.

Across the country, many insurers have already put appeal systems in place voluntarily or are poised to do so, although many of these systems are less rigorous than would be required under the federal legislation. Most voluntary systems to date have used outside reviewers only for experimental treatments--if they used them at all.

In July, Aetna/US Healthcare expanded its program to cover disputes over all types of treatment, provided that appeals involved at least $500 worth of services. United Healthcare restricts reviewers to decisions involving medical necessity and asks the reviewers to choose the cheaper when there are two treatments that achieve the same goal.

Other health plans have more accessible appeal programs. For instance, Healthnet automatically sends to external review cases in which patients have been denied coverage by internal review.

One of the most aggressive of the nation’s appeal programs is attached to the federal Medicare program of health insurance for the elderly and disabled. When Medicare denies coverage for particular treatments, it informs patients of their right to internal appeals. Patients who lose at this level are automatically referred to the independent Center for Health Dispute Resolution.

As a result, Medicare patients are far more likely than others to pursue external appeals. Of Medicare’s external appeals, 60% involve questions of whether the program covers the desired treatment.

This is precisely the question at the heart of Spencer and Kristi Jarnagin’s case against United Healthcare, which declines to pay for the $550-per-month infant formula for Anna Jarnagin on grounds that it is not medication.

United Healthcare has told the Jarnagins that they are ineligible for the company’s voluntary appeal process, which is available only in cases in which the patient and the plan disagree over whether treatments are medically necessary or whether they are experimental.

In the company’s view, Anna’s case is neither, because the Jarnagins’ contract specifically rules out coverage for “food supplements” and “medical supplies purchased over the counter.”

“Food is something that really doesn’t belong in health care insurance,” said Lee Newcomer, United Healthcare’s medical oncologist and senior vice president for health policy. “We were trying to balance how to keep health insurance affordable and how to cover truly disastrous things.”

Spencer Jarnagin, a wallpaper hanger, argues that Anna’s formula, Neocate, is really a digestive medicine.

“Her condition is life-threatening, and when your doctor tells you Neocate is what you need, then it’s a treatment,” he said. “I don’t see what the Neocate supplements. This is a little baby. She doesn’t have teeth. She can’t eat anything else.”

In the absence of state or federal legislation requiring a broad-based independent appeal, the Jarnagins have had to rely on their own resources and help from their community. A state program put them in touch with local charities that supplied enough formula to last a week and Catholic social ministries sent over a couple of cases.

“People are so nice. But you exhaust all those programs pretty quick,” Spencer Jarnagin said. “I’m not out to get the insurance company to pay for everything. We just want them to pay their part. . . . We’ll just cut corners. It’s our little girl. But what about people who have even less than us?”

APPEAL inside A12 foto

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* RANKS OF UNINSURED SWELL

The number of people lacking health coverage continued to rise despite good economy. A13