Dumb and Dumber: Two Wrongs Don’t Make A Patients’ Bill of Rights

This week, the Senate considers legislation to impose a lengthy laundry list of new federal regulations and accompanying costs on employer-insured health plans. The proposed measure would mandate more insurance coverage of emergency room treatment; require HMO plans to offer a point-of-service coverage option; insist on greater patient access to specialists; guarantee direct access to obstetricians, gynecologists, and pediatricians; and subject coverage determinations to binding third-party review and reversal.

Those provisions threaten to enact more special-interest benefits, further politicize complex health care decisions, and dampen incentives to economize. The proposed “Patients’ Bill of Rights” misframes the health care debate. By making the wrong diagnosis in response to the complaints and concerns of health care consumers, this legislation delivers a prescription for higher costs, fewer choices, and less market-driven innovation.

And you ought to see the Democratic version of the Patient’s Bill of Rights, too.

Democrats want, Republicans oppose. The conventional media treatment of Capitol Hill’s managed care debate often has been reduced to the shorthand phrase “Democrats want, Republicans oppose.”2 Without question, the Senate Democrats’ competing proposal (S. 1344), also labeled the “Patients’ Bill of Rights Act,” would regulate managed care plans even more aggressively than the Senate Republican bill (S. 326). The Democratic measure begins by establishing baseline federal requirements for all private health insurance. Among its coverage mandates, S. 1344 would require health plans to allow insured consumers to designate obstetricians, gynecologists, or pediatricians as their primary care providers (the “Titanic” standard of health care – women and children first!). S. 1344 would require greater access to other forms of specialty care as well. Its “prudent lay person” standard for emergency care coverage would extend beyond screening and stabilization to include coordination of maintenance and post-stabilization care. The Democrats’ plan would sharply limit any extra cost-sharing or out-of-network charges to patients for such emergency care.

The Democratic “Bill of Rights” imposes grievance and appeals procedures that are more favorable to health care providers and plaintiffs’ attorneys. Its external review provisions apply to a wider range of decisions denying care or payment for care, or violating other patients’ rights in the bill.

S. 1344 severely limits the ability of health plans to overrule the determination of a treating doctor that services provided to a patient are “medically necessary,” and it defines such services as those consistent with generally accepted principles of professional medical practice (in other words, if doctors say it’s medically necessary, insurers must pay). Most notably, the Democrats’ plan would allow dissatisfied patients to sue group health plan insurers (and, in some cases, the employers who sponsor those plans) under state law to recover damages resulting from personal injury or wrongful death.

GOP version no bargain. Although the Congressional Budget Office estimates that the above provisions in the Democratic bill would boost the cost of employer-sponsored health insurance premiums an estimated five to six percent higher, the Senate Republican version of patients’ rights is no bargain either. In many cases, it adopts a “yes, but we can do it cheaper” approach that incorporates parallel versions of Democratic initiatives, with various limitations, exceptions, and loopholes. S. 326 limits most of its provisions to self-insured employer health plans, which currently are exempt from state regulation. Senate Republicans would apply slightly watered down “direct access” requirements for ob/gyn, pediatric, and other specialty care services. Their plan’s emergency care mandates stop at screening and stabilization services, and they hamper only more innovative and targeted forms of cost sharing.

Senate Republicans have drawn a line in the sand that marks their bottom-line political imperative: preserving the ERISA3 barrier to tort-based lawsuits in state courts by patients unhappy with coverage and treatment decisions by their employer-sponsored health plans. Like a retreating army, the Republican generals on Capitol Hill have given away a lot of market-based ground in order to defend a tort-free peninsula. Although S. 326 resists insertion of a doctor-friendly medically necessary standard, its reliance on binding external review mechanisms threatens to impose a centralized, single measure of appropriate care in insurance coverage disputes that will gravitate toward the upper end (albeit with a more limited and predictable range of costs and penalties for insurers and employers). According to the accompanying report of the Senate Committee on Health, Education, Labor, and Pensions, independent external reviewers must take into consideration “expert consensus,” which includes “both what is generally accepted medical practice and recognized best practice.”4

Neglect broader case. In resisting the longstanding inefficiencies of liability lawsuits within most state court systems, sponsors of S. 326 neglect to make the broader case for a contract-based determination of health insurance coverage disputes. They appear reluctant to affirm that consumers should expect to get what they are promised in plan documents (and what their employers paid for, on their behalf), but neither more nor less than that. Senate Republicans may wish to criticize the excess of the plaintiffs’ trial bar, but they stop well short of defending the “dirty work” done by managed care insurers in restraining health care costs. In the final analysis, innovative insurers facing the provisions of S. 326 will be deterred from straying much distance away from the medical community’s consensus view of medical necessity. Necessary efforts to more clearly define contractual limits on the scope and intensity of health care appear much less likely.

While placing all their political eggs in the ERISA exemption basket, Senate Republicans have agreed to overlook the excessive and wasteful use of emergency care services,5force many HMOs to make costly organizational changes (in response to such requirements as a mandatory point-of-service option6 ), and establish additional precedents for federal micromanagement of health care decisions. In Senate floor debate earlier this week, Sen. Phil Gramm (R-TX) described “freedom” as the hallmark of the GOP bill.7 As if.

Unfortunately, President Clinton hit too close to home on July 9 when he said of Senate Republicans opposing the Democrats’ plan: “They’re not for it, but they know they can’t afford to be caught being against it.”8 Indeed, the primary message sent by Hill Republicans on managed care quality and service under private sector management appears to be, “We know it’s bad too, but you will get even less of it if we invite the trial lawyers to a regulatory party.”

Plea-bargaining. Rather than resort to half-clever legislative loopholes while plea bargaining on most of the political charges against managed care insurers, Capitol Hill legislators should consider more fundamental structural reforms to address the managed care backlash and feelings of disempowerment on the part of consumers. Providing greater tax equity for all health care purchasers and expanded voluntary pooling options beyond the workplace would enable consumers to choose and control the types of health plan and benefits packages for which they are willing to pay. Tax assistance provisions in S. 326, however, fail to reach beyond the uninsured and self-employed to include all workers who seek alternatives to their employers’ group health plans. On the House side, promising alternatives such as HealthMarts and association-sponsored health plans offer a start on the pooling front, but they need further refinement.9

Voluntary contracts v. consumer choice. In a policy environment friendlier to value-driven consumer choice, managed care insurers and self-insured employers can be held more accountable by their true customers. By relying more on voluntary contracts instead of random lawsuits to stimulate health care innovation and flexibility, consumers can decide how much they want to spend on medical care and in what particular manner.10 While asking consumers to be more responsible for weighing the costs and benefits of their health care purchasing decisions, health plan sponsors should be held accountable for their representations to plan subscribers.

A return to decentralized, voluntary health care decision making would better balance the never-ending tension between cost, quality, and accessibility. It would right the wrongs about to be set loose on Capitol Hill. The only losers would be political brokers trying to promise something for nothing, but sure to deliver the opposite.

1 Tom Miller ([email protected]) is head of Economic Policy Studies at the Competitive Enterprise Institute.

2 See, for example, Dewar, Helen and Goldstein, Amy, “Partisanship, Pathos Open Patients’ Rights Debate”, Washington Post, July 13, 1999, p. A8

3 The Employee Retirement and Income Security Act of 1974 (ERISA) governs employer-sponsored pension and welfare benefits plans. It exempts all employer-sponsored health plans from punitive or compensatory damages in civil suits, brought under state law, that charge improper denial or processing of an employee’s health coverage.

4 “Patients’ Bill of Rights Act of 1999,” Sen. Rpt. 106-82, Senate Committee on Health, Education, Labor and Pensions, June 17, 1999.

5 An estimated 30 to 55 percent of emergency room visits “probably could have been handled less expensively in doctor’s offices or clinics” and emergency care may cost “two-to-three times as much as the same care elsewhere.” Clark, Charles S. “Emergency Medicine,” The CQ Researcher, January 5, 1996.

6 Only lawmakers could imagine the oxymoronic concept of a “mandatory option.”

7 Dewar and Goldstein, op. cit.

8 Sanchez, Rene, “Clinton Attacks Senate GOP Health Plan,” Washington Post, July 10, 1999, p. A8.

9 See Miller, Tom and Conko, Gregory, “Getting Beyond the Managed Care Backlash,” Regulation, vol. 21, no. 4 (1998), pp. 53, 54.

10 See Rubin, Paul H., “Treatment Decisions: Tort or Contract?” Regulation, vol. 22, no. 1 (1999), pp. 25-30.