August 1999

The Latest on Federal Managed Care Legislation

by Deanna S. Tarry

Congress is scrambling to pass managed care legislation in response to numerous consumer concerns. The House is expected to vote on the proposed managed care/patient protection bills upon returning from the August recess. The legislation will affect millions of Americans as 87 percent of Americans are under age 65 and insured through employers covered by managed care plans. 

Many of these managed care participants are having difficulty navigating the system. Furthermore, consumers are concerned about whether managed care plans

• will overly limit their choice of doctors;
• will cover emergency care;
• will be immune from recourse if a consumer disagrees with a health plan’s decision; and
• will make the final decisions (as opposed to a doctor) about the appropriateness of certain treatments.

Currently two bills are circulating in the U.S. House—a bipartisan effort and a Republican package that is still being finalized. House leadership has scheduled a vote to settle the issue in early September, while managed care legislation has already passed the Senate. Final differences will have to be resolved in a House-Senate conference committee.

The Bipartisan Effort

Reps. Charlie Norwood (R-Ga.) and John Dingell (D-Mich.) announced The Bipartisan Consensus Managed Care Improvement Act (H.R. 2723) on August 5th. The Norwood-Dingell bill combines several major managed care reform bills introduced into the House this year, including Representative Norwood’s Access to Quality Care Act and Representative Dingell’s Patients’ Bill of Rights. The legislation, with 45 Democratic and 20 Republican cosponsors, has widespread support and is likely to pass the House. The bill also has the support of the White House: In a statement on August 5th, President Clinton said approvingly, “It is clear that there is now a bipartisan majority of House members ready to vote for a strong and enforceable Patients’ Bill of Rights…[the Norwood-Dingell bill] is a Patients’ Bill of Rights not just in name but in reality.” The president called on House Speaker Dennis Hastert (R-Ill.) to schedule a vote immediately upon return from the congressional recess.

The GOP Leadership’s Response

After bipartisan support for the Norwood-Dingell bill became apparent, House GOP leadership turned to Tom Coburn (R-Okla.) and John Shadegg (R-Ariz.) to develop an alternative GOP package. The specific details of the bill are still being worked out, but the representatives were able to outline their package generally before the August recess. It includes a patient protection bill and a separate measure for expanding access to health coverage through tax deductions and other means. 

Similarities

In many ways the two managed care bills are quite similar, probably due to the fact that they are both based in part on a bill submitted to the House Commerce Committee by Norwood, Coburn, and Shadegg last spring. Patient protections covering 161 million privately insured Americans are included in both. These protections include 

• access to an external, independent body with the capability and authority to resolve disputes for cases involving medical judgement; 
• guaranteed coverage of emergency services without prior authorization; 
• direct access to specialists such as cardiologists or obstetricians/gynecologists; and 
• a point-of-service option allowing patients to use services outside the network of providers. 

Both bills also provide for a patient’s right to sue for damages over delayed or denied benefits. Currently, health plans have limited liability for decisions about patient treatment that result in injury or death. The Employee Retirement Income Security Act (ERISA) of 1974, which preempts state regulation of self-insured benefit plans and regulates them under a single federal law, provides no significant remedy for an injured individual who is harmed by his/her health plan’s decisions. At this time, if a plan is at fault, the maximum remedy is the denied benefit itself. 

These new patient protection provisions would remove ERISA’s preemption and allow patients to hold their health plans accountable for harm caused by limiting patient care. Both packages address this issue using the following approaches:

• The Norwood-Dingell bill allows for lawsuits in state court. However, if the health plans follow the recommendations of external reviewers, they cannot be sued for punitive damages. 
• The Coburn-Shadegg bill will include some kind of right to sue for damages, but the sponsors have not yet decided whether it will allow lawsuits in federal or state courts. 

Both bills also protect employers from lawsuits unless they are involved in the decision to deny benefits. 

Differences

There are some significant differences between the two bills. The Norwood-Dingell bill gives the final say on disputes regarding the medical necessity of various treatment options to physicians, not health plans. The Coburn-Shadegg package only requires health plans to disclose in detail any coverage limitations before a patient joins the plan.

The Coburn-Shadegg bill requires external review by an independent board to certify that a patient really has been injured before a lawsuit can proceed. Norwood and Dingell decided not to include that provision in their bill out of concern that the provision would raise constitutional questions about a private entity’s right to prevent a lawsuit from going forward.

The Norwood-Dingell package doesn’t include provisions for improving access to care because the representatives did not feel there was sufficient time to take up both access and patient protection issues. The GOP package’s access measures are likely to make health and long-term care insurance expenses fully deductible for people who pay at least half of their premiums. This package also provides measures that encourage medical savings accounts, which Republicans believe will give patients more freedom to change health plans if they are not satisfied. The access and patient protection bills will be separate but may be joined if it reaches the House-Senate conference committee.

The Norwood-Dingell bill also includes a “whistleblower” provision. This is a contentious issue prohibiting health plans from retaliating against doctors or nurses who disclose problems with the quality of their patients’ managed care provider or who cooperate in investigations into managed care quality. Hospital and nursing home groups contested the provision, arguing that laws protecting whistleblowers already exist. To date, the GOP package does not include a similar provision.

External Appeals

The Norwood-Dingell bill in particular emphasizes the external appeals process. As proposed, the reviewers would have 21 days to issue their ruling in routine cases and 72 hours in emergencies. While lawsuits can only be initiated in state courts, patients can take their case to federal court if the health plan fails to comply with recommendations resulting from the appeals process. Appeals cannot involve benefits that are explicitly excluded from the plan contract. According to Representative Norwood’s office, if the external appeals process settles disputes as planned, liability should never be an issue. The Coburn-Shadegg bill will also contain an external appeals component, though the details have not yet been decided.

Senate Action

Patient protection legislation, or the Patients’ Bill of Rights Act of 1999 (S. 1344), has already passed the U.S. Senate. This bill 

• bans gag clauses, which prohibit providers from discussing treatment options with patients;
• mandates coverage for emergency care service/screening and stabilization and uses a prudent layperson standard for reimbursement of emergency care;
• requires an independent appeals process which allows consumers to appeal certain adverse determinations to an independent or external entity; and
• requires health plans to offer continuity of care and, in some cases, allows new enrollees to continue receiving services from their previous health care provider, even if the provider isn’t affiliated with the new plan.

The Senate managed care bill does not include the right to sue health plans. The liability component was purposely excluded from the legislation as Senate Republicans have said that quality of care should not be improved through lawsuits. Many expect that the final battle on liability will take place in the House-Senate conference committee.