Statement of Judith L. Lichtman, President, National Partnership for Women & Families
Testimony Before the Subcommittee on Health
of the House Committee on Ways and Means
Hearing on Patient Protections in Managed Care
April 24, 2001
Good afternoon, Chairwoman Johnson, Congressman Stark, and other distinguished members of the Subcommittee. I am Judith L. Lichtman, President of the National Partnership for Women and Families. Thank you for convening this important hearing and for the opportunity to testify today about patient protections in managed care. The National Partnership is a nonprofit, nonpartisan organization that uses public education and advocacy to promote fairness in the workplace, quality health care, and policies that help women and men meet the dual demands of work and family. Founded in 1971 as the Women's Legal Defense Fund, the National Partnership has grown from a small group of volunteers into one of the nation's leading advocates for women and families. We are also a leading member of a coalition of more than 300 health care and consumer organizations supporting passage of strong patient protection legislation. One of the Partnership's key priorities is ensuring that American women and their families enrolled in health insurance plans, particularly "managed" health plans, receive the highest quality health care.
Over the past decade, our health care system has undergone unprecedented changes, most notably in the movement towards managed care. These changes affect every one of us, and women in particular have a tremendous stake in the outcome. Women are the primary consumers of health care services in this country, as well as the majority of managed care enrollees. They make up the majority of those on Medicare and the overwhelming majority of adults on Medicaid - programs that are also increasingly turning to managed care. Women are also the primary health care decisionmakers for their families - from choosing the family health plan to weighing different treatment options, women are the primary payers of our health care dollars. As both consumers of care and guardians of their families health needs, women's lives are dramatically affected by the rise of managed care.
Women have a real stake in how health care services are delivered for other reasons as well. They have unique health care needs that include, but are not limited to, their reproductive capacity. Some diseases (such as osteoporosis and eating disorders) are more prevalent in women, and others (such as heart disease) are too often ignored, misdiagnosed, or mistreated. Moreover, women and men with the same underlying disease do not always have the same symptoms, nor do they have the same risk factors. Cutting-edge research continues to shed more light on these gender differences. And finally, differences in social roles and behaviors can have significant implications for women's health. For example, women, much more than men, are victims of domestic violence in our society. To appropriately diagnose and treat women, health care professionals - and the health plans that increasingly determine the care they provide - need to understand the substantial impacts of gender and be specifically trained to provide health care to women.
Managed care has great potential. Its promise is to save money and provide better quality care through better coordination of services and a strong emphasis on preventive and primary care. Managed care plans are also uniquely positioned to educate millions of women and men about how to get and stay healthy. Women, especially, stand to benefit from managed care done right. A quality managed care plan can make it easier for women to learn about and obtain services, such as mammograms, Pap smears, and prenatal care, and take advantage of health-promoting benefits, from smoking-cessation classes to discounted health club memberships. In addition, a good relationship with a well-trained primary care provider can give women a chance to get answers to health questions that might otherwise go unasked. But providing quality health care is about much more than just delivering preventive services.
Over the past few years, managed care's potential has been eclipsed by concerns that for some it may do more harm than good. The American people, including American women, have become increasingly worried that the legitimate interest in controlling costs could compromise the quality of care managed care plans provide. Concerns about emergency treatment not being covered, restrictions on direct access to Ob/Gyns or pediatricians, and limits on participation in clinical trials on breast cancer or other life-threatening illnesses that could save women's lives have marred women's experiences of managed care. These and other concerns have helped to fuel the groundswell of public support for improved patient protections aimed at righting managed care's balance between quality and cost. Meaningful patient protections must ensure high quality, affordable health care and restore a sense of trust and accountability to our system.
Congress has come a long way in its understanding of Americans' need for patient protections in the nearly seven years that these issues have been debated. While we are heartened to hear the Chairwoman's view that there is now general agreement on many of the patient protections that must be included in a bill, there are still key unresolved issues that must be addressed to ensure that the bill will really help women and families. Central among these issues is the issue of accountability: what new rights will consumers have to ensure that health plans can be held accountable?
Issues of trust and accountability lie at the heart of this debate. Many consumers have lost trust in their health plan because they fear that their health plan will deny them the care they need when they need it most. A recent Kaiser Family Foundation survey of managed care consumers suggests this concern is grounded in real experiences. Of those surveyed, half reported having some problem with their managed care plan, a third of which involved either a delay or denial of needed care - one in five with problems reported that their difficulties resulted in declining health.(1) As managed care has increasingly blurred the distinction between medical and insurance decisions, consumers worry that the current system gives too much power over medical treatment decisions to those who now have a financial incentive to deny care. This sense of mistrust is only deepened by consumers' growing awareness that there are few protections in place to hold plans accountable for their decisions. This absence of true accountability is unacceptable - a parent whose child has been injured by an HMO insurance company's decision deserves the same access to remedies as a parent whose child has been injured by a defective toy. These are critical issues of concern to women and families, and issues that must be addressed in any patient protection legislation being considered by Congress.
My testimony today will highlight key considerations relating to the need for greater accountability, focusing on external review and expanded legal responsibility. I will also briefly discuss two other main areas of concern: the scope of the bill and the key patient protections that are needed to ensure a strong and enforceable patients' rights bill.
External Review:
Independent, external review procedures are an essential component to restoring consumers' trust in the health care system. Although internal review protections that allow the plan to conduct its own timely review of the dispute are also important, a timely independent review by a neutral third party outside of the plan is critical to assure that an individual will get a fair decision that is based on their specific medical needs. External review is now required in thirty-five states, making it a firmly established principle of business for many health plans and insurers. Experience in the states also shows that consumers are not abusing these rights by overusing the system. Despite its prevalence in the states, a federal law is still needed to ensure that all consumers have access to these important protections.
Strong patient protection legislation must ensure that patients have access to a speedy and genuinely independent external review. True independence from the plan means that the managed care plan cannot select the external review entity. It also means there must be ample standards to ensure the reviewer has no financial or business relationship with the plan or other parties involved in the appeal that could bias the decision. In addition, the external reviewer must be free to make its own determinations regarding medical necessity and should not be bound by the plan's definitions.
With respect to the process of bringing an appeal, the external review process should be fair and open, without unnecessary barriers like short time frames to bring an appeal or financial thresholds that could keep consumers from exercising their rights to appeal. Some important aspects of the external appeal process deal with the relationship between the right of appeal and the right to judicial review. While individuals should be required to complete the internal and external appeal process before they may seek judicial review, 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 and is consistent with general principles of administrative law, which do not require an individual to exhaust administrative remedies when it would be futile. In this context, the patient is no longer seeking the benefit she was denied, but is seeking redress for her injury, which cannot be given through the external review process. Finally, the external reviewer's decision should not be given the same weight as a judge's opinion, and should not foreclose a consumer's right to a full and fair review in court that includes all of the evidentiary rules and discovery protections.
The external review scheme should also build on, not replace, states' expertise in this area and allow states flexibility to provide a stronger appeal process where they choose. Any federal rights that are created should establish a floor, not a ceiling, of protections for consumers.
While these protections are essential to ensuring a fair process for resolving benefit disputes with the managed care plan, they do not replace the need for additional legal responsibility.
Expanded Legal Responsibility:
Health plans are protected against liability for many of their decisions today because of an anomaly in the law that was created by the Employee Retirement Income Security Act of 1974 (ERISA). Some background on ERISA and its interpretation by the courts is important to understand the current legal baseline that Congress will affect with any new patient protection legislation.
When ERISA was passed, it included a provision that preempted state laws that "relate to" private job-based benefit plans, including health plans. In 1987, the Supreme Court issued a landmark decision in Pilot Life Insurance Co. v. Dedeaux in which it held that ERISA's preemption of state law meant that state law suits that relate to private job-based health plans' benefit decisions are barred. Individuals seeking redress for a plan's decision could only bring an action under ERISA for the benefit that should have been provided - no compensation for injuries would be available. Since the mid-1990s, a trend in federal caselaw has developed that has carved out an area from ERISA's general preemption - cases involving medical malpractice have been found not to be preempted by ERISA. These cases established a distinction between suits involving the quality of medical care and those involving a benefit decision - cases involving medical quality issues could now be brought in state court; but those involving a benefit decision were still preempted by ERISA.
Many believe that state law liability has been expanded even further under a unanimous decision issued by the Supreme Court last year in Pegram v. Herdrich. In their opinion in Pegram, the Supreme Court suggested that cases involving a benefit decision that also involved a medical treatment issue should be pursued under state law, not under ERISA. Under the Court's rationale, only cases that involved what the Court referred to as "pure eligibility" decisions - decisions that involve coverage issues like whether an individual was a member of the plan or whether a waiting period under the plan had elapsed - were still subject to ERISA's preemption of state suits. This is a major shift in the courts' view regarding ERISA preemption and one that could greatly expand the types of cases that can now be brought in state court. The new legal baseline after the Pegram case allows individuals to hold most health plans accountable in state court for decisions involving medical treatment issues.
Although Congress is considering legislation at a time when remedies may be greatly expanding, there is still a need for action to expand legal accountability. First, it is unclear how federal courts will interpret the Court's suggestion in the Pegram decision - settling this issue could take many years, depriving individuals of greater certainty. Second, it is important to remember that the Court's decision did little to address the need for greater remedies for cases involving what the Court called a "pure eligibility decision" - a case that only involves the plan's interpretation of its own coverage policies. Without addressing this area, individuals will not be able to have any redress when their plan makes a mistake regarding enrollment or determining whether a benefits is covered, or wrongly interprets a waiting period requirements. However, the recent expansion of liability also creates a new baseline that Congress must consider in establishing new rights. The courts have already established a precedent that allows individuals greater access to meaningful remedies - whatever new accountability Congress creates should not curtail these rights.
ERISA's preemption of much state law liability has created a situation in which health plans offered by private employers have become outliers in our legal system - unlike almost every other business entity, they are often immune from accountability for their actions, even if individuals are hurt by their actions. Other businesses in the health care and other industries are legally accountable for their actions as a generally accepted principle of public policy. 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, our most precious commodity, any differently? This immunity from suit also further perpetuates an imbalance of power between patients and their plans - a real patients' bill of rights will tip the balance back to empower patients.
Real people are hurt by the absence of meaningful accountability. Health plan denials can jeopardize the quality of patients' care as well as their financial security. In a Kaiser Family Foundation survey of consumers' experiences with managed care, those who had experienced delays or denials of care suffered tangible harms including a quarter reporting physical injuries or lost school or work time, and forty percent reporting financial losses. There are also too many examples of those who are left without redress after the tragic results of a health plan's decision to delay or deny care. The parents who lost their baby after their health plan refused to authorize round-the-clock hospital monitoring during the mother's high-risk pregnancy despite two doctor's recommendations. The man who committed suicide after his health plan denied him admission to a health plan's alcohol rehabilitation program, despite his desperate need for help and the plan's stated coverage of the services. These are the real faces behind the need for health plans to be accountable for these decisions, not only to address the inequity of these tragic losses, but to deter bad decisions that can lead to them.
The costs of expanding accountability are low. According to estimates prepared by the Congressional Budget Office evaluating the effect of the Bipartisan Consensus Managed Care Improvement Act (H.R. 2990), the cost of expanding liability to allow all suits to go to state court is minimal - a total increase of one percent of premium for job-based health plans per member per month, approximately $2.50 per month for the average individual. And practical experience in the states where there is now expanded liability shows that there will not be a flood of litigation - in Texas, where a bill expanding HMO liability was passed four years ago, only nine suits have been brought. Even if there is some additional cost, public opinion surveys gauging Americans' support for patient protections have consistently shown that a majority of Americans are willing to spend a little more to ensure they have these strong protections.(2)
In response to charges that this increased cost will cause employers to drop coverage, it should be noted that health care costs increased last year at a rate from two to three times the estimated cost of the entire Bipartisan Consensus Managed Care Improvement Act, and census data shows that employer coverage actually increased. In a recent survey of employers, when asked what they would do in the face of projected increases of up to 12% or more in the coming year, almost half said they would either absorb the costs themselves or do nothing - the other half said they would pass some costs on to consumers.(3) No one responded that they would drop coverage. Another survey of smaller employers showed a vast majority of small employers support patient protection legislation and a majority would maintain coverage if patient protection legislation passed, even if their share of premiums rose by as much as $20 per month.(4)
Expanding accountability for managed care consumers is a practical, common sense answer that will neither break the bank nor disrupt our health care system - the majority of Congress has supported these rights in the past and the overwhelming majority of Americans support them as well. The time has come for them to be enacted.
Scope:
Any patient protection bill must apply to all Americans with private health insurance. This includes those covered by private-sector group health plans, individual health plans, and fully-insured state or local government plans. Proposals that only cover those in private job-based plans, or only those that are in self-insured job-based plans do not meet the mark - all Americans need and deserve the same protections. Some versions of these bills would apply key protections to only those in self-insured job-based plans, leaving out as many as seven in ten Americans with private health insurance coverage who need and deserve the same rights.
Patient protections should apply a uniform federal floor of protection of everyone, regardless of what type of plan covers them. The certification of state laws that meet or exceed the Federal minimum standard should be determined and enforced by a federal body. States should not be provided with loopholes, such as having limited penetration of managed care in their state or allegations of premium increases, which allow them to easily opt out of the Federal minimum standard.
Patient Protections:
In addition to these other components, a strong patient protection bill must guarantee a variety of other comprehensive patient protections that are essential to women and families. These include access to emergency rooms, Ob/Gyns, prescription drugs, clinical trials, pediatricians and other medical specialists including those outside of the network if the network providers are not adequate. Patient protection legislation must also assure that medical judgments are made by medical experts, patients with a special medical condition receive continuity of care, patients have a choice of a full range of health providers, and patients are provided with full and understandable information about their health plan. Health care professionals must be protected against retaliation when they advocate on behalf of patients' needs or to improve health care quality. And "gag clauses" that prevent medical professionals from providing patients with full information about their treatment should also be barred.
As Congress continues to debate these issues 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 might have.
1. Kaiser Family Foundation National Survey of Consumer Experiences with Health Plans, June 2000.
2. Kaiser Family Foundation Public Opinion Update, February 2000.
3. Actual cost increases for the year 2000 were 8.1%; estimated cost increases for the year 2001 are 10-12% - these are respectively two and three times the amount of CBO's 4.1% estimated cost increase associated with the Bipartisan Consensus Managed Care Improvement Act. Mercer/FosterHiggins National Survey of Employer-Sponsored Health Plans 2000, April 2001.
4. Kaiser-Harvard National Survey of Small Business Executives on Health Care, June 1998.