In response to the legitimate frustrations many Americans feel with respect to their employer-provided managed care insurance, many Members of Congress support a federally guaranteed "patients' bill of rights" for employees in private-sector plans.
The House-passed legislation, H.R. 2990, is based on a bill (H.R. 2723) originally sponsored by Representatives Charles Norwood (R-GA) and John Dingell (D-MI). The House bill is a far-reaching regulatory measure. More recently, Senators Edward Kennedy (D-MA) and John McCain (R-AZ) cosponsored similar legislation in slightly different versions (S.1052/S. 872/S.283), which will soon be scheduled for Senate floor consideration. These legislative vehicles include a variety of federal remedies, including congressional definitions of medical necessity, giving physicians primary responsibility for determining what is or is not a "medically necessary" procedure or treatment, new federal grievance procedures, and new avenues of litigation for patients who have been injured as a result of the decisions of private-sector plan officials.
Perhaps the most significant feature of patients' bill of rights legislation, however, is not the nature and scope of the litigation embodied in these bills, but rather the breadth and reach of federal regulation over the private-sector health care system. In effect, regardless of the issue of how much litigation is or should be encompassed in these bills, Congress should not neglect the impact of new and extensive federal regulation, particularly in terms of its cost.
Congress should consider policy options for private-sector plans that would address the fundamental problem behind the patients' rights controversy: namely, an absence of basic choices. Patients should be able to consult with a doctor of their choice, to buy the medical services of their choice, and enroll in a plan of their choice. Likewise, they should be able to choose to disenroll from plans that do not respect their privacy, interfere with physicians' provision of their medical care, or refuse to disclose the terms and conditions of their contracts or the financial incentives that govern doctors. Congress should also adopt fundamental health insurance market reforms and change the tax treatment of health insurance to foster patient choice and the personal ownership and portability of plans. Employees, for whatever reason, must be able to fire poorly performing plans and choose higher quality ones. The right policy, in other words, is a free market policy.
Patients have legitimate concerns but few opportunities to act upon them. Reasons for switching plans, moreover, are numerous and will range from misgivings over cost to a desire on the part of consumers to enroll in a plan that best reflects their personal or moral values. Why should an employee find herself locked into a plan chosen for her by her employer that covers abortions, contraceptives, or sterilization procedures if she finds those procedures morally repugnant? Employees with sensitive medical conditions may find the privacy policies of the employer-chosen plan entirely unsatisfactory. Shouldn't they be able to switch to a plan with more comprehensive privacy protections?
Congress, for reasons that have not yet been adequately illuminated, seems either unable or unwilling to pursue a positive free market policy direction, thus reversing the regulatory dynamics that drive current health care policy. Instead, Congress is poised to impose additional regulation of the already over-regulated private health insurance market, frustrate defined contribution plans, or minimize further patient choice. Congress thus appears even more committed to aggressively regulating employer-provided plans and doing little or nothing to enable frustrated employees to choose the plans and benefits best suited to their personal needs.
TOWARD A BETTER PATIENTS' RIGHTS POLICY
Realistically, it does not appear that much will change in the near future. If Congress insists on moving forward with the Patients' Bill of Rights and enforcing more federal rules on an already heavily regulated sector of the economy, it should consider the following specific policy changes.
- Give patients the right to
know the value of their health benefits plan. Every dollar
increase in health care benefits means a dollar decrease in wages
and other compensation. Households, not employers, pay 100 percent
of all health care costs. But survey research shows that too many
Americans either do not know that they, and not their employer, are
paying for their health care benefits package, or they don't have a
clue about the real cost of their health benefits package. Workers
and their families have a right to know, and they should be told
Recommendation: Employers should be required to disclose the value of the health benefits package to workers and disclose the truth that this benefit is also reducing their wages and other compensation by a like amount. House Majority Leader Richard Armey (R-TX) has proposed legislation to establish such transparency in employee compensation.
- Give patients the
right to know whether the doctors in their health plans adhere to
the Hippocratic Oath and traditional medical ethics.
With the rapid aging of the
American population and the coming pressures imposed on the
delivery of medical services, medical ethics will be at the center
of the next stage of America's continuing health care debate. These
debates will be serious and far-reaching, with profound
implications for the quality and character of American life, and
American policymakers are mistaken if they think that they can
avoid confronting these difficult questions. Many patients
erroneously believe that their physicians adhere to the canon of
traditional medical ethics first outlined in the 5th Century B.C.
in the ancient Oath of Hippocrates:
I swear…to keep according to my ability and judgment the following oath-
To consider dear to me as my parents him who taught me this art; to live in common with him and if necessary to share my goods with him; to look upon his children as my own brothers; to teach them this art if they so desire without fee or written promise; to impart to my sons and the sons of the master who taught me and to the disciples who have enrolled themselves and have agreed to the rules of the profession, but to these alone, the precepts and the instruction. I will prescribe regimen for the good of my patients according to my ability and my judgment and never do harm to anyone. To please no one will I prescribe a deadly drug, nor give advice which may cause his death. Nor will I give a woman a pessary to procure abortion. But I will preserve the purity of my life and my art. I will not cut for stone, even for patients in whom the disease is manifest; I will leave this operation to be performed by specialists in this art. In every house where I come I will enter only for the good of my patients, keeping myself far from all intentional ill-doing and all seduction, and especially from the pleasures of love with women or with men, be they free or slaves. All that may come to my knowledge in the exercise of the profession or outside my profession or in daily commerce with men, which ought not to be spread abroad, I will keep secret and never reveal. If I keep this oath faithfully, may I enjoy my life and practice my art, respected by all men and in all times; but if I swerve from it or violate it, may the reverse be my lot. [Italics added.]
Under the ancient oath, and modern variations of the oath that uphold traditional medical ethics, the doctor is a servant of the patient. The patient comes first, over and above other considerations, including monetary rewards, specific health plan incentives, or third-party interventions. Physicians, moreover, are ethically required to maintain confidentiality and are clearly prohibited from engaging in certain specific medical practices considered abhorrent to the traditional practice of medicine, such as assisted suicide and abortion.
Today, however, Hippocrates and his ancient oath are too often venerated in name only; many physicians subscribe to standards quite different from the ancient oath, and even its modern variations, or practice medicine in a fashion starkly incompatible with traditional medical ethics. Unfortunately, too many patients are unaware of these often unspoken commitments to different values. For example, a young mother ready to give birth might find it very unsettling that the physician who is charged with delivering her baby is also an abortionist.
Recommendation: Physicians and health plans desiring to disregard traditional medical ethics and provide health care services according to their own notions of ethics, morals, or professional guidelines should, of course, be free to do so; but, both as a matter of integrity and in the interests of patients, they should also inform their patients as to the ethical standards that govern their practice of medicine. Patients, in turn, should have the right to know the ethical standards that govern their physicians' practice of medicine, and should have the option of switching the generous federal tax subsidy that accompanies employer-provided coverage to plans with physicians who subscribe to traditional ethical standards of medical practice.
- Protect patients' right of
conscience in health insurance. Many employees do not realize that their
employers have chosen health plans for them that cover medical
treatments or procedures that violate their personal religious,
ethical, or moral convictions. Current law provides no remedy that
allows the aggrieved employee to receive the same generous tax
subsidy for an alternative and ethically acceptable plan. The
generous tax subsidy is available only for employer-provided
insurance. Employees should not be compelled to render financial
support for those medical treatments or procedures which violate
their rights of conscience. Under our constitutional and legal
tradition, no freedom is more important than the freedom of
Abortion, sterilization, contraception or other such medical services are the most common items of controversy, though there are others. With the advance of medical science and technology, many controversial issues are certain to arise, particularly issues relating to medical procedures concerning the beginning and the end of life.
Recommendation: Congress should require employer-provided plans to disclose information concerning coverage of controversial medical procedures to employees enrolled in those plans. Employees who find such coverage morally unacceptable should enjoy the same federal tax subsidy for the purchase of alternative benefit packages. Americans should not be forced to check their ethical, moral, or religious convictions at the door when they purchase health care services.
- Dedicate any punitive
damage awards for suits against health insurance companies (or
employers) into state funds for refundable tax credits for the
uninsured. When suits are filed to recover losses, such as
medical bills, lost wages, or non-economic damages, such as pain
and suffering, the individual is compensated. Punitive damages,
however, are designed to punish wrongful action and discourage such
wrongful action in the future, not simply to reward the aggrieved
patient or her lawyer. In the Senate bill, for example, there are
statutory limitations of $5 million per case and statutory
conditions under which punitive damages can be otherwise
Recommendation: Congress could provide direct help for the uninsured by requiring that punitive damages awarded in health care lawsuits (whether under state or federal law) be deposited in special state health insurance trust funds to provide refundable tax credits to help individuals and families purchase private health insurance.
There is precedent for such a proposal. A total of eight states already allocate punitive damages in a variety of cases, or a percentage of punitive damages, to various funds, for purposes of medical assistance to low-income persons, to the state treasury, or to special compensation funds for victims of criminal negligence. In 1992, Congressman John Dingell (D-MI) sponsored the Health Choice Act (H.R. 5514), which would have redirected 50 percent of punitive damage awards in medical malpractice claims to states that work to prevent medical injuries. Congressman Christopher Cox (R-CA) proposed the Health Insurance Choice and Protection Act (2000) to dedicate amounts awarded in punitive damages to help finance a Medicare prescription drug benefit by earmarking the awards for the Medicare Trust Fund for that purpose.
- Give patients the right to
privacy in their medical records by abolishing the patient
identifier provisions of the Health Insurance Portability and
Accountability Act of 1996 and stopping Medicare officials'
intrusions into privacy. In 1993, the Clinton Health Security
Act provided for the creation of a powerful National Health Board
to collect and use individual patient information from health
records for a variety of purposes. The Clinton health plan also
required that each insured individual, employer and health plan,
and doctor be given a "unique identifier" for a federal data base.
Despite the political unpopularity of these and other provisions of
the Clinton health plan, a Republican Congress insisted on enacting
some of its more onerous regulatory provisions; and in the Health
Insurance Portability and Accountability Act of 1996, Congress
imposed a requirement that the Secretary of HHS establish a
standard for electronic transactions and the use of personally
identifiable health care information. Like the Clinton health plan,
the Congress authorized the assignment of a unique identifier
number for each patient. In the meantime, the Health Care Financing
Administration (HCFA) has initiated a remarkable program to collect
detailed and sensitive personal information on Medicare patients
using home health services without their full and voluntary and
- Guarantee the right of any
person, whether enrolled in a public or private health plan, to
refrain from authorizing a doctor to submit a medical claim for
reasons of personal privacy.Many patients fear that the submission
of a medical claim would reveal sensitive information to an
insurance company, an employer, or a government agency. Patients
using prescription medications for sexually transmitted diseases,
for example, may prefer that HMO bureaucrats and government
officials not learn of their sensitive conditions.
Recommendation: Patients should be able to stop sensitive claims submissions and pay directly for the medical service if they choose to do so.
- Require employers and
health plans to disclose the privacy protections in health plans
and give employees privacy options. Many employees are unaware
of the extent to which the sensitive or confidential medical
information collected through their employment-based health
insurance plan will be disseminated to third parties.
Recommendation: Employers should be required to disclose the privacy policies of plans they choose for their employees and give dissatisfied employees the right to opt out of a plan with insufficient privacy protections and automatically shift the favorable federal tax treatment for employer-provided insurance to a plan that satisfies their concerns.
- Establish a safe haven for
patient choice. The professional literature shows beyond
dispute that wherever there is increased patient choice, there is
also significantly increased patient satisfaction with health
plans. Popular dissatisfaction with private plans is largely
attributable to the simple fact that employees and their families
have no real options outside of employer-based health
Recommendation: Any employer who maximizes freedom of choice of plans and benefits should be treated differently from employers who do not give their employees a choice of plans and benefits. If Congress persists in imposing regulations and mandates, it should exempt from all the mandates and procedures embodied in patients' bill of rights legislation:
Representative Jim DeMint (R-SC) introduced language (H.R. 5568) in 2000 that would accomplish similar policy objectives.
- Employers who offer employees
a choice of health plans, including fee-for-service, managed care,
- Employers who give employees
an open season (to be modeled on the open season option available
in the FEHBP) during which they can fire a plan that they feel has
not lived up to its responsibilities.
- Employers who make a defined
contribution toward the employee's health coverage, where the
choice of the plan is the employees' choice. These plans,
personally chosen by employees, should be exempt from all mandates
or lawsuits, and employees who get a defined contribution from
their employer would be able to sue the plan to uphold their rights
under their contract with the plan.
- Employers who allow their
employees to participate in a health mart or voluntary purchasing
- Give patients the right to
a Section 125 rollover. Millions of employees today have
cafeteria plans. Once again, if patients can spend their resources
directly on medical services without the intrusion of third-party
payment systems, this eliminates the need for creating federal
grievance procedures or new avenues for litigation. Under current
law, employees can deposit a certain amount of money in a tax-free
account, called a Section 125 account. However, under current law,
any money not used by the employee is forfeited to the
Recommendation: Allow employees and employers both to contribute to such plans and to roll over their existing Section 125 accounts. If a family could roll over, say, several thousand dollars a year tax free, this would mean that they could spend that amount for routine medical services or the services of specialists directly without going through a managed care network. It would also mean that premiums would decrease for employers who adopted such accounts, as more of existing funds would be used for direct payment. The proposal increases the economic efficiency of employer-based insurance, promotes direct payment for routine medical services, and liberates employees from the restriction of managed care or third-party payment for routine or specialized care.
Senator Robert Bennett (R-UT) and Congressmen Ed Royce (R-CA) have sponsored legislation to establish a tax-free rollover of flexible spending accounts.
- Apply every provision of
the Senate patients' bill of rights legislation to the government
health insurance programs, particularly Medicare, Medicaid, and the
FEHBP. Curiously, Members of Congress are considering the
application of patients' rights to plans in the private sector but
are not considering applying these provisions to plans under their
immediate jurisdiction: namely, Medicare and Medicaid. The House
bill provides no such application, and the Senate bill (S. 872)
does not amend the relevant statutes governing the government
health insurance programs to make its terms applicable to these
plans. If federal rules are beneficial, they should also be applied
to federal health programs. There is no justice in applying
different rules to health insurance if the Congress insists on
developing and applying new federal rules in the first
Recommendation: If Members of Congress are serious about a patients' bill of rights policy, they should clearly include the huge public health plans directly under congressional authority, most importantly Medicare and Medicaid, the two largest plans under congressional jurisdiction. Needless to say, there can be no solid case for excluding other smaller plans that come under congressional jurisdiction, such as the military and veterans health care systems, or the Indian health care system, or even the popular FEHBP. During the 1999 debate on the House patients' bill of rights legislation, Representative John Peterson (R-PA) proposed an amendment to establish such a policy for floor consideration, but it was rejected by the House Rules Committee.
- Establish a public
insurance demonstration program before applying the patients' bill
of rights to the private-sector insurance plans.The current debate on the patients' bill
of rights legislation offers Congress an excellent opportunity to
establish a demonstration program. Naturally, the establishment of
new rules and standards, mandates, and new opportunities for
litigation will certainly result in higher health care costs and,
consequently, will result in higher numbers of uninsured persons in
the private sector. Members of Congress may feel that these costs
will not be very high, or will easily be absorbed without adverse
consequences, or will, at the end of the day, be worth the higher
price in order to establish a comprehensive federal regulatory
system over private health insurance. In any case, a demonstration
program, using the large public health programs like Medicare and
Medicaid, can avoid or seriously reduce the guesswork that so often
accompanies health care policy at the federal level. Demonstrations
can be the basis of sound public policy and can avoid the numerous
unintended consequences so common to federal health policy.
Recommendation: Before applying any such provisions to the private sector, it should be congressional policy to apply these provisions at least to Medicare and Medicaid. There is ample evidence that patients in both programs are in as much need of redress, if not more so, than patients in employer-based insurance. Using Medicare, in particular, on an experimental basis for the vigorous application of patients' rights would demonstrate the effects of such far-reaching proposals on the financing and delivery of health care services on a fairly large scale before imposing them on the entire country. Because the Medicare expenditure and utilization data are easily accessible, this would enable both the independent Congressional Budget Office and the General Accounting Office to make solid projections of the costs and benefits of such provisions. Benefits do not come without costs. If such provisions turn out to be dramatically expensive for the Medicare program, then Members of Congress will at least have some idea of the kinds of costs they are ready to impose on private-sector plans and the employers and employees who are served by them. It is not at all clear why public-sector plans should escape the consequences of federal rules that are widely thought to be otherwise broadly beneficial.
12. FOCUS ON MEDICARE AS A SPECIAL CASE FOR THE APPLICATION OF A PATIENTS' BILL OF RIGHTS
The day-to-day operations of the huge Medicare program are largely controlled by the Centers for Medicare and Medicaid Services, particularly the Center for Medicare Management, formerly known as the Health Care Financing Administration (HCFA). Those operations are undertaken through a massive regulatory regime, estimated by the officers of the prestigious Mayo Foundation in 1999 to number in excess of 111,000 pages of rules, regulations, guidelines, and other paperwork at that time. Therefore, the traditional Medicare program is, in effect, the most managed of all managed health care in the United States. While the corporate rules that govern private-sector managed care are pervasive, the impact of Medicare and its federal management on non-Medicare patients is also far-reaching, though indirect.
The key issue is medical decision-making. For the private sector, now dominated by managed care organizations, many Members of Congress want to shift more responsibility away from the bureaucratic control of corporate benefit managers and managed care officials into the hands of doctors and the medical profession so that the needs of patients can be met more effectively. In employment-based health insurance, employers rather than consumers make most of the decisions in these plans. If the principles of the House and Senate legislation were applied to Medicare, one could expect at least four major changes from current practice.
- With the patient bill of
rights applied to Medicare, patients should have the right to sue
the Medicare bureaucracy and its contractors for personal injury
and damages incurred because of plan or coverage
law and regulation, patients can only be compensated for benefits
not rendered. Patients are not reimbursed for damages. The right to
sue gives patients an opportunity to seek remuneration for loss and
will spread the responsibility of effective care.
- Make the Medicare
bureaucracy accountable for attorney's fees and damages, just as
private companies are held legally accountable. Today, there is
no direct accountability for Medicare officials' actions that incur
legal damages or attorney's fees. Today, the Department of Justice
pays for designated damages and attorney's fees out of a special
Department of Justice fund known as the Judgement Fund, and adverse
decisions on coverage are paid out of the Medicare trust funds. A
much better idea is to make the Medicare bureaucracy directly
accountable for its decisions. If Congress changes the law and
allows for recovery of damages and attorney's fees for the acts of
Medicare officials that injure patients, then Congress should
likewise clarify official accountability. This could be done simply
by specifying that any damages and attorney's fees arising from the
decisions of Medicare officials from litigation should be taken out
of the personnel budget of the Center for Medicare Management, its
salaries and expenses account.
As former HHS Deputy General Counsel Robert Charrow argues, no private firm is immune from the damages it inflicts on others in the course of its operations. The costs of these mistakes, including attorney's fees, hit the bottom line of the firm, and thus the salaries, expenses, and profits of the firm. The same should apply to the Center for Medicare Management. Each year, then, Congress would have the opportunity to review the court decisions awarding patients damages. This would enable Congress to make the appropriate policy adjustments, improve the Medicare bureaucracy's performance, and replenish the requisite funds for the Medicare bureaucracy's account through the annual appropriations process. Such a process would have the added benefit of strengthening congressional oversight and enhancing the accountability of the Center for Medicare Management as a "customer friendly" agency.
- With the patients' bill of
rights applied to Medicare, doctors of Medicare beneficiaries,
rather than the Medicare bureaucracy or Medicare contractors, will
decide what is deemed "medically necessary" for a patient's
health.If Members of
Congress take seriously the rhetoric of the advocates of the
patients' bill of rights, then, clearly, doctors are more qualified
to assess the needs of a patient than are the bureaucrats within
the Medicare bureaucracy or its contractors. The problem of
insurance executives superceding the best judgment of physicians,
either in reimbursement decisions or claims reviews, is not
confined to the private sector. The current Medicare process for
determining "medical necessity" is a vague and contradictory one,
with the Medicare bureaucracy and Medicare contractors making
different decisions at different locations all over the country.
Physicians are frustrated by the arbitrary, and often silly and
dangerous, character of these decisions. Giving doctors the
presumption, over the Medicare bureaucracy or its contractors, to
decide what is best for patients is unquestionably more compatible
with the stated objective of assuring a high quality of care. And
it is, of course, also compatible with what many Members of
Congress say they want to accomplish in the private sector.
- With the patients' bill of
rights applied to Medicare, Medicare beneficiaries will be entitled
to the same speedy process of review of denials of coverage and
appeals promised to private-sector patients. In the Senate and
House bills on patients' rights, health plans are required to meet
specified deadlines on responding to claims for benefits and the
processing of appeals, both internally and externally.
In the Senate bill (S. 872), for example, a private health plan must give an enrollee a period of not less than 180 days from the denial of a claim to appeal the denial. When claims are denied, a health plan is to make a determination on the appeal of a denial for benefits as soon as possible, but no later than 14 days from the time necessary information is received and more than 28 days after the request for the appeal is received. If there is a need for an expedited determination of a claim for benefits during the appeals process, when a person's life or health is threatened, the plan is to make a determination no later than 72 hours after receiving a request for an appeal. In the conduct of the review of any denial of these claims, if the denial is based on lack of medical necessity or appropriateness, the review is to be made by a physician.
The situation is very different in Medicare. Hearings in 1999 before the House Ways and Means Subcommittee on Health revealed that the entire appeals process for Medicare beneficiaries has been disgracefully cumbersome and lengthy. Under the Medicare process, the initial denial of claims can lead ultimately to a cumbersome process before an administrative law judge. The Medicare bureaucracy has admitted that the average processing time for appeals in the administrative law system of claims denied under Medicare Part A, the part of the program that pays hospitals, was 310 days; and for Medicare Part B, the part of Medicare that pays doctors, it was 524 days.
Following the revelations that surfaced in the 1999 House Ways and Means hearings, Congress, largely through the leadership of Representative Bill Thomas( R-CA), the Chairman of the House Ways and Means Committee, enacted changes in law to improve the Medicare appeals process. Even with these changes, the Medicare process falls short of the strict requirements being proposed for private plans in the House and Senate "patients' bill of rights" legislation. Congress, now intent on imposing strict standards for review and appeals on private health plans, at the very least ought to guarantee senior citizens receiving Medicare entitlements exactly the same timely review of denials required by provisions of the patients' bill of rights legislation.
The best approach to the problems in the health care system is not to expand federal regulations, but rather to expand patient choice so that patients may pick and choose the options that are best for them. This change in the health insurance market would solve the overwhelming majority of problems that are the target of patients' bill of rights legislation. This would require, however, a dramatic shift in federal health policy: a change in fundamental direction.
Until Congress makes the necessary changes in the federal tax code to accomplish the broader objective of reforming the health insurance market to empower individuals and families to pick the plans they want and the benefits they need in an open market, it should take incremental steps, wherever possible, to expand patient choice and control in the health care system. On the issue of liability, litigation, and increased regulation, especially as embodied in the House and Senate versions of the patients' bill of rights legislation, Congress should at least demonstrate the impact of its proposals before applying them broadly to the private sector. Moreover, it is only fair that new federal rules also apply to federal plans.
Robert E. Moffit, Ph.D., is Director of Domestic Policy Studies at The Heritage Foundation.