Statement of Richard F. Corlin, M.D., President-Elect, American Medical Association
Testimony Before the Subcommittee on Health
of the House Committee on Ways and Means
Hearing on Patient Protections in Managed Care
April 24, 2001
Madam Chairman and members of the Subcommittee, my name is Richard F. Corlin, MD. I am the President-Elect of the American Medical Association (AMA), and formerly served as the Speaker of the AMA's House of Delegates. I am a practicing gastroenterologist from Santa Monica, California. On behalf of the three hundred thousand physician and medical student members of the AMA, I appreciate the opportunity to comment on patient protections in managed care.
Close to Agreement
The AMA firmly believes that virtually all patient protections are interrelated. Ensuring that patients have information about accessible grievance and appeals procedures, for instance, would mean little if the standards that the review entities would apply are arbitrarily defined by the plans. Similarly, guaranteeing that patients have access to specialty care, would be virtually meaningless if plans could arbitrarily determine that the specialty treatment was not medically necessary. And even though we may discuss only one or two patients' rights in a particular forum, we should realize that it would be inappropriate to barter or trade one set of patient rights at the expense of other legitimate patient rights. Patients deserve to have protected all of the rights which fairness and justice require.
The good news is that, as Chairman Johnson has said, there truly is "significant agreement on both sides of the aisle on the underlying patient protections, such as access to OB/GYNs, access to specialists, prudent layperson standard for emergency rooms, and disclosure of plan information." Virtually everyone now agrees that any patient protection legislation considered by Congress should include certain basic rights which all patients deserve and want. Even the details of those rights in most of the various competing bills are extraordinarily similar. We are strongly encouraged by this progress and by President Bush's Principles for a Bipartisan Patients' Bill of Rights, which include these protections.
Allow us to focus, therefore, on what--as Chairman Johnson has called--the "more vexing issue": how to ensure that health plans can be held accountable for their decisions.
An Issue of Fundamental Fairness
The Employee Retirement Income Security Act of 1974 (ERISA) established an elaborate regulatory system intended to ensure that employees receive the pension benefits which their employers have promised them. The statute was enacted in response to widespread allegations of pension fund mismanagement and fraud. In addition to preventing these abuses, the statute sought to create uniform regulatory requirements that would govern the administration of pension and benefit plans, thereby encouraging employers to offer employees these benefits. The intention of the bill's sponsors therefore was to ensure that employers doing business in more than one state could design financial benefits plans that could operate nationwide and would not face conflicting state requirements. To override then current state laws that sought to regulate pension plans, Congress incorporated broad preemption language into ERISA.
Most of the remedies included in ERISA were also geared toward protecting plan assets. ERISA's appeals procedures and civil enforcement mechanisms were all directed at ensuring that plan fiduciaries handled plan funds properly and prudently for the plan participants' benefit. The drafters of ERISA never anticipated or intended the bill to protect plan participants who sought to access services, such as medical care, as part of a health care benefits package.
The drafters of ERISA also could not have anticipated the eventual effects of ERISA and its preemption provision because of the dramatic changes the health care market itself has undergone. In 1974, the health care delivery system was entirely different from today's market. Over the last several decades, we have seen a transformation in employer-sponsored health care plans from traditionally insured or "fee-for-service" to managed care. This transformation has given rise to new types of arrangements and relationships for financing and delivering health care that were not foreseen by the framers of ERISA in 1974.
A Matter of Fundamental Fairness
In the era of managed care, health plans increasingly make decisions that directly affect the care that patients receive. Illustrations of these practices include: inappropriately limiting access to physicians through restricted networks (blocking patient access to specialists); refusing to cover or delaying needed medical services (transplants, transfusions, therapies); drawing treatment protocols too narrowly (patients discharged from a hospital prematurely); offering payment incentives or creating deterrents to care (disciplining physicians who refer patients for necessary medical care); and discouraging physicians from fully discussing health plan treatment options (gag rules and gag practices).
These non-financial functions were never intended to be covered or regulated by ERISA. Instead, the states typically have regulated the practice of medicine and, more generally, the delivery of health care. Even the federal courts have repeatedly noted that the regulation of quality of care has traditionally been a matter of state law, and that quality of care standards should be enforced in state courts.
Nevertheless, under many circumstances, ERISA currently preempts state-based causes of action, thereby preventing injured patients from recovering against health plans that have acted wrongfully. As a result, ERISA's federal preemption of state liability actions leads to harsh consequences for many patients harmed by their health plans. The federal judiciary has also observed the incongruity and inherent unfairness resulting from ERISA preemption, with several federal judges calling on Congress to amend ERISA. One case involved a 41-year-old father of four who went on a drinking binge and committed suicide. After his death, his widow said that the health plan had refused to approve a detoxification program after an earlier suicide attempt. Unable even to look at the merits of the case, the U.S. District Judge threw it out of court, saying that ERISA gave the health plan a "shield of immunity." The judge went on to say that "the tragic events set forth in Diane Andrews-Clarke'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."(1) According to Judge Young, "the shield of near absolute immunity now provided by ERISA simply cannot be justified…. Even more disturbing to this Court is the failure of Congress to amend a statute that, due to the changing realities of the modern health care system, has gone conspicuously awry from its original intent."(2)
Allowing plans to continue to escape liability for negligent decision-making through this statutory loophole leaves patients in serious jeopardy. If ERISA plans know they can avoid liability due to ERISA preemption of state law, they have no incentive to act responsibly and provide needed and contracted for medical care.
Consider, for example, some evidence presented in a lawsuit against one of the nation's largest insurance companies last year. The case involved a deputy district attorney, Mr. Goodrich, who died of stomach cancer after trying for 2 ½ years to get his insurance company to approve the cancer treatment that the insurance company's own physicians had recommended. During the trial, a training video of the insurance company was admitted into evidence. The training film showed one of the company's attorneys instructing claims handlers, and telling them "[a]s a practical matter, you really may have to do more on a non-ERISA plan to protect against some of the legal exposure we're talking about."(3)
The bottom line is that patients who receive health benefits through ERISA plans are currently denied the same rights and remedies as patients in non-ERISA plan. This is a simple question of fairness. It is also a matter of the public's will and desire. A vast majority of Americans believe that health plans should be legally accountable for negligent decisions that injure or kill patients.(4) We strongly agree.
While some courts continue to view ERISA as preempting all state-based causes of action against health plans, many courts have allowed injured patients' complaints against health plans to survive ERISA preemption scrutiny. In fact, most ERISA experts acknowledge a definite trend in federal courts whereby the courts are deciding that causes of action against health plans based on medical decisions or "mixed" medical-eligibility decisions are not preempted by ERISA. In other words, injured patients or the estates of deceased patients may increasingly pursue legal remedies in state courts under state law. Legislative ERISA reform, however, is necessary to ensure that all patients are protected.
A Developing Trend
Because of the existing "preemption" provision of ERISA, patients enrolled in ERISA plans lack the remedies currently available to patients participating in non-ERISA plans. Many courts have recognized this problem. In Corcoran v. United Healthcare,(5) for instance, a patient who had a high-risk pregnancy was advised by her physician to be hospitalized as she approached her due date. The plan, however, denied the request and instead authorized nursing home care. When the patient was at the nursing home and the nurse was off-duty, the fetus went into distress and died. The woman sued the plan alleging that the plan was negligent in not hospitalizing her. The federal court, however, decided that because the woman's claim involved a decision about the availability of hospitalization it was actually a "benefits" decision, and consequently preempted by ERISA. As a result, the woman could only proceed under ERISA, which provides as the woman's sole remedy the benefits sought--in this case pre-delivery hospitalization. The woman therefore could obtain no real legal remedy under either ERISA or state law.
Several other federal courts, however, have taken the position that ERISA was never intended to preempt injured patients from suing managed care plans for negligence simply because the plans contract with private employers or unions. These courts have looked to the preemption doctrine as articulated in the Pilot Life Insurance Co. v. Dedeaux(6) and Metropolitan Life Insurance Co. v. Taylor(7) cases, and then focused on the Dukes v. U.S. Healthcare, Inc.(8) case. In Dukes, the Third U.S. Circuit Court of Appeals acknowledged a previously identified distinction between "quality of care" decisions and "quantity of benefits" claims, and found that state law claims addressing the quality of care that the enrollees received were outside the scope of ERISA remedies and were not preempted.
After the Dukes case, a federal court in Connecticut found in Moscovitch v. Danbury Hospital(9) that a claim against an ERISA plan in which the enrollee challenged the medical and psychiatric decisions of the plan administrator was not preempted by ERISA, despite the plan's allegations to the contrary. The enrollee had on two occasions attempted suicide and was hospitalized both times. Determined to be suicidal on a third occasion, the patient was again hospitalized. Deciding that hospitalization was no longer medically necessary, the plan administrator on this occasion transferred the enrollee from the hospital to a treatment center, where he committed suicide.
Similarly, federal and state courts in Pennsylvania, Missouri, and Illinois, in the Tiemann v. U.S. Healthcare, Inc.(10) and Pappas v. Asbel,(11) Harris v. Deaconess Health Services Corp.,(12) and Crum v. Health Alliance-Midwest, Inc.,(13) respectively, all found that plan participants and beneficiaries could bring their negligence claims against the health plans in state court--ERISA did not preempt them. In Harris, a plan participant had sought authorization for hospitalization, for what he thought was appendicitis. The plan denied him admission and his appendix ruptured. The participant suffered permanent physical injury as a result. In the recent Pappas case, a managed care plan physician denied one of the plan enrollees permission for admission to a spinal cord trauma center. The patient now suffers from permanent quadriplegia resulting from an abscess compressing his spine. The Pennsylvania Supreme Court found that the plan's decision which determined where and when the patient's epidural abscess would be treated, constituted a "mixed eligibility and treatment decision" and was not preempted by ERISA. In Crum, a plan participant believed that he may be suffering a heart attack and sought admission to an emergency room. The plan's advisory nurses twice denied him permission for emergency room services, and he died of a heart attack.
As we have stated, however, this trend remains in its nascent stage and without clear leadership from Congress, the court rulings will remain inconsistent and unpredictable. Many patients will continue to have no legal remedies when their health plans act negligently and cause them injury or death.
A Complementary Solution
Under the principle of federalism, the federal and state governments maintain a complementary relationship; the states retain all powers not delegated to the federal government. The Tenth Amendment of our U.S. Constitution reiterates this principle by assuring that "the powers not delegated to the United States" nor prohibited to the states "are reserved to the states respectively, or to the people."
The political theory underlying this judicial philosophy was that the local or state governments were best equipped to address the needs of their citizens. The Founders were also generally concerned about an excessively powerful, excessively centralized national government. As a result, many of the Founders sought to ensure that the national government would be empowered to legislate only in those areas in which the separate states were incompetent.
Historically, the states have retained jurisdiction to govern the practice of medicine and, more generally, the delivery of health care for their citizens. The states, for instance, retain virtually sole authority to license and regulate health care professionals and institutions, as well as to provide remedies to citizens who are harmed by the negligent acts of those practicing medicine. When health plans, insurance companies, or even employers, make medical treatment decisions--and in essence, practice medicine--they should therefore be held accountable under state law, in state courts.
Recent statements by the Judicial Conference of the United States, which is headed by Chief Justice Rehnquist, prove instructive on this issue. In a March 2000 letter to the Chairman of the conference committee on managed care legislation passed in the 106th Congress, the Judicial Conference stated that: "Personal injury claims arising from the provision or denial of medical treatment have historically been governed by state tort law, and suits on such claims have traditionally and satisfactorily been resolved primarily in the state court system. . . . 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." (Emphasis added).
The Judicial Conference urged Congress "to provide that, in any managed care legislation agreed upon, the state courts be the primary forum for the resolution of personal injury claims arising from the denial of health care benefits." (Emphasis added).
Recent federal case law reflects the Judicial Conference's policy favoring state court jurisdiction over cases regarding medical judgments. The Supreme Court in last year's Pegram v. Herdrich(14) case stated that health plan coverage decisions often involve medical and administrative components which are "inextricably mixed," and the "eligibility decisions cannot be untangled from physicians' judgements about reasonable medical treatment." The Court expressly declined to find a "fiduciary malpractice claim" under ERISA, and noted that permitting such a cause of action would create the unattractive possibility of ERISA preemption of state medical malpractice laws. The Supreme Court's reasoning therefore supports the contention that state courts remain the appropriate forum for holding health plans accountable. Many lower federal courts have made similar statements, acknowledging that states retain "their traditional police powers in regulating the quality of health care."(15)
Not only does the federal judicial branch--including the U.S. Supreme Court--recognize the importance of states retaining jurisdiction over the practice of medicine, the states also are trying to exercise their authority over the regulation of medical care. Every state legislature has passed laws governing the delivery of health care services to its citizens, whether pertaining to external appeal rights, utilization review, access to emergency services, or some other patient protection. Eight states have passed laws expressly authorizing statutory causes of action against health plans, in addition to the state "common law" actions already recognized by their courts.
Texas, for instance, in 1997 passed a statute that creates a new state cause of action against health insurance carriers, HMOs, and other managed care entities who breach their duty to exercise ordinary care when making health care treatment decisions, and the breach causes harm to the patient. An additional seven (7) states--Arizona, California, Georgia, Louisiana, Maine, Oklahoma, and Washington--have passed similar health plan accountability statutes.
We strongly urge Congress therefore to recognize the legitimate authority of states and incorporate a bifurcated cause of action into a bipartisan patient protection bill. Such a bill would need to remove ERISA preemption in a targeted fashion, permitting states to pass or retain their own legislation which would protect the legitimate interests of their citizens. Additionally, removing ERISA preemption in this manner would preserve prior federal court decisions that have recognized state common law causes of action.
The "split" between the federal and state causes of action must be made according to whether the plan exercised medical judgment when making its decision. The judiciary has repeatedly relied on that criteria, and so should Congress. When a health plan intervenes in the medical decision-making process, and imposes its medical judgment on the patient, the plan is engaging in the practice of medicine and should be held accountable under state law. If the plan has not made a medical judgment and has made simply an eligibility decision, the claim should be brought in federal court.
Because of the gross inadequacy of ERISA remedies, an acceptable patients' bill of rights must modify ERISA to also permit a meaningful federal cause of action when an enrollee has been injured by a health plan's decision that did not involve medical judgment. As we mentioned above, ERISA was enacted to protect pension plan and other employee benefit financial assets. ERISA needs to be updated to reflect the current managed care market and protect plan participants and beneficiaries when their group health plans act negligently and cause them harm.
Some advocates of plan accountability have suggested that patient protection legislation should provide only a federal cause of action. A federal cause of action alone however would wipe out those state statutes as well as state common law rights which have provided citizens with state law remedies against health plans for negligent medical decision-making. Additionally it would prevent forty-two (42) other state legislatures from passing similar patient protection legislation in the future. The AMA firmly believes that Congress should not override the will of the states by passing a federal-only cause of action.
Creating solely a federal remedy for health plan and employer misconduct would also violate the most basic principles of federalism. Chief Justice Rehnquist has warned that "Congress should commit itself to conserving the federal courts as a distinctive judicial forum of limited jurisdiction in our system of federalism. . . . [M]atters that can be adequately handled by states should be left to them . . . ."(16) (Emphasis added).
To provide all patients with adequate remedies, Congress must enact federal legislation permitting patients to seek legal recourse against managed care plans under state law when the plans' negligent medical decisions result in death or injury.
Controlling Litigation
A bifurcated cause of action would grant all Americans who receive employer-based health benefits an extremely important patient protection, which they both need and desire. This protection could, and should, be coupled with other critical patient rights that would directly benefit patients while both directly and indirectly benefiting health plans.
As we have noted, many federal courts have begun to allow injured patients to bring causes of action against health plans in state courts. The pleadings and legal theories for these cases will increasingly mimic the pleadings and theories of those cases that have successfully withstood ERISA preemption scrutiny. As a result, managed care organizations will most likely become increasingly subject to liability--despite ERISA--for improper claims decisions that result in patient injury or death.
When patients have been successful in bringing legal actions against ERISA plans, current law provides few protections for the plans. In many jurisdictions, patients would be able to proceed directly to court without appealing internally or externally, and theoretically, could proceed against their employers, as well. Critical to any acceptable patient protection bill, therefore, are provisions granting employers protection against unwarranted liability and independent external appeals provisions that would eliminate unnecessary litigation. With these provisions, health plans and employers would also certainly benefit from the bill.
Restricting Negligence Actions
Crucial to an acceptable patients' bill of rights are a grievance system and an internal and independent external appeals provision. Without a grievance system, disgruntled patients with legitimate, though perhaps minor, complaints against their health plans would be required to go to court to resolve their disputes. And patients who are seeking medical care and have serious coverage disputes with their health plans, need and want timely coverage determinations and medical treatment, not lengthy and expensive litigation.
We therefore consider it essential that a patient protection bill provide patients with access to a grievance system and an internal and independent external appeals process, which would effectively eliminate any need for litigation.
An acceptable bill, for instance, could require patients first to appeal coverage denials directly to reviewers selected by their plans. The plans could control whether an internal review would be conducted, but their decision would have to be timely and account for the medical exigencies of the specific case. If the plan chose not to waive this requirement, the patient would be obligated to complete the internal review before proceeding to an external appeal.External appeals should be independent, binding on the plan, timely and conducted by qualified physicians (MDs/DOs) of the appropriate specialty. To ensure that their decisions are truly independent, plan definitions of "medically necessary" and "investigational and experimental treatment" must not be binding on the external reviewers. An effective independent appeals process would resolve virtually all of the egregious cases--like Corcoran--without the need for litigation. We firmly believe that with access to efficient, effective, and truly independent external appeals entities, patients will rarely need to go to court.
Employer Liability
The insurance industry and some other opponents of patient protection legislation have alleged that a patient protection bill would place employers in jeopardy. They claim that by holding health plans accountable for their own negligence, the legislation would somehow expand employers' liability. These concerns, though understandable, can easily be addressed and remedied in a bipartisan patients' bill of rights.
A patient protection bill can offer real and meaningful protection to employers and other plan sponsors. The bill for example could expressly state that it does not authorize a cause of action against an employer or other plan sponsor, and only an employer or plan sponsor that directly participates in making an incorrect medical determination for an individual claim decision could be held accountable. Consequently, only if an employer or plan sponsor directly participated in making an incorrect medical decision for an individual claim decision under its group health plan, and that decision resulted in injury or wrongful death, could it be exposed to a state law claim. Even then, to recover, the injured patient would have to prove: (1) that the employer directly participated in making an incorrect medical determination on that particular claim for benefits, (2) that individual decision caused the patient's injury or death, and then (3) that the employer's conduct also met all elements of an applicable state law cause of action.
Some opponents of patient protection legislation have spuriously alleged that employers will be held liable for simply selecting the plans, under this scenario. We therefore believe that the bill should explicitly state that employers and other plan sponsors cannot be held liable for fulfilling their traditional roles as employers and plan sponsors. The bill should provide "safe harbors," for instance, for the following activities: (I) any participation by the employer or other plan sponsor in the selection of the group health plan or health insurance coverage involved or the third party administrator or other agent; (II) any engagement by the employer or other plan sponsor in any cost-benefit analysis undertaken in connection with the selection of, or continued maintenance of, the plan or coverage involved; (III) any participation by the employer or other plan sponsor in the process of creating, continuing, modifying, or terminating the plan or any benefit under the plan, if such process was not substantially focused solely on the particular situation of the participant or beneficiary; and (IV) any participation by the employer or other plan sponsor in the design of any benefit under the plan.
Additionally, because many employers and other plan sponsors seek to advocate for their employees during the review and appeals processes, an acceptable patient protection bill should explicitly protect employers and plan sponsors functioning as patient advocates as well.
Some advocates of patient protection legislation have suggested that a federal bill should mirror the Texas "accountability" statute. In fact, the provisions we have identified would provide employers the same if not greater protection than what is offered in the Texas law. Both our principles and the Texas statute protect employers, but neither specifically excludes from liability employers who "play doctor" and improperly intervene in medical decisions. We note, though, that our proposed principles also expressly protect employers functioning as employers.
We anticipate that some employer advocacy groups will continue to allege nevertheless that employers would, despite these employer protections, still be exposed to liability under such a bill. Interestingly, in our many discussions with many of these organizations, we and the sponsors of several patients' rights bills have explicitly requested alternative language that the employer groups believe would adequately address their concerns. In every instance, these organizations have failed even to propose such language. After our repeated and diligent efforts to arrive at an agreement, we have begun to think that some of the organizations are not genuinely interested in solving what they claim is a potential problem.
We acknowledge that if an employer "plays doctor" and directly participates in making an incorrect medical determination on a particular claim for benefits, the employer could potentially be held liable in state court. In such an extraordinarily rare situation of an employer directly interfering in a specific medical treatment decision and injuring a patient, should it not be exposed to liability? President Bush apparently thinks so, since he stated in his Principles for a Bipartisan Patients' Bill of Rights that he would hold those employers accountable "who retain responsibility for and make final medical decisions."
Exhaustion of Remedies
In order to ensure that the external appeals process can effectively reduce litigation while encouraging timely coverage decisions, patients must be required to utilize the appeals process. Patients should therefore have to exhaust all appropriate administrative remedies before going to court.
The purpose of the appeals process is to ensure that coverage disputes may be resolved in a timely fashion, so that patients may obtain the medical treatment to which they are entitled before they unnecessarily suffer harm. If, because of the health plan's conduct, they suffer serious and irreparable harm or die, they or their estates should not be required to exhaust all administrative appeals. At that point, the patient is no longer seeking the medical treatment, but instead desires and needs court protection. Consequently, the patient or the patient's estate should not be required to spend additional time and money unnecessarily in an appeals process. To complete the external appeals process under those circumstances would be futile. The patient should at that time be allowed access to the court system.
Texas law includes a very similar exception in its appeals process. Under Texas law, a person is permitted to bypass the independent review if harm has already occurred.
The AMA recognizes the current controversy regarding the extent to which exceptions to an exhaustion of administrative remedies requirement are appropriate. As with various other specific provisions of patient protection legislation, the AMA is willing to work with this Subcommittee to find new ways to address the various parties' concerns with an exhaustion requirement and any applicable exceptions.
Cost
In the past, many opponents of health plan accountability have alleged that federal patient protection legislation would cause health care premiums to skyrocket. Although no cost reports are presently available for pending federal patients' rights legislation, the fact remains that if plans were forced to accept responsibility for their decisions, costs would not be significantly affected.
We are aware for instance that in Texas, the first state to adopt managed care accountability legislation, this issue was hotly debated. Milliman and Robertson completed an actuarial determination of the cost of the Texas liability legislation to a Texas-based HMO and set the cost at only 34 cents per member per month. A study prepared by William M. Mercer, Inc. and the AMA demonstrates that managed care accountability legislation would only increase premiums between .5% and 1.8%.
In fact, the American Association of Health Plans (AAHP) and the Health Insurance Association of America (HIAA) surveyed their HMO members in Texas and "could not find one example" where the Texas patient protection law forced Texas HMOs to raise their premiums or provide unneeded and expensive medical services.(17)
Other representatives of the insurance industry have also publicly admitted that holding plans accountable will not significantly drive up health care premiums. Jeff Emerson, the former CEO of NYLCare, stated in a July 11, 1999, Washington Post article that he is ". . . not going to make the argument that it's going to be a lot of money." Aetna/USHealthcare spokesman, Walter Cherniak, stated in the same Washington Post article that "we would charge the same premium to a customer with the ability to sue as we do those who do not have the ability to sue." Why? "Those judgments to date have been a very small component of overall health care costs," according to Cherniak.
In fact, the four-year-old Texas law that allows HMOs to be sued for their negligent medical decisions has prompted little litigation--approximately ten lawsuits out of the 4 million Texans in HMOs. Texas State Senator David Sibley, a Republican, stated two years after this bill was enacted, that "those horror stories" raised by the HMO industry "just did not transpire." President George W. Bush, who was then the Texas Governor, has repeatedly affirmed that he thinks this law has worked well in Texas.
Some opponents of HMO accountability have alleged that employers would drop their health benefits if ERISA preemption is removed. In many industries, however, companies provide additional incentives to attract and keep quality employees or else lose them to competitors, and one of the basic corporate benefits is full or partial health care coverage. It is therefore very unlikely that companies will eliminate health benefits simply because health plans are held accountable for the coverage and medical decisions they make.
Tort Reform
The issue of liability caps has been raised frequently in recent discussions of health plan accountability in patient protection legislation. Within the context of medical malpractice, the AMA has long supported tort reforms, including reasonable caps on damages. In recent years, we sought the passage of tort reform legislation, which passed the House of Representatives but has consistently failed in the Senate. A number of Senators from both parties have opposed reasonable limits on non-economic damages.
When discussing caps in a patients' bill of rights, several issues must be addressed. What would be considered "reasonable" caps for damages? What type of damages would be capped? Would a federal bill permit state tort reform laws to remain intact? Would the caps apply only to federal causes of action? Would a disparity between state and federal caps create undesirable and unnecessary forum-shopping? Would caps applicable to health plans also apply to all other health care providers?
The AMA fully recognizes the complexity of these and various other issues associated with tort reform, and we believe that tort reform must be addressed. With that said, we question whether adequate support exists in the Senate to pass meaningful tort reform in the context of patient protection legislation. If sufficient votes are not present, we would urge Congress to pass an acceptable patient protection bill at this time and then continue to push for meaningful tort reform. The AMA remains fully committed to both issues, but recognizes that coupling them together, could kill both.
Conclusion
We appreciate the Committee's interest in addressing the issue of health plan accountability and the respective state and federal roles. As we have indicated, the AMA strongly believes that ERISA must be reformed to permit injured patients or their estates to recover against negligent health plans. The most sensible solution to this problem parallels the traditional roles of the state and federal governments, allowing states and their courts to continue to govern the practice of medicine while the federal courts adjudicate strictly benefits decisions under ERISA. Without this type of ERISA reform, any patient protection or health care quality legislation would not fully ensure fairness for all patients.
The AMA understands that several patient protection bills will be or are being considered, and we are committed to working with both Congress and the President to reach agreement on a bipartisan patient protection bill that can be enacted into law this year. We thank the Chairman and this entire Subcommittee for the opportunity to discuss this critical issue.
1. Andrews-Clarke v. Travelers Insurance Co., 984 F. Supp. 49, 64-5 (D. Mass. 1997).
2. Id.
3. January 27, 1999, Los Angeles Times, B. 7.
4. A national public opinion poll conducted by Penn, Schoen & Berland showed that seventy-seven percent (77%) of Americans support changing federal law to allow patients to sue a managed care company when they are injured by negligent decisions or cost containment actions. May 7, 1998, APA News Release. Henry J. Kaiser Family Foundation, Harvard School of Public Health survey conducted on January 25, 2001, found that seventy-five percent (75%) of Americans support patient protection legislation, including the right to sue health plans. Fifty-three percent (53%) of Americans favor legislation making it easier to sue managed care plans that make negligent decisions which cause injury or harm to patients. Harris Poll #56, September 29, 1999.
5. 965 F.2d 1321 (5th Cir. 1992).
6. 481 U.S. 41 (1987).
7. 481 U.S. 58 (1987).
8. 57 F.3d 350 (3d Cir. 1995), rev'g Visconti v. U.S. Healthcare, 857 F. Supp. 1097 (E.D. Pa. 1994), and Dukes v. United States Healthcare Sys. of Pennsylvania, Inc., 848 F. Supp. 39 (E.D. Pa. 1994), cert. denied, 116 S. Ct. 564 (1995).
9. 25 F. Supp. 2d 74 (D. Conn. 1998).
10. 93 F. Supp. 2d 585 (E.D. Pa. 2000).
11. 2001 Pa. LEXIS 687. See also, Lazorko v. Pennsylvania Hospital, 2000 U.S. App. LEXIS 33792 (3d Cir.)(finding that a managed care plan physician's decision not to rehospitalize an enrollee for treatment of depression and schizophrenia constituted a "mixed eligibility decision" which implicates the quality of care the patient could receive, and the patient's claim must therefore be decided in state court).
12. 61 F. Supp. 2d 889 (E.D. Mo. 1999).
13. 47 F. Supp. 2d 1013 (C.D. Ill. 1999).
14. 530 U.S. 211.
15. (Corporate Health Insurance Inc. v. Texas Department of Insurance, 5th Cir., June 20, 2000, No. 98-20940, 215 F.3d 526; 2000 U.S. App. LEXIS 14215).
16. Remarks of Chief Justice William H. Rehnquist at the American Law Institute Annual Meeting, May 11, 1998.
17. September 28, 1999, Washington Post.