[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]
PATIENT APPEALS IN HEALTH CARE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
__________
APRIL 23, 1998
__________
Serial 105-100
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
63-213 CC WASHINGTON : 2000
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut BARBARA B. KENNELLY, Connecticut
JIM BUNNING, Kentucky WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Health
BILL THOMAS, California, Chairman
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
JOHN ENSIGN, Nevada GERALD D. KLECZKA, Wisconsin
JON CHRISTENSEN, Nebraska JOHN LEWIS, Georgia
PHILIP M. CRANE, Illinois XAVIER BECERRA, California
AMO HOUGHTON, New York
SAM JOHNSON, Texas
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C O N T E N T S
__________
Page
Advisory of July 24, 1998, announcing the hearing................ 2
WITNESSES
Health Care Financing Administration, Michael M. Hash, Deputy
Administrator.................................................. 9
U.S. Office of Personnel Management, William E. Flynn III,
Associate Director for Retirement and Insurance................ 16
______
Association of Private Pension and Welfare Plans, and GTE
Corporation, J. Randall MacDonald.............................. 36
AvMed Health Plan, Stephen J. deMontmollin....................... 52
Center for Health Dispute Resolution, David A. Richardson, Jr.... 70
National Association of Insurance, Colorado Division of
Insurance, Jack Ehnes.......................................... 44
SUBMISSIONS FOR THE RECORD
American Association of Retired Persons, Jim Parkel, statement
and attachment................................................. 78
Medical Care Management Corporation, Bethesda, MD, Peter G.
Goldschmidt M.D., statement.................................... 83
National Senior Citizens Law Center, Vicki Gottlich, statement
and attachment................................................. 91
PATIENT APPEALS IN HEALTH CARE
----------
THURSDAY, APRIL 23, 1998
House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:10 a.m., in
room 1100, Longworth House Office Building, Hon. Nancy Johnson
presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
Subcommittee on Health
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
April 16, 1998
No. HL-21
Thomas Announces Hearing on
Patient Appeals in Health Care
Congressman Bill Thomas (R-CA), Chairman, Subcommittee on Health of
the Committee on Ways and Means, today announced that the Subcommittee
will hold a hearing on how patient appeals are processed in various
health care settings. The hearing will take place on Thursday, April
23, 1998, in the main Committee hearing room, 1100 Longworth House
Office Building, beginning at 10:00 a.m.
Witnesses will include representatives from the Health Care
Financing Administration (HCFA), health insurance and managed care
organizations, and patient advocacy groups. Any individual or
organization not scheduled for an oral appearance may submit a written
statement for consideration by the Committee and for inclusion in the
printed record of the hearing.
BACKGROUND:
Due process is a core value of the American legal system and has
recently become an important health care issue. Virtually all private
and public health organizations provide consumers with some form of
complaint resolution, using varied procedures to respond to consumer
complaints.
With respect to the Medicare appeals process, a U.S. District Court
in Arizona in 1997 found that HCFA (and the Medicare HMOs with which
HCFA contracts) denied beneficiaries their right to fair notice and
hearings in contesting coverage issues. The court ordered HCFA to
provide seniors with detailed information concerning grievances,
hearings and appeals.
Many States require health insurers to provide certain complaint
procedures. More than thirty States have some specific complaint
procedures that health plans must follow. A growing number of States
are also requiring expedited appeals for denials of urgently needed
care.
In announcing the hearing, Chairman Thomas stated: ``Patients
should be assured that they have an avenue for appealing health care
decisions and that these decisions are made in a timely manner. While
concerns have been raised about current regulations, in fact, many
insurers and health care organizations are already going beyond the
requirements of existing State and Federal law. Patient satisfaction in
resolving disputes is a key element for maintaining confidence in the
American health care system."
FOCUS OF THE HEARING:
The Subcommittee will examine the different types of appeals
procedures used in Medicare and in private markets, and what progress
HCFA has made in improving patient appeals. In addition, the
Subcommittee will consider lessons learned from States which have
traditionally regulated health insurance benefits. A representative of
the National Association of Insurance Commissioners (NAIC) will testify
regarding its model grievance statute which is under consideration in a
number of States.
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Representatives, 1102 Longworth House Office Building, Washington, D.C.
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noted above.
Mrs. Johnson of Connecticut. Welcome. My Chairman, Mr.
Thomas, is unexpectedly detained and we're going to move ahead
in his absence.
Due process means many things. To legal scholars, it's a
term of art meaning the technical process by which legal rights
are enforced. In a larger sense, due process means simply the
opportunity to be heard, the chance to air grievances. Due
process has always been important to our legal system.
Today the concept is gaining significance in health care.
The reason for this is simple. Americans are becoming more
informed consumers and they are demanding opportunities to be
heard. With a wide variety of opportunities to educate
themselves through newspapers, journals, television
documentaries, and the Internet, the average patient today is
much better informed about medical options than the average
patient just a decade ago.
In the past, a patient with a rare disease might only have
sought a second opinion before selecting a treatment regimen.
Today a patient may sit down at their home computer, or stop in
at their local library, and enter a world of information--from
the National Library of Medicine to chat rooms for patients
with a similar condition.
This empowerment of consumers means that they no longer
take a coverage denial decision sitting down. When a fee-for-
service health plan or a managed care plan denies coverage for
service, because it is either not covered by the policy or the
service is deemed to be medically unnecessary, patients often
feel angered and frustrated.
Insurers and managed care plans could significantly reduce
these concerns by, first, providing coverage information in a
form that is easily understood by consumers when they enroll in
their plan, and two, by making coverage decisions in a timely
manner, so that patients are not in limbo for an undefined
period of time. Many plans have already taken these steps, and
I predict that they will be the winners in the end, as
individual consumers and employers walk with their feet to the
plans that meet their needs.
Finally, it is inevitable that, no matter how detailed the
information provided to consumers, and no matter how elaborate
the appeals process concerning coverage decisions, there will
be always disputes about what is and is not covered. Our goal
should be to minimize these disputes.
Today we will hear from several witnesses representing a
wide variety of opinions on the issue of patient appeals.
Our first witness today is Mike Hash, the new Deputy
Administrator of the Health Care Financing Administration.
Joining him is Mr. William Flynn, who is responsible for
managing the Federal Employees Health Benefit Plan, the health
program that covers Members of Congress and all Federal
employees. I look forward to hearing testimony from these and
our other witnesses today, and yield now to Mr. Stark.
Mr. Stark. Thank you, Madam Chairman, and I intend to yield
to Mr. Cardin, who has a bill that was referred to this
Subcommittee. And, I thank you, Chairman Thomas, for holding
this hearing.
I'm sorry to say that I think this is perhaps the most
important health issue before the public today. The
administration has put forward a lot of bills which will help
in some small way to expand insurance to the uninsured, and we
have talked a lot about fraud and abuse, and there is a
commission to extend the life of Medicare. But, I think nothing
is more in the public's mind now than the almost obscene
indifference of the for-profit health care plans to their
patients--the idea that they will deny health care at every
opportunity in an effort to make increasing profits and pay
ever higher executive salaries, and do this by refusing to
deliver decent medical care. And, arbitration plans aren't the
solution. Health plans will only wake up and do the right thing
when they stand close to criminal indictment and/or severe
civil penalty. And, it is for that reason, that it is
imperative that the Federal Government and the Congress respond
to the overwhelming public demand.
I seriously would like to repeat, I know of no other
legislative proposal than patient protection that is more in
the public's mind today, and that includes cutting taxes. They
are more interested in this than they are in having taxes
reduced. It is incumbent on this Subcommittee to move ahead and
satisfy that or the States will come up with a hodgepodge of
different protections which will make life very much more
complicated for all Americans.
And, I'd like to yield at this point to Mr. Cardin, who has
an excellent bill that has been referred to this Subcommittee.
Mr. Cardin. Let me thank Mr. Stark for yielding the time,
and Madam Chairman, let me thank you and Mr. Thomas for holding
this very important hearing on patients' rights.
We really start the debate, and this hearing, on Congress
passing a patients' bill of rights bill. It is very important
that we provide for an independent, unbiased review of
insurance company decisions affecting one's health care.
The President's Advisory Commission on Consumer Protection
and Quality last November came out with a series of
recommendations to protect the quality of health care in this
country. And, they did provide for an external appeal--an
independent appeal process. The President took action in
February, by Executive order, extending this right to all
enrollees of Federal health programs, so that 85 million people
are currently covered by an external appeal, thanks to
President Clinton's actions.
Madam Chairman, it is interesting to point out that some of
these plans already had an external appeal for many years. And,
as the testimony today will point out, there have been none of
the problems that some of the opponents of external appeal have
said would happen in those programs in our Federal Government
that have had an external appeal process.
But, it is important now that we deal with Americans who
are not covered by the President's Executive order. Their
claims are being denied as not medically necessary, or not a
medical emergency, and the internal review process within these
plans has not worked.
Let me give you just one example that maybe will underscore
the problem that we have with the internal review process that
most managed care plans use. A person from my State happened to
be hiking in the State of Virginia. She fell from a 40-foot
cliff, and fractured her arm, pelvis, and skull. She was
airlifted to a hospital and was admitted as an inpatient. The
HMO denied coverage, and, to this day, has still denied the
inpatient services. The internal review process has not worked.
Let me quote from the executive of that managed care
program as to how that plan is saving money. I'm quoting,
``Perhaps the brightest spot in our operations is the
improvement of our claims auditing ability. We have taken
advantage of significant opportunities to reduce current and
future medical expenses by more closely challenging the
contractual and medical appropriateness of claims.''
Now, in this managed care program, the annual compensation
package for the company's top executives in 1996 was $1.8
million. I think we can figure out ways in which this managed
care program can save money. It shouldn't be by denying claims
that are appropriate, in order that there be higher bonuses for
the corporate executives. And that's what is happening, and
without an external appeal process, we are in danger that that
will just be exaggerated.
The States have tried to respond. One-third of our States
have passed laws that guarantee to their citizens an external
review process. My own State of Maryland enacted a review
process in their last legislative session that will become
effective on January 1, 1999--the NIAC model, where the State
legislature contains an external appeal process. But,
currently, there are 125 million Americans who are enrolled in
programs that are covered under the ERISA statute. Even if
every State in this Nation passes an external review process,
125 million Americans won't be covered under those laws,
because of the Federal preemption under ERISA.
It is important that we in Congress pass this basic
protection for those individuals. I have introduced H.R. 3469,
The Patient's Right to Independent Appeal Act, which provides
that an external review of cases must be determined within 72
hours for emergency cases, and 60 days for all other decisions.
This bill has been endorsed by the American Federation of
State, County, and Municipal Employees; the National Senior
Citizens Law Center, and Families USA. A comparable, similar
provision is provided in the Democratic caucus bill, Patient
Bill of Rights Act, H.R. 3605, that I am an original cosponsor
of.
Let me just point out one additional fact. Proponents of
external appeal say it would add to the cost of health care in
this country. I disagree with that. There are two independent
studies that have been done. One, by the Lewin Group, that said
the cost will range from three-tenths of $.01, to $0.07 per
month, per person, and Coopers and Lybrand recently came in
with a review that shows it will cost $1.20 per year, or $0.10
per month, for an external review process.
I think that those estimates are wrong. I think it will
save money. If we adopt national standards for external review,
managed care programs will develop a much stronger internal
review process. And managed plans will be handled more
efficiently. It will also reduce the amount of litigation that
has taken place in health care.
For all these reasons, I urge this Congress to act quickly
on an external review process, so that we can provide this
protection to all people in our country, and, Madam Chairman, I
ask you now to consent that my entire statement be included in
the record.
Mrs. Johnson of Connecticut. So ordered.
[The opening statement follows:]
Opening Statement of the Hon. Benjamin L. Cardin, a Representative in
Congress from the State of Mayland
Good morning, Mr. Chairman, Members of the Subcommittee. I
want to commend Chairman Thomas for holding this hearing on the
most fundamental of patient rights-
to obtain an independent, unbiased review of insurance
company decisions affecting one's health care.
I also want to applaud you for beginning with a discussion
of the Medicare program. Since its creation more than 30 years
ago, Medicare has led the way in setting high standards for
health care quality.
In the years since Medicare was enacted, America's over-65
population has increased rapidly due to technological advances
and increased awareness of healthful lifestyles. At the same
time, health care costs have increased, and Congress has been
challenged to keep its promise to beneficiaries-guaranteeing
them comprehensive medical care while keeping the program
solvent.
One of the ways we have kept that promise is by providing
access to an external appeals process where denied claims can
be reviewed by an independent entity and beneficiaries can
trust that their cases are being considered fairly. I hope that
by examining Medicare's external appeals system, we can both
improve it for seniors and appreciate the value of guaranteeing
this process for all Americans.
The President's Advisory Commission on Consumer Protection
and Quality recognized the importance of external review and
included it in its Patients Bill of Rights last November. In
February, the President issued an Executive Order extending
this right to all enrollees of Federal Health Programs-more
than 85 million Americans.
When that Executive Order was signed, Americans in private
health plans looked to Congress for reassurance that they, too,
would be guaranteed this right. They are looking to us because
there is a crisis of confidence in managed care. Every week, I
receive letters and phone calls from people in my district who
are frustrated with their health care companies. They follow
the rules, and still they are unable to receive services that
are covered by their insurance policies. Claims are denied as
``not medically necessary,'' or ``not a medical emergency.''
They find it difficult to register complaints or obtain
reconsideration of their decisions, and they experience lengthy
delays in getting their cases reviewed. They are concerned that
these delays will put their health or life in jeopardy while
they fight a health plan's red tape.
Last July, a Maryland woman was hiking in Virginia when she
fell off a 40-foot cliff, sustaining arm, pelvis and skull
fractures. After being air-lifted to a hospital, she was
admitted as an inpatient. Her HMO denied reimbursement for the
ER, air-lift and inpatient treatment charges because she did
not obtain pre-authorization. The patient says that she was so
heavily medicated during and after the hospitalization that she
was unable to provide notification. Although the HMO has now
approved reimbursement for the ER and air-lift charges,
inpatient expenses are still denied. Clearly, the internal
review process did not provide adequate patient protection in
this case.
Because of scenarios like this, which are widespread,
people do not believe that their health plans are providing
them a fair and impartial review of their cases. A majority of
all Americans are worried that their health plan would be more
concerned about saving money than about providing the best
medical treatment for them.
And they have good reason to worry. The Chief Financial
Officer of the health plan that denied the air-lift and
hospitalization told Wall Street Journal analysts that
``perhaps the brightest spot in our operations is the
improvement in our claims-auditing capability. We have...taken
advantage of significant opportunities to reduce current and
future medical expenses by more closely challenging the
contractual and medical appropriateness of claims.''
The average annual compensation package for this company's
top executives in 1996 was $1.8 million.
In response to these types of cases, one-third of our state
legislatures have enacted laws to guarantee their citizens the
right to an external appeal, and bills have been introduced in
many others. My own state of Maryland recently enacted external
appeals legislation that will go into effect on January 1,
1999.
And yet, because we have an illogical system of health care
laws, even if every state legislature in the nation were to
pass an external appeals law, millions would still be denied
this right. Approximately 125 million Americans are enrolled in
ERISA plans, which are not subject to state insurance laws on
grievances and appeals.
ERISA requires plans to give its beneficiaries notice and
opportunity for a full and fair review of denied claims within
60 days, but if the internal review results in an adverse
determination, the only recourse is to sue the benefit plan to
recover the cost of treatment. Because most managed care
denials occur during the pre-authorization process, that is,
before treatment is rendered, the consequences for a patient's
life or health are far more serious than with a fee-for-service
denial. Yet, patients are not able to receive compensation for
pain and suffering that result from the denial, nor are they
eligible to receive punitive damages.
The tremendous disparities between states and between
state-regulated and ERISA plans have led me to conclude that
federal legislation is imperative.
I have introduced HR 3469, the Patient Right to Independent
Appeal Act. This bill provides external review for cases that
are not resolved through an internal process or when the plan
does not complete the internal process in a timely manner.
External review is mandated when services are denied as not
medically necessary and the amount exceeds a significant
threshold, when the treatment is denied as experimental or
investigational, or when the patient's life or health is
jeopardized. The procedure may vary depending upon whether it
is for ERISA self-insured plans or traditional insurance plans.
In either case, the applicable state or federal authority (U.S.
Department of Labor) can choose to establish its own external
review entity, or certify an independent entity. Each plan will
contract with an entity and will pay for the direct costs of
the appeal process. This system will allow multi-state plans
the opportunity to obtain nationally consistent interpretations
of coverage, and is compatible with ERISA's requirement that
plans administer their benefits in a consistent manner.
All participants have the opportunity to submit evidence
and make an oral presentation. The plan is also required to
provide timely access to all information. This external review
must be made within 72 hours for emergency cases and within 60
days for all other decisions, and the decision of the review
panel is binding on the health plan.
HR 3469 has been endorsed by the American Federation of
State, County and Municipal Employees, the National Senior
Citizens Law Center, and Families USA.
This provision is also included in the Democratic Caucus
Patient Bill of Rights Act,
HR 3605, which I have co-sponsored.
Some groups claim that costs associated with a guaranteed
external appeals process are prohibitive. I want to refute
that. Last November, the Lewin Group estimated the cost of an
appeals process for national implementation. Researchers
considered data from Florida, Rhode Island, Texas, and New
Jersey. The state of Florida, which implemented its external
review system in 1985, is the longest standing appeals process
among all the states. Florida's Statewide Assistance Panel, a
state agency, performs the appeals at an average cost of $867
per appeal. In the other states, appeals are contracted out to
a private company and costs range from $288 to $600 per appeal.
Using the low figure of 1 appeal per 10,000 enrollees (Florida)
and the high of 2.5 appeals per 1,000 enrollees (Medicare),
Lewin determined that the costs would range from three-tenths
of one cent to seven cents per person per month. Patients will
tell you that is a small price to pay for the peace of mind
that comes from knowing that when you require life-saving
treatment, the final decision will not be made by someone who
stands to profit if appropriate care is denied.
A separate report released yesterday by Coopers & Lybrand
for the Kaiser Family Foundation estimates the cost of external
appeals at $1.20 per year, or ten cents per per month.
Employers are beginning to acknowledge that consumer
protections for ERISA plans are inadequate. The Corporate
Health Care Coalition is an alliance of 26 large, multi-state
self-insured companies focused on national health care policy.
On Monday, one of its largest members, IBM, testified before
the Senate Labor Committee that ``in one area, the revision of
ERISA requirements for internal reviews and creation of a new
external, independent review of benefit denials, we believe it
is appropriate for Congress to legislate.''
There are additional benefits to enacting a federal
external appeals law. If health plans are so opposed to
external review, perhaps they will strengthen their internal
review systems to respond promptly and responsibly to patient
concerns so that further appeals will not be needed.
Second, an adequate external appeals system will result in
fewer lawsuits. The existence of an independent review process
will reduce the need for liability claims against health plans
and will eventually result in reduced overall health care
expenditures.
Mr. Chairman, thank you for providing a forum for this
issue. I look forward to hearing from our witnesses, and to a
productive discussion of existing appeals systems and how this
Congress can act to improve the health care system for all
Americans.
Mrs. Johnson of Connecticut. We will now proceed with Mr.
Hash and Mr. Flynn to come forward.
STATEMENT OF MIKE HASH, DEPUTY ADMINISTRATOR, HEALTH CARE
FINANCING ADMINISTRATION
Mr. Hash. Good morning, Madam Chair, Subcommittee Members.
I want to thank you for inviting the Health Care Financing
Administration to testify today about the appeals process
available to our beneficiaries. Effective and efficient appeals
processes are essential to ensure access to the benefits, to
protect our beneficiaries, and to promote improvements in our
overall programs. We welcome any insights that you, or the
other witnesses today, may share with us about how to improve
our processes.
Clearly, Medicare beneficiaries must have the right to
speedy remedies in cases where time may be crucial, as Mr.
Cardin has just discussed. Beneficiaries must know that they
have prompt recourse if they feel they are denied needed care.
It is important to note, I think from the perspective of the
Medicare Program, that most of our beneficiaries never file an
appeal. In fiscal year 1997, less than 1 percent of claims in
Medicare were appealed, and less than 5 percent of all
beneficiaries have reported through surveys that they have ever
filed an appeal. But when there is a dispute, we want our
systems to help assure that the rights of patients come first.
Beneficiaries can appeal virtually any issue under the
Medicare system. Beneficiaries are regularly reminded of their
appeal rights through a variety of sources: Our Medicare
Handbook, which we distribute to new Medicare beneficiaries;
explanation of Medicare benefits, and Medicare summary notices,
which we periodically send to beneficiaries. With respect to
patients who are admitted to hospitals, we provide notice of
their appeal rights as hospital patients, and, finally,
information about our appeal process is included in the
enrollment materials with respect to our managed care plans.
And at each time a denial is made by one of our contracting
private plans, enrollees are advised of their appeal rights.
We think this hearing today is especially timely because we
are now considering further improvements in our managed care
appeals process. Last year, as I know many of you know, the
Clinton administration published the regulations that guarantee
appeal rights to Medicare beneficiaries that are among the
strongest in the country.
I'd like to call your attention to a chart that we included
in our testimony today, which I think illustrates our appeals
process, both on the managed care side for our enrollees, and
in the traditional fee-for-service program. We are
strengthening our managed care appeals because the incentives
in the managed care system are so different from the incentives
in the traditional fee-for-service system. Beneficiaries must
be confident that managed care incentives to reduce unnecessary
care won't limit appropriate care. That's why we now require
our managed care partners to respond within 72 hours when
Medicare beneficiaries appeal a denial of care decision by a
managed care plan that could result in jeopardizing life,
health, or the ability to regain maximum function.
As I mentioned, we are considering additional improvements
to address continuation of care during appeals in managed care,
notification of beneficiaries when services are reduced or
terminated, and tighter standards for review in routine appeals
in managed care. For example, we believe that the turnaround
time for nonurgent appeals should be reduced from the current
60-day period, and we would welcome any comments from the
Subcommittee, or other interested parties, on what those
timeliness standards should be.
We do guarantee expedited appeals for both managed care and
fee-for-service when it comes to a hospital discharge. A
Medicare beneficiary or a physician may decide that such a
discharge is inappropriate. In this circumstance, there are
very short time periods for resolution of that dispute. This is
essential to make sure that incentives for hospitals to be
efficient do not result in the denial of appropriate care.
Generally, in the fee-for-service part of Medicare, the
process works somewhat differently, because the incentives are
different there. And, this is an important distinction. Claims
denials in the fee-for-service system generally come after
services have been delivered and there is not the potential
medical urgency issue that arises in the context of managed
care when there is a denial before services are actually
rendered. Under part B of the Medicare Program, providers have
the same right to appeal as beneficiaries if they accept
assignment. As you know, accepting assignment means the
provider will accept our payment as payment in full, and agree
not to bill the beneficiary more than the 20 percent
coinsurance.
Most of the delays, that you see from our information
included in my longer statement, in our appeals process, occur
at the administrative law judge level, where cases can be
appealed that are not resolved in favor of the beneficiary at
our contractor level. It takes, on average, about 45 days for
our contractors to process part A appeals, but the average time
for administrative law judge decisions on part A appeals
averages over 300 days. It takes, on average, less than 34 days
for our contractor to process and review part B claims, but for
those that are appealed to ALJs it takes an average of 664 days
to resolve those cases.
Now, the administrative law judge system remained within
the Social Security Administration when HCFA became an
independent agency a number of years ago. Only 5 percent of the
ALJs case load is from Medicare appeals. As a result, the
judges tend to be far more expert in the Social Security rules
and regulations than in Medicare regulations. ALJs are not
bound, in addition, by HCFA local review policies that our
contractors may apply, and Medicare officials are not
automatically included in the discussion of cases at the ALJ
level. And, finally, providers can introduce new information,
new documentation, at the ALJ level, which has not been
available to our contractors in their review process.
To address these problems, we are adding new requirements
for our contractors in the appeals area, to ensure that case
files that go forward to ALJs are complete and comprehensive.
Also, thanks to the Social Security Administration, they have
now dedicated about 30 of the administrative law judges to be
Medicare-only specialists. We are working to educate those
designated ALJs about Medicare policies. We look forward to
continuing to work with the Social Security Administration on
further improvements that might be made in reducing the time
lags associated with ALJ reviews.
So, while there is room for improvement in our appeals
process, especially at the ALJ level, we believe our appeal
system is working. We have the strongest appeal rights in the
country for our managed care beneficiaries, where appeal rights
are so essential because of the incentives in a capitated
delivery system. We are working to bolster these managed care
appeal rights further for nonurgent appeal cases.
We very much appreciate this opportunity to be with you and
participate in this discussion. We, of course, look forward to
working with you, Madam Chair, and the Members of the
Subcommittee, as you continue to refine the appeals process,
and, of course, at the appropriate time, I'd be happy to
respond to any questions that you, or other Members of the
panel, may have for me. Thank you very much.
[The prepared statement follows:]
Statement of Michael Hash, Deputy Administrator, Health Care Financing
Administration
Chairman Thomas, Subcommittee members, thank you for
inviting HCFA to testify today about the appeals processes
available to our beneficiaries. Effective and efficient systems
for beneficiaries to appeal Medicare's coverage and payment
decisions are essential. We appreciate any ideas or insights on
improving these systems that you and your witnesses might
share.
Clearly, Medicare beneficiaries must have the right to a
speedy ruling in cases where time may be crucial. Beneficiaries
must know that they have a prompt recourse if they feel that
they are denied needed care. Most beneficiaries never file
appeals, and in Fiscal 1997 less than 1 percent of claims were
appealed, and less than 5 percent of beneficiaries report
having ever filed appeals. But when there is a dispute, our
objective is to have an appeal system that helps to assure that
the rights of patients come first.
Beneficiaries can appeal virtually any issue regarding
provision or payment of services, and beneficiaries are
regularly reminded of their appeal rights. These rights are
discussed in the Medicare handbook. They are listed on every
Explanation of Medical Benefits and Medicare Summary Notice
sent to beneficiaries. They are included on notices to patients
when they are admitted to hospitals. And they are described on
every denial made by a Medicare managed care plan. (A chart
outlining the various appeal levels that are available is
attached to this testimony.)
This hearing is timely because we are currently considering
options for further improvements in our appeals process. Just
last year the Clinton administration published final
regulations guaranteeing appeal rights to Medicare managed care
beneficiaries that are among the strongest available to any
managed care enrollees in the country.
MANAGED CARE APPEALS
Appeal rights are important in both managed care and fee-
for-service. We are strengthening regulations for managed care
appeals because the incentives are so very different from fee-
for-service Medicare. Beneficiaries must be assured that
managed care incentives to reduce unnecessary care will not be
allowed to limit appropriate care.
That is why we require plans to respond within 72 hours
when Medicare beneficiaries appeal a denial-of-care decision by
a managed care plan that could jeopardize life, health or
ability to regain maximum function. The rule also covers
termination of care, such as discharge from a skilled nursing
facility.
In expedited appeals, health plans must notify Medicare
enrollees within 72 hours of receiving an enrollee's request
for services that they are denying the service. The plan at
that time must state the reasons for the denial, inform the
beneficiary of their appeal rights, use denial notice forms
that describe the expedited appeal right, accept oral requests
for appeals, follow up verbal notifications in writing within
two working days, automatically grant all physician requests,
and maintain logs and periodically report on requests for
expedited appeals. The beneficiary has 60 days to file an
appeal, and the plan generally has 72 hours to rule on
expedited cases, and 60 days on standard cases.
If a plan upholds its original decision to deny the
service, the case must automatically be forwarded to our
independent reviewer. This contractor runs what we call the
Center for Health Dispute Resolution, also known by the acronym
CHDR. The CHDR contractor generally acts on expedited appeals
within 10 working days, and managed care plans have up to three
days from the date an expedited appeal request is made to the
CHDR to submit additional information. For appeals that are not
medically urgent, the CHDR generally has 30 working days to
make a ruling.
Beneficiaries have up to 60 days to request a review of an
ALJ's decision by the Department of Health and Human Services
Appeals Council. After that level of appeal, beneficiaries have
up to 60 days to request a Federal District Court review of any
decision involving at least $1,000.
Beneficiaries have up to 60 days to request a review of ALJ
rulings in cases involving at least $100 by an Appeals Council.
After that, beneficiaries have up to 60 days to request a
review by the Department of Health and Human Services Appeals
Council. After that level of appeal, beneficiaries have up to
60 days to request a federal district court review of any
decision involving at least $1000.
Since the federal government is the largest purchaser of
managed care, our expedited appeals regulation for urgent care
cases helps set a new, higher standard for the entire managed
care industry.
As I mentioned, we are now considering additional
improvements to the regulations to address continuation of care
during the managed care appeals process, notification of
beneficiaries when services are reduced or terminated, and
tighter standards for appeals involving situations that are not
urgent. We believe the turnaround time for non-urgent appeals
should be reduced from the current 60 days, and welcome
comments from your committee and other interested parties on
what the standards should be.
As we did with our expedited appeals regulation last year,
we are consulting with beneficiary advocates, provider groups
and the managed care industry in developing these further
improvements.
FY 1997 Managed Care Appeals Statistics
In Fiscal Year 1997 there were 5,458,109 Medicare
beneficiaries enrolled in managed care plans. We do not
currently receive information on the number of appeals filed
with managed care plans, which is the first level of appeal for
managed care disputes.
Cases not resolved by plans are automatically forwarded to
our independent CHDR appeals contractor, and 9,024 appeals were
sent to CHDR in FY 1997. About 24 percent of CHDR rulings are
in favor of the beneficiary. About 6 percent of CHDR ruling are
appealed on for Administrative Law Judge review.
FEE-FOR-SERVICE APPEALS
In fee-for-service Medicare, the appeals process works
somewhat differently because incentives are different. Payment
denials generally come after care is delivered, and there is
not the potential medical urgency that could occur because of a
managed care denial before care is delivered.
Part A Appeals
Because of incentives in the Medicare payment system for
hospitals, expedited appeals are guaranteed for cases in which
a hospital wants to discharge a Medicare beneficiary and the
beneficiary's physician considers discharge to be
inappropriate. Providing expedited appeal rights for inpatients
facing hospital discharge against their physician's advice is
an essential check to make sure incentives for hospitals to be
efficient do not result in denial of appropriate care.
For Part A disputes other than hospital discharges that
concern hospital, skilled nursing and home health claims,
appellants must request review within 60 days of receiving
notice--called the ``initial determination'' that the claim is
being denied. Our contractors must complete 75 percent of
appeals within 60 days, and 90 percent within 90 days.
Part A disputes not resolved at the contractor level can be
taken to Administrative Law Judges (ALJs), where there are no
time limits for decisions that can be enforced, and where
backlogs and delays are occurring. Appeals to ALJs must be
requested within 60 days of receiving a decision on the appeal
from the contractor level. Issues for ALJ appeals must be for
claims of at least $100, and claims can be added together to
meet the $100 requirement.
Part A disputes can be appealed beyond the ALJ level to an
Appeals Council. These appeals must be requested within 60 days
of the ALJ decision, and unlike other prior appeal levels, the
Appeals Council can turn down the request. The Appeals Council
can also choose to review an ALJ decision on its own, without a
request from a beneficiary or provider.
Part A disputes can be appealed past the Appeals Council to
judicial review. These requests must be made within 60 days of
the Appeals Council decision, and must involve matters of at
least $1000.
Part B Appeals
For disputes about Part B physician, equipment, and lab
service claims, beneficiaries must request an appeal within six
months of receiving notice that the claim is being denied. Our
contractor must complete 95 percent of reviews within 45 days.
Part B disputes can be appealed past the contractor review
level to contractor Hearing Officers, who must complete 90
percent of hearings within 120 days. Requests for hearing
officer hearings must be made within six months of the initial
contractor review decision, and must be for disputes of at
least $100. Claims can be added together to meet the $100
requirement.
Part B disputes can be appealed beyond the Hearing Officers
to Administrative Law Judges (ALJs). These appeals must be
requested within 60 days of the Hearing Officer decision, and
must involve disputes of at least $100 for home health claims
and $500 for all other Part B claims. Again, claims can be
added together to meet the dollar amount threshold.
Part B disputes can be appealed beyond the ALJs to the
Appeals Council. The request must be made within 60 days of
receipt of an ALJ decision. And, as with Part A disputes, the
Appeals Council can decide to turn down a case, and it can
decide to take up an ALJ case on its own, without a request
from a beneficiary or provider.
And again, as with Part A disputes, Part B disputes can be
appealed beyond the Appeals Council level to the courts. These
requests must be made within 60 days of the Appeals Council
decision, and must involve matters of at least $1000.
FY 1997 Fee-for-Service Appeals Statistics
In Fiscal Year 1997, we processed 843,859,934 claims.
Appeals were filed involving 6,091,313, or 0.72 percent.
Part A Appeals:
Our contractors received 58,030 Part A cases in fiscal
1997. They completed 59,689 cases involving 81,432 claims, and
ruled in favor of the appellant in 30 percent of cases.
The ALJs were sent 15,937 Part A appeal requests involving
25,422 claims. They completed 12,465 and ruled in favor of the
appellant in 72 percent of cases.
Part B Appeals Related to Services such as Hospital Outpatient
and Home Health Care:
Our contractors received 152,251 cases. They completed
160,082 cases involving 198,141 claims, and ruled in favor of
the appellant in 44 percent of cases.
Hearing Officers received 20,514 cases, completed 14,988
involving 21,694 claims, and ruled in favor of the appellant in
40 percent of cases.
ALJs were sent 3,120 cases involving 4,685 claims. They
completed 1,321 cases, and ruled in favor of the appellant in
59 percent of cases.
For Part B Appeals Related to Physician and Other Services:
Our contractors received 3,868,160 cases. They completed
3,337,592 cases involving 5,811,740 claims, and ruled in favor
of the appellant in 70 percent of cases.
Hearing Officers received 86,746 cases. They completed
86,898 cases involving 539,040 claims, and ruled in favor of
the appellant in 45 percent of cases.
ALJs were sent 8,412 cases involving 123,791 claims. They
completed 4,701 cases, and ruled in favor of the appellant in
51 percent of cases.
PROVIDER, PHYSICIAN AND SUPPLIER APPEAL RIGHTS
Providers, physicians and suppliers, as well as
beneficiaries have appeal rights, and all can appeal on behalf
of beneficiaries if they become the beneficiary's appointed
representative.
Under Part A, providers can only appeal denials based on
medical necessity. Under Part B, physicians and suppliers have
the same right to appeal as beneficiaries if they accept
``assignment'' on a claim. Assignment, in Medicare jargon,
means that they accept what Medicare pays as payment in full
without billing the beneficiary for more than the standard 20
percent copayment.
Physicians and other Part B suppliers who do not accept
assignment do not have the same appeal rights as the
beneficiary. They may, however, appeal medical necessity
denials where they are required by statute to make a refund to
the beneficiary.
ADMINISTRATIVE LAW JUDGE APPEALS
One area where we would like to make improvements is in the
Administrative Law Judge appeals system, and in the coming
year, we will work with our partners in the Social Security
Administration on this. As I explained earlier, the
Administrative Law Judge level is where delays can occur in our
appeals process. On average, ALJs process Part A appeals in 301
days and Part B appeals in 664 days. Also, since the vast
majority of the judges' workload is Social Security cases, the
judges, as a whole, tend to be far more expert in Social
Security rules than in Medicare regulations. Furthermore, ALJs
are not bound by HCFA local policy or manuals, though they are
bound by Medicare law and regulation.
These issues point to a need for some improvement. HCFA is
performing an analysis of the ALJ process and will be in
discussions with officials of the Social Security
Administration about future steps that may be taken.
For now, we are adding new requirements for our contractors
to ensure that case files that go to ALJs are complete and
comprehensive. Also, about 30 ALJs are being dedicated as
Medicare-only specialist who will handle the most complicated
Medicare cases. Finally, we are working to educate ALJs about
how Medicare local policy is created and the underlying reasons
for the policy.
CONCLUSION
There is room for improvement in our appeals process,
especially at the Administrative Law Judge level.
We have the strongest appeals rights in the country for our
managed care beneficiaries, where appeals rights are so
essential because of the incentives that exist in managed care.
We are currently working to bolster these managed care appeals
rights further for non-urgent cases, and will keep you abreast
of our progress.
We also have sufficient appeal rights for our fee-for-
service beneficiaries and providers, with prompt turnaround on
cases up until they reach the ALJ level, where Medicare has no
control.
We appreciate your interest in this issue, and look forward
to working with you as we monitor and continue to refine the
appeals process. I'd be happy to answer any questions you might
have.
[GRAPHIC] [TIFF OMITTED] T3213.001
Mrs. Johnson of Connecticut. Thank you, Mr. Hash.
Mr. Flynn.
STATEMENT OF WILLIAM E. FLYNN III, ASSOCIATE DIRECTOR FOR
RETIREMENT AND INSURANCE, OFFICE OF PERSONNEL MANAGEMENT
Mr. Flynn. Thank you, Mrs. Johnson. I've submitted a
statement for the record. I might highlight just for the
Subcommittee perhaps 5 points from that.
First, I'd like to thank you for your invitation here
today. The Federal Employee Health Benefits Program is the
largest employer-sponsored health benefits program in the
United States. It consists of over 350 plans, providing health
care benefits to over 9 million Federal employees, Federal
retirees, and Members of their families.
I think the first point that I'd like to make with respect
to the patient appeals process is that we believe we have a
good program. It's been in place for over 20 years, since 1975.
It's fully compliant with the broad principles included in the
Patient Bill of Rights, and, as Mr. Cardin mentioned earlier
today, it includes an external review process independent from
the plan and the initial decision that the plan made on a
disputed claim or a patient appeal.
The second point that I'd like to make is that our
participants understand the process. They have information on
how to use it. That information is included in plan brochures
that they get from their individual health carriers. It's
included in program guides and other materials that the Office
of Personnel Management provides participants. It's on the
Office of Personnel Management Internet website, and in other
places. Generally speaking, we think it's a relatively simple
program. It's easy to understand and relatively efficient to
administer.
And, that brings me to my third point. We have in the
Federal Employees Health Benefits Program three levels of
review. Those are laid out pretty clearly.
The first level of review is at the health plan level. We
require health plans to issue a decision to a patient within 60
days, and most plans meet that standard. If the individual is
still dissatisfied with the decision at the plan level, they
can then come to the Office of Personnel Management, and we
have a standard to make a decision--to render a decision within
60 days.
This year we're running at about 37.5 days on average to
issue a decision. Last year, it was about 42 days. We process
about 4,500 cases a year. Last year was 4,500. This year, at
this point, it's about 2,300, so it looks about the same. That
is a very small proportion of the total number of claims that
are processed in the Federal Employees Health Benefits Program.
It runs sort of plan by plan from roughly one quarter of 1
percent in some plans to as high seven-tenths of 1 percent in
other plans.
And, then, finally, if an individual is still dissatisfied
with OPM's decision, they have the ability to take the matter
to Federal court where it is reviewed under the Administrative
Procedure Act standard. But I will say that very few cases go
to court in any given year, fewer than a half dozen. In fact, a
half dozen would be unusual for us.
The fourth point that I would like to make is that we do
survey the participants in the Federal Employees Health
Benefits Program each year. Each year we ask questions of them
about their opinion of their particular plan's claim processing
operation, and what we found consistently over the past 4 or 5
years is that our enrollees believe, between 80 and 90 percent,
that they're satisfied with the adequacy of claim processing at
the plan level. Perhaps a little bit more precisely, in 1995,
we specifically asked enrollees about how satisfied they were
with OPM's processing of their disputed claims. And I think
that will give a little bit more information here. Just about
half of the people who had a dispute, that they asked us to
review, felt that we handled it fairly. About three-quarters of
the people felt that, even if they were dissatisfied with the
decision, the decision that we gave them was simple, clear, and
easy to understand. Clearly, we've got some room to improve,
but I think we have a pretty good track record from which to
operate.
The last point I'd make, Madam Chair, is that the disputed
claims process is one component in this program that actually
helps us improve the program. It's a good early warning system.
It helps us detect, in some cases, problems with consistent
administration of contract provisions across the program, and
my statement contains several recent examples where that has
been the case.
I think that concludes my brief opening statement, and I'd
be happy to answer any questions the panel may have for me as
well.
[The prepared statement follows:]
Statement of William E. Flynn III, Associate Director for Retirement
and Insurance, U.S. Office of Personnel Management
Mr. Chairman and Members of the Subcommittee:
Thank You for this Opportunity to Describe Appeal Rights
the Federal Employees Health Benefits Program Affords to
Individuals When There Is a Dispute with Their Health Plan over
the Provision of Service or Payment of a Claim.
As the Agency Responsible for Administration of the
Nation's Largest Employer-sponsored Health Insurance Program,
Opm Contracts with 350 Health Plans to Provide Comprehensive
Health Care to Approximately 9 Million Civilian Federal
Employees, Retirees, and Their Eligible Family Members. The
Program Has Afforded Enrollees Both an Internal Appeals Process
at the Health Plan Level, and an Independent Review Provided by
Opm for over 20 Years. Throughout the Program, These Review and
Appeal Procedures Are Uniformly Applied No Matter Where the
Participant Lives or Which Plan Provides Their Health Care.
The Steps We Use for Resolving Claims Disputes Are in Full
Compliance with the Recommendations Made by the President's
Advisory Committee on Consumer Protection and Quality in the
Health Care Industry in the Patient Bill of Rights. Standard
Language in Benefit Brochures, Which All Health Plans must Give
Their Enrollees Each Contract Year, Fully Describes the Steps
for Seeking Initial Reconsideration of Denied Benefits by the
Plan and a Final Decision by Opm. A Summary of These Steps Also
Appears on Our Federal Employees Health Benefits Web Page. They
Are Also Referenced Inside the Cover of the Guide to Federal
Employee Health Benefits Plans, Which Opm Makes Available to
Participants Each Year, Where We Pledge to Provide Fair,
Understandable, and Prompt Action on Disputed Claims.
If a Health Plan Denies a Benefit Claim, or a Portion of a
Claim, the Individual Has 6 Months to Make a Written Request to
the Plan for a Review of That Decision. Within 30 Days, a Plan
must Do One of Three Things: 1) Affirm the Denial, 2) Provide
the Service or Payment, or 3) Request Additional Information.
The Plan must Then Make a Final Decision Within 30 Days after
Receiving the Added Information. If Additional Information Is
Not Supplied to the Plan Within 60 Days, the Plan must Make a
Decision Based on Available Evidence.
A Plan must Send a Written Notice of its Decision to the
Covered Individual. If it Affirms the Initial Denial, the Plan
must Provide Specific and Detailed Reasons for its Decision and
Advise the Individual of the Right to Request an Opm Review. If
a Health Plan Fails to Respond to a Plan Member Within
Applicable Time Limits, the Individual May Bring the Matter
Directly to Opm.
These Formal Procedures Do Not Prevent Opm from Initiating
an Immediate Review When an Individual Contacts Us about a
Life-threatening or Other Urgent Situation for Which a Health
Plan Has Refused Benefits and We Conclude the Plan Is Unlikely
to Change its Initial Decision on Reconsideration.
If an Individual Asks Opm to Review a Plan's Decision, We
Acknowledge These Requests Within 5 Days of Receipt and Will
Provide a Final Decision Within 60 Days of Receiving the
Request in Non-life-threatening Situations, and as Soon as
Possible in Life-threatening Situations, Unless We Need More
Information. In Reviewing a Claim, Opm May Request the
Individual or the Plan to Submit Additional Information, Obtain
an Advisory Opinion from an Independent Physician, or Make a
Decision Solely on Evidence Submitted with the Request for
Review. Further, We May Reopen a Decision We Made on a Disputed
Claim If We Receive Evidence That Was Unavailable at the Time
of That Decision.
If Opm Upholds a Health Plan's Denial of Benefits, the
Affected Individual Has a Right to Sue Opm in Federal Court
under the Administrative Procedure Act. A Lawsuit May Not Be
Brought until Opm Has Taken Final Action and the Recovery in
Such a Suit Is Limited to the Amount of Benefits in Dispute.
Such Lawsuits Have Been Very Rare.
During Fiscal Year 1997, Opm Reviewed Approximately 4,500
Disputed Claims. In about One-third of These Cases, We
Overturned the Plan and Provided Coverage for All or a Part of
the Matter in Dispute. Thus Far this Fiscal Year, We Have
Reviewed Almost 2,300 Disputed Claims with Similar Results. The
Majority of Disputed Claims We Receive Involve Issues of
Medical Necessity, Preventive Care Services, and Dental
Services. We Also Receive Disputes Involving Services Obtained
from Non-covered Providers, as Well as Disputes Related to the
``Usual, Customary, and Reasonable'' Cost Basis for
Reimbursement.
Disputes Arise in less than One Percent of the Claims
Filed. We Believe the Very Small Number of Disputes That Occurs
Reflects the Value of Broad Competition Within the Program and
Opm's Commitment to Making the Best Possible Information
Available to Enrollees, Combined with the High Customer
Standards to Which We Hold Ourselves and Our Health Plan
Carriers.
Opm Conducts an Annual Customer Satisfaction Survey in
Which Enrollees in the Federal Employees Health Benefits
Program Have an Opportunity to Rate Various Aspects of Their
Health Plan's Performance. We Report Survey Results to
Enrollees in the Annual Guide to Fehb Plans. In Our 1997
Survey, We Found the Following Levels of Satisfaction in Areas
Relating to Claims Processing:
86 Percent of Respondents Believed Their Claims
Were Processed Accurately
79 Percent of Respondents Were Satisfied with the
Fairness of Claim Payments
83 Percent of Respondents Indicated That They Were
Satisfied with Their Plan's Explanation of Benefits (Explaining
What Amount the Plan Pays and What the Enrollee Owes).
These Results Show Two Things. First, Most Respondents Are
Satisfied with the Claims Processing Services They Receive from
Their Health Plan. Nonetheless, the Results Also Show Us That
There Is Still Room for Improvement in this Area.
Aside from Helping to Ensure That Program Enrollees Receive
All of the Benefits Opm Has Contracted For, We Have Found
Disputed Claims Reviews to Be an Invaluable Indicator of What
Is Happening in the Program, Often Alerting Us to Problems or
Issues We Need to Address. Let Me Briefly Cite Two Recent
Examples.
In the First Case, We Found Some Plans Were Applying
Program Exclusions for Experimental or Investigational
Treatments Inconsistently. Despite Accelerated Fda Approval for
Some Drugs and Devices, Some Plans Felt That Fda Requirements
for Further Tests Rendered These Products Investigational in
Nature. We Clarified Our Policy to All Health Plans to Assure
Consistent Application of Coverage for These Treatments.
In a Second Situation, We Learned That Benefits Were Being
Denied Inappropriately for Some Screening Services Provided to
Children Born in Foreign Countries. We Discovered That the
American Academy of Pediatrics Had Made Specific
Recommendations for More Exhaustive Tests in Such Cases and We
Directed That Benefits Be Provided Consistent with Those
Recommendations.
In Summary, the Disputed Claim Program in the Federal
Employees Health Benefits Program Has Existed for over 20
Years, Fully Meets the Requirements of the Patient Bill of
Rights, and Is Regarded as Effective by Our Customers. In
Addition, it Helps Us in the Administration of this Program by
Highlighting Areas for Improvement or Clarification.
This Concludes My Statement. I Will Be Glad to Answer
Questions You May Have at this Time.
Mrs. Johnson of Connecticut. Thank you very much. Thank you
both for your testimony.
Mr. Hash, I was interested that in 1997 there were 5.4
million Medicare beneficiaries that are in managed care
organizations, and there were about 9,000 appeals sent to the
Center for Health Dispute Resolutions. This is less than one
one-thousandth of the complaints that went to appeals--of the
services that went to appeals. About 24 percent of the rulings
were in favor of the beneficiary, and about 6 percent were
appealed to the administrative law judges.
In the Medicare fee-for-service program, which, of course,
is a lot larger, there were many more claims, but there were 6
million appeals for 0.72 percent. So there was a much higher
percentage of appeals in the fee-for-service than in the
managed care plans. I wondered if you had any comment on those
figures?
Mr. Hash. Madam Chair, I believe that what those figures
still reflect is that we have a very low incident of appeals on
either managed care, or in the fee-for-service. I mean, as you
pointed out, on the fee-for-service, with nearly a billion
claims processed for Medicare beneficiaries in a year, we have
less than 1 percent that actually are appealed, even at the
basic level within our contractors. Now that's not to say that
that 1 percent is not a large number, it is. But, in fact, we
think in the context of the size of the claims that are being
processed, nearly a billion, something on the order of 5
million claims have been appealed at some level.
Mrs. Johnson of Connecticut. Well, certainly we need time
and experience, but at this point we are having a lower
percentage of appeals in the managed care plans than we are in
the fee-for-service sector of Medicare. That may indicate that
networks are communicating more effectively with patients, and
it may not. But I think it is worth noting that at this point
we have some, we don't have a big red flag that the appeals
process isn't working in the Medicare managed care sector, as
we had hoped it would.
Now I just want to go back to this court suit that HCFA has
been involved in. In March 1997, the Federal court in Arizona
issued a decision requiring HCFA to take steps directed by the
problems in its appeals process. The Balanced Budget Act of
1997, which we passed and this Committee wrote, contained a lot
of new requirements in part to address that court decision.
However, there is some conflict between HCFA--there's a lot of
conflict between HCFA's original policies, some of its
remaining policies and the balanced budget reforms that were
passed through this Committee. And, in 1997, Secretary Shalala
filed for a stay of the court order in Arizona, and asked that
it not be enforced. The stay was granted and all parties are
now waiting a decision on the appeal. Can you give us some
better understanding of why HCFA is still insisting on this
stay, and what the relationship is between the reforms that
Congress adopted in 1997, and the changes that HCFA needs to
make, both to comply with the court decision, and to comply
with the new law, and, therefore, better meet the needs for
access to care of Medicare beneficiaries?
Mr. Hash. That's an important question, and a complicated
one. And, at the outset before I go into the answer, I'd like
to say we'd like to submit to you much more detail about the
specifics of both the court decision, the BBA provisions, and
our position relative to those two issues. Because as you, I'm
sure, are familiar, the decision of the court in the original
case provided an order that was very specific with respect to a
number of specific notification requirements and other appeals
rights. And, so we are actively working on responding to those
and preparing our response to be a part of the regulations that
we are publishing on, or about, June 1, which is the required
regulation implementing all of the requirements of the Balanced
Budget Act related to Medicare Part C, the new Medicare+Choice
opportunities for beneficiaries. So, we are in the process of
addressing them.
[The following was subsequently received:]
[GRAPHIC] [TIFF OMITTED] T3213.002
[GRAPHIC] [TIFF OMITTED] T3213.003
In the meantime, as my testimony indicated, last April, we
actually published the final rules requiring expedited appeals
in the case of urgent medical disputes within managed care
plans, the so-called ``72-hour requirement,'' which is now
imposed upon all of our risk contractors in the Medicare
Program. And so we have taken steps to actually begin that
process. And now that the BBA provisions are in place, we can
actually speak to some of the court's decisions, we are
obviously going to be implementing them as a part of our
rulemaking on, or about, June 1. There is a lot of detail
underneath that and we'd be happy to furnish you a more
complete answer for the record.
Mrs. Johnson of Connecticut. Two things: First of all, why
do you think 72 hours is a sufficient period of time in which
to respond to urgent care decisions?
Mr. Hash. Well, I think the judgment there is that's a
period of time in which information on the record, and so
forth, could be provided to reviewers in health plans in order
to make a judgment about coverage. I think the actual practice,
hopefully, is much more rapid than 72 hours, but that was--I
believe, I don't know this for sure, I believe it might have
been, included in the order of the court in the case to which
you referred earlier.
Mrs. Johnson of Connecticut. Well, Mr. Flynn testified to
the fact that on discharge issues, which I think was Mr. Flynn,
perhaps it was you, Mr. Hash, testified that in regard to
discharge issues you have kind of an expedited process?
Mr. Hash. We do.
Mrs. Johnson of Connecticut. And you, too, Mr. Flynn?
Mr. Flynn. I'm sorry, we don't have, I didn't mention
anything about expedited procedures----
Mrs. Johnson of Connecticut. All right.
Mr. Flynn [continuing]. Under discharge. I think that was
Mr. Hash.
Mrs. Johnson of Connecticut. Well, discharge decisions
seems to me something that has to be responded to promptly----
Mr. Hash. We have----
Mrs. Johnson of Connecticut [continuing]. In fact, you
pointed out Mr. Hash in your testimony, that fee-for-service,
in fee-for-service medicine, claims are--the claims denial
process takes place after the services are delivered. Now this
is not an advantage. This is a disadvantage. People have to
know who's going to pay. Everyone needs to know who's going to
pay before the service is delivered. So that is one of the
really big weaknesses of the fee-for-service system, and I've
seen that head-on, as I'm sure every Member has in their
office.
So I think trying to deal with the issue of timeliness is
one of, certainly, my goals as we write this legislation. And
I'd like to know from you, either now or later, whether you
have the data, or whether you could develop for us the data, to
differentiate between those things that need 6-hour turnaround.
I mean, discharge issues can't have 3 days. A lot of medical
procedure issues that are urgent can't wait 3 days, and
shouldn't wait 3 days. Often a person is, you know,
disadvantaged from the point of recovery possibly, pain
endurance, and so on and so forth, having to wait 2 days for a
decision about urgent care.
With electronics, if you have really a person of equal
competence, of specialty training. You know, consultations in
the old world used to take place at bedside with knowledgeable
people sharing information and making decisions.
So, one of the things I think we have to really look hard
at is why is 72 hours a timeframe for urgent decisionmaking.
Most of the decisions I would consider urgent, they are 6-hour
decisions, they are 8-hour decisions, they are 10-hour
decisions. They are not 3-day decisions.
And, likewise, while 45 days may be an improvement, it's
not logical that if someone has been diagnosed with a certain
illness, and the certain course of treatment has been proposed,
that it should take a month and a half to figure out whether
this is reasonable or not. So when it takes a month and a half,
what that tells you is that you're bureaucratic. That's not
medical; that's bureaucracy. So the whole issue of timeliness
of appeals, the 60-, 72-day structure is totally inadequate in
my estimation. I think that one of the things we have to do is
to be more honest about what this issue is. So if you have any
comments on that now, or if you can get us information later,
please do. Pete Stark would like to make a comment.
Mr. Hash. I would like to follow on that but----
Mrs. Johnson of Connecticut OK, let him make a comment now.
Mr. Hash. I would like to comment, Mrs. Johnson. I've
failed to make an important distinction here, I think, about
the urgency and so forth of appeals and the timeliness of them,
and that distinction is clearly our contractors are, in private
health plans now, are required to cover and pay for any
emergency service that is required by a patient, whether that's
in the network of the plan, or outside the network of the plan,
and there is no 72-hour wait associated with that.
Mrs. Johnson of Connecticut. Yes, but Mr. Hash, to a
certain extent that's simply dishonest. I mean they need to
know who's going to pay. I appreciate that, that's good for the
patient. I'm not about to change it. But a system ought to be
able to say that you are going to get paid.
Mr. Hash. We do, we do.
Mrs. Johnson of Connecticut. And we can't--as we try to cut
costs and, as there's less margin, and less cushion out there,
we cannot put either patients, or physicians, or hospitals in
the position of being mandated to provide care that 24 hours
later we are going to say, ``Oh, we don't agree that was
necessary.'' So, I appreciate that people are getting the care
but that is not enough.
Mr. Hash. I just wanted to underscore that in any emergency
situation there is no question about payment.
Mrs. Johnson of Connecticut. Well, it's good----
Mr. Hash. Payment is required. And second, I think the
other distinction I was going to try to make about the
remaining window of 72 hours is the way our language reads for
our health plan requirement is that health plans are required
to make urgent coverage decisions as expeditiously as possible
but in no event no longer than 72 hours.
Mrs. Johnson of Connecticut. Thank you. I'm going to yield
to Mr. Stark and move on with the Subcommittee's questions.
Thank you.
Mr. Stark. I want to follow up on the Chair's line, and
maybe I'll bring that up a couple of times today, if you'll
just bear with me.
Mr. Hash and Mr. Flynn, the issue appears to be two things.
In the cases I'd like to talk about, let's assume that a
primary care physician has recommended a parhcular treatment.
Leave the emergency room alone for a minute. But the plan may,
or may not, agree with the primary care physician's
recommendation and it may provide the specialty care or choose
not to provide the speciality care.
You've got two issues. The patient may at some point be
harmed because of this. If we get rid of the ERISA exemption,
and a few other things, the patient, if the patient lives,
could sue the plan for denying care. And, in my opinion, that
would be fair. The patient may die and then the case isn't very
strong. But the issue is whether a plan is denying care.
If they're in the emergency room, we have antidumpting
laws, you've got to provide the care.
And then you get the question of, who is going to pay? In
other insurance, like homeowners' insurance, if your house
burns, you as an individual have a duty, and I don't know what
it's called; you've got to protect that house. If the roof
burns, you've got to put canvas over it, so the rain doesn't
hurt it further. You have a contractual duty, to protect it.
Why shouldn't we, in general, say that if a responsible
primary care physician, or whatever the entry mechanism is,
recommends a procedure, that the procedure be performed, and we
subsequently argue about who pays? Then at least we eliminate
the risk of killing the patient because of care denied. And we
can argue later about the dollars.
In the emergency room situation, the public gets stuck with
the bill if the patient isn't covered and is indigent. That
payment then comes under charity care or bad debt/uncompensated
care. Managed care plans don't have that problem and they don't
do charity care. So maybe they ought to have to absorb it
internally if they lose the decision regarding payment. But it
would seem to me we could simplify all this if the rule, in
general, became if a responsible physician requests a test or
procedure, it gets done, and the appeal is subsequently over
the dollars. And you don't keep somebody from getting a
transfusion, or an operation, or a blood test because some bean
counters are arguing about who's going to pay. I don't know how
or what that would do to the entire system.
Now, it's my understanding, Mr. Hash, that that's what HCFA
does for hospital care under Medicare. If there's a quarrel
over discharge, the patient stays in the hospital as long as
the patient can either convince the hospital to let him, or as
long as his doctor requires. You subsequently decide whether
you're going to pay or not pay. But the patient doesn't get
kicked out pending your decision to pay. Is that not correct?
Mr. Hash. Well, I think in the case of hospital discharges,
if there's a dispute about the timing of the discharge, it is
subject to an appeal through our peer review organization.
Mr. Stark. But they don't kick the patient out?
Mr. Hash. No.
Mr. Stark. In other words----
Mr. Hash. Pending the----
Mr. Stark [continuing]. The patient stays. The only
argument later is who's going to pay the bill. What I'm
suggesting is, could we not extend that same concept to managed
care?
Mr. Hash. Mr. Stark, if I may, I think what you've
described is essentially what most of the appeals are about in
the traditional fee-for-service part of Medicare. The service
has been rendered and the issue whether or not the program is
going to pay, or cover, even though the service has already
been provided. And we also have special protection to prevent
the beneficiary from being liable in the case where they did
not know about our policy.
Mr. Stark. And I think there could be reasonable concerns
about over utilization from unscrupulous providers. There are
always those outliers who game the system. But it would seem to
me that Chairman Johnson's and my concerns would be
significantly different if we were just arguing about who's
paying the bill. Patients would be treated and the provider
would know that they would either be paid or, in fact, as some
emergency rooms now have to swallow uncompensated care, then
they build that into the rest of their fees. But the system
would be compensated. The question as to whether the patient
has to pay extra or the plan has to pay extra could be decided
after the care was provided.
Mrs. Johnson of Connecticut. I would just like to make the
comment that I do disagree with you, Pete. I think the system
we have in Medicare is dishonest. It protects the patient from
paying. It lets the service be provided without deciding the
issue of appropriateness. And I don't think that's fair. And
more and more we're going to have hospitals being minimally
reimbursed and under a lot of economic pressure, and we
shouldn't be doing that. Now, in some of the old issues, often
it was Medicare who was saying, who decided afterward, ``No,
you should have discharged sooner,'' over the doctor's decision
that the patient needed to stay. And in that instance the
hospital had to eat it.
So what I'm saying is that, as we go forward and build for
the future, the current HCFA system of saying, ``provide the
service, can't let the patient pay but we'll decide later on
whether we're going to pay you,'' is really totally inadequate.
There are physicians, there are hospitals who want to keep
people longer than they should. There are also patients who
want to stay longer than they should. The main goal should be,
I think, that we have a system that determines up front, in a
timely fashion, whether this is a reimbursable service across,
you know, in the eyes of all the payers and the providers. So
really I don't think we want to settle for the current HCFA
fee-for-service system. I think we have to do better than that.
Mr. Stark. What I was suggesting is if a primary care
physician requires something, I presume it's the doctor who
would argue about the appropriateness of that benefit, not some
accountant.
Mrs. Johnson of Connecticut. Right.
Mr. Stark. Let's assume the patient require a blood test,
and blood tests are covered by the plan. But, the plan may say,
``We don't want to pay the blood test for this person,'' over
the doctor's recommendation. Why should we keep the poor
patient sitting in limbo while they argue about who's going to
pay? Why shouldn't the doctor be presumed to be correct and
then the argument about payment can come later?
Mrs. Johnson of Connecticut. Well, I think if we have a
very good appeals----
Mr. Stark. Then----
Mrs. Johnson of Connecticut [continuing]. Procedure, yes.
Mr. Stark. That's exactly what I'm saying, but within a
short period of time.
Mrs. Johnson of Connecticut. My goal would be, if we have a
very good appeals procedure that's timely, then, as Ben said,
and as many, many of you commented, it will create a much
better internal process. And we shouldn't have providers out
there arguing about whether to cover blood tests.
Mr. Stark. But we do. That's what managed care plans are
doing all the time.
Mrs. Johnson of Connecticut. But that's why a timely
appeals procedure----
Mr. Stark. Could I ask one more question? In the appeals
question, the Chair raised the issue that there were far fewer
appeals from managed care plans. The appeals process is
different for managed care than it is for fee-for-service, is
it not, Mr. Hash?
Mr. Hash. Yes, sir.
Mr. Stark. OK. And in managed care they first have to
appeal to the managed care plan whereas in fee-for-service they
come directly to you?
Mr. Hash. They come to our contractors.
Mr. Stark. Right. And, it is my understanding that you
don't know how many people are appealing to their managed care
plans because you don't have those records?
Mr. Hash. We do not, Mr. Stark.
Mr. Stark. So it is not correct necessarily to assume that
there are fewer appeals in managed care plans? There are fewer
appeals that are appealed to a second level. But if you start
at the base level, the managed care plan has a two-tier level,
and the fee-for-service a direct level. So that there may very
well be an equal number, or a larger or smaller number, of
managed care plan appeals. We just don't know.
Mr. Hash. The one observation I would make is under our
managed care appeal procedures. Any reconsideration by a plan
of an appeal that is not in the beneficiary's interest is
automatically subject to the external appeals process.
Mr. Stark. I'm just saying, you don't know how many people
are appealing?
Mr. Hash. We do not.
Mr. Stark. And, unfortunately, we don't either, which would
be a good thing to know.
Thank you, Madam Chairman.
Mrs. Johnson of Connecticut. But just before I go on to Mr.
McCrery, the point that you just made about the automatic
forwarding, at any case in which a patient is dissatisfied with
a decision of the managed care plan, it's automatically
forwarded?
Mr. Hash. That is my understanding.
Mrs. Johnson of Connecticut. Thank you.
Mr. McCrery.
Mr. McCrery. Thank you. While Mr. Stark may be correct that
it's hard to compare the appeals because of the difference in
the nature of the appeals between managed care and fee-for-
service, my quick math here, according to these statistics,
it's about 700 times as frequent under fee-for-service, the
incidence rate so, you know, it might take a lot of, well, from
the statistics that we've been provided here.
Mr. Stark. We don't have the number of people who've
appealed.
Mr. McCrery. No, I'm just saying that if you take the
statistics which is .0016 percent complaint rate, under managed
care, and .72 percent complaint under fee-for-service----
Mr. Stark. Would the gentleman yield?
Mr. McCrery [continuing]. It's about 700 times----
Mr. Stark. Would the gentleman yield?
Mr. McCrery. Sure.
Mr. Stark. Those, the managed care appeals to HCFA are only
a second level, we don't know how many people----
Mr. McCrery. I understand the gentleman's----
Mr. Stark [continuing]. Initially----
Mr. McCrery [continuing]. Point. My point is in order to
just equal the frequency rate you'd have to have about 700
times as many than are being reported. So----
Mr. Stark. That makes sense to me.
Mr. McCrery. Yes, well, it would. But, as evidenced by your
opening statement that this is the most pressing problem facing
America, the incidence rate simply does not bear out that
statement, nor does it even come close. And I've heard, and I'm
sorry, I don't have before me, but I have been told that the
incidence rate in private sector plans is also extremely low so
I think before we jump to conclusions that this is the ``most
pressing problem facing America,'' that we ought to have
hearings like this and try to discover the facts. Because it
seems to me that, perhaps, this is not the most pressing
problem facing Americans.
Mr. Flynn, in the FEHBP plans, do you, or do we, require an
external review process?
Mr. Flynn. Yes, sir, we do. That is, the patient appeals
procedure, we call it the ``disputed claims process,'' is
required of all plans that participate in the Federal Employees
Health Benefits Program. It's the same for fee-for-service and
managed care plans. It involves a reconsideration of a plan's
initial denial first at the plan level, and if the individual
is still dissatisfied with the plan's decision, then it comes
to the second level at the Office of Personnel Management for
an independent external review.
Mr. McCrery. So the independent external review for plans
in the FEHBP is OPM?
Mr. Flynn. As the plan sponsor, OPM, yes, sir.
Mr. McCrery. So the OPM is the government, right?
Mr. Flynn. Yes, sir.
Mr. McCrery. OPM is the government. The government is the
employer----
Mr. Flynn. Right.
Mr. McCrery [continuing]. Of these folks that are in these
plans. So you are telling us that if they are dissatisfied at
the plan level with their appeal, then they appeal that to the
employer, OPM?
Mr. Flynn. Yes, sir, they do.
Mr. McCrery. Well now, how is that different from, in the
private sector a person who is dissatisfied with a decision in
its plan and the individual then has the right to appeal that
decision to his employer?
Mr. Flynn. In that respect, Mr. McCrery, it would be no
different whatsoever. We do apply probably the same standards
that a typical private employer would apply. What's the
contract with the health plan? What's the service that is in
dispute? Is it covered under the terms of the contract or not?
If a medical judgment is needed, we go to outside physicians,
medical consultants, to help us with that. An opinion comes
back in and, as an employer, the employer sponsor here, we look
at this. We look at it objectively, but we are looking at it as
an employer sponsor, and we render a decision.
Mr. McCrery. Thank you. I think we will hear, Madam
Chairman, in later panels today, that, in fact, that is the
norm. That if an individual in a health plan sponsored by his
employer, under ERISA, has a complaint, and he's not satisfied
with a decision of his plan, he then can appeal that decision
to his employer just like in the FEHBP plan. I'm anxious to
hear from the employers who will testify.
And, Mr. Flynn, do you have any idea what that procedure
costs OPM to provide that service to employees?
Mr. Flynn. Mr. McCrery, we, at the Office of Personnel
Management, to administer the Federal Employee Health Benefits
Program, we spend about $25 million a year. The disputed claims
process takes up about 5 percent of that, about a little over
$1 million a year.
Mr. McCrery. And do you pass that cost on to the plans?
Mr. Flynn. That cost is not passed on to the plans, it's
built into the premiums that all Federal employees, all
participants in the program, pay for the Program.
Mr. McCrery. OK.
Mr. Flynn. I will say that the $20 million or so that we
spend amounts to about seven-tenths of 1 percent of the total
program expense, so it's a very small factor. But it is passed
on in the form of part of the premium.
Mr. McCrery. Yes, and again that cost for the dispute
resolution is about 5 percent of your total administrative
costs, is that what you said?
Mr. Flynn. That's correct, Mr. McCrery.
Mr. McCrery. OK, thank you very much.
Mr. Stark. Would the gentleman yield to me? I just want to
make one correction.
Mr. McCrery. OK, sure.
Mr. Stark. I believe that ERISA does not require that a
complainant may complain to the employer. He can only complain
to the plan. OPM actually is different. After appealing to the
plan, a complainant can appeal directly to OPM.
Mr. McCrery. No, I understand that, Mr. Stark, but I think
we will hear from witnesses today that the norm, that the
normal practice in the private sector is for that individual,
that employee to have recourse to his employer.
Mr. Stark. Could I ask Mr. Flynn----
Mr. McCrery. Sometimes we have to take note of what is
actually happening rather than, you know, what's in the black
letter of the law.
Mr. Stark. If you'd yield further, just to ask Mr. Flynn
one question?
Mr. McCrery. Sure.
Mr. Stark. You have some statistics about appeals, as a
percentage of your members in your testimony. But you don't
separate between fee-for-service and managed care plans. Do you
know that, or would you have that information in your records?
Mr. Flynn. I don't have the information with me. I can tell
you, Mr. Stark, that the number of appeals emanating from
managed care plans, primarily, health maintenance organizations
is very small compared to those which emanate from fee-for-
service. And as Mrs. Johnson and yourself both noted earlier, I
think a lot of that has to do with the fact that the more plans
are managed care, and if you think of it in terms of the staff
model health maintenance organization being sort of the end
point of that, it's natural to expect that the more familiar a
provider, or physician, or whomever is with the particular plan
structure, the less likely there is to be some dispute between
the provider and the plan over what's an appropriate form of
treatment for an individual.
Mr. Stark. Do you think the plan structure itself resolves
many disputes just by informing the provider and the patients?
Mr. Flynn. I think it's a contributing factor, yes, sir.
Mr. Stark. Thank you.
Mr. Flynn. Thank you.
Mrs. Johnson of Connecticut. Mr. Becerra.
Mr. Becerra. Thank you, Madam Chairman.
Mr. Hash, let me go back to some of the questions that were
raised earlier about the appeals process and the difference, in
terms of data, that we have for HMO-based care and fee-for-
service-based care. It would seem to be that most of these
providers, under whatever setting, would collect and store data
on grievances filed and, in the case of HMOs, appeals that go
beyond just a complaint stage that are internally handled
before they get on to some external, or higher level of appeal.
HCFA right now does not require that data from the HMO-based
providers, correct?
Mr. Hash. That's correct.
Mr. Becerra. Is there any reason why you don't request that
information?
Mr. Hash. I think the answer I can give you that I think is
more the other side of this question is that we have under
consideration for our rulemaking that I referred to that's
coming out in June, amending our reporting requirements. And I
believe in some of the provisions that are in the Balanced
Budget Act there are requirements for the reporting of this
kind of information as a part of measures for performance of
our contractors. So I think we're definitely--our plans are to
move in that direction.
Mr. Becerra. Now, when you say you're considering it, does
that mean you haven't come to a conclusion if you are going to
include that within the rulemaking?
Mr. Hash. Well, we're still in the process of reviewing and
clearing our regulation which will be published on or about
June 1. So I don't have before me the final resolution, and
some of the specifics, but I know that this is an issue that's
very much a part of the consideration.
Mr. Becerra. Is there any reason not to request that
information from the HMOs?
Mr. Hash. No, in fact, none that I'm aware of.
Mr. Becerra. So, while you may not be able to answer the
question what will be in the rulemaking, what----
Mr. Hash. Well, I think I should be more precise, and I
apologize. It sounds like I'm not trying to answer this
directly. I believe the BBA language, in terms of information
to be reported by our contracting plans, will, in fact, require
this information to be reported and to be disclosed.
Mr. Becerra. So, today we could say, with some level of
confidence, that there's, in whatever rulemaking we have, will
be a requirement that HMOs provide that data?
Mr. Hash. I believe that will be the case.
Mr. Becerra. In regard to the whole issue of the
beneficiaries as consumers, some folks complain that, if it
were more required, or more known, to the beneficiaries that
they had an appeals process, or that they knew what the
process, how it worked, that we could probably get some of
these things a lot of sooner because some folks evidently go
through the whole process of getting care without knowing what
their appeal rights are.
Evidently there have been some investigative reports that
have been done to show that in some cases up to one-third, or
maybe more, of a plan's enrollees are not familiar with their
appeal rights. My understanding is that HCFA has responsibility
to ensure that a plan is doing everything it can to inform its
enrollees of their rights to appeal. What's HCFA doing at this
stage to ensure that there is widespread dissemination of the
information of appeal rights to enrollees under HMOs plans?
Mr. Hash. Again, as I think it was included in my written
testimony, we, in fact, require that when an individual, one of
our beneficiaries enrolls in a private Medicare managed care
plan, that, in the enrollment materials that they are
furnished, and which we actually preview and certify, that they
are informed of their appeal rights in the managed care plan.
And then, subsequently, at any time there is a denial of
service by a managed care plan, they are required to notice
with the denial the appeal rights to the enrollee.
Mr. Becerra. And I understand that, but your own
investigative general report says that what is it with regard
to those who are disenrolling, 35 percent of those disenrolling
in a March 1998 study, knew not of their appeal rights, or were
uninformed of their appeal rights. And 27 percent of those who
were enrolling did not know of their appeal rights. So I know
what you can do and I know that what you're trying to do, but
obviously a good chunk of those who are becoming HMO
beneficiaries--or enrollees are not learning what their appeal
rights are so what I'm asking is, beyond what the statute, or
regulation, may already tell HCFA to do, what are you doing to
try to make it more enforceable?
Mr. Hash. But we are, again, as a part of our
implementation of the Balanced Budget Act requirements in this
area, which is also where these are included as well, we are
going to step up our oversight and enforcement with compliance
with these. And I----
Mr. Becerra. What does that mean, step up your enforcement?
Mr. Hash. We have regional office reviews of our managed
care contractors which involve site reviews, and we are
stepping up the intensity of our investigation of these kind of
effects. You're correct in your figures that those surveys by
the Inspector General actually, the Department of HHS actually
came up with those results. And we need to improve our
surveillance and enforcement of these requirements. There's
definitely room for improvement.
Mr. Becerra. So when you say you're stepping up your
efforts, I assume that means more research devoted to this?
Mr. Hash. Yes, sir.
Mr. Becerra. How much more?
Mr. Hash. I don't have that but I can, I'll try to get back
to you and give you a more specific answer on that.
Mr. Becerra. So if you don't know how much more you're
devoting research, can you tell how much more you're devoting
in staff time to do the investigative work or the enforcement
itself?
Mr. Hash. I can get you that. I don't have that with me
this morning.
Mr. Becerra. Has that been determined? Is it that you just
don't have it with you but it's been determined, or is still in
the process of being determined?
Mr. Hash. I don't know the answer to that. But I will get
back to you.
Mr. Becerra. If you could get back to us, thank you.
[The following was subsequently received:]
Mr. Becerra. Thank you very much, Madam Chair.
Mrs. Johnson of Connecticut. Thank you.
Mr. Flynn, I just wanted to ask you one follow on question.
In your testimony, you state that you believe your education
program and your customer surveys and things like that give you
a pretty good handle and give your participants a pretty good
handle on their rights of appeal, and your level--your
knowledge of their satisfaction, or dissatisfaction. Eighty-six
percent of the respondents were--believe that their claims are
processed accurately in your most recent survey. Of the 14
percent who weren't satisfied, what percentage of those cases
were about billing errors and what percentage were about survey
denial?
Mr. Flynn. I don't know the answer to that question, Mrs.
Johnson. The statistics cited in my statement have to do with
claims processing generally, and don't get more precise in
terms of the disputed claims process. The survey that we did in
1995 did focus on the disputed claims or patient appeals
process specifically, and on OPM's administration of it. And,
while I don't have comparable questions, we do know in that
year that a statistically valid sample of our respondents felt
that our action about half the time was appropriate, and that
people felt it was easy to understand why we had come to the
conclusion we did. Now that's a rough surrogate for
satisfaction at the appellate level itself but that's about as
close as I can get right now.
Mrs. Johnson of Connecticut. What plans do you have to
improve that 50 percent?
Mr. Flynn. Well, it would first require us to decide that
that was needed. I mean the thing that is important, I think,
to remember here is that the people that we surveyed are at the
second level already, and in about 70 percent of the cases that
we review, we uphold the plan's decision. So there is,
expectedly I think, a natural reaction for individuals not to
be satisfied with the decisions that they got from us because
they came to us at the second level in an effort to have a
plan's decision overturned. I really don't know what the target
should be. I think, actually, I'm kind of heartened by the fact
that about half felt that we came to a conclusion that they
felt satisfied with.
Mrs. Johnson of Connecticut. Now you also mentioned that
you had many fewer appeals from the managed care plans than
from the fee-for-service side. As a Federal employee, whose
husband recently retired, and so I recently entered your
system, my recollection is that I had no choice but managed
care plans in Connecticut. But maybe I didn't notice the fee-
for-service choice but as I recall noticing----
Mr. Flynn. Well, Mrs. Johnson, I would be more than happy
to make sure you are fully aware of all your choices in the
Federal Employees Health Benefits Plan. [Laughter.]
Mrs. Johnson of Connecticut. Well, I had very good choices.
I had very good choices. And I'm not surprised that you are
getting fewer complaints from managed care than you are from
fee-for-service because in a fee-for-service system, by its
nature, each sort of medical episode is independent and on its
own. But I do think it's worth noting on the record because, as
Mr. McCrery pointed out, this is a very important issue but we
have to see it in perspective and not react inappropriately. So
there are some very good things happening out there in managed
care. I think one of the things we're--one of the reasons we're
all interested in the appeals process is because we feel that a
timely prompt appeals process with clear explanations is
critical to people getting access to quality care. And that if
we can address this problem, then some of the others will fall
away, others that might require more radical solutions.
So I think this is terribly important but I do--I was very
interested that, in a sense, you are sitting here testifying to
the fact that one of the largest health care systems in the
world, the Federal Employees Health Benefits Program, is
primarily managed care and is getting fewer complaints from the
managed care sector than the fee-for-service sector, is that
correct?
Mr. Flynn. That's correct, yes, ma'am.
Mrs. Johnson of Connecticut. I thank this first panel very
much, appreciate hearing from you.
Mr. Stark. May I----
Mrs. Johnson of Connecticut. Excuse me, I'm sorry.
Mr. Stark [continuing]. May I follow-up with Mr. Flynn?
Mrs. Johnson of Connecticut. Mr. Stark.
Mr. Stark. Thank you.
Mr. Flynn, I have a couple of questions. Recently, a member
of my staff was denied, by Mid-Atlantic Medical Services of
Rockville, payment for emergency care. He's a diabetic and he
passed out. And he was taken by ambulance to the hospital. Mid-
Atlantic denied the emergency care on the basis that he didn't
call first for permission. And it's somewhat beyond me how
somebody who is unconscious in the back of an ambulance could
call for permission. But, assuming that they are kind and
sensitive to their patient's needs, they probably have a way
that that can be done.
This was made an issue in the press, and your office called
my office to follow up on it. Now, that's a pretty tough way to
get your medical plan to do the right thing, is to try to get a
story published in the Washington Post or the New York Times,
or these other great papers that follow those issues. But, my
question is, what would be your normal procedure?
I had the same problem in my family with Blue Cross in
Maryland a couple of years ago. We were being denied a service
on the basis of pre-existing conditions. My wife wasn't
pregnant, and they said that's a pre-existing condition, so we
won't pay for fertility treatment. I said, ``that makes good
sense to me.'' I wonder how many people have a pre-existing
condition of not being pregnant? [Laughter.]
But, I got precious little help on that appeal. If
somebody, other than a Member of Congress, calls and complains,
``they're hassling me to pay for my emergency room care,'' or
``they won't give me services,'' what do you do?
Mr. Flynn. Well, first of all, the overwhelming majority of
situations like that are resolved immediately at the plan
level.
Mr. Stark. No, I'm saying it gets to you; what do you do?
Mr. Flynn. If it gets to us, we will, if it gets to us in
the form of the need for a quick decision to be made because
there's a real emergency out there, we will do whatever it
takes to get in touch with the plan and find out what's going
on.
Mr. Stark. What if it's not an emergency; it's just a
denial of payment?
Mr. Flynn. If it's a denial of payment and it's been
through the regular appellate process at the plan level, we'll
accept it as a disputed claim. We'll gather the information
from the individual and the plan and render a decision. In this
particular case, it never came to us for a decision. And
clearly, the plan, once it had all the facts in front of it,
made the right decision.
Mr. Stark. Is the decision that you render binding on the
plan?
Mr. Flynn. Yes, it is.
Mr. Stark. So, I'll come back--what's the statute of
limitations?
Mr. Flynn. The statute of limitations on, in this
particular case?
Mr. Stark. Yes, on any of it.
Mr. Flynn. Or in the other case about pregnancy?
Mr. Stark. A statute of limitations on any case. My second
question is this: Do you have a procedure, a board or a
Committee in Congress that makes a decision on new benefits? I
don't know whether OPM requires coverage for bone marrow
transplant. But, if it was being suggested to OPM that we add
to our Federal Employees Benefit Plan a certain benefit, what
is the procedure? Is that done through a Committee in Congress?
Do you have a Committee that studies this? Could you explain
that to us?
Mr. Flynn. I'll try and answer that question very briefly.
Each year the plans that participate in the Federal Employees
Health Benefits Program enter into a new contract year, and
there are changes in benefit levels every year. That process
begins in the Spring of each year when we issue what's known as
our annual call letter. It outlines what our negotiating
objectives with 350 plans that participate in the program are
for the year that begins the next January. Plans also----
Mr. Stark. OK, right there. How do you determine what you
might like to add for me, as a benefit, do you hear from your
Members, Members of Congress?
Mr. Flynn. We hear from our Members; we hear from
Representatives; we have oversight by various Committees here
in the Congress. We stay in touch with developments in the
health care industry and that sort of thing.
Mr. Stark. But there is no specific day when OPM states,
``This is the day we're going to have suggestions''? Is there a
formalized process?
Mr. Flynn. No, there's no formal process, Mr. Stark.
Mr. Stark. OK.
Mr. Flynn. But that outlines what we would like to see. And
then the plans come in at the end of May.
Mr. Stark. How would this work? If I have a benefit I want
to add, if I talk to you, would that at least start the
process?
Mr. Flynn. Yes, it would.
Mr. Stark. OK, I'll talk to you. Thank you. [Laughter.]
Thank you, Madam Chairman.
Mrs. Johnson of Connecticut. Well, thank you. That's very
interesting to me because the Congresswomen's Caucus is very
interested in requiring the Federal Employees Benefits Plan to
cover contraceptive medication.
Mr. Stark. We'll both be to see you. [Laughter.]
Mrs. Johnson of Connecticut. And so that's very
interesting. And it's also, I think, worth noting that HCFA has
a technical advisory Committee that makes recommendations in
regard to coverage decisions but its meetings are closed to the
public, is that not so, Mr. Hash?
Mr. Hash. We have, actually, it was correct, Madam Chair,
but we have disbanded that because we made a determination that
it was not consistent with the Federal Advisory Committee Act
and we are in the process of reformulating a coverage advice
system within----
Mrs. Johnson of Connecticut. Thank you. I think that's a
very constructive step. I felt the time was too late to bring
it up, but I'm glad to hear that, and glad it did come up.
I did have one other question that is just too important to
neglect and I had forgotten it earlier. Mr. Flynn, in joining,
in becoming a Federal employee in your coverage plan, my
choices were the same HMOs as any other employee of any
employer in Connecticut had. And to my knowledge, the Federal
employees benefits that that HMO offered weren't much different
from the benefits that they were offering to others. Now if we
require a review process that, for example, has brief short
turnaround times for medically urgent matters and so on and so
forth, do you believe that these plans will extend those same
privileges to everyone in the plan, or in your experience are
they likely to segregate out benefits for Federal employees?
When we make changes that affect the Federal Employees Benefit
Plan, will that permeate the health care system and affect
benefits in, for example, the self-employed sector, in your
estimation?
Mr. Flynn. Let me try and answer that very quickly at two
levels. I think when you have 9 million covered lives, as we do
in this program, there can't help but be an influence on health
plans when we request something of them as an employer sponsor
and they look at whether or not they would like to offer
something similar to their other lines of business. But that
is, that's an independent decision by a health plan and my
guess is that they would look at the issue itself and make a
judgment that they felt was in their best business interest. I
would imagine that on the administrative side of things, for
example, decision, turnaround time on decisions and things like
that, there would likely be more susceptibility to adopt a
single standard than to have different standards for different
employers. But with that caveat that's how I would answer that
question.
Mrs. Johnson of Connecticut. Thank you very much. I thank
the first panel.
Now we will call up Jack Ehnes, the commissioner of
Division of Insurance, Colorado Department of Regulatory
Agencies, Randall MacDonald, executive vice president of GTE
Corp., on behalf of the Association of Private Pension and
Welfare Plans, and Stephen deMontmollin, deMontmollin?--sorry--
vice president and general counsel of AvMed Health Plans from
Gainesville, Florida.
And I want to welcome Mr. MacDonald, not only representing
a great corporation but I want him to know that we are
cognizant that while today is ``Take Your Daughter to Work
Day,'' that he intends to take his daughter to the high school
dance tonight and we have no intention of in any way
compromising those plans.
STATEMENT OF J. RANDALL MACDONALD, EXECUTIVE VICE PRESIDENT,
GTE CORP., ON BEHALF OF THE ASSOCIATION OF PRIVATE PENSION AND
WELFARE PLANS, NEW YORK, NEW YORK
Mr. MacDonald. Nor do I.
Mrs. Johnson of Connecticut. With that, let me invite you
to testify first. And if you cannot stay throughout the
questions, please feel free to excuse yourself, Mr. MacDonald.
Mr. MacDonald. Thank you, Madam Chair. And my daughter will
be glad to hear that it's on the record that I intend to leave
to make sure I get home.
It is truly a great opportunity to be able to tell the GTE
story. I am here today talking about a health plan which
voluntary covers more than 90,000 employees, 60,000 retirees,
as well as all of their dependents in 50 states. I'm also here
to say that GTE was the first company to voluntarily accept and
implement the Consumer Bill of Rights as a result of the
Presidential Commission on Health Care Quality.
I am also, as you mentioned, appearing on behalf of the
Association of Private Pension and Welfare Plans. We spend
about $500 million per year on direct health care costs to
attract a work force that is really differentiated based on
talent. It clearly is in our own self-interest to take this
issue seriously. We have to offer a range of health plan
choices. We have to ensure that they are managed well and, most
importantly, we have to ensure on a fiduciary basis that we are
consistently and fairly administering them for all
participants.
I'm tempted to get into a complex explanation, but in its
simplest form I would suggest that employers are voluntarily
driving the solutions that you are seeing in the marketplace
today. I think it's important to keep in perspective that we
are looking at millions of Americans and, or in the case of
GTE, hundreds of thousands of employees who are securing health
care coverage every day without much fanfare, to be very
truthful. We literally have millions and, or thousands, of
employees who are very satisfied patients.
I think in many ways there are discussions today that are
focusing on less than 1 percent of the occurrences that we tend
to use as horror stories and while Congressman Stark is not
here at the moment, I would suggest that in one case if that
happened to one of our employees, about the diabetic coma, I
would suggest to you that that health plan would not be offered
next year. Perhaps that's the first message: that the Federal
Government ought to begin to think about its role as a group
purchaser and be very selective in the quality of the plans
that they offer and horror stories like this will no longer
exist. So I do think the whole issue needs to be put in
perspective.
I would, second, suggest that our view on grievances and
appeals is important but I would also take exception with the
fact that it is the most important thing. I would suggest to
you that what people are most interested in is the ability to
have coverage for health care, and second, to ensure that it is
done in a quality manner. It is not the issue of whether or not
I can appeal it. I don't ever want to appeal for it as long as
it works.
In that regard, I think that GTE has a concept of where we
start and that is the whole concept of information. We need to
first identify high quality health plans, share the feedback
with the plans. It's a continuous improvement, and work to
correct problems, real or perceived. And if they're not
corrected, there has to be some form of accountability for
that. We have to ensure that plans are offering services that
are medically necessary. You do not want to return to the
horror stories of the eighties where you see inflation in the
medical care community skyrocketing, and then see, ultimately,
the plans being dropped, because I will suggest to you that
they will be dropped. We fixed the problem the first time. We
may not have a chance the second time.
What we ought to be thinking about is the ability to
identify the best practices for the best providers and figure
out how that can be allayed across the Nation, so that, in
essence, what we're really focusing on is making the right
decision in the first place. Simply put, I think how it should
work is that the plan should be in writing, and it should be
easily understood.
Second, I think that in reality the items covered, and not
covered, should be specifically mentioned. Directions on how to
secure those services, and if indeed an appeal is necessary,
how, when, and where it should be filed.
We do, indeed, as a company, support the use of external
appeals. We still believe that this concept is in its infancy.
In essence, there are not that many national experts that are
available and we may be, indeed, creating an entire industry if
we're not careful. I would suggest that experimentation of
different approaches may be the most appropriate. Medicare,
GTE, other public and private purchasers, should really be the
incubator of that process.
I want to caution this Subcommittee to recognize that
public policy changes can either stabilize coverage, or create
additional incentives for its decline. We need to recognize who
provides the coverage, why do they do it, and, most important,
the fragile nature of that coverage if it is de-stabilized.
And with that in mind, I would suggest to you that the
concept of liability truly scares me. I think that, in essence,
if we begin to assign liability to employers, I think we'll
simply get out of the business. And that in and of itself may
be an alarming view, but I think it is a reality.
I think, in essence, the conclusions that I would make is
that the issue is coverage. Policies that encourage employers
to maintain coverage, and allow incentives and other employers
to obtain that coverage in a way that's relevant for both the
individual and the employer. Remember employers who drop
coverage add to the uninsured and to the government's payroll
in some way.
I believe in the market. Health plans and employers are in
the best position to respond to emerging and changing demands.
We can be, and should be, discriminating purchasers. We need to
get real value from the health plans, not because a series of
laws have been passed. I believe in the market in that I think
it's preferable, frankly, to have health plans falling all over
themselves, competing for GTEs share of the business and using
evidence-based practices to ensure that the quality of that
health care that's delivered meets the expectations of those
who are receiving it. We shouldn't be worried about boasting
their compliance records; we ought to be boasting about the
quality of the services that are provided. We should be trying
to stimulate innovation and excellence.
In conclusion, I would suggest that the government really
should begin to think about acting as a purchaser, that we
should be focusing on quality; we should be focusing on the 40
million Americans who do not have coverage, and we should be
allowing the employer community to continue its innovation and
creativity that it has shown in this marketplace.
Thank you for allowing me to testify.
[The prepared statement follows:]
Statement by J. Randall MacDonald, Executive Vice President, Human
Resources and Administration, GTE Corporation on behalf of the Private
Pension and Welfare Plans
Chairman Thomas and members of the Subcommittee, my name is
J. Randall MacDonald. I am Executive Vice President, Human
Resources and Administration for GTE Corporation. We at GTE
share your commitment and interest in ensuring access to
quality healthcare. Thank you for the opportunity to speak
about the importance GTE places on quality healthcare and the
benefits to our 91,000 U.S. employees, more than 60,000
retirees, and their dependents.
With 1997 revenues of more than $23 billion, GTE is one of
the world's largest telecommunications companies and a leading
provider of integrated telecommunications services. In the
United States, GTE provides local service in 28 states and
wireless service in 17 states; nationwide long-distance and
internetworking services ranging from dial-up Internet access
for residential and small-business consumers to Web-based
applications for Fortune 500 companies; as well as video
service in selected markets.
Outside the United States, the company serves more than 7
million telecommunications customers. GTE is also a leader in
government and defense communications systems and equipment,
directories and telecommunications-based information services,
and aircraft-passenger telecommunications.
GTE is one of the largest publicly held telecommunications
companies in the world with revenues of $23.3 billion in 1997.
GTE is also the largest U.S.-based local telephone company and
a leading cellular-service provider--with wireline and wireless
operations that form a market area covering more than one third
of the country's population. GTE also is a leader in government
and defense communications systems and equipment, aircraft-
passenger telecommunications, directories and
telecommunications-based information services and systems.
GTE has employees and retirees in every state. We offer
healthcare benefits to our employees and retirees nationwide.
I appreciate the opportunity to present how GTE provides
health benefits to our employees and their families and the
steps that we and other employers take to ensure that coverage
decisions are made accurately and fairly.
I am appearing before you today on behalf of the
Association of Private Pension and Welfare Plans (APPWP-The
Benefits Association), a national trade association of
companies concerned about the employee benefits system. APPWP's
members include Fortune 500 companies and other organizations
that provide benefit services to employees. Collectively,
APPWP's members either sponsor or administer health and
retirement plans covering more than 100 million Americans.
I have recently completed my service as a member of the
President's Advisory Commission on Consumer Protection and
Quality in the Healthcare Industry and I would like to share my
perspectives with you on several of the recommendations
contained in our report to the President and GTE's efforts to
implement them for our employees.
GTE's Perspective on Healthcare Benefits
Our approach to grievances and appeals begins with
selecting health plan partners committed to operating in the
best interests of our employees and our expectation of fair and
consistent coverage determinations.
GTE spends more than $500 million each year on direct
health costs. We project that we incur a similar additional
cost in lost time from work because of health problems of
employees or their family members. It is in our own self-
interest to have healthy employees at work and we take
seriously our efforts to provide employees with a range of
health plan choices to meet their personal needs and we work
hard at seeing that these plans are managed well.
In addition, GTE is keenly aware that we must compete for
one of our most valuable assets: a skilled and committed
workforce. GTE, and other employers like us, provide health
benefit plans to employees as part of overall compensation
designed to attract and retain talented employees. But it also
goes much further than that. We also share with our employees a
strong and mutual interest in maintaining a high quality,
affordable set of benefits that are administered consistently
and fairly for all plan participants. We are committed to
selecting the best possible health benefit plans, with proven
records of performance, and we work closely with our health
plan partners to resolve problems when they occur and to reduce
administrative errors for the benefit of our plan participants.
Every full-time and eligible part-time GTE employee may
choose a healthcare plan that meets their family's needs
including either a traditional fee-for-service plan or a point-
of-service plan, except one specific labor agreement that
provides otherwise. This means that almost every one of our
employees can select a plan that will allow him or her to see
the doctor of their choice. Additionally, we offer more than
120 quality managed healthcare plans throughout the country--
including both staff and Individual Practice Association (IPA)
model HMOs.
In this voluntary environment, more than sixty-eight
percent (68%) of GTE's employees voluntarily chose managed
healthcare plans in 1998, and an additional sixteen percent
(16%) selected a network based ``Preferred Provider Plan.''
Less than ten percent (10%) selected a traditional indemnity
plan. We believe that GTE employee elections reflect the
quality of care, higher level of benefits, satisfaction,
service, and overall value that managed healthcare plans offer.
We are also actively involved in setting tough, meaningful
standards for the health plans that we offer to our employees
and we continuously monitor and evaluate these plans to ensure
they maintain high performance levels. Finally, we strongly
believe in the value of informed choices and we work closely
with our health plan partners to provide clear, reliable
information to guide employees in making decisions about how
the different health plans operate and their responsibilities
as plan participants.
In short, GTE's primary healthcare objective is to ensure
that our beneficiaries have access to the best healthcare
resources available and we are receiving superior value for the
money we are spending.
At GTE, we work to establish long-term partnerships with
the plans we select and we believe in continuous quality
improvement. Long-term relationships with health plans promote
stable enrollee relationships with the plans of their choice,
with the provider networks, and ultimately pay off by placing a
greater focus on improved healthcare status of our employees
and the larger community where our employees and customers
live. We view these partnerships as a process where all parties
learn from each other and drive toward higher levels of
performance with appropriate economic and market share rewards
for their innovation and success.
We also work to correct problems if a plan fails to perform
at or above our performance standards, first by sharing our
findings directly with the plan and soliciting their review and
commitment to take corrective action. Additional steps include
notifying employees of the particular problems and, if not
corrected, ``freezing'' any additional enrollment. The final
step of discontinuing the offering of a plan is only considered
when problems persist.
The final critical link in successful health plan
management is giving our employees the information they need to
make appropriate decisions and then paying careful attention to
the results from employee satisfaction surveys. We are
convinced that a large part of the reason that so many of our
employees voluntarily elect managed healthcare plans is because
of the information we provide about them during the annual
enrollment period.
Each year, we conduct extensive mailings to employees
summarizing the health plan options available to them and
giving them information on each option that is based on the
type of information that they have told us helps them to make
decisions. In addition to basic information about the size of
the plan's membership, how long it has been in business, and
any differentiating attributes, we highlight those plans that
meet GTE's ``Benchmark'' status as one of the best in terms of
combining access, quality of care, service, satisfaction, and
overall cost-effectiveness. We also actively promote plans that
meet GTE's highest rating, ``Exceptional Quality Designation,''
which is reserved for those plans that have been rated by us as
having the very best overall quality of all of the plans
offered by GTE throughout the country. These are the select
group of plans that, in our evaluation, offer the highest
combination of healthcare quality and member satisfaction.
These designations do not come easily in a competitive
marketplace and, I can assure you, our health plan partners
work very hard to earn them.
We want our employees to have a choice of high quality
health plans that are committed to working closely with us over
the long term to deliver high levels of service at a fair
price. We try to foster a sense of customer focus in how health
plans meet our needs, and those of our employees.
Making the Right Decisions on Coverage
GTE's employee healthcare elections have changed
dramatically over the years. Like most companies, for many
years we provided health benefits primarily through
traditional, comprehensive, indemnity-type plans where benefits
for all medically necessary and appropriate care were
explicitly and discretely defined in the plan documents. One of
the most common misperceptions is that managed healthcare plans
are more restrictive than the typical indemnity plans of the
past. The reality is that managed healthcare improves access to
more extensive healthcare services including (a) coverage for
preventive health services which indemnity plans usually
restrict or exclude altogether, and (b) elimination of the
economic barriers to healthcare access. Managed healthcare
plans use modest fixed-dollar co-payments in lieu of large
annual deductibles and additional co-insurance. This allows
consumers to know their out-of-pocket costs before seeking
healthcare services.
In addition, most managed healthcare plans are rapidly
engaging in sophisticated, value-added pharmaceutical benefit
strategies designed to provide highly effective programs to
combat and proactively manage complex diseases. Finally,
managed healthcare has significantly improved the integration
of information available to practicing healthcare providers to
evaluate the wide range of treatment options for a particular
condition and allows for much better decisions to be made about
which of the options are most likely to lead to improved,
patient-specific healthcare.
The one thing that distinguishes managed healthcare from
the indemnity plans that preceded them is that more decisions
about what is considered ``medically necessary and
appropriate'' are made up-front, rather than after the service
has already been provided. In the past, when these types of
decisions were made, they largely affected the issue of whether
a payment would be made by the plan for a service that had
already been provided. Now, under managed healthcare, the
healthcare provider and the patient often know the plan's
decision before the service has actually been provided. This
means that everyone involved--the patient, the provider, the
plan, and the employer--has a stake in making sure that the
right decisions are made in the first place, and that decisions
are made consistently and fairly.
At GTE, we strongly subscribe to the concepts of evidence-
based medicine and standards for coverage of medical services.
This means defining benefits in terms of the treatment that is
most suitable for the patient, based on proven medical
technologies and practice. GTE holds health plans accountable
for making sure that medical practitioners have the flexibility
to do what is required for their patients. But we also believe
that it is not enough to simply cover whatever a treating
physician prescribes. Not every treating physician is always
right. We want plans to bring individual physician decision
making into a system of accountability, to ensure that the
treatment proposed is consistent with the latest and accepted
medical knowledge. Many in the healthcare field seem to
consistently believe that ``more is better.'' We believe that
only ``better is better,'' and ``better'' may be more--or fewer
medical services. We believe our employees deserve protection
against non-evidenced based medical services and have
encouraged others to support this basic consumer protection.
For example, removal of cataracts once required a minimum
hospital stay of five to seven days. These are now routinely
done on an out-patient basis for most patients. The point here
is evidenced-based medical services should be based on the
patient's needs and not on out dated historical practices or
the convenience of healthcare providers. Given the high cost
and quality risks of healthcare, non-evidenced based services
can no longer be the responsibility of plan sponsors.
Medicine is not yet--and may never be--entirely science-
based. There continue to be significant areas where there is
not yet medical consensus. Where disagreements occur--as they
inevitably will--we want these to be resolved fairly and
quickly, and when additional medical judgment is needed, we
want final decisions to be made that keep pace with constantly
emerging medical technology and advances.
I can assure you from my own experience that nothing we do
in our health benefits program is more important, or more
difficult, than ensuring that the best decision is made for an
employee or a member of their family in difficult coverage
cases. And, we have an even higher obligation required by law
to act dispassionately, consistently, and in the interest of
all plan participants. In practice, that means it is just as
important to ensure that we are covering appropriate and needed
care as it is to ensure that we are not paying for
inappropriate or unnecessary services. In either case, once the
decision is made for a single individual, it then must be our
policy to act consistently in all future cases, knowing that
coverage interpretations must change based on emerging medical
science.
When our employees have questions or concerns about the
decisions made about their health benefits, the first step is
to make sure all parties have complete information to make sure
that the correct decision was made. Most are relatively
straight forward coverage decisions and are quickly resolved.
Where questions continue, we ask that both the guidelines
involved in these cases and the specific clinical cases in
question be reviewed by independent medical practitioners
including the best medical providers available anywhere in the
country to provide the patient with specific clinical findings
regarding the proposed treatment, including whether the
proposed treatment is within the medically appropriate coverage
provided by their plan.
The point that I want to underscore is that we do not
attempt to substitute our judgment for the judgment of medical
professionals. Our job--and legal responsibility--is to make
sure that our healthcare plans are administered properly and
consistently. We rely on medical professionals to make medical
judgments. In fact, we strongly believe that medical decision
making must remain in the medical arena. Where disagreements
over medical issues occur, we seek independent medical judgment
so that the best decision possible can be made about the
services provided to our employees. And where there is
reasonable doubt, we want these decisions made in the employees
favor, consistent with our interest in having a health plan
that is both perceived, and truly is acting, in their
interests.
By moving toward ``evidence-based medicine,'' we can
subject both coverage decisions and medical treatment decisions
to an objective test of what has been shown to work best and is
in the patient's best interest. Evidence-based medicine is the
best hope we have for seeing that patients with chronic, rare,
or difficult conditions get the best treatment available, based
on the best medical knowledge, and actually improve their
condition.
Making informed, consistent decisions about what is covered
under a health benefit plan is a serious responsibility that
needs to be undertaken by those with a commitment to making the
best decisions possible. If we are honest with ourselves, we
must also recognize that in many cases, the job of making
health benefit coverage decisions involves difficult judgment
calls based on the best available information at the time. It
is extremely important that public policy recognize our common
interests in seeing that these difficult but essential
decisions are made properly so that we do not end up with a
system that encourages or requires coverage for services that
are excessive, unproven, inappropriately delivered, simply
unnecessary, and perhaps even dangerous to the patient's
health.
Recommendations From the President's Advisory Commission
The recommendations of the President's Advisory Commission
were achieved by reaching consensus among a widely divergent
group of independent-minded commissioners. All of us were
motivated by a common desire to make the world's best
healthcare system even better than it is today.
I can honestly tell you that the by-product of this
consensus document is far better than it would have been if we
had split apart and only issued a report that highlighted our
occasional differences. Along the way, we learned that no
single Commissioner, industry, or constituency held a monopoly
on the consumer's best interests in the healthcare system.
Did the Commission reach consensus on every issue? No, we
did not. We vigorously debated a number of issues where
ultimately we concluded that we could not reach agreement. For
example, there were strong proponents on the Commission for
certain mandated benefits, standardized benefit packages, any
willing provider concepts, mandatory offerings of open network,
increased provider and consumer accountability, and the
consumer protections of evidenced-based medical care I
previously described. I am sure that you can guess where I was
on these sorts of topics. We found it difficult to mandate
coverage requirements in a voluntary system, but pledged to
work collaboratively for continuous improvement.
We certainly did not need a Presidential Commission to find
that divergent interests did not agree on all issues. The
important work of the Commission was in identifying the many
areas where we did agree--employers, health plans, healthcare
providers, union representatives, consumer advocates, and
public purchasers--and the need to move forward for the benefit
of both providers and consumers. Let me touch on a few of those
for you that are particularly relevant to today's hearing.
Information
We agreed that a well-functioning healthcare system depends
upon good information in the hands of the individuals who are
making decisions about how their health plans operate, how
services are provided, and the healthcare providers who
participate in their networks. As I have already mentioned, we
at GTE believe that clear, relevant, and well-presented
information is a vital tool for our employees in making
informed choices. We can all do better in this area, including
government programs, I should add. I believe that consumer
responsive information will continue to be an evolutionary,
rather than prescriptive, process. We can learn from each other
and should listen carefully to those who must use this
information at the end of the day. The goal should be to give
all of the information that is truly worthwhile in a form that
is consumer friendly, and avoid the tendency to bury people
with information that is only understandable or appreciated by
healthcare technicians.
Claims Review Procedures
Again, this is an area where a number of positive
recommendations have been made. The Commission recommended much
shorter time periods for making coverage decisions than is
currently required by federal regulations and an even shorter
process for expediting the review of cases that involve urgent
care needs. In addition, the Commission proposed that plan
participants be provided with written explanations of all
decisions and a review by appropriate medical professionals
when it is required.
I agree that the current time frames need to be updated.
The Commission's recommendations now need to be tested against
market place reality to determine the most appropriate and
practical time frame for plans and plan participants.
External Review
This was undoubtedly one of the most difficult issues for
the Commission to resolve, but I believe that in the end, the
Commission made a valuable contribution on the issue of when
health plans should seek external review of certain coverage
decisions. The Commission proposed that plans seek independent,
external review by appropriate medical professionals in cases
that involve coverage decisions related to treatments that are
(1) ``experimental or investigational in nature,'' or (2) where
services may not be considered medically necessary. The
Commission concluded that external review should be available
where ``the amount in question exceeds a significant threshold
or the patient's life or health is jeopardized.''
Reasonable people may disagree on many of these issues,
including many employers and health plans. We at GTE find
external review to be an extremely valuable way to resolve
coverage issues that involve medical judgment. We also believe
that this is an evolving field and that no single ``best
practice'' model for external review has yet emerged. While we
support external review and have voluntarily incorporated it
into our practices, we intend to be fully engaged in the debate
about how it works best by learning pragmatic approaches from
our health plan partners.
We fully understand that many organizations are not at the
same place that we are in this area, and that external reviews
require sophisticated contracting with well-recognized national
medical experts who are often in short supply and whose
services can be quite costly. We believe that plans that
implement an effective dispute resolution process will receive
the reward of increased market share from satisfied consumers
and discriminating purchasers. GTE is working with enlightened
public and private healthcare purchasers and responsible health
plans to identify the best models and mechanisms for extending
external reviews more quickly and efficiently than can be
accomplished though a bureaucratic or legislative mandate. In
addition, we believe that much more needs to be done in the
area of outcomes research and medical technology assessment.
These will provide decision makers with the kind of information
that they can rely upon to make the best decisions possible in
these areas at the earliest possible stage, so that our
knowledge about what is proven and effective is able to keep
pace with the constant advances in medical practice.
GTE believes that the best way to put the recommendations
of the President's Commission in place is through the mechanism
that we already use effectively. We have committed ourselves to
moving forward on the recommendations contained in the Consumer
Bill of Rights proposed by the President's Commission and we
are working with all of our health plan partners to make these
recommendations a reality for our employees. In addition, we
have successfully encouraged many other employers and
organizations concerned with healthcare value and member
satisfaction to begin to adopt these proposals. All the leading
national health plans have joined with us in this effort, but I
regret that the State, County and Municipal representatives are
the largest segment that have not begun to move forward for
their own employees and those within their responsibility.
I believe that legislation on grievance and appeal
procedures is both unnecessary and unwise. However, federal
agencies already have sufficient authority to revise their
current regulations to adopt sensible standards to ensure that
all plan participants get timely and appropriate review of
their healthcare claims. In doing so, the agencies should work
closely with all interested parties on updating the current
regulations, especially where there is already broad agreement
that changes need to be made.
Conclusion
Finally, let me conclude by encouraging the members of this
Committee to keep in mind the importance of maintaining and
encouraging the positive involvement of employers in the
process of arranging and financing healthcare benefits.
Employer sponsorship has made it possible for the private
healthcare marketplace to evolve at an astonishing pace with a
minimum of government involvement with demonstrated positive
results for more than 100 million Americans. Employer
sponsorship creates purchasing clout in the market to secure
high quality, cost effective plans and to hold health plans
accountable for improving their performance and satisfying
their enrollees.
The issues presented in today's testimony are important to
improve the confidence of health care consumers. We believe
that health plans and employers are in the best position to
respond to emerging and changing demands. In fact, there is
ample evidence that healthcare reform is alive and well--and is
being driven by discriminating purchasers working to meet the
needs of their employees.
By contrast, we are concerned that additional legislative
mandates, especially those that could make plan sponsors liable
for health treatment decisions and outcomes, would force even
large employers to back away from voluntary health coverage.
Over the next several years, we expect that accountability
will shift from a concern about the processes and performance
of plan operations--that has been the focus of so much
attention today--to a concern about the effectiveness of plans
in improving the health status of their enrollees and of the
general population.
This will be the ultimate test for medical practice and of
our healthcare system. It will also be the ultimate measure of
value for employers and other healthcare purchasers. Their
active, engaged efforts to reach for this high standard will be
essential to future success.
Thank you for offering me the opportunity to share our
view, our success, and our vision of the challenges that will
continue to emerge.
Mrs. Johnson of Connecticut. Thank you very much, Mr.
MacDonald.
Mr. Ehnes.
STATEMENT OF JACK EHNES, COMMISSIONER, DIVISION OF INSURANCE,
COLORADO DEPARTMENT OF REGULATORY AGENCIES, DENVER, COLORADO,
ON BEHALF OF THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS
Mr. Ehnes. Good morning, Madam Chair, Members of the
Subcommittee. My name is Jack Ehnes. I'm the Commissioner of
Insurance for the State of Colorado. I'd also like to add that
in a prior work career, I was an employee benefits manager for
the largest self-funded plan in Colorado, so I have a
perspective both as a regulator, and as an employer, and as a
purchaser when I make my comments.
Today my remarks will summarize the three areas that's
covered in detail in my written statement. First, I'm going to
talk about the NAIC Health Carrier Grievance Procedure Model
Act. Second, I'd like to tell you what the states have already
done in making sure that consumer grievances are addressed in a
fair and independent manner. And then, finally, and maybe most
importantly, I'd like to discuss with you an approach that we
feel may be the best way for Congress to legislate on this
issue without micromanaging health regulation by the States.
No issue is more important to State insurance regulators
than the successful resolution of consumer complaints about
health plans. This is why State governments devote so many
resources to complaint handling and resolution. This is also
why the NAIC adopted the Health Carrier Grievance Procedure
Model Act. This model requires all health carriers to establish
clear mechanisms for resolving employee complaints. Under the
model, indemnity carriers only need to provide a one-step
process. With indemnity insurance, the services have already
been provided and the dispute generally centers around who will
pay the providers.
Managed care plans must create a two-step process. The
second step is required because sometimes the plan has denied
treatment before the treatment has been given. The second level
process must be as independent as possible. The majority of
people performing the review must be health professionals in
the appropriate field. Where services have been denied, the
professional involved may not be in the covered person's health
plan, and may not have a financial interest in the outcome of
the review. Seventy-two hour expedited reviews are required if
the time limits of the standard procedure would seriously
jeopardize the life or health of a covered person.
In 1996, Colorado, along with six other States, enacted
legislation and promulgated regulations concerning the
provisions of this Model Act. And I just might show you here,
this is a brochure but we're really attempting to communicate
this throughout Colorado in a variety of ways. But the title of
this brochure says, ``What Happens When Your Health Insurance
Co. Says `No?''' In very simple plan terms, it goes through
what grievance processes are available to the public. We make
this available on the Internet. But, particularly, we're going
to place it in provider offices, doctor offices, hospital
offices, where these issues arise. And providers need to be
counseling patients.
Madam Chair, all 50 States have passed legislation
requiring health maintenance organizations, or managed care
plans to establish some type of consumer grievance and appeals
process. Other State laws regarding how a managed care plan
conducts its business and deals with its consumers also come
into play. For example, because Maryland requires a prudent
layperson standard for payment of emergency room claims, my
colleague, Commissioner Steve Larson, was able to order the
payment of the full claim and fine Optimum Choice for failing
to pay the claim of a women who fell off of a cliff. It was
reported in the front page of The Washington Post. The case, of
course, has been discussed several times already this morning.
This is the order issued by the insurance commissioner for the
State of Maryland ordering that insurance company to pay the
claim in full in early March.
Yet, the member States of the NAIC do not feel that the
current grievance model goes far enough. In the 18 months since
we adopted this model, our members have developed a great deal
of interest in requiring an external review process as well. At
our spring meeting, the members of the NAIC decided to revise
the grievance model to provide for independent, external review
appeals mechanism, and that process of developing that model
should be completed by next year.
But even without a change in the model by the NAIC, 17
States have already passed legislation that provides for an
external appeals process. California, Texas, and Maryland are
among the States that have taken some action in this area. In
fact, the Maryland legislature passed this bill less than 2
weeks ago. These external reviews take many forms.
During our 1998 legislative session, the Colorado
legislature also debated the adoption of an external grievance
procedure. Unfortunately, the bill was introduced late in the
session, not allowing adequate time for development. Our
legislature wanted to review what other States had already
accomplished to decide what approach works best in Colorado.
But we expect that the bill will be drafted throughout the
summer and reintroduced in January.
As you can see by the chart we have over here of all the
States and what action they've already taken, all States in the
country require HMOs to have some type of internal procedure
for addressing grievances. The 17 States in blue require an
external grievance procedure of some type.
It's also important to note that State insurance
departments routinely assist consumers who have complaints
about a plan's denial services. The Maryland example happens
everyday on a small basis in every insurance department around
the country.
Given this, the members of the NAIC do not wish to see
Federal preemption of requirements for grievance procedures.
However, if Congress feels compelled to mandate an external
grievance process, that we would request that States be given
the utmost flexibility to address the needs of our consumers.
Instead of drafting a specific external review requirement and
mandating that the States meet, or exceed, this new Federal
standard, Congress should first develop an independent
procedure for ERISA plans. Congress could then require that the
States implement some type of external procedure within a set
time period. Congress could even work it out so that State
action and Federal regulatory action were completed at the same
time. This way States that had already acted, or were planning
on acting in the near future, would not have to take additional
action other than gubernatorial certification.
In summary, this proposed State-Federal partnership would
have three major features: It would list the general topics
that Congress wanted the States to address; it would set a date
by which States had to act; and if a State failed to act, the
requirement set by the Federal Government for ERISA plans would
apply to all State-licensed insurers.
In conclusion, the members of the NAIC feel States have
already responded. All States require some type of grievance
procedure for HMOs, and 17 States have gone further requiring
an external process. We recognize, however, that we need to do
more. By fall, our model law will be amended to include an
external grievance procedure. However, we recognize that ERISA
plans do not offer the same level of protections for their
enrollees as the States offer. We urge Congress to amend ERISA
to provide these provisions. We also ask that if Congress wants
to compel States to take action, that it do so in the least
prescriptive possible. We believe the State-Federal partnership
approach, outlined in my written statement, ensures that all
consumers receive similar levels of protection without
congressional micromanagement.
Thank you for the opportunity to testify, and, of course,
I'd be glad to answer any questions.
[The prepared statement follows:]
Statement of Jack Ehnes, Commissioner of Insurance, State of Colorado,
on behalf of the National Association of Insurance Commissioners'
Special Committee on Health Insurance
I. Introduction
Good morning, Mr. Chairman and Members of the Subcommittee.
My name is Jack Ehnes. For four years I have been the
Commissioner of Insurance for the State of Colorado. I am also
the Vice Chair of the Accident and Health Insurance (B)
Committee of the National Association of Insurance
Commissioners (NAIC). I am testifying this morning on behalf of
the NAIC's (EX) Special Committee on Health Insurance. I would
like to thank you for providing the NAIC with the opportunity
to testify today about due process within the health care
industry including the NAIC's Health Carrier Grievance
Procedure Model Act.
The National Association of Insurance Commissioners (NAIC),
founded in 1871, is the organization of the chief insurance
regulators from the 50 states, the District of Columbia, and
four of the U.S. territories. The NAIC's objective is service
to the public by assisting state insurance regulators in
fulfilling their regulatory responsibilities. Protection of
consumers is the fundamental purpose of insurance regulation.
The NAIC Special Committee on Health Insurance is composed
of 41 state insurance regulators. The Special Committee was
established as a forum to discuss federal proposals related to
health insurance and to provide technical assistance to
Congress and the Administration on a nonpartisan basis. Over
the past several years, other members of the NAIC have had the
privilege of testifying before this Subcommittee on various
legislative proposals.
II. NAIC's Five Model Acts
Beginning in 1993, the states, with the assistance of the
members of the NAIC, have done extensive work to help ensure
that the health care provided by state-regulated health plans
is of the highest quality. In 1996, the states, through the
NAIC, adopted five model acts that set standards for managed
care plans on a range of topics. These managed care model acts
are the:
Health Carrier Grievance Procedure Model Act;
Managed Care Plan Network Adequacy Model Act;
Utilization Review Model Act;
Quality Assessment and Improvement Model Act;
Health Care Professional Credentialing
Verification Model Act.
The Health Carrier Grievance Procedure Model Act works with
the other four model acts to create a comprehensive regulatory
structure at the state level for managed care health plans. In
some instances they apply to fee-for-service plans as well.
Their purpose is to protect the consumer, especially when
carriers and health plans restrict a consumer's choice of
providers, or use incentives to direct consumers to particular
providers.
A NAIC model law becomes effective in a state only when
that state's legislature chooses to enact the model or
legislation based on the model. A state is free to modify an
NAIC model to meet the needs of consumers and/or the market
within the state. As with all our models, the NAIC is
monitoring state legislatures to determine which states have
adopted provisions of some or all of these managed care models.
The states through the NAIC developed the Health Carrier
Grievance Procedure Model Act and the four other managed care
models because they recognized that the delivery of health care
services was rapidly evolving away from fee-for-service
insurance arrangements to managed care arrangements of many
types. State insurance regulators have observed this market
evolution firsthand because state insurance departments have a
principal role in regulating managed care entities. Insurance
regulators appreciate the need to strengthen protections for
consumers participating in managed care plans.
III. Health Carrier Grievance Procedure Model Act
No issue is of greater concern to consumers or state
insurance regulators than the appropriate resolution of
consumer complaints about health plans. The NAIC's Health
Carrier Grievance Procedure Model Act requires both health
carriers and managed care plans to establish clear procedures
for resolving enrollees' complaints. The term ``grievance'' is
broadly defined and explicitly includes complaints about
denials of care or treatment.
Graduated Levels of Review: The model requires all health
carriers to provide a ``first level grievance review.'' These
reviews enable a covered person to submit written material to a
health carrier, but the carrier is not required to have a
meeting with the complainant. There are separate requirements
for grievances involving an adverse determination based on a
utilization review decision and grievances involving all other
matters. An adverse determination means a decision by a health
carrier that an admission, availability of care, continued stay
or other health care service has been reviewed and does not
meet the health carrier's requirements for medical necessity,
appropriateness, health care setting, level of care or
effectiveness, and the requested service is therefore denied,
reduced or terminated.
A health carrier must issue a written decision containing:
the names, titles, and qualifying credentials of the reviewers
who participated in the first level grievance review process; a
statement of the reviewers' understanding of the covered
person's grievance; the reviewers' decision in clear terms and
the contract basis or medical rationale in sufficient detail
for the covered person to respond further to the carrier's
position; a reference to the evidence or documentation used as
the basis for the decision. In cases involving an adverse
determination, the carrier must provide the instructions for
requesting a written statement of the clinical rationale,
including the clinical review criteria used to make the
decision. If applicable, the carrier must also provide a
description of the process to obtain a second level grievance
review and the written procedures governing a second level
review, including the time frames; and the notice of the
covered person's right to contact the insurance commissioner's
office, including the phone number and address of the
commissioner's office.
A health carrier that offers managed care plans must
establish an independent second level grievance process. This
additional step provides a covered person dissatisfied with the
outcome of the first level review the option of a second
review. The second level review is offered to managed care
enrollees since they would not have the option, as a fee-for-
service patient would, of possibly seeking to obtain the
service from a different source. At the second level review the
covered person has the right to appear in person before
authorized representatives of the health carrier. A carrier
must ensure that a majority of the persons reviewing a second
level grievance involving an adverse determination are health
care professionals who have the appropriate expertise. In cases
where there has been a denial of service, the reviewing health
care professional may not be a provider in the covered person's
health benefit plan and may not have a financial interest in
the outcome of the review. The requirement of an independent
reviewer does not apply, however, when such a reviewer is not
reasonably available. This may be the case in small states
where providers, especially specialists, are likely to have
contracts with every major health plan.
If a face-to-face meeting is not practical for geographic
reasons, the health carrier must provide and pay for the option
of communication between the covered person and the reviewers
by other means, such as a conference call or a videoconference.
The health carrier must also provide a written decision
containing specified information. The decision must be issued
within five working days after the review meeting, and that
meeting must be held within 45 working days from the time that
the health carrier receives a request from a covered person for
a second level review.
The requirement that the health plan offer a managed care
consumer the opportunity for a face-to-face meeting with the
plan is a very significant feature of this model. Because the
model defines ``grievance'' to include an adverse determination
made pursuant to a utilization review process, consumers have
the right to meet with the plan to resolve disputes about the
denial of care.
Expedited Reviews: The model also requires a carrier to
perform expedited reviews if the timeframe of the standard
grievance procedure would ``seriously jeopardize the life or
health of a covered person or would jeopardize the covered
person's ability to regain maximum function.'' Once the review
is started, the health carrier must reach a decision within
seventy-two (72) hours.
Grievance Procedures: Health carriers are required to use
written procedures for receiving and resolving grievances from
covered persons and are required to file a copy of the
procedures with the commissioner. The model act requires an
annual report to be filed with the commissioner. Carriers are
required to attach a description of the grievance procedures to
the policy, certificate, membership booklets, outline of
coverage or other evidence of coverage provided to covered
persons. The procedures document is required to include a
statement of a covered person's right to contact the
commissioner's office for assistance at any time. The statement
must include the telephone number and address of the
commissioner.
Grievance Register: Health carriers are required to
maintain written records to document all grievances received
during a calendar year. The model act defines minimum
information to be contained in the register and requires the
register to be maintained for the longer of three years or
until the commissioner had adopted a final report of an
examination that contains a review of the register for that
calendar year.
Plans are required to submit an annual report to the
insurance commissioner that includes: 1) the total number of
grievances; 2) the number of grievances referred to the second
level of review; 3) the number of grievances resolved at each
level; 4) the number of grievances appealed to the commissioner
of which the health carrier has been informed; 5) the number of
grievances referred to alternative dispute resolution
procedures or resulting in litigation; and 6) a synopsis of
actions being taken to correct problems identified.
Another significant feature of the NAIC's Health Carrier
Grievance Procedure Model Act is that it coordinates with the
NAIC's Utilization Review Model Act. Both models require health
plans to disclose the clinical review criteria used for making
utilization review determinations. This ensures that both
consumers and providers know the basis of a denial and have the
necessary information to challenge the plan's decision.
In 1996 Colorado enacted legislation and promulgated
regulations containing the provisions of the Health Carrier
Grievance Procedure Model Act.
All 50 states require health maintenance organizations or
managed care plans to establish consumer grievance and appeals
processes. These processes vary in their complexity. Several
representative state samples follow. The following section on
individual state action was put together using data provided by
The National Conference of State Legislatures.
Georgia requires every HMO to maintain a complaint
system that has been approved by the commissioner. A grievance
hearing must be conducted by a panel of not less than three
people. Enrollees must be notified in writing of the
determination. Notice of an adverse determination must include
specific findings, the policies and procedures for making the
determination, and a description of the procedures, if any, for
reconsideration of the adverse decision.
Illinois requires every HMO to submit for the
director's approval a system for the resolution of grievances.
The procedures must be fully and clearly communicated to all
enrollees. The process must take place within specific time
frames. Enrollees must be notified in writing of the
determination.
Louisiana requires that every HMO establish and
maintain a grievance procedure approved by the commissioner.
The HMO must inform enrollees annually of the procedures,
including the location and phone number of where grievances may
be submitted.
Nebraska requires each HMO to establish and
maintain grievance procedures that provide for the resolution
of grievances initiated by enrollees. The procedures must be
approved by the director of insurance after consultation with
the director of regulation and licensure.
Nevada requires the commissioner (in consultation
with the state board of health) to approve the system developed
by managed care organizations for resolving enrollee
complaints. Denials of coverage must be in writing, must
provide the reason for the denial and the criteria used in
making the determination. The enrollee must also be notified of
the right to file a written complaint.
New York requires HMOs to establish and maintain a
grievance procedure. Grievances can be filed in writing or by
phone. The grievance process must take place within a specific
time period. Notice of an adverse determination must be in
writing and explain the process for filing a grievance.
Expedited determinations must be made by phone followed by a
written notice within three business days.
Wisconsin requires all HMOs to establish and use
an internal procedure that is approved by the commissioner.
Enrollees must be provided with complete and understandable
information describing the internal grievance process.
IV. External Review of Grievances:
There has been much recent discussion about the
desirability of requiring a health plan to have an independent
external review process. The NAIC's model does not require a
health plan to submit a grievance to the review of an external
entity or state agency. In general, the grievance process
required by the NAIC's Health Carrier Grievance Procedure Model
Act is a process internal to a health carrier or plan. It does,
however, require a managed care entity or carrier that performs
utilization review to convene an independent, impartial panel
of experts to review denials of care.
In the 18 months since the NAIC adopted its grievance and
utilization review models, the interest in requiring
independent external appeals has grown greatly, both in
Congress and among state legislatures. At its Spring National
Meeting in March 1998, the NAIC's Accident and Health Insurance
(B) Committee, of which I am the Vice Chair, decided to revise
the NAIC's grievance model to provide for an independent
external appeals mechanism. We hope to complete this revision
expeditiously.
At least seventeen states have passed legislation that
provides for some type of specific independent external appeals
process. These states are Arizona, California, Connecticut,
Florida, Maryland, Michigan, Minnesota, Missouri, New
Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Rhode
Island, Tennessee, Texas, and Vermont. Other states may enact
bills this year.
State independent external appeals mechanisms take various
forms. There are at least six possible approaches already found
in state law. A state that is developing an independent
external appeals process would examine these processes and
determine which one would fit best in that state, or a state
could combine aspects of these approaches and create something
more suitable for its own market:
1. The appropriate state entity develops a list of
independent reviewers. Once it is determined that an external
appeal is necessary, the health plan chooses a reviewer from
this list. The reviewer cannot have a financial interest or any
other connection to the case. If the list maintained by the
state does not include a reviewer with appropriate experience
to conduct the external independent review, then the health
plan along with the appropriate state entity will choose a
reviewer who is mutually acceptable to perform the review.''
(Arizona.)
2. Independent review entities are accredited by a private,
nonprofit accrediting organization. The accrediting
organization is under contract with the appropriate state
entity. (California.)
3. The enrollee appeals to the appropriate state entity.
The state entity appoints an independent, impartial health
entity to perform a medical review. (Connecticut, Missouri,
Rhode Island, Texas.)
4. The state creates a panel that hears all external
appeals. The panel is composed of state employees. Panel staff
performs an initial review to determine if the panel will hear
the case. If the case is heard, the panel presents its findings
to the appropriate state entity, which issues a final
determination. (Florida.)
5. The enrollee may choose an alternative dispute
resolution mechanism to resolve the HMO's internal appeal
decision. (Minnesota.)
6. The appropriate state entity performs the review.
(Tennessee,Michigan)
In its 1998 legislative session, the Colorado legislature
debated the adoption of an external grievance procedure.
Because the legislation was introduced late in the session, the
legislature had insufficient time to examine the bill. The
Colorado legislature wanted to review what other states had
already accomplished and decide which approach would work best
for the citizens of Colorado. The bill will be redrafted
between now and the beginning of the next session in January
1999. It is expected to pass since there was limited opposition
to the bill last session.
V. The Roles of State and Federal Government in Regulating Health Care
Federal Role: The enactment of the Employee Retirement
Income Security Act of 1974 (ERISA) created a dual regulatory
structure in this country for health insurance and heath
benefits. Had ERISA not been enacted, we would strongly oppose
any federal role in setting quality standards including
mandating an external grievance procedure. However, because
state insurance departments lack jurisdiction over self-funded
ERISA plans, and because we believe that consumers within ERISA
plans would benefit from the same types of protections
available under state law, the NAIC has advocated, in past
testimony, that Congress amend ERISA. We therefore think it
appropriate that Congress set standards--including grievance
procedures--for ERISA plans.
With respect to state-regulated insurers and health plans,
we continue to believe that the states are better able to
determine what works best in their marketplace. The delivery of
health care services is a local activity. Health markets are
determined by geographic factors, demographics, the level of
market penetration by different types of entities, the
composition of the health care workforce, and consumer
preferences, among other factors. A single federal standard
will be difficult to apply to diverse populations and different
geographic areas and may stifle innovation in local markets. As
we have already seen, states have already approached the
subject of independent external grievance procedures in many
different ways, each designed to fit the needs of their
citizens and health care market.
State Role: State insurance departments conduct many
critical activities which directly relate to and are intimately
connected with the required grievance procedure. These
activities are labor intensive
Consumer Complaints: A primary role of state insurance
departments is the handling of consumer complaints. The help
provided by consumer services divisions is one of the most
critical services offered by state insurance departments. It is
arguably the service that consumers appreciate most. In
resolving consumer complaints, state insurance departments are
acting, in part, as an external appeal. If the health plan is
denying care contrary to its contractual obligations, a
department of insurance can take many different actions, which
range from fining the plan to revoking its license. Often a
pattern of consumer complaints regarding denials of care will
lead the department of insurance to perform a ``market
conduct'' examination.
Market Conduct Regulation: ``Market conduct'' refers to how
the regulated entity conducts its business within the state's
market, including such activities as marketing, the issuing of
policies, and the handling of consumer complaints. A large
number of complaints or a pattern of complaints will trigger a
market conduct exam. An exam may also be triggered by a large
number of enrollee grievances and appeals. If a regulated
entity fails its market conduct examination the department of
insurance can require the entity to take corrective action.
In recognition of the important role state insurance
commissioners play in resolving consumer complaints, the NAIC
recently formed the Consumer Complaints Working Group. This
group will review the complaint handling process, including the
handling of health plan complaints, of insurance departments
across the country. The working group will then identify the
``best practices'' used by insurance departments, will
publicize these practices, and will encourage all state
regulators to incorporate them into their department's efforts.
In keeping with providing assistance to state insurance
departments, the NAIC maintains the largest database in the
world on final actions taken against all insurance companies,
including health insurers.
VI. Federal Preemption
All states require HMOs to have internal procedures for
addressing grievances. Seventeen states require an external
grievance procedure. It is also important to note that state
insurance departments routinely assist consumers who have
complaints about a plan's denial of services or other matters.
Given this, the members of the NAIC do not wish to see federal
preemption of state requirements for grievance procedures.
However, if Congress feels compelled to mandate a specific
grievance procedure (i.e. an external process), then the
members of the NAIC would request that the states be given the
utmost flexibility. In order to provide this flexibility we
would urge you not to use the legislative model embodied in the
Heath Insurance Portability and Accountability Act of 1996
(HIPAA).
At the time of HIPAA's enactment in 1996, prescribing a
detailed set of minimum federal requirements seemed far
preferable to total preemption of state law implementing small
group and individual health insurance market reforms. The HIPAA
model recognizes the integrity of state insurance law and the
state regulatory framework. This approach made sense for the
implementation of federal standards relating to the issuance,
portability, and renewability of health insurance.
However, the legislation required states to enact complex
changes to state law within a very limited timeframe. It was a
difficult task for most states to modify their laws to conform
to the complex federal statute. HIPAA's preemption language
required most states to enact the provisions of the federal law
into state law in order to retain enforcement authority. It
also required them to repeal any state law provisions that
conflicted with the federal statute. Therefore, while the
federal statute did not preempt existing state law, it did
require a comprehensive review of state law and significant new
state legislation in most jurisdictions.
Federal Principles--State Specifics: There is another
approach Congress should adopt. Rather than enacting specific
requirements and allowing states to ``do better,'' the federal
government could simply direct the states to adopt an
independent external grievance procedure and provide a deadline
for action. Instead of drafting a specific independent external
grievance procedure and mandating that the states meet or
exceed this new federal standard, Congress should first develop
an independent external grievance procedure for ERISA plans,
and then require the states to implement some type of
independent external grievance procedure within an explicit
time frame. Congress might also specify the characteristics of
that procedure (e.g. the reviewer(s) cannot have a financial
stake in the outcome; the process must be timely). The governor
of the state would then certify that the state met the
requirements of the federal principles. States that had already
adopted an acceptable independent external grievance procedure
would not have to take any action.
Such a Congressional statement of principle gives the
states the most flexibility and minimizes Congressional
micromanagement. Unlike the HIPAA model, states that have
already acted in the areas outlined by Congress would not have
to take any additional action. This is better for consumers
because a state could tailor its external grievance procedure
requirements to its specific marketplace and could take its
consumers into account.
In summary, legislation modeled on this state-federal
partnership would have three major features: (1) it would list
the general topics or problems that Congress wants the state to
address to protect consumers and ensure health care quality.
Congress might also specify the general characteristics of
acceptable state legislation, but it would not establish
detailed requirements or specific provisions that states must
adopt to address these topics. (2) Congress would set a date by
which states must act to address these issues; and (3) if a
state failed to act, the requirements set by the federal
government for ERISA plans would apply to state-licensed
insurers.
The federal principles--state specifics approach has other
strengths in addition to maximizing state flexibility. It would
allow Congress to address immediately the lack of protections
contained in ERISA for beneficiaries of ERISA plans. Another
strength is that this more general approach does not penalize
states that have already implemented an external grievance
process. Unlike the HIPAA model, federal principles--state
specifics legislation would be drafted to let these state laws
stand, even if the provisions were not identical to the federal
law's requirements for ERISA plans. Allowing states this
flexibility would not detract from the major goal of federal
quality legislation: the protection of consumers.
Resources: It is important to note, however, that any
standards the federal government creates for ERISA plans will
essentially be meaningless if Congress does not provide the
regulating body with adequate resources. To regulate the
business of insurance in 1996, state insurance departments
employed over 1,000 financial examiners and 360 market conduct
examiners. They initiated over 1100 financial examinations,
over 790 market conduct examinations, and approximately 660
combined examinations. In addition, state insurance departments
responded in 1996 to a combined total of more than 386,000
consumer complaints and more than 3.5 million consumer
inquiries. Clearly, regulating insurance carriers is a labor
intensive proposition.
VII. Conclusion:
States recognize the importance of providing managed care
enrollees with the ability to appeal an unfavorable
determination made by a health plan. All states have already
acted to require HMOs to establish a grievance procedure.
Seventeen states (compared to nine in 1997) have already
enacted an independent external grievance procedure
requirement.
Congress should not attempt to micromanage the managed care
marketplace and force diverse regions and localities into a
``one-size fits all'' approach. Rather, states should be given
the flexibility to continue the development of innovative
solutions to complex problems, including the development of
independent external grievance procedures for health plans.
In providing federal guidelines, Congress will ensure that
all consumers receive similar types of protections. In allowing
the states to determine what those specific solutions are,
Congress will ensure that innovative solutions to local
problems are not disregarded.
I appreciate the opportunity to testify today. The NAIC is
looking forward to working with Congress.
Mrs. Johnson of Connecticut. Thank you very much.
Mr. deMontmollin.
STATEMENT OF STEPHEN J. DEMONTMOLLIN, VICE PRESIDENT AND
GENERAL COUNSEL, AVMED HEALTH PLAN, GAINESVILLE, FLORIDA
Mr. deMontmollin. Madam Chair, and Members of the
Subcommittee----
Mrs. Johnson of Connecticut. Would you say your name for me
so I can understand it?
Mr. deMontmollin. OK. Madam Chair and Members of the
Subcommittee, I'm Steve deMontmollin.
Mrs. Johnson of Connecticut. ``deMontmollin,'' thank you.
Mr. deMontmollin. I'm vice president and general counsel of
AvMed Health Plan which is Florida's oldest and largest not-
for-profit health maintenance organization----
Mrs. Johnson of Connecticut. Excuse me, could you pull the
microphone closer to you?
Mr. deMontmollin. Yes, ma'am.
Mrs. Johnson of Connecticut. And talk right into it.
Mr. deMontmollin [continuing]. Serving some 375,000
members, including approximately 70,000 Medicare members
throughout the State. AvMed is an IPA model HMO and contracts
with close to 7,000 private physicians, and 126 hospitals, is
federally qualified and is accredited by the National Committee
for Quality Assurance and the Joint Commission on Accreditation
of Health Care Organizations. Both accreditation organizations
require written grievance and appeals procedures for addressing
member complaints.
I appreciate the opportunity to testify today. Managed care
isn't perfect, just better by far than unmanaged,
uncoordinated, unaccountable, unaffordable care. Managed care
is an approach to the delivery and financing of health care
which changes somewhat the relationship between the physician,
the patient, and the payer of health care services.
With the growth of managed care comes new issues with which
you, the States, the managed care industry, and my company must
deal. One of the most troublesome issues is the potential for a
managed care company to deny payment for medically necessary
services to subscribers despite the recommendation of the
treating physician.
My company recognizes that plans like ours that have the
ability to deny or reduce coverage for nonauthorized services
need a mechanism for members to seek review of claims that have
been denied or covered at a lower than expected level of
benefits. In fact, any plan that provides for the financing of
health care must have such a system to address the member's
concerns about payment decisions. My company is a member of the
American Association of Health Plans, and heartily endorses the
mandatory AAHP policy which states, ``Health plans should
explain, in a timely notice to the patient, the basis for a
coverage or treatment determination in which the patient
disagrees, accompanied by an easily understood description of
the patient's appeal rights and the timeframes for an appeal.
An expedited appeals process should be made available for
situations in which the normal timeframe could jeopardize a
patient's life or health. Appeals should be resolved as rapidly
as warranted by the patient's situation.''
The Florida legislature, as far back as 1972, enacted the
first HMO enabling act and declared its intent as follows:
``Faced with a continuation of mounting costs of health care,
coupled with the State's interest in high quality care, the
legislature has determined that there is a need to explore
alternative methods for the delivery of health care services
with a view toward achieving greater efficiency and economy in
providing these services.'' In that first enabling act, the
legislature mandated that health maintenance organizations
have, ``a grievance procedure that will facilitate the
resolution of subscriber grievances and that both includes
formal and informal steps available within the organization.''
Grievance and appeals procedures are required of health
plans by the States and by the Federal Government for federally
qualified HMOs and other health plans contracting with
Medicare, as well as contractors for Federal Employees Health
Benefits, and AvMed is proud to be a contractor for both the
Medicare Program and the Federal Employees' program.
Using my State as an example, Florida requires that each
health plan have a written grievance procedure available to its
subscribers for the purpose of addressing complaints and
grievances, an expedited grievance procedure and external
review by the State. In 1984, the legislature created an
external appeals process through the Florida statewide
subscriber assistance program. This external appeals process
was designed to provide assistance to subscribers, including
those whose grievances are not resolved to the satisfaction of
the subscriber in the internal grievance and appeal process at
the HMO.
I have described in some detail in my prepared remarks the
Florida internal grievance procedures, the expedited internal
grievance procedures, and the external grievance procedures,
and would be pleased to discuss those procedures further should
the Subcommittee Members so desire.
In closing, I would like to offer that any consideration of
an external review process should be guided by several
principles: Foremost, an external review process should not be
initiated unless, and until, a subscriber has exhausted the
internal appeals process, including the internal expedited
review process if applicable, established by the health plan.
Additionally, the scope of review for an external review
process should be limited and clearly defined.
More generally, an external review process should be fair
to all parties, administratively simple, nonadversarial,
objective and credible, accessible, cost-efficient, time-
limited, and subject to quality standards. Subscriber grievance
and appeals processes are evolving as health plans, consumer
groups, and regulators seek to find a suitable balance between
consumer protection and a high-quality, cost-efficient health
care delivery and financing system.
AvMed, and the other AAHP member plans, are committed to
upholding high standards of patient care, and we are likewise
prepared to be held accountable for our actions. And we believe
that all health care organizations and providers should
likewise be held accountable.
Thank you for the opportunity to testify today.
[The prepared statement follows:]
Statement of Stephen deMontmollin, Esq., Vice President and General
Counsel, AvMed Health Plan
Mr. Chairman and members of the Subcommittee, I am Steve
deMontmollin, Vice President and General Counsel of AvMed
Health Plan which is Florida's oldest and largest not-for-
profit health maintenance organization, serving some 375,000
members, including approximately 70,000 Medicare members,
throughout the state. AvMed contracts with close to 7,000
private physicians and 126 hospitals, is Federally qualified
and is accredited by the National Committee for Quality
Assurance and the Joint Commission on Accreditation of
Healthcare Organizations. AvMed is a member of the American
Association of Health Plans (AAHP) which represents 1,000 HMOs,
PPOs, and similar network plans. AAHP member companies are
dedicated to a philosophy of care that puts the patient first
by providing coordinated, comprehensive health care. Together,
AAHP members provide care for over 100 million Americans
nationwide.
Health plans provide a vehicle for systematic quality
improvement that is not available under the old-style fee-for-
service health care system. Health plans combine a number of
interrelated features that foster a comprehensive approach to
quality, including:
selection of a defined, fully-credentialed network
of providers who can work together on care and quality issues;
provision of comprehensive services across the
spectrum of inpatient and outpatient settings, allowing a full
range of quality improvement interventions; and
clinical and fiscal accountability for the health
care of a defined population--allowing population-based data
collection, analysis, intervention, and monitoring--and
ensuring accountability for performance.
These unique characteristics enable network-based plans to
deliver quality care, and to be accountable for the care
provided. The organizations and individuals who purchase health
care, including consumers, employers, and the federal and state
governments, demand this accountability. It is the
accountability that provides the mechanism for marketplace
competition based on quality.
I appreciate the opportunity to testify today about the
important role appeals, and grievances play today in ensuring
that consumers' needs and concerns are addressed in a timely
fashion by health plans. All health care delivery systems,
including provider-sponsored networks, offered to all
subscribers should be required to meet comparable standards
governing quality of care, access, grievance procedures and
solvency. Subscribers should have confidence that all options
meet standards of accountability that ensure that they will
have access to all benefits and rights regardless of the choice
of plan they select. My comments today will focus on the
following appeals and grievances issues:
Health Plan Initiatives
State Grievance Procedure Requirements
Health Plan Initiatives
AAHP-Putting Patients First
The American Association of Health Plans has issued a
policy on grievances and appeals which is now a requirement for
its member health plans. The Florida Association of Health
Maintenance Organizations has adopted the AAHP policy and
mandates it for FAHMO members as well. The Putting Patients
First initiative advocates a set of specific policies that
promote high quality care in a manner that meets the needs of
individual patients. AAHP members strongly believe that all
plan enrollees should have the information they need to
understand their rights and that timely procedures should be in
place to permit them to pursue their rights. Educating
beneficiaries about their rights is critical. It is not only
important that enrollees be given information about their
appeal rights at an appropriate time, but that information
needs to be clear and the processes for pursuing those rights
need to be readily accessible. However, notification
requirements also need to be implemented in a way that respects
the patient/physician relationship. A careful balance is
required not only to ensure that beneficiaries understand and
can exercise their rights at the time most beneficial to them,
but also to avoid interfering in physician-patient discussions
about care. While situations may occur in which there is
disagreement about treatment decisions, it is common for
physicians and their patients to discuss difficult clinical
issues and reach agreement about a course of treatment that
meets clinical objectives and responds to beneficiary concerns.
A successful appeals notification process should respect
successful interactions, while providing appropriate
notification of rights when disagreement occurs. The policy
issued by AAHP and endorsed by FAHMO states:
``Health plans should explain, in a timely notice
to the patient, the basis for a coverage or treatment
determination in which the patient disagrees, accompanied by an
easily understood description of the patient's appeals rights
and the time frames for an appeal. An expedited appeals process
should be made available for situations in which the normal
time frame could jeopardize a patient's life or health. Appeals
should be resolved as rapidly as warranted by the patient's
situation.''
To promote implementation of this policy as expeditiously
as possible, AAHP member plans are being encouraged to review
their internal policies and practices to ensure adherence.
State Grievance Procedure Requirements
Internal Grievance Procedures
Grievance and appeals procedures are required of health
plans by the states, and by the federal government for
federally qualified HMOs and other health plans contracting
with Medicare as well as contractors for federal employees'
health benefits. Using my state as an example, Florida requires
that each health plan have a written grievance procedure
available to its subscribers for the purpose of addressing
complaints and grievances, an expedited grievance procedure,
and external review by the state through the Statewide
Subscriber and Provider Assistance Panel which will be
described more fully below.
Definitions
Florida law distinguishes between a ``complaint'' which is
``any expression of dissatisfaction by a subscriber, including
dissatisfaction with the administration, claims practices, or
provision of services, which relates to the quality of care
provided by a provider pursuant to the organization's contract
and which is submitted to the organization or to a state
agency,'' and a ``grievance.'' A complaint is part of the
informal steps of a grievance procedure and is not part of the
formal steps of a grievance procedure unless it is a
``grievance.'' A ``grievance'' ``means a written complaint
submitted by or on behalf of a subscriber to an organization or
a state agency regarding the:
(a) Availability, coverage for the delivery, or
quality of health care services, including a complaint
regarding an adverse determination made pursuant to utilization
review;
(b) Claims payment, handling, or reimbursement for
health care services; or
(c) Matters pertaining to the contractual
relationship submitted by or on behalf of a subscriber eligible
for a grievance and appeals procedure provided by an
organization pursuant to contract with the Federal Government
under Title XVIII of the Social Security Act.
An ``adverse determination'' means a coverage determination
by a plan that an admission, availability of care, continued
stay, or other health care service has been reviewed and, based
upon the information provided, does not meet the plan's
requirements for medical necessity, appropriateness, health
care setting, level of care or effectiveness, and coverage for
the requested service is therefore denied, reduced, or
terminated. An ``urgent grievance'' means an adverse
determination when the standard time frame of the grievance
procedure would seriously jeopardize the life or health of a
subscriber or would jeopardize the subscriber's ability to
regain maximum function.
Every health plan is required by Florida law to have a
grievance procedure. Plans, as part of their procedure, must
inform subscribers that they have one year from the date of the
occurrence to initiate the grievance and that the member can
appeal to the Statewide Subscriber and Provider Assistance
Panel after the final disposition of the grievance through the
plan's grievance process. Health plans must report annually to
the Agency for Health Care Administration all grievances and
their final dispositions. Plans must respond to an initial
complaint within a reasonable time. The organization must also
inform the member that the member can submit a written
grievance at any time. The plan in addition must inform the
member that the plan will assist the member in preparing the
written grievance.
The grievance procedure must at a minimum contain the
following:
1. An explanation of how to pursue redress of a
grievance.
2. The names of appropriate employees or
departments that are responsible for implementing the grievance
procedure.
3. A list of the addresses and toll free numbers
of the grievance department, the Agency for Health Care
Administration and the Statewide Subscriber and Provider
Assistance Panel.
4. The description of the process through which a
subscriber may contact the toll free hot line of the Agency for
Health Care Administration.
5. An expedited review process.. Notice that the
member can use binding arbitration, if provided in the
contract, instead of the Statewide Subscriber and Provider
Assistance Panel.
6. A procedure giving access to the grievance
procedure to members who cannot submit a written grievance.
With respect to a grievance regarding an adverse
determination, a plan must make available to the subscriber a
review of the grievance by an internal review panel; such
review must be requested within 30 days after the plan's
transmittal of the final determination notice of the adverse
determination. A majority of the panel must be persons who
previously were not involved in the initial adverse
determination. A plan must establish written procedures for a
review of an adverse determination and the procedures must be
available to the subscriber. In any case when the review
process does not resolve a difference of opinion between the
organization and the subscriber, the subscriber may submit a
written grievance to the Statewide Provider and Subscriber
Assistance Panel.
Expedited Internal Grievance Procedure
A health plan in Florida must have a written procedure for
an expedited appeal of an urgent grievance. In an expedited
review, all necessary information, including the plan's
decision must be transmitted between the plan and the
subscriber by telephone, facsimile, or the most expeditious
method available. In an expedited review, an organization shall
make a decision and notify the subscriber as expeditiously as
the subscriber's medical condition requires, but in no event
more than 72 hours after receipt of the request for review. In
any case when the expedited review process does not resolve a
difference of opinion between the organization and the
subscriber, the subscriber may submit a written grievance to
the Statewide Provider and Subscriber Assistance program.
External Grievance Procedures
Statewide Provider and Subscriber Assistance Program (SPSAP)
Some states have legislated processes for external or independent
review of adverse decisions made by health plans. For example, last
year three states (Arizona, Connecticut, and Texas) have enacted laws
with external review provisions, and two states (New Jersey and New
Mexico) have issued regulations with such provisions. These states join
California, Florida and Rhode Island, all of which had some form of
independent review of disputes prior to 1997.
In Florida, the external review is accomplished by the Statewide
Provider and Subscriber Assistance panel. This six-member panel was
established by the Florida Legislature to provide assistance to
subscribers by hearing the grievances they have against health
maintenance organizations which have not been resolved to the
subscriber's satisfaction. The panel recommends to the Agency for
Health Care Administration any actions the Agency or the Department of
Insurance should take concerning both individual cases as well as the
types of grievances. This program has three components: 1)
responsibility to provide assistance with unresolved grievances to both
subscribers and providers of HMOs; 2) review of quarterly unresolved
grievance reports submitted by HMOs; and 3) the imposition of fines,
after investigation, for failure to comply with quality of care
standards.
How It Works
HMOs and the agency notify subscribers of their right to
appeal to panel at completion of plans' internal grievance processes
Subscriber voluntarily completes and returns SPSAP form
and medical release to the Agency for Health Care Administration
Agency notifies HMO of subscriber's appeal and requests
data
Case review initiated by Agency staff and case is
discussed with panel members to determine if case meets criteria for
hearing
Hearings are generally open to the public but may be
closed in whole or in part upon request of a party for confidentiality
of medical record or other legitimate privacy purpose
Case heard (not subject to the Administrative Procedures
Act); panel prepares recommendations to Agency or Department of
Insurance
Agency or Department issues final determination based on
panel recommendations.
The Statewide Subscriber and Provider Assistance Panel is chaired
by the Florida Consumer Advocate and is composed of employees of the
Florida Agency for Health Care Administration and the Florida
Department of Insurance. The panel also contracts with a medical
director of a health maintenance organization and a primary care
physician. The panel reviews cases submitted to it by members who are
not satisfied with the results of their HMO's grievance procedure. The
panel then makes recommendations to the agency and the department on
actions that the agency or department should take in a particular case.
External review is also utilized by HCFA and the Office of
Personnel Management (OPM). HCFA requires HMOs to submit adverse or
unresolved grievances to independent reviewers such as the Center for
Health Dispute Resolution that are contracted with HCFA. The contracted
reviewer makes the final decision in those grievances.
Similarly, OPM utilizes external review in its administration of
the Federal Employee Health Benefit Plan (FEHBP). OPM contracts with
HMOs to provide federal employees health coverage. As part of the
contract, HMOs must have a grievance procedure. Federal employees who
have a complaint about an HMO must use the HMO's full grievance
procedure. However, if the federal employee is dissatisfied with the
HMO's determination, the employee can appeal the HMO's decision to OPM.
In my view, any consideration of an external review process should
be guided by several principles. Foremost, an external review process
should not be initiated unless, and until, an enrollee has exhausted
the internal appeals process, including the internal expedited review
process, if applicable, established by the health plan. Additionally,
the scope of review for an external review process should be limited
and clearly defined. More generally, an external review process should
be fair to all parties, administratively simple, non-adversarial,
objective and credible, accessible, cost efficient, time limited, and
subject to quality standards. Grievance and appeals processes are in a
state of evolution with changes being initiated by health plans, the
states and, as more fully appears below, the Health Care Financing
Administration. The common purpose is to adequately protect the
consumer while contributing to a quality health care delivery system.
Subscriber grievance and appeals processes are evolving as health
plans, consumer groups and regulators seek to find a suitable balance
between consumer protection and a high quality, cost efficient health
care delivery system. AvMed and the other AAHP member plans have
demonstrated that they are listening and responding to consumers'
needs. We are committed to upholding high standards of patient care.
AvMed and the other AAHP member plans are prepared to be held
accountable for our actions, and we believe that all health care
organizations and providers should likewise be held accountable.
AvMed Health Plan welcomes the Subcommittee's interest in these
issues, and I thank you for the opportunity to testify today.
Mrs. Johnson of Connecticut. Thank you very much.
Mr. MacDonald, under what circumstances does GTE decide to
use an external appeals process? How useful has external
appeals, has the external appeals process been in resolving
coverage disputes, and has your company ever done an analysis
of the costs to provide external appeals?
Mr. MacDonald. We typically use external appeals processes
after all internal processes have been used, and they tend to
focus on that type of coverage that would be viewed as
experimental, in particular, is one that we tend to focus a
great deal on or medically complex. I would tell you that they
have been few and far between, but I think the distinguishing
characteristic is that we allow ourselves to go out and find
nationally recognized experts that we are not limited by, for
instance, the particular State or the locality of where the
occurrence may have taken place. It gives us the ability to go
back out and look for competent physicians to do that. To be
very candid with you, I don't know of any study that would talk
about costs. I can assure you that anything like that has a
cost to it, but I don't have the specific numbers.
Mrs. Johnson of Connecticut. So most of these disputes are
about the use of experimental treatments and appropriate care
in complex cases. When, in going through this process, does the
patient have to agree to the external experts that you're going
to use, or is there any communication about that?
Mr. MacDonald. There's a great deal. To answer your
question, does the patient have to agree to the external
expert, no, because, in essence, and I think it's an important
point that we are the ones that are offering these plans
voluntarily. And so there isn't an issue about whether there's
an agreement or not. These are not mandated plans. These are
plans that we use on the basis of a competitive business
posture. So on that basis, we do have the right for that
determination.
Second, I think that what we have found is that we have
very strong communication. We have our own internal standards
by which we will respond. We have direct dialog on case
management with these people, so there's a lot of back and
forth in that regard. I think communication is absolutely
critical. When it's all said and done, if people understand why
they were right or why they were wrong, that's what they're
really asking for.
Mrs. Johnson of Connecticut. And as to the issue of
timeliness, do you have any idea what the timeframes are in
which appeals within your plan are determined?
Mr. MacDonald. We have an internal standard that is less
than what ERISA is calling for. We typically try to resolve our
appeals in less than 60 days. I'd also like to tell you that on
a percentage basis, it's less than one-tenth of 1 percent, and
I think part of the reason is that we do a very good job of
communicating information up front during the enrollment
process, and we provide a lot of quality information.
So what we have within GTE is an educated consumer, and
they are going to the good plans. They are not going to the
plans, for instance, that Congressman Stark talked about
because we eliminate those plans. We make them accountable for
their actions. We had 137 plans, for instance, about 5 years
ago, we've dropped about 12 to 14 of those plans because they
just don't meet government, quality standards. The Federal
Government might do well to be very selective in how they focus
on quality.
Mrs. Johnson of Connecticut. On the other hand, is there
any way you can get back to us with more detailed information
in less than 60 days?
Mr. MacDonald. Sure, I can do that.
Mrs. Johnson of Connecticut. Because in particularly
differentiating kinds of care, if you're dealing only with
very, for the most part on that, well, that 60 days dealt with
all your appeals, correct?
Mr. MacDonald. That's correct.
Mrs. Johnson of Connecticut. If you could get back to us
with more detail on what kinds of appeals were dealt with and
what timeframe, that would be very helpful.
[The information was not available at the time of
printing.]
Mrs. Johnson of Connecticut. And that goes to my last
question, which is really to the whole panel: Clearly, all of
you think that the external appeals process has a place in our
system and is useful, but all of you have cautioned against our
mandating a prescriptive solution.
First of all, I'd like you to enlarge a little bit about
what you think we should be saying and then how do we reach the
self-employed? Is opening ERISA the only option, or is
requiring a process set up by State regulators a way to get to
that, or if we require the Federal Employees Benefit Plan,
Medicare, and Medicaid to have a certain kind of process, would
that ultimately affect the kinds of processes that govern the
self-insured sector? Anyone who wants to start may.
Mr. MacDonald. Go ahead.
Mr. Ehnes. Sure.
Mrs. Johnson of Connecticut. Mr. Ehnes.
Mr. Ehnes. In terms of how to, I guess, develop a broad-
base standard. I think we recognize that it's unlikely the
States are going to be empowered to regulate in some fashion
that ERISA market, that's why I was encouraging in my testimony
that you do take action in some format to develop standards for
that ERISA market as soon as possible, because I think, as this
chart would indicate, that if it turns out you're still
debating this a year from now and we're back with this chart
again, a lot more of that chart is going to be blue for States,
and if you haven't taken action in the ERISA market, I think
the unlevel playing field will just be exacerbated all the
more.
Mrs. Johnson of Connecticut. So you don't think action in
the regulated market will permeate the ERISA market?
Mr. Ehnes. Well, you know, I think if you have testimony
from GTE, and Xerox, or Eastman Kodak, and we compare those
standards, what they're doing to what you're proposing in your
bills, or what States are doing, probably. It looks like
there's going to be a lot of comparability. My sense is that in
those types of employers they infuse those kinds of standards
into their plans. But the reality is self-insured employers
goes down to an employer of 50 people, and I've worked with a
lot of businesses like that that are self-insured. And to think
that an employee would go to the human resource manager of a
50-person company and expect to get fair, unbiased, objective
treatment. I can't even get in that ballpark of that kind of
conception.
Mrs. Johnson of Connecticut. But from your experience, both
in working in that sector and as an insurance commissioner, at
the State level and then part of the national organization, if
we, if State commissioners establish this plan for appeal, and
make it cover all licenses insurers, or if we mandate a certain
kind of process for Federal health--for Federal employees,
would plans actually, an HMO that opens itself to all employers
and covers both self-insured, and nonself-insured, would they
really have a separate appeals process for me within that plan,
rather than anybody else in that plan?
Mr. Ehnes. I think it has a sentinel effect in that manner.
I would have to agree it has some effect, but I would not agree
that it provides the tightness in the system that I think you
are expecting, and I guess that's why we would still encourage,
if we're going to set standards on one side, you set standards
on both sides.
Mrs. Johnson of Connecticut. And you don't fear that, if we
get into opening up ERISA, we won't go too far?
Mr. Ehnes. Well, you've got a whole variety of bills in
Congress opening up ERISA, and I think----
Mrs. Johnson of Connecticut. Do you think any of them go
too far?
Mr. Ehnes. [continuing]. I think the most prominent issues,
like this issue, need to be opened up and addressed.
Mrs. Johnson of Connecticut. But that is not the entire
issue. You know, in legislating, if you open up a certain
situation, and particularly if you have on the table, a lot of
bills that go too far--and you may think that none of the bills
go too far. I happen to think that some of them will be very
destructive to the evolution of our health care system. So, you
know, recognizing that danger, are there--first of all, do you
think it's a danger? Do you think there are bills that go too
far, and do you think, in your experience of legislating, that
it is impossible for a legislature to overkill? And if that's a
real danger, what are our options? How could we reach the self-
employed? Excuse me, the self-insured market without opening up
ERISA?
Mr. Ehnes. Well, I don't have the solution without opening
up ERISA. I would agree with you entirely that there's a
propensity to overkill in some areas of health legislation, but
the political reality is, I have to be candid with you,
regardless of what you do in Congress, those statehouses will
continue, in the next 2 years, to work on this issue every day.
It will happen. I think the real question before you is do you
want the people that are in insured plans to feel they've got
those protections coming through statehouses, and those
employees that work in self-insured, maybe not the GTE, or the
Eastman Kodak, but the vast majority of the population.
In Colorado, it's a small-business State. It isn't a
Fortune 100 State. So the extent of my self-insured market is
50 percent of my population. They're coming under unequal
protection, and I don't know how you can avoid dealing with the
inequity of this issue because the State legislatures are
intent on addressing this.
And if I could add one other point that Congressman Stark
made, that I feel is very valid, is: regardless of the number
of appeals that make it to that external process, it does have
a strong tightening process on the internal processes of the
HMO, knowing that the external piece is out there. So it isn't
necessarily critical that it's 5, or 100, or 1,000 going to
that external piece, but that independence does create, I
think, a stronger integrity in the organization itself.
And I do happen to subscribe to the theory that health
plans want your business as customers. This article in the
Washington Post about not paying your care when you go in for
an emergency, obviously, it's a ridiculous situation and who's
going to enroll in this health plan thinking they're not going
to get their services paid? It has an enormous impact. But the
other piece I'd like to say is you can pass these laws, and the
fact is Maryland had a prudent person law on the books for
emergency care that was the law the commissioner used to
enforce, but unless--your real objective here is to gain
compliance; it isn't just to pass the law.
And I guess I'd like to just again come back to my message,
is there is a lot of value in having local communities, through
statehouses, debate these bills and work through the issues? I
have learned that you can gain a lot of compliance through that
mechanism. They, even though they may not agree with the bill
initially in the statehouse, they work through the process.
There is a lot of public attention to it in your local
community and you can get the companies on board. I do worry
about uniform Federal standards and whether it results in real
compliance, not just a law, but real compliance at the local
level.
Mr. deMontmollin. Can I follow up on that, Madam Chairman?
Mrs. Johnson of Connecticut. Yes.
Mr. deMontmollin. With respect to Florida, Florida has,
since 1985, had an external review process in place. It
involves three representatives from the Agency for Health Care
Administration, three from the Department of Insurance, and is
chaired by the consumer advocate of the State of Florida. They
contract with a primary care physician from a health plan and
they also have a provider there in the peer specialty area of
the issue that comes before the board.
There are 4.2 million Floridians in HMOs in Florida. For
the period, October 1993 to March 1997, the total number of
cases opened were 403; settled before a hearing, 100;
ineligible or out of jurisdiction, 118; heard by the panel, 52;
the average elapsed days was 197 and the average dispute amount
was $4,337.
I have accompanied a member of our board of directors, on a
2-hour trip down to Orlando, Florida from Gainesville, appeared
before the panel, which told the petitioner, the subscriber,
that orthopedic shoes simply were not a covered benefit under
the contract she had negotiated through her employer. We got
back in the car and drove back home. This year, the Governor of
Florida has recently signed a bill that passed overwhelmingly
and was sponsored by the Agency for Health Care Administration
that would narrow slightly the types of issues that are taken
to this appeals panel.
Now, there are obligations to notify members of their
rights at all stages--when we sign them up, every time there's
an open enrollment throughout the year, in the member contract,
and in our contracts with providers. Constant notification to
our members that they have a right, not only to appeal any
decision of the plan at the Statewide Subscriber and Provider
Assistance Panel, but they can also call a 1-800 number, a
hotline number directly in the State. So while I would
associate myself with Mr. MacDonald's remarks with respect to
ERISA, I would simply say that the States do need this
flexibility on external appeals--because, if politics is local,
then I can assure you that health care is likewise local.
Mr. MacDonald. Could I just respond quickly?
Mrs. Johnson of Connecticut. Yes.
Mr. MacDonald. I recognize the issue of time. You asked, do
things go too far, are there other ways to do it? I mean, I
think there's a real-life example happening right before us, is
that in November of this year, the presidential commission gave
a bill of rights, and then a company like GTE voluntarily stood
up and said, we're going to subscribe to those bill of rights.
I stand before--or sit before you today being able to represent
that we know for a fact that health plans, and/or employers, 60
million Americans are now covered voluntarily by that bill of
rights, that they've signed up voluntarily with efforts that
we've done to work with them.
In addition to that, President Clinton has asked the
Federal Government to subscribe to those bill of rights as
well. There's 150 million Americans that are already, on a
voluntary basis, working with the fruits of that effort. So I
think that you don't necessarily have to change laws to make
things happen. The marketplace can demand that.
Second, I would suggest to you why it sounds good for
external appeals. I mean if there is, there is an aura about
that. The reality of it is, are there recognized experts? Is
there a supply of talent out there that can ultimately provide
that service? I don't know if that exists today. We're having a
hard time finding them as one company. So you can legislate the
right, but if there is no ability to ultimately give that
right, what good is it? So I don't even know if the experts
exist. I think this is a cottage industry at best right now.
And then, last but not least, the issue of cost. This is a
very competitive workplace that we are in right now on a global
basis, and I don't care if it's one-tenth of 1 percent, or one
any, it's a cost. When it's all said and done, it's a cost, and
that's what drives business right now. How much does it cost?
Mrs. Johnson of Connecticut. Mr. Stark.
Mr. Stark. That's pretty sad, Mr. MacDonald. There are
other things, in business besides costs. I'd like to say that
people can know the cost of everything and the value of
nothing. But, that's a major change in the way employers tend
to think about employees from what we had in past decades.
We're making a lot of money in this country. Maybe that shows
that it's working. But, we still have 42 million, or 43 million
people without any health insurance.
Mr. MacDonald. So why are we having this hearing?
Mr. Stark. I don't know. We are the only country in any of
the countries in which you do business that does not have
universal health care. Countries that compete with us certainly
do. And my answer is, if we had it, you could afford it because
it would probably save you money in the long-run. But that's
where we ought to start.
Let me follow up. You're afraid of liability, you said. You
said it truly scares you. Does GTE operate any health plans as
such? Or do you have a company that runs the health plan? Could
you be a health plan legally?
Mr. MacDonald. No.
Mr. Stark. OK. Some of the managed care reform bills before
Congress that eliminate the ERISA protections, specifically
protect the employer. Would that assuage your fears? In other
words, if the health plan makes a medical decision my theory is
they ought to be liable for it. If you don't make any medical
decisions, and instead allow the health plan to make those
decision, I mean, you are specifically protected. Would that
raise your comfort level.
Mr. MacDonald. No.
Mr. Stark. OK.
Mr. MacDonald. Because the reality of it is that, while I
may not be liable in that instance, if there is liability
associated to the health plan, that's a cost that the health
plan is going to pass along somehow, some way to me, hidden or
direct.
Mr. Stark. All right. We have a variety of figures which
people don't quite yet agree on, but so far indications are
that the cost of the ERISA liability provision pretty minimal.
I mean, relative to a major liability suit, it's minimal.
Mr. MacDonald. I'm not sure what you said was minimal.
Mr. Stark. There are those who would suggest to you that
the cost of removing the ERISA exemption is not great if the
plans aren't scallywags. But that's a matter on which we don't
have much certain data yet.
Mr. MacDonald. I think this is very relevant to your
district. I think there is a significant cost associated with
that and the preemptive provisions of ERISA are very important.
Right now in order to do the cost of doing business in San
Francisco, and I want you to understand up front that we offer
domestic partner benefits in certain of our businesses because
it's a competitive necessity. But I'm also now being told by
certain cities of what my benefit coverage must be in order to
do work there, but not just in that city; I have to offer that
for all employees GTE-wide.
Mr. Stark. Time out. I'm just talking about the liability
issue; I'm not talking about the level of benefits which States
may, or may not, prescribe. Look, that's off the table for this
conversation. I'm suggesting to you that the costs of a managed
care plan that has ERISA exemption from liability and for a
managed care plan under State law is not high. Often they're
the same plans; it's just some members are exempted from
liability and other members aren't.
Mr. Ehnes, you estimate that 50 percent of Coloradans are
exempt.
Mr. Ehnes. Yes.
Mr. Stark. That is what it is in Maryland, we understand.
And I don't know what it is in California. You think you're
doing a good job, don't you?
Mr. Ehnes. I think we do a very good job.
Mr. Stark. Don't you think you protect the people of
Colorado?
Mr. Ehnes. Yes.
Mr. Stark. Don't you think you ought to protect all of
them?
Mr. Ehnes. Yes.
Mr. Stark. I do, too. And I think it's that simple. I think
Mr. Pomeroy was here in your seat not many years ago when he
was the commissioner of insurance in North Dakota. He said to
us, over the issue of Medigap, that if in a few years he
couldn't deliver a majority of the States with Medigap
controls, he would stipulate that the Federal Government ought
to do it. Well, you guys couldn't get together to do it. I
think only 14 States really had Medigap standards, and so we
passed a Federal Medigap law. I think that serves the people of
Colorado well, don't you?
Mr. Ehnes. Yes.
Mr. Stark. I'm willing to give you a shot, but I have to
remove the ERISA exemption to give you the chance to do your
job. Is that fair?
Mr. Ehnes. Right.
Mr. Stark. And if you don't do your job, meaning all of
your members, or let's say a majority of the insurance
commissioners pass strong consumer protection standards, would
you say that we ought to have minimum Federal standards? That
way, in the States that don't comply, people can't go across
the border and buy insurance in the neighboring State by mail
and harm the insurers who do the right thing in Colorado.
Mr. Ehnes. I think it's appropriate to say an issue of this
critical importance, that a drop-dead date, it can be
meaningful for States, but the problem, again, is by setting--
if we want to call that word, the HIPAA, Health Insurance
Portability and Accountability Act, approach of the floor
approach as setting some minimum standards, you do force
whatever it is, 17 States, or by the time you add 29 States to
recycle all the legislation back in their States to re-debate
it, when, in fact, you might have decided that it's 23 days and
a State said it was 14. That's Mickey Mouse, I have to say.
Mr. Stark. I agree if, as I suspect, all the States will
have good bills long before we do. But if we were to act first,
it would probably help the States because at least you'd set
some minimal standards and then they could argue about the
frosting on the cake. But my guess is that you're going to find
a majority of the States with good legislation, and all we're
going to have to do is take away that ERISA exemption of
responsibility, as I'd like to call it. Can you think of any
reason the managed care plans will tell us they need this
protection? I'd suggest that Mrs. Johnson has, but I don't
think she remembers that she said that. Plans should pay for
the service and then we'll argue about after providing the
service. The managed care plans say, ``Goodness, gracious, that
will hurt us,'' because I imagine that's the only way they save
any money. I don't know of any way that managed care plans can
reduce the cost of medical care except by denying it. There's
been precious little evidence to the contrary.
Do you require in Colorado that the care be provided and
they argue about the cost later, or is your law silent on that?
Mr. Ehnes. Well, on this grievance issue, specifically, if
you're sitting in the hospital and receiving treatment, and
your doctor is asking for additional services, or extended
stay, the plan's, the turnaround time actually is 1 day.
Mr. Stark. OK.
Mr. Ehnes. The plan needs to make a decision in 1 day. But
having said that, the plan----
Mr. Stark. Suppose they don't come back with the decision;
may the doctor then go ahead and provide the service and argue
about the cost later?
Mr. Ehnes. Yes, the plan must cover the hospital stay or
treatment until you've been notified of the denial. They're
accountable.
Mr. deMontmollin. Mr. Stark, since I'm the only member
representing a health plan, may I respond to that?
Mr. Stark. Sure.
Mr. deMontmollin. I disagree entirely that we believe that
the doctor should not act as a doctor on behalf of the patient.
The health plan is making a coverage decision about who's going
to pay. There are courts that recognize that utilization
review, or utilization----
Mr. Stark. Excuse me, go back; I'm not sure I understand.
You believe that, if the primary care physician requests a
procedure, the procedure should be done?
Mr. deMontmollin. Precisely. In one case----
Mr. Stark. OK, and then argue about the costs----
Mr. deMontmollin. Well, let me just make the point.
Mr. Stark. OK.
Mr. deMontmollin. The court held that, ``whether or not the
proposed treatment is approved, the physician retains the
right, and indeed the ethical and legal obligation, to provide
appropriate treatment to the patient.'' State attorneys general
have expressed similar opinions. The North Carolina attorney
general wrote that ``denial of third party payment may have a
direct impact upon a patient's decision of whether or not to
undergo the treatment. However, such denial does not prohibit
the patient from seeking treatment without third party
benefits. It does not prohibit the attending physician from
providing the treatment.''
Mr. Stark. Mr.----
Mr. deMontmollin. What I say to our medical directors is
simply this, ``You are the patient's advocate. You are to use,
for instance, the U.S. Department of Health and Human Service's
Agency for Health Care Policy and Research Practice Guidelines.
You are to use the ones that are promulgated by the Agency for
Health Care Administration in the State of Florida, and you are
to have a science-based, or evidence-based, collaboration with
the treating physician, which, hopefully, will lead to the more
fully informed consent on the part of the consumer. But you,
the plan medical director, are making coverage decisions. You
are to say to that doctor, `It is your patient. You have to do
what you think is right.'''
Mr. Stark. Let me just put this in laymen's terms that I
can understand. In your plan if I have a family practitioner,
or an internist, and they say to me, ``Have a sigmoidoscopy,
and----
Mrs. Johnson of Connecticut. Mr. Stark, if I could ask you
to move forward. We can come back to this----
Mr. Stark. I'm sorry.
Mrs. Johnson of Connecticut. Mr. McCrery has to leave.
Mr. Stark. I'm sorry, but I just want to make one point.
Your plan would say whatever the doctor says, I get, but if
there's a dispute later on between you, and the doctor and me
about whether I should have that, or whether you cover it, it's
only a fight over who's going to pay?
Mr. deMontmollin. We say it is a science-based
collaboration with the treating physician. Make sure that that
treating physician advises the member of what our practice
guideline is, what we believe is medically necessary. We advise
them of their appeal rights if they should disagree with our
denial of the payment of that, but what that doctor and that
patient decided to do vis-a-vis the treatment decision is one
that should rightly remain there.
Mr. Stark. And the treatment goes right ahead. And then we
argue--in effect, we argue only about the money. I think we're
saying the same thing.
Mr. deMontmollin. Absolutely.
Mr. Stark. I'm sorry, Madam Chairman, but I think this is
an area you're interested in, too. I'm not sure that every plan
operates that way, but I'm certainly pleased that your's does.
Thank you.
Mrs. Johnson of Connecticut. Mr. McCrery.
Mr. McCrery. Mr. Ehnes, do you have any jurisdiction over
any ERISA plans?
Mr. Ehnes. We have no jurisdiction over the self-insured
market, right, to be----
Mr. McCrery. Oh, self-insured?
Mr. Ehnes. Right, but, I mean, to the extent----
Mr. McCrery. But on fully insured ERISA plans, you do have
jurisdiction, don't you?
Mr. Ehnes. To the extent----
Mr. McCrery. So it's not 120 million people that are exempt
from State regulation, is it? As has been said here by somebody
at one point, it's more like 32 to 48 million people?
Mr. Ehnes. Well, it's about half my State that is self-
insured and not subject to State regulation. I guess I want
to--I mean I was sensitive to that comment. To the extent that
employers are using more insured managed care plans, the more
they would come under State regulation--and there is some
indication that is occurring, that there's a shift back toward
insured markets for some employers. So that it is a proper
comment, to the extent those States adopt grievance mechanisms
and more employers use insured plans, then they will come under
that regulation.
Mr. McCrery. I just wanted to make sure everybody
understood that ERISA doesn't mean, ``exempt.'' Only self-
insured ERISA plans are exempt from State regulation, and that
number, the number of people in self-insured ERISA plans, is
somewhere between 32 and 48 million, not 120 million people in
the country.
Mr. MacDonald, you were doing just fine until your last
statement--[Laughter.]--when you said basically, ``Cost is
everything.'' You didn't mean that. I know you didn't mean that
because earlier you said that you're in a competitive business
and you offer health insurance and you want to make sure it's
good health insurance because you are in a very competitive
business. So I'm going to give you a chance to rehabilitate
yourself. [Laughter.]
We all know that cost is important. And you're in business
and you're in business to make a profit. And although my good
friend from California occasionally denigrates profitmaking, it
is basically what has made this country tick for a long, long
time, and tick pretty well. So I happen to like people who make
profits and I think that has given us a society that has
generated the highest standard of living for the greatest
number of people in our society. Having said that though, we do
care about our employees don't we? I mean, a happy employee is
a good employee, right?
Mr. MacDonald. I'm getting the message. [Laughter.]
You know, it's interesting that you said that, Congressman,
and I thank you for the opportunity to clarify my intention. My
father always used to tell me that, ``You know, Randy, you'll
be a very successful man someday when you learn to keep your
mouth shut.'' [Laughter.]
So I probably have not heeded that warning over the years.
I have to tell you that, and I think that the prime example of
that is, if cost was everything than why would we be even
offering health care? The bottom line is that we are looking to
differentiate ourselves in the marketplace through our people.
And the ability to have those people be a satisfied employee
represents ultimately a satisfied customer.
And I would ensure--I can assure you that while we
constantly manage our costs, we're always focused on the issue
of quality, whether it be in the workplace or with our
customer. So you're absolutely right. I will also be very
truthful in saying to you that cost is a consideration as it
relates to our shareholders so that's what I was attempting to
say, and I will try to remember my father's words. [Laughter.]
Mr. McCrery. Absolutely.
Mr. deMontmollin. Mr. McCrery, I think that it's likewise
clear that cost follows quality, that if you improve the
quality sufficiently, as GTE has done through their RFPs to our
industry, then clearly the costs are going to come down. The
question is whether it's best through a voluntary market system
as NCQA, with the National Committee for Quality Assurance, or
is it better to come from this body?
Mr. McCrery. I think I've already answered that question
from my viewpoint, but I'll give Mr. MacDonald another chance
to buttress my belief. Mr. deMontmollin mentioned RFP, that's a
Request for Proposal, I presume?
Mr. MacDonald. That's what you intend, yes.
Mr. McCrery. Does GTE actually go through that process of
developing an RFP for health plans seeking their business,
seeking your business?
Mr. MacDonald. Yes, in fact, if you remember in my
testimony----
Mr. McCrery. That's a lot of trouble, isn't it, to actually
put all that down on paper, and prescribe exactly what you want
for your employees, why do you do that?
Mr. MacDonald. Our belief is that by establishing quality
standards to my colleague's point that we can ultimately
increase our satisfaction with our employees, with their
dependents, and to Congresswoman Johnson's point is that we're
also affecting the local market as well, because by
establishing those standards, for instance, in Tampa, Florida,
as an example, where we have a large concentration of
employees, establishing those standards in that marketplace are
having an effect for all people who are participating in that
plan. We drive quality through the process. If you don't meet
our quality standards, you are not a vendor to GTE.
Mr. McCrery. That's an important point. When you contract
with a health plan for your employees in a given location, that
health plan serves people other than just your employees,
doesn't it generally?
Mr. MacDonald. Yes, sir, yes, sir, very much so.
Mr. McCrery. So the quality standards that you put in your
RFP and that you look for when you're contracting with health
plans has an effect on that local market, doesn't it, outside
GTE? It certainly affects other people who contract with that
health plan?
Mr. MacDonald. That's unequivocal.
Mr. McCrery. Thank you.
Mrs. Johnson of Connecticut. Just to follow up on that
then, it's not your experience because this is an issue--the
question I was asking Mr. Ehnes earlier, in your experience,
then, when you contract with plans that are already in the
Florida market, and make sure they meet your standards, you see
them offering that plan to everybody then with your standards
and not singling out your people for different treatment?
Mr. MacDonald. Yes, I mean, I think that that is probably
one of the most significant by-products of working with plans
like that is because we are establishing quality and the fact
that you drive quality, you drive the cost considerations, you
drive greater patient satisfaction. Why would somebody use a
process just for a GTE employee and not for another patient
from another company, if, indeed, you're going to be able to
manage the process in a way. That's the word--that's what
health care is all about right now is managing health care. And
you're going to apply the best principles to those situations.
Mrs. Johnson of Connecticut. So as you contract with plans
and improve their standards then all participants in their
plan, whether they're from your company or other companies,
benefit?
Mr. MacDonald. Either directly or indirectly, yes.
Mrs. Johnson of Connecticut. That's very logical.
Mr. Ehnes, do you wish to comment?
Mr. Ehnes. I would, actually; thank you. Back to, actually,
his earlier comments again on cost though, the way insurance
works is, to the extent that someone can strip costs off a
health plan and an employer still wants to offer health care,
can make decisions around parts of that plan, they certainly
will do that, not necessarily in the Fortune 500 market, but in
the small and middle market where everything, any additional
costs could make, could drive whether they're going to continue
to offer insurance. So although there is some market effect, I
have to say, where the good employers, or particularly, the
large employers, tend to set quality standards in a community,
I think it does have beneficial culture to the community. There
is always a countervailing force in insurance where businesses
are working the other direction.
Mrs. Johnson of Connecticut. I appreciate that, but in this
particular instance, if a big actor in the market requires you
to set up an external appeals process, so you develop the
mechanism and the context--the contacts, then it's far easier
for the small employer participants to also be covered by that.
And it gives you, in a sense, a market advantage in marketing
yourself to those small employers without putting on the small
employer the whole cost of setting up the external appeal
process. I do think, as in--that in this issue, as well as in
every other issue, we have to be very sensitive to the cost of
insurance in the small employer market because that's where
we're seeing the reduction in coverage for cost reasons. But I
think the, I think what Mr. MacDonald is saying is that once he
gets a plan to do this, then they've done it for him because
it's an economic benefit for them, but they have it there for
everyone else and it would be much easier then for small
employers to participate in it is the way I read it.
Mr. MacDonald. I think you might be surprised to learn that
in some instances we actually subsidize higher cost plans
because they meet our quality standards and therefore we cut
our subsidy to those plans who may be substandard to that
quality standard. So the issue of cost and quality are in the
decisionmaking process all the time and that's what ultimately
would drive the byproduct to the local community.
Mrs. Johnson of Connecticut. In other words, in some
instances the improvement in quality that you get from the
external review process makes it worth paying more for the
plan?
Mr. MacDonald. Yes, because we think ultimately----
Mrs. Johnson of Connecticut. I'm seeing that too.
Mr. MacDonald [continuing]. They're managing the health
care in a way that is most cost-effective and in the highest
quality manner.
Mrs. Johnson of Connecticut. Interesting.
Mr. deMontmollin. Mrs. Johnson, this is happening all over
the country. Martin Marietta joined with Walt Disney in the
Orlando area; went not only to the health plans and said,
``Here are our standards,'' but also to the providers. For
instance, the Orlando Regional Medical Center. It's important
to understand that HEDIS, Health Plan Employer Data and
Information Set, came out of the private sector, that the
National Committee on Quality Assurance and their standards
came out of the private sector. And it seems to me that the
major employers have made a significant contribution, a
tremendous contribution, in this area, and this is another
reason why I associated myself with Mr. MacDonald's remarks on
the ERISA preemption.
Mrs. Johnson of Connecticut. I think that is a very wise
note on which to include the testimony of this panel, that
HEDIS did come out of the private sector and most of our
quality oversight mechanisms have come out of the private
sector at the--with the stimulus of participation of the big
providers.
Thank you very much for your testimony. Have a great time
tonight, Mr. MacDonald.
Mr. MacDonald. Thank you, appreciate it.
Mrs. Johnson of Connecticut. And now for our final panel:
David Richardson, president, Center for Health Dispute
Resolution; Peter Goldschmidt, president of the Medicare Care
Management Corp.; James Parkel, member of the board of
directors, the American Association of Retired Persons; and
Vicki Gottlich, staff attorney, National Senior Citizens Law
Center. Welcome.
Mr. Richardson.
STATEMENT OF DAVID A. RICHARDSON, JR., PRESIDENT, CENTER FOR
HEALTH DISPUTE RESOLUTION, PITTSFORD, NEW YORK
Mr. Richardson. Yes, thank you. The Center for Health
Dispute Resolution is a corporation based outside Rochester,
New York, and I'm president of the Center. We work exclusively
in the area under review by this Subcommittee, namely, managed
care appeals. We've been the Medicare sole national appeal
agent for managed care for 9 years. We conduct reviews under
three different State independently regulated programs, and we
provide reviews for some ERISA employer plans and HMOs on a
voluntary basis. We've conducted over 40,000 reviews over the
last 9 years, and these reviews come from every State, and
hundreds of health plans and all the variety of configurations,
IPA, group network, and what have you.
I'm also glad to see next to me, Dr. Goldschmidt, because
between the two of us, we represent about 98 percent of the
external review market. And I'd like to point out that, while
we are a small industry, I think, based on our experience, we
are more than what I would typically deem a ``cottage
industry.''
I want to make just a few highlights today from the written
testimony. One, I want to talk about why appeals are necessary.
Second, I want to talk about why the Medicare model, with some
improvements, I think is the best available. And, third, I'll
leave you with some recommendations.
Let's start with why appeals are necessary. In the language
of the announcement for this testimony, the first reason I
think appeals are necessary is because they're due process
protection that give consumers confidence. And whether, or not,
the plans are at fault, and whether, or not, the plans have
made mistakes of various types, it is a reality that consumer
confidence is eroded and needs to be restored in the health
system. I can tell you that we get cases from people who
apparently had a good situation in the HMO but once the denial
was made, they draw upon all the rhetoric and all the bad
feelings about the HMO bubbles to the surface. So confidence is
an issue.
However, it is true, and I do agree with the speaker from
GTE and the industry, that there are very many protections and
quality systems that have been built, such as NCQA, HEDIS,
FAQS, and so forth. The difficulty with these systems is they
are designed to raise the performance of the plans, generally,
and they deal with raising measures for general population. We
don't yet know how to guarantee the best possible health care
for a given individual in a given circumstance. Managed care
plans are incredibly complicated organizations that have to
make millions of business decisions and clinical decisions on
an annual basis. It's true that 95 percent of the people are
well satisfied, but plans are going to make mistakes simply
because of the complexity. So we should understand that the
real purpose of appeals is to provide a remedy when people,
when plans do make mistakes.
Second, we find through our external review experience, and
I think this is comparable for all of us that do reviews, in
whatever setting, that even after an internal plan review, we
will find that the plan has violated its own rules, or has not
provided medically necessary service in about 25 to 30 percent
of the cases that come to us. So I would like to suggest that
the key to resolving the debate about appeals is for advocates
and spokespersons to recognize that appeals programs serve both
interests.
Now why is the Medicare model the best model? I'll point to
four issues. I want to emphasize a couple. One reason that the
Medicare model is superior is because of its definition of
disputes that are eligible. Medicare says that if you are
aggrieved by a denial, you have a right to appeal. It's as
simple as that. Medicare does not say that that denial has to
be of a certain type or that it has to be given a label.
Conversely, if we look at the programs that are promulgated
in the States, if we look at the NAIC model, if we look even at
the President's Commission's recommendations, we find that
conditions are put on appeals. The most common one is to limit
the appeal for those denials that are ``related to medical
necessity.'' But in California we have otherwise good
legislation that limits appeals to terminally ill patients.
What we have found in Medicare, remember we have 10 years
experience in an open system, and 40,000 cases, is that 60
percent of denials are not related to medical necessity.
Plans use a variety of reasons, often valid, for denying
claims, such as, eligibility, failure of the enrollee or
provider to abide by the rules. For example, ``you were
supposed to call the 800 number but you didn't,'' exhaustion of
benefit limits, contract interpretation. In fact, most plans go
through a decisionmaking hierarchy in which they apply these
rules before they get to medical necessity.
So why is it problematic to limit appeals to medical
necessity? One, because 60 percent of the cases are never going
to get to external review. Second, I know that this
Subcommittee, and people who are astute in health care, tend to
focus on HMOs in the context of providing quality health care,
or attempting to provide quality health care. But outside of
the beltway, enrollees believe they have bought a financial
product. It is still insurance and when that claim is denied,
these enrollees are mad as hell and they really don't care why
it was denied. So if your objective is to build confidence in
the system, then all sides are better served by an appeal
program that does not involve rules which enrollees are going
to regard as gimmicks.
Mrs. Johnson of Connecticut. Mr. Richardson, if you could
move a little more rapidly----
Mr. Richardson. I'm sorry.
Mrs. Johnson of Connecticut. [continuing]. There are some
hearings starting and so we get to them.
Mr. Richardson. I'll move right ahead.
The second reason that I support the Medicare model is
because it's linked to coverage policy. And what I mean by that
is that our decisions are based upon coverage rules, and when
we learn that the coverage rules aren't working, there's
feedback. A prominent example is, for example, that we were one
of the first people to produce evidence on the problem of
emergency denials not being related to a ``prudent person''
definition.
Finally, the Medicare appeal system is widely publicized,
as was talked about, and provides automatic external review.
I'll jump ahead to the recommendations. There are a few
things that you might consider doing to help on the Medicare
side. First, Medicare nonplan providers currently have no
obligation to cooperate in the appeal process. This is causing
us and plans problems. Specifically, neither us, nor the plans,
can get medical records to do external review in an expeditious
basis from nonplan providers.
Second, nonplan providers are putting Medicare
beneficiaries in collection while the appeal process unfolds.
And third, we don't have the ability to find the nonplan
provider liable. We either have to give the bill, if you will,
to the beneficiary or the HMO, and in some cases it's the
provider who should be liable.
Second, I'd ask you to consider indemnifying those of us
that do this work. It's very difficult to get insurance and
there's a very imperfect market.
As far as my final recommendation, I do believe that
Federal standards are required and I would offer the Medicare
model, as I've explained in my testimony as the basis.
Thank you.
[The prepared statement follows and an attachment is being
retained in the Committee files.]
Statement of David A. Richardson, Jr., President, The Center for Health
Dispute Resolution
The Center for Health Dispute Resolution (``CHDR'') is a
corporation based near Rochester, N.Y. and I am President and
founder of the Center. We work exclusively in the area under
review by the Sub-Committee today--health insurance appeals. We
have been Medicare's sole national appeal agent for managed
care for 9 years, we conduct review pursuant to three State
independent appeal programs and we provide external review to
ERISA employer plans and HMOs on a voluntary basis. We have
conducted over 40,000 external reviews, drawn from every State
and hundreds of varied health plans.
When we began this work ten years ago, managed care
``appeals'' was hardly a noteworthy topic. Since then, there
has been an explosion of interest. Some 15 States have enacted
external review legislation. The President's Commission has
reported on this topic and numerous bills have been introduced
to this Congress.
As a leading provider of managed care appeals, I am glad
this topic is receiving attention. Properly structured and
implemented, appeals systems are powerful and effective tools.
As Chairman Thomas said in his announcement, appeals systems
provide due-process which, in turn, maintains consumer
confidence in the managed care strategy. I sincerely appreciate
this recognition of the importance of our work, and look
forward to any support that the legislative process can
provide.
But I am also concerned. From my view in up state New York,
the debate about appeals seems unnecessarily emotional and
divisive. Proponents of appeal regulation cite sensational
cases involving terminally ill patients and portray managed
care decision-makers as profiteers. Conversely, some segments
of business and industry respond with public relations
campaigns that flatly characterize regulation as an invention
of Frankenstein. I am saddened and distressed by unfair and
extreme rhetoric on both sides of this issue. We need to find a
way to displace anger and distrust in our health system with
communication, compassion and confidence.
Appeal systems are a key ingredient in the managed care
model. It is true that the regulators, accreditors, payers, and
HMOs have developed an array of methods for measuring and
promoting quality of care. Consequently, well over 90% of
enrollees in managed care are very satisfied. However, managed
care involves an incredibly complex set of provider
relationships, rules, computer systems and, of course, the
intrinsic complexity of individual health and health care.
Consequently, all of our management and quality tools are
imperfect. These protections can and will fail for a given
enrollee in a given instance. Not because most HMOs and their
physicians are amoral, greedy or uncaring, but simply because
no organization as complex as an HMO can execute perfectly.
The appeal system is, therefore, the option of last resort
for persons who fall through the cracks of our imperfect
managed care policies and plans. It is the final, and vital,
remedy for the person who believes the system has failed him/
her. Equally, it is the ultimate source of feedback to the
prudent policy maker or HMO administrator who realizes
complaints are a most fruitful source for program improvement.
The key to resolving the contentious debate about appeals
is thus for consumer advocates and industry spokespersons to
recognize that appeals programs serve both of their interests
equally. If advocates will permit HMOs to make the honest
mistake, and HMOs will admit mistakes cannot be fully avoided,
both parties will support the strongest appeal programs
imaginable. The question will not be how much appeal programs
cost, but rather how much can be invested in this important
tool.
Looking across the country and HMO industry, there are few
examples of appeal systems that are based on this philosophy,
or are robust and implemented with any vigor. One exception is
the Medicare managed care model. Today, I want to report on its
performance, and propose it as a model for other populations as
well.
In recommending the Medicare appeal program as a national
model, I realize that Congress and the American public often
distrust federal government health regulation. But there are
exceptions to every rule. Some of us remember when Congress
took the initiative to regulate nursing homes and intermediate
care facilities for the mentally retarded. These are examples
of effective regulatory programs.
Likewise, the Medicare appeal program is cost effective
regulation that works. This is not only my personal view. For
instance, a recent American Bar Association roundtable of
industry experts concluded, ``the structure of a universal
grievance and appeal system should generally use the Medicare
model as a foundation.'' \1\ Congress itself recently codified
current Medicare HMO appeal practice within the bi-partisan
Balanced Budged Act. This Committee should give great weight to
Congress's recent endorsement and recognize that the Medicare
model is also applicable to other managed care populations.
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\1\ American Bar Association, Commission on Legal Problems of the
Elderly Report.
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The Medicare Managed Care Appeal Model
I want to discuss four positive features of the Medicare
Managed Care Model:
All denial disputes, not just ``medical
necessity'' denials, are eligible for review.
The Medicare appeals process is linked to coverage
policy.
Medicare appeal rights are widely publicized.
The Medicare model provides for automatic
independent review offered by a multidisciplinary team
including physicians.
I will also discuss areas for improvement, some of which
may depend upon action by Congress.
1. All Coverage Disputes Are Eligible for the Medicare Appeal System
The first distinguishing and positive attribute of the
Medicare appeal system is its straightforward, all-inclusive
definition of disputes subject to full appeal. A beneficiary
may appeal an HMO denial of virtually any type of claim for
reimbursement or request for service (prior authorization). The
Medicare approach is far more inclusive than NAIC, most State
programs and the recommendations of the President's Commission.
For example, a California program limits external appeals to
terminally-ill patients. Other State programs limit appeals
solely to denials on the basis of ``medical necessity.'' The
President's Commission further limits appeal rights to costly
cases.
Because the Medicare program does not limit appeals, by
type, we now have 9 years of national experience and data about
the volume and type of (external) appeals that arise in an open
system. This data dispels many of the myths and fears about
appeals. For example, the HMO industry is correct that most
enrollees are satisfied with HMO care and decisions. Only 1 to
2 persons, per 1,000 enrollees per year, seek to use the
external appeal process. Consumers are not appeal happy, and an
open program is not a great administrative or financial
burden.\2\
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\2\ Medicare's administrative cost for external appeals is under 4
cents per member month. The total value of service in dispute in l966
was estimated at 32 cents per member month.
---------------------------------------------------------------------------
Secondly, when appeals do arise, it is because HMOs deny
claims or service requests for a wide assortment of reasons--
not just because of ``medical necessity.'' Plans also issue
denials on the basis of questions about enrollee eligibility,
alleged failure of the enrollee or provider to abide by HMO
rules, exhaustion of benefit limits, or contract
interpretation. In fact, many Plans seem to prefer to site
these reasons, because they are more straightforward and less
contentious than ``medical necessity.'' Thus the majority of
Medicare appeal cases do not reflect medical necessity issues.
Over 60% of Medicare appeals arise from so called ``coverage''
issues.
The Committee may know that insurance industry and business
interests generally want to exclude these ``coverage''
questions from external review. Thus they want to exclude the
majority of denials from due process. Why is this wrong--not
only for the consumer, but also for the industry?
First, it is wrong because if the goal of an appeal system
is to retain consumer confidence in managed care, it is self-
defeating to construct barriers to appeal. Inside the Beltway
and the employee benefits office, health experts think managed
care is about quality and improved health status. But most
consumers still regard managed care as health insurance--a
financial product. If these consumers believe a claim is
incorrectly denied, and upheld in internal grievance systems,
they are mad as hell and want redress. The explanation that
external appeal is limited to ``medical necessity'' questions
is at best irrelevant and, at worst, regarded as a semantic
trick by the insurer.
Secondly, in attempting to limit rights to appeal, the
industry acts like it has something to hide, when it has
nothing to hide. In our objective/external appeal we uphold the
majority of HMO coverage denials, and nearly 90% in some
service categories. Where we do overturn HMO denials we see no
conspiracy. We see errors of execution by enormous
organizations that process thousands of decisions and
transactions daily. Some error rate is to be expected, and the
forward thinking Plan or employer group will welcome all means,
such as external review, that might provide feedback to detect
and fix mistakes.
Third, the tendency to limit appeal programs to ``medical
necessity'' denials oversimplifies the appeals process. The
problem is oversimplified by suggesting that medical science,
or ``the best'' health care is the sole criteria for resolving
disputes. This view leads to the conclusion that a viable
appeals program consists simply of individual case review by an
independent doctor.
It is obvious that physicians should make medical necessity
decisions in appeals. However, in making these decisions
clinicians need support and orientation regarding the (valid)
coverage policies that may constrain medical judgment. This is
a reflection of the truism that Medicare and other insurance
programs have limits and do not provide for all care possibly
beneficial to a given patient (i.e., ``the best'' care).
Here, legislators in particular face a real burden to be
explicit and courageous about the limits of appeal programs.
The easy thing to do is to promise the public an appeal system
that will guarantee ``the best'' health care on the basis of
unfettered review by independent physicians. The hard and right
think to do is to remind the public that managed care involves
limits and appeals programs operate within those (valid)
limits.
2. The Medicare Appeals Process is linked to Coverage Policy
The second desirable feature of the Medicare appeal system
is an intentional link between coverage policy and the appeal
process. This Committee has held hearings on Medicare (FFS)
coverage policy and is aware of HCFA's efforts in this area.
The appeal process uses these policies as decision criteria,
while also illuminating and informing the policy process. One
clear example is the role of Medicare managed care appeals in
review of HMO denials of emergency care. Examination of Plan
decision making, and even our own early internal decisions,
revealed a bias towards ``expert'' clinical judgment of the
severity of emergency encounters. Our data lead directly toward
development of the ``prudent lay person'' standard, now
codified in the Balance Budget Act and generally adopted by the
managed care industry.
The appeal/coverage link, occurring within the public
Medicare program, helps to militate against the abuse of
appeals as a source of hidden or silent rationing or policy
making. If the nature of our decisions (as opposed to
confidential identifying data) was hidden, HMOs or even HCFA
could simply relegate all difficult decisions to our review.
But our decisions, including rationales, are shared with the
enrollee, the Plan and HCFA. So our decisions can be, and are,
challenged and improved.
3. Medicare Appeal Rights are Widely Publicized
Although HCFA has been sued twice for failure to implement
the appeal process, Medicare and its HMOs have actually done a
fairly effective job of informing consumers about appeal
rights. HCFA requires Plans to describe appeal rights in
enrollment materials and the Agency reviews these descriptions.
Plans must also include a notice of appeal rights in each claim
or coverage denial. While there is room for improvement, we are
now receiving over 1,000 cases per month for Medicare external
review. By contrast, entire State external review programs are
generating only a handful of cases.
4. The Medicare Appeals Process Includes Automatic, External Review
The Medicare model involves 5 levels of escalating appeal,
following a beneficiary challenge to an HMO retrospective
claim, or pre-service prior authorization request:
HMO (internal) Reconsideration
HCFA (CHDR) External Reconsideration
SSA Administrative Law Judge (ALJ) Review
Appeals Board Review
Judicial Proceeding
Since August, 1997, beneficiaries enrolled in managed care
have access to two appeal venues--expedited and normal. Under
expedited review, the Plan has 72 hours, with minimal
exceptions, to complete an internal Reconsideration. Under
normal review, the Plan has 60 days for this process. The
beneficiary has a right to present evidence, in person or
otherwise, to the Plan Reconsideration, which should be a ``de-
novo'' review.
Medicare is unique in requiring external review (by CHDR)
automatically if the Plan fails to find totally in favor of the
member in Plan Reconsideration. Thus the member does not have
to ask for CHDR review, and it is required if the Plan fails to
make its Reconsideration decision within the applicable time
frame.
Our independent review is conducted ``on the record'' or on
the basis of a hard copy case file submitted by the HMO
directly to us. Pursuant to our agreement with HCFA, we do not
take (unwritten) testimony from beneficiaries or Plans. This
limitation is offset, to some extent, by the possibility of an
in-person hearing before (at the HMO level) or after (at the
ALJ level) our review. We do require, pursuant to a published
manual, that HMOs submit case files with a standard form and
standard attachments, including medical records. We have the
right to request additional information from the Plan,
including statements from members, which we find necessary to
exercise in about 50% of cases. This process, and the overall
tracking of cases, is supported by a data system. Statistical
reports generated by this system have been made available to
the Subcommittee and are widely used by HCFA, Plans, advocacy
and research organizations.
Each appeal is assigned to a professional case manager, who
oversees the review process, executes appeal correspondence,
and may make actual decisions unless the deciding factor is
medical necessity as judged by our physician consultants. When
we began our work in 1989 we exclusively used nurses as case
managers. However, as explained above we found that the
majority of cases involved issues other than medical necessity
(e.g., compliance, coverage, etc.). We have since added
attorneys, medical record specialists, nurse/attorneys and a
physician/attorney. Thus a multidisciplinary professional team
has proven necessary to address the gamut of issues arising in
appeal cases.
In review of the case file, the CHDR professional first
determines if the enrollee is eligible and properly enrolled.
If questions exist, the case may be referred to a HCFA Regional
Office for evaluation for retroactive disenrollment.
Secondarily, the reviewer determines the item(s) denied by the
Plan and its denial reason. This is contrasted with any
beneficiary (or provider) arguments for coverage. The Plan's
rebuttal to these arguments, if any, is considered. Although
CHDR is independent and not an advocacy organization, we
recognize that beneficiaries are not expert in matters of HMO
coverage or medical science. Accordingly, we do consider
arguments in favor of the beneficiary that are apparent in the
facts, but might not be expressly raised by the member.
The policies and criteria that we apply in review are
twofold. First, Medicare HMOs are bound to provide Medicare
Part A and Part B benefits. Accordingly, we must consider
Medicare FFS regulation and its numerous interpreting manuals
(e.g., Coverage, SNF, Hospice, etc.). Simultaneously, we
consider Medicare regulations and manuals that apply directly
to managed care.
40% of our cases do involve questions of medical necessity
and must be referred to a physician, dentist or chiropractor
for evaluation. We maintain a panel of professionals in all
specialties for which we have recurring need for review. Most
of these professionals practice in the Rochester area, but also
maintain faculty appointments at the teaching hospital, The
University of Rochester Medical Center. We also employ a chief
physician consultant from Harvard School of Public Health, and
he assists in recruitment of physicians from this institution
for unusual cases or rare disease review.
If we uphold the HMO denial, and the matter in controversy
is $100 or more, the beneficiary may obtain a hearing before
and ALJ. A total of 528 hearings were reported in 1997, when 6%
of beneficiaries subject to CHDR review sought an ALJ
proceeding. HMOs currently do no have the right to appeal to
the ALJ, but do have a right to attend a hearing called by a
beneficiary. Either party may request a review by the Appeal
Board if the matter in controversy is over $1,000. We are aware
of approximately 50 requests in 1997. Our system does not track
judicial review, and we are aware of only a few cases filed in
the ten years of our tenure. The Court dismissed these case
because available remedies (i.e., the appeal process steps) had
not been exhausted.
Medicare Appeals: Areas for Improvement
Although the Medicare appeal system is the best model
available, it is not perfect. The most frequent criticism is
delay in appeal processing--particularly for urgent cases. This
problem was addressed by HCFA regulation, effective August of
last year, creating a 72 hour ``expedited'' appeal process at
the HMO level, plus a shortening of our time frame to 10 days
or less. HCFA's upcoming BBA regulation will reduce the time
frame for processing routine cases. Both HMOs and CHDR
experience delays obtaining medical records and when
unpredictable spikes occur in appeal volume. Finally, the
Administrative Law Judge (ALJ) process is not timely, although
it is not under HCFA's direct control.
Advocates have expressed concerns about limitations in HMO
denial and appeal rights notices, HMO misdirection of appeals
to a (different) ``grievance'' system, and absence of support
of enrollees in the process. Plans sometimes question the
application of Medicare FFS coverage rules to the HMO setting.
These problems should be expected in any appeal system and do
not, in my opinion, substantially limit the effectiveness of
the Medicare model. Nevertheless, we continue to work
internally, with HCFA, advocates and Plans to improve the
appeal program.
There are a few areas in which Congress might assist us to
improve the Medicare appeal program. Appeals often involve
enrollee care with ``non-plan'' providers, or those doctors and
hospitals outside the HMOs' network. Although these providers
are usually Medicare FFS participants, they are not expressly
required to cooperate with managed care appeals. They should be
required to provide medical records, and should be prohibited
from instituting bill collection efforts against enrollees,
pending the outcome of the complete appeal process. CHDR
sometimes determines that a non-plan provider has rendered
unnecessary services. Currently, we have no authority to find
the provider ``liable'' for this care. Our options are limited
to upholding or overturning the HMO denial, or to assigning
liability either to the HMO or the member. We should have
authority to assign liability to providers, or to refer the
case to entities that could effect this judgement.
I would ask Congress to explicitly indemnify organizations
and individuals that agree to provide external appeal services.
We deal with many medically significant, but contentious cases.
Standard malpractice policies exclude coverage for ``review,''
and there is a poor market for procurement of insurance.
Congress should be aware of and periodically track emerging
issues in appeal review. In Medicare, two current noteworthy
topics are integration of HMO and FFS coverage policies and
scope/duration of appeal decisions in ongoing care cases.
Appeal Policy Recommendations: General
Appeal requirements are proliferating at both the State and
federal level. Consumers and HMOs are increasingly subject to
duplicative or conflicting processes--sometimes with
conflicting results in the same case. Many of the newer program
requirements are poorly constructed and will not ultimately
prove workable for government, business, the consumer, or the
health plan. Conversely, the Medicare appeal model is widely
regarded as effective and has low administrative and claim cost
impact. A number of Plans that are implementing voluntary
(external) appeal programs are emulating the Medicare model.
Any broad federal legislation for appeals should use the
Medicare model as its basis. To repeat, critical elements of
the Medicare model are: (i) applicability to all denials,
irrespective of reason, (ii) public disclosure of decision
logic and link to applicable coverage policies, (iii) effective
consumer education about the appeal program, and (iv) automatic
independent review.
The Medicare appeal contractor (currently CHDR) was
selected in a competitive procurement and operates under the
oversight of HCFA. Legislation broadening appeal coverage
should provide for some comparable mechanism, perhaps
accreditation, to insure the quality and independence of appeal
services.
Mrs. Johnson of Connecticut. Thank you very much, Mr.
Richardson.
Dr. Goldschmidt.
STATEMENT OF PETER G. GOLDSCHMIDT, M.D., PRESIDENT, MEDICAL
CARE MANAGEMENT CORP., BETHESDA, MARYLAND.
Dr. Goldschmidt. Thank you. I'm Peter Goldschmidt,
president of Medical Care Management Corp. We are pleased that
the Subcommittee invited us here today to learn about our
experience in conducting external expert reviews of medical
care.
Mrs. Johnson of Connecticut. I'm sorry, Dr. Goldschmidt.
There's a fire alarm, and so we have to evacuate the building.
You can smell it. I've been wondering about that.
Would you submit your testimony for the record, and if you
can hang around if we're able to reconvene in half an hour,
we'll do so. So if you'll submit your testimony, but those of
you who can hang around, please do so. Thank you.
[Whereupon, at 12:25 p.m., the hearing adjourned subject to
the call of the Chair.]
[Submissions for the record follow:]
Statement of Jim Parkel, AARP Board Member, American Association of
Retired Persons
Good morning. I am Jim Parkel from New Fairfield,
Connecticut, and a member of the Board of Directors of the
American Association of Retired Persons. I am pleased to
present the views of AARP's membership on the Medicare managed
care appeal process.
Six million Medicare beneficiaries are currently enrolled
in Medicare managed care plans. The pattern of rapidly
increasing enrollment in managed care persists, as about
100,000 new enrollees sign up every month. A high rate of
enrollment is projected to continue as the new Medicare+Choice
program is implemented. Consequently, it is important to
examine frequently, as we go forward, how well beneficiaries
are being served and what protections they need. We commend the
Committee for doing just that, and allowing us to share our
views on the Medicare managed care appeal system.
Given the built-in financial incentives in managed care to
limit use of services, there is a risk that a particular
treatment decision will be made not because it is best for the
patient but rather because it will save the plan money. While
most plans act responsibly, there are some that will improperly
restrict access to needed care. Effective quality oversight is
essential, but it is also essential to have a strong appeal
system that allows enrollees to challenge decisions by their
plans. Moreover, both have an important the sentinel effect by
deterring problems before they occur.
The Medicare program has the foundation for such a system
for managed care enrollees. The system is not perfect, and it
is not always implemented properly, but the critical elements
are in place, to a greater or lesser degree, through statute
and regulation. The basic elements in place in Medicare merit
serious consideration for the private sector.
To understand what is needed in a managed care appeal
system, it is first necessary to understand the unique problem
faced by managed care enrollees. In fee-for-service Medicare,
the beneficiary, in most cases, has already received the care
in question and the dispute is about payment. In managed care,
payment disputes can and do arise, but the majority of managed
care appeals in Medicare are brought by enrollees who have not
yet received treatment because the plan has denied the care in
question, or by enrollees for whom services have been suddenly
terminated or reduced, or are about to be terminated or
reduced, because the plan has decided that further services are
not required.
Key Elements of a Managed Care Appeal Process
To adequately protect enrollees when a dispute arises over
medical services which are denied, terminated or reduced, a
managed care appeal system must include five critical elements.
Implicit in this discussion is an assumption that enrollees
know in a general way that they have appeal rights and that
they do not have to accept what the plan tells them. However,
this level of understanding does not yet exist in the Medicare
managed care program. With that caveat, these are the five key
elements to an effective managed care appeal process.
1. Speed. Most people would agree that speed is essential
when a medical treatment decision is involved. Most treatment
decisions should be made within a few weeks, and some within a
few days or even hours.
2. Notice and opportunity to be heard.In order to challenge
a decision, the enrollee has to have clear, timely notice of
the plan's decision, the reason for the decision, and
instructions on how to appeal. In order to ensure a full and
fair review of the dispute, the enrollee must be able to
present his or her side of the case.
3. Appropriate medical expertise. In general only health
care professionals should make clinical decisions. A member of
the plan administrative staff, without medical training, is not
qualified to assess surgical risk, or the side effects of
different drugs, or the benefit that can reasonably be expected
from additional physical therapy.
4. Continuity of care. This is a major concern for
enrollees whose care is about to be terminated or reduced. It
makes no sense to cut back on treatment, or to force a patient
to leave a hospital, and then later decide that this was an
error. In many cases, the care cannot be re-started, and where
it can, the interruption in care may have caused serious and
possibly irreversible harm. Treatment disputes in these cases
should be resolved before any change in treatment occurs.
5. Outside independent review. A plan denial of medical
care should be reviewed by someone having no relation to the
plan and no stake in the outcome. Unbiased review is essential
in a managed care environment where the health plan's financial
incentives may encourage saving money over delivery of
appropriate, perhaps expensive, care. In a dispute with a
building contractor over what type of flooring should have been
installed in your house, you would never agree to let the
contractor be the sole judge of the matter, especially where
the contractor stood to benefit financially by not putting in
what you wanted. Impartial review is even more important where
health and safety are at stake. Outside independent review
accomplishes two things: it corrects wrong decisions, and it
also has a sentinel effect. We believe that plans are more
careful when they know that an objective, external review is
part of the process.
The Medicare Managed Care Appeal Process
Against this background, now consider how the Medicare
managed care appeal process works. There are five steps in the
current appeal process. This testimony focuses primarily on the
first three steps because that is where most cases are
resolved.
Step 1--Formal denial by the plan. If there is a question
or a disagreement about what care should be provided, the plan
is required to give the enrollee a written decision, stating in
understandable language, the basis for the decision and
explaining the enrollee's appeal rights. The technical term for
this is an ``organization determination.'' Every enrollee who
disagrees with a denial of care, or with a termination or
reduction of care, needs to know the reason for the plan's
decision and how to have that decision reviewed.
Step 2--Reconsideration by the plan. If the enrollee
requests reconsideration, the plan must have the case reviewed
by individuals who were not involved in the original
determination. Any questions about medical necessity must be
resolved by a physician with appropriate expertise in the field
of medicine relevant to the treatment at issue. The enrollee
may present evidence in person or in writing. The plan must
give the enrollee a written decision, stating the specific
reasons for the decision and explaining further appeal rights.
Step 3--Outside independent review. If the plan does not
decide fully in favor of the enrollee, the case is reviewed by
HCFA's outside contractor-the Center for Health Dispute
Resolution, also known as ``CHDR.'' CHDR is a private
organization with no ties to the plans. CHDR is paid for its
work by HCFA, not by the plans. If CHDR decides in favor of the
enrollee, this has no effect on the amount Medicare has to pay
the plan. Medicare will continue to pay the same capitation
amount, regardless of the outcome. CHDR arranges for review by
clinicians of clinical issues and for review of contract and
legal issues by other trained staff. The enrollee may submit
written evidence but may not appear in person.
Step 4--Administrative hearing. If the enrollee is still
dissatisfied, in most cases he or she will qualify for a
hearing before an administrative law judge. The administrative
hearing is provided and paid for by the Medicare program. The
enrollee may make written submissions and may appear in person
and present evidence. In some cases, there may also be further
review within the Department of Health and Human Services.
Step 5---Judicial review. If the amount in controversy
exceeds $1,000, the enrollee may seek review in federal court.
There are two special systems within the appeal process
which supplement the process in critical ways.
The first is ``expedited review.'' This is a system for
rapid review of cases where the enrollee's medical condition
requires that a treatment decision be made right away. In this
situation, if waiting the amount of time that it would take for
a regular, non-urgent appeal could jeopardize the enrollee's
health or ability to regain function, then the plan must issue
the written organization determination as rapidly as the
situation requires, with an outside limit of 72 hours. The same
time limit applies to an expedited reconsideration. External
review by CHDR must also be expedited.
The other is a special system for review of hospital
discharges. This is extremely important for enrollees who
believe they are being sent home too soon. All Medicare
beneficiaries, those in fee-for-service as well as those in
managed care, are entitled to have a proposed discharge from
the hospital reviewed immediately by a Peer Review Organization
(``;PRO''). A PRO is a private organization which has a
contract with the Medicare program to monitor and evaluate
quality of care given to Medicare beneficiaries, including so-
called ``immediate review'' of hospital discharges. During PRO
immediate review (which usually takes 24 hours or less), the
enrollee may remain in the hospital until noon of the day after
the PRO renders a decision. The plan must continue to cover the
cost of the stay up to that point, regardless of how the PRO
decides.
Assessing the Medicare Appeal Process
With this overview of the process in mind, I would like to
share with you our ideas on how the Medicare managed care
appeal process measures up in light of each of the five
critical elements listed earlier: speed, notice and opportunity
to be heard, appropriate medical expertise, continuity of care,
and outside independent review. It is important to keep in mind
that HCFA will be issuing major new regulations in June for the
entire Medicare+Choice program, including the appeal process,
and that a full assessment will need to include these new
developments as they come ``on line.''
Speed
Through the expedited review process, Medicare assures a
very rapid appeal in urgent situations. This is an essential
protection, and it targets effectively the situations where
speed is needed most. However, the time limits for regular
appeals are far too long. The regulations allow the plan to
take 60 days to issue the formal denial and 60 more days to
complete reconsideration. That means that in the best of
circumstances, when the plans actually meet these extremely
generous deadlines (which does not always happen), four months
can pass before the case even goes to outside appeal. This is
not reasonable for most treatment decisions. In our view, the
first two steps, together, should not take longer than 30 days
in most cases. We understand that HCFA is concerned about the
lengthy process and is planning to revise the time limits in
forthcoming regulations. However, the new time limits will be
meaningless without compliance by the plans.
Notice and opportunity to be heard
The written Medicare notice requirements are fairly good
but implementation is a problem. The requirements are supposed
to ensure that enrollees receive clear, timely written notice
of the plan's decision, of the basis for the decision, and of
their appeal rights. However, all too often the plans simply
ignore the requirements. We hear frequently of cases where the
formal denial is delayed indefinitely or never communicated to
the enrollee, or the reason given for a denial is meaningless
(for example ``service not covered'' or ``not medically
necessary). Therapy may be suddenly terminated with little or
no advance warning. While Medicare managed care enrollees have
a general notion that they can appeal, most are uncertain about
their appeal rights in a particular situation. They need to be
told, at the time the disagreement arises, that they can appeal
and how to go about it. Often the plans do not give them this
information. Most enrollees do not know, and are not told, that
they have an absolute right to an expedited appeal if a doctor
says that delay could be medically harmful.
In general, the Medicare managed care appeal system does
provide adequate opportunity to be heard. However, lack of
information about the basis for the plan's decision has an
adverse effect the right to be heard. In order to challenge a
denial of services one has to now the reasons for the denial.
Appropriate medical expertise
The Medicare statute, as amended last year by the Balanced
Budget Act, now specifically requires that when a plan does a
reconsideration, any determination of medical necessity must be
made by a physician with appropriate expertise in the area of
medicine involved. This is essential. A credible medical
evaluation during reconsideration can reduce the number of
appeals, provide a better record for review in the cases that
are not resolved at that point, and reduce public distrust of
managed care. In the past, many plans have not met this
standard. We hope they will begin to take the matter seriously.
Medical expertise is also a part of outside independent
review by CHDR. The details of CHDR's review are established
through its contract with HCFA. Clinical matters are reviewed
by clinicians with appropriate expertise.
Continuity of care
With respect to hospital discharges, Medicare does
extremely well. As explained before, the PRO immediately
reviews a contested discharge, and the enrollee is allowed to
stay in the hospital until the matter is resolved. The most
important element in this system is the financial protection
given to the enrollee--protection against liability for the
cost of the extra day or days needed for PRO review, regardless
of how the PRO decides. Without such protection, PRO review is
meaningless. Few people could risk facing a bill for $700 or
$1,000 a day. If that were the price of losing the appeal, only
a small number of beneficiaries could afford to appeal. The
policy of allowing the enrollee to remain in the hospital
during the appeal without additional financial responsibility
assures that ongoing acute care, often where the patient is in
very fragile condition, is not interrupted.
For other services, however, Medicare has not yet addressed
the problem of continuity of care. In general, Medicare does
not require plans to resolve disagreements about terminating or
reducing care prior to imposing the change. We understand that
the problems are complicated and that the plans have legitimate
cost and administrative concerns. However, as more
beneficiaries are encouraged to enter managed care, it becomes
essential that we tackle and begin to resolve the problems that
are precipitated by this evolution in health care delivery.
AARP is prepared to work with HCFA and with the plans to find
solutions that are reasonable for everyone.
Outside independent review
This is the part of the appeal process where Medicare
probably performs best. Outside review by CHDR is truly
independent. In addition, it is quick, it is free to the
enrollee, and it costs the Medicare program only pennies per
enrollee per month. CHDR is also an extraordinarily valuable
source of data about the program and about individual plans.
For example, CHDR data can help answer such questions as--
What situations or services are triggering
disagreements?
Is there a compliance problem or rather an
education problem?
How are the plans carrying out their part of the
appeal process?
In addition, information about how frequently a particular
plan is overruled by CHDR, or what services generate the most
appeals, could be very helpful to an enrollee who is trying to
choose a plan or decide whether to change plans.
Review by CHDR is not the only form of outside, independent
review in Medicare. As explained earlier, hospital discharges
are subject to review by the local PRO, which is an
independent, outside organization. Also, although few cases
proceed as far as an administrative hearing, the administrative
law judges who conduct the hearings provide outside,
independent review.
Conclusion
On balance, we give the Medicare managed care appeal
process high marks. Compared to what is available in private
sector managed care, the Medicare appeal process remains the
gold standard, despite its shortcomings. Moreover, as
increasing attention is given to improving protections for
people enrolled private sector plans, the Medicare appeal
process can serve as a model. While not all of it can be
applied outside of Medicare, much of it can.
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Statement of Peter G. Goldschmidt, MD, PH, DMS, President, Medical Care
Management Corporation
We established Medical Care Ombudsman Program to meet a
particular need: a credible, objective mechanism to provide
expert reviews of cases' medical facts to help patients and
payors to make decisions involving complex and contentious
medical care. Through expert reviews of cases' medical facts,
we tell plans, providers, and patients not what they want to
hear but what each needs to know about the fit between the
patient and the proposed therapy. The program is now in its
sixth year. It has been remarkably successful in achieving its
objective, and in responding to clients' and patient's needs
for credible, authoritative information. We have more than 150
corporate clients, more than 550 expert reviewers, and have
reviewed almost 7,000 paid and volunteer cases. About 10% of
our case reviews have been free reviews for individual
patients. Less than one half of a percent of cases proceed to
litigation.
Our remarkable success rests on the following four pillars:
Our vigilance in protecting our independence,
which permits us to focus on patients' medical needs
Our credibility, which permits us to attract the
very best clinicians as reviewers
Our dedication to detail, which produces high
quality, timely reviews
Our quality assurance mechanisms, which allow us
to ensure clients receive objective reviews of cases' medical
facts.
Clients use our services for three principal reasons:
The high quality of our reviews
The timeliness of our reviews
Reviewers' willingness to stand behind their
reviews in the rare court challenge.
Our Medical Care Ombudsman Program has resulted in:
Patients receiving beneficial treatments that they
might not otherwise have received
Reduction in the number of patients receiving
treatments that were unlikely to have benefitted them
Increase in the number of patients made aware of
clinical trial options available to them.
Origins of corporation and program
Medical Care Management Corporation was established by
Peter Goldschmidt and Grace Ann Monaco in 1992 to provide
health insurers, managed care organizations, employers, and
others with solutions for managing issues of patient access to
high technology, high risk, high cost medical care cases.
Increasingly, clients were facing costly court challenges
regarding policy exclusions for experimental and
investigational treatments and other complex and contentious
cases. The cornerstone of Medical Care Management Corporation
is our Medical Care Ombudsman Program.
Medical Care Management Corporation provides a process to
enhance patients' early access to appropriate treatments and
clinical trials. This Medical Care Ombudsman Program provides
payors and patients with an independent, objective review of
proposed treatments. This remarkably successful program is
based on the volunteer ombudsman program that Grace Ann Monaco
developed in 1970 for pediatric cancers and which has been used
by the Candlelighters Childhood Cancer Foundation and most
recently by the Childrens Brain Tumor Foundation of Woodbridge
Virginia.
Need for an independent external review process
An independent external case review process is necessary
for may reasons, including the following:
Medical technology assessments are inadequate and
incomplete, and can never address the question of whether a
treatment is appropriate for the individual patient for whom it
has been recommended
Internal health plan coverage decision--especially
appeal--processes can never be free from the appearance of
conflict of interest
A credible, objective review process must exist to
inform the health plan and the patient whether or not a
recommended treatment is in the patient's best interest; simply
paying for everything would waste resources and threaten
patients' health.
Medical technology assessments attempt to determine if a
specific treatment is effective, that is, improves patients'
health status more than doing nothing or more than an
alternative standard therapy. Technology assessors face
formidable problems. The published literature may not include
all studies (because some studies have been accepted for
publication but have not been published, which is often the
case in an active field). Studies may not involve the same
treatment, especially because new treatments evolve rapidly as
practitioners gain experience in their use, limiting assessors'
ability to compare or aggregate findings from different
studies. Many studies are scientifically inadequate. There may
be no completed studies, especially for new and emerging
technologies. The technology assessment process, including its
findings are subject to challenge. Moreover, no matter how
adequate a health plan's process for assessing medical
technology, if qualified providers believe that a treatment is
effective for some types of patients, someone has to determine
whether or not the treatment is appropriate for the patient for
whom it has been proposed, that is, whether or not the patient
is of the type for whom the treatment is known to be effective,
and the patient does not exhibit characteristics that would
make an otherwise effective treatment inadvisable. Thus, for
all practical purposes, payors must rely on a case-by-case
assessment to determine, for example, whether or not a
treatment is experimental or investigational for the particular
patient for whom it has been proposed.
If health plans set up an internal process to assess cases,
it is always subject to charges of potential bias, especially
when the cost of the treatment is high. The problem is
compounded when a payor must review a patient's appeal of its
original determination not to cover a proposed treatment.
Presently, in these circumstances, if a patient is dissatisfied
with a payor's decision, he or she has no option but to sue in
court. At this stage the patient and/or provider (who may steer
the patient to a lawyer) is heavily invested in the proposed
treatment--whether or not it is appropriate--making it
difficult, if not impossible, to reason with the patient and/or
provider. Further, court challenges of payors' decisions are
costly to patients, providers, and payors.
Simply paying for any proposed treatment may not be a wise
decision. Payors have a fiduciary responsibility to manage
purchasers' premiums wisely. Otherwise they increase group plan
health care costs to the point that purchasers insist on
containing them by cutting back or eliminating services. Some
emerging technologies may not be effective and some may harm
patients. Further, a treatment that is effective for some
patients may harm others because of their specific
circumstances. An objective, external review process that
provides expert reviews of proposed treatments offers the best
way to determine whether or not a treatment is appropriate for
the patient, including the question of whether or not the
treatment is experimental or investigational for that
particular patient.
Requirements of successful external review programs
Requirements of a successful external review process
include the following. The external review organization:
Must be independent and unbiased, that is, not
subject to political influence or manipulation, and must be
able to adapt to clients' and patient's changing needs and
circumstances for objective, credible information about
recommended treatments
Must select reviewers
Must determine the form of the review
Must use only qualified reviewers who are matched
to the treatment proposed in the case under review
Must credential reviewers
Must have in place a meaningful quality assurance
and quality improvement process
Must determine and make payments to reviewers to
compensate these experts fairly for the time they spend
reviewing cases
Must publish information on credentialing, review,
and quality assurance and improvement processes and procedures
so that payors, providers, and patients can understand how the
program operates.
The key to a successful external review program lies in the
quality of its reviews, which in turn, depends on reviewers'
integrity and the quality of their reviews. To ensure
objectivity, the external review organization--and not the
payor or patient--must select both the reviewers and the form
of the review, to avoid the appearance of trying to select or
to steer the reviewer toward a certain determination. Further,
the external review organization must use only qualified
reviewers, must exclude those who have a real or apparent
conflict of interest, and must assign available, qualified,
conflict-free reviewers without prejudice (which can be
achieved, for example, by random or rotational assignment). A
qualified reviewer is one who meets certain credentialing
criteria (for example, relevant specialty board certification)
and who provides scientifically-supportable reviews in a timely
manner. To assure the quality of reviews, the external review
organization must publish a detailed description of its
structured quality assurance program, including, for example,
its criteria and process for credentialing reviewers, assessing
reviews' quality, educating reviewers to improve the quality of
their reviews, and improving the quality assurance program. To
ensure that qualified experts will devote the time needed to
conduct careful and thorough reviews of cases, the external
review organization must be permitted to pay reviewers a
reasonable fee for the time that they devote to this important
effort.
Medical Care Ombudsman Program
Medical Care Ombudsman Program provides independent,
objective expert reviews of cases' medical facts. The program's
credibility and acceptance stems from our dedication to
ensuring that clients--payors and patients--receive
straightforward answers to questions about a treatment's status
or appropriateness for the individual patient for whom it has
been proposed, including, where applicable, the scientific
adequacy of a clinical trial and/or whether or not the
particular patient meets study criteria.
Since its inception, our Medical Care Ombudsman Program has
reviewed more than 6,000 cases for our more than 150 corporate
and other clients. We have more than 550 active reviewers most
of whom are academically-affiliated. They are located
throughout the country. The program offers the same services
that we offer to our clients at no charge to patients, for as
many volunteer assessments as our reviewers have agreed to
provide. About 85 percent of our reviewers participate in the
volunteer review program.
To our knowledge, less than one-half of one percent of
cases reviewed have proceeded to litigation. None in which the
client followed our recommended procedures resulted in a jury
judgment against the client. The program has resulted in
patients receiving beneficial treatments that they might not
otherwise have received, a reduction in the number of patients
receiving treatments that were unlikely to have benefitted
them, and an increase in the number of patients made aware of
clinical trial options available to them.
Review services
Medical Care Ombudsman Program provides reviews in 7 to 10
business days after reviewers receive complete review
materials. When clients have an urgent need, we provide rush
reviews within three business days, and express reviews within
48 hours (with an oral review in 24 hours), subject to
reviewers' availability. There is no fee for joining the
program. Clients pay a fixed fee for each review; there is no
annual or other minimum payment. We offer discounts to users
who order more than 100 reviews per year.
Program clients
Our clients include large and small insurance companies,
health maintenance organizations, preferred provider
organizations, independent practice associations, self-insured
employers, third-party administrators, utilization review
companies, lawyers, doctors, and patients.
Reasons clients request reviews
Clients request reviews for many reasons, including the
following:
To obtain independent expert reviews of a
recommended treatment plan
To facilitate the identification and coverage of
medically appropriate care
To diffuse conflicts of interest that patients and
courts may perceive exist with in-house reviewers
To use a process that appears to deter litigation,
and provides expert witnesses if litigation ensues.
To validate an in-house reviewer's analysis.
To secure expert analysis when in-house reviewers
are not sufficiently knowledgeable about the recommended
treatment plan.
To provide a 'second opinion option' to employees
and insureds.
To meet regulatory requirements for external
review of appeals.
Our expert reviews inform payors and patients about
treatment choices. They permit clients to channel scarce
resources into treatments that are most likely to benefit
patients, to minimize litigation resulting from coverage
disputes, and to provide an appropriate way to resist pressures
from some providers to pay for inappropriate levels of care
that are unlikely to benefit patients. Our experience suggests
that we save payors $20 to $25 for each review dollar. Further,
our expert reviews can also protect patients' health.
Types of review cases
Medical Care Ombudsman Program usually reviews cases that
involve use of high technology, high risk, high cost medical
procedures. Our review cases are usually complicated and
involve cutting-edge medical care; some are unique. Cases
involve treatments for every type of cancer, for example, high
dose chemotherapy with allogenic, autologous, stem cell or
unrelated donor rescue, and proton beam radiotherapy. The
program also reviews other types of cases--including, for
example, cardiac cases, fertility problems, immune system
diseases, pediatric and adult procedures involving solid organ
transplants (eg, heart, heart-lung, kidney, liver, and
pancreas), plasmapheresis, apheresis, gene therapy, novel uses
of drugs, biologicals, and vaccines, and other high technology
interventions that pose high risks to patients and incur high
costs to payors. We also review cases in all domains of
medicine for which the plan has denied coverage and the patient
has appealed the denial, as well as controversial approaches,
sometime referred to as 'alternative medicine.'
Reviews
Reviewers focus exclusively on cases' medical aspects,
address clients' questions, and describe the basis for their
views, including, where appropriate, citations to the relevant
medical literature. We recommend that clients always use a
panel of three experts to obtain an idea of the extent of
consensus among experts regarding the answers to their
questions regarding the appropriateness of a recommended
treatment plan. We provide reviewers with structured guidance
to assist them to produce a usable review, that is, one that
address clients' questions, is clear and unambiguous, and
provides rationale for decisions and cites evidence in their
support. Our experts draw on their extensive clinical
experience, the medical literature, and their intimate
knowledge of their fields of expertise. After reading
reviewers' analysis, clients can talk directly to reviewers to
obtain additional information. We monitor reviews for focus on
the questions asked, coherence, substantiation, and timeliness.
We invite clients' feedback on the quality of reviews.
Reviewers
We have more than 550 credentialed reviewers. They
encompass all domains of medicine; many are pediatric and
medical oncologists. Our reviewers are located throughout the
country. Most reviewers are in charge of academic departments
or affiliated with academic institutions and practice in the
nation's leading medical centers.
About three-fourths of our reviewers have agreed to
participate in litigation on their pretreatment reviews. All
three-member review panels include at least one member who has
agreed to participate in litigation. About one-quarter will
consider participating in litigation on cases that did not go
through the Medical Care Ombudsman Program process prior to
entering litigation if they agree that a client's decision was
medically appropriate.
Reviewer recruitment and credentialing
Current reviewers recommended most of the reviewers that we
add to our panels. Most are in academic medicine. Occasionally,
experts request that we consider using them as reviewers.
Reviewers complete a credentialing document in which they
describe their qualifications, licenses and privileges, the
diseases and procedures that they consider themselves to be
qualified to review and the reasons that they consider
themselves qualified to review cases in these areas, and their
availability to review cases.
Generally, Medical Care Ombudsman Program reviewers are
physicians. All of our physician-reviewers are board-certified
and they are in active medical practice with admitting
privileges at JCAHO accredited hospitals. Occasionally, it is
appropriate to use non-physician scientists or other experts as
reviewers, when, for example, a client's questions involve such
matters as a therapeutic agent's chemical properties or the
views of an expert in pathology, language, education, or
psychology.
Matching cases to reviewers
Reviewers are experts in the types of cases that we ask
them to review. Clients have no control over the assignment of
reviewers to their cases. To preserve the program's
objectivity, we match a case's circumstances to reviewers'
qualifications, and rotate review assignments among available
qualified experts. We never send a case to a reviewer
affiliated with the recommending physician's institution or the
institution where the recommended procedure will be conducted.
Further, we ask our reviewers to identify any real or apparent
conflicts of interest. Where the reviewer identifies such
conflict, we reassign the case to another qualified reviewer.
Assuring and improving the quality of reviews
Our primary goal is to provide clients with objective, high
quality expert reviews of cases' medical facts. We follow the
principle of continuous quality improvement [1] to provide
clients with expert reviews of the highest possible quality. In
providing reviews, reviewers use their extensive knowledge and
best professional judgement and, as needed, support their
opinions with citations to the relevant medical literature.
Clients can ask reviewers to amplify points expressed in their
reviews. In addition, we act promptly to ask a reviewer to
clarify his or her review on those few occasions when a client
complains about an ambiguity in the review that they have
received. We continue to use only reviewers who provide
coherent, well-substantiated, timely reviews. Based on reviewer
and client feedback and our analyses of completed reviews, we
refine the guidance we offer to clients (about the questions
that they ask reviewers to address) and to reviewers (about how
to respond to clients' questions). We also survey our clients
each year to ascertain how we can better meet their needs for
credible, objective information about cases' medical facts. The
results of our 1996 survey showed conclusively that clients use
our services for three principal reasons: the quality of our
reviews, their timeliness, and reviewers' willingness to stand
behind their reviews in the rare court challenge. Subsequent
surveys have confirmed these findings.
Review results
The percentage of recommended treatment plans that
reviewers find to be medically appropriate depends on the type
of case:
For intensive chemotherapy our expert reviewers
agree with providers' recommended treatment plans in about 40
to 60 percent of cases.
When clients use our expert reviewers to validate
their in-house reviewers' analysis, our reviewers confirm the
in-house reviewers' assessment in 60 percent of these cases.
This result illustrates the potential risk of deciding claims
based solely on in-house reviews.
In about 50% of the treatment plans that the
provider has labeled a clinical trial, the patient proposed for
the trial either does not meet its eligibility criteria or the
so-called clinical trial is not scientifically adequate. In an
increasing number of cases, the patient offered an
inappropriate care option or enrollment in a scientifically
inadequate clinical trial--which would not be covered by the
health plan--would be eligible for a clinical trial that the
health plan would cover--for example, NCI-sponsored or Clinical
Cooperative Group trials--but the patient does not appear to
have been referred to such a trial.
Results of special studies
At clients' request, we undertake special studies that may
shed light on the agreement between reviewers on panels or
other relevant matters. Because of the cost of such studies, we
cannot afford to undertake them routinely, because to do so
would incur additional costs that we would have to pass on to
clients generally. Recently, we were able to analyze
information pertaining to certain reviews. We provided this
information in our biennial newsletter to reviewers. This
analysis showed that with respect to a series of multiple
myeloma cases (recommended for high dose chemotherapy with stem
cell rescue) for which we had assembled 2-expert panels, that
the experts were of the same mind in 80% of the cases.
Recently, the Journal of the American Medical Association
published a letter that we wrote that contained the results of
our analysis of certain review results [2]. Between October
1996 and April 1997, our review panels analyzed the medical
records that client's provided to them for 55 breast cancer
cases in which the recommended treatment was high dose
chemotherapy with some type of stem cell rescue or transplant.
The client had requested a 3-reviewer panel for 16 cases, a 2-
reviewer panel for 17 cases, and a single reviewer for 22
cases. Aggregate results of these independent reviews showed
that for half of the cases (47%), the panel found that there
was insufficient information in the medical record (unanimously
in 63% of cases involving a 3-reviewer panel) to answer the
question: Is the treatment experimental or investigational for
this patient as defined in the contract language?. When they
could tell, the panel judged just under half (45%) of the
recommended treatments to be experimental or investigational
for the particular patient. For this same set of patients, the
panel found that the recommended treatment was medically
appropriate for the particular patient in under half (43%) of
the cases.
Obstacles to unbiased, cost-effective external review
Ideally, health plans would be encouraged to have in place
a coverage decision mechanism that:
Permits patients to seek external review (and thus
obtain a second opinion), without feeling that they are
challenging either the provider or the plan
Results in patients receiving the care that they
need--including, when appropriate, participation in
scientifically adequate clinical trials or other worthwhile
scientific research--while protecting patients from inadvisable
care and protecting the health plan from wasting resources
Is credible and acceptable to purchasers,
patients, and providers.
Such mechanisms will almost certainly have to include
external expert review of complex and contentious cases.
Inevitably, no matter how well-designed coverage decision
mechanisms may be, in some number of cases coverage disputes
will arise. In these cases, the purpose of mandated external
review is to ensure that the patient receives the best possible
advice regarding the advisability of the recommended treatment
and the health plan is not forced to pay for care that is
unlikely to benefit the patient nor for care that is inferior
because an alternative exists that would likely provide the
patient with more health benefit or is otherwise more in the
patient's interest. It is not sufficient to mandate an external
review process. It is also necessary to ensure that the process
produces the right outcome for the patient: the highest
possible quality review, one that is a careful, considered,
well-supported expert opinion about the advisability of the
treatment for which the patient has been recommended.
Some of the requirements imposed on the conduct of external
expert review by legislation and/or regulations may have the
effect of biasing the process against patients' interests,
because, for example, they will prevent reviewers from
commenting unfavorably on treatments that may be inappropriate,
less favorable than alternatives, or, if not dangerous, harbor
risks out of all proportion to expected benefits. Among the
most troubling state mandates or legislative or regulatory
requirements (referred to here as mandates) are the following:
Mandates that all external reviewers must be
medical practitioners licensed in the state (in which the
patient is to be treated). This requirement has no scientific
basis. It treats medicine as a provincial concern without
regard to scientific standards of medical practice. States with
only one academic medical center, which would normally provide
high technology treatments, would be precluding their citizens
from obtaining the highest quality external review because
potential reviewers drawn from this academic medical center
would have a conflict of interest. Even in our most populous
states, such requirements may impose implied, if not explicit,
pressures to be less than candid when reviewing proposed
treatments. Moreover, as we have learned, practitioners at
academic medical centers do not always propose treatments that
are in patients' best interests. To protect patients'
interests, external review organizations should be free to
select the most qualified experts to conduct a case review,
without regard to their licensure in a specific state.
Mandates that require the external review
organization to provide lists of reviewers to the state or to
reveal the identity of case reviewers to the patient or to the
provider. Reviewers may be subject to intimidation or
harassment. The net result is likely to be a diminished pool of
qualified experts who are willing to conduct reviews, and, less
rigorous reviews because willing experts are likely to be less
critical and might pull their punches when commenting on
inappropriate therapy for fear of retaliation. We provide our
clients with a short blinded biographical sketch of each
reviewer as a matter of course and encourage them to share not
only this sketch but also the reviews with the patient and his
or her provider (with the reviewer's identity redacted). When
requested by the client, we also provide the patient with a
specially written summary of the review. To protect patients'
interests, there should be no requirement to provide lists of
reviewers. With respect to case reviewers' identity, external
review organizations should be required only to provide
patients and providers with reviewers' qualifications, for
example, board-certifications, specializations, and a
description of the reviewer's experience in medicine and
research; it is not essential to reveal the reviewer's name nor
that of his or her current institution, except in the rare
instance that a case proceeds to litigation.
Mandates that impose additional credentialing and
administrative costs. For example, there may be needlessly
duplicative credentialing requirements that certainly add to
costs but that are unlikely to produce commensurate benefits.
When external review organizations must bear these costs, it is
almost inevitable that they have to include them in the fees
that they charge to their clients. What may have started out as
a reasonably-priced review, may become an expensive service,
or, to keep prices down, external review organizations may be
forced to cut corners and thereby reduce the quality of the
resultant reviews. To protect patient's interests,
credentialing and administrative mandates for external review
should only address recognized deficiencies in the way that
external review organizations provide reviews or in the quality
of their reviews, lest they raise needlessly the cost of these
reviews, which will once again rachet up the cost of health
care out of all proportion to resultant benefits.
Mandates that require the state to contract
directly with external review organizations. The state's
requirements may make it difficult, if not impossible, for us
to provide the high quality reviews that have become the
hallmark of our service. The state has to decide to which
external review organization to assign a particular case, and
this assignment may not be based on the quality of the
organization's reviews. The permitted payment may be so low
that high caliber reviewers will choose not to participate, or,
if they do participate, to spend less time and effort on their
reviews. The net result will be to penalize conscientious
reviewers, and to encourage an inferior product that will not
meet the needs of the patients that the mandate was meant to
serve. To protect patients' interests, states should encourage
plans to adopt appropriate coverage decision mechanisms that
include external review. There should be no need for the state
to arrange these reviews. Instead, the state should focus on
oversight functions, including, for example, the development of
mechanisms to accept and investigate consumers' complaints
about their health plans' handling of appeals and other
coverage decisions, including provisions for appropriate
sanctions against health plans that deny patients meaningful
access to high quality, independent, objective, external expert
reviews.
References
1. Wilson LL, Goldschmidt PG. Quality Management in Health
Care. New York: McGraw-Hill, 1995.
2. Goldschmidt PG, Monaco GP. Investigational treatments:
process, payment, priorities (letter). JAMA 1997; 278(17):
1402-1403.
Footnotes
1. There are no universally accepted definitions of the
terms experimental and investigational. We use the following
definitions. Experimental treatment--one that is neither known
scientifically nor accepted generally by qualified medical
practitioners to be effective for the type of patient for whom
it is being proposed. The treatment may be known or accepted to
be effective for other types of patients (but not the type for
whom it is being proposed). Experimental is a property of a
treatment or procedure. Investigational treatment--one that is
the subject of an investigation. An investigational treatment
may an effective treatment or it may be an experimental
treatment. For example, in a clinical trial, investigators may
be comparing two treatments generally accepted by qualified
medical practitioners to be effective for the type of patient
enrolled in the study, to determine scientifically which one is
the most effective. While the investigators are engaged in
research and the treatments are investigational, neither
treatment should be regarded as experimental because if a
physician were to propose the treatment for the type of patient
enrolled in the trial, qualified medical practitioners would
generally consider it to be appropriate.
2. An effective treatment is one known scientifically or
assumed generally by qualified medical practitioners to improve
patients' health status (outcome). Effectiveness--the quality
of being effective--is a statistical concept. An effective
treatment improves the health status of a specified patient
population beyond that of doing nothing or that is obtainable
with supportive care (the placebo effect), even if some
patients' health status is unchanged or worsened by the
treatment. The manifest variation in the extent of individuals'
health status improvement describes the intervention's risk.
Measuring a treatment's effectiveness in terms of health status
improvement subsumes the notion of safety (absence of unwanted
effects that adversely affect health status). It automatically
captures gains (in health status) and losses (injury or harm to
patients' health) to yield net improvement (or deterioration).
Safety is a judgement about the acceptability of risk,
especially early in an intervention's course if it spans an
extended period. The term effectiveness is preferable to the
term efficacy.
3. Williamson JW, Goldschmidt PG, Colton. T. The quality of
medical literature: An analysis of validation assessments. In:
Bailor JC, Mosteller F (eds). Medical uses of statistics.
Boston: NEJM Books, 1986. This study assessed the quality of
articles that assessed the quality of research reports
published in the medical literature. According to valid
assessments of the quality of the medical literature (involving
more than 4,200 articles published in such journals at New
England Journal of Medicine and JAMA), only a small fraction of
published research reports are scientifically adequate. Most
concerningly, 80 percent of inadequately-designed studies but
25 percent of adequately-designed studies reported a positive
finding, for example, that the intervention studied was
effective.
4. The term 'status' refers to where along a spectrum from
interesting idea to proven effective therapy a treatment
proposed for an individual patient sits according to qualified
providers. Most often clients are interested in knowing whether
or not the treatment is experimental.
5. An appropriate treatment is one that is suitable for the
particular patient because he or she fits the profile of
patients for whom the intervention is known scientifically or
assumed among qualified medical practitioners to be effective,
and for whom there are no contra-indications to the
intervention or other factors that make it inadvisable, for
example, the existence of an alternative treatment that has
lower risk and equal benefit. If a patient's physiology is such
that he or she is unlikely to survive a recommended treatment,
for example, it would not be appropriate for this particular
patient, even if the treatment is effective generally for the
type of patient involved.
6. Scientific adequacy is a broad terms that covers for
example, the scientific importance of the question the study is
designed to answer, the adequacy of the study design, and data
collection and analysis methods, in terms of likelihood of
producing an unequivocal answer to the study question, and
protection of human subjects and informed consent issues. In
some instances a clinical trial may be scientifically adequate,
but the patient whom the provider proposes to enter into the
trial does not meet study criteria. In this case, the patient
will not contribute to answering the study question.
7. Joint Commission on the Accreditation of Healthcare
Organizations. An independent, not-for-profit organization
(founded in 1951) that develops organization standards and
other performance measures, awards accreditation decisions, and
provides education and consultation to hospitals and other
health care facilities. [The official Committee record contains
additional material here.]
Statement of Vicki Gottlich, Staff Attorney, National Senior Citizens
Law Center
Introduction
I am Vicki Gottlich, an attorney with the National Senior
Citizens Law Center (NSCLC). NSCLC thanks you for the
invitation to testify today before the Subcommittee on Health
of the Ways and Means Committee. We appreciate the
Subcommittee's interest in patient appeals in health care, an
issue of concern to all consumers.
The National Senior Citizens Law Center is a non-profit
organization that provides litigation, education and technical
support on issues affecting low-income older people and people
with disabilities. For over twenty-five years we have assisted
clients and their advocates with problems arising under
Medicare, Medicaid and ERISA, and so are very familiar with the
grievance and appeals systems for both public health care
programs and employer-sponsored plans. Our recent work includes
the filing of extensive comments with the Department of Labor
in response to their requests for information about the ERISA
appeals process and about notices under the COBRA health care
continuation provisions. We currently are co-counsel in a case
in Arizona concerning the Medicaid managed care appeals
process, and in a nation-wide class action challenging the
appeals process for disputes involving Medicare home health
benefits. NSCLC is not counsel of record in Grijalva v.
Shalala, the case challenging the Medicare managed care appeals
process, however, we joined in amicus briefs in support of
plaintiffs that were filed in the District Court for the
District of Arizona and in the Ninth Circuit. We also met with
HCFA staff during the development of its Medicare managed care
appeals regulations and submitted comments on those
regulations, and we have met with HCFA staff concerning the
regulations to implement the Medicare+Choice appeals process.
Based on our experience with appeals of health care
decisions under various systems, we believe the Medicare system
provides, overall, the best protection for beneficiaries. The
Medicare system establishes national, uniform standards that
apply to all Medicare managed care plans throughout the
country. The federal Medicaid statute provides many similar
protections, though variations in state Medicaid laws result in
a lack of uniformity that hurts some beneficiaries. Unlike
Medicare, Medicaid makes no provision for expedited
consideration, though the federal scheme provides for
continuation of care pending external review.
We have great concern for individuals covered under ERISA
plans. The long time frames given to plans to make decisions,
the lack of impartial decision-makers, and the lack of an
independent external review render many ERISA plan claims
procedures useless for plan participants seeking medically
necessary care. We have yet to encounter an ERISA plan that
contains the protections available under Medicare and Medicaid.
Those that come closest are generally collectively bargained
plans, where the bargaining unit fought for and won additional
consumer protections for its members. Although many states have
enacted managed care legislation, state laws regulating
insurance do not apply to self-insured plans, under which a
growing number of plan participants are covered. Further, the
complexities of ERISA preemption call into question whether
state law provisions establishing grievance and appeals
procedures apply even to fully-insured employer-sponsored
plans. And many state laws do not contain all of the key
elements of an adequate appeals process meeting the standards
set by the Medicare and Medicaid programs.
We support federal legislation that establishes an
appropriate appeals procedure, including the opportunity for
external review, for all consumers. Such legislation would
establish a floor of protection that does not currently exist.
As Families USA pointed out in its July 1996 report, HMO
Consumers At Risk: States to the Rescue, ``...large numbers of
managed care enrollees are not protected by state legislation.
Moreover, the patchwork quilt of managed care legislation
across states makes it difficult for multi-state managed care
companies to standardize their data systems and operations.''
(At p. 41).
In developing a patient appeal system that would benefit
all consumers, we recommend the following key components:
Key Components of a Managed Care Appeals Process Based on Medicare and
Medicaid Appeals Processes
Broad definition of appealable issues: Under the Medicare
statute and regulations, an appeal may be taken from any
dispute involving a denial of services or payment for services
made by the HMO, even if the request is denied only in part.
This broad definition allows beneficiaries to appeal as wide
range of issues, and not just those involving medical necessity
determinations. Thus, an appeal may be taken from a denial of
payment for emergency or urgently needed care, from a dispute
whether the service is a Medicare covered service, or from a
dispute whether the beneficiary meets the eligibility criteria
to receive the service (ex., meets the definition of
``homebound'' to receive home health services.)
The Medicare managed care regulations issued last April
clarified that an appeal can be taken when a service is
discontinued, such as a skilled nursing facility discharge.
Although appeals from reductions of service are being
adjudicated through the Medicare managed care appeals process,
the Medicaid regulations are much clearer that an appeal may
ensue when a service is denied, delayed, reduced or terminated,
and should be the model for Medicare and for private plans.\1\
Internal plan review conducted by a medical expert. The
Balanced Budget Act (BBA) adds an important protection to the
Medicare internal plan review process. When reviewing
determinations that base the denial of coverage on a lack of
medical necessity, Medicare+Choice plans must use only a
physician with appropriate expertise to make a determination of
the necessity of the treatment. In addition, the physician must
not have been involved in the initial determination.
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\1\ See 42 C.F.R. 431.200, 431.201, 431.206(c)(2).
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Independent external review: Independent external review of
the plan determination is a fundamental component of the
Medicare system, and should be incorporated into all appeals
processes. In the managed care context, with its financial
incentives to limit care, external review provides an
impartiality that may not always be present in the internal
review process. The external review considers whether the
service is medically necessary, falls within coverage
guidelines, and/or is one for which the beneficiary is
eligible, without consideration of the financial impact on the
plan of providing the service. Thus, external review keeps
plans ``honest,'' and prevents them from using service denials
to persuade those with the greatest health care costs to
disenroll.
At the HCFA reconsideration level, the Center for Health
Dispute Resolution (CHDR) uses registered nurses and accredited
medical technicians to perform reviews of the record submitted
to CHDR by the HMO. At the hearing stage, the ALJ reviews the
evidence and decides whether the determination is in accordance
with the Medicare statute, regulations, and case law.
Beneficiaries have the opportunity to review the record, submit
evidence and have a face-to-face meeting with the decision-
maker. Taken together, these external review procedures ensure
that plans cover Medicare-covered services and comply with
Medicare law, and create an incentive for plans to learn and
apply Medicare coverage rules.
Medicaid also provides for independent, external review of
managed care plan decisions. Reviews are conducted before an
impartial hearing officer. As with the Medicare ALJ hearing,
the Medicaid fair hearing allows the individual to review the
case file and records, present and cross-examine witnesses, be
represented by a legal representative, and obtain a written
decision. An unfavorable decision may be appealed to state
court.
Expedited review: An expedited determination and/or
expedited plan review is available under Medicare when the
standard, 60-day time frame ``could seriously jeopardize the
life or health of the enrollee or the enrollee's ability to
regain maximum function.'' The beneficiary or the beneficiary's
doctor may request expedited consideration, which must be
granted if the request comes from the doctor. The request may
be made orally. The health plan must receive the request for an
expedited determination or reconsideration, decide whether the
determination will be made through the expedited or regular
appeals process, conduct the review, and issue its
determination within 72 hours. Health plans can be permitted up
to 10 additional days in certain circumstances. If a health
plan upholds its original decision in whole or in part, it must
forward the case to CHDR within twenty-four hours. CHDR will
then conduct an expedited reconsideraton, though current
Medicare regulations do not impose any obligations upon CHDR to
do so, or establish any time frames within which the expedited
HCFA reconsideration must be completed.
Key Components of Patients' Appeals Based on the Grijalva Order
As detailed in the chart we have attached to this
testimony, the BBA appeals provisions and the Medicare
expedited appeals regulations differ in several respects from
Judge Marquez's order in Grijalva v. Shalala, CV 93-711 (TUC
ACM (D.Az, March 3, 1997). For one, the Grijalva court
shortened the time frame for making the initial organizational
determination from 60 to five days. While our conversations
with HCFA lead us to believe that HCFA may shorten this time
period in the BBA implementing regulations, we do not expect
that HCFA will adopt the Grijalva standard.
Another difference involves the criteria for expedited
review. Judge Marquez ordered that expedited review occur when
services are urgently needed, and he gave examples of
situations in which the availability of expedited review is
presumed, i.e., ``certain types of nursing facility care,
certain types of home health and therapy services, and denials
of certain types of non-cosmetic surgery.'' This standard,
setting forth concrete examples of when expedited review is
needed, is more easily understandable and enforceable by
beneficiaries. Judge Marquez also held that a doctor's
statement is not required to trigger expedited review, and lay
evidence may be used to show urgency. However, the regulations
allow only the doctor and/or the plan to decide whether
expedited review is required, thus establishing a barrier that,
for many beneficiaries, is making the availability of expedited
review meaningless.
In terms of defining the key components of a managed care
appeals system, the most important differences between Grijalva
and the HCFA approach involve notice and the continuation of
care pending reconsideration. Adequate notice and continuation
of care are the fifth and sixth elements that should be
available in all health care appeals systems.
Adequate notice: Adequate notice that complies with all
constitutional and statutory requirements makes any appeal
system work better. Yet the Medicare regulatory notice
provisions do not address some of the problems most commonly
experienced by beneficiaries both before the filing of the
Grijalva suit and after the implementation of the Medicare
regulations last August. Although the preamble to the Medicare
regulations explains that beneficiaries initially requesting an
organization determination can request an expedited decision,
there is no provision for giving such persons advance notice of
this right. Without such knowledge, beneficiaries fall within
the regular process, which currently allows plans up to 60 days
to make a decision. When beneficiaries finally receive notice
of the organizational determination, the lack of specificity
and detail in the notices causes confusion and
misunderstanding. The notices use general and generic terms
that do not inform the beneficiary of the factual basis for the
denial, explain what specific service is not covered and why,
or in any way indicate to the beneficiary the additional
information needed to approve the request for services.
Continuation of care: Judge Marquez ordered that the
Medicare appeals process require services to be continued until
a final expedited reconsideration decision has been rendered.
The continuation of care, or, as it is known in many states,
``aid paid pending,'' has been a crucial component of the
Medicaid program for years.\2\ In many situations, it is the
only way to ensure that the beneficiary receive needed care.
Unlike in fee-for-service cases, where the issue is payment for
services already received, the issue being appealed in the
managed care context is the ability to receive needed medical
care. The hiatus in care caused by the inappropriate
termination of certain services--such as rehabilitative
therapies, home health care, a skilled nursing facility stay--
often cannot be remedied by a subsequent successful appeal. For
example, a patient whose home health services were terminated
prematurely may already have been transferred to a nursing
home, and so may no longer benefit from the services that were
denied.
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\2\ 42 C.F.R. 431.230.
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Ombudsman Program as a Key Component
An issue not addressed in either the Grijalva decision, the
Medicare managed care regulations, or in Medicaid is the need
for an independent health care ombudsman to work with
beneficiaries through the appeals process and with all of their
dealings with their health plan. Ombudsman programs have proven
effective in assisting beneficiaries with their disputes with
plans, clarifying questions about plans, and clarifying general
questions about health care coverage. One of the most
successful models is the Sacramento, California, Ombudsprogram
operated by Peter Lee of the Center for Health Care Rights.\3\
---------------------------------------------------------------------------
\3\ Peter Lee and Carol Scott, Managed Care Ombudsprograms: New
Approaches to Assist Consumers Improve the Health Care System (Center
for Health Care Rights, Los Angeles, CA 1996).
---------------------------------------------------------------------------
Medicare beneficiaries have more of an opportunity to get
help than other health care consumers. The Omnibus Budget
Reconciliation Act of 1990 established limited funding for an
Information, Counseling and Assistance (ICA) program in every
state. ICA programs aid Medicare beneficiaries in understanding
Medicare and their Medigap and other private insurance options,
and help beneficiaries who experience problems with their
plans. While not called an ombudsprogram, the ICAs perform many
of the same functions. The biggest challenge faced by these
programs is the lack of resources to perform the beneficiary
education and assistance required. Implementation of the
Medicare+Choice program, and the anticipated questions that
will arise from beneficiaries about the choices available to
them, will tax the limited resources of these programs
considerably, so that they may not be available to help
negotiate a plan's grievance and appeals system.
Experience With the Medicare Managed Care Appeals Process
In presenting our testimony to support a strong patient
appeals process, we wanted to share with the Subcommittee some
of the experiences beneficiaries have had with the Medicare
system. NSCLC asked several of the Medicare advocates around
the country with whom we work on a regular basis to provide
examples of both the effectiveness of the system and its
glitches. Several of the examples in this testimony come from
an early draft of a report by the Medicare Rights Center (MRC),
that documents the first six months of calls to its expedited
appeals hotline.\4\
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\4\ HCFA's Medicare expedited appeal regulations went into effect
on August 28, 1997.
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The Medicare appeals scheme works. For example:
MRC was asked by HCFA to include its telephone
number on model denial letters HCFA developed and distributed
to managed care plans. Many of the people who called the MRC
hot line learned about the organization from the notice. This
experience substantiates the importance of providing complete
information on notices to beneficiaries, and the usefulness of
have an ICA or ombudsprogram available to respond to inquiries.
A woman in California recovering from a car
accident was receiving physical therapy and occupational
therapy in the rehabilitation unit of a hospital. Although
these services clearly constitute skilled care under Medicare
law, and although the services were still medically necessary,
the medical group sent notice of discontinuation of coverage.
The woman's family contacted a Medicare advocate who asked for
an expedited appeal. Within 72 hours, the HMO reversed the
medical group's decision, and care was continued.
The system worked successfully in the California case for a
number of reasons. The medical group sent official notice. The
family was knowledgeable enough to seek help from an advocate
familiar with Medicare coverage rules, and the advocate
requested an expedited appeal. The particular HMO in question
is equipped to investigate complaints regarding inadequate
care, and has designated specific people to handle expedited
appeals. But, as the advocate involved pointed out, the case
could have come out differently. The beneficiary is unable to
seek help on her own; without family to intervene, she never
would have pursued an appeal. The plan involved granted the
request for expedited appeal, even though the request was not
made by a doctor. Advocates from around the country report that
many plans automatically deny requests for expedited review
when they come from beneficiaries. In this case, as in many,
medical support was difficult to obtain. Neither the doctor nor
the therapists wanted to go on record supporting the appeal,
even though they believed additional therapy was medically
necessary. Finally, this HMO is complying with the law, though
the advocate who represents the woman reports other HMOs in the
area use untrained customer service representatives who give
unrepresented beneficiaries inaccurate information about
appeals.
Problems arise when plans do not comply with the regulations and have
not implemented an appeals process. For example:
The failure to provide proper notice still remains
a problem, despite the Grijalva case. MRC found that, even
though HCFA distributed model denial notices to HMOs, several
of the letters received by callers to its hotline were so
unclear in their description of the appeals rights that the
enrollees did not know what those rights were and could not
have pursued an appeal based on the information in the notices.
MRC also found that one plan in New York sent the same notice
of noncoverage, regardless of the nature of the problem, in
violation of the requirements that notices contain a specific
reason for denial, and that an HMO cannot use the same reason
for all denials.
An enrollee in Michigan who asked to file an
appeal was told by two different people in the plan that he had
waived his Medicare appeal rights when he enrolled in an HMO,
and that no appeal was available to him. The underlying issue
involved the inadequacy of the plan network, and the plan's
refusal to refer the enrollee to an outside specialist.
When an Oregon HMO upheld on reconsideration its
original decision to deny coverage of durable medical
equipment, the enrollee requested an external review of his
case. Despite the fact that unfavorable plan reconsiderations
must be sent automatically to CHDR, plan representatives told
the enrollee he did not have any further appeal rights.
MRC received numerous calls from beneficiaries
whose request for an appeal was lost or not documented in the
record. Other callers related situations in which the HMO
failed to act on initial organization determinations or
reconsideration within the statutory time periods.
One further difficulty involves the completeness of the
record being reviewed at both the plan reconsideration level
and the HCFA reconsideration level and the ability of the
enrollee to get access to the medical records. Medicare managed
care regulations require that a HCFA reconsideration include
review of, among other things, ``.... other evidence submitted
by the parties....'' \5\ Yet, while CHDR gives directions to
plans on how to submit additional evidence to support their
decision, no process exists by which beneficiaries may review
the records before CHDR and submit additional evidence to
support their claim or to correct inaccurate or incomplete
records.
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\5\ 42 C.F.R. 417.622(a).
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When a Florida enrollee got no response to her
numerous attempts to obtain doctor-authorized durable medical
equipment from her plan, she finally went out-of-plan to get
the equipment. The plan denied reimbursement, and CHDR upheld
the plan. At the ALJ level, the enrollee discovered that the
plan had not included in the record it sent to CHDR the
doctor's referral for the equipment or evidence of her numerous
contacts with the plan. The plan had refused to release the
records to the enrollee and her attorney, even when requested
to do so by the ALJ, so the enrollee could not correct the
records earlier.
A Connecticut HMO denied, without written notice,
medically necessary care to an enrollee who had just be
discharged from the hospital. The doctor wrote to the plan, and
the case was sent to CHDR. CHDR initially declined to give the
enrollee's attorney access to the medical records submitted by
the HMO. When CHDR finally provided the records, the records
contained erroneous information about the enrollee's medical
condition, and did not include the materials submitted by the
treating physician in support of the appeal. The records were
corrected, the treating physician's supporting information was
submitted, and CHDR ordered that care be provided.
In the last example, effective advocacy by the treating
physician and the beneficiary's attorney resulted in an
inappropriate decision being overturned upon external
reconsideration. One month later, however, the enrollee was
again told orally and not in writing that his care was being
discontinued. The doctor again wrote a letter to the plan, and
the case was referred to CHDR. Although CHDR, after much
discussion, corrected the plan's previous violations, in this
instance CHDR declined to order that care be reinstated until
the HMO followed the federal regulatory requirement to provide
written notice. Further, CHDR upheld the denial based on the
recommendations of a consulting physician who applied a
standard that did not comply with Medicare regulations. CHDR
denied enrollee's attorney access to the consulting physician's
evaluation of the case.
As plaintiffs in Grijalva have argued since the complaint
was first filed in 1993, HCFA must enforce all Medicare laws
and regulations, including those pertaining to the appeals
process, and hold accountable any HMO that does not follow
them. The failure of HCFA to enforce the Medicare managed care
appeals regulations does not in any way diminish the fact that
those regulations represent good, sound health care policy. The
availability of external review to Medicare beneficiaries
assures them that an independent entity with the appropriate
expertise in Medicare law will review all claims and protect
them against decisions made for reasons that do not comply with
Medicare rules. All consumers, regardless of the type of health
plan, are entitled to the same protection.
[GRAPHIC] [TIFF OMITTED] T3213.008
[GRAPHIC] [TIFF OMITTED] T3213.009
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