July 23, 2001

July 23, 2001 | WebMemo on Health Care

Why Federal Unions and Members of Congress Want to Escape thePatients Bill of Rights


Members of Congress and representatives of federal employee organizations are trying to get out from under the "patients bill of rights" legislation.

While the Senate agreed by voice vote to include government health programs, including Medicare and the Federal Employees Health Benefits Program (FEHBP), under the terms of the Senate version of the patients bill of rights legislation, the House versions do not include any such direct application. Meanwhile, federal employee union representatives have stated their opposition to the proposal, arguing that it would have a negative impact on the federal employees health insurance program, raising costs for federal workers and their families. Federal employee plan representatives also fear the impact of lawsuits and the erosion of federal standards for federal employee plans. Curiously, these complaints about the patients bill of rights legislation echo similar sentiments expressed by private employers.

Of course, federal employee representatives have a right to be concerned about the impact of the House and Senate versions of patients bill of rights legislation. Both the House and Senate versions will add a significant layer of regulation over federal employees plans, thereby driving up health care costs. Private plans in the FEHBP operate in an atmosphere of comparative freedom from the kind of regulation that accompanies traditional Medicare, the beleaguered Medicare+Choice program, Medicaid, and other government health care programs. Moreover, as Senator Edward M. Kennedy (D- MA) has pointed out, unlike millions of other Americans, federal employees and their families enjoy a broad choice of plans and can choose the package of benefits that they think are best for them. As Senator Kennedy has also observed, federal workers and their families do not need the kind of appeals processes embodied in these bills that he and his colleagues insist should be created for Americans who are deprived of such personal choice. Not surprisingly, federal workers and retirees register a high degree of satisfaction with their private plan coverage. Naturally, the number of lawsuits over claims in the FEHBP is infinitesimal.

Both Senator Kennedy's commentary and the reality of choice and competition in the FEHBP highlight the essential reason why congressional policy on the patients bill of rights is missing the point. Patients do not need lawyers when they can fire poorly performing plans, or reject plans that do not give them the benefits that they want or need. Consumer choice is a powerful instrument of patient protection. The best policy is to extend the principle of choice and competition to the health care system, and allow Americans to choose for themselves the plans that they want. In such a system, lawyers would be largely superfluous.

Watch for increasing pressure to exclude government health programs from the terms and conditions of the patients bill of rights legislation. Look also for a variety of rationalizations to justify such an exclusion. If Members of Congress wanted to exclude their own plans and the plans covering congressional staff and federal workers and retirees from their legislation on patients bill of rights, and if they wished to do so on the crucial point of personal choice, then, of course, they could do so. Unlike other government health programs, the FEHBP is characterized by a high degree of consumer choice and price competition. But to be fair, they would also have to exclude private employers who also offer a range of health plan choices to their employees. Anything less would be inequitable.

The Senate Bill Language

The United States Senate has recently enacted the sweeping Bipartisan Patient Protection Act (S. 1052). The bill provides new avenues for lawsuits in both federal and state courts, and dramatically expands the regulatory authority of the Department of Health and Human Services and the Department of Labor over virtually all aspects of private health plan operations (from utilization reviews, to the appeals and grievance processes, to formularies for prescription drugs, to the dissemination of plan information). Even fee for service plans, for reasons that are still unclear, come under the regulatory reach of a bill designed to target HMOs.

While most of the debate thus far has focused on the nature and scope of litigation, the fact is that overall, this is the most ambitious attempt to expand the reach of federal regulation over the American health care system since the ill-fated Health Security Act of 1994: the Clinton health plan.

The Nickles Amendment
Embodied in the Senate Bill is a provision (Section 301 of Title III), successfully offered as an amendment by Senator Don Nickles (R-OK), that would apply all of the terms and conditions of the patients bill of rights to federal government insurance programs, including Medicare, Medicaid, and the popular Federal Employees Health Benefits Program. The number of additional persons thus covered would be enormous. Medicare covers approximately 40 million, Medicaid covers roughly 34 million, and the FEHBP covers 9 million. Senator Nickles offered the amendment on the grounds of fairness: The nation's largest single provider of health benefits should not be exempt from the provisions of the bill. The amendment, by agreement with Senator Kennedy, was accepted without a recorded vote.

The House Legislation

In the House, neither the Patients Bill of Rights Act of 2001 (H.R. 2315), sponsored by Representative Ernest Fletcher (R-KY) and backed by the Republican Leadership, nor the Bipartisan Patient Protection Act (H.R. 526), sponsored by Representatives Greg Ganske (R-IA) and John Dingell (D-MI) has a provision similar to the Nickles amendment applying the terms and conditions of these bills to government insurance programs.

Congressional staffers in the House of Representatives are reporting deep uneasiness about the impact of the Nickles amendment and are unsure about how they should deal with it. In 1994, House Republicans made a major point, in enacting the Contract With America, that they were going to end the routine practice of excluding Members of Congress and cCongressional staff from the laws, rules, and regulations that they impose on the rest of American society. They also then enacted provisions to highlight any measures that would impose unfunded federal mandates on the private sector of the sort that, one would think, are explicit in the patients bill of rights legislation. Those once-lauded protections have not been invoked.

Issues in the Current Debate
Critics of the patients bill of rights have argued that the terms and conditions of the bill would result in a significant increase in health care lawsuits, an unprecedented expansion of federal regulation (now conducted largely by the CMS, formerly the Health Care Financing Administration) over private-sector plan operations, and higher health care costs. The Congressional Budget Office (CBO) estimated a widely reported increase of 4.2 percent. A lingering historical problem: The CBO has invariably underestimated the true cost of federal health policy changes.

Supporters of the Senate and House bills have argued that the threat of lawsuits is exaggerated; that the ability of plan members to pursue such lawsuits is necessary; and that the additional costs incurred under the bills, and thus the impact on the number of the uninsured, are marginal. Ron Pollack, Executive Director of Families USA, a grass-roots organization that supported the Clinton plan in 1994, says that the legislation will not have an "adverse effect." 1

Efforts By Members of Congress and Congressional Staff to Avoid Coverage Under the Legislation

Senior congressional staff are uneasy about coming under the terms and conditions of the patients bill of rights legislation, or applying the provisions of the legislation to federal government insurance programs, such as Medicare, Medicaid, or their own health plans under the popular Federal Employees Health Benefits Program.

The Ganske-Dingell Bill
In a remarkable re-write of the Bipartisan Patient Protection Act of 2001 (the Ganske-Dingell bill), 2 the sponsors avoid direct application of the terms and conditions of the legislation, but do so with a rhetorical bow to the principle of fairness. Under Title III, "Application of Patient Protections Standards to Federal Health Programs," Section 301(a), the bill expresses the "sense of Congress" that federal enrollees should have the "same rights and privileges" as those who come under the federally regulated private-sector health plans. Of course, a "sense of the Congress" resolution is not legally binding; it is merely the expression of a sentiment.

Under Section 301(b), the bill expresses the "sense of the Congress" that the President "should require" by executive order that federal officials who have responsibility for the administration of Medicare, Medicaid, the FEHBP, etc. should " to the extent feasible" take such "steps as are necessary to implement the rights and privileges" being established by the legislation. In other words, the sponsors of the bill shift the responsibility for making the tough decisions to the President and suggest he do what is necessary to the extent that the unamended law allows. This is designed, apparently, as a substitute for the direct application of the legislation to the large federal health programs.

Under Section 301(c), the sponsors authorize the General Accounting Office (GAO) to study the question for one year and then submit a report to Congress on what changes in law would be required to apply the terms of the legislation, with the crucial qualification that these changes be "consistent with the missions of the federal health insurance programs" and that they avoid "unnecessary duplication or disruption of such programs." This would, of course, lay down the potential for an excuse, embodied in statute, not to apply the patients bill of rights legislation to federal programs. Private-sector plans often don't have such explicit mission statements; the mission of employers in offering health care coverage is to offer employees a benefit and thus make employment at the firm attractive to individuals and families. It is worth noting that the one-year reprieve represented by the period of the GAO's investigation is not accorded to private-sector plans, which already wrestle with "disruptive" and "duplicative" state and federal regulation. It would be hard to craft a more explicit double standard in health care policy.

The Fletcher Bill
The same concerns have animated congressional proponents of the White House-backed Fletcher bill. These issues surfaced at a July 17 Capitol Hill congressional staff briefing on the House legislation. A key issue in the patients bill of rights debate, of course, has been the denial of claims based on "medical necessity" or the "appropriateness" of medical services, and supporters of the managed care reform legislation want to shift responsibility for defining medical necessity to physicians. In Medicare, however, where denials of claims on the grounds of medical necessity are more common than in private insurance, these crucial decisions are not made by physicians, but by contractors or the Medicare bureaucracy itself. Physicians are understandably angry and frustrated with the sluggish Medicare bureaucracy. Medicare, for example, also has an exhaustive and time-consuming appeals process, and the Medicare law bars judicial relief until the Medicare patient exhausts the existing administrative remedies.

During the July 17 staff briefing, staff with Congressman Thomas Tancredo (R-CO) asked whether Medicare's exhaustive review language, precluding litigation, is similar to the language of the Fletcher bill. Representative Ernest Fletcher's staff replied that it was not and further noted that the Senate language, which would apply the patients bill of rights to the government programs, is bad legislation because it would increase costs and introduce a complicated layer of additional regulation on top of existing layers of regulations in these large programs. Another staff concern is that if the House applied the terms of the patients bill of rights legislation to government programs, it would "complicate" and "confuse" existing law, and apply to members of the military and even prisoners in federal prison health care facilities.

These are curious concerns. They are also persistent. During the October 1999 debate in the House of Representatives on the Dingell-Norwood Bill, Representative Jon Peterson (R-PA) submitted an amendment (No. 29) to apply the provisions of the patients bill of rights to all federal programs, and the amendment, along with several others, was killed in the House Rules Committee. More recently, Congressman Tancredo has indicated that he too will offer a version of the Nickles amendment to the House legislation, making sure that the terms and conditions of the rules that apply to the private sector also apply to the public sector, including Medicare, Medicaid, and the private health plans that cover Members of Congress, the White House, congressional staff, and federal workers and retirees.

Efforts by Federal Employee Unions to Avoid Coverage Under the Legislation

Also recently, Stephen Barr, in a remarkable article for The Washington Post, reported that representatives of federal unions and representatives of federal employee health plans and private insurers, including the National Association of Letter Carriers, he Mail Handlers union, the Government Employees Hospital Association, and Blue Cross and Blue Shield, oppose coverage under the bill. These organizations cover federal workers and their families in the FEHBP. These powerful federal employee organizations and interested groups make arguments remarkably similar to those made by health policy analysts who have looked at the Senate and House legislation (See, for example, John S. Hoff, "The Patients' Bill of Rights: A Prescription for Massive Federal Regulation," Heritage Foundation Backgrounder No. 1350, February 29, 2000). For example:

  • The Fear of a Systemic Negative Effect.
    George Gould, a representative of the National Association of Letter Carriers, a postal union that offers health plan coverage through the FEHBP, said that the Nickles amendment would have "a very negative effect" and that "We strongly oppose that provision." 3

    It should be noted that the federal union leader's argument about the "negative effect" of the legislation is not substantially different than the systemic argument that has been made routinely, for months, by Heritage Foundation and other health policy analysts. It is also similar to the position of private employers, who are also strongly opposed to the bill for the same reasons as Mr. Gould.

  • The Fear of Lawsuits.
    Richard G. Miles, President of the Government Employees Hospital Association, said, "I'm concerned about litigation in state courts…. If an employee is denied some service or some claim is denied, and OPM the Office of Personnel Management upholds the plan decision and it goes to state court, and there are punitive damages, who is liable for that?" 4

    Again, the GEHA President's concern about unlimited punitive damages in state courts is no different from the concerns repeatedly expressed by Heritage Foundation and other analysts.

    This is also similar to the misgivings of employers. It does not appear that a majority of the Members of Congress share these sentiments. Senate backers of S. 1052 feel that bill language requiring patients to exhaust the appeal process before going to court and exempting employers who do not participate in medical decisions by plan administrators is sufficient protection for employers. On the other hand, Senator Phil Gramm (R-TX), bowing to the argument repeatedly made by supporters of the legislation that Texas's experience with a "similar" law proved that fears of suits were exaggerated, offered the Texas language as an amendment. The language was designed to shield businesses from lawsuits, but the Senate rejected the Texas language on litigation. Senator Wayne Allard (R-CO) offered an amendment to protect small businesses from lawsuits, and that language, too, was rejected during the Senate debate.

  • The Fear of Higher Health Care Costs.
    Steven Gammarino, Senior Vice President of Blue Cross and Blue Shield, said, "This bill has the potential to result in significant premium increases to federal employees, retirees and their families, making it more difficult to afford health insurance coverage." 5

    Federal workers and retirees and their families will undoubtedly see their health insurance premiums rise as a result of the legislation, and lower-income federal workers and their families could well find it more difficult to afford health insurance. Higher prices invariably price lower-income families out of health insurance coverage. But the same holds true for workers and their families in the private sector. A recent study conducted by the Commonwealth Fund, for example, shows that lower-income workers over the past 19 years were far more likely to lose coverage than other private-sector workers. Even more recently, the Health Insurance Association of America estimated, based on its analysis of the Senate bill, that an additional 3.7 million Americans could be uninsured and another 2.8 million who lost private coverage would be forced to sign up for Medicaid and the State Child Health Insurance Program. 6 But there is no reason why federal workers and their families should get special protection from Congress if Congress is, as appears to be the case, unconcerned about the impact of its legislation on the affordability of insurance for private-sector workers and their families.

  • The Fear of Erosion of Existing Federal Protections.
    According to the July 15 Washington Post report, federal union officials and federal employee plan representatives "also argue that Congress intended for federal employees, regardless of where they work and live, to receive uniform benefits in the FEHBP. To foster uniformity, FEHBP preempts state law, restricts patient grievances to federal court and limits enrollees to recovering only the benefit they were denied." 7

    It should be noted that the among the purposes of the Earned Retirement Income Security Act of 1974 (ERISA) was to provide uniformity of treatment for private self-insured health plans, which were shielded from state law, state premium taxes, and state benefit mandates. It is unclear why federal employee plans should retain special federal uniformity protections and private-sector plans should not.

Health Policy: They Just Don't Get It

During the June 29 Senate debate on the Nickles amendment, Senator Kennedy, who, as noted, agreed to accept the measure, offered a crucial and largely neglected comment: "It is interesting, as we get into the federal employees, we have 34, 35 different choices. What other worker in America has that kind of choice? The people say, what about your appeal? Generally speaking, you do not need an appeal: you can just go to another health care policy. We have that choice, but working Americans do not. They are stuck with the choices in the workforce author's emphasis." 8

Senator Kennedy is, of course, exactly right. In a normal, consumer-driven market in which individuals and families can pick and choose their own plans and benefits, and in which poorly performing health insurance plans can be fired by consumers, one really doesn't need an appeal system or a complicated regulatory regime; nor does one have to hire a lawyer. The FEHBP is not, of course, a perfect market; nor is it completely free from counterproductive rules restricting either consumer choice or free market competition. But it is the closest thing in reality to a normally functioning, consumer-driven health insurance market. Moreover, the positive experience of the FEHBP proves that a resort to lawyers is a last resort in a rational system. According to the Washington Post report, OPM officials said that they knew of just eight suits in federal courts over disputed claims. 9 The FEHBP, as noted, covers 9 million persons.


If Congress were genuinely concerned about patients rights, it would change the laws and rules that govern the health insurance market to give individuals and families the right to make the choices that are best for them and force health insurance companies to compete in an open market for consumers' dollars. They would, in other words, set to work on fixing a broken and distorted health insurance market that frustrates both consumer choice and competition. Senator Kennedy's simple observation as to why federal employees are both empowered to act and satisfied with their choices, while other Americans are restricted in their options, is perhaps the best illustration yet why conventional congressional health policy in the House and Senate alike simply misses the point.

Robert E. Moffit, Ph.D. is Director of Domestic Policy Studies at The Heritage Foundation.


1 Stephen Barr, "Amendment to the Patients Rights Bill Riles Large Federal Plans," The Washington Post, July 15, 2001, p. C2.

2 The language cited here is based on changes in the bill as made on July 18, 2001, as of 8:12 PM.

3 Ibid.

4 Ibid.

5 Ibid.

7 Barr, "Amendment to the Patients Rights Bill Riles Large Federal Plans."

8 Congressional Record, June 29, 2001, pp. S7144-S7145.

9 Barr, "Amendment to the Patients Rights Bill Riles Large Federal Plans."

About the Author

Robert E. Moffit, Ph.D. Senior Fellow
Center for Health Policy Studies