[Senate Hearing 111-37, Part 1]
[From the U.S. Government Publishing Office]
S. Hrg. 111-37, Part 1
DECEPTIVE HEALTH INSURANCE INDUSTRY
PRACTICES: ARE CONSUMERS GETTING
WHAT THEY PAID FOR?--PART I
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
MARCH 26, 2009
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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50-466 PDF WASHINGTON : 2009
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
JOHN D. ROCKEFELLER IV, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii KAY BAILEY HUTCHISON, Texas,
JOHN F. KERRY, Massachusetts Ranking
BYRON L. DORGAN, North Dakota OLYMPIA J. SNOWE, Maine
BARBARA BOXER, California JOHN ENSIGN, Nevada
BILL NELSON, Florida JIM DeMINT, South Carolina
MARIA CANTWELL, Washington JOHN THUNE, South Dakota
FRANK R. LAUTENBERG, New Jersey ROGER F. WICKER, Mississippi
MARK PRYOR, Arkansas JOHNNY ISAKSON, Georgia
CLAIRE McCASKILL, Missouri DAVID VITTER, Louisiana
AMY KLOBUCHAR, Minnesota SAM BROWNBACK, Kansas
TOM UDALL, New Mexico MEL MARTINEZ, Florida
MARK WARNER, Virginia MIKE JOHANNS, Nebraska
MARK BEGICH, Alaska
Ellen L. Doneski, Chief of Staff
James Reid, Deputy Chief of Staff
Bruce H. Andrews, General Counsel
Christine D. Kurth, Republican Staff Director and General Counsel
Paul Nagle, Republican Chief Counsel
C O N T E N T S
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Page
Hearing held on March 26, 2009................................... 1
Statement of Senator Rockefeller................................. 1
Statement of Senator Lautenberg.................................. 3
Prepared statement........................................... 3
Statement of Senator McCaskill................................... 30
Statement of Senator Udall....................................... 32
Statement of Senator Begich...................................... 35
Statement of Senator Klobuchar................................... 37
Statement of Senator Pryor....................................... 39
Statement of Senator Snowe....................................... 41
Witnesses
Linda A. Lacewell, Counsel for Economic and Social Justice and
Head of the HealthCare Industry Taskforce, Office of the New
York State Attorney General.................................... 4
Prepared statement........................................... 7
Nancy H. Nielsen, M.D., Ph.D., President, American Medical
Association.................................................... 10
Prepared statement........................................... 11
Chuck Bell, Programs Director, Consumers Union................... 20
Prepared statement........................................... 22
Appendix
Mary Reinbold Jerome, M.D., Yonkers, New York, prepared statement 53
DECEPTIVE HEALTH INSURANCE INDUSTRY
PRACTICES: ARE CONSUMERS GETTING
WHAT THEY PAID FOR?--PART I
----------
THURSDAY, MARCH 26, 2009
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10:34 a.m. in
room SR-253, Russell Senate Office Building, Hon. John D.
Rockefeller, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV,
U.S. SENATOR FROM WEST VIRGINIA
The Chairman. Good morning, everybody. Today's hearing is
the first of two hearings--which works out very well, the setup
of the two hearings--that we're holding to look at deceptive
payment practices that the health insurance industry has gotten
away with for the last decade, probably longer. The victims of
this deceptive practice were probably most of the people
sitting in this hearing room today, along with the more than
100 million Americans who pay for health insurance coverage
that allows them to go outside of their provider network for,
you know, medical care. Having the ability to get health care
service outside of the network is a very important option for
American consumers, and it's an option that they pay for--and
they know they're going to pay for that--in the form of higher
premiums, higher deductibles, and higher coinsurance payments.
Now, Dr. Jerome should be sitting here today. We are--Dr.
Mary Jerome--she's a resident of Yonkers, New York. She has
been fighting ovarian cancer since 2006. She had planned to be
here, but she just can't physically make it, today. But, I'm
still going to say something about her.
According to her testimony, Dr. Jerome received her health
care coverage through a point-of-service plan, which encouraged
her to get care within a provider network, but also allowed her
to see out-of-network providers, if she so desired and it was
necessary.
So, here's what she says in her testimony, ``I had always
been confident that paying for the out-of-network option
provided peace of mind with respect to the financial burdens
associated with catastrophic medical costs.''
After her cancer diagnosis, Dr. Jerome and her in-network
primary-care physician decided that she needed to be treated at
a health care provider that was outside of her network; that
one being in Memorial Sloan-Kettering Hospital in New York
City. Dr. Jerome knew she was going to have to pay some portion
of these costs out of her own pocket, but she also assumed, in
good faith, that the treatment was going to be covered by her
insurance.
What we're going to learn today is that American consumers
like Dr. Jerome, people who have been paying higher premiums
for the choice to see out-of-network doctors, have not been
getting what they have been paying for. We're going to hear
testimony suggesting that the health insurance industry has
been systematically low-balling American consumers. And this is
a very upsetting situation, one which has been revealed in New
York. And if we have to have 50 hearings for 50 states, I'll be
glad to do that, too.
They have been promising, these insurance companies, to pay
a certain share of the consumers' medical bills, but they have
been rigging health care-charge data to avoid paying their fair
share. The result is that billions of dollars in health care
costs have been unfairly shifted to Dr. Jerome and millions of
other American consumers like her; as I said, probably many in
this room.
So, here's how it works. The insurance company generally
promises to reimburse out-of-network medical services at what
they refer to in the industry as the ``usual, customary, and
reasonable rate.'' Usually, just the word ``usual and
customary.'' Well, the problem is that it's been the insurance
industry who has been deciding what is ``usual, customary, and
reasonable,'' what that means. They make that decision.
Consumers have not had any input. Doctors and other health care
providers have not had any input. The chairman of the American
Medical Association has not had any input. Only the insurance
companies have been getting to decide what's reasonable, which
is like letting the fox define ``usual, customary, and
reasonable'' in the henhouse.
You understand that.
Senator McCaskill. I do. We have both, in Missouri. Fox and
henhouse.
The Chairman. So, the good news is that, thanks to a series
of lawsuits and a year-long investigation by the New York
Attorney General's Office, the insurance companies that operate
in New York, including, most importantly, UnitedHealth Group,
and its medical information subsidiary, Ingenix, have been
forced to change the way they do business. And Ms. Lacewell has
a lot to do with that.
Conclusion--our goal for today is to get an update on how
the reforms proposed in New York are being implemented, and to
understand how the deceptive practices uncovered in New York
have been harming customers in the other 49 States.
I'm looking forward to this testimony, especially at a time
when our country is going through all kinds of murderous
economic situations for people to pay any kind of health
insurance at all.
I would, finally, like to note that missing from our
hearing today is one group of stakeholders who played an
indispensable role in creating and perpetuating this unfair
reimbursement system, but who will also play an essential role
in changing it, and that is a little group called the insurance
industry.
On March 9, I invited the CEOs of UnitedHealth Group and
Ingenix to testify at this hearing, because we wanted to hear
their side of the story, because we're always fair here.
Because UnitedHealthcare told us that their CEO, Mr. Stephen
Hemsley, was not available to testify today, we agreed to hold
a second hearing, next week. So that's what we're going to do
on Tuesday. That's very important, for observers and for press
and for members here to know that.
It's perfect. We get--we have the good guys, and then we
have the other guys.
[Laughter.]
The Chairman. The good guys are today, the other guys--
you're going to set up next Tuesday.
So, at 10 a.m. next Tuesday, we'll be holding a hearing,
during which we hope to gain a better understanding of the
insurer's perspective.
Now, I, at this point, usually call on the Ranking Member,
and I don't see one, so what I would like to do is call--is
simply to ask you to present your testimony, unless any of our
members would care to make a statement. Short statement. Very
short statement.
STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY
Senator Lautenberg. It just keeps getting shorter?
The Chairman. Yes. Because I was long.
Senator Lautenberg. You're very generous to make that
offer. In a place like this, people don't usually make that
kind of an offer, so I will take advantage, for a moment, of
the Chairman's latitude with allowing just a short statement.
Mr. Chairman, as I'm sure you mentioned, in New Jersey and
across the country, people are working harder than ever, still
struggling to get by. And the worst thing to do is to have to
be caught in the middle of a scheme--for them, for the
individual--that permits the insurance companies to siphon off
more of the profit than they're entitled to. And they do pretty
well in that provider--health provider business.
And so, we're pleased to have you here. We've had terrible
problems, the State of New Jersey. In 2000-2007, premiums in
New Jersey rose 71 percent, while workers' earnings increased
15 percent. So, the health care costs in New Jersey, seeing a
doctor, getting a prescription, need grew 50 percent from 1999
to 2008.
So, we're pleased to have--that you chose to have this
hearing, Mr. Chairman, and that we have a chance to learn more
about it from people who are directly involved. And we thank
you for being here.
Thank you very much.
[The prepared statement of Senator Lautenberg follows:]
Prepared Statement of Hon. Frank R. Lautenberg,
U.S. Senator from New Jersey
Mr. Chairman, in New Jersey and across the country, people are
working harder than ever before, but still struggling to get by.
They are being forced to make devastating choices between paying
their mortgage and paying for health care.
In these difficult economic times, the cost of health care is
putting a tremendous strain on families in my state.
Between 2000 and 2007, health care premiums in New Jersey rose
seventy-one (71) percent while worker's earnings increased just fifteen
(15) percent.
In addition, total health care costs in New Jersey--from seeing a
doctor to getting the prescriptions people need--grew fifty (50)
percent from 1999 to 2008.
So when we learn that the insurance industry may be manipulating
data to make consumers overpay for their health care, Congress has
reason to be concerned and Americans have reason to be angry.
One patient in New Jersey was left owing thousands of dollars in
health care bills for her breast cancer treatment because her insurance
company cooked the books to cover far less of the cost than it should
have.
This New Jersey patient--like many other patients and families--was
forced to pay for care that her insurer should have covered under the
terms of her insurance plan.
And if that wasn't bad enough, the so-called ``independent
organization'' that was supposed to protect all patients by objectively
determining how much of the cost should be covered by insurance was
owned by an insurance company.
That arrangement was a conflict of interest and undermined all
Americans' faith in the health care system.
I'm pleased that this problem has been resolved, but we must remain
vigilant on behalf of consumers.
People are willing to do their part. They are willing to pay a fair
price for the health care they get.
But Americans who work hard to pay their premiums rightfully expect
their insurance companies to keep up their end of the bargain.
Along with my colleagues, I will fight to keep insurance companies
working for Americans--not against them.
I look forward to hearing from today's witnesses and seeing how we
can stop consumers from getting a raw deal.
The Chairman. Thank you, Senator Lautenberg.
Any other statements?
Senator Udall. Let's get to the witnesses.
The Chairman. Well, I like that.
The first one is Ms. Linda Lacewell. And this is her title.
She is Counsel for Economic and Social Justice, and Head of the
Healthcare Industry Task Force, and she knows her business
very, very well. Obviously, as I indicated, Mary Jerome--Dr.
Mary Jerome, could not be here. Dr. Nancy Nielsen, President of
the American Medical Association, with the incredible fortune
of having been born in Elkins, West Virginia.
Dr. Nielsen. That's right.
The Chairman. And Mr. Chuck Bell, Programs Director for the
Consumers Union.
So, we look forward to your statements, starting with you,
Ms. Lacewell.
STATEMENT OF LINDA A. LACEWELL, COUNSEL FOR
ECONOMIC AND SOCIAL JUSTICE AND HEAD OF THE
HEALTHCARE INDUSTRY TASKFORCE, OFFICE OF THE NEW YORK STATE
ATTORNEY GENERAL
Ms. Lacewell. Thank you very much, Mr. Chairman. Thank you
to the Committee, for inviting me here today with respect to
this hearing. It's a pleasure to be here, and it is my
privilege to represent the Attorney General of the State of New
York, Andrew Cuomo, at this hearing.
For the past year, the Attorney General in New York has
been conducting an industry-wide investigation with respect to
the insurance industry concerning a scheme that is truly, in
our view, staggering in scope and impact, affecting, as the
Chairman noted, over 100 million Americans around the country--
that is one in three people in this country--a scheme run by
the Nation's largest health insurers, as we found, which left
working families across the country wrongly stuck with at least
hundreds of millions of dollars in unreimbursed medical
expenses, a scheme that ran for at least 10 years, and one that
is finally coming to an end.
The Attorney General is the people's lawyer and seeks to be
responsive to their concerns. As a result of that, he travels
the State of New York and learns what the issues are of concern
to the people. And time and again, the primary concern raised
by the people in the State of New York is health care and
health care costs and whether or not they're getting the
benefit of the bargain of their health insurance.
A key concern raised by them with respect to health care is
reimbursement for what is known as out-of-network medical
costs. About 70 percent of insured Americans have a plan that
allows them to choose their own doctor outside of the network
of insurers--outside the network that insurers have put
together by contract with their doctors. These consumers, it's
important to note, do pay more; they pay a higher premium. It
costs them more money for this right to go out of network. And
that balance of--that bargain is an important one to ensure is
met. And they choose to pay more for the right to go out of
network because it is fair to say that health care can be a
matter of life and death, and choosing a doctor is a critical
issue in that regard.
Under these out-of-network plans, in exchange for the
higher premium, the insurer typically promises to pay a
substantial portion, a huge portion, of the anticipated cost,
which they refer to as a ``usual and customary rate.''
Frequently, the insurer says, ``I will pay 80 percent of what
the usual and customary rate is.'' And that is understood to
mean--in the industry, to mean ``the prevailing rate the
doctors charge when they have not negotiated a lower rate with
the insurer on an in-network basis.''
And this is a critical consumer issue, because in the out-
of-network setting, when the insurer does not reimburse the
entire bill to the consumer, it is the consumer who is
responsible to the doctor to pay the balance of the bill, which
would not ordinarily be the case in an in-network setting.
So, our investigation sought to determine why the
reimbursement rates to consumers were so low, who was
determining the rates, and how, and whether, in fact, these
rates were fair or not fair.
We, therefore, surveyed health insurers operating in the
State of New York, which includes some of the largest insurers
in the country that operate in New York, UnitedHealth Group,
Aetna, CIGNA, WellPoint, which is the largest in the country.
And time and again we received the same answer, ``When we
determine these rates, we are relying on this independent
company, known as Ingenix.'' We then went to Ingenix and said,
``How are you determining these rates?'' And time and again
from Ingenix we received the same answer, ``Well, we collect
fee information, billing information, from insurers around the
country, the largest insurers that there are--United, Aetna,
CIGNA, WellPoint, and everybody else. We take all their data,
we put it in a database, we mix it up, and we issue these fee
information schedules that go to the industry to determine
usual and customary rate.''
The natural question then became, Who is Ingenix? And on
that question, when you look behind the curtain of this oracle
of usual and customary rates, one finds UnitedHealth Group, the
second largest insurer--health insurer in the United States,
because Ingenix is a wholly owned subsidiary of UnitedHealth
Group, making this essentially a closed-loop system of the
health insurance industry collecting the information among
itself, pooling the information together, all relying on the
same rate information, a system that is impenetrable to the
consumer.
The Attorney General found, and health insurers have since
acknowledged, that there are conflicts of interest here, a
picture of conflicts of interest from top to bottom, because
each of the health insurers has a reimbursement obligation
toward the consumer and therefore has an interest in keeping
the reimbursement rate low.
So, if the rates are being determined and agreed upon,
essentially, by the insurers, and the database is based on
their product, there is a significant danger to consumers of
underpayment. And our investigation found that, in fact,
Ingenix did lead to underpayments.
The other problem that we found with this system is that
Ingenix has been essentially a black box to consumers, who do
not know, first of all, that it is the insurance industry
determining what this--what these rates, and second, they don't
know how to challenge the rates, and they are almost never
given, by the industry, an opportunity to do so.
It is important to note, as the Chairman did, that,
although this issue may sound technical, it affects almost
everyone in the country, and it has a human impact, as
demonstrated by the story of Mary Jerome, referred to by the
Chairman, who was stuck with tens of thousands of dollars of
unanticipated medical costs at a time when she was fighting,
not only for her health, but for her life.
Having identified this problem, the Attorney General set
about to determine an appropriate reform. And when the problem
is framed, the answer becomes simple and clear to note, and
that is, there must be an independent system that does not have
the conflicts of interest that currently exist; there should be
a database that is independent; we feel it should be run by a
not-for-profit company associated with a university, which has
an interest in the database being accurate, because it will
also be used for academic research; and the system should be
reformed in that way. And also, it is critical that consumers
across the country get some transparency into their
reimbursement rates so that they know ahead of time what their
costs are going to be, what their out-of-pocket expense is
going to be, before they shop for a doctor. And in that regard,
it is the Attorney General's goal that there be a website
ultimately available to consumers where they can go to find
out, in their area, what their reimbursement rates are likely
to be for various medical services.
UnitedHealth Group and Ingenix have agreed to sign on to
these reforms, and we have commended them for that, and we
continue to do so. When the new database is ready, they will
shut down the existing Ingenix database. They are funding the
new, independent not-for-profit with $50 million, and the rest
of the industry, like dominos, has quickly followed suit, and
we have now collected about $95 million to institute these
reforms.
We are also working closely with the New York Department of
Insurance to make these reforms permanent, and we believe there
is a need for a new regulation to end, once and for all, the
conflicts of interest that derailed the existing system, and to
bring new rigor and transparency so that this problem can never
happen again.
The Attorney General strongly believes that states are a
laboratory for reforms and advancements in many areas,
including health care, and we hope that the new regulation in
New York will serve as a model for the Nation so that the goals
of accuracy, transparency, and fairness in out-of-network
reimbursement for consumers like Mary Jerome can be met.
Thank you.
[The prepared statement of Ms. Lacewell follows:]
Prepared Statement of Linda A. Lacewell, Counsel for Economic and
Social Justice and Head of the Healthcare Industry Taskforce, Office of
the
Attorney General, State of New York
I thank Chairman Rockefeller, Ranking Member Hutchison, and the
Members of the Committee on Commerce, Science, and Transportation for
inviting me to speak this morning. It is my pleasure to be here today
on behalf of New York State Attorney General Andrew Cuomo.
Background
Over the last year-and-a-half, the Office of the Attorney General
has conducted an investigation into how the health insurance industry
reimburses consumers for out-of-network health care services. During
the course of the investigation, we uncovered a fraudulent and
conflict-of-interest-ridden reimbursement scheme. These deceptive,
industry-wide practices affected millions of patients and their
families and cost them hundreds of millions of dollars in unexpected
and unjust medical costs.
As the Attorney General travels around the State of New York and
addresses local community forums, the number one concern people raise
is health care. It is easy to see why the results of this investigation
have struck a chord with the public. Our nation faces a health care
crisis. In addition to the obvious problems of the uninsured and the
underinsured, our investigation has found that under-reimbursement of
the insured is a major problem. Until now, it has been a hidden
problem. This is not just a problem in the State of New York.
Nationwide, medical costs are the leading cause of individual
bankruptcy, even though the individual usually had insurance.
Fraudulent under-reimbursement for insured Americans is one part of
this negative equation for consumers.
Of insured Americans, about 70 percent pay higher premiums for the
right to select their own doctor. That's 110 million people or 1 in 3
insured Americans. The reasons vary. Some people want the freedom to
make decisions about their families' health care while others cannot
find the best physician to treat a particular condition in their
insurer's network. Those who carry out-of-network coverage sometimes
need it when they least expect it. Patients are admitted to in-network
hospitals and through no choice of their own are treated by out-of-
network doctors there, resulting in anticipated, high medical costs for
the consumers involved.
In exchange for higher premiums, the insurer promises to pay a
large portion of the bill when a consumer has seen an out-of-network
doctor. Typically, health insurers promise to pay a percentage of the
bill, often it is 80 percent, of market rate, which the industry calls
the ``usual and customary'' or ``reasonable and customary'' rate, also
known as ``UCR.'' The ``usual and customary'' rate is supposed to be a
fair reflection of the market rate of doctors across the country for
all kinds of medical services, and we found that consumers read the
term that way.
If the insurer does not reimburse the consumer at that level
because the insurer did not deem the doctor's charges to be usual,
customary or reasonable, the consumer is responsible for paying the
balance of the bill. As a result, consumers who choose to go out of
network have to pay more for medical care than they anticipated. In
this way, out-of-network policies can be a financial trap for
consumers, leading to unexpected health care debts. Moreover, when
health insurers fail to explain accurately or clearly what they will
pay for out-of-network care, consumers are unable to make intelligent
and informed decisions about their health care.
I will take the next few minutes to elaborate on the inherent
conflicts of interest in the consumer reimbursement system, and how we
are moving the industry away from this self-serving model and toward
reform of the out-of-network reimbursement system.
Conflict of Interest
For 10 years, the ``usual and customary'' rate for the entire
industry has been decided by one company: Ingenix. As we learned, the
largest health insurers throughout the country use Ingenix to determine
``usual and customary'' rates. Who is Ingenix? Early on in our
investigation we discovered that Ingenix is a wholly-owned subsidiary
of the Nation's second largest health insurer, UnitedHealth Group. As
both a user of and contributor to the Ingenix database, UnitedHealth
clearly had an interest in depressing reimbursement rates, causing
consumers to pay more. Shortly thereafter, we learned that many other
national health insurers also contributed their billing data to this
database and then used the database as a benchmark for reimbursement
rates. This resulted in the creation of a closed system, leaving no
real options for consumers.
Reasonable and customary rates are supposed to fairly reflect
market rates, but our investigation revealed that Ingenix is nothing
more than a conduit for rigged information that is defrauding consumers
of their right to fair reimbursements for their out-of-network health
care costs. All the while consumers are left to sort through confusing
policy language and are then stuck with the balance of their doctors'
bills. To make matters worse, health insurers routinely hide this
conflict of interest from their members in obscure policy language
making it a problem that is nearly impossible to detect.
Lack of Transparency
During the investigation, our Office subpoenaed a broad range of
plan documents describing out-of-network policies. Our review of these
materials revealed a shocking lack of transparency and accuracy. Most
insurers failed to disclose accurately and clearly what they would pay
or how they would determine payment for out-of-network care. In one
case, we found that a national insurer had filled an entire page with
alternative ways of how it purported to calculate out-of-network rates
in language that was unintelligible. As expected, none of the insurers
accurately described the role Ingenix played in determining those
reimbursement rates.
The Ingenix Data base Under-Reimburses Consumers
Ultimately, our investigation found that the Ingenix schedules
themselves, created in a well of conflicts, are unreliable, inadequate,
and wrong--often forcing consumers to bear an even greater burden of
the cost of care. UnitedHealth had a financial incentive to understate
the ``usual and customary'' rate so as to reduce the amount reimbursed
to consumers. For the same reason, other insurers had a financial
incentive to manipulate the data they provided to the Ingenix database
so that the pooled data would skew reimbursement rates downward. When
combined with Ingenix's lack of incentive to audit the data it received
and pooled, consumers were continually at risk of being under-
reimbursed.
As part of our investigation, in an effort to determine the level
of accuracy of the Ingenix database, we collected and analyzed millions
of health care bills from a variety of sources, including a range of
insurers operating within New York State. Our analysis showed that
insurers systematically under-reimburse New Yorkers for doctor's office
visits and that there were wide disparities when comparing various
regions across the State. Underpayments of up to 10 to 20 percent in
Manhattan alone translated to millions of dollars in underpayments.
When extrapolated across the State and the country, it is fair to say
that the Ingenix database have caused Americans to be under-reimbursed
by hundreds of millions of dollars over the past 10 years.
Ingenix has been a ``black box'' for consumers who do not know
their out-of-pocket cost of medical services before receiving them and
has driven up costs when consumers cannot get the best value for their
dollar before choosing a provider because they cannot comparison shop.
Mary Jerome's story stands out in my mind and illustrates the
point. Mary Jerome is a college professor in New York who was found to
have ovarian cancer in 2006 and was left with tens of thousands of
dollars in unreimbursed medical bills. Her doctor recommended she be
treated at leading cancer center Memorial Sloan Kettering where she
expected to pay no more than her $3,000 deductible for going out of
network. Soon she faced bills that left her $70,000 to $80,000 in debt
and was forced to navigate a complicated appeals process with her
health insurer while trying to recover from a devastating illness.
Cases like Mary Jerome's inspired us to think more broadly about
the kinds of industry reforms that were needed to protect patients, who
could be focused on recovering physically instead of having to spend
time and energy trying to recover their health care costs.
Solutions
After consulting with a number of stakeholders, including consumer
advocates, representatives from the physician community, and health
care economists, our primary objectives became clear. First, the
``usual and customary'' or market rates for health care charges have to
be determined by an independent third party free of conflicts of
interest, using a fair, objective, and reliable database. Second,
before consumers choose an out-of-network doctor, they should have a
range or estimate of what it will cost them. Consumers need more
information about how they will be reimbursed and they need it earlier
in the decision-making process.
To resolve this industry-wide issue, we zeroed in on the source of
the problem: Ingenix and UnitedHealth, Ingenix's parent company. Once
UnitedHealth acknowledged that there were inherent conflicts of
interest in the reimbursement system, it not only agreed to stop making
the Ingenix database available to other insurers for purposes of
calculating usual and customary rates, but also agreed to contribute
fifty million dollars for the creation of a new, independent database
that will become a new industry standard. After the agreement with
UnitedHealth was announced, our Office quickly secured agreements with
the other leading insurers around the country, as well as the largest
insurers in New York State, to stop using Ingenix to calculate out-of-
network reimbursement rates and contribute resources to the new
database. To date, in addition to the agreement with UnitedHealth, we
have also entered into agreements with WellPoint, Aetna, CIGNA, MVP
Health Care/Preferred Care, Independent Health, HealthNow, CDPHP,
Excellus, GHI/HIP (EmblemHealth), and Guardian Life Insurance Company.
The funds we collect will go toward the creation of a not-for-
profit entity that will operate the new, independent database designed
to fairly reflect the market and create a website available to
consumers to provide reimbursement information so that consumers can
make more informed decisions and better manage their health care costs
before they shop.
The not-for-profit entity will set up the database, which will:
be a credible source for the industry and consumers
not be controlled by the industry
determine rates fairly reflecting the market, and
collect information that goes beyond the limited information
collected and provided by Ingenix.
These industry reforms will bring accuracy, transparency, and
independence to a broken system and keep hundreds of millions of
dollars in the pockets of over one hundred million Americans.
Need for Additional Regulation
Our office has also been working with the New York State Department
of Insurance to revise and improve the rules regarding consumer
reimbursements.
We believe there is a need for a new regulation to end once and for
all the conflicts of interest that derailed the previous system and to
bring new rigor to the system. First, insurers should not be permitted
to use as a source or basis for determining usual and customary rate
any entity that has a pecuniary interest in the rates. That includes
any insurer, HMO, medical association, or health care provider. Second,
insurers should base consumer reimbursements in this area on accurate
schedules that fairly reflect the market and are regularly updated. And
they should disclose to consumers ahead of time how much they will be
reimbursed.
National Action
The Attorney General believes that the states can serve as
laboratories for advances and reforms in areas such as health care. New
York should adopt a regulation that serves as a model for the Nation in
advancing the goals of accuracy, transparency and fairness in out-of-
network reimbursement for consumers.
The issue of out-of-network reimbursement is just one example of
how our complex health care system burdens consumers without
necessarily delivering better outcomes. By the time individuals reach
out to our Office for help, they have often spent countless hours
trying to decipher coverage language, filling out claims forms, filing
appeals with their insurers, negotiating with their providers and
trying to make sense of mountains of paperwork--all in an effort to
manage their health care costs, and frequently at a time of coping with
serious illnesses. Building clarity and accuracy into the reimbursement
system can also alleviate these unnecessary burdens on patients and
consumers.
Conclusion
As this Congress tackles the reform of our health care system, the
Attorney General asks that it consider ways to make health care
transactions more transparent, provide clearer information to consumers
about their rights and responsibilities, and hold insurers accountable
for providing accurate and complete information to their members.
The Attorney General looks forward to providing any assistance the
Committee may require to help achieve these goals.
The Chairman. Thank you, Ms. Lacewell.
Dr. Nielsen?
STATEMENT OF NANCY H. NIELSEN, M.D., Ph.D., PRESIDENT, AMERICAN
MEDICAL ASSOCIATION
Dr. Nielsen. Good morning, Chairman Rockefeller, Members of
the Committee. I'm Dr. Nancy Nielsen. I'm originally from West
Virginia, as you heard, and I now live in Buffalo, and I am a
practicing internist and also President of the American Medical
Association. Thank you very much for inviting me here today to
testify about this important issue. We have been involved in
this issue for nearly a decade.
You have already heard how it worked, that the database was
used to determine ``usual, customary, and reasonable fees''
that insurers paid when a patient went out of network. And the
patients, as you've also heard, paid extra for the privilege of
going out of network.
There have been, as you heard from Ms. Lacewell, two
precedent-setting settlements by United, one with the AMA and
the other with Attorney General Cuomo. And therefore, this
abuse is being addressed. My comments will focus on the AMA's
lawsuit and its implications for physicians and patients.
You might wonder why a doctor would not belong to a network
and why people would have to go out of network. Patients
understand that all physicians are not part of every network,
either because the payer sometimes restricts the network
deliberately, or because the physician decides that the fee
schedule is not adequate, or that the hoops that they have to
jump through are not worth it to get the care that their
patients need, or the administrative burdens are too high, or
there's simply no benefit to taking a discounted rate when
there's no volume that is going to follow. So, there are lots
of reasons why physicians sometimes do not join networks.
And you've also heard, from Ms. Lacewell, how it works.
There is usually a percentage that the insurer agrees to pay
for the out-of-network charge. And the patients believe, the
consumer believes, that the insurer will pay that percentage of
what the doctor charges. What actually happens, as you've
heard, is that it's the insurers themselves, through the
Ingenix database, that are actually lowering the amount and
deciding what is, quote, ``allowed.''
That is a rude awakening for patients like Dr. Mary Jerome.
It's also very harmful to patients--to physicians. And the
harm is not just financial. This drives a stake in the heart of
the doctor-patient relationship, because if you're a patient
and you're told that X is the ``usual, customary, and
reasonable,'' and your doctor charged Y, what is your
assumption? That it is an ``unreasonable'' charge. And that is
unfair, and that has damaged the doctor-patient relationship
throughout this country, not just in New York.
In the year 2000, the AMA and the Medical Societies of the
State of Missouri and New York filed suit against United on
this issue, exactly. It lay aborning in the courts for many
years, despite the best efforts, until the Attorney General
took it on. And we are very pleased that the consumers and the
doctors worked together with the Attorney General's office.
They did the groundbreaking work, got the information that no
one else was able to get.
How did the database lower those fees? Let me just give
you, quickly, four ways. First, they deleted higher charges and
any charges with cases that had complications. They included
outdated information, discounted rates, and even charges from
nonphysicians. They failed to collect relevant information
about the site of service, the length of training, the
physician qualifications. And when there was no data available
in an area, they derived some. Those were the ways that the
flaws occurred.
The conflicts of interest, you have heard described quite
readily, both by the Chairman and by Ms. Lacewell.
Ultimately, to be fair, United recognized the importance of
restoring its relationship with patients and physicians, and is
settling its court battle with the AMA. It agreed to pay $350
million, the largest settlement against any insurer in this
country, to compensate under-reimbursed patients and
physicians, and to transfer this UCR database from Ingenix to
the new not-for-profit entity These settlements will help make
sure that patients understand what they're being promised when
they purchase an out-of-network service, what their obligation
will be, and what the obligation of their insurer will be.
We urge Congress to ensure that everyone, including Federal
workers, who may have also been shortchanged through these out-
of-network benefits, to receive reasonable compensation. We
also urge you to pursue payment transparency, because the
transparency of the health industry, for payments and for other
things, is in everyone's best interest--patients, doctors, and
the country as a whole.
Thank you very much, Mr. Chairman.
[The prepared statement of Dr. Nielsen follows:]
Prepared Statement of Nancy H. Nielsen, M.D., Ph.D., President,
American Medical Association
The American Medical Association (AMA) appreciates the opportunity
to present testimony to the Committee on Commerce, Science, and
Transportation regarding usual and customary reimbursement for out-of-
network providers. We commend Chairman Rockefeller, Ranking Member
Hutchison, and Members of the Committee for your leadership in
recognizing the far-reaching implications of the recent settlements
involving the Ingenix usual, customary, and reasonable (UCR) databases
owned by United Health Group (United).
These databases were used for over a decade as the basis for
determining the UCR fees that United and many other third-party payers
paid for medical services provided out of network, that is, by
physicians who had not contracted with the patient's health insurer to
accept a discounted rate. These databases employed flawed data to
determine out-of-network payment rates, resulting in increased health
insurer profits at the expense of patients and physicians. As a result
of two precedent-setting settlements entered into by United, one with
the AMA and the other with Attorney General Cuomo, this practice is
finally being eradicated.
The elimination of these UCR databases represents a major step
toward improving the health insurance system in the United States. Most
of the medical care provided pursuant to health insurance today is
provided by physicians and other clinicians who have agreed to provide
care to the patients covered by that health insurance product for a
discount. Physicians generally try to contract with health insurers
because they may receive significant benefits in return--(1) a promise
of prompt payment, (2) increased patient volume by virtue of inclusion
in provider directories and benefit plans that give patients a
substantial financial incentive to go to in-network providers, and (3)
maintenance of patient loyalty by meeting their patients' requests that
they be ``in-network.'' These benefits can justify a significant
discount from a physician's retail charges.
However, at least 70 percent of people in the United States who
have health insurance, have a product that covers out-of-network care
for an additional premium.\1\ Patients understand that not all
physicians are contracted, either because the payer has restricted the
network, or because the physician did not agree to the contract terms--
the fee schedule offered was too low, the administrative or other
burdens imposed were too high, or the health insurer was promising
little or nothing with respect to benefits. Out-of-network coverage
varies, but typical health insurance policies call for the insurer to
pay a percentage of the UCR charge of the out-of-network provider, for
example 50 percent. While health insurers have in recent years used
various iterations of this language, the traditional definition of UCR
charge is as follows:
---------------------------------------------------------------------------
\1\ 2008 Kaiser/HRET Employer Health Benefits Survey.
Usual: A charge is considered ``usual'' if it is a
---------------------------------------------------------------------------
physician's usual charge for a procedure.
Customary: A charge is considered ``customary'' if it is
within a range of fees that most physicians in the area charge
for a given procedure (often measured at a specific percentile
of all charges submitted for a given procedure in that
community).
Reasonable: A charge is considered ``reasonable'' if it is
usual and customary, or if it is justified because of special
circumstances.
Most patients expect their physicians to bill at a rate which is
typical for their specialty and community for the services provided.
Thus, assuming they have health insurance which includes an out-of-
network benefit of 50 percent of UCR, patients expect that if they
receive a bill of $100 for a service provided by a non-contracted
physician, the health insurer will pay $50 of the bill, and they will
be responsible for the remainder--in this case $50. But if the insurer
systematically ``allows'' less than the UCR charge, the patient is left
with a larger bill. For example, if the payer ``allows'' only $80 for
the $100 service, the health insurer pays $40 (50 percent of $80) and
the patient is now left with a $60 obligation ($100-$40=$60).
Obviously, the size of the underpayment will vary based on the size
of the claim and the way in which the insurer calculated the UCR
payment, which may magnify the underpayment dramatically. For example,
an insurer that bases its payment on the 50th percentile of the Ingenix
database, will pay substantially less than an insurer that bases its
payment on the 80th or 90th percentile. As demonstrated in several of
Attorney General Cuomo's settlements, insurers that use older versions
of the Ingenix database will pay less than those who are using the
current database. These problems may be further compounded depending on
how the benefit package is structured, particularly the deductible and
coinsurance responsibilities. To the extent these are structured in a
way that the patient is only ``credited'' with expenditures based on
the understated ``allowable'' amount, rather than on the amount the
patient has truly been responsible to pay out-of-pocket, the patient is
harmed twice.
Financial harm to the patient is not the only damage caused by this
scheme. First, the patient-physician relationship may be unfairly
undermined, and physicians may be unfairly defamed if patients wrongly
believe they have been over-charged. As Attorney General Cuomo found in
his report, ``The Consumer Reimbursement System is Code Blue,'' states:
The responsible consumer reads the plan documents and sees a
thicket of words. One term seems intelligible: the ``usual and
customary rate'' of a similar physician for a similar service
in a similar area. That sounds reasonable. The consumer makes
the leap out of network and submits the bill to the insurer,
only to be told the consumer will not be fully reimbursed
because the doctor's charge exceeded the usual and customary
rate. The fog of ignorance continues, thanks to the insurer.
The physician-patient relationship is undermined, as the
physician has been branded a charlatan whose bills are
inflated.
Health Care Report, ``The Consumer Reimbursement System is Code
Blue,'' State of New York, Office of the Attorney General, January 13,
2009, which can be
found at, http://www.oag.state.ny.us/bureaus/health_care/HIT2/
reimbursement
_rates.html.
Through the Litigation Center of the AMA and the State Medical
Societies, the abusive practice is being eliminated. In 2000, the AMA
was joined by the Medical Society of the State of New York, the
Missouri State Medical Association and several other parties in
initiating a class-action lawsuit against United Health Group for using
skewed data to determine out-of-network payment rates. The AMA's
lawsuit alleged that the Ingenix data was artificially reduced in the
following ways:
Inadequate data--The Ingenix database lacks information
which is relevant to a physician's retail charges, such as the
physician's training and qualifications, the type of facility
where the service was provided, and the patient's condition.
Corrupted data--Ingenix manipulates the database in numerous
ways to reduce the charges, including but not necessarily
limited to all of the following:
By deleting valid high charges and by deleting
proportionately more high charges than low charges.
By deleting charges that have modifiers to indicate
procedures or services with complications.
By failing to collect information affecting the value
of the service, such as whether the service was performed
by someone other than a physician.
By pooling data from dissimilar providers (such as
nurses, physician assistants, and physicians) for use in
the database.
By maintaining outdated information.
By commingling negotiated or discounted rates with
retail charges.
By accepting data from contributors who had already
deleted higher charges from the data they submitted.
By using defective data in the database and a
deficient methodology to derive charges which are
artificially low. For example, if Ingenix does not have a
UCR rate for a particular geographic area, it will attempt
to infer or derive the rate from other geographic areas.
These derived charges, however, are faulty.
Conflict of interest--Last, but certainly not least, the
entire enterprise was permeated with conflicts of interest. All
of the insurers that contributed data to the Ingenix UCR
databases had a financial motive to manipulate it in ways that
reduced the UCR charges.
A detailed description of one court's findings concerning the
Ingenix databases and their shortcomings is available in Judge
Hochberg's thoughtful decision approving a recent class action
settlement on behalf of HealthNet patients of approximately $250
million in McCoy v. HealthNet. See generally, 569 F. Supp. 2d 448
(D.N.J. 2008).
After nearly a decade of litigation, the AMA is very pleased that
United Health Group recognized the importance of restoring its
relationship with patients and physicians and is settling the AMA's
lawsuit by agreeing to pay $350 million toward reimbursing the patients
and physicians it short-changed, and by confirming in Federal court its
separate agreement with New York Attorney General Cuomo to end the use
of this database and trust its repair and operation to a not-for-profit
institution.
Indeed, evidence gathered during the course of this litigation was
brought to the attention of New York Attorney General Cuomo. The AMA
urged Attorney General Cuomo to investigate the abuses, and we are
gratified that his office devoted such substantial resources to that
effort. Attorney General Cuomo's report documenting that investigation,
``Health Care Report--The Consumer Reimbursement System is Code Blue,''
does an excellent job of describing how the lack of transparency which
characterizes the current health insurance payment system for out of
network services works to disadvantage patients and their physicians,
while benefiting the health insurance companies. The further
specificity contained in Attorney General Cuomo's Agreements of
Discontinuance with individual health insurers, which document knowing
practices by certain insurers to exacerbate the problems with the
Ingenix databases by using out-dated versions of those databases is
especially troubling, as is the finding in his report that one national
payer has been paying the same rates for in-network and out-of-network
care, despite charging higher premiums for the out-of-network benefit.
The AMA commends Attorney General Cuomo for successfully
negotiating the transition of the UCR database from Ingenix to an
independent, not-for-profit, and for his further success in gaining the
commitment of virtually all of the health insurers that do business in
New York to support that transition financially and with data going
forward for the next 5 years.
Eliminating the long-standing underpayment of patients based on the
faulty Ingenix database, these settlements will ensure that patients
receive the benefit of the higher premiums they have paid to have out-
of-network coverage. There will finally be an accurate, legitimate data
warehouse compiling all physician billed charges for out-of-network
services. The information from the newly created database will be
available not only to payers but also to the public, including patients
who are shopping for health insurance and those who are seeking medical
services. This welcome transparency should go a long way toward
resolving the issues with out-of-network coverage uncovered by the AMA
lawsuit and confirmed by Attorney General Cuomo's investigative report
and settlements.
We urge the Congress to ensure that everyone who was injured by
this scheme, including Federal workers who may have been shortchanged
on out-of-network benefits, are provided with reasonable compensation.
We also urge the Congress to pursue health insurance payment
transparency. The entire health insurance payment system is marked by
complexity and confusion. This is graphically illustrated by the AMA's
National Health Insurer Report Card, which provides objective measures
of the claims processing activities of the major health insurers. See
attached. The AMA believes enormous savings would accrue to patients,
physicians, health insurers, and other third-party payers if there were
complete transparency. Enhancement of the Health Insurance Portability
and Accountability Act (HIPAA) standard transactions by the adoption of
additional standards governing payment policies and additional
enforcement of the existing standards, would also lead to dramatic
efficiencies throughout the system.
The AMA appreciates the opportunity to provide our views to the
Committee on these critical matters affecting the nations patients and
physicians and we look forward to working with the Committee and
Congress to ensure accurate and transparent health insurance payments.
2008 National Health Insurer Report Card
The purpose of the AMA's National Health Insurer Report Card
(NHIRC) is to provide physicians and the general public a reliable and
defensible source of critical metrics concerning the timeliness,
transparency and accuracy of claims processing by the health insurance
companies that are responsible for paying these claims. Billions of
dollars in administrative waste would be eliminated each year if third-
party payers sent a timely, accurate and specific response to each
physician claim.
The NHIRC is for informational purposes only. Physicians and payers
are encouraged to review the NHIRC results and begin healing the health
care claims process by supporting the AMA's ``Heal the Claims Process''
campaign and committing to the goal of reducing the cost of claims
administration to 1 percent of collections. Visit the AMA Practice
Management Center Website at www.ama-assn.org/go/pmc for information on
the ``Heal the Claims Process'' campaign.
\1\ At least some payer proprietary edits are available.
\2\ At least some medical payment policies are available.
\3\ May not be applicable given that no payer-proprietary claim
edits were identified by this analysis.
2008 National Health Insurer Report Card--Complete Metrics
Payment Timeliness
Metric 1--Payer claim received date disclosed
Description: What percentage of time does the payer provide the
date it received the claim (payer claim received date) in its
electronic remittance advice (ERA) or explanation of benefits (EOB)
response to the physician?
Metric 2--First remittance response time (median days)
Description: What is the median time period in days between the
date the physician claim was received by the payer and the date the
payer produced the first ERA or EOB? If a payer did not provide the
payer claim received date, the most current date of service that was
reported on the claim was used to perform the calculation, as noted in
the disclaimer.
Metric 3--ERA activity during the data period (We have chosen not to
report at this time)
Description: How many ERAs (one, two, three or more) does the
physician receive for the same claim within the data period?
Accuracy
Metric 4--Allowed amount disclosed
Description: On what percentage of records (lines on claims) does
the payer provide the physician contracted rate (allowed amount) in its
ERA response to the physician?
Metric 5--Contracted payment rate adherence
Description: On what percentage of records does the payer's allowed
amount equal the contracted payment rate?
Transparency of Contracted Fees and Payment Policies on Payer Web Sites
Metric 6--Contracted fee schedule
Description: Is the physician's contracted fee schedule (payer
allowed amount) available on the payer's Website?
Metric 7--Contract fee schedule codes allowed per request
Description: If the contracted fee schedule is available on the
payer's Website, how many procedure codes are available per request?
Metric 8--Availability of payer proprietary code edits
Description: If the payer uses proprietary code edits, are they
available on the payer's Website? Proprietary code edits are edits
other than those found in one or more of the following: AMA Current
Procedural Terminology \1\ (CPT), National Correct Coding Initiative
(NCCI), Centers for Medicare and Medicaid Services (CMS) Publication
100-04 and the American Society of Anesthesia (ASA) Relative Value
Guide.
---------------------------------------------------------------------------
\1\ CPT is a registered trademark of the American Medical
Association.
---------------------------------------------------------------------------
Metric 9--Medical payment policies
Description: Are the payer's medical payment policies available on
its Website?
Compliance with Generally Accepted Pricing Rules
Metric 10--Percentage of claim lines (i.e., records) reduced by edits
Description: On what percentage of records does the payer apply a
claim edit that reduces the payment (allowed amount) of the line to $0?
Metric 11--Source of claim edits
Description: On what percentage of records is the source of the
claim edit applied by the payer based on one or more of the following:
CPT, NCCI, CMS Publication 100-04, ASA Relative Value Guide or payer
proprietary edits?
Denials
Metric 12--Percentages of claim lines (i.e., records) denied
Description: What percentage of records submitted are denied by the
payer for reasons other than a claim edit? A denial is defined as:
allowed amount equal to the billed charge and the payment equals $0.
Metric 13--Reason codes (Claim Adjusted Reason Codes [CARC*]) given for
denials
Description: What are the most frequently reported reason codes for
a denial?
------------------------------------------------------------------------
Effective Modified
Reason Code Description Date Date
------------------------------------------------------------------------
B9 Services not covered because 1/1/1995
the patient is enrolled in a
Hospice.
B11 The claim/service has been 1/1/1995
transferred to the proper
payer/processor for
processing. Claim/service not
covered by this payer/
processor.
1 Deductible Amount. 1/1/1995
16 Claim/service lacks information 1/1/1995 6/30/2006
which is needed for
adjudication. At least one
Remark Code must be provided
(may be comprised of either
the Remittance Advice Remark
Code or NCPDP Reject Reason
Code).
17 Payment adjusted because 1/1/1995 9/30/2007
requested information was not
provided or was insufficient/
incomplete. At least one
Remark Code must be provided
(may be comprised of either
the Remittance Advice Remark
Code or NCPDP Reject Reason
Code). This change to be
effective 4/1/2008: Requested
information was not provided
or was insufficient/
incomplete. At least one
Remark Code must be provided
(may be comprised of either
the Remittance Advice Remark
Code or NCPDP Reject Reason
Code).
18 Duplicate claim/service. 1/1/1995
26 Expenses incurred prior to 1/1/1995
coverage.
27 Expenses incurred after 1/1/1995
coverage terminated.
29 The time limit for filing has 1/1/1995
expired.
31 Claim denied as patient cannot 1/1/1995
be identified as our insured.
38 Services not provided or 1/1/1995 6/30/2003
authorized by designated
(network/primary care)
providers.
49 These are non-covered services 1/1/1995
because this is a routine exam
or screening procedure done in
conjunction with a routine
exam.
50 These are non-covered services 1/1/1995
because this is not deemed a
`medical necessity' by the
payer.
51 These are non-covered services 1/1/1995
because this is a pre-existing
condition
96 Non-covered charge(s). At least 1/1/1995 6/30/2006
one Remark Code must be
provided (may be comprised of
either the Remittance Advice
Remark Code or NCPDP Reject
Reason Code).
97 Payment adjusted because the 1/1/1995 10/31/2006
benefit for this service is
included in the payment/
allowance for another service/
procedure that has already
been adjudicated.
109 Claim not covered by this payer/ 1/1/1995
contractor. You must send the
claim to the correct payer/
contractor.
160 Payment denied/reduced because 9/30/2003 9/30/2007
injury/illness was the result
of an activity that is a
benefit exclusion. This change
to be effective 4/1/2008:
Injury/illness was the result
of an activity that is a
benefit exclusion.
197 Payment adjusted for absence of 10/31/2006
precertification/
authorization.
204 This service/equipment/drug is 2/28/2007
not covered under patient's
current benefit plan.
------------------------------------------------------------------------
Metric 14--Remark codes given for denials
Description: What are the most frequently reported remark codes for
a denial?
------------------------------------------------------------------------
Effective Modified
Remark Codes Description Date Date
------------------------------------------------------------------------
M15 Separately billed services/ 1/1/1997
tests have been bundled as
they are considered components
of the same procedure.
Separate payment is not
allowed.
M16 Alert: Please see our website, 1/1/1997 4/1/2007
mailings, or bulletins for
more details concerning this
policy/procedure/decision.
M20 Missing/incomplete/invalid 1/1/1997 2/28/2003
HCPCS.
M25 The information furnished does 1/1/1997 11/5/2007
not substantiate the need for
this level of service. If you
believe the service should
have been fully covered as
billed, or if you did not know
and could not reasonably have
been expected to know that we
would not pay for this level
of service, or if you notified
the patient in writing in
advance that we would not pay
for this level of service and
he/she agreed in writing to
pay, ask us to review your
claim within 120 days of the
date of this notice. If you do
not request an appeal, we
will, upon application from
the patient, reimburse him/her
for the amount you have
collected from him/her in
excess of any deductible and
coinsurance amounts. We will
recover the reimbursement from
you as an overpayment.
M27 Alert: The patient has been 1/1/1997 8/1/2007
relieved of liability of
payment of these items and
services under the limitation
of liability provision of the
law. The provider is
ultimately liable for the
patient's waived charges,
including any charges for
coinsurance, since the items
or services were not
reasonable and necessary or
constituted custodial care,
and you knew or could
reasonably have been expected
to know, that they were not
covered. You may appeal this
determination. You may ask for
an appeal regarding both the
coverage determination and the
issue of whether you exercised
due care. The appeal request
must be filed within 120 days
of the date you receive this
notice. You must make the
request through this office.
M50 Missing/incomplete/invalid 1/1/1997 2/28/2003
revenue code(s).
M51 Missing/incomplete/invalid 1/1/1997 12/2/2004
procedure code(s).
M64 Missing/incomplete/invalid 1/1/1997 2/28/2003
other diagnosis.
M81 Missing/incomplete/invalid 1/1/1997 2/28/2003
provider/supplier signature.
M86 Service denied because payment 1/1/1997 6/30/2003
already made for same/similar
procedure within set
timeframe.
M127 Missing patient medical record 1/1/1997 2/28/2003
for this service.
MA67 Correction to a prior claim. 1/1/1997
MA130 Missing invoice or statement 1/1/1997 2/28/2003
certifying the actual cost of
the lens, less discounts, and/
or the type of intraocular
lens used.
N4 Missing/incomplete/invalid 1/1/2000 2/28/2003
prior insurance carrier EOB.
N19 Procedure code incidental to 1/1/2000
primary procedure.
N29 Missing documentation/orders/ 1/1/2000 8/1/2005
notes/summary/report/chart.
N59 Alert: Please refer to your 1/1/2000 4/1/2007
provider manual for additional
program and provider
information.
N102 This claim has been denied 10/31/2001
without reviewing the medical
record because the requested
records were not received or
were not received timely.
N115 This decision was based on a 5/30/2002 4/1/2004
local medical review policy
(LMRP) or Local Coverage
Determination (LCD). An LMRP/
LCD provides a guide to assist
in determining whether a
particular item or service is
covered. A copy of this policy
is available at http://
www.cms.hhs.gov/mcd, or if you
do not have Web access, you
may contact the contractor to
request a copy of the LMRP/
LCD.
N130 Consult plan benefit documents 10/31/2002 4/1/2007
for information about
restrictions for this service.
N155 Alert: Our records do not 10/31/2002 4/1/2007
indicate that other insurance
is on file. Please submit
other insurance information
for our records.
N174 This is not a covered service/ 2/28/2003
procedure/equipment/bed;
however, patient liability is
limited to amounts shown in
the adjustments under group
``PR.''
N179 Additional information has been 2/28/2003
requested from the member. The
charges will be reconsidered
upon receipt of that
information.
N197 The subscriber must update 2/25/2003
insurance information directly
with payer.
N225 Incomplete/invalid 8/1/2004 8/1/2005
documentation/orders/notes/
summary/report/chart.
N269 Missing/incomplete/invalid 12/2/2004
other provider name.
N270 Missing/incomplete/invalid 12/2/2004
other provider primary
identifier.
N285 Missing/incomplete/invalid 12/2/2004
referring provider name.
N286 Missing/incomplete/invalid 12/2/2004
referring provider primary
identifier.
N290 Missing/incomplete/invalid 12/2/2004
rendering provider primary
identifier.
N365 This procedure code is not 4/1/2006
payable. It is for reporting/
information purposes only.
N418 Misrouted claim. See the 8/1/2007
payer's claim submission
instructions.
------------------------------------------------------------------------
The Chairman. Thank you, Dr. Nielsen.
Mr. Bell.
STATEMENT OF CHUCK BELL, PROGRAMS DIRECTOR, CONSUMERS UNION
Mr. Bell. Mr. Chairman, Members of the Committee, thanks
very much for the opportunity to testify on consumer
reimbursement for health care services.
Consumers Union is the nonprofit, independent publisher of
Consumer Reports magazine, with a circulation of 8 million
readers, both print and online. And we regularly poll our
readership and the public about key consumer issues, and the
high cost of health care consistently ranks among their top
concerns.
I work for Consumers Union's advocacy and public policy
division in the New York office, where I've represented
Consumers Union's positions on health care issues for the last
19 years in the Northeastern States on issues relating to
health insurance, prescription drugs, patient safety, and
restructuring of nonprofit health plans in hospitals.
I think, as all of us are painfully aware, health insurance
costs for employers are going up at a very steep rate. But, in
addition to that, they're going up a lot for consumers, too,
and consumers are having to dig a lot deeper to pay for health
care.
The average employee contribution for company-provided
health insurance has increased more than 120 percent since
2000, and for consumers and employer-provided plans, average
out-of-pocket costs for deductibles, co-payments for drugs, and
coinsurance for physician and hospital visits have also risen
115 percent since 2000. So, this is the context. And in the
midst of this escalating crisis of out-of-pocket costs,
consumers have been struggling with a gravely flawed out-of-
network reimbursement system, which has been described here
today.
And the scale of the issue is huge. Over 110 million
Americans, roughly one in three consumers, are covered by
health insurance plans which provide an out-of-network option,
and that's--includes about 70 percent of people who have
employer-sponsored coverage.
So, as a national organization that represents consumers,
we emphatically agree with Attorney General Cuomo's conclusion
that the structure of the out-of-network reimbursement system
is broken. We believe that it needs to be rebuilt from the
ground up so that consumers will be assured of being reimbursed
fairly, and that there will be appropriate public oversight and
accountability for collection of data regarding physician and
provider charges.
This investigation, as you've heard, has exposed a swamp of
financial shenanigans, and has now reached a critical juncture.
We believe that we need coordinated action by State and Federal
policymakers and regulators to help consolidate the
investigation's gains and ensure that the new database for
calculating out-of-network charges will be broadly used across
the entire marketplace.
Some of the implications of the investigation that we think
are important are the following:
First, we think that regulators need to hold insurance
companies accountable to their contractual promises on an
ongoing basis. Consumers clearly have the right to expect that
their health insurance policies will pay the bills that they
are legally obligated to pay.
Everyone can easily agree that insurance companies should
not engage in deceptive and unfair practices against consumers,
but there's nothing automatic about that process. It takes
sustained effort and political will to achieve the vigorous
comprehensive enforcement of State and Federal insurance and
consumer-protection laws and regulation.
And in this case, the technical nature of the subject
matter and the obscure veiled nature of the Ingenix database
resulted in a persistent ripoff that took far too many years to
rein in.
Attorney General Cuomo, to his great credit, plunged in
and--as soon as he learned about the problem, and drove hard to
get a consumer-friendly solution, but it--I think this case
raises some troubling questions about why financial ripoffs
like this one persist in the marketplace for so many years
without effective intervention at the State or Federal level.
Why didn't the alarms go off earlier about these unfair
practices?
So, we believe that oversight of the insurance industry can
be tightened up at the State level by more intervention by
attorneys general and insurance commissioners, and by
establishing independent offices of insurance consumer
advocates.
Second, we think consumers do need a trusted system that
they can rely on to ensure that the UCR rates will be
calculated for out-of-network reimbursements, and that they'll
be accurate and up to date. We believe the independent
databases proposed by Attorney General Cuomo will have great
benefits and give consumers a fix on what their reimbursements
will be.
We believe, also, that the insurance regulation that's
being proposed in the State of New York to apply to all
insurers in our State, and basically encourage them to use an
independent source for this data, will be a very popular
regulation, and it will be quickly adopted. But, it still begs
the question--consumers need protection across the entire
country on these issues, and we really hope that the regulation
will be adopted as a model by the NAIC, or perhaps the Federal
Government could set some minimum standards in this area.
We also would note that Attorney General Cuomo's done a
fabulous job in lining up some of the largest insurers in the
country to support the settlements, but there are still many
other insurance companies around the country, particularly
State and regional companies, that use data from the Ingenix
databases, who have--do not have operations in New York State,
and have not been reached by this investigation. So, they have
not necessarily halted their use of the Ingenix database or
notified consumers of its shortcomings. And so, we would
therefore urge the Senate Commerce Committee to investigate the
nature and extent of the use of the Ingenix databases by other
health insurance companies throughout the U.S. and to seek
possible remedies or solutions for halting this practice.
The New York investigation suggests that tens of millions
of consumers have been directly hurt by industry practices that
led to the underpayment of their health insurance bills. And at
this point, nobody can say for sure exactly how much consumers
were underpaid as a result of the broken out-of-network
reimbursement system, but we believe that the financial damage
sustained by consumers is clearly very substantial. We know it
runs at least into the hundreds of millions of dollars.
Finally, for the health care system to function
effectively, we need strong ongoing financial accountability
and oversight. We believe that this important reform of the
out-of-network system prefigures much larger changes that we
need to make as a country to ensure transparency and
accountability in the health care system. Consumers need more
and better information about the costs of medical procedures
and treatments, and their therapeutic benefits, to ensure that
we're getting good value for the precious dollars that we
spend.
Mr. Chairman and Members of the Committee, thank you very
much for your efforts to assure appropriate Federal oversight
of consumer reimbursement issues. We look very much--to working
with you to shape solutions on this area, and to help transform
the health care system in the United States.
Thanks very much for considering our views.
[The prepared statement of Mr. Bell follows:]
Prepared Statement of Charles Bell, Programs Director, Consumers Union
Introduction
Mr. Chairman, Members of the Committee:
Thank you very much for the invitation to testify on the issue
consumer reimbursement for health care services. We commend you for
holding this hearing to focus attention on issues related to consumer
reimbursement and consumer protection in health insurance.
Consumers Union \1\ is the independent, non-profit publisher of
Consumer Reports, with circulation of about 7 million (Consumer Reports
plus ConsumerReports.org subscribers). We regularly poll our readership
and the public about key consumer issues, and the high cost of health
care consistently ranks among their top concerns.
---------------------------------------------------------------------------
\1\ Consumers Union, the nonprofit publisher of Consumer Reports,
is an expert, independent organization whose mission is to work for a
fair, just, and safe marketplace for all consumers and to empower
consumers to protect themselves. To achieve this mission, we test,
inform, and protect. To maintain our independence and impartiality,
Consumers Union accepts no outside advertising, no free test samples,
and has no agenda other than the interests of consumers. Consumers
Union supports itself through the sale of our information products and
services, individual contributions, and a few noncommercial grants.
---------------------------------------------------------------------------
I work in Consumers Union's advocacy and public policy division,
where I have represented Consumers Union's positions on health care
issues for the last 19 years in the Northeastern states on issues
relating to health insurance, prescription drugs, patient safety and
the restructuring of nonprofit health plans and hospitals. I also serve
on the steering committee of New Yorkers for Accessible Health
Coverage, a statewide organization representing consumers with chronic
illnesses and disabilities.
Consumers Face A Growing Financial Burden for Health Care--Especially
for Out-of-Pocket Costs
The financial burdens on consumers related to health care have been
steadily increasing over the last 15 to 20 years. As the Committee is
no doubt painfully aware, the cost of health insurance has increased
dramatically in recent years. Consumers are both paying more in
premiums, AND shouldering a higher burden for out-of-pocket expenses,
including deductibles, co-payments and other expenses not covered by
their health insurance.
According to the Kaiser Family Foundation, the cumulative growth in
health insurance premiums between 1999 and 2008 was 119 percent,
compared with cumulative inflation of 29 percent and cumulative wage
growth of 34 percent. The rapid growth in overall premium levels means
that both employers and workers are paying much higher amounts than
they did a few years ago.
Policymakers and the media often focus on the economic challenges
posed by high cost of rising health insurance premiums for employers--
and that is absolutely appropriate. But a lot of money comes directly
out of the consumer's pocket as well. The average employee contribution
to company-provided health insurance has increased more than 120
percent since 2000.
Consumers are also paying significantly more for out-of-pocket
health expenses. For consumers in employer-sponsored plans, average
out-of-pocket costs for deductibles, co-payments for medications, and
co-insurance for physician and hospital visits have risen 115 percent
since 2000. Consumers who buy their own coverage also have high out-of-
pocket expenses.
As result of these trends, health expenses are taking up a rising
share of family income. 30 percent of insured consumers spent 10
percent or more of their incomes annually on out-of-pocket costs and
premiums in 2007, compared to 19 percent in 2001, according to a recent
report from the Commonwealth Fund.
The steady, accelerating shift of costs to individuals and families
results both in financial stress and increasing financial barriers to
needed care. In 2007, more than 40 percent of working age adults in the
U.S. had difficulty paying medical bills or accumulated medical debt
last year, compared with about 33 percent in 2005, according a study by
the Commonwealth Fund. The Fund also reports that ``an increasing
number of adults who are insured have such high out-of-pocket costs
relative to their income that they are effectively `underinsured.' ''
Consumers Confront Serious Problems in Obtaining Fair Out-Of-Network
Reimbursement
In the midst of this escalating crisis of out-of-pocket costs,
consumers have also been forced to contend with a gravely-flawed out-
of-network reimbursement system. According to a recent investigation by
New York Attorney General Andrew Cuomo, and recent settlements with
some the Nation's largest insurance carriers, it now appears that
consumers may have been underpaid for their out-of-network
reimbursements by hundreds of millions of dollars. The databases used
to calculate out-of-network reimbursements are riddled with serious
data quality problems and massive financial conflicts of interest.
Over the last several years, Consumers Union has become
increasingly concerned about consumer problems in obtaining fair,
appropriate and timely reimbursement for out-of-network health
services. These problems came to our attention as a result of consumer
complaints, concerns expressed by physicians and employers, reports in
the news media, and litigation.
In particular, in New York state, we were aware that the American
Medical Association, the Medical Society of the State of New York,
other state medical societies, New York State United Teachers, Civil
Service Employees Association (CSEA), other public employee unions and
other consumer plaintiffs had sued UnitedHealth Group in 2000, alleging
that they were being systematically shortchanged regarding out-of-
network payments. From a consumer point of view, the implications of
the lawsuit were potentially very significant, because over 1 million
public employees in New York state are covered by the Empire Plan,
which is insured by UnitedHealth Group, one of the Nation's largest
for-profit insurance companies.
We were therefore very pleased when Attorney General Andrew Cuomo
initiated a national investigation of problems relating to out-of-
network charges in February, 2008. The methods used by insurance
companies to calculate ``usual, customary and reasonable'' rates (also
known as UCR rates) have long been obscure and mysterious to consumers.
It was not easy for consumers to verify the basis of the alleged UCR
rates, or to contest perceived underpayments. Companies are supposed to
disclose the details of how they calculate these charges upon request.
But in practice many consumers found it difficult to find out how the
charges are calculated, and what they are based on.
Over 110 million Americans--roughly one in three consumers--are
covered by health insurance plans which provide an out-of-network
option, such as Preferred Provider Organizations (PPOs) and Point of
Service (POS) plans This includes approximately 70 percent of consumers
who have employer-sponsored health coverage.
Consumers and employers often pay higher premiums to participate in
an out-of-network insurance plan, because it gives patients greater in
flexibility in seeking care from doctors, specialists and providers who
are not in a closed health plan network. In most out-of-network plans,
the insurer agrees to pay a fixed percentage of the ``usual, customary
and reasonable'' rate for the service (typically 80 percent of the
rate), which is supposed to be a fair reflection of the market rate for
that service in a geographic area. Because the health plan does not
have a contract with the out-of-network doctor or provider, the
consumer is financially responsible for paying the balance of the
bill--whatever the insurance company doesn't pay. By law, the provider
may pursue the consumer for the entire amount of the payment,
regardless of how little or how much the insurer reimburses the
consumer.
Even if UCR charges were calculated accurately, consumers could
still experience ``sticker shock'' when they get the medical bills for
out-of-network care. Why? They may not understand that the insurance
company didn't agree to pay 80 percent of the doctor's bill--they only
agreed to pay 80 percent of ``usual and customary'' rate, which is an
average of charges in a geographic area. For example, suppose a patient
went to visit the doctor for a physical, and charged $200. 80 percent
of $200 is $160. But if an impartial and accurate calculation of
``usual and customary rate'' shows that what other comparable doctors
charge for physicals is an average of $160, the insurance company would
only pay $128, or 80 percent of $160. The consumer would be responsible
for paying the balance of $72.
The key problem with the out-of-network reimbursement system is
that the UCR rates were not calculated in a fair and impartial way. For
the last 10 years or so, the primary databases that are used by
insurers to determine ``usual, customary and reasonable'' rates have
been owned by Ingenix, a wholly-owned subsidiary of UnitedHealth Group.
Ingenix operates a very large repository of commercial medical billing
data, and prepares billing schedules that are used to calculate the
market price of provider health services. In 1998, Ingenix purchased
the Prevailing Healthcare Charges System (PHCS), a database that was
first developed by the Health Insurance Association of America, an
insurance industry trade association. beginning in 1974. Also in 1997,
Ingenix purchased Medical Data Research and a customized Fee Analyzer
from Medicode, a Utah-based health care company.
Thanks to Attorney General Cuomo's investigation, however, we now
know that there were serious problems with the Ingenix database that
appear to have consistently led to patients paying more, and insurers
paying less.
In January, 2009, Attorney General Cuomo announced key findings
from his office's investigation regarding the out-of-network
reimbursement system:
According to an independent analysis of over 1 million
billing records in New York state carried out by the Attorney
General, the Ingenix databases understate the market rate for
physician visits by rates ranging from 10 to 28 percent across
New York state. Consumers got much less than the promised UCR
rate, so that instead of getting reimbursed for 80 percent of
the UCR charge, they effectively got 70 percent, 60 percent or
less. Given the very large number of consumers in out-of-
network plans--110 million--this translates into hundreds of
millions of dollars in losses over the last 10 years for
consumers around the country.
Ingenix has a serious financial conflict of interest in
owning and operating the Ingenix databases in connection with
determining reimbursement rates. Ingenix is not an independent
database--it is wholly-owned by UnitedHealth Group, Inc. It
receives billing data from many insurers and in turn furnishes
data back to them, including to its own parent company,
UnitedHealth. UnitedHealth had a financial incentive to
understate the UCR rates it provided to its own affiliates, and
other health insurers also had an incentive to manipulate the
data they submit to Ingenix so as to depress reimbursement
rates.
In general, there is no easy way for consumers to find out
what the UCR rates are before visiting a medical provider. The
Attorney General characterized Ingenix as a ``black box'' for
consumers, who could not easily find out what level of
reimbursement they would receive when selecting a provider.
When they received a bill for out-of-network services,
consumers weren't sure if the insurance company was underpaying
them, or whether the physician was overcharging them.
As an example of the lack of transparency, when UnitedHealth
members complained their medical costs were unfairly high, the
United hid its connection to Ingenix by claiming the UCR rate
was the product of ``independent research.''
The Ingenix database had a range of serious data problems,
including faulty data collection, outdated information,
improper pooling of dissimilar charges, and failure to conduct
regular audits of the billing data submitted by insurers.
As a result of Attorney General Cuomo's investigation, on January
13, UnitedHealth agreed to close the 2 databases operated by Ingenix,
and pay $50 million to a qualified nonprofit organization that will
establish a new, independent database to help determine fair out-of-
network reimbursement rates for consumers throughout the U.S.
As a central result of his investigation, Attorney General Cuomo
wisely concluded that:
``. . . the structure of the out-of-network reimbursement
system is broken. The system that is meant to reimburse
consumers fairly as a reflection of the market is instead
wholly owned and operated by the [insurance] industry. The
determination of out-of-network rates is an industry-wide
problem and accordingly needs an industry-wide solution.
Consumers require an independent database to reflect true
market-rate information, rather than a database owned and
operated by an insurance company. A viable alternative that
provides rates fairly reflecting the market based on reliable
data should be set up to solve this problem . . . Consumers
should be able to find out the rate of reimbursement before
they decide to go out of network, and they should be able to
find out the purchase price before they shop for insurance
policies or for out-of-network care.''
While UnitedHealth did not acknowledge any wrongdoing in the
settlement, its agreement with the New York Attorney General ended the
role of Ingenix in calculating UCR charges, and created a new national
framework for a fair solution. In fact, in a press release announcing
the settlement, Thomas L. Strickland, Executive Vice President and
Chief Legal Officer of UnitedHealth Group, expressed strong support for
a nonprofit database to maintain a national repository of medical
billing information:
``We are committed to increasing the amount of useful
information available in the health care marketplace so that
people can make informed decisions, and this agreement is
consistent with that approach and philosophy. We are pleased
that a not-for-profit entity will play this important role for
the marketplace.''
Shortly after settling with the Attorney General's office,
UnitedHealth also settled the lawsuit brought by the AMA and Medical
Society of the State of New York, other physician groups, unions and
consumer plaintiffs for $350 million, the largest insurance cash
settlement in U.S. history. As sought by MMSNY and the other physician
groups, United also agreed to reform the way that out-of-network
charges were calculated.
Since January, nine other insurers with operations in New York
state, including huge national insurers such as Wellpoint, Aetna and
Cigna, have also agreed to stop using data furnished by Ingenix, and to
contribute funds in support of the new nonprofit database. The leaders
of other insurance companies have also expressed support for a new
nonprofit database to increase transparency and reduce conflicts of
interest, and pledged to use the database when it becomes available.
Two insurance companies agreed to also reprocess claims from consumers
who believe they were underpaid for their out-of-network charges.
All told, the Attorney General has now collected over $94 million
to support the new independent database, which will be based at a
university in NewYork state.
Implications of the New York State Investigation
From a consumer point of view, Attorney General Cuomo's
intervention has been extremely helpful for consumers in New York state
and across the U.S. This investigation squarely exposed the problems
resulting in underpayment of consumers and physicians, and created a
sweeping new framework for a national solution. The plan set out in the
agreements reached by Attorney General Cuomo will help bring
comprehensive, sweeping reform to the out-of-network reimbursement
system.
The investigation has exposed a swamp of financial shenanigans, and
now reached a critical juncture. Consumers Union is calling for
coordinated action by state and Federal policymakers and regulators to
help to consolidate the investigation's gains, and ensure that the new
database for calculating out-of-network charges will be broadly used
across the entire marketplace.
First, regulators need to hold insurance companies accountable to
their contractual promises, on an ongoing basis. Consumers clearly have
the right to expect that their health insurance policies will pay the
bills that they are legally obligated to pay. We rely on the promises
our insurance companies make in their contracts, and we expect the
provisions of those contracts to be enforced by regulators and the
courts. If your policy says it will pay you 80 percent of the ``usual
and customary'' charge for a medical service, it should pay that
amount.
To enforce this principle in New York state, Attorney General Cuomo
used his authority under New York's General Business Law 349 and 350,
which prohibits deceptive acts and practices against consumers, to
bring the insurance industry into compliance in New York state, as well
as sections of the insurance law and the common law. Other states have
similar laws, and they should be appropriately used when needed to
prevent egregious consumer ripoffs.
Everyone can easily agree that insurance companies should not
engage in deceptive or unfair practices against consumers. But the
reality is that it takes sustained effort and political will to achieve
the vigorous, comprehensive enforcement of state and Federal insurance
and consumer protection laws and regulations. In this case, the
technical nature of the subject matter, and the obscure, veiled nature
of the Ingenix database, resulted in a persisting ripoff that
unfortunately took far too many years to rein in.
To his great credit, Attorney General Cuomo stepped in quickly upon
learning about the problem, and drove hard to achieve a consumer-
friendly solution. At the same time, this case raises some troubling
questions about why financial ripoffs persist in the marketplace for
many years without effective intervention at the state or Federal
level. Why didn't the alarms go off earlier about unfair practices that
created very large financial losses for consumers?
In the future, we hope that Attorneys General and Insurance
Commissioners--as well as Members of Congress--will step up and act
quickly to prevent financial abuses of health insurance consumers, and
coordinate their work where lines of jurisdiction are unclear. In New
York, the state Attorney General's health bureau served as a early
warning system to monitor consumer problems, and intervene when things
were going wrong.
Attorneys General around the country maintain similar units, and
some even have the power to intervene before government when insurance
rates are established. A few other states have established an ``Office
of Public Insurance Counsel'' or independent consumer advocate to
fulfill a similar function. But in many states, consumers with
insurance problems have little recourse, and consumer problems in
getting fair reimbursement are not routinely investigated or
publicized. Consumers Union and other consumer groups support expansion
of Attorney General health care oversight, and the establishment of
independent consumer advocates in every state.
Second, consumers need a trusted system they can rely on to ensure
that the UCR rates calculated for out-of-network reimbursements are
accurate and up-to-date. By establishing a new nonprofit organization
to maintain the database on ``usual and customary charges,'' the New
York Attorney General's agreements help assure those charges will be
calculated and maintained in a fair, up-to-date and transparent way,
free from financial conflicts of interest. Consumers will be able to
obtain up-to-date information on usual and customary charges through a
national, free website, and have a good fix on what their potential
reimbursements will be when they visit physicians and other health care
providers.
In New York, the Attorney General is developing a state insurance
regulation which will require health insurers who utilize UCR databases
to ensure that they are fair, accurate, free from conflicts of interest
and transparent to consumers. We expect that such a regulation will be
very popular and will quickly be adopted in New York state.
However, because this is a national problem, there is still a huge
need for a national or 50-state solution, to ensure that the out-of-
network reimbursement system is fixed for ALL U.S. consumers. A
regulation based on the New York model could potentially be adopted as
a model by the National Association of Insurance Commissioners, or
otherwise codified into law at the state and Federal level. It could
also be enacted as part of overall Federal health reform legislation.
Third, by arranging for some of the largest health insurers in the
country to support the new database, Attorney General Cuomo has paved
the way for a comprehensive national resolution of these issues. We
would note, however, that there are many other health insurance
companies who used data from the Ingenix databases, including state-
based and regional health plans in the South, Midwest and Western
states, who do not have operations in New York state. These companies
were not reached by the investigation or the agreements, so they have
not necessarily halted their use of the Ingenix database, or notified
consumers of its shortcomings. We therefore would encourage the Senate
Commerce Committee to investigate the nature and extent of the use of
the Ingenix databases by other health insurance companies throughout
the U.S., and possible remedies or solutions for halting this practice
and securing restitution for consumers.
Fourth, as mentioned above, the New York investigation suggests
that tens of millions of consumers have been directly hurt by industry
practices that led to underpayment of their health insurance bills. At
this point, no one can say for sure how much consumers were underpaid
as a result of the broken out-of-network reimbursement system. But the
financial damage sustained by consumers is clearly substantial.
There are few things that are more frustrating in life than getting
shortchanged on your medical expenses by your health insurance company.
We expect consumers across the country will be very concerned about the
issues in this case, and where they have been shortchanged, would want
to be fairly compensated by their insurer.
Fifth, consumers know that for the health care system to function
effectively, we need strong, ongoing financial accountability and
oversight. We believe that the proposed reform of the out-of-network
reimbursement prefigures much larger changes we need to ensure
transparency and accountability in the health care system. Consumers
need more and better information about the cost of medical procedures
and treatments, and their therapeutic benefits, to ensure we're getting
good value for the precious dollars we spend. As mentioned above,
health care costs are skyrocketing. Consumers want very much to get
better value for our dollars, to ensure that when we visit a physician
or provider, that we will get safe, appropriate, quality health care,
that is based on the best medical evidence that is available.
In the case of the proposed new nonprofit database for out-of-
network charges, Consumers Union is pleased to see that it will be
specifically developed to be an independent database that is protected
from financial conflicts of interest. The architecture of the health
care system must specifically incorporate safeguards that protect
against inappropriate bias or financial influence from insurance
companies or others operating in the commercial marketplace. We also
believe that this new non-commercial database can help to create much
greater transparency regarding physician and provider fees, and be an
important resource for medical researchers and others who are working
to improve the quality, safety and affordability of care for consumers.
Conclusion
Mr. Chairman, Members of the Committee, the problem of ensuring
effective state and Federal oversight of consumer reimbursement for
health care services calls out for your prompt attention. We look
forward to working with you to shape solutions that will assure that
the United States rises to the challenge of transforming our health
care system so that we are no longer at risk of facing financial
hardship or financial barriers to care just when we need care the most.
Thank you very much for considering our views.
The Chairman. Thank you very much, Mr. Bell.
I should have said at the beginning that all statements are
automatically included in the record, so--you just sort of gave
yours, but if you have something written, it goes in, Dr.
Nielsen. So, that----
Dr. Nielsen. Yes.
The Chairman. That's our practice.
Dr. Nielsen. Yes.
The Chairman. Ms. Lacewell, I'd like to start with you. In
January, your office issued a report that discussed some of the
findings from your investigation. In your report, on page 20,
there is a table, which I believe people have, now, before
them, do they not? And I would like to ask you about it.
[The information referred to follows:]
Payments for Doctor Visits
Erie County, NY (2007)
------------------------------------------------------------------------
Ingenix ``usual
Doctor and customary'' NYAG Estimate of
Office Visit Reimbursement Prevailing Cost Difference (%)
Codes Rate
------------------------------------------------------------------------
99211 $36-$37 $45 18-20%
99212 $53-$61 $68 10-22%
99213 $70-$78 $84 7-17%
99214 $105-$122 $130 6-19%
99215 $145-$182 $200 9-28%
99245 $276-$340 $373 9-26%
------------------------------------------------------------------------
Source: State of New York, Office of the Attorney General, Health Care
Report: The Consumer Reimbursement System is Code Blue (Jan. 13 2009),
20.
It's a table that lays out the Ingenix reimbursement rates
for out-of-network doctor visits in Erie County. In Erie
County, where you live, right?
Ms. Lacewell. That's correct.
The Chairman. And I'd like to give you a copy--or, you now
have one. The first column contains the various billing codes
that doctors cover--that cover doctor visits. And they're
simply--don't get too hung up on them, they just say what was
the--what was being treated, what was the subject at hand. And
the second column presents the range of ``usual and customary''
reimbursements, as calculated by Ingenix.
Now, here's where it gets interesting. It's my
understanding, Ms. Lacewell, that you and your staff went back
and gathered the insurance claims data for Erie County--just
Erie County--and performed your own calculation of the
prevailing wages for doctor visits in the area. Is that
correct?
Ms. Lacewell. Yes, that's correct, Mr. Chairman.
The Chairman. The third and fourth columns of the chart
show that the numbers you came up with indicate that the
insurance industry's reimbursement rates, as now calculated by
Ingenix, were anywhere from 10 to 25 percent lower than what
the doctors were actually charging their patients in this area.
Is that correct?
Ms. Lacewell. Yes, sir, that's correct.
The Chairman. So, let's take an example from this table. If
a doctor in Buffalo is charging $84 for an office visit, but
the insurance company is only paying $74 for that visit,
consumers get stuck paying the $10 balance themselves, correct?
Ms. Lacewell. That's right.
The Chairman. Ten dollars doesn't sound like a lot of
money, but if you have a lot of--you know, you just have a lot
of doctor's visits, and you multiply this throughout the
population, it escalates rapidly into millions or hundreds of
millions of dollars. And they're--the customers are paying it
out of their own pockets, and they shouldn't be.
So, Ms. Lacewell, correct me if I'm wrong here, but doesn't
this table show that families in Erie County are being stuck
with the millions of dollars of health care costs that should
be paid for by the insurance companies?
Ms. Lacewell. Yes, Mr. Chairman, that's exactly what it
shows.
The Chairman. How did the health insurance companies react
when you showed them this data? Your data.
Ms. Lacewell. They settled.
[Laughter.]
The Chairman. But, what did they do before they settled. I
mean, people don't just sort of settle on the spot.
Ms. Lacewell. That's right, Mr. Chairman. The reason that
we conducted this analysis is because many of the insurers said
to us, ``Well, you say it's a conflict of interest. It's
hypothetical. Show me the database is wrong. Show me I owe
money.'' So, we collected billing information and put this
together and demonstrated to them that there was a difference
in what they were paying, based on Ingenix. And for insurers
that didn't have a clear window, themselves, into the Ingenix
data, it was actually useful for them, because some seemed more
inclined to settle if they could be shown this kind of
information. For others, who were more obstinate, it sort of
left them less of a choice, in our view. But, they did not have
any explanation. They said, ``Well, if there are errors in the
database that are leading to under-reimbursement, they're just
errors, there's no intent.'' And our response was that the
error was always in favor of the insurer and against the
consumer.
The Chairman. Wouldn't, sometimes, they just cut 50 percent
right off the top?
Ms. Lacewell. They would cut a percentage off the top,
which is important, because if you're talking about a
prevailing rate, it's what most doctors charge. So, if you
throw out charges at the high end, that's going to depress the
reimbursement rate.
The Chairman. Now, let me turn to you, Dr. Nielsen. You're
from Buffalo. You've practiced medicine there for many years.
Are you surprised to learn that the insurance companies'
industry reimbursement rates for your visits in your community
are 10 to 25 percent lower than the actual market rate?
Dr. Nielsen. We were surprised to know exactly how low,
because--you might wonder why we didn't do what the Attorney
General's office did, and collect that data. And it's very
clear. It's because of concerns about antitrust enforcement.
Doctors are not allowed to talk to other doctors about fees. It
does sound crazy. So, we knew that the underpayment was
occurring. That's why we filed this lawsuit, back in 2000. We
didn't know the magnitude of it. We knew it from the doctors
who came forward. But, the pervasive nature of it is amazing.
And if you look--if you look at the numbers, those numbers
correlate very well with another suit that was settled in the
State of New Jersey with Health Net. And there, it appears
that, on exactly the same issue, the Ingenix database
underpayment and the rigging, and the numbers of--the amount of
underpayment was, in the settlement, estimated to be between 14
and 28 percent. And that winds up very well with this third
column that you're seeing.
The Chairman. My final point, before going to Senator
McCaskill, is that--you know, make what comparisons you want,
but Erie County, New York, any county--West Virginia--you find
a lot of parallels, a lot of people trying to make it, not
being able to make it, insufficient health insurance, every $10
counts, every $25 counts. You add them up, it makes an enormous
amount of difference. The thing that's hardest to understand
about this practice is that the insurance companies, had they
behaved as they should have, would have still been making an
enormous amount of money. Is that correct?
Ms. Lacewell. That's correct.
The Chairman. I think it's inexcusable. I'm glad this
practice has been exposed and that we're beginning to correct
it.
I have one final question for you. You settled, and it
became very reasonable, because, you said, like dominos,
everybody else began to do that. Now, you're going to have to
prove that to me, because--I don't know why you didn't go after
them for fraud. Or maybe you did, and that's why they settled.
Ms. Lacewell. Well, we alleged to them--and we had to
threaten to sue some of them under our consumer fraud and
deceptive practices statutes. And we gave them the option of
litigating and defending against a fraud lawsuit or signing
onto the reform practice and stepping away from this deceptive
system and moving toward a new system of reform. And the
insurers that operate in the State of New York chose to join
onto reform.
The Chairman. But, what's important to me is, you were
prepared to go the fraud route, and they knew it.
Ms. Lacewell. That's right.
The Chairman. I thank you.
Senator McCaskill?
STATEMENT OF HON. CLAIRE McCASKILL,
U.S. SENATOR FROM MISSOURI
Senator McCaskill. First, let me say, for the record, that
I'm a big fan of Andrew Cuomo. And I don't mean, by the
comments I'm about to make, that I want to diminish his
accomplishments as a crusader on behalf of consumers. But, I
think it's important to point out for the record that this
journey began with a lawsuit that was filed. And I find it a
little ironic that the Missouri Medical Association and the AMA
turned to America's trial lawyers to right a wrong as it
related to the way they were being reimbursed. Because
generally when I'm speaking to the members of the Missouri
Medical Association, they're explaining to me that Missouri's
trial lawyers are nothing short of Satan and that they are the
evil that has cast such problems upon the practice of medicine
that it makes it impossible for doctors to do their work.
So, I wanted the record to show that the AMA turned, in
fact, to a class-action lawsuit handled by trial lawyers. And
the reason that it had not been settled by the time that Andrew
Cuomo took office, some 7 years after the lawsuit had been
filed, was because the defendants in that lawsuit refused to
acknowledge the proof that those trial lawyers were willing to
show the court, and they were delaying and delaying and bumping
up the costs of that lawsuit for UnitedHealthcare and for the
defendants in that lawsuit. And had UnitedHealthcare taken
cognizance of the facts that those trial lawyers had brought to
the court, and immediately capitulated and admitted that they
had this collusive system of data that was flawed, we wouldn't
have had to rely on Andrew Cuomo to come to the rescue.
Dr. Nielsen?
Dr. Nielsen. You bet. We don't hate all lawyers. We just
haven't had remarkable luck with the trial bar, as you know.
The issue here was the facts, unearthing the facts, and having
enough persuasive muscle to make sure that the flawed database
was exposed. And it took the muscle of the people's lawyer. And
so, it did take a lawyer. It took the people's lawyer. We are
grateful for that. We are also grateful for the help that we
had from the attorneys. And sometimes things lie aborning in
the courts because of other reasons, other than the skill of
the attorneys.
Senator McCaskill. I think that's--you know, I appreciate
that. And I don't mean to--you know, to pick on you. I--but, I
do think it's important to note that, even the American Medical
Association, when they need a justice to be addressed, turn to
America's trial lawyers to try to get into court and fix a
problem. And that's why America's trial lawyers are so
important to our system of justice in this country. And I just
wanted to point that out.
Now, let me ask you, Dr. Nielsen, do the doctors generally
agree to take the reduced rate for the out-of-network payment
from the consumer? And is this difference in payment one that
the consumer is generally going on the line for, or is there a
general--I know there have been times in my life that I believe
that my doctors have taken a reduced rate for an out-of-service
medical charge.
Dr. Nielsen. Some do.
Senator McCaskill. Out-of-network, I mean.
Dr. Nielsen. Some do. They don't have to, of course. What
should be--what should happen is, the patient going out of
network should have access to the information as to what they
will pay. Just as you heard from the consumer, the patient who
was unable to be here today; she thought she knew what she was
going to owe. She knew what the charge was.
Senator McCaskill. Right.
Dr. Nielsen. The problem wasn't the charge. The problem was
the amount of reimbursement from the insurer, which left her
holding the rest.
Some doctors do negotiate lower fees when the patient is
left holding the bag. Some do not. Some give uncompensated
care, as you know----
Senator McCaskill. Right.
Dr. Nielsen.--70 percent of doctors give uncompensated care
to patients who have no insurance.
But, this is different. This is a situation of a promise
made and a contract between a health insurance plan and a
consumer. And the promise wasn't kept.
Senator McCaskill. Do--how does the UCR rate compare to the
Medicare rate, generally speaking? Can you speak to that? Can
any of the witnesses speak to that? How far off is the Medicare
rate for reimbursement to doctors from the UCR rate that this
data--the phony data was supporting?
Ms. Lacewell. Senator, we did look at that issue, and we
found that typically the Medicare rate is much lower, and, of
course, we believe this is one of the reasons why insurers
charge a higher premium for the structure of this out-of-
network system, because the insurer's saying, ``It's going to
cost me more. I'm going to pass on a little more of the cost to
you.'' And we think it's important that the consumer get the
benefit of that bargain, because if the insurer's taking a
little bit more, they shouldn't be holding on to that and not
complying with their obligations.
Senator McCaskill. Well, once again, that fact underlies
our desperate need for health care reform in this country,
because if the Medicare rate has been lower than the UCR rate,
that we now know was artificially too low, then therein you see
all the kinds of incentives in the system to try to game it in
order for doctors to come out whole at the end of the day. So,
I think that's important.
Final question. Was there any evidence of collusion that
you all saw between these insurance companies as this data
company was bought by UnitedHealthcare? Did all the other
insurance companies know that this was now becoming their's--
that they were going to own this and it wasn't going to be
independent and it wasn't going to be audited, or there wasn't
going to be any oversight of it?
Ms. Lacewell. We believe that the insurers that use the
Ingenix system were aware of Ingenix's relationship with
UnitedHealth Group, and they were aware that, once Ingenix and
United bought up the competitors, that there was nothing else
in the marketplace. And we believe that they were content with
that, because it was a system that worked for all of them,
collectively. It was the consumers who were not aware of this.
Senator McCaskill. OK. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator McCaskill.
Senator Udall, to be followed by Senator Lautenberg.
STATEMENT OF HON. TOM UDALL,
U.S. SENATOR FROM NEW MEXICO
Senator Udall. Thank you, Chairman Rockefeller. And I want
to congratulate you for holding this hearing today. I think
it's a very important topic that you're highlighting. It
impacts my State of New Mexico.
And I'd like to also say that the Senator from Missouri, I
think, raised a very interesting question, here, the AMA hiring
trial lawyers to bring justice to a situation, and I hope that
that portends a rapprochement, or something like that, between
the trial lawyers and the AMA, so that you can step forward and
offer proposals for reasonable reform in the malpractice area.
This is an exciting opportunity, I think, here for you.
But, Dr. Nielsen, the ``double harm'' you cite in your
testimony, where the patient actually ends up paying more than
the fees outlined in her network of benefits, speaks to a
current situation in my home State of New Mexico. Recently,
industry interests have pushed for the right to form exclusive
PPOs, something New Mexico's Medical Society opposes. In terms
of timely access to health care, do exclusive PPO plans pose
another kind of double-harm threat for consumers? And, in your
estimation, is the push for exclusive PPOs cause for concern,
given the Attorney General's findings from the UnitedHealthcare
settlement?
Dr. Nielsen. You'll need to educate me about what's
happening in New Mexico, because when you say an ``exclusive
PPO,'' are you talking about a restricted network?
Senator Udall. That's right. That's right.
Dr. Nielsen. That is not new. That is not new. That's been
around a long time. They've been done under the HMO umbrella.
They've been done under--even a point-of-service sometimes has
an exclusive extended network.
The problem there is that the balance of power between an
insurer and a physician, there is no comparison between the
imbalance of power, particularly if that insurer is one of the
large ones that services many employers in that State. We saw
this in Nevada, for example, when one company bought up another
health insurance company.
So, it is a problem, because then sometimes insurers say to
the doctors, ``Take it or leave it.'' It's then up to the
doctor to either take or leave it. And if they feel that the
volume--number of patients that they would see would justify
the discount, then they make an informed decision to accept and
be part of that network. And that's a fair negotiation. The
problem of unfairness comes when the doctor does not have the
ability to say no, because they would lose their entire
practice.
Senator Udall. Now, the settlement agreements in these two
cases are great first steps to reining in managed-care's ad hoc
cost-containment strategies. Is the case precedent set by the
AMA's example enough, going forward? How do you see the Federal
Government best addressing the conflict-of-interest questions
raised by these two cases?
Dr. Nielsen. I think your hearing is a remarkable first
step.
I want to be sure that there--that it's clear that there
are basically two parts to the kinds of settlements. And that's
really very important. The settlements that you heard described
by Ms. Lacewell that the Attorney General negotiated were
essentially fixing this database, ceasing and desisting using
the flawed database, and going to a new unbiased database,
going forward. But, the other part is the settlement that
UnitedHealthcare has reached with the AMA and the other medical
societies, and that's really very important. It's different.
That's reparation for the past actions.
So, United has solved both of those, from their standpoint.
There are three others that we are helping to come to that
conclusion by filing lawsuits. The recent one was against
WellPoint, yesterday. So, Aetna, CIGNA, and WellPoint have not
yet reached a settlement on reparations; whereas, United has.
We think that everyone needs to understand this. What the
Federal Government will do, what the jurisdiction of the
Federal Government is, compared to State laws, I--that's beyond
my expertise as a physician, so I would have to turn to Mr.
Chairman and ask, What is the role of the Federal Government
here?
Senator Udall. Well, I'm not sure you're allowed to ask the
Chairman a question, but I'll defer to our distinguished
chairman, here.
The Chairman. You have 13--12 seconds left.
Senator Udall. I'm going to yield it to you.
The Chairman. I know.
[Laughter.]
The Chairman. That's why I'm offering you 12, now 10
seconds.
[Laughter.]
The Chairman. All right.
Senator Lautenberg?
Thank you very much.
Senator Lautenberg. Thank you very much, Mr. Chairman.
And it's a great idea to hold this hearing and learn from
what experienced people like our witnesses here know something
about.
And when you see that--though I think that you did mention
that--Dr. Nielsen, that the agreement with UnitedHealthcare is
still awaiting formal approval by the Federal court--is that
right?
Dr. Nielsen. That's correct, Mr. Senator. And that is going
to be happening--we believe that that happens next week, the
first hearing.
Senator Lautenberg. And the area of discussion is about
$350 million, is it?
Dr. Nielsen. That's correct.
Senator Lautenberg. $350 million. It's outrageous. You
know, a scam is a scam is a scam, whether or not it's a street
thug or a well-dressed corporate executive. That's been an
interest of mine for a long time--I'm on the board of the
Columbia University School of Business, and I was able to grant
them a chair, some 8 years ago, in my subject, and I'd led one
of America's great companies for 30 years--in business ethics.
And we don't have that sprinkled in our dialogue often enough.
Ms. Lacewell, last summer at the Federal court--and I think
the Chairman touched on this--you proved your settlement with a
New Jersey insurer, as you know, and detailed significant
problems with the insurance companies underpaying patients.
Now, your investigation found similar problems with the
insurance companies operating in New York. What can be done to
stop these companies across the country that are engaged in
similar practices, but are not included in the New Jersey and
New York settlements? Do you have any recommendations? I know
it's outside of your direct province. What do you think?
Ms. Lacewell. Senator, it's--obviously, it's a very
important question. The Attorney General finds that
transparency--bringing light to a problem has a very powerful
effect, which is why, as Dr. Nielsen has noted a few times,
this hearing is important. Because if the problem is in the
shadows, probably no one will do anything about it. But, when
light is brought to the problem, and the problem is articulated
with detail and with proof and with vigor, the insurance
companies really could not dispute that this was a real
problem. And once it was brought out into the light of day, it
became really too much for them to bear. And when you get the
first to settle--and Ingenix being at the center of the
problem--that generates a momentum of its own.
Senator Lautenberg. So, you're saying they must pursue it
with--helped by the knowledge that you've established in the
State of New York. And when we look at the chart, we see this
breach of conduct throughout. And despite what we heard before,
we can't berate the activities of attorneys in trying to
resolve these issues. So--I have a daughter who's one of them.
There are--Mr. Bell, nine--there are nine States, plus
D.C., that allow health insurance to deny coverage to women
buying insurance on their own because they have been victims of
domestic violence. And I've authorized a law protecting victims
of domestic violence from having to live with a gun-carrying
spousal abuser.
How can insurance companies justify the denials of
coverage? It's my understanding that, typically, pregnancies
are not covered in their health care costs. So, (a) if that's
true; (b) isn't that discrimination against women, also?
Mr. Bell. Yes, I agree that that's a pretty shocking
finding. I think that these issues were recently investigated
by the National Women's Law Center, that did a report called
``Nowhere to Turn: How the Individual Health Insurance Market
Fails Women,'' where they looked at how flawed the individual
insurance market is for women who are seeking coverage. They
found, in many States, women had very difficult time purchasing
maternity coverage; in some cases, the out-of-pockets were
enormous, even if they were successful in securing it.
And I think it's--is actually--the situation is even worse
than that, in the sense that the individual insurance market is
really a deeply flawed market, not only across gender lines,
but for people who are older and sicker, or who have chronic
illnesses and disabilities. There are all types of problems
that consumers have getting access to affordable coverage in
the individual market. And so, we would favor efforts to give
consumers other options to get coverage, frankly. I mean,
giving them a choice of enrolling in a public plan, like
Medicare, or putting them into a larger pool. In states like
New York, we have community rating, which broadly spreads the
risks out across the entire marketplace. It gets rid of some of
those discrimination issues. But, we still have affordability
issues for younger people. So, clearly that's not a panacea.
But, I think that the--this is a very important question.
It could be addressed by tighter state oversight. I mean, why
are the states permitting insurance companies to operate in
this fashion in those states? And so, I think we need much more
consumer-oriented oversight and enforcement. And we're
certainly happy that we have it in New York; we'd like to see
it strengthened there, as well, and strengthened in other
states.
Senator Lautenberg. Yes. When you're--if you're a card
player, in the vernacular, it's good to know the deck is fixed.
In the case of Ingenix, the deck was fixed. And that was kind
of the reference that the companies were using. Quite unfair.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Lautenberg.
Senator Begich, to be followed by Senator Klobuchar.
STATEMENT OF HON. MARK BEGICH,
U.S. SENATOR FROM ALASKA
Senator Begich. Thank you very much, Mr. Chairman.
Thank you all for being here today and giving your
presentation.
If I can ask--and I want to ask, just, some general
questions about the status of, kind of, what's next with the
lawsuit, and then some policy questions, generally. But, now
that it's been--it's in the process of settlement, where do you
see the timetable in regards to the database development and
availability for the public?
Ms. Lacewell. Senator, the Attorney General has estimated
about 6 months as an aggressive timetable to get the not-for-
profit up and running and have an initial database that can be
available to the Nation. And when that happens, Ingenix will
close its database to the Nation. So, insurers who have not yet
signed on to the reform are going to need someplace to go, and
we hope----
Senator Begich. Sure. But----
Ms. Lacewell.--they'll go there.
Senator Begich. But, it'll be, you think, 6 months or a
little bit longer.
Ms. Lacewell. Yes, possibly a little bit longer, that's
right.
Senator Begich. And then, how do you give access to that
database for those that may not have Internet access or
computer access? I know that may be difficult to think about,
from New York, but I'm from Alaska, and we have some very
small, remote communities that do not even have access to
broadband or dial-up.
Ms. Lacewell. That's a very important question. One of the
things that we're looking at with respect to the proposed
regulation in New York with the Department of Insurance is
requiring insurers to tell the insured, upon request, what the
amount of reimbursement will be, and to do it before they seek
the medical treatment from an out-of-network physician. And so,
whatever means of communication that is available to the member
would entitle them to that information.
Senator Begich. And would the database also have
information, if you access it and you want to protest the fees,
or whatever the right term is, it will show them how to do
that?
Ms. Lacewell. We do----
Senator Begich. They----
Ms. Lacewell. Senator, we do want to include some consumer
education efforts there, and we also hope that the amount of
money that we've collected will enable us to embark on some of
those efforts with some of those funds.
Senator Begich. Right. And then, I guess all of you know--
as you know, the Congress is working, and the President is
working, on massive health care reform. Do you see, within that
reform, some sort of process or nationwide approach to this as,
now, you have done through New York? I don't know what the
right--who the right person to ask would----
Dr. Nielsen, you've grabbed the mike, so you're it.
Dr. Nielsen. Let me take a first crack at it. We are
privileged to have been part of that discussion, and we look
forward to being part of the discussion, both within the Senate
and the House. So, absolutely, what you've seen is something
that needs to be corrected. What you've heard about the pre-
existing conditions, not allowing a patient to get insurance--
let alone afford it, not even get it--those are issues that
concern us deeply, and have for years, and we are on the brink,
we think, of some very meaningful health system reform that
will help all Americans.
Senator Begich. And I do--I recognize that--meeting with
Senator Baucus last week in regards to the issue of those that
can't get insurance now, and how that can be fixed. But, I
guess I'm kind of honing in on the permanency of the database.
How do you make sure it's reviewed? How do you make sure it's
consistent and that everyone has to participate? I mean,
that's, I guess my--is that--have you, or any of you, proposed
ideas to some of the leads in this area of health care--Senator
Kennedy, Senator Baucus, and others?
[No response.]
Senator Begich. If not--it's not a trick question--if not,
then would you do that? And would you do that in a timely
manner?
Dr. Nielsen. Well, it's going to be transparent, so anybody
who has an out-of-network bill that would be submitted--that
amount would be submitted to the database, and there would be
no incentive to alter that database. So, it should be
transparent to all. It would be available to consumers, to
physicians, to a health plan. So, I guess we are hoping that
the transparency will be what we need.
Senator Begich. I guess--I don't know--I want to make sure
you--you've done it through a lawsuit, but to make sure it's
codified, from a national perspective. That's what I'm trying
to get to. In other words, it's great that you've done it
through a lawsuit, in your own way, but we're about to do
massive health care reform. Is there a way to codify this to
ensure that we don't have to go through this process again? And
then, to regulate it, to a certain extent, because, you're
right, it should be transparent, but, I think, 10 years ago,
some people might say, it should have been transparent. So.
Ms. Lacewell. That's right, Senator. And in New York, we're
seeking to make those reforms permanent through a regulation in
the State of New York, and Attorney General Cuomo would be more
than happy to cooperate and facilitate other efforts that could
be applied nationwide or, you know, as part of a Federal
program.
Senator Begich. Can I just--my time is out, but can I
encourage you to talk to the Attorney General and see if he
would submit some information to--at least to Senator Baucus,
Senator Kennedy, and myself? I mean, they're doing the
legislation, but I have real interest in this issue.
Ms. Lacewell. Absolutely.
Senator Begich. Thank you very much.
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you very much--am I next,
Chairman?
The Chairman. You are next, thank you.
Senator Klobuchar. Thank you. I jumped ahead.
Thank you, all of you, for being here and for your work.
And just to clarify this--a little bit of what Senator Begich
was doing--do, is UnitedHealthcare the only company that's
settled, now, of these lawsuits?
Ms. Lacewell. With respect to the Attorney General's
efforts, UnitedHealth Group and Ingenix were the first. And
that was important, since Ingenix was at the center of the
problem. And then, all the other large national insurers that
operate in the State of New York--Aetna, CIGNA, WellPoint--and
large regional insurers that operate in New York--have all
signed on to settlements to move away from Ingenix and to use
the new system.
There are, of course, West Coast-based national insurers
that don't operate in New York that, at this point, we were not
able to reach, but the new database is available to any insurer
that wants to explore using it.
Senator Klobuchar. So, the--I mean, the lawsuit involved,
as you discussed, some--righting the past wrongs, and then also
looking forward, which I appreciate, so that this database,
paid for by the UnitedHealthcare settlement money, is used,
then, for other people that aren't even on their--that weren't
even customers of theirs. Is that correct?
Ms. Lacewell. That's right, Senator.
Senator Klobuchar. OK. And so, the other thing that I
wanted to ask about was, Dr. Nielsen, in your testimony, you
referenced the American Medical Association's National Health
Insurer Report Card. And in AMA's analysis of major health
insurers, Medicare was included. And, as you know, Medicare has
been discussed here as the largest purchaser of health care
services. And, while it appears that Medicare adheres strictly
to a contract rate, we also know that there are issues with
those rates. And, in fact, Mayo Clinic just came out--one of
the most efficient health care providers in the country--came
out to say that they lost $765 million in 2008 from Medicare
patients. What do you think needs to be done to--for health
care reform with this reimbursement rate?
Dr. Nielsen. Let me quote Dr. Denny Cortese, who is the CEO
of the Mayo, who actually----
Senator Klobuchar. Who we both know.
Dr. Nielsen. Who we both know, who was quoted in
yesterday's New York Times, and he said, ``Medicare has
systematically been underpaying for services,'' and he goes on
to say, ``If more patients are enrolled in a Medicare-like
program,'' he predicted, ``your very best providers will go out
of business or stop seeing patients covered by the government
plan.'' We can't let that happen. I mean, the Mayo obviously is
a model of efficiency, as well as expertise.
So, I think everyone knows, and there isn't anybody in the
Senate who doesn't know, the problem with physician payments,
and we will be back, talking about it, toward the end of this
year, as well. So, it really is a problem. We have to--this is
a safety-net program for our elderly, and we really must make
sure that it's fiscally responsible and sustainable.
Senator Klobuchar. Thank you.
And the other thing Denny Cortese has focused on is the
fact that if we're going to make it sustainable, we have to
make it as efficient as possible. And one of the things that
has most struck me is this geographic disparity issue. And I
know it's hard when you're representing a national group, but
an independent study out of Dartmouth showed that if the rest
of the hospitals in the country simply used the protocol that
the Mayo Clinic uses in the last 4 years of a chronically ill
patient's life, where the quality ratings are incredibly high--
if we want to save money, Mr. Chairman--$50 billion, every 4
years, in taxpayer money. So, as we talk about these rates and
the Medicare rates and the good work that you've done here, I
just think we cannot neglect this issue of making sure, as we
look at reform, that these are offered in the most efficient
way.
And I think people would be shocked to know that, in fact,
the highest quality often comes from States with the lowest
costs. Is that not correct?
Dr. Nielsen. That is correct. And, in fact, in the White
House Forum on Healthcare Reform, that issue was addressed, and
I was asked directly by Nancy-Ann Min DeParle, you know, ``What
is your profession going to do at looking at the geographic
variation?'' It's an appropriate question that actually was
originally addressed by Senator Baucus. They are both right to
ask that. Our profession is very concerned about that.
In our experience, the biggest variations occur when there
is not a clear-cut path for the one right thing to do----
Senator Klobuchar. Exactly.
Dr. Nielsen.--such as beta blockers after a heart attack or
aspirin on the way in to the hospital. So, we really need, very
quickly, to make sure that we generate the evidence that we
need to see what is absolutely necessary, and that we
promulgate it. And we will be your partners in that regard.
Senator Klobuchar. Thank you. It often seems that, also,
this team--the medical team idea of--whatever you call it--the
medical home or--what they do at Mayo and--or in many of our
more rural areas, where you have a primary physician and then
you have a team that works with them, is where you often find
the lower rates, I think.
So, thank you very much.
The Chairman. Thank you, Senator Klobuchar.
And then Senator Pryor and then Senator Snowe.
STATEMENT OF HON. MARK PRYOR,
U.S. SENATOR FROM ARKANSAS
Senator Pryor. Thank you, Mr. Chairman.
Let me ask, if I may--Ms. Lacewell, if I can start with
you--if a consumer, John Q. Public, called his or her insurance
company and asked them to explain the--what ``usual, customary,
and reasonable reimbursement rate'' means, what kind of answer
would they get?
Ms. Lacewell. Well, Senator, that's an excellent question.
Assuming the consumer could get through on the telephone, which
is another big complaint that we get, in our experience the
people who answer the phones are really not trained to answer
that question and would simply refer the consumer to their
written materials, which vary from plan to plan, and from area
to area. And we took a look at the written materials, and they
are frequently--they're simply unintelligible. And we met,
then, with in-house counsel for a number of these large health
insurance companies, and we pointed them to the page and said,
``What does this mean? What are you saying here, when you go,
paragraph after paragraph, `the lowest--the maximum allowable
rate' '' and all this other legal jargon and five different
ways that they may compute it? And when pressed, it was
amazing, they sometimes said, ``I really don't know. I can't
explain it to you.'' So, even in-house counsel couldn't explain
it. So, I don't think the customer reps could, either.
Senator Pryor. Dr. Nielsen, let me ask you the same
question. If a doctor calls and----
Dr. Nielsen. Sure.
Senator Pryor.--asks, you know, what does ``usual,
customary, and reasonable'' mean, what do they tell the doctor?
Dr. Nielsen. Well, they would tell the--Senator, they would
tell the doctor the same gobbledygook, but when it gets down to
the real question, which is--from the doctor--and this happened
many, many times before the lawsuit was filed in 2000--they
said, ``How''--the doctor would say, ``How in the world did you
really calculate that in this area?'' And the answer was
always, ``It's proprietary.''
Senator Pryor. Yes, OK.
Let me follow up on that with you, Ms. Lacewell, if I can,
and that is--you've spent a lot of time on this subject dealing
with this issue, and I appreciate that. In all of your time and
all your efforts there, were you able to find any written
material that was available to anyone outside the insurance
company about how these ``usual and customary rates'' were
calculated?
Ms. Lacewell. No, we were not.
Senator Pryor. So, in other words, even if a customer
said--or a consumer said--a policyholder--``Send me something
in writing so I can understand this,'' there is nothing that
you've ever found, that's gone outside the insurance company,
to tell you how that works.
Ms. Lacewell. No, that's right.
Senator Pryor. And also, in terms of disclosure to
policyholders, did the insurance companies ever disclose about
the sources of information and the company that we--is Ingenix,
you know--and whether--who owns that, and how that's set up?
Have they ever--did they ever disclose that to consumers, as
far as you can tell?
Ms. Lacewell. Senator, another excellent question. Not only
did the insurers not disclose Ingenix was doing this or that
Ingenix was part of the health insurance industry, they
frequently affirmatively misstated how they were determining
this, by either referring to entities that used to do it,
because they hadn't updated their materials, or by saying, ``We
rely on, you know, independent data,'' and things that really
misled consumers who were reading that language.
Senator Pryor. OK.
Mr. Bell, I don't want to leave you out of this
conversation, so let me ask you--if John Q. Policyholder is
trying to get information from their insurance company so they
understand how their policy works and, when they pay their
premiums, what they're actually going to have covered, and the
insurance company sort of stonewalls them, you get an 800
number, maybe you get someone who doesn't know what they're
talking about or some gobbledygook you can't read, what can a
consumer do to get that basic information about how their
particular insurance policy works?
Mr. Bell. Well, we certainly encourage people to seek
outside help, and particularly to contact their state's
insurance departments or the Attorney General in their state.
In our state, we have a health care bureau at the Attorney
General's office that serves as a great early warning system
for all kinds of consumer complaints and problems.
But, in the case of this issue, I mean, I think our overall
takeaway is, the consumer was really in a fog about how the
charges were calculated. It was hard to go up against the word
of the insurance company. I've seen some websites of insurance
departments around the country, where they basically said, ``We
can't help you with this,'' you know, ``We don't regulate this
practice. You're basically on your own.'' So, the consumer
wasn't sure if the doctor was charging too much, as Dr. Nielsen
mentioned, or whether the insurance company was underpaying,
and it just persisted for many, many years like that.
So, my experience is just that people often--their eyes
glaze over when it comes to insurance, and they just feel like
they can't dig into it. And I'm sure that that happened many,
many times with these types of billing underpayments.
Senator Pryor. Mr. Chairman, I just have one quick follow-
up on that. In our state, our state insurance department and
insurance commissioner, he or she has a team of, sort of,
consumer helpers there, a hotline or something that you can
call and talk to them about this. And I think they try to be
helpful. But, I also understand that a lot of insurance
departments around the country, they have this other mission,
and that is, they want to provide a good business climate for
insurance companies so they'll have a lot of insurance
companies doing business in their state. Do you think there's
an inherent conflict there?
Mr. Bell. There is a longstanding tension between, sort of,
the role of the insurance department to promote the financial
health and solvency of companies--because clearly they don't
want companies to go out of business, and that is often
considered to be ``job one,'' is to look out for that. And so,
sometimes consumer protection issues, they both get less
emphasis, but also can sometimes conflict with that mission.
And that's why we think it's useful to have--to establish an
independent unit, such as an independent office of consumer
advocate, as Texas and some other States have done, to ensure
that there's someplace in the government that really is working
just for the consumer. Just like we have units that intervene
on utility-rate hearings, you know, why not have similar
counterbureaucracies or counter---you know, public counsel that
would work on behalf of the consumer?
Senator Pryor. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Pryor.
Senator Snowe?
STATEMENT OF HON. OLYMPIA J. SNOWE,
U.S. SENATOR FROM MAINE
Senator Snowe. Thank you, Mr. Chairman.
Well, one of the things that we're learning today is that
millions of Americans who required health care services were at
the mercy of a small medical data company called Ingenix and
produced these tables, those ``usual and customary rates'' that
were accepted as gospel truth in the industry. If Ingenix said,
``Your doctor was charging you above the going market rate,''
then you had no choice but to pay. I mean, you were simply out
of luck, because Ingenix always got the last word, it appears.
But, it looks like the reality was that the data was all
smoke and mirrors. For example, Ingenix said its data was based
on actual provider charges, the actual amount that doctors were
charging the patients. So, let me ask you, Dr. Nielsen, did
Ingenix ever call you or your organization to collect the fees
that the doctors were charging their patients?
Dr. Nielsen. Let me make sure, Senator, that I've
understood your question. Did they ever call the AMA to----
Senator Snowe. That's correct.
Dr. Nielsen.--to find out what the fees were?
Senator Snowe. Yes.
Dr. Nielsen. We are prohibited from collecting that
information, because of antitrust concerns.
Senator Snowe. OK. So, the medical data came from the
insurance, but--the medical data that came from the insurance
company, is that correct? I mean, that's----
Dr. Nielsen. The medical data came from individual
physicians who submitted their claims. So, they got the
information. The actual claims went in. It's what they did with
it thereafter that's the issue.
Senator Snowe. But, the medical-charge data came from the
insurance company or specifically from the physician.
Dr. Nielsen. Came from the physician----
Senator Snowe. Physician to the----
Dr. Nielsen.--to the insurer.
Senator Snowe.--insurance company.
Dr. Nielsen. Or--either through the patient or directly to
the insurer. And then, the insurer decided what they would pay,
and the patient was left with the rest.
Senator Snowe. So, what we're discovering, today, is that
obviously all of the information wasn't turned over to Ingenix
and, you know, the health--the insurance companies would throw
out some of their higher-cost charges so that the rates would
be much lower. Is that correct?
Dr. Nielsen. That's correct.
Senator Snowe. Yes.
Dr. Nielsen. And in the written testimony, we go through
the various ways in which that was done.
Senator Snowe. OK. So, you've been trained as a doctor and
as a medical researcher, so maybe you can answer this question.
Statistical experts who looked at this Ingenix database have
concluded it's--that it is a convenient sample of medical
charges, not a representative sample of medical charges. Can
you explain that difference----
Dr. Nielsen. Yes. It's a----
Senator Snowe.--between the two?
Dr. Nielsen. It's a pretty simple difference. If it's
representative, the individual doing the sampling works very
hard to make sure that it accurately represents the full range.
A convenient sample is left to the person doing the sampling to
decide how to do the sample. And it's a very big difference.
Senator Snowe. The big difference, in terms--because they
don't analyze the data.
Dr. Nielsen. Sure.
Senator Snowe. Obviously, in this instance--in these
instances, they did not analyze what was--you know, but----
Dr. Nielsen. What was inconvenient.
Senator Snowe.--what was inconvenient. So, obviously it was
a very convenient sample for the insurance company, but a raw
deal for consumers. They underestimated the real charges, and
consumers obviously paid billions of dollars out of their own
pockets that clearly the insurance companies should have been
paying.
Ms. Lacewell, I understand that part of the settlement that
you reached with the insurance companies is set up a new
independent database to estimate the ``usual and customary''
data charges. Can you tell us how this new database would be
better than the old one?
Ms. Lacewell. Yes, Senator. What we intend to do is have a
qualified university be involved with an independent not-for-
profit that will create the new database. And what we have
looked to here are the incentives. So, whereas the incentives
we found with the database being run by the health insurance
industry, that has an obligation to reimburse, was to skew it
downward, we feel that, with a not-for-profit company, that is
independent from the industry and that is associated with a
university that will do academic research based on the
database, and therefore has an incentive in it being accurate,
that we will be moving the system out of conflicts and into
independence and more accuracy.
Senator Snowe. And when is this system going to be
established?
Ms. Lacewell. We anticipate it'll take, on the aggressive
side, about 6 months.
Senator Snowe. Ms. Lacewell, on the out-of-network premium
increase and--in your investigation of these procedures, did
you find any justification for insurers to charge customers
going out of network a higher--for higher prices than were
charged the providers who were given the same--given the in-
network rate--I mean, they weren't charged any more, but yet,
the customer going outside of the network was charged a higher
premium----
Ms. Lacewell. Yes, Senator, I----
Senator Snowe.--for those services?
Ms. Lacewell.--I think the theoretical justification by the
insurer is, the insurer has not been able to negotiate a lower
rate with the doctor and, therefore, is going to have to pay
more. And so, they're passing on some of that cost to the
consumer. The problem, of course, lies when the insurer does
not keep their promise to make sure that the balance of the
economic cost is fair, based on that promise.
Senator Snowe. What about balance billing, which is another
issue that--you know, that, unfortunately, so many individuals
are having to pay because of an underpaid insurance, so the
doctor goes directly to the patient to recover those charges.
Now, in California they have, you know, prohibited this
practice. What's your evaluation of it? Is it unfair to allow
balance billing?
Ms. Lacewell. Senator, what we have found, at least in New
York, is that balance billing is allowed when the patient is
out of network, has gone out of network, because there's no
contract between the doctor and the insurer. So, the doctor
doesn't look to the insurer, they look to the patient. In other
more ordinary circumstances involving in-network, it's
generally prohibited, because the doctor must look to the
insurer.
The reason that this is such a huge consumer issue is
because balance billing is typically allowed, in that it is the
consumer who's then stuck in between the doctor and the
insurer, and is the one who has to pay the cost.
Senator Snowe. But, generally that's a practice that occurs
in network and not--and not under any other circumstance.
Ms. Lacewell. Generally, we find balance billing being
allowed and occurring out of network.
Senator Snowe. In out of----
Ms. Lacewell. When it happens in network, it's frequently--
--
Senator Snowe. As----
Ms. Lacewell.--illegal.
Senator Snowe. OK. So, it's generally illegal----
Ms. Lacewell. That's right.
Senator Snowe.--in that case, but it's out-of-network that
is more conventional practice.
Ms. Lacewell. That's right, Senator.
Senator Snowe. Thank you.
Well, let me just make another point, Mr. Chairman. You
know, a Government Accountability report came out recently, at
the request of Senator Bond, Senator Durbin, and Lincoln and
myself, and it's even more troubling to see what's happening
here, because there's very little competition in the insurance
market. And based on the study that, you know, I requested back
in 2005, and to compare that study to the results of the study
that was released last week, that the combined market share of
the five largest insurance companies now controls 75 percent of
the market in 34 of the 39 States that we surveyed, and more
than 90 percent in 23 of these States. So, it tells you that
there, you know, dramatic, direction toward less competition,
if any, in many of the States across this country. So, when you
see--combine it with all of these deeply troubling practices, I
think it really is an enormous burden to consumers all across
this country, because there's virtually nowhere to go with
respect to competitive--competition in the health insurance
industry. There are no options, essentially, in many of these
States, as, you know, indicated by this report.
Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Snowe.
This is kind of a--what I would call an investigative
hearing, and the first of two, so we're trying to lay
predicates, which is why we're trying to establish a base from
you all, not just ask you questions, to give you a chance to
talk about all kinds of things.
Dr. Nielsen, you bring up an issue in your testimony that I
want to talk about a little bit more. You say that when the
insurance industry uses those Ingenix numbers to reimburse a
doctor or other health care provider, they just look at the
service delivered, but not the person who delivered the
service. Is that correct?
Dr. Nielsen. That's correct.
The Chairman. So, let me give you an example and ask you to
comment on it.
Say, a patient with a heart problem goes to see a doctor to
discuss the results of an EKG--an electrocardiogram test--the
patient could go in to see his general practitioner and discuss
test results, or he could make an appointment--or she--with a
board-certified cardiologist who is a chair, for example, of a
cardiology department at a major university.
Now, let me ask if I have this right. Ingenix doesn't make
any adjustment for the fact that a board-certified heart
surgeon might charge more for this service than a general
practitioner. There is one code for this service, listed on
here, and everybody who performs it gets reimbursed at exactly
the same rate. Is that correct?
Dr. Nielsen. That's our understanding, Senator Rockefeller.
And it's even worse than that. It's--it may be that the service
was rendered by a nonphysician, so those fees were also mixed
into this mix.
The Chairman. So, a non-----
Dr. Nielsen. So, you're absolutely right.
The Chairman. But, a nonphysician could do an EKG?
Dr. Nielsen. They can.
The Chairman. What kind of nonphysician?
Dr. Nielsen. Nurse practitioner, physician assistant.
The Chairman. I've got a healthy respect for physician
assistants, but your point is still----
Dr. Nielsen. So do we. So do we. And that's----
The Chairman. I mean, a place like West Virginia, we----
Dr. Nielsen. A place like New York, too.
The Chairman. Yes.
Dr. Nielsen. We value members of the health care team, and
there are many. That really isn't the issue. The issue is, this
is America, and when a patient elects to go out of network,
they need to know where they're going, what the charge is going
to be, and they have a right to ask for that. They also have a
right to know what they're going to be reimbursed from their
insurer. That really is the issue.
It--to do anything different is to essentially price-fix.
We don't do that anywhere else within our economy.
The Chairman. I want to come back to that in a minute.
So, anyway, Ingenix only collects service-code data. And it
doesn't collect data on who was delivering the service. The so-
called modifier data is available, but Ingenix does not use it.
Dr. Nielsen. That's correct. It's not that it isn't
collected. It would be on the claim. It is not used. It's what
happens after the claim gets there that----
The Chairman. It might be----
Dr. Nielsen.--is the problem.
The Chairman.--part of what's cut off----
Dr. Nielsen. Correct.
The Chairman.--the top, yes.
I can see what the problem would be with this system. It's
an apples-and-oranges comparison. You could be a cardiologist
whose charges are reasonable compared to other cardiologists
with the same level of training, but if you compare your
charges to when general practitioners charge to read an EKG,
all of a sudden your charges look excessive.
Dr. Nielsen, do you know why Ingenix and the insurance
industry do not collect information about providers' experience
or qualifications when they calculate the ``usual and
customary''?
Dr. Nielsen. I guess you would have to ask them why they
did all the things that they did----
The Chairman. Well, we're----
Dr. Nielsen.--that did not represent the actual charges. I
don't know the answer to that.
The Chairman. Yes, well, we're going to.
Can you explain to us why the American Medical Association
believes that insurers need to consider the experience and
expertise of the person delivering the service?
Dr. Nielsen. Sure. Sure. Where do you want----
The Chairman. Please do.
Dr. Nielsen. Where do you want me to start? Where do you
want me to start? There is----
The Chairman. Laying the case, just----
Dr. Nielsen. I'm an internist. I also have a subspecialty
in infectious diseases. I read EKGs. I have billed for the
reading of an EKG. If there was a complication on that EKG that
I wasn't certain that I could interpret, I would certainly send
the patient to the best cardiologist or electrophysiologist I
could find, and that person would be entitled to charge for
their expertise, for their years of training, beyond what I
have.
The Chairman. OK. I appreciate that response. But, next
week there's going to be an insurance executive sitting right
where you are. And let me give you a preview of what they're
going to say. They're going to say that ``usual and customary''
rate services serve to restrain doctors from overcharging the
patients. Higher doctor bills are good for doctors, but not for
everybody else. So, how do you respond to their argument?
Dr. Nielsen. I'm warming up the chair, here. I hope----
The Chairman. You can come back.
Dr. Nielsen.--it's still warm by the time--by the time he
gets here.
The American Medical Association has strong ethical policy
prohibiting excessive charging. The insurance industry would
like you to believe that what they did, this scheme, kept costs
down. It didn't. What it did is, it passed costs on to
patients. That's the problem. They got the profits at the plan,
the patients got stuck with the bill. That's the issue. Don't
let them kid you.
The Chairman. With your forbearance, Senator Begich, just
one more quick question.
You mentioned earlier about not being able to do some
things because of collusion. It's a very interesting word in
American law and practices of all sort. After 9/11, the first
bill that the Congress passed was to allow--make it legal for
the Central Intelligence Agency and the FBI to talk to each
other. They were not allowed to share information or to talk to
each other about any case, even though one might have
information that bore directly on what another--the other was
doing. You know, the FBI arrested, the CIA surveilled, and the
twain shall never meet. And I think we paid a terrible price
for that, in terms of national security, over many, many years.
And we changed that law. As I say, that was the first one we
passed.
Where do you--if you can't find out something--and I'm not
a lawyer, so I don't know how collusion--good collusion, bad
collusion, allowable collusion, not allowable collusion--but,
where does collusion--where do you think the collusion laws are
misplaced?
Dr. Nielsen. I'm not a lawyer, either. We do use them when
we have to go to court, but we also take care of them when they
get sick, so----
I--we are very--we have been very concerned, over the
years, about what has been a pretty aggressive interpretation
by the Federal Government of antitrust regulation. We have
not--against physicians; that's a very important thing to
understand--we have not seen similar antitrust enforcement
actions against insurers. You heard Senator Snowe describe the
consolidation of the health insurance market, to the point of
real market control, without enforcement action. So, doctors
are afraid of enforcement action.
There is one thing that will help. The new database, with
the transparency of out-of-network charges, that will be
transparent to all. It will available to everyone. A doctor can
find that out, as well. And that avoids the collusion
allegation, I believe.
I'm not sure I can answer it any better than that, Senator
Rockefeller.
The Chairman. No, you did a good job. Dr. Lacewell. I mean,
Ms. Lacewell.
Ms. Lacewell. Yes, sir. Two comments on the anticipated
position of the insurance industry about overcharging by
doctors.
One is, we're a consumer advocacy organization, and what we
have endeavored to do is to make sure that the promise made by
the insurer is kept. And the promise is, ``We will reimburse
you, based on what doctors typically charge,'' not on what they
should have charged, in the view of the insurer. And the
insurer extracts that higher premium, based on that promise.
And if they think that that particular arrangement is not
satisfactory for them, economically, then what they ought to do
is to change what they promise and not break the promise that
they've made.
In addition, the Attorney General believes that, to the
extent that there are inefficiencies in the market, for health
care charges or health care services, transparency will be a
good thing. So, this Ingenix database that kept everything in
the dark and didn't allow anybody to know what the rates were
going to be, or the reimbursement rates were going to be, we
think, for the insurers, actually did more harm than good. And
to bring to light what doctors are charging in various parts of
the country for various kinds of services, we believe, will
bring efficiencies and competition to the market, and
therefore, be a good thing in that regard.
The Chairman. Thank you. Thank you.
Senator Begich, it's your turn.
Senator Begich. I'll be very brief. I just have a--I want
to do a little follow-up there. And it was an interesting
question the Chairman asked you in regards to AMA medical folks
in regards to excess charges. How do you--in your code of
conduct, how do you monitor that if you can't talk to each
other?
Dr. Nielsen. It's not easy.
Senator Begich. No, that's----
Dr. Nielsen. I will tell you that this is a problem. I have
it with me. I'm--anticipated that it might--the issue might
come up, so I brought the ethical policy with me. I have it
here somewhere.
Senator Begich. That's OK. I recognize----
Dr. Nielsen. Well, but----
Senator Begich.--that that's part of the----
Dr. Nielsen.--but, let me tell you what we used to do----
Senator Begich. OK.
Dr. Nielsen.--because--in the old days, before there was
this aggressive antitrust enforcement concern. What we used to
do is, county medical societies used to be able to sanction
doctors----
Senator Begich. Oh.
Dr. Nielsen.--who charged excessively. And how did they
know? Because a patient would complain to the Ethics Committee.
That--we can't do that anymore. It's really very difficult to
figure out what should be charged.
Now, if someone is totally gouging a patient, what's the
most important thing that happens? The patient figures that
out, leaves the doctor, tells everybody they know--and they all
know a lot--and the doctor's reputation is ruined. The problem
is, that's what happened with the Ingenix database, and the
doctor didn't gouge them. But, if the doctor was charging
excessively, patients figure that out, they switch doctors, and
they tell everybody they know.
Senator Begich. Then, on the information database--it was
interesting to hear discussion of how--when the information is
put in--or the future--let's talk about the future, not the
past--when the new database is established, who determines--is
all the data going in, and then it's just calculated from that,
or is it a selective batching that's done? I'm just trying to
understand that piece of it.
Ms. Lacewell. Yes, Senator. What we anticipate is that
qualified people, from the university, who are experts in these
areas will make independent decisions about what kinds of
information should go into the database, what the sources of
that information should be, and how it should be collected,
audited--which, by the way, Ingenix did not audit its data,
either--but, what kinds of protocols and sampling are
appropriate. We want independent experts to do that, and to
make those decisions independently, with an incentive that
they're getting it right.
Senator Begich. So, they'll set some protocol process that
then will adhere to--throughout the database collection----
Ms. Lacewell. That's exactly right.
Senator Begich. OK.
Do you think that--any one of you can answer this, or
hopefully all of you might have a comment on this--do you
think--again, in health care reform--that we should require all
health insurance companies to submit data, if there is a
protocol set up for a database--require them all--in other
words, you talked about the East Coast ones--I mean, we've got
Blue Cross. Huge. Controls a sizable amount of our market. Had
huge adjustments last year, of 25 percent. That's why our city
is self-insured now.
Ms. Lacewell. Right. The Attorney General would certainly
like to see all insurers contribute data, if they can. Now,
within New York State, we have some smaller not-for-profit
local Upstate insurers----
Senator Begich. Sure.
Ms. Lacewell.--as to whom it might be a burden.
Senator Begich. OK.
Ms. Lacewell. But----
Senator Begich. But, with some limitations, would you think
some of the larger ones--would it make sense to require them to
do this?
Ms. Lacewell. Yes, it would, and it would help bring rigor
to the database.
Senator Begich. Do--the other two, do you agree with that?
Mr. Bell. Yes.
Dr. Nielsen. Yes.
Senator Begich. And do you think that's something that we
should think about with our health care reform legislation.
Mr. Bell. Yes.
Ms. Lacewell. Yes.
Senator Begich. OK.
That's all, Mr. Chairman. I appreciate it.
The Chairman. It's going to be a large piece of
legislation.
Senator Begich. Well, you know, it's a big--it's a big
issue.
[Laughter.]
The Chairman. It's interesting, you know, that--and this a
side comment on my part, but I think the President chose to
take on everything--you know, climate change, energy,
education, health care, banks, housing--and do it all at once.
And I happen--to think that's the right way to do it. And then
people talk about everything--you know, climate change is just
an absolutely huge subject, one which I'm confronting in West
Virginia, to unhappy reviews, but, nevertheless, you know, West
Virginia has the most to gain by acting well, and the most to
lose by continuing practices that have taken place for over 100
years.
So, I mean, this is a big risk we're taking, and never has
there been so much asked of the Congress. And so, Senator
Begich's question is very interesting, because, you know, we
had a 2-hour meeting yesterday, so-called ``Board of
Directors'' of health care reform, which I think is an obscene
title to give to what--we should just say ``nine Senators on a
bipartisan basis''--and, there are a lot of people that don't
want health care reform. They don't necessarily want it,
because they don't want the President to get credit for it.
They don't want it because they have, as so--is so typically
the case--I mean, as you found, this morning, we started the
discussion yesterday on the--on broad health care reform, and
immediately somebody pounced right on trial lawyers, ``Well,
until we get the trial-lawyer thing, we can't--obviously can't
talk about health care reform.'' So, it's going to be
incredibly complicated. And it's going to take time, but it's
going to be worth it, because I think all of these things have
to work in tandem. And I left out education. All these things
have to work in tandem, at the same time. If we don't do
climate change, what the heck difference does it make what our
national debt is, to our great-grandchildren? I mean, they're
going to be underwater and won't be thinking about that very
much. I mean, it's a very interesting time, and your
contributions here are huge.
I just want to wrap up with a couple of points.
What I think we've learned today is that there's a reality-
based prevailing market price for medical services, and then
there is a fictional ``usual''--UCR rate used by the insurance
companies. Thanks to Attorney General Cuomo and you and others,
we know that the insurance industry's reimbursements were just
dramatically lower than reality in New York--in some cases, by
25 to 30 percent.
Now, Ms. Lacewell, if I wanted to find out if the people in
my State of West Virginia, which doesn't have the resources of
your Attorney General's office, or maybe the vigor of your
Attorney General's office--if I wanted to find out if people
were getting underpaid in the same way that your consumers in
New York were, how would I figure that out?
Ms. Lacewell. Well, Senator, the way that we did it was, we
subpoenaed two sets of information. One, we subpoenaed the rate
information coming out of Ingenix for the particular medical
codes and--for particular ZIP Codes. And then we went to the
insurance companies, and we subpoenaed--that operated in those
areas--and subpoenaed them for the medical bills they had
received from doctors for the same services in the same areas.
So, we had, sort of, Ingenix and mini-Ingenix--or bad Ingenix,
good Ingenix--and then we could compare the two. And we did
that through an economist.
It seems to me that--with subpoena power, that could be
replicated anywhere.
The Chairman. Do you know we've added that on, in this
Committee----
Ms. Lacewell. So I have heard.
The Chairman. We've never heard it--we've never had it
before. And it's wonderful. I mean--actually, I--it wasn't
Olympia Snowe, but her colleague from Vermont and Senator Levin
mentioned to the EPA, who had been refusing to give information
for a long time--they just mentioned, ``Well, OK, then we'll
come subpoena it.'' The next day, they had all of the
information.
Ms. Lacewell. Yes.
The Chairman. So, it's just not having it----
Ms. Lacewell. Yes.
The Chairman.--it's what--it's just saying it, sometimes
will get you your result.
Ms. Lacewell. That's right.
The Chairman. Please.
Dr. Nielsen. Could I just make a suggestion, and maybe ask
Linda Lacewell to comment on it?
It is now clear, by view of the settlements, that the
Ingenix database was flawed. And it's pretty clear the range by
which the underpayment occurred. So, I wonder, Senator
Rockefeller, if you could simply go to the insurers, the health
insurers who operate in your State, and say to them, ``How many
out-of-network claims did you pay? And what were they?'' And
then extrapolate that. I--and I don't know if that's
statistically something that could be done without hiring--
because we know they're flawed----
The Chairman. And that's the point. The--obviously, that
could be done. But--for example, insurance commissioners in
states, like ours, are always--you know, there's no money for
them. There's never enough money for them to do anything except
sort of basically keep up with keeping their shops running.
That can also be true in attorneys general offices. You know,
they have--the attorneys general spent a lot of time on the
road, but they don't really have the resources to do the kind
of deep investigative research, which we're trying to here to
lay the predicate for the meeting on Tuesday. We're going to do
a lot of that, on behalf of consumers, because we think this
committee ought to relate to consumers as well as railroads and
airplanes. So, that's a problem.
Ms. Lacewell. Mr. Chairman, it seems to me that the
Attorney General's investigation has created enough doubt about
the integrity of this database that----
The Chairman. That would----
Ms. Lacewell.--it is incumbent----
The Chairman. That'll help.
Ms. Lacewell.--incumbent upon any insurer to demonstrate
how they think that what they're using is accurate, because
they are promising to pay, based on a certain kind of rate. And
we've demonstrated, as Dr. Nielsen indicated, that the database
is defective, that it does result in under-reimbursement, at
least in some areas that we've affirmatively proven. And so,
the burden really ought to be on these other insurers to
demonstrate to the country----
The Chairman. Well, this is, in effect, what you meant by
the domino----
Ms. Lacewell. Yes.
The Chairman.--effect.
Ms. Lacewell. That's right.
The Chairman. Yes.
OK, final--the final thing is--has already been asked, I
think, by somebody else, and that is, Why didn't we get to all
of this earlier? I'll ask that to you, Mr. Bell. I mean, why
didn't we get at this problem earlier? I mean, people have
been--we're talking about hundreds of millions of dollars. They
settled for 350, 325, whatever it was, and they're probably
thrilled to do that, and they're still making a ton of money.
And there are many, many others out there, and one of them you
just sued yesterday. They have lots and lots of money. I mean,
you know, you can--there are always ways to avoid these things,
and we seem to have avoided them pretty well, up until New York
took these steps.
Mr. Bell. Senator, I think it partly goes back to the
resource question that you just mentioned, is that the--as
we've discussed earlier, the insurance commissioners have a
primary mission of assuring financial safety and soundness. A
lot of them don't have sufficient resources or--and sometimes
they don't have the orientation or the inclination to
aggressively pursue an investigation like this one.
So, I--what I hope will come out of this is that--a lesson
for the country, that when you get it right, when somebody
steps up and exposes a financial abuse, that's something that
consumers are very concerned about, and they are going to
support solutions that create greater accountability and
transparency.
And so, we've said a lot of nice things about Attorney
General Cuomo, because he has done an excellent job for
consumers, and--just as the plaintiffs did in these lawsuits by
challenging this practice. And I think that they also have a
role. There's a role for private rights of action to bring
accountability, in some cases, where public officials are
unable to act.
So, I think a heightened sense of--you know, more resources
for regulators, and more inclination to go after consumer
problems, is something that we absolutely need.
The Chairman. But, you know what? It's also a question of
zeal, isn't it? You know, I was a Governor for 8 years, and the
last appointment that I made was the insurance commissioner.
Now, I don't know why that was, but it was a fact. And I had a
very, very hard time trying to find anybody, in a small state,
with a small salary for that position, who would be willing to
take that position. And, as a result, I got a good person, but
the energy level wasn't, perhaps, as high as I would have
hoped.
And I think that part of what motivates the Attorney
General of New York and you, Ms. Lacewell, is that you are
zealous on this. I mean, you're going to get to the bottom of--
you seek malevolence, you relish malevolence, you want to
expose it----
[Laughter.]
The Chairman.--and you want to correct it. And it's just--
it's all very interesting to me, and I just--I thank you very
much for being here.
Ms. Lacewell. It's----
The Chairman. I think we have laid a predicate for next
Tuesday--that is, if we should all be here. Maybe we can
videostream it to you all.
Ms. Lacewell. That would be great.
The Chairman. Thank you so much.
This hearing is adjourned.
Senator Begich, did you have any other questions?
Senator Begich. No, thank you.
The Chairman. OK.
Thanks so much.
[Whereupon, at 12:23 p.m., the hearing was adjourned.]
A P P E N D I X
Prepared Statement of Mary Reinbold Jerome, M.D., Yonkers, New York
My name is Dr. Mary Reinbold Jerome and I live in Yonkers, New
York. I thank Chairman Rockefeller, Ranking Member Hutchison, and the
Members of the Committee on Commerce, Science, and Transportation for
inviting me to speak this morning.
In July 2006, I was diagnosed with advanced stage ovarian cancer. I
am currently being treated at Memorial Sloan Kettering cancer center,
where I have received excellent care. Since my diagnosis, I have had a
series of operations, and I received two separate rounds of
chemotherapy, the second of which just ended. I did have a recurrence
of the disease, but thankfully, now I am currently in remission.
When I was diagnosed with cancer, my primary care physician
recommended that I get treatment at Memorial Sloan Kettering. At the
time, that hospital was the only recognized, comprehensive cancer
treatment center in the New York City area. Even though the hospital
was not in my insurer's network, I had paid for an out-of-network
coverage, part of a point-of-service plan. I had always been confident
that paying for the out-of-network option provided peace of mind with
respect to the financial burdens associated with catastrophic medical
costs.
In reviewing the massive number of bills for my treatment, I
noticed that over and over again, Memorial Sloan Kettering was not
being reimbursed at an amount that was anywhere close to the cost of
their services. I was then responsible for what my insurance company
would not pay.
When I was diagnosed with cancer, I thought the most difficult
hurdle I would face would be the disease. Little did I know, that
dealing with my insurance company would be my greater battle, because
unknown to me, they were operating with deceptive methods of
reimbursement. I had to battle cancer--and I am still battling it--and
I had to battle my insurance company to try and get fair coverage. It
was almost too much to bear.
It was also shocking to discover firsthand how callously and
deceptively insurance companies treat people while they are fighting
for their lives. Throughout my life, I have believed that people had
principles, that they abided by a code. My Mom and Dad were in the
military--the ``Service'' is what we called it. When we were younger,
my brother and I tried to live up to our parents call to service; he
was in the army and I joined the Peace Corps. Our parents are now
buried at West Point, but we have always tried to live by the values of
duty, honor, and country.
But even at this point in my life, I was surprised to see an
American company not abiding by any code at all. These insurance
companies showed no regard for duty; they have no regard for honor;
they have no regard for the citizens of this country. They take
advantage of their countrymen when these countrymen are most
vulnerable, and they try to bury them in paper and doubletalk while
they are still alive.
My parents also taught their children to fight back. At first it
was not easy. I wrote to several law enforcement agencies about the
inordinate, unfair charges from my insurance company. Attorney General
Cuomo's office was the only one that responded to me and helped me to
fight the insurance company for proper coverage.
I am grateful that Attorney General Cuomo's work on behalf of
people like me has led to nationwide agreements to end the deceptive
practices of insurance companies, and I am glad to have been a part of
the effort.
I am more fortunate than many others because I had funds to offset
the costs that were unfairly passed to me by my insurance company--I
had money left by my parents and other family members. But so many
people are not as fortunate and do not have that ability. I cannot
imagine the hardship that they must face.
Since originally appearing with Attorney General Cuomo earlier this
year to announce his reform of the out-of-network reimbursement system,
I have received letters of support from all over the United States from
people who have been in my situation. A woman in Louisiana wrote: ``I
want to shout out to you go, Mary, go! Your actions have helped your
neighbors across America.'' Another one from New York wrote: ``Your
story and spirit are truly inspiring. It shows that one person can take
on a big business and make a difference; you are in my thoughts and
prayers.''
These people, like me, have been fighting two battles--one against
an illness and another against their insurance company--and are looking
to the work of the Attorney General with great hope. They are also
looking to you.
The crisis in our health care system is a national problem that
demands a national solution. The problems in the insurance industry
that Attorney General Cuomo has exposed and the pioneering solutions he
has achieved should guide the Congress in a much-needed reform of our
Nation's health care system.
As a patient, as a cancer survivor, as a person who believes in
duty, honor, and country, and as an American, I urge you to help make
sure that in the future, patients can focus their energies on getting
better, not on getting their rightful insurance benefits.
Thank you.