Stage Is Set for a Patients’ Rights Bill That Works

Partisan bickering in Washington has prevented the passage of a badly needed “patients’ bill of rights” for years. If the Senate now approves the terms of the bill passed last week by the House, as it should, the fundamental promise of patient protection legislation finally can be realized.

Earlier this summer, the Senate approved patient protection legislation, but President Bush threatened a veto, and the bill languished in the House until an unexpected agreement between Bush and the leading congressional patients’ advocate, Rep. Charlie Norwood (R-Ga.), opened the way for House passage.

The Bush-Norwood compromise strikes a balance between competing positions on the most contentious issue holding up passage of the legislation: the right of patients to sue HMOs and other health insurers for the denial of needed care.

When we as consumers purchase health insurance, either on our own or through our employer, we don’t know what type of illnesses might befall us or what treatment we will need. Consequently, insurers cannot tell us in advance what care they will provide. Instead, they promise to provide all care that is “medically necessary.”

Conflict arises when a patient becomes ill and wants a treatment that he or his doctor thinks is medically necessary but the insurer does not.

The issue that divides lawmakers is what recourse the patient should have when his request for treatment is denied.

All of the key players in the legislative drama now agree that the patient should have a right to “external review” of any treatment request denied by an insurer--that is, for evaluation of the request by an independent panel. This is a sensible provision, as insurers have a financial incentive to deny expensive care after they have collected premiums, and this can cloud their judgment concerning what treatment is medically appropriate.

A right to external review is not enough, however, unless the insurers have reason to follow the independent panel’s recommendation when it calls for the provision of a treatment.

Legislation passed in June by the Democratic Senate would permit aggrieved patients to sue insurers in state court for pain and suffering caused by an improper denial of necessary care as well as for punitive damages. The president threatened to veto any law that provides such a broad remedy on the grounds that it would encourage frivolous lawsuits.

Under the Bush-Norwood compromise, patients would be permitted to sue their insurers in state court, but they would be limited by a new federal law capping pain-and-suffering and punitive damages at $1.5 million each. Also, the evidentiary burden that patients would have to meet to win in court would be high if the independent reviewers ruled in favor of the insurer.

Many Democrats and some Republicans claim that these provisions would deny a meaningful remedy to aggrieved patients.

What is most important is not the fate of the relatively few patients who actually might sue their insurers but rather what effect that the threat of lawsuits would have on insurers when they make treatment decisions concerning the millions of patients who will never sue. Legislation should give insurers a financial incentive to provide all needed and cost-effective care, but it should also bolster insurers’ resolve to deny care that is unnecessary or not cost-effective.

Consumers of health insurance suffer in obvious ways when too little care is provided, but we also suffer in the form of ever-increasing insurance premiums when too much care is provided.

The Bush-Norwood compromise strikes a balance. It is critical that injured patients be permitted to sue insurers who provide too little care, because this keeps insurers honest. But it is also sensible to place some limits on recoveries. Otherwise, insurers fearful of astronomical judgments would provide nearly every service their patients’ request, whether cost-effective or not. This would transport us back to the world of health insurance prior to the emergence of health maintenance organizations, in which all services were readily available to patients with private insurance but there were virtually no controls on costs. The likely result would not only be higher health insurance costs but also more employers deciding that they cannot afford to provide coverage to their employees.

It is impossible for anyone to say with certainty whether $3 million per injured patient is the “right” amount at which to cap insurer liability. But the idea of balancing patients’ rights to sue with some limits on insurer liability is sound, and after a decade of failed attempts by Congress to enact meaningful patient protection legislation, $3 million is a figure that is certainly close enough.

When the House and Senate negotiators meet in conference committee this fall to work out the differences between their two bills, they should agree to the Bush-Norwood compromise and end the legislative deadlock.