Letter to Senators on Holding Health Plans Accountable
February 15, 2000
Dear [Committee Member]:
The conference committee on managed care legislation will soon get underway. One of the major issues before the conference committee is how to hold health plans accountable.
The National Partnership strongly supports the compromise approach taken in the bipartisan Norwood/Dingell bill. The approach in the Norwood/Dingell bill is a compromise on the issue of liability. The Norwood/Dingell bill is different in critical respects from S.6, the bill introduced by Senators Daschle and Kennedy. Unlike S.6, the Norwood/Dingell bill requires exhaustion of internal and external appeals, except in cases where injury or death already has occurred. Unlike S.6, the Norwood/Dingell bill prohibits punitive damages in cases where the plan complies with the recommendations of the external reviewer. The Norwood/Dingell bill and S.6 are similar in their general approach to liability, in that both are structured to remove the ERISA roadblock that now prevents patients from pursuing such causes of action under state law -- but their differences are real and important.
While we prefer the approach to liability taken in S.6, in the spirit of compromise and in the desire to get a strong bill to the House floor, we accepted the changes made by Representatives Norwood and Dingell. Their calculations proved correct, and the Norwood/Dingell approach to liability was approved overwhelmingly by the House (275-151) last October. In voting for the Norwood/Dingell compromise, the House resoundingly defeated all other approaches, including a leadership-backed amendment offered by Representatives Goss, Coburn, Shadegg, Thomas, and Greenwood.
As shown on the attached chart, the approach to liability in the Goss/Coburn/Shadegg amendment is not a compromise. The liability provisions in the Goss/Coburn/Shadegg amendment are intentionally riddled with loopholes that would make it virtually impossible to hold health plans accountable. Injured patients would only be able to sue to recover damages if:
(1) the basis of the suit is the planís negligent failure to follow the plan's own requirements or definitions regarding what care is medically necessary or appropriate (or experimental), no matter how inconsistent with best medical practice the plan's definitions may be;
(2) the patient has exhausted internal and external appeals in all cases -- even when injury or death already has occurred;
(3) the patient suffered "substantial harm." "Substantial harm" is narrowly defined in the amendment as "loss of life, loss or significant impairment of limb or bodily function, significant disfigurement, or severe and chronic physical pain" -- a formulation that excludes mental or psychological injury; and
(4) the external reviewer agrees with the patient that the plan improperly denied care.
These prerequisites mean that very few injured patients will be able to bring an action in court to recover damages for injury or death.
The first prerequisite lets plans completely off the hook as long as they follow their own rules, however arbitrary or profit-driven they might be. Medical decisions should be made on the basis of the best medical evidence. We need to hold plans to a high standard of conduct. Plans should not be able to ignore the best medical evidence and deny care by writing arbitrary rules into the plan contract, but this prerequisite allows plans to do just that.
The second prerequisite irrationally requires injured patients (or their survivors) to go through internal and external appeals even though they have already been injured (or killed) by the planís wrongful denial of care. When a patient has already been injured or killed due to a health planís wrongdoing, it makes no sense to force the patient to go through a process designed to obtain care that will no longer do the patient any good.
The third prerequisite disallows lawsuits based solely on mental or psychological injury and takes an issue that should affect the amount of damages and makes it the determinant of whether a patient can sue at all. This prerequisite puts a serious roadblock in the way of patients seeking to hold their health plan accountable. Under this approach, plans would get away with making improper decisions as long the patient isnít hurt "too" badly. Instead of focusing on the planís conduct and the patientís medical needs, the focus of the action will be the nature and extent of the patientís injury. Every patient will have to fend off a motion to dismiss the case, right off the bat, and will have to spend precious time and resources at the outset proving that he or she has suffered enough to get in the courthouse door.
The fourth prerequisite lets external reviewers shut the door to the courthouse. This prerequisite ties the hand of the court by preventing the court from awarding damages whenever a private non-judicial body (the external reviewer) has concluded that the plan acted properly. A court cannot award damages for injury sustained no matter what evidence is presented to the court about the planís improper conduct. Courts are better positioned than external reviewers to determine if an award of damages is appropriate because they will have the benefit of fuller development of the evidence and the presentation of testimony.
And these are just prerequisites that determine whether a patient can even get in the courthouse door. The rare patient who overcomes these hurdles will find other roadblocks in the way -- one trick that leads to automatic dismissal and one that requires patients to put forth more evidence than normally is required in civil cases. For the even rarer patient who can overcome these roadblocks, damages will be capped or not available at all. For example, non-economic damages are always capped, an approach that penalizes people like stay-at-home parents and children who are not wage earners, and punitive damages (capped also) are never available in cases alleging wrongful denial of care.
And if that isnít enough, the Goss/Coburn/Shadegg amendment contains language that could well make patients worse off than they now are. Even with existing ERISA loopholes, some courts have held health plans liable under state law for delivering substandard care. The Goss/Coburn/Shadegg approach could stop the development of this case law in its tracks, leaving patients with no legal rights when health plans make decisions based on the balance sheet rather than the patientís chart.
We urge you to adopt the liability provisions in the Norwood/Dingell bill -- a solid compromise that passed the House overwhelmingly in a bipartisan fashion and that is fair to patients and plans alike.
If you have any questions, please contact Joanne Hustead, Director of Legal and Public Policy.
Judith L. Lichtman
National Partnership for Women & Families.