[Congressional Record Volume 143, Number 93 (Friday, June 27, 1997)]
[Extensions of Remarks]
[Pages E1352-E1354]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        TESTIMONY OF PETE STARK

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                        Thursday, June 26, 1997

  Mr. STARK. Mr. Speaker, I would like to submit for the ='04'>Record 
recent testimony I presented to President Clinton's Advisory Commission 
on Consumer Protections and Quality in the Health Care Industry. The 
need for consumer protections in managed care is great--I urge my 
colleagues to pass legislation to protect the millions of patients in 
managed care plans:

 Testimony of Congressman Pete Stark Before the Advisory Commission on 
      Consumer Protection and Quality in the Health Care Industry

       Secretary Shalala, Secretary Herman, and Members of the 
     Commission: Thank you for this opportunity to present 
     testimony concerning critically needed consumer protections 
     for the millions of Americans in managed care plans.


                               Background

       Health care consumers who entrust their lives to managed 
     care plans have consistently found that many plans are more 
     interested in profits than in providing appropriate care. In 
     the process of containing costs patients are often harmed. My 
     constituent mail has been full of horror stories explaining 
     the abuses that occur at the hands of HMOs and other forms of 
     managed care.

[[Page E1353]]

       For example, David Ching of Fremont, California had a 
     positive experience in a Kaiser Permanente plan and then 
     joined an employer sponsored HMO expecting similar service. 
     He soon learned that some plans would rather let patients die 
     than authorize appropriate treatment. His wife developed 
     colon cancer, but went undiagnosed for 3 months after the 
     first symptoms. Her physician refused to make the appropriate 
     specialist referral because of financial incentives and could 
     not discuss proper treatment because of the health plan's 
     policy. Mrs. Ching is now dead.
       This tragedy and others like it might have been avoided if 
     the patient had known about the financial incentives not to 
     treat, or if the physicians had not been gagged from 
     discussing treatment options, or if there had been 
     legislation forcing health plans to provide timely grievance 
     procedures and timely access to care. It is too late for some 
     victims, but it is not too late to provide these protections 
     for the millions of people in managed care today.
       A few years ago, Congress recognized a crisis in the health 
     care industry. Expenditures were soaring and overutilization 
     was the rule. At that time, I chose to address this problem 
     with laws that prohibited physicians from making unnecessary 
     referrals to health organizations or services that they 
     owned.
       Others responded by pushing Americans into new managed care 
     plans that switched the financial incentives from a system 
     that overserves to a system that underserves. They got what 
     they asked for. The current system rewards the most 
     irresponsible plans with huge profits, outrageous executive 
     salaries, and a license to escape accountability. 
     Unfortunately, patients are dying unnecessarily in the wake 
     of this health care delivery revolution. It must stop.
       Several states have already addressed the managed care 
     crisis. In 1996, more than 1,000 pieces of managed care 
     legislation flooded state legislatures. As a result, HMO 
     regulations were passed in 33 states addressing issues like 
     coverage of emergency services, utilization review, post-
     delivery care and information disclosure. Unfortunately, many 
     states did not pass these needed safeguards resulting in a 
     piecemeal web of protections that lacks continuity. The 
     states have spoken; now it is time for federal legislation to 
     finish the job and provide consumer protections to all 
     Americans in managed care.


       H.R. 337--The Managed Care Consumer Protection Act of 1997

       I have introduced a bill--H.R. 337--The Managed Care 
     Consumer Protection Act of 1997 which includes a 
     comprehensive set of protections that will force managed care 
     plans to be accountable to all of their patients and to 
     provide the standard of care they deserve.
       This legislation includes measures to protect patients from 
     the abuses of managed care on several fronts. One particular 
     provision in the bill would require the managed care plan to 
     at least see the patient and perform some form of preventive 
     health screening before the Federal government pays the 
     monthly capitated dollar amount. We should not continue to 
     pay plans a monthly fee when many times, the plan has never 
     seen the beneficiary face-to-face. If one of the goals of 
     managed care is to focus on preventive care, the patient 
     must--at the very least--first be seen by the managed care 
     plan.
       I am pleased that many of the provisions in my bill were 
     included in the recent Medicare proposals in both the Ways 
     and Means and the Commerce Committees. I have attached a 
     summary of the bill for your review.
       Many Members testifying today have introduced legislation 
     with similar provisions. In that light, I will focus on only 
     a few issues.


       A Plea to Revisit the Physician Financial Incentive Issue

       I am the author of the law limiting physician financial 
     incentives to withhold care. I am very disappointed in the 
     regulation implementing this law.
       The regulation allows a plan to place a doctor 25 percent 
     at risk.
       How many of you flew here on an airline that gave 25 
     percent bonuses to its airplane mechanics NOT to spend too 
     much time checking the plane's safety? Good luck going home.
       What is particularly disappointing about the 25 percent 
     figure is that there is some data that the industry average 
     is closer to 19 percent. The 25 percent figure should be 
     lowered. I urge you to recommend that it be phased down over 
     a period of years to a level where the average patient would 
     not be offended or suspicious.
       If you think the 25 percent figure is okay and won't change 
     behavior in strange ways, I refer you to a Wall Street 
     Journal article of two weeks ago, which talked about doctors 
     selling Amway products to their patients to make extra money 
     on the side. The doctor featured in the article had seen his 
     income from $400,000 a year to $300,000, so he was selling 
     soap to everyone in sight. Think about it.


             Need to Reform Government Oversight Structure

       HCFA has an impossible task: to promote managed care and at 
     the same time to try to regulate it on behalf of consumers. 
     The two missions are inconsistent: you can't do both well. 
     Note the current controversy over the Grijalva case, where 
     HCFA has come down on the side of the HMO companies, much to 
     the anger of every consumer group in the nation.
       We need a new structure of governance as managed care 
     grows.
       I urge the Commission to recommend a restructuring of 
     government to address this problem. Let HCFA be the promoter 
     and payer of managed care plans. That is certainly their 
     bureaucratic culture and history.
       For the public and the consumer, we need a new, independent 
     consumer commission that will make coverage, consumer appeals 
     and grievance, and quality measurement decisions. I recommend 
     to you the SEC-type model suggested in several books and 
     articles by Professor Marc Rodwin of Indiana University. This 
     Commission should be composed of consumers and must be 
     structured so it is never captured by the industry.
       We need an independent consumer commission now. We will 
     need it more each passing day. I do not believe that HCFA has 
     yet made Medicare coverage decisions on the basis of cost to 
     the program. But as the Baby Boom generation retires and the 
     financial pressures on the program become more intense, will 
     people be able to trust their government to make medically 
     honest coverage decisions? Will HCFA become a rationing 
     system that controls costs but may not be good for our 
     health? Various right-to-life groups are already questioning 
     the program. An independent consumer commission that would 
     address coverage issues would prevent this government 
     rationing issue from becoming a future divisive issue in our 
     aging society.
       A wise industry would support such a Commission: it is 
     their only hope to show the public that there is an 
     independent, honest ombudsmen whom families can turn to in 
     matters of life and death concerning health care. The managed 
     care industry is facing a weekly drumbeat of ridicule in the 
     one place that truly has the pulse of the American public--
     the nation's comic strips and political cartoons. The last 
     page of my testimony attaches two cartoons from just the 
     Washington Post of the last week. What would it be worth to 
     the HMO industry for these cartoons to go away? They will go 
     away when the public no longer things they are funny and when 
     they no longer resonate. An independent, pro-consumer 
     Commission is the single best answer to ending the ridicule 
     and bad press.


               The impending crisis in rural managed care

       I urge the Commission to take a special look at what I 
     believe is an impending crisis in rural health care.
       In the Medicare Reconciliation bill, Congress is preparing 
     to place a very high floor on payments to managed care plans 
     in rural counties--a floor far above their cost of serving 
     the beneficiaries who live in those communities. At the same 
     time, we are making it easy for local doctors and hospitals 
     to form Provider Sponsored Organizations or ``baby HMOs'' 
     that serve as few as 500 enrollees. PSOs in rural America, 
     where there is already a shortage of providers, will 
     certainly look like monopolies.
       The combination of the high managed care payments and the 
     new PSOs will work to force most rural Americans into brand 
     new HMO-type organizations. The good news is that the payment 
     floors will be so high that (if the ACRs are calculated 
     honestly) rural Americans will be offered a wide range of 
     extra benefits. The bad news is that it may be hard for rural 
     Americans to get referrals to urban or out-of-area providers 
     who can provide better quality care than their local rural 
     PSO.
       I believe we will need some special measurements of these 
     new rural PSOs to ensure that we are not trapping millions of 
     rural residents in monopolistic low-quality plans.


                      Managed Care and Anti-Fraud

       The HHS Inspector General, in cooperation with the GAO, has 
     undertaken a system-wide audit of Medicare. Their report will 
     be issued in about three weeks.
       According to press reports, they will find that in fee-for-
     service Medicare last year we lost about $23 billion to 
     fraud, waste, and abuse. Over five years that would be about 
     $115 billion--the exact size of the Medicare Budget cuts the 
     House passed yesterday.
       Some will say that this proves we need to move faster to 
     managed care. I submit there is substantial fraud in managed 
     care as well. I urge the Commission to encourage HCFA to do a 
     better job of rooting out managed care fraud.
       There is the fraud of under-service and denial of care--the 
     fraud that can kill.
       There is the fraud of the Adjusted Community Rates (ACR) 
     that companies tell us equal the cost of serving their 
     commercial business. Time after time an HMO does not provide 
     extra benefits and says that its ACR does not require such 
     extra benefits. Then when a second or third managed care plan 
     enters the market, all of a sudden the plan finds that it can 
     offer zero premiums, drug benefits, and eyeglasses. On its 
     face, the plan that for years offered no or few extra 
     benefits was committing a type of fraud.
       I've attached an exchange of correspondence with the OIG 
     that makes the point that if fee-for-service Medicare has a 
     10 to 14 percent fraud, waste, and abuse factor built into 
     its rates, we certainly should not base managed care payment 
     rates on that fraudulent, inflated base. It is a mathematical 
     fact that the payment rate to HMOs should be less than 90 
     percent of the current fee-for-service rate--unless you want 
     to pay twice for fraud.

[[Page E1354]]

       Thank you for this opportunity to present my ideas about 
     much needed consumer protections in managed care.

     

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