Another Slick Sales Job

Like used car salesmen, politicians in Washington have taken the flawed old model of the Patients’ Bill of Rights and slapped a new sticker on it to try to fool unwitting buyers.

The legislation was a clunker and did not sell last year or the year before that or the year before that. But it has been brought back this year in the Senate, with a few cosmetic changes, and given a new name-the Bipartisan Patient Protection Act of 2001. This new legislation deserves the same fate as the old.

The new salesmen are Senators Edward Kennedy (D-MA) and John McCain (R-AZ). The new sticker does not disguise the reality that this highly flawed legislation would lead to more litigation in both federal and state courts for larger amounts, driving up the cost of insurance and causing millions of Americans people to lose their health insurance altogether.

The many salesmen for patients’ rights bills have been hawking the legislation as necessary so that people can sue their HMOs. The fact is that people already can sue their HMOs. The real issue is what kind of damages they can recover if an employer-sponsored health plan wrongfully denies them coverage for a medical service.

Current Federal law permits them to recover only the value of the denied benefit.

Under the new Kennedy-McCain bill, damages awarded in federal court would be capped at $5 million. However, even if a health plan exercised “ordinary care” in making a decision about whether or not to cover a medical treatment, a claim that it wrongfully denied coverage could go to state court if it involved a question of “medical necessity” or judgment.

There, these disputes over coverage would be decided under the full panoply of state law in which juries could award as much money in damages as the state allows.

Health plans then would be exposed to massive judgments when a jury decides — looking in hindsight after an injury has occurred — that a patient was denied a medically necessary treatment, even though the treatment might have had a very low chance of success and even though there is no clear meaning of what the term “medically necessary” means.

The states are likely to import the full panoply of tort law into what are essentially contract questions. This means that a member would be able to recover not only the cost of denied care but also economic losses that are found to have been caused by the denial of coverage (such as lost wages), non-economic damages (such as pain and suffering, loss of consortium, and hedonic damages), and punitive damages intended to punish the plan.

And no matter how many assurances are offered to the contrary, employers also could be subject to lawsuits by disgruntled workers because of their involvement in selecting the health plan in the first place.

Allowing these new types of recovery and large judgments in coverage cases will increase the cost of insurance, cause employers to drop coverage, make it more difficult for individuals to obtain coverage, and increase the number of uninsured while a few patients recover large awards far beyond their actual economic loss.

People who get their health coverage through their jobs generally have few if any choices of health plans. Either they take what their employer offers, or they do without. That doesn’t set well with consumers who are used to a multitude of choices in virtually every other sector of the economy.

In an ideal world, people would be able to choose their health plan from a variety of offerings and, if they were dissatisfied, switch to another carrier. But since they are trapped into the plans selected by their employers, political activism and lawsuits are their main recourse. Lawsuits therefore can be expected to be more prevalent than if consumers had more options.

But if legislators are intent on passing some legislation, there is a middle ground. Rather than turning the question over to state law, the legislation could change the restrictions now in Federal law to provide a fair remedy.

But instead of trying to encourage more litigation, as this legislation would do, the better approach would be to give patients more power and more choice.

There is only one way to give patients effective and meaningful rights-by giving them greater control over their own insurance policies, the ability to select their own insurer, and the right to change insurers if they are not satisfied.

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Grace-Marie Arnett is president of the Galen Institute, a health policy research organization based in Alexandria, VA..


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