C O N T E N T S

Advisory of April 17, 2001, announcing the hearing

American Medical Association, Richard F. Corlin, M.D.

Association of Trial Lawyers of America, and Robinson, Calcagnie & Robinson, Sharon J. Arkin

National Association of Manufacturers, and Ashland, Inc., Michael J. Toohey

National Partnership for Women & Families, Judith L. Lichtman

Patient Access Coalition, American College of Cardiology, and Indiana University School of Medicine, Douglas P. Zipes, M.D.

American Psychological Association, statement

National Council on Disability, Marca Bristo, letter and attachments

Self, Thomas W., San Diego, CA; Linda P. Self, San Diego, CA; and Miles J. Zaremski, Chicago, IL; joint statement

Zaremski, Miles J., Highland Park, IL, letter

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:]

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:]

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 Nickels 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:]

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:]

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:]

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 consider considerably, especially in the movement towards 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:]

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:]

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:]

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 narrow 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. Okay. 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. Okay. 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. Okay. 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. Okay. 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.

Secondly, 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 time frame 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. Okay.

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. Okay. 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 secondly, 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 lastly, 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 decision-making?

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 decision-making 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 decision-making 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 businessman. 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.

Secondly, 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:]

American Psychological Association, statement

National Council on Disability, Marca Bristo, letter and attachments

Self, Thomas W., San Diego, CA; Linda P. Self, San Diego, CA; and Miles J. Zaremski, Chicago, IL; joint statement

Zaremski, Miles J., Highland Park, IL, letter