[Congressional Record Volume 145, Number 20 (Thursday, February 4, 1999)]
[Senate]
[Pages S1271-S1275]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CHAFEE (for himself, Mr. Graham, Mr. Lieberman, Mr. 
        Specter, Mr. Baucus, Mr. Robb, and Mr. Bayh):
  S. 374. A bill to amend the Public Health Service Act, the Employee 
Retirement Income Security Act of 1974, and the Internal Revenue Code 
of 1986 to protect consumers in managed care plans and other health 
coverage; to the Committee on Health, Education, Labor, and Pensions.


           THE PROMOTING RESPONSIBLE MANAGED CARE ACT OF 1999

 Mr. CHAFEE. Mr. President. I am pleased to be joined this 
morning by Senators Graham, Lieberman, Specter, Baucus, Robb and Bayh 
in introducing the ``Promoting Responsible Managed Care Act of 1999.'' 
In introducing our bill from last year, we are especially pleased to 
have Senators Robb and Bayh join us as original cosponsors.
  As you know, the Senate was unable to consider this important issue 
before the close of the 105th Congress. Nonetheless, each party 
developed and introduced legislation, and the House actually passed a 
bill proposed by the Republican majority. To encourage discussion 
across the aisle, this group of Senators introduced a bipartisan reform 
bill--the only one thus far.
  In crafting our legislation, we omitted or modified those provisions 
which were anathema to either side. Thus, for example, we excluded 
Medical Savings Accounts, a feature of the Senate Republican Task Force 
bill, because this provision is a non-starter with Democrats. Likewise, 
we proposed allowing injured parties to seek redress in federal court 
as an alternative to the state court provision in the Democratic bill 
because that is a non-starter with Republicans.
  Well, here it is, the 106th Congress. Why have the prospects 
brightened for legislation to improve the quality of managed care? 
First, voters sent a clear message on election day: they want action, 
not gridlock. Second, the Democrats gained five more seats in the 
House--the very margin by which that body rejected the ``Patient Bill 
of Rights'' last year. Third, both Speaker Hastert and Senate Majority 
Leader Lott have instructed their respective committees of jurisdiction 
to get down to work. Fourth, the President is anxious to begin a 
bipartisan dialogue.
  Perhaps more important than any of these developments, though, is the 
fact that consumers want assurances they will actually get the medical 
care they need, when they need it. Regrettably, many have learned this 
is not always the case.
  The opponents of reform have had a field day mischaracterizing what 
the managed care quality debate is about. It is not, as they allege, 
about erasing the gains managed care has made in bringing down costs 
and coordinating patient services. It is not about forcing plans to 
cover unnecessary, outmoded or harmful practices. Nor is it about 
forcing plans to pay for any service or treatment which is not a 
covered benefit. And, it is certainly not about giving doctors a blank 
check.
  In fact, this debate is about making sure patients get what they pay 
for. It's about ensuring that patients receive medically necessary 
care; that an objective standard and credible medical evidence are used 
to guide physicians and insurers in making treatment and coverage 
determinations; that patients' medical records and the judgments of 
their physicians are given due consideration; and, that managed care 
plans do not base their medical decisions on practice guidelines 
developed by industry actuaries, but rather credible, independent, 
scientific bodies.
  On a more tangible level, this legislation is about making sure that 
the infant suffering from chronic ear infections is fitted with 
drainage tubes--rather than being prescribed yet another round of 
ineffective antibiotics--to ameliorate the condition and prevent 
hearing loss. It is about making sure that the patient with a broken 
hip is not relegated to a wheelchair in perpetuity, but rather given 
the hip replacement surgery and physical therapy that prudent medical 
practice dictates.
  Make no mistake about it: Without provisions to ensure that plans are 
held to the objective, time-tested standard of professional medical 
practice, federal legislation giving patients access to an external 
appeals process will be nothing more than a false promise.
  The ``Promoting Responsible Managed Care Act'' would restore needed 
balance to our managed care system while preserving its benefits. 
Moreover, it would do so using the very same framework established by 
Congress with the enactment of the so-called Kassebaum-Kennedy law in 
1996. That statute--which extends portability and guaranteed issue 
protections to patients--has two very important benefits. First, it 
applies to all privately insured Americans--not just those 48 million 
enrolled in self-funded ERISA plans. Second, it preserves states' 
rights to occupy the field if they so choose.
  Thus, our bill would establish a minimum floor of federal patient 
protections for all 161 million privately insured Americans. Yet, it 
would also protect state authority to go beyond this federal floor, and 
would preserve the good work states have already undertaken in this 
area. It would also encourage states which have taken little or no 
action to do the right thing. Despite the flurry of activity, only 15

[[Page S1272]]

states have adopted the most basic patient protection--an external 
review procedure.
  As the process moves ahead, we look forward to working with the 
Finance Committee and the Health, Education, Labor, and Pensions 
Committee to formulate legislation which will help to restore consumer 
confidence in managed care, and to ensure that patients receive all 
medically necessary and appropriate care.
  Mr. President, I ask unanimous consent that the following documents 
be printed in the Record: a summary of the bill, a one-page description 
of our enforcement provisions, a three-page document on what national 
health organizations say about our bill, and a white paper entitled, 
``Medical Necessity: The Real Issue in the Quality Debate.''
  There being no objection, the items were ordered to be printed in the 
Record, as follows:

             Promoting Responsible Managed Care Act of 1999


                               principles

       Today, a majority of the U.S. population is enrolled in 
     some form of managed care--a system which has enabled 
     employers, insurers and taxpayers to achieve significant 
     savings in the delivery of health care services. However, 
     there is growing anxiety among many Americans that insurance 
     health plan accountants--not doctors--are determining what 
     services and treatments they receive. Congress has an 
     opportunity to enact legislation this year which will ensure 
     that patients receive the benefits and services to which they 
     are entitled, without compromising the savings and 
     coordination of care that can be achieved through managed 
     care. However, to ensure the most effective result, 
     legislation must embody the following principles:
       It must be bipartisan and balanced.
       It must offer all 161 million privately insured Americans--
     not just those in self-funded ERISA plans--a floor of basic 
     federal patient protections.
       It must include an objective standard of what constitutes 
     medically necessary or appropriate care to ensure a 
     meaningful external appeals process. Furthermore, that 
     standard must be informed by valid and reliable evidence to 
     support the treatment and coverage determinations made by 
     providers and plans.
       It must establish credible federal enforcement remedies to 
     ensure that managed care plans play by the rules and that 
     individuals harmed by such entities are justly compensated.
       It should encourage managed care plans to compete on the 
     basis of quality--not just price. ``Report card'' information 
     will provide consumers with the information they need to make 
     informed choices based on plan performance.


                                summary

       The ``Promoting Responsible Managed Care Act of 1999'' 
     blends the best features of both the Democratic and 
     Republican plans. The legislation would restore public 
     confidence in managed care through a comprehensive set of 
     policy changes that would apply to all private health plans 
     in the country. These include strengthened federal 
     enforcement to ensure managed care plans play by the rules; 
     compensation for individuals harmed by the decisions of 
     managed care plans; an independent external system for 
     processing complaints and appealing adverse decisions; 
     information requirements to allow competition based on 
     quality; and, a reasonable set of patient protection 
     standards to ensure patients have access to appropriate 
     medical care.
     Scope of protection
       Basic protections for all privately insured Americans. All 
     private insurance plans would be required to meet basic 
     federal patient protections regardless of whether they are 
     regulated at the state or federal level. This approach 
     follows the blueprint established with the enactment of the 
     Health Insurance Portability and Accountability Act of 1996, 
     which allows states to build upon a basic framework of 
     federal protections.
     Enforcement and compensation
       Strengthened federal enforcement to ensure managed care 
     plans play by the rules. To ensure compliance with the bill's 
     provisions, current federal law would be strengthened by 
     giving the Secretaries of Labor and Health & Human Services 
     enhanced authorities to enjoin managed care plans from 
     denying medically necessary care and to levy fines (up to 
     $50,000 for individual cases and up to $250,000 for a pattern 
     of wrongful conduct). This provision would ensure that 
     enforcement of federal law is not dependent upon individuals 
     bringing court cases to enforce plan compliance. Rather, it 
     provides for real federal enforcement of new federal 
     protections.
       Compensation for individuals harmed by the decisions of 
     managed care plans. All privately insured individuals would 
     have access to federal courts for economic loss resulting 
     from injury caused by the improper denial of care by managed 
     care plans. Economic loss would be defined as any pecuniary 
     loss caused by the decision of the managed care plan, and 
     would include lost earnings or other benefits related to 
     employment, medical expenses, and business or employment 
     opportunities. Awards for economic loss would be uncapped and 
     attorneys fees could be awarded at the discretion of the 
     court.
     Coverage determination, grievance and appeals
       Coverage determinations. Plans would be required to make 
     decisions as to whether to provide benefits, or payments for 
     benefits, in a timely manner. The plan must have a process 
     for making expedited determinations in cases in which the 
     standard deadlines could seriously jeopardize the patient's 
     life, health, ability to regain or maintain maximum function 
     or (in the case of a child under the age of 6) development
       Internal appeals. Patients would be assured the right to 
     appeal the following: failure to cover emergency services, 
     the denial, reduction or termination of benefits, or any 
     decision regarding the clinical necessity, appropriateness, 
     efficacy, or efficiency of health care services, procedures 
     or settings. The plan would be required to have a timely 
     internal review system, using health care professionals 
     independent of the case at hand, and procedures for 
     expediting decisions in cases in which the standard timeline 
     could seriously jeopardize the covered individual's life, 
     health, ability to regain or maintain maximum function, or 
     (in the case of a child under the age of 6) development.
       External appeals. Individuals would be assured access to an 
     external, independent appeals process for cases of sufficient 
     seriousness or which exceed a certain monetary threshold that 
     were not resolved to the patient's satisfaction through the 
     internal appeals process. The external appeal entity, not the 
     plan, would have the authority to decide whether a particular 
     plan decision is in fact externally appealable. In addition 
     to the patient's medical record and the treating physician's 
     proposed treatment, the range of evidence that is permissible 
     in an external review would include valid and reliable 
     research, studies and other evidence from impartial experts 
     in the relevant field--the same types of evidence typically 
     used by the courts in adjudicating health care quality cases. 
     The external appeal process would require a fair, ``de novo'' 
     determination, the plan would pay the costs of the process, 
     and any decision would be binding on the plan.
     Consumer information
       Comparative information. Consumers would be given uniform 
     comparative information on quality measures in order to make 
     informed choices. Data would include: patient satisfaction, 
     delivery of health care services such as immunizations, and 
     resulting changes in beneficiary health. Variations would be 
     allowed based on plan type.
       Plan information. Patients would be provided with 
     information on benefits, cost-sharing, access to services, 
     grievance and appeals, etc. A grant program would be 
     authorized to provide enrollees with information about their 
     coverage options, and with grievance and appeals processes.
       Confidentiality of enrollee records. Plans would be 
     required to have procedures to safeguard the privacy of 
     individually identifiable information.
       Quality assurance. Plans would be required to establish an 
     internal quality assurance program. Accredited plans would be 
     deemed to have met this requirement, and variations would be 
     allowed based on plan type.
     Patient protection standards
       Emergency services. Coverage of emergency services would be 
     based upon the ``prudent layperson'' standard, and, 
     importantly, would include reimbursement for post-
     stabilization and maintenance care. Prior authorization of 
     services would be prohibited.
       Enrollee choice of health professionals and providers. 
     Patients would be assured that plans would: Allow women to 
     obtain obstetrical/gynecological services without a referral 
     from a primary care provider; allow plan enrollees to choose 
     pediatricians as the primary care provider for their 
     children; have a sufficient number, distribution and variety 
     of providers; allow enrollees to choose any provider within 
     the plan's network, who is available to accept such 
     individual (unless the plan informs enrollee of limitations 
     on choice); provide access to specialists, pursuant to a 
     treatment plan; and in the case of a contract termination, 
     allow continuation of care for a set period of time for 
     chronic and terminal illnesses, pregnancies, and 
     institutional care.
       Access to approved services. Plans would be required to 
     cover routine patient costs incurred through participation in 
     an approved clinical trial. In addition, they would be 
     required to use plan physicians and pharmacists in 
     development of formularies, disclose formulary restrictions, 
     and provide an exception process for non-formulary treatments 
     when medically necessary.
       Nondiscrimination in delivery of services. Discrimination 
     on the basis of race, religion, sex, disability and other 
     characteristics would be prohibited.
       Prohibition of interference with certain medical 
     communications. Plans would be prohibited from using ``gag 
     rules'' to restrict physicians from discussing health status 
     and legal treatment options with patients.
       Provider incentive plans. Plans would be barred from using 
     financial incentives as an inducement to physicians for 
     reducing or limiting the provision of medically necessary 
     services.
       Provider participation. Plans would be required to provide 
     a written description of their physician and provider 
     selection procedures. This process would include a 
     verification of a health care provider's license, and

[[Page S1273]]

     plans would be barred from discriminating against providers 
     based on race, religion and other characteristics.
       Appropriate standards of care for mastectomy patients. 
     Plans would be required to cover the length of hospital stay 
     for a mastectomy, lumpectomy or lymph node dissection that is 
     determined by the physician to be appropriate for the patient 
     and consistent with generally accepted principles of 
     professional medical practice.
       Professional standard of medical necessity. Health plans 
     would be prohibited from arbitrarily interfering with the 
     decision of the treating physician if the services are 
     medically necessary and a covered benefit. Medically 
     necessary services are defined to be those which are 
     consistent with generally accepted principles of professional 
     medical practice. This professional standard of medical 
     necessity has been a well-settled standard in our legal 
     system for over two centuries, and is necessary to ensure a 
     meaningful external appeals process. Treatment and coverage 
     decisions would be measured against the same standard of 
     medical necessity, and providers and insurers would both be 
     guided by the same evidentiary requirements (described under 
     external appeals).
                                  ____


    Promoting Responsible Managed Care Act of 1999--Enforcement and 
                        Compensation Mechanisms

       Strengthened federal enforcement to ensure managed care 
     plans play by the rules. To ensure compliance with the bill's 
     provisions, current federal law would be strengthened by 
     giving the Secretaries of Labor and Health & Human Services 
     enhanced authorities to enjoin managed care plans from 
     denying medically necessary care.
       In addition, the Secretaries of Labor and Health & Human 
     Services would be given new authority to levy substantial 
     monetary penalties on managed care plans for wrongful 
     conduct. Fines could be awarded as follows:
       For failures on the part of plans that result in an 
     unreasonable denial or delay in benefits that seriously 
     jeopardize the individual's life, health, or ability to 
     regain or maintain maximum function (or in the case of a 
     child under the age of 6) development: Up to $50,000 for each 
     individual involved in the case of a failure that does not 
     reflect a pattern or practice of wrongful conduct and up to 
     $250,000 if the failure reflects a pattern or practice of 
     wrongful conduct.
       For failures on the part of plans not described above: Up 
     to $10,000 for each individual involved in the case of a 
     failure that does not reflect a pattern or practice of 
     wrongful conduct and up to $50,000 if the failure reflects a 
     pattern or practice of wrongful conduct.
       In the case of failures not corrected within the first 
     week, the maximum amount of the penalties in all cases would 
     be increased by $10,000 for each full succeeding week in 
     which the failure is not corrected.
       These provisions would ensure that enforcement of federal 
     law is not dependent upon individuals bringing court cases to 
     enforce plan compliance. Rather, it provides for real federal 
     enforcement of new federal protections.
       Compensation for individuals harmed by the decisions of 
     managed care plans. All privately insured individuals would 
     have access to federal courts for economic loss resulting 
     from injury caused by the improper denial of care by managed 
     care plans. Economic loss would be defined as any pecuniary 
     loss caused by the decision of the managed care plan, and 
     would include the loss of earnings or other benefits related 
     to employment, medical expenses, and business or employment 
     opportunities. Awards for economic loss would be uncapped and 
     attorneys' fees could be awarded at the discretion of the 
     court.
                                  ____


 What Organizations Are Saying About the Promoting Responsible Managed 
                            Care Act of 1999

       National Association of Children's Hospitals, Inc: ``The 
     National Association of Children's Hospitals, which 
     represents more than 100 children's hospitals across the 
     country, strongly supports your legislation--and its 
     provisions that ensure children's unique health care needs 
     are protected as families seek access to appropriate 
     pediatric health care in their health plans.''
       National Mental Health Association: ``On behalf of the 
     National Mental Health Association and its 330 affiliates 
     nationwide, I am writing to express strong support for the 
     Promoting Responsible Managed Care Act of 1999. . . .  NMHA 
     was particularly gratified to learn that you included 
     language in your important compromise legislation which 
     guarantees access to psychotropic medications. . . . 
     Finally--alone among all the managed care bills introduced in 
     this session of Congress--your legislation prohibits the 
     involuntary disenrollment of adults with severe and 
     persistent mental illnesses and children with serious mental 
     and emotional disturbances.''
       National Alliance for the Mentally Ill: ``On behalf of the 
     185,000 members and 1,140 affiliates of the National Alliance 
     for the Mentally Ill, I am writing to express our strong 
     support for the bipartisan managed care consumer protection 
     legislation you . . . are developing. . . . Thank you for 
     your efforts on behalf of people with severe mental 
     illnesses. Your bipartisan approach to this difficult issue 
     is an important step forward in placing the interests of 
     consumers and families ahead of politics. NAMI looks forward 
     to working with you to ensure passage of meaningful managed 
     care consumer protection legislation in the 106th Congress.''
       American Protestant Health Alliance: ``Your proposal 
     strikes a balance which is most appropriate. As each of us is 
     aware, often we have missed the opportunity to enact health 
     policy changes, only to return later and achieve fewer gains 
     than we might have earlier. It would be tragic if we allowed 
     this year's opportunity to escape our grasp. We are pleased 
     to stand with you in support of your proposal.''
       American Academy of Pediatrics: ``As experts in the care of 
     children, we believe that [your] legislation makes important 
     strides toward ensuring that children get the medical 
     attention they need and deserve. . . . Children are not 
     little adults. Their care should be provided by physician 
     specialists who are appropriately educated in the unique 
     physical and developmental issues surrounding the care of 
     infants, children, adolescents, and young adults. We are 
     particularly pleased that you recognize this and have 
     included access to appropriate pediatric specialists, as well 
     as other protections for children, as key provisions of your 
     legislation.''
       American Cancer Society: ``. . . I commend you on your 
     bipartisan effort to craft patient protection legislation 
     that meets the needs of cancer patients under managed care. . 
     . . Your legislation grants patients access to specialists, 
     ensures continuity of care . . . and permits for specialists 
     to serve as the primary care physician for a patient who is 
     undergoing treatment for a serious or life-threatening 
     illness. Most importantly, your bill promotes access to 
     clinical trials for patients for whom satisfactory treatment 
     is not available or standard therapy has not proven most 
     effective. . . . We appreciate that your bill addresses all 
     four of ACS' priorities in a way that will help assure that 
     individuals affected or potentially affected by cancer will 
     be assured improved access to quality care.''
       American College of Physicians/American Society of Internal 
     Medicine: ``We believe your bill contains necessary patient 
     protections, as well as provisions designed to foster quality 
     improvement, and therefore has the potential to improve the 
     quality of care patients receive. The College is particularly 
     pleased that your proposal covers all Americans, rather than 
     only those individuals who are insured by large employers 
     under ERISA. . . . We also appreciate that you have taken 
     steps to address the concerns about making all health plans . 
     . . accountable in a court of law for medical decisions that 
     may result in death or injury to a patient.''
       National Association of Chain Drug Stores: ``. . . we 
     applaud your efforts . . . in crafting a bipartisan managed 
     care proposal. . . . Your bill, `Promoting Responsible 
     Managed Care Act' takes a realistic step in improving the 
     health care system for all Americans.''
       Council of Jewish Federations: ``Your provisions on 
     continuity of care also provide landmark protections for 
     consumers in our community and in the broader community as 
     well. Overall, your legislation provides important safeguards 
     for consumers and providers that are involved in managed 
     care.''
       Families USA: ``We are pleased that your bill . . . would 
     establish many protections important to consumers, such as 
     access to specialists, prescription drugs and consumer 
     assistance. In addition, your external appeals language 
     addresses many consumer concerns in this area.''
       Catholic Health Association: ``The Catholic Health 
     Association of the United States (CHA) applauds your 
     bipartisan leadership in Congress to help enact legislation 
     this year protecting consumers who receive health care 
     through managed care plans. The Chafee-Graham-Lieberman bill 
     is a sound piece of legislation.''
       National Association of Community Health Centers: ``We 
     appreciate the bipartisan efforts you have undertaken to 
     correct the deficiencies in the managed care system. . . . We 
     applaud your inclusion of standards for the determination of 
     medical necessity (Section 102) that are based on generally 
     accepted principles of medical practice. . . . We also 
     appreciate your inclusion of federally qualified health 
     centers (FQHCs) as providers that may be included in the 
     network.''
       American College of Emergency Physicians: ``The American 
     College of Emergency Physicians . . . is pleased to support 
     your bill, the `Promoting Responsible Managed Care Act of 
     1999.' We . . . are particularly pleased that your 
     legislation would apply to all private insurance plans. . . . 
     We also commend your leadership in proposing a bipartisan 
     solution. . . . We strongly support provisions in the bill 
     that would prevent health plans from denying patients 
     coverage for legitimate emergency services.''
       National Association of Public Hospitals & Health Systems: 
     ``This legislation provides consumers with the information to 
     make informed decisions about their managed care plans, 
     offers consumers protections from disincentives to provide 
     care, and provides consumers with meaningful claims review, 
     appeals and grievance procedures. We applaud your leadership 
     in this area and we look forward to working with you to shape 
     final legislation. We note that many of the patient 
     protections contained in your legislation are already 
     applicable to [Medicaid and Medicare], and we believe that a 
     nationwide level playing field is desirable for all patients 
     and all payers. For these reasons . . . we believe

[[Page S1274]]

     that many of the consumer protections in your legislation are 
     necessary to prevent abuses and improve quality in managed 
     care.''
       Mental Health Liaison Group (14 national organizations): 
     ``. . . we are writing to commend you for the introduction of 
     [your legislation]. [It] takes a significant step forward in 
     protecting children and adults with mental disorders who are 
     now served by managed care health plans. . . . By 
     establishing a clear grievance and appeals process, assuring 
     access to mental health specialists, and assuring the 
     availability of emergency services, your bill begins to 
     establish the consumer protections necessary for the delivery 
     of quality mental health care to every American.''
                                  ____


      Medical Necessity: The Real Issue in the Quality Debate \1\


                                 ISSUE

       Without an objective standard of what constitutes medically 
     necessary or appropriate care, federal legislation to ensure 
     that patients receive the care for which they have paid will 
     not be effective. For example, absent such a standard, what 
     measures would an external appeals body use in determining 
     whether a treatment or coverage decision was appropriate?
---------------------------------------------------------------------------
     \1\ This paper was adapted from two sources. The first is an 
     article which appeared in the New England Journal of 
     Medicine, January 21, 1999, titled, ``Who Should Determine 
     When Health Care Is Medically Necessary?'' authored by Sara 
     Rosenbaum, J.D., George Washington University School of 
     Public Health and Health Services, David M. Frankford, J.D., 
     Rutgers University School of Law, Brad Moore, M.D., M.P.H., 
     and Phyllis Borzi, J.D., George Washington University Medical 
     Center. The second source is a special analysis of recent 
     ERISA coverage decisions prepared by professor Rosenbaum.
---------------------------------------------------------------------------
       Thus, federal legislation should incorporate the 
     professional standard of medical necessity. This has been a 
     well-settled standard in our legal system for over two 
     centuries, and is commonly defined as ``a service or benefit 
     consistent with generally accepted principles of professional 
     medical practice.'' In fact, many insurance contracts in 
     force today include some version of this standard (see 
     attached table).


                               BACKGROUND

       The advent of managed care has blurred the lines between 
     coverage and treatment decisions, since for all but the 
     wealthiest Americans, an insurer's decision regarding 
     coverage effectively determines whether the individual will 
     receive care.
       As a consequence, the quality of coverage decisions, that 
     is to say--the standard used to decide a coverage question 
     and the evidence considered in deciding whether the care that 
     is sought meets the standard--becomes the central issue in 
     the managed care debate.
       As insurers began to move significantly into the coverage 
     decision-making arena in the 1970s, they adopted the same 
     standard used by the courts in adjudicating health care 
     quality cases--the professional standard of medical 
     necessity.


                       TRENDS IN THE MARKETPLACE

       A review of recent cases (see attached table) suggests that 
     while most insurers use this professional standard, some are 
     beginning to write other standards into their contracts. 
     Courts must abide by these standards unless they conflict 
     with other statutes.
       There are also indications that some insurers may be 
     seeking, by contract, to limit the evidence they will 
     consider in making their coverage determinations, instead 
     relying only on the results of generalized studies (some of 
     which may be of questionable value) that have some, but not 
     conclusive, bearing on a given patient's case.
       The cases also indicate that some insurers are attempting 
     to make their decisions unreviewable by using terms such as, 
     ``as determined by us.''
       The result of these trends is arbitrary decision-making 
     (based either on bad evidence, or no evidence at all) which, 
     by failing to take into account individual patient needs, 
     diminishes health care quality, and does not constitute good 
     professional practice.
       It is not possible for consumers to see these contracts 
     under normal circumstances. However, when individuals 
     challenge denials of coverage or treatment, contract clauses 
     affecting millions of persons become public as part of the 
     court decision.
       A close examination of the contract provisions in the 
     attached cases reveals, in some instances, the use of 
     extraordinary standards that pose a significant departure 
     from the professional standard of practice:
       In Fuja, Bedrick, Heasley, and McGraw, all of the contracts 
     underlying these cases omit coverage for ``conditions.'' 
     Prudent medical professionals would not deny care for 
     conditions, nor is it likely that there are any scientific 
     studies which indicate that treatment of children and adults 
     with ``conditions'' such as cerebal palsy, multiple 
     sclerosis, or a developmental or congenital health problem, 
     is not ``medically necessary.''
       In Metrahealth, the contract requires a showing that care 
     be ``absolutely essential and indispensable'' prior to its 
     coverage. This verges on an emergency coverage definition and 
     is at odds with the approach taken by prudent medical 
     professionals.
       In Dowden, use of the term ``essential'' achieves a similar 
     result.
       In Dahl-Elmers, the contract requires a showing that the 
     care ``could not have been omitted without adversely 
     affecting the insured person's condition or the quality of 
     medical care.'' It is doubtful there are any scientific 
     studies that demonstrate how much care can be withheld before 
     a patient deteriorates. In fact, such a study would be 
     unethical even to undertake. Thus, there is virtually no 
     scientific evidence to support denial of coverage under this 
     standard.
       The standards employed in these contracts are in complete 
     conflict with prudent medical practice by health 
     professionals who rely on solid evidence of effectiveness. No 
     reasonable physician would withhold treatment until a 
     patient's condition satisfied any one of these standards.
       These cases deal implicitly with the issue made explicit in 
     Harris v. Mutual of Omaha, which is discussed in the New 
     England Journal of Medicine article from which this paper was 
     adapted. Specifically, because such contracts do not contain 
     any evidentiary standards to inform purchasers of what 
     constitutes reasonable medical practice, insurers are 
     effectively free to use or disregard the evidence of their 
     choosing. This freedom to ignore relevant evidence, such as 
     the opinion of treating physicians, goes to the heart of 
     Harris.


                            RECOMMENDATIONS

       Because coverage standards and evidence are absolutely 
     central, albeit poorly understood concepts, protecting 
     against the diminution of quality of care should not be left 
     to the marketplace. Neither consumers, nor employee benefit 
     managers, have the expertise to recognize the implications of 
     the language which appears in these contracts.
       In light of these trends and their impact on health care 
     quality, federal legislation should incorporate the 
     professional standard of medical necessity as the framework 
     against which a patient's medical care will be decided.
       In addition, the legislation should specify the types of 
     evidence that will be considered in determining whether the 
     professional standard has been met in treatment and coverage 
     decisions. In addition to the patient's medical record and 
     the treating physician's proposed treatment, the courts have 
     typically relied upon valid and reliable research, studies 
     and other evidence from impartial experts in the relevant 
     field.
       Thus, enacting the professional standard of medical 
     necessity into federal law would balance the interests of 
     patients, providers and insurers. Treatment and coverage 
     decisions would be measured against the same standard of 
     medical necessity, and providers and insurers would both be 
     guided by the same evidentiary requirements.
                                  ____


    EXAMPLES OF MEDICAL NECESSITY CLAUSES IN EMPLOYEE HEALTH BENEFIT
                                CONTRACTS
------------------------------------------------------------------------
                                      Contractual definition of medical
             Case name                            necessity
------------------------------------------------------------------------
Friends Hospital v. MetraHealth     ``A health care facility admission,
 Service Corp., 9 F. Supp.2d 528     level of care, procedure, service
 (E.D. Penn. 1998).                  or supply is medically necessary if
                                     it is absolutely essential and
                                     indispensable for assuring the
                                     health and safety of the patient as
                                     determined by the * * * plan * * *
                                     with review and advice of competent
                                     medical professionals.''
McGraw v. Prudential Ins. Co. of    ``To be considered `needed', a
 America, 137 F.3d 1253 (10th Cir.   service or supply must be
 1998).                              determined by Prudential to meet
                                     all of these tests:
                                      (a) It is ordered by a Doctor
                                      (b) It is recognized throughout
                                       the Doctor's profession as safe
                                       and effective, is required for
                                       the diagnosis or treatment of the
                                       particular sickness or Injury,
                                       and is employed appropriately in
                                       a manner and setting consistent
                                       with generally accepted United
                                       States medical standards.
                                      (c) It is neither Educational nor
                                       Experimental nor Investigational
                                       in nature.''
Gates v. King & Blue Cross & Blue   ``The Plan defines medically
 Shield of Virginia, Inc., 129       necessary as: Services, drugs,
 F.3d 1259 (4th Cir. 1997).          supplies, or equipment provided by
                                     a hospital or covered provider of
                                     health care services that the
                                     carrier determines:
                                      (a) are appropriate to diagnose or
                                       treat the patient's condition,
                                       illness or injury;
                                      (b) are consistent with standards
                                       of good medical practice in the
                                       U.S.
                                      (c) are not primarily for the
                                       personal comfort or convenience
                                       of the patient, the family, or
                                       the provider
Dowden v. Blue Cross & Blue Shield  Services that are ``essential to,
 of Texas, Inc., 126 F.3d 641 (5th   consistent with and provided for
 Cir. 1997).                         the diagnosis or the direct care
                                     and treatment of the condition,
                                     sickness, disease, injury, or
                                     bodily malfunction,'' and
                                     treatments ``consistent with
                                     accepted standards of medical
                                     practice.''
Bedrick v. Travelers Ins. Co., 93   1. Services that are appropriate and
 F.3d 149 (4th Cir. 1996).           required for the diagnosis or
                                     treatment of the accidental injury
                                     or sickness;
                                      2. It is safe and effective
                                       according to accepted clinical
                                       evidence reported by generally
                                       recognized medical professionals
                                       and publications;
                                      There is not a less intrusive or
                                       more appropriate diagnostic or
                                       treatment alternative that could
                                       have been used in lieu of the
                                       service or supply given.

[[Page S1275]]

 
Florence Nightingale Nursing Svc.,  The services and supplies furnished
 Inc. v. Blue Cross/Blue Shield of   must ``be appropriate and necessary
 Alabama, 41 F.3d 1476 (11th Cir.    for the symptoms, diagnosis, or
 1995).                              treatment of the Member's
                                     condition, disease, ailment, or
                                     injury; and be provided for the
                                     diagnosis or direct care of
                                     Member's medical condition; and be
                                     in accordance with standards of
                                     good medical practice accepted by
                                     the organized medical community * *
                                     * *
Trustees of the NW Laundry and Dry  1. The treatment must be
 Cleaners Health & Welfare Trust     ``appropriate and consistent with
 Fund v. Burzynski, 27 F.3d 153      the diagnosis (in accord with
 (5th Cir. 1994).                    accepted standards of community
                                     practice).''
                                      2. Treatments ``could not be
                                       omitted without adversely
                                       affecting the covered person's
                                       condition or the quality of
                                       medical care.''
Fuja v. Benefit Trust Life Ins.     Services that are ``required and
 Co., 18 F.3d 1405 (7th Cir. 1994).  appropriate for care of the
                                     Sickness or the Injury; and that
                                     are given in accordance with
                                     generally accepted principles of
                                     medical practices in the U.S. at
                                     the time furnished; and are not
                                     deemed to be experimental,
                                     educational or investigational. . .
Lee v. Blue Cross/Blue Shield of    ``Appropriate and necessary for
 Alabama, 10 F.3d 1547 (10th Cir.    treatment of the insured's
 1994).                              condition, provided for the
                                     diagnosis or care of the insured's
                                     condition, in accordance with
                                     standards of good medical practice,
                                     and not solely for the insured's
                                     convenience.''
Heil v. Nationwide Life Inc. Co.,   Services for which there is
 9 F.3d 107 (6th Cir. 1993).         ``general acceptance by the medical
                                     profession as appropriate for a
                                     covered condition and [that] are
                                     determined safe, effective, and non-
                                     investigational by professional
                                     standards.''
Heasely v. Belden & Blake Corp., 2  Services and procedures ``considered
 F.3d 1249 (3rd Cir. 1993).          necessary to the amelioration of
                                     sickness or injury by generally
                                     accepted standards of medical
                                     practice in the local community.''
Dahl-Eimers v. Mutual of Omaha      (a) ``Appropriate and consistent
 Life Inc. Co., 986 F.2d 1379        with the diagnosis in accord with
 (11th Cir. 1993).                   accepted standards of community
                                     practice;
                                      (b) Not considered experimental;
                                       and
                                      (c) Could not have been omitted
                                       without adversely affecting the
                                       injured person's condition or the
                                       quality of medical
                                       care.''
------------------------------------------------------------------------

                                 ______