[Congressional Record (Bound Edition), Volume 145 (1999), Part 5]
[House]
[Pages 7589-7595]
[From the U.S. Government Publishing Office, www.gpo.gov]



                     PATIENT PROTECTION LEGISLATION

  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.
  Mr. GANSKE. Madam Speaker, it is deja vu all over again. Delay 
patient protection, keep it from the floor, try to push it back in the 
legislative year so that time will run out, or load up a clean patient 
bill of protection with a lot of extraneous, untested ideas and then 
let it sink of its weight.
  Madam Speaker, I would think that we would learn in this House that 
the American public is demanding that Congress address this problem. I 
recently learned, Madam Speaker, that the leadership of the House is 
not thinking about bringing patient protection legislation to the floor 
until October at the earliest. And I also learned, Madam Speaker, that 
the chairman of jurisdiction is considering adding a number of untested 
ideas to a clean bill of patient rights, things like health marts or 
association health plans, ideas which have not been tested, which could 
actually be harmful.
  Why is this a disaster, Madam Speaker? Well, consider the case of 
little James Adams, age 6 months. At 3:30 in the morning his mother 
Lamona found him hot, panting, sweaty, moaning. His temperature was 
104. Lamona phoned her HMO and was told to take James to Scottish Rite 
Medical Center. ``That is the only hospital I can send you to,'' the 
reviewer added.
  ``Well, how do I get there?'' Lamona said.
  ``I do not know. I am not good at directions.''
  So at about 3:30 in the morning Lamona and her husband wrap up little 
Jimmy, little sick Jimmy. It was raining out, terrible night. They get 
in their car. They live way on the east side of Atlanta, Georgia, about 
20 miles.
  About 20 miles into their ride they pass Emory Hospital's emergency 
room with a renowned pediatric medical center. Nearby are two more of 
Atlanta's leading hospitals, Georgia Baptist and Grady Memorial. But 
they did not have permission to stop, and they knew that if they did 
the HMO would stick them with the bill. So not being medical 
professionals, they thought, ``We think we can get there in time.''
  They had 22 more miles to travel before they got to Scottish Rite. 
While searching for the hospital, James's heart stopped. Madam Speaker, 
think of what it was like for Mr. and Mrs. Adams, driving frantically 
in the early morning hours, trying to resuscitate and keep little Jimmy 
alive while they push on to the emergency room.
  Well, they got him to Scottish Rite eventually but it looked like he 
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, he 
ended up with gangrene of both of his hands and both of his feet. The 
doctors had to amputate both of little Jimmy's hands and both of his 
feet.
  All this is documented in the book ``Health Against Wealth,'' and the 
details of baby James' HMO's methods emerged, and a judge who looked at 
this said the margins of safety of that HMO were razor thin. Madam 
Speaker, I would say about as razor thin as the scalpel that had to 
amputate little baby James' hands and feet.

[[Page 7590]]

  Think of the dilemma this places on a mother struggling to make ends 
meet. In Lamona's situation, under last year's Republican task force 
bill, if she rushes her child to the nearest emergency room she could 
be at risk for a charge that is on average 50 percent more than what 
the plan would pay for in network care. Or she could hope that her 
child's condition will not worsen as they drive past other hospitals to 
finally make it to the ER that is affiliated with their plan. And woe 
to any family's fragile financial condition if this emergency occurs 
while they are visiting friends or family out-of-State.
  Madam Speaker, cases like this are not isolated examples. They are 
not mere anecdotes. Madam Speaker, tell to little James today or to his 
mother Lamona, who I spoke to about a month ago, that James is just an 
anecdote. Those anecdotes, if we prick their finger, if they have a 
finger, they bleed.
  Little James, with his bilateral leg amputations and his bilateral 
hand amputations, today with his arm stumps can pull on his leg 
prosthesis, but his mom and dad have to help him get on his bilateral 
hooks. Little James will never be able to play basketball or sports. 
Little James, some day when he marries the woman that he loves, will 
never be able to caress her cheek with his hand.
  Madam Speaker, this is the type of disaster that the type of delay 
that we are seeing in this House and in this Congress in addressing 
this problem makes this a tragedy. Well, Madam Speaker, these cases 
have earned the HMO industry a reputation with the public that is so 
bad that only tobacco companies are held in better esteem.
  Let me cite a few statistics. A national survey shows that far more 
Americans have a negative view of managed care than positive. By more 
than two to one, Americans support more government regulation of HMOs. 
The survey shows that only 44 percent of Americans think managed care 
is a good thing.
  Do my colleagues need proof? Just remember the way the audience 
clapped and cheered during the movie ``As Good As It Gets'' when 
Academy Award winner Helen Hunt expressed an expletive, which I cannot 
repeat on the floor of Congress, about the lack of care her asthmatic 
son got from their HMO.

                              {time}  2015

  No doubt the audience's reaction was fueled by dozens of articles and 
news stories highly critical of managed care. These are real-life 
experiences.
  In September of 1997, the Des Moines Register ran an op-ed piece 
entitled ``The Chilly Bedside Manners of HMOs'' by Robert Reno, a 
Newsweek writer. Citing a study on the end of life care he wrote, 
``This would seem to prove the popular suspicion that the HMO operators 
are heartless swine.''
  The New York Post ran a week-long series on managed care. The 
headlines included, ``HMOs Cruel Rules Leave Her Dying for the Doc She 
Needs.''
  Another headline blared out, ``Ex-New Yorker Is Told, Get Castrated 
So We Can Save Dollars.''
  Or maybe you are interested in this headline: ``What His Parents 
Didn't Know About HMOs May Have Killed This Baby.''
  Or how about the 29-year-old cancer patient whose HMO would not pay 
for his treatments? Instead, the HMO case manager told him to hold a 
fund-raiser. A fund-raiser? Madam Speaker, I certainly hope that 
campaign finance reform will not stymie this man's effort to get his 
cancer treatment.
  To counteract this, even some health plans have taken to bashing 
their colleagues. Here in Washington, one HMO's ads declared, ``We 
don't put unreasonable restrictions on our doctors. We don't tell them 
that they can't send you to a specialist.''
  In Chicago, Blue Cross ads proclaimed, ``We want to be your health 
plan, not your doctor.''
  In Baltimore, an ad for Preferred Health Network assured customers, 
``At your average health plans, cost controls are regulated by 
administrators. At PHN, doctors are responsible for controlling 
costs.''
  Madam Speaker, advertisements like these demonstrate that even the 
HMOs know that there are more than a few rotten apples in that barrel. 
As the debate over HMO reform has evolved, there has been a great deal 
of focus lately on the question of who decides what health care is 
medically necessary. Simply put, most health plans extol the fact that 
they pay for all health care that is medically necessary. Consumers 
find this reassuring as it suggests that if they need care, they will 
get it. What plans do not advertise nearly as extensively is that plans 
usually reserve for themselves the right to decide what is and what is 
not medically necessary.
  On May 30, 1996, Congress got its first glimpse at this issue. On 
that day, a small, nervous woman testified before the House Commerce 
Committee. Her testimony 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. She should have been the first witness that day, not the 
last. She told about the choices that managed care companies and self-
insured plans are making every day when they determine medical 
necessity. Linda Peeno had been a claims reviewer for several HMOs and 
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.

  She went on:

       Although this was known to many people, I have not been 
     taken to 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 on my job and contributed to my advancement 
     afterwards. Not only did I demonstrate that I could do what 
     was expected of me, I exemplified the good company doctor, 
     because I saved a half million dollars.

  Well, 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 bare 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. 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. As the HMO 
     would have me say, when any moral qualms arise, I was to 
     remember, I am not denying care, I am only denying payment.

  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 associations, were thanking God 
that this witness had come 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 escapist reasoning that allowed me to rationalize that 
     decision. I accept my responsibility now for that man's death 
     as well as the immeasurable pain and suffering many other 
     decisions of mine caused.

  She then went on to list the many ways that managed care plans deny 
care to patients but she emphasized one particular issue, the right to 
decide what care is medically necessary.
  ``There is one last activity that I think deserves a special place on 
this list, and that is what I call the smart bomb of cost containment, 
and that is medical necessity denials. Even when medical criteria is 
used, it is rarely developed in any kind of standard, traditional, 
clinical process. It is rarely standardized across the field. The 
criteria is rarely available for prior review by the physicians or 
members of the plan. We have enough experience from history to 
demonstrate the consequences of secretive, unregulated systems that go 
awry.''

[[Page 7591]]

  And after exposing her own transgressions, she closed by urging 
everyone in that hearing room to examine their own conscience. I 
remember her saying this very well.
  She said,

       One can only wonder how much pain, suffering and death will 
     we have before we have the courage to change our course? 
     Personally, I have decided even one death is too much for me.

      The room 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 isn't 
about treatment, it's really just about benefits.''
  Dr. Peeno refused to continue this denial and 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 our colleagues consider 
before voting on patient protection legislation, I hope it will be the 
fact that no amount of procedural protection or schemes for external 
review can help patients if the 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 treatment decisions by determining what goods and services they 
will pay for.
  The difference between clinical decisions about medically necessary 
care and decisions about insurance coverage are especially blurred. 
Because all but the wealthy rely on insurance, the power of insurers to 
determine what coverage is medically necessary gives them the power to 
dictate professional standards of care.
  Make no mistake, Madam Speaker. 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 what we would call ``prevailing standards 
of medical practice.'' This is the definition used in many managed care 
reform bills, including my own, the Managed Care Reform Act of 1999.
  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 themselves clinically derived professional 
standards of care to reverse insurers' attempts to deviate from 
standards. This 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 process of review, utilizing clinical 
standards of care, guarantees that the decision of the review board is 
made without regard to the financial interests of either the doctor or 
the health plan. On the other hand, if the review board has to use the 
health plan's definition of medically necessary, there is no such 
guarantee.
  In response to the growing body of case law and their own need to 
demonstrate profitability to shareholders, insurers are now writing 
contracts that threaten even this minimal standard of care. 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.
  Let me give my colleagues one example out of many of a health plan's 
definition of medically necessary services. This is from the 
contractual language of one of the HMOs that some of you probably 
belong to: ``Medical necessity means the shortest, least expensive or 
least intense level of treatment, care or service rendered or supply 
provided, as determined by us.''
  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 to the 
patient's medical needs. So on the surface some would say, ``Well, what 
is wrong with the least expensive treatment?''
  Let me give my colleagues one example out of thousands. As a 
reconstructive surgeon before I came to Congress, I treated children 
with cleft lips and cleft palates. Clinical standards of care would 
determine that the best treatment is surgical correction. But under 
this HMO's contractual definition, that plan could limit coverage to a 
piece of plastic to fill in that hole in the roof of that kid's mouth. 
After all, that plastic obturator would be cheaper than a surgical 
correction.

                              {time}  2030

  However, instead of condemning children to a lifetime of using a 
messy plastic prosthesis, the proper treatment, reconstruction 
utilizing that child's own tissue, will give that child the best chance 
at normal speech and a normal life.
  Paradoxically, insurers stand to benefit from misguided legislative 
changes that displace case law. An example is the legislation that 
passed this House last year and the GOP bill in the Senate that 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 to be found necessary by 
the insurer's own technical review panel.
  Think of that, Madam Speaker. The legislation that passed, the 
Republican legislation that passed this House last year explicitly gave 
to the HMOs, the ones that were abusing medical necessity in the first 
place, the ability by legislative language to determine exactly what 
they thought medical necessity should be, and the Senate bill would 
have even 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.
  And I know, Madam Speaker, that many of our colleagues who supported 
those bills last year had no idea of the implications of the medical 
necessity provisions that were in those bills. Specifically, insurers 
now want to move away from clinical standards of care applied to 
particular patients, and they want to move to standards linking medical 
necessity to what are called population studies. On the surface this 
may seem sort of scientific or rational, but as a former medical 
reviewer myself who worked for many insurers, large and small, let me 
explain why I think it is critical that we stick with medical necessity 
as defined by, quote, clinical standards of care, unquote.
  First, sole reliance on broad standards from generalized evidence is 
not good medical practice; second, there are practical limits to 
designing studies that can answer all clinical questions; and, third, 
most studies are not of sufficient scientific quality to justify 
overruling clinical judgment.
  Now let me explain these points in a little more detail, and I also 
recommend an article on these shortcomings by Rosenbaum in the January 
21, 1999, edition of the New England Journal of Medicine.
  First, while it may sound counter intuitive, it is not good medicine 
to solely use outcome-based studies of medical necessity even when the 
science is rigorous. Why is this? Well, it 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. But what about quality?
  As a surgeon I treated many patients with broken fingers simply by 
reducing the fracture and splinting the part. For most patients this 
would restore adequate function. But for the musician who needs a 
better range of motion 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 involves much 
individualization and variation. Definition of medical necessity must 
be flexible enough to take into account the needs of each patient. One-
size-fits-all outcomes make

[[Page 7592]]

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 are called generalized evidence, particularly as it applies to 
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 of the 
number of procedures and the circumstances of their application, which 
are limitless.
  In addition, by their very nature many controlled clinical trials 
study treatments in isolation. They are controlled studies, whereas 
physicians need to know the benefits of one type of treatment over 
another. Prospective, randomized comparison studies, on the other hand, 
are 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. And come to think of it, Madam Speaker, maybe 
that is why the HMOs are so keen on getting away from prevailing 
standards of care.
  Third, Madam Speaker, the validity of HMO guidelines and how they are 
used I think is very much open to question. Medical directors of HMOs 
were asked to rank the sources of information they use to make medical 
decisions. Industry guidelines generated by the trade associations 
representing health plans ranked ahead of information from national 
experts, government documents and NIH consensus conferences. The most 
highly ranked respected source, medical journals, was used by HMO 
directors less than 60 percent of the time.
  And industry guidelines are frequently done by a group called 
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, plain and simple.
  Let me give two examples of the errors of these guidelines. A 
National Cancer Institute study released in June found that women 
receiving outpatient mastectomies face, quote, significantly higher, 
unquote, risks of being rehospitalized and have a higher risk of 
surgery-related complications like infections and blood clots. In 1997 
a study published in the Journal of the American Medical Association 
showed that babies discharged within a day of birth faced increased 
risk of developing jaundice, dehydration and dangerous infections.
  So there we have drive-through deliveries and outpatient 
mastectomies. The 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.
  Now that is not to say that outcome-based studies do not make up a 
part of how clinical standards of care are determined, because they do. 
But we are all familiar with the ephemeral nature of new scientific 
studies such as those on the supposed dangers of alar.
  Now clinical standards of care do 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 be free of any 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.
  The importance of this issue, Madam Speaker, cannot be over 
emphasized, and it can be found in a recent decision by the Tenth 
Circuit Court of Appeals. In the case Jones v. Kodak, the name Jones is 
particularly appropriate, I might add, because after this decision 
other health plans will rush to keep up with what their competitors are 
doing to the Joneses of this world. In any event, in Jones v. Kodak the 
Tenth Circuit Court of Appeals showed how ERISA, the Employee 
Retirement Income Security Act, and a clever health plan can work in 
tandem to keep patients from getting needed medical care.
  Now the facts are relatively simple of this case. Mrs. Jones received 
health care through her employer, Kodak. The plan covers in-patient 
substance abuse treatment when medically necessary. Here we are, back 
at the medically necessary issue again. The determination as to whether 
a particular substance abuse service is medically necessary is made by 
American Psych Management, APM.
  American Psych Management reviewed a request for in-patient substance 
abuse treatment and found that Mrs. Jones did not meet APM's protocol 
for in-patient mental health hospitalization. So the family pursued the 
case further, eventually persuading the health plan to send the case to 
an independent medical expert of the plan's own choosing for review.
  The reviewer agreed that Mrs. Jones did not qualify for the benefit 
under the criteria established by the plan. But he observed that, 
quote, these criteria are too rigid and do not allow for 
individualization of case management, unquote. In other words, the 
criteria were not appropriate to Mrs. Jones' condition. But his hands 
were tied. The reviewer was unable to reverse APM's original decision.
  So, Madam Speaker, Mrs. Jones sued for the failure to pay the claim. 
In affirming the trial court's decision to grant summary judgment to 
the defendants, the Tenth Circuit Court of Appeals held the following:
  ``ERISA's disclosure provisions do not require that the plan summary 
contained particularized criteria for determining medical necessity.''
  They also held: ``The unpublished APM criteria were part of the 
plan's terms. Because we consider the APM criteria a matter of plan 
design and structure, rather than implementation, we agree that a court 
cannot review them.''
  So what does this all mean in layman's terms? Well, it means that a 
plan does not have to disclose the treatment guidelines or the 
protocols it uses to determine whether or not a patient should get 
care, and furthermore, any treatment guidelines used by the plan would 
be considered part of the plan design and thus are not reviewable by 
the court.
  The implications of this decision, Madam Speaker, are, in a word, 
breathtaking. Jones v. Kodak provides a virtual road map to 
enterprising health plans of how to deny payment for medically 
necessary care. The decision is a clear indication of why we need 
Federal legislation to ensure that treatment decisions are based on 
good medical practice and take into consideration the individual 
patient circumstances.
  Under Jones v. Kodak, health plans do not need to disclose to 
potential or even current enrollees the specific criteria they used to 
determine whether a patient will get treatment. There is no requirement 
that a health plan use guidelines that are applicable or appropriate to 
a particular patient's case.
  Despite these limitations, Jones compels external reviewers to follow 
the plan's inappropriate treatment guidelines because to do otherwise 
would violate the sanctity of ERISA. And finally, plans following their 
own criteria, no matter how misguided, are shielded from court review 
since, as the court in the Jones case noted, this is a plan design 
issue and is therefore not reviewable under ERISA.
  If Congress, through patient protection legislation, does not act to 
address this issue, many more patients will be left with no care and no 
recourse. Jones v. Kodak sets a chilling precedent making health plans 
and the treatment protocols untouchable. The case in effect encourages 
health plans to concoct rigid and potentially unreasonable criteria for 
determining when a covered benefit is medically necessary.

[[Page 7593]]



                              {time}  2045

  That way, they can easily deny care and cut costs, all the while 
insulated from responsibility for the consequences of their actions.
  For example, a plan could promise to cover cleft lip surgery for 
those born with that birth defect, but they could put in undisclosed 
documents that the procedure is only medically necessary once the child 
reaches the age of 16; or that coronary bypass operations are only 
medically necessary for those who have previously survived two heart 
attacks. Logic and principles of good medical practice would dictate 
that that is not sound health care, but this case affirmed that health 
plans do not have to consider medicine at all. They can be content to 
consider only the bottom line.
  Unless Federal legislation addresses this issue, patients will never 
be able to find out what criteria their health plans use to provide 
care and external review. They will be unable to pierce those policies 
and reach independent decisions about medical necessity of proposed 
treatment using clinical standards of care. ERISA will prevent courts 
from engaging in such inquiries too. The long and the short of the 
matter is that, increasingly, sick patients will find themselves 
without proper treatment and without any recourse.
  To illustrate these dangers, let me give you a hypothetical case. 
Imagine a plan that proudly states in its enrollment materials that it 
has the best mental health benefits in the field, and, in fact, their 
benefit package includes longer inpatient mental health benefits than 
other area insurers. But the plan contracts with a managed mental 
health care company who states that inpatient admission is only 
available if a person has unsuccessfully attempted suicide three times. 
This fact is not made known to the employer and it is not made known to 
the employee, who, by the way, may not have any option in terms of 
which plan he chooses.
  So let us say an employee's son swallows a bottle of sleeping pills 
and is taken to the ER, where he is revived. Two days later the son 
tries to drink Drano, but is caught by his mother before ingesting any. 
The family calls the plan, asks for an inpatient mental health 
admission, but, using the ``three tries'' criteria, coverage is denied.
  Unable to afford inpatient care themselves, the family returns home, 
hoping to keep a careful watch on this son, maybe to get him some 
outpatient counseling. But 3 days later, you know, three times a charm, 
the boy sneaks into the woods and, with a kitchen knife, he slits his 
wrists and bleeds to death.
  What remedies would that family have? According to the court in the 
Jones case, none. The plan followed its own criteria. The Jones 
decision makes it clear that the written criteria for medical necessity 
are considered part of the contract, even if not disclosed to that 
family, and, no matter how unreasonable the criteria may seem to an 
independent review panel, that body is bound to decide the case based 
on whether the plan followed its own definition of medical necessity. 
And even if the plan's criteria for defining medical necessity is 
arbitrary and contrary to common medical practice, a court cannot 
review that matter because it is an issue of plan design.
  Madam Speaker, the Jones decision is an HMO road map on how to deny 
medically necessary care at no risk, and Congress must pass 
legislation, and the sooner the better, to ensure that external 
reviewers are not bound by the plan's concocted definitions of medical 
necessity. Anything less than that is a mockery of legislation 
promising patients an independent external review.
  Madam Speaker, I have introduced legislation, H.R. 719, the Managed 
Care Reform Act, which addresses the very real problems in managed 
care. It gives patients meaningful protections, it creates a strong and 
independent review process, and it removes the shield of ERISA which 
health plans have used to prevent State court negligence actions by 
enrollees who are injured as a result of that plan's negligence.
  This bill has received a great deal of support and has been endorsed 
by consumer groups like the Center for Patient Advocacy and the 
American Cancer Society and the American Academy of Family Physicians. 
It has received strong words of support from groups like the America 
Medical Association and multiple other organizations.
  Madam Speaker, we need to move this legislation. Every day that we 
wait, we have a similar circumstance to what happened to little Baby 
James. But I want to focus on one small aspect of my bill, specifically 
the way in which it addresses the issue, the Employee Retirement Income 
Security Act.


  It is alarming to me that ERISA combines a lack of effective 
regulation of health plans with a shield for health plans that largely 
gives them immunity from liability for negligent actions. 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 for their conduct. Laws 
that shield entities from their responsibility only encourage them to 
cut corners. Congress created that ERISA loophole, and Congress should 
fix it.
  My bill has a new formulation on the issue of health plan liability. 
I continue to believe that health plans that make negligent medical 
decisions should be accountable for their actions, but a winning 
lawsuit is of little consolation to a family who has lost a loved one. 
The best HMO bill assures that health care is delivered when it is 
needed.
  Madam Speaker, 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 those discretionary decisions, they should not face 
liability, and that is a provision in my bill. But if they cross the 
line and they determine whether a particular treatment is medically 
necessary in a given case, then they are making medical decisions and 
they should be held accountable for their actions.
  To encourage health plans to give patients the right care without 
going to court, my bill provides for both an internal and external 
appeals process that is binding on the plan, and an external review 
could be requested by either the patient or the plan.
  I foresee some circumstances where a patient is requesting an 
obviously inappropriate treatment, like laetrile for cancer, and the 
plan would want to send the case to an external review that will back 
up their decision and give them an effective defense if they are ever 
dragged into court to defend that decision.
  When I was discussing this idea with the CEO of my own Blue Cross 
plan back in Iowa, he expressed support for this strong external 
review. In fact, he told me that Iowa Wellmark is instituting most of 
the recommendations of the President's Commission on Health Care 
Quality and he did not foresee any premium increases as a result. 
Mostly what it meant, he told me, was tightening existing safeguards 
and policies. He also told me that he would support a strong 
independent external review system like the one in my bill, but, he 
cautioned, if we did not make the decision and are just following the 
recommendation of the review panel, then we should not be liable for 
punitive damages.
  I agree with that. Punitive damage awards are meant to punish 
outrageous and malicious conduct. If a health plan follows the 
recommendation of an independent review board composed of medical 
experts, it is tough to figure out how they have acted with malice. So 
my bill provides health plans with a complete shield from punitive 
damages if they promptly follow the recommendation of an external 
review panel.
  That, I think, is a fair compromise on the issue of health plan 
liability. I sure suspect that 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 of $116 million in punitive damages to

[[Page 7594]]

his widow. If Aetna or the Goodriches had had the ability to send the 
denial of care to an external review, they could have avoided the 
courtroom; but, more importantly, David Goodrich might still be alive 
today.
  That is why my plan should be attractive to both sides. Consumers get 
a reliable, quick, external appeals process which will help them get 
the care they need. They can go to court to collect economic damages 
like lost wages and future medical care, and non-economic damages like 
pain and suffering. If the plan fails to follow the external review 
decision, the patient can then sue for punitive damages.
  Health insurers, whose greatest fear is $50 million or $100 million 
punitive damage awards, can shield themselves from those astronomical 
awards, but only if they follow the recommendations of an independent 
review panel, which is free to reach its own decision on what care is 
medically necessary.
  I have heard from insurers who say that premiums will skyrocket. I 
think there is adequate evidence that that would not be the case. Last 
year the CBO estimated a similar proposal, which did not include the 
punitive damages relief of my bill, would only increase premiums around 
2 percent over 10 years, and when Texas passed its own liability law 2 
years ago, the Scott & White Health Plan estimated premiums would have 
to increase just 34 cents per member per month to cover the cost. Those 
are hardly alarming figures. The low estimate by Scott & White seems 
accurate, since only one suit has been filed against the Texas health 
plan since the law was passed. That is far, Madam Speaker, from the 
flood of litigation that the opponents predicted.
  I have been encouraged by the positive response my bill has received, 
and think that this should be the basis for a bipartisan bill this 
year. In fact, the Hartford Courant, a paper located in the heart of 
the insurance country, ran a very supportive editorial on my bill by 
John MacDonald.
  Speaking of the punitive damages provision, McDonald called it ``a 
reasonable compromise.'' He urged insurance companies to embrace the 
proposal as ``the best deal they see in a long time.''
  Madam Speaker, I include the full text of the editorial by John 
MacDonald for the Record at this point.

               [From the Hartford Courant, Mar. 27, 1999]

                A Common-Sense Compromise On Health Care

                          (By John MacDonald)

       U.S. Rep. Greg Ganske is a common-sense lawmaker who 
     believes patients should have more rights in dealing with 
     their health plans. He has credibility because he is a doctor 
     who has seen the runaround patients sometimes experience when 
     they need care. And he's an Iowa Republican, not someone 
     likely to throw in with Congress' liberal left wing.
       For all those reasons, Ganske deserves to be heard when he 
     says he has found a way to give patients more rights without 
     exposing health plans to a flood of lawsuits that would drive 
     up costs.
       Ganske's proposal is included in a patients' bill of rights 
     he has introduced in the House. Like several other bills 
     awaiting action on Capitol Hill, Ganske's legislation would 
     set up a review panel outside each health plan where patients 
     could appeal if they were denied care. Patients could also 
     take their appeals to court if they did not agree with the 
     review panel.
       But Ganske added a key provision designed to appeal to 
     those concerned about an explosion of lawsuits. If a health 
     plan followed the review panel's recommendation, it would be 
     immune from punitive damage awards in disputes over a denial 
     of care. The health plan also could appeal to the review 
     panel if it thought a doctor was insisting on an untested or 
     exotic treatment. Again, health plans that followed the 
     review panel's decision would be shielded from punitive 
     damage awards.
       This seems like a reasonable compromise. Patients would 
     have the protection of an independent third-party review and 
     would maintain their rights to go to court if that became 
     necessary. Health plans that followed well-established 
     standards of care--and they all insist they do--would be 
     protected from cases such as the one that recently resulted 
     in a $120.5 million verdict against an Aetna plan in 
     California. Ganske, incidentally, calls that award 
     ``outrageous.''
       What is also outrageous is the reaction of the Health 
     Benefits Coalition, a group of business organizations and 
     health insurers that is lobbying against patients' rights in 
     Congress. No sooner had Ganske put out his thoughtful 
     proposal than the coalition issued a press release with the 
     headline: Ganske Managed Care Reform Act--A Kennedy-Dingell 
     Clone?
       The headline referred to Sen. Edward M. Kennedy, D-Mass., 
     and Rep. John D. Dingell, D-Mich., authors of a much tougher 
     patients' rights proposal that contains no punitive damage 
     protection for health plans.
       The press release said: ``Ganske describes his new bill as 
     an affordable, common sense approach to health care. In fact, 
     it is neither: It increases health care costs at a time when 
     families and businesses are facing the biggest hike in health 
     care costs in several years.''
       There is no support in the press release for the claim of 
     higher costs. What's more, the charge is undercut by a press 
     release from the Business Roundtable, a key coalition member, 
     that reveals that the Congressional Budget Office has not 
     estimated the cost of Ganske's proposal. The budget office is 
     the independent reviewer in disputes over the impact of 
     legislative proposals.
       So what's going on? Take a look at the coalition's record. 
     Earlier this year; it said it was disappointed when Rep. 
     Michael Bilirakis, R-Fla., introduced a modest patients' 
     rights proposal. It said Sen. John H. Chafee, R-R.I., and 
     several co-sponsors had introduced ``far left'' proposal that 
     contains many extreme measures. John Chafee, leftist? And, of 
     course, it thinks the Kennedy-Dingell bill would be the end 
     of health care as we know it.
       The coalition is right to be concerned about costs. But the 
     persistent No-No-No chorus coming from the group indicates it 
     wants to pretend there is no problem when doctor-legislators 
     and others know better.
       This week, Ganske received an endorsement for his bill from 
     the 88,000-member American Academy of Family Physicians. 
     ``These are the doctors who have the most contact with 
     managed care,'' Ganske said. ``They know intimately what 
     needs to be done and what should not be done in 
     legislation.''
       Coalition members ought to take a second look. Ganske's 
     proposal may be the best deal they see in a long time.

  Madam Speaker, it is also important to state what this bill does not 
do to ERISA plans. It does not eliminate ERISA or otherwise force large 
multistate health plans to meet the individual consumer protection and 
benefit mandates of each State. This is a very important point.
  Just last week I had representatives of a large national company, 
headquartered in the upper Midwest, in my office. They urged me to 
rethink my legislation because, they alleged, it would force them to 
comply with the benefit mandates of each State and that the resulting 
rise in costs would force them to discontinue offering health insurance 
to employees.
  Frankly, Madam Speaker, I was stunned by their comments, because 
their fears were totally incorrect and misplaced. It is true that my 
bill would lower the shield of ERISA and allow plans to be held 
responsible for their negligence; but, Madam Speaker, it would not 
alter the ability of group health plans to design their own benefits 
package.
  Let me be absolutely clear on this point: The ERISA amendments in my 
bill would allow States to pass laws to hold health plans accountable 
for their actions. It would not allow States to subject ERISA plans to 
a variety of health benefit mandates or additional consumer 
protections.
  Madam Speaker, there are other pressing issues that require our 
prompt attention. In particular, the crisis in the Balkans is becoming 
a humanitarian tragedy of unspeakable proportions. Congress should 
exercise its constitutional responsibility and decide whether to 
authorize the use of ground troops, and I am very pleased Congressman 
Campbell will be bringing this to the floor tomorrow.
  However that vote turns out though, we must not turn our backs on our 
own domestic problems. It would be irresponsible of Congress to ignore 
the people that are being harmed daily by medically negligent decisions 
by HMOs around the country. The need for meaningful patient protection 
legislation continues to fester every day.

                              {time}  2100

  And to repeat, Madam Speaker, I have recently heard that the 
leadership of the House is not going to allow debate on patient 
protection until October at the earliest. Why the delay? We could move 
this in committee next month. We could bring this to the floor before 
the August recess, and we should. The clock is ticking, Madam

[[Page 7595]]

Speaker, and patients' lives are on the line.
  Madam Speaker, I look forward to working with all of my colleagues to 
see that passage of real HMO reform legislation is an accomplishment of 
the 106th Congress that we can all go home and be proud about. I urge 
my colleagues to cosponsor H.R. 719, the Managed Care Reform Act of 
1999.

                          ____________________