Born with a painful jaw deformity that worsened considerably during her teen years, Molly Phelan faced what many consider the defining problem of the managed health care age: She needed treatment, but her plan refused to cover it.
Phelan's parents had leverage, however, that relatively few Americans do: They could file a lawsuit seeking unlimited damages from their HMO. When the Ojai family finally threatened to use this weapon, four years into their fight, the HMO agreed within weeks to pay for the surgery.
"With no fear of a suit," said Molly's father, Jim Phelan, "we would never have gotten the operation."
As early as this week, the Senate is expected to vote to extend at least some of that leverage to virtually all 180 million people in this country enrolled in health plans. But critical questions confronting lawmakers are how broad the right to sue should be and whether patients should face limits on what they can collect in damages.
To some degree, it is a measure of patients' frustrations with HMOs that Washington seems at all inclined to expose the groups to new lawsuits. But health care measures have a long history of dying over details, and the current bill's survival hinges on whether lawmakers can agree on the parameters of liability.
The issue should come to a head this week, as the Senate resumes its debate on a sweeping patients' bill of rights. Sponsored by Sens. Edward M. Kennedy (D-Mass.), John Edwards (D-N.C.) and John McCain (R-Ariz.), the legislation would carve out a host of new protections for patients, including guaranteed access to specialists and emergency room care.
But the most controversial aspect of the legislation would greatly expand the number of people able to sue their HMOs.
Sponsors of the bill insist that insurers should be exposed to unlimited damages for pain and suffering, as well as punitive penalties of as much as $5 million. But Republicans are rallying around--and President Bush is insisting upon--a rival proposal to cap all noneconomic damages at $500,000.
Senate moderates, including Olympia J. Snowe (R-Maine) and John B. Breaux (D-La.), are expected to offer amendments that would try to split the difference.
Beyond Washington, people like the Phelans, the attorneys who represent them and the HMOs they're fighting say that how Congress settles the matter could make all the difference.
Mark Hiepler, the Phelans' attorney, said that whatever dollar figure Congress sets immediately will be used by insurers to calculate their potential liability, which in turn will influence their decisions concerning which treatment disputes to contest.
"The best leverage the patient has against a billion-dollar HMO is the unknown of a potential jury verdict," Hiepler said. Had the Phelans confronted a liability cap, "there would have been much greater incentive for the HMO to fight this girl forever."
The HMO industry argues that allowing unlimited damages--or even setting multimillion-dollar caps--will help attorneys like Hiepler far more than it will aid patients.
"Giving trial lawyers what they want--high jury verdicts--gives little to individual beneficiaries," said Karen Ignagni, president of the American Assn. of Health Plans. Indeed, "liability is the focus" of the industry's multimillion-dollar campaign to defeat the legislation, she added. "There's no question about it."
If a patients' bill becomes law this year, it will supplant the existing set of rules that effectively divides those in health plans into two camps: those who can sue their plans for unlimited damages and those who can't.
Congress never intended to create the disparity, which stems from a 1974 law that was designed to shield corporate pension plans from a confusing patchwork of state regulations. Court interpretations of that law--known as the Employee Retirement Income Security Act, or ERISA--have defined health insurance as an employee benefit that is exempt from state laws and state courts. Those rulings on the law have created a liability shield for private health plans.
As a result, roughly 75% of people in this country with health insurance--those who get their coverage through private companies--are blocked from suing their plans for anything beyond the cost of the denied treatment. But the other 25%, mainly those who get their coverage through government jobs and individuals who buy their own insurance, are exempted from the ERISA restrictions.
Few Americans are even aware that this disparity exists. But those who try to sue run into it immediately, and their divergent experiences illustrate the stakes of reform.
The Phelans could sue for unlimited damages because they got their health insurance through the local school district, where Molly's mother, Penny, worked as a fifth-grade teacher. (Health Net, the Phelans' HMO, declined to discuss the case.)
But patients who get their coverage through private employers often find it almost impossible to get attorneys to take their cases. The potential payoff is minuscule, and the HMO has little incentive to settle.
Even patients who believe they are exempt from ERISA often find that they spend much of their legal resources proving that they are.
Sandra Shifrin, a 62-year-old St. Louis resident, has been battling ovarian cancer for nearly six years. When her prognosis worsened last year, specialists at a Houston cancer clinic told her that her best hope was to undergo a $200,000 regimen of high-dose chemotherapy and stem cell transplants. But her insurer, Group Health Plan, balked. So Shifrin and her husband, Eugene, sued.
The Shifrins were sure they were exempt from ERISA because they buy their own insurance, paying full premiums on a plan offered by Eugene Shifrin's former employer, McDonnell Douglas. They were elated last month when a state court issued a preliminary injunction ordering GHP to pay for Shifrin's cancer treatment.
But the HMO swiftly filed to have the suit moved to federal court and argued that because the Shifrins got their coverage through a corporate plan it was subject to ERISA.
The Shifrins now wait anxiously for a ruling on this question, hoping it comes before Sandra Shifrin's cancer flares up again. But the very notion that their fight for treatment could turn on an obscure regulatory ruling has left them embittered.
"To tell you the truth, I'm Republican by nature and vote conservative most of the time," said Eugene Shifrin, 67. "But I'm definitely for the patients' bill of rights."
An attorney who represents GHP in the case declined to comment.
The HMO industry has mounted an all-out assault on the patients' bill before the Senate, flooding the capital with television, radio and newspaper ads. The spots warn that the legislation will only drive up insurance costs, making premiums more expensive and leaving more people unable to afford health care coverage.
Industry lobbyists argue that reform should instead focus on creating mechanisms for resolving disputes, such as independent review panels staffed by doctors, which would issue binding decisions when HMOs and patients disagree.
"An independent review process would allow [patients] to get the care they need as quickly as possible," Ignagni said. "In a litigation lottery, maybe patients win, maybe they lose."
The Kennedy-McCain-Edwards bill and a rival Republican-backed measure offered by Sens. Bill Frist of Tennessee and Breaux both would require patients to pursue disputes through review panels before turning to the courts.
But the two plans diverge sharply over the extent to which patients should be able to turn to courts as a last resort.
Breaux said that he and Frist likely will introduce an amendment Monday that would set a single cap--somewhere between the $500,000 for noneconomic damages favored by Republicans and the $5 million ceiling on punitive awards built into the Democrats' bill--for both pain-and-suffering and punitive damages.
"It's key to deliver a bill the president will sign," Breaux said, adding that a number of moderate Democrats have told him they are prepared to support a compromise on caps.
But there likely will be other approaches offered. Snowe has talked to McCain about an amendment that would set a sliding scale for liability caps. An aide to Snowe said that one scenario would limit the total of punitive and pain-and-suffering damages to twice the amount of economic damages. The aide stressed that no agreement has been reached.
The Phelans and the Shifrins said they are closely following the debate.
"It's still an emotional issue for me," said Penny Phelan, whose daughter--now in college--has healed from the jaw surgery she had last year. Just talking about it, she said, "I find my heart racing."
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Patients' Rights Bills
A final Senate vote may occur later this week on a patients' bill of rights measure. Two versions of the bill are under consideration, one sponsored by Edward M. Kennedy (D-Mass.), John McCain (R-Ariz.) and John Edwards (D-N.C.), the other by Bill Frist (R-Tenn.) and John B. Breaux (D-La.)
About 180 million people
About 170 million people
Guarantees patient access to emergecy room care, certain specialists and clinical trials of experimental drugs.
Similar, but does not cover participation in federal Food and Drug Administration clinical trials.
Patients required to pursue disputes through independent review panels before filing lawsuits.
Similar, but patients are required to exhaust the independent review process before filing suit for monetary damages.
RIGHT TO SUE
Patients can sue health plans in state courts for medical decisions and in federal courts for administrative matters, including questions of coverage.
Would not allow suits in state courts. Patients can file suit in federal courts if health plan fails to comply with decision of independent review panel.
No limit on economic or pain-and-suffering damages. Allows civil penalties similar to punitive damages up to $5 million.
Unlimited economic damages in federal court, but would not allow punitive damages and caps pain-and-suffering damages at $500,000.
Would raise premiums an estimated 4.2%.
Would raise premiums an estimated 2.9%.
Backed by most Democrats.
Backed by many Republicans, including President Bush.
Source: Congressional Budget Office