[Congressional Record (Bound Edition), Volume 145 (1999), Part 3]
[House]
[Pages 4522-4526]
[From the U.S. Government Publishing Office, www.gpo.gov]




                          MANAGED CARE REFORM

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 1999, the gentleman from Iowa (Mr. Ganske) is recognized for 
60 minutes as the designee of the majority leader.
  Mr. GANSKE. Madam Speaker, tomorrow on the other side of the Capitol, 
in the Senate, debate begins on managed care reform legislation.
  I would like to take my colleagues back to May 30, 1996, when a 
small, nervous woman testified before the House Committee on Commerce. 
Her testimony, Madam Speaker, was buried in the fourth panel at the end 
of a long day about the abuses of managed care. The reporters were 
gone, the television cameras had packed up, most of the original crowd 
had dispersed.

                              {time}  1615

  Madam Speaker, she should have been the first witness that day, not 
one of the last. She told about the choices that managed care companies 
and self-insured plans are making every day when they determine medical 
necessity.
  This woman, Linda Peeno, had been a claims reviewer for several HMOs. 
Here is her story:
  ``I wish to begin by making a public confession. In the spring of 
1987, as a physician, I caused the death of a man. Although this was 
known to many people, I have not been taken before any court of law or 
called to account for this in any professional or public forum. In 
fact, just the opposite occurred. I was rewarded for this. It brought 
me an improved reputation in my job and contributed to my advancement 
afterwards. Not only did I demonstrate I could do what was expected of 
me, I exemplified the good company doctor. I saved half a million 
dollars.''
  Madam Speaker, as she spoke, a hush came over the room. The 
representatives of the trade associations who were still there averted 
their eyes. The audience shifted uncomfortably in their seats, both 
gripped and alarmed by her story.
  Her voice became husky, and I could see tears in her eyes. Her 
anguish over harming patients as a managed care reviewer had caused 
this woman to come forth and bear her soul.
  She continued:
  ``Since that day I have lived with this act and many others eating 
into my heart and soul. For me a physician is a professional charged 
with the care or healing of his or her fellow human beings. The primary 
ethical norm is: Do no harm. I did worse; I caused death.''
  She went on:
  ``Instead of using a clumsy, bloody weapon, I used the simplest, 
cleanest of tools: my words. This man died because I denied him a 
necessary operation to save his heart. I felt little pain or remorse at 
the time. The man's faceless distance soothed my conscience. Like a 
skilled soldier, I was trained for this moment. When any moral qualms 
arose I was to remember I am not denying care, I am only denying 
payment.''
  Madam Speaker, by this time the trade association representatives 
were staring at the floor, the Congressmen who had spoken on behalf of 
the HMOs were distinctly uncomfortable and the staff, several of whom 
subsequently became representatives of HMO trade organizations, were 
thanking God that this witness came at the end of the day.
  Dr. Peeno's testimony continued:
  ``At the time this helped me avoid any sense of responsibility for my 
decision. Now I am no longer willing to accept the escapist reasoning 
that allowed me to rationalize this action. I accept my responsibility 
now for this man's death as well as for the immeasurable pain and 
suffering many other decisions of mine caused.''
  She then listed the many ways managed care health plans deny care to 
patients, but she emphasized one particular issue: the right to decide 
what care is medically necessary.
  She said:
  ``There is one last activity that I think deserves a special place on 
this list, and this is what I call the smart bomb of cost containment, 
and that is medical necessities denials. Even when medical criteria is 
used, it is rarely developed in any kind of standard traditional 
clinical process.''
  She continued:
  ``It is rarely standardized across the field. The criteria is rarely 
available for prior review by the physicians or the members of the 
plan. We have enough experience from history to demonstrate the 
consequences of secretive, unregulated systems that go awry.''

[[Page 4523]]

  After exposing her own transgressions, she closed by urging everyone 
in the room to examine their own consciences:
  ``One can only wonder how much pain, suffering and death we will have 
before we have the courage to change our course. Personally, I have 
decided even one death is too much for me.''
  Madam Speaker, the hearing room at that time was stone cold quiet. 
The chairman mumbled, ``Thank you, Doctor.''
  Linda Peeno could have rationalized her decisions, as many do. Oh, I 
was just working within guidelines, or I was just following orders, or, 
you know, we have to save resources, or this is not about treatment, it 
is really just about benefits.
  Madam Speaker, Dr. Peeno refused to continue this denial, and she 
will do penance for her sins the rest of her life by exposing the dirty 
little secret of HMOs determining medical necessity.
  Madam Speaker, if there is only one thing to consider before our 
colleagues vote on patient protection legislation, I urge our 
colleagues to consider the following:
  Before we vote on any patient protection legislation, we must keep in 
mind the fact that no amount of procedural protection or schemes of 
external review can help patients if insurers are legislatively given 
broad powers to determine what standards will be used to make decisions 
about coverage. As Dr. Peeno so poignantly observed, insurers now 
routinely make decisions by determining what goods and services they 
will pay for. The difference between clinical decisions about medical 
necessary care and decisions about insurance coverage are especially 
blurred, and, Madam Speaker, because all but the wealthy rely on 
insurers, the power of insurers to determine coverage gives them the 
power to dictate professional standards of care.
  Make no mistake. Along with the question of health plan liability, 
the determination of who should decide when health care is medically 
necessary is the key issue in patient protection legislation.
  Contrary to the claims of HMOs that this is some new concept, for 
over 200 years most private insurers and third party payers have viewed 
as medically necessary those products or services provided in 
accordance with prevailing standards of medical practice, quote, 
unquote. This is the definition that I use in my own managed care 
reform bill, the Managed Care Reform Act of 1999, and the courts have 
been sensitive to the fact that insurers have a conflict of interest 
because they stand to gain financially from denying care and have used 
clinically-derived professional standards of care, the courts have, to 
reverse insurers' attempts to deviate from those standards. That is why 
it is so important that managed care reform legislation include an 
independent appeals panel with no financial interest in the outcome. A 
fair review process utilizing clinical standards of care guarantees 
that the decision of the review board is made without regard to the 
financial interests of either the HMO or the physician. On the other 
hand, if the review board has to use the health plan's definition of 
medically necessary, there is no such guarantee.
  Now, Madam Speaker, in response to a growing body of case law and the 
HMOs' own need to demonstrate profitability to their shareholders 
insurers are now writing contracts that threaten even this minimal 
level of consumer protection. They are writing contracts in which 
standards of medical necessity are not only separated from standards of 
good practice but are also essentially not subject to review.
  Here is one example of many of a health plan's definition of 
medically necessary services. This is directly from the language of a 
contract from an HMO:
  ``Medical necessity means the shortest, least expensive or least 
intense level of treatment, care or service rendered or supply provided 
as determined by us, the health plan.''
  Contracts like this demonstrate that some health plans are 
manipulating the definition of medical necessity to deny appropriate 
patient care by arbitrarily linking it to saving money, not the 
patient's medical needs.
  Now on the surface some might say, so what is wrong with the least 
expensive treatment? Well, let me give my colleagues one example out of 
thousands I could cite:
  Before I came to Congress, I was a reconstructive surgeon. I treated 
children with cleft palets, a fissure on the roof of the mouth. 
Clinical standards of care would determine that the best treatment is 
surgical correction, but under this HMO's definition, the one that says 
shortest, least expensive, the plan could limit coverage to a piece of 
plastic to fill the hole in the roof of that patient's mouth. After 
all, that plastic obturator would be cheaper. However, instead of 
condemning children to a lifetime of using a messy prosthesis, the 
proper treatment, reconstruction using the child's own tissue, would 
give that child the best chance at normal speech and a normal life, and 
let me warn my colleagues paradoxically insurers stand to benefit from 
misguided legislative changes that can displace case law.
  Last year legislation passed this House and the GOP bill in the 
Senate would have granted insurers the explicit power to define medical 
necessity without regard to current standards of medical practice. This 
would have been accomplished by allowing them to classify as medically 
unnecessary any procedures not specifically found to be necessary by 
the insurer's own technical review panel. The Senate bill also would 
have given insurers the power to determine what evidence would be 
relevant in evaluating claims for coverage and would have permitted 
insurers to classify some coverage decisions as exempt from 
administrative review.
  Madam Speaker, I know that many of our colleagues who supported those 
bills last year had no idea of the implication of the medical necessity 
provisions in them.

                              {time}  1630

  That is why I hope my friends in both the House and the Senate are 
listening. As I said, tomorrow the Senate starts to address this issue.
  Specifically, insurers now want to move away from clinical standards 
of care applied to particular patients to standards linking medical 
necessity to what are called population studies.
  On the surface, this may seem to be scientific and rational. However, 
as a physician who is a former medical reviewer myself and who worked 
with many insurers, large and small, let me explain why I think it is 
critical that we stick with medical necessity as defined by clinical 
standard of care.
  First, sole reliance on broad standards from generalized evidence is 
not good medical practice. I will explain these. Second, there are 
practical limits to designing studies that can answer all clinical 
questions. Third, most studies are not of sufficient scientific quality 
to justify overruling clinical judgment.
  Let me explain these points, and I also recommend an article on this 
by Rosenbaum in the January 21, 1999, edition of the New England 
Journal of Medicine.
  First, while it may seem counterintuitive, it is not good medicine to 
solely use what are called outcomes-based studies of medical necessity, 
even when the science is rigorous. Let me explain why.
  The reason is because the choice of the outcome is inherently value 
laden. The medical reviewer for the HMO is likely, as shown by the 
above-mentioned contract, to consider cost the essential value.
  What about quality? As a surgeon, I treated many patients with broken 
fingers merely by reducing the fracture and splinting the finger and, 
Madam Speaker, for most patients this inexpensive treatment would 
restore adequate function.
  What about the musician, the piano player who needs a better range of 
motion? For that patient, surgery might be necessary.
  Which outcome should be the basis for the decision about insurance 
coverage? Playing the piano or routine functioning?
  My point is this: Taking care of patients requires a lot of variation 
and a

[[Page 4524]]

lot of individualization. Definitions of medical necessity have to be 
flexible enough to take into account the needs of each patient. One-
size-fits-all outcomes make irrelevant the doctor's knowledge of the 
individual patient and is bad medicine, period.
  Second, there are practical limitations on basing medical necessity 
on what is called generalized evidence, particularly as applied by 
HMOs.
  Much of medicine is a result of collective experience, and many basic 
medical treatments have not been studied rigorously. Furthermore, aside 
from a handful of procedures that are not explicitly covered, most care 
is not specifically defined in health plans because the number of 
procedures and the circumstances of their application is limitless.
  In addition, by their very nature, many controlled clinical trials 
study treatments in isolation; whereas physicians need to know the 
benefits of one type of treatment over another when they are taking 
care of an individual patient. Prospective randomized comparison 
studies, on the other hand, are very expensive. Given the enormous 
number of procedures and individual circumstances, if coverage is 
limited to only those that have scientifically sound generalized 
outcomes, care could be denied for almost all conditions.
  Come to think of it, Madam Speaker, maybe that is why HMOs are so 
keen to get away from prevailing standards of care.
  Third, the validity of HMO guidelines and how they are used is open 
to question. Medical directors of HMOs were asked to rank the sources 
of information they used to make medical decisions. Industry 
guidelines, generated by the trade associations representing health 
plans, were ranked ahead of information from national experts, 
government documents and NIH consensus conferences. The most highly 
respected source, medical journals, was used less than 60 percent of 
the time.
  Industry guidelines are frequently written by a firm by the name of 
Milliman and Robertson, a strategy shop for the HMO industry. This is 
the same firm that championed drive-through deliveries and outpatient 
mastectomies. Many times these practice guidelines are not grounded in 
science but are cookbook recipes derived by actuaries to reduce health 
care costs.
  Here are two examples of the errors of their guidelines. In reference 
to outpatient mastectomies, a National Cancer Institute study released 
in June found that women receiving outpatient mastectomies face 
significantly higher risks of being rehospitalized and have a higher 
risk of surgery-related complications like infections and blood clots. 
In regard to drive-through deliveries, in 1997, a study published in 
the Journal of the American Medical Association showed that babies 
discharged within a day of birth faced increase risk of developing 
jaundice, dehydration and dangerous infections.
  Objectivity of medical decision-making requires that the results of 
studies be open to peer review, yet much of the decision-making by HMOs 
is based on unpublished proprietary and unexamined methods and data. 
Such secret and potentially biased guidelines simply cannot be called 
scientific.
  This is not to say that outcomes-based studies do not make up a part 
of how clinical standards of care are determined. They do, but we are 
all familiar with the ephemeral nature of new scientific studies such 
as those on the supposed dangers of alar. Remember the apple scare a 
few years ago?
  Clinical standard of care, the standard that we should use for 
medical necessity, does take into account valid and replicable studies 
in the peer-reviewed literature, as well as the results of professional 
consensus conferences, practice guidelines based on government-funded 
studies and guidelines prepared by insurers that have been determined 
to have been free of conflict of interest, but most importantly, they 
also include the patient's individual health and medical information 
and the clinical judgment of the treating physician.
  Madam Speaker, Congress should pass legislation defining this 
standard of medical necessity because, one, the Employee Retirement 
Income Security Act, ERISA, shields plans from the consequences of most 
decisions about medical necessity. Two, under ERISA, patients generally 
can only recover the value of the benefits denied. Three, even this 
limited remedy is being eroded by insurance contracts that give 
insurers the authority to make decisions about medical necessity based 
on questionable evidence.
  To ensure these protections, Congress must provide patients with a 
speedy external review of all coverage decisions, not merely those that 
insurers decide are subject to review. It is time for Congress to 
defuse the smart bomb of HMOs.
  Madam Speaker, the issues of managed care reform should go from the 
drawing board to the signing ceremony this year. Last year, I joined 
with the gentleman from Michigan (Mr. Dingell) and offered the 
Patients' Bill of Rights as an amendment on the House floor. While I 
regret that it did not pass, there may have been at least one good 
thing about that. In the last few weeks, many HMOs have announced 
double digit premium increases. We can be sure that if the Patients' 
Bill of Rights had passed, there would be a whole lot of HMO fingers 
pointing at Congress blaming us now for those skyrocketing premiums 
which are really due to HMO mismanagement.
  I think it is important to remember why it is so important that 
Congress should pass HMO reform legislation. I will bet, Madam Speaker, 
that every one of our colleagues has heard from constituents describing 
their own HMO horror story.
  We have all seen headlines like, HMO's rules leave her dying for the 
doc she needs, or ex-New Yorker is told get castrated so we can save 
dollars. Or how about this headline: What his parents did not know 
about HMOs may have killed this baby.
  Consider the 29-year-old cancer patient whose HMO would not pay for 
his treatments. The HMO case manager told him instead to hold a fund-
raiser, a fund-raiser.
  Well, Madam Speaker, we just had an hour of debate about campaign 
fund-raising. I certainly hope that campaign finance reform will not 
stymie that man's chance to get his cancer treatment.
  During congressional hearings 2 years ago we heard testimony from 
Alan DeMeurers who lost his wife Christy to breast cancer. When a 
specialist at UCLA recommended she undergo bone marrow transplant 
surgery her HMO leaned on UCLA to change its medical opinion. Who knows 
whether Kristi would be with her two children today had her HMO not 
interfered with her doctor/patient relationship?
  Other plans have placed ridiculous burdens on those seeking emergency 
care. Ask Jacqueline Lee how bad that can be. This 28-year-old lady was 
hiking in the mountains, just west of Washington, D.C. in the 
Shenandoah Mountains when she fell off a 40-foot cliff. She fractured 
her skull, her arm, her pelvis. She was comatose, lying at the bottom 
of this 40-foot cliff. Fortunately, her hiking companion had a cellular 
phone and she was airlifted to a local hospital and she was treated in 
the ICU for a month on morphine drips.
  Now, one will not believe this. Her HMO refused to pay for the 
services because she failed to get preauthorization. I ask, what was 
she supposed to do with her fractured skull, her broken arm, her broken 
pelvis, lying at the base of the cliff? Maybe wake up from her coma 
with her nonbroken arm, pull a cellular phone out of her pocket, dial a 
1-800 phone number and say, hey, I just fell off a 40-foot cliff; I 
need to go to the hospital?
  There are countless other examples. A pediatrician who worked in this 
area took care of a pediatric ICU. She told me about how a few years 
ago, a 6-year-old boy came into her ICU, after drowning. Prognosis was 
terrible. The little boy had been in the unit about 5 hours. They had 
him intubated. They had the drips running. Doctors and nurses and 
family were standing around the bed praying for a sign of life when the 
phone rings. It is a medical manager from the HMO.
  Well, tell me about this little boy.
  Well, he nearly drowned. The prognosis is not very good.

[[Page 4525]]

  Now, one can almost picture the computer screen and the algorithm 
from this medical manager a thousand miles away. Ventilator patient, 
poor prognosis.
  Well, came the next question, have you considered sending this little 
boy home on home ventilation? After all, it is cheaper.
  Think about that. Does not that just about make the hair stand up on 
the back of your head? That is what we are dealing with.

                              {time}  1645

  Madam Speaker, because our friends and our neighbors and our fellow 
workers and our own families have had these types of experiences, 
countless polls show that people want Congress to pass managed care 
reform.
  A recent Kaiser Family Foundation survey found that 78 percent of 
voters support managed care reform, and a similar percentage support 
allowing consumers to go to court to sue their health plans when those 
health plans are negligent. No public opinion poll, however, conveys 
the depth of emotion on this issue as well as movie audiences around 
the country who spontaneously clapped and cheered Helen Hunt when she 
gave an obscenity-laced evaluation and description of her HMO in the 
Oscar-winning movie, ``As Good As It Gets.'' Audiences across the 
country responded to the plight of her little boy with asthma because 
they see the same thing happening to their friends, their neighbors, 
and their family members.
  The industry responds by saying, Christy DeMeurers, Jacqueline Lee, 
this little boy who has just drowned, they are just anecdotes; we do 
not legislate because of anecdotes. Well, Madam Speaker, to paraphrase 
Shakespeare, Hath not these anecdotes, these HMO victims, eyes? Hath 
not these anecdotes hands, organs, dimensions, senses, affections, 
passions? If you prick the anecdotes, do they not bleed? And if you cut 
short their care for profits, do those anecdotes not die?
  Madam Speaker, I hope we never hear that word anecdote when we debate 
this issue on the floor this year.
  Last year, I and a few other brave souls crossed party lines to push 
for passage of the Patients' Bill of Rights. It was a good bill, and it 
would have done a great deal to end the constant stream of HMO horror 
stories. It contained, for example, very strong language ensuring that 
health plans pay for emergency care.
  Consider the plight of James Adams, aged 6 months old. At 3:30 in the 
morning, his mother, Lamona, found him hot, panting, and moaning. His 
temperature was 104 degrees. Lamona phoned her HMO and was told to take 
little Jimmy to the Scottish Rite Medical Center. Quote: ``That is the 
only hospital I can send you to,'' the HMO reviewer added. ``How do I 
get there,'' Lamona asked. ``I don't know,'' the nurse said. ``I am not 
good at directions.''
  Well, it turns out that Scottish Rite Hospital was about 70-some 
miles away. So, at 3:30 in the morning, Lamona and her husband wrap up 
little Jimmy, put him in the car. Picture this: It is a stormy night. 
They start their drive to the hospital. Madam Speaker, 20 miles into 
their ride they passed Emory University Hospital, a renowned pediatric 
center. Nearby were two more of Atlanta's leading hospitals, Georgia 
Baptist and Grady Memorial. But the Adams did not have permission to 
stop there, and so they pushed on. They had farther to go to get to 
Scottish Rite Hospital. While searching for the hospital, James' heart 
stopped.
  There is a scene in the movie that is out now, A Civil Action, 
showing a mother and a father in a car on the side of the road on a 
stormy night administering CPR to their child. Think of Jimmy Adams 
when you see that movie.
  Well, Lamona and her husband eventually got Jimmy to Scottish Rite. 
It looked like the boy would die. But he was a tough little guy, and 
despite his cardiac arrest, due to delay in treatment by his HMO, he 
survived. However, the doctors had to amputate both of his hands and 
both his feet because of the gangrene that resulted from his cardiac 
arrest.
  All of this is documented in the book, Health Against Wealth, and as 
the details of Baby James' HMO's methods were emerged, it became clear 
that the margins of safety in that HMO were razor thin. Maybe as thin 
as the scalpel that had to amputate both this little boy's hands and 
both of his feet. For the rest of his life, this little boy will never 
be able to play basketball. I talked to his mother last week. He has 
learned how to put on his leg prostheses without his bilateral hooks, 
but he cannot get on his bilateral hooks unless he has help from his 
mom. He will never be able to touch and caress the cheek of the woman 
that he loves some day.
  Think of the dilemma an HMO places on a mother struggling to make 
ends meet. In Lamona's situation, if she rushes her child to the 
nearest emergency room, she could be at risk for hundreds or even 
thousands of dollars because she was not given authorization. It was 
not medically necessary to go to that nonprovider hospital. Or, she 
could hope that her child's condition will not worsen as they drive 
past one hospital after another, an additional 20 miles, to get to the 
nearest emergency room affiliated with their plan.
  Madam Speaker, a strong HMO reform bill would ensure that consumers 
would not have to make that potentially disastrous choice.
  Now, in recognition of problems in managed care, three managed care 
plans joined with Families USA and other consumer groups in 1997 to 
announce their support of an 18-point agenda. Here is a sample of the 
issues that the groups felt required nationally enforceable standards: 
Guaranteeing access to appropriate services, providing people with a 
choice of health plans, ensuring the confidentiality of medical 
records, protecting the continuity of care, providing consumers with 
relevant information, covering emergency care, and banning gag rules.
  These health plans and consumer groups wrote, ``Together, we are 
seeking to address problems that have led to a decline in consumer 
confidence and trust in health plans. We believe that thoughtfully 
designed health plan standards will help to restore confidence and 
ensure needed protection.''
  After listening to some of these examples of the victims of managed 
care, I would certainly agree with them, that we need some Federal 
standards to correct the abuses, and from the viewpoint of the plans, 
they certainly have a public relations disaster.
  These plans said that they noted that they already make extensive 
efforts to improve the quality of care, and the Chief Executive Officer 
of the one plan said quote, ``We intend to insist on even higher 
standards of behavior within our industry, and we are more than willing 
to see laws enacted to ensure that result.''
  Let me repeat that. The Chief Executive Officer of one of these 
nonprofit plans said, ``We are more than willing to see laws enacted to 
ensure that result.'' However, I am sad to say that despite strong 
public support to correct problems like these and the support of some 
responsible managed care plans, legislation stalled in Washington last 
year. That is truly unfortunate, since the problem demands Federal 
action.
  While historically, State insurance commissions have done an 
excellent job of monitoring the performance of health plans, Federal 
law puts most HMOs beyond the reach of State regulations. Now, how is 
this possible?
  Well, more than two decades ago, Congress passed the Employee 
Retirement Income Security Act. As I have said before, this is called 
ERISA. It did this to provide some uniformity for pension plans in 
dealing with different State laws. Health plans were included in ERISA, 
almost as an afterthought. But the result has been a gaping regulatory 
loophole for self-insured plans under ERISA. Even more alarming is the 
fact that this lack of effective regulation is coupled with an immunity 
from liability for negligent actions.
  Now, Madam Speaker, personal responsibility has been a watchword for 
this Republican Congress, and this issue should be no different. Health 
plans that recklessly deny needed medical service should be made to 
answer

[[Page 4526]]

for their conduct. Laws that shield entities from their responsibility 
only encourage them to cut corners. Congress created this ERISA 
loophole, and Congress should fix it.
  Now, many of the opponents to this legislation say, well, we will end 
up, if we pass this, with nationalized health insurance. It is always 
the big bogeyman, nationalized health insurance. But I ask my 
colleagues, think for a moment about buying a car. Federal laws ensure 
that cars have horns and brakes and headlights and seatbelts; they also 
ensure that they do not pollute. Yet, despite these minimum standards, 
we do not have a nationalized auto industry. Instead, consumers have 
lots of choices. But they know that whatever car they buy will meet 
certain minimum safety standards. One does not buy safety a la carte.
  The same notion of basic protections and standards should apply to 
health plans. Consumer protections will not lead to socialized medicine 
any more than requiring seatbelts has led to a nationalized auto 
industry. In a free market, these minimum standards set a level playing 
field that allows competition to flourish.
  Before closing, Madam Speaker, let me share some thoughts on how I 
think this issue will evolve in the coming months. As we know, we came 
close to passing the Patients' Bill of Rights last year in part, 
because I and some other Republicans crossed party lines to support the 
better bill. Already I see signs this year that the fight could break 
out the same way. We simply cannot let the issue of managed care reform 
die on the cross of partisanship.
  So I decided not to cosponsor the Patients' Bill of Rights when it 
was introduced earlier this year. Instead, I introduced my own bill: 
The Managed Care Reform Act of 1999, H.R. 719. While my bill shares the 
best features of other leading managed care reform proposals, it also 
eliminates some provisions that would add regulatory burdens on health 
plans without providing much in the way of added patient safety. In 
addition, the bill has a new formulation on the issue of health plan 
liability. I continue to believe that health plans which make negligent 
medical decisions should be accountable for their actions.
  But a winning lawsuit is little consolation to a family who has lost 
a loved one. The best HMO bill ensures that health care is delivered 
when it is needed, and I also believe that the liability should attach 
to the entity that is making medical decisions.
  Many self-insured companies contract with large managed care plans to 
deliver care. If the business is not making discretionary decisions, 
they should not face liability. This is true of folks like third-party 
administrators if they merely perform administrative functions. But if 
they cross the line and determine whether a particular treatment is 
medically necessary; remember, this brings us back to the medical 
necessity issue that I started this speech about. If they cross that 
line in a given case, then they are making medical decisions, and they 
should be responsible for their actions.
  To encourage health plans to give patients the right care without 
having to go to court, my bill provides for both an internal and an 
external appeals process. But unlike last year's Republican bill, the 
external review is binding on the plan.

                              {time}  1700

  It could be requested by either the patient or the health plan. The 
review would be done by an independent panel of medical experts. 
Frequently, patients pursuing cases through appeal win. They win their 
treatment. But many times, also, the plan's decision is proven to be 
the right one.
  My bill provides that, if the plan follows the definition of the 
external review panel, there could not be punitive damages liability on 
either the health plan or the business. After all, there cannot be any 
malice if they have bound themselves to the decision of an independent 
panel of experts.
  Madam Speaker, I suspect Aetna wishes they had had an independent 
peer panel available, even with the binding decision on care, when it 
denied care to David Goodrich. Earlier this year, a California jury 
handed down a verdict with $116 million in punitive damages to Teresa 
Goodrich, his widow. If Aetna or the Goodriches had had the ability to 
send the denial of care to an external review, with a binding decision 
on the plan, where that independent panel has the authority to 
determine clinical standards of care as medical necessity, then they 
could have avoided the courtroom. But more importantly, David Goodrich 
might be alive today.
  That is why my plan should be attractive to both sides. Consumers get 
a reliable and quick external appeals process that will help them get 
the care that they need. They can go to court to collect economic 
damages like lost wages and future medical care and noneconomic damages 
like pain and suffering.
  If the plan fails to follow the external reviews decision, the 
patient can sue for punitive damages. But if it has gone in a timely 
fashion through the review process to that independent panel for a 
binding decision on the plan, that plan then knows that it has no 
punitive damages liability. That is the big unknown to an insurance 
company. That eliminates for them the risk of a $50 million or $100 
million punitive damages award. But they have to follow the 
recommendations of that independent review panel.
  I have heard from insurers that they fear that this legislation will 
cause premiums to increase. I think there is ample evidence that this 
would not be the case. Last year, the Congressional Budget Office 
estimated that a similar proposal, which did not include punitive 
damages relief, would only increase premiums around 2 percent over 10 
years.
  When Texas passed its own liability law 2 years ago, Scott and White 
Health Plan estimated that premiums would have to increase just 34 
cents per member per month to cover the cost. These are hardly alarming 
figures.
  The low estimate by Scott and White seems accurate since only one 
suit has been filed against a Texas health plan since Texas passed 
legislation similar to this. That is far from the flood of litigation 
that opponents predicted.
  Madam Speaker, I have been encouraged by the positive response my 
bill has received. I think this could be the basis for a bipartisan 
bill this year. In fact, I spoke with the CEO of a large Blue Cross 
plan who confided to me that his organization is already implementing 
virtually all of the recommendations of the President's Health Care 
Quality Advisory Commission for little or no cost.
  One part of the health care debate that concerns him is the issue of 
liability. He has indicated that shielding plans from punitive damages 
when they follow an external review body would strike an appropriate 
balance.
  Madam Speaker, passage of real patient protection legislation is 
going to require a lot of hard work, dedication, and some compromise. 
My new bill represents an effort to break through this partisan 
gridlock and move this issue forward.
  I hope to work with all my colleagues to help break the logjam 
keeping patient protection legislation from becoming law. This issue is 
vitally important to families across this country.
  To my fellow legislators, please do not let the insurers define 
``medically necessary'' or someday my colleagues or a family member or 
a friend will find themselves defined out of a treatment that is a 
clinical standard of care that could save their life or the life of 
somebody else.

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