[Congressional Record (Bound Edition), Volume 146 (2000), Part 2]
[House]
[Pages 2752-2756]
[From the U.S. Government Publishing Office, www.gpo.gov]



                            HMO LEGISLATION

  The SPEAKER pro tempore (Mr. Isakson). Under the Speaker's announced 
policy of January 6, 1999, the gentleman from Iowa (Mr. Ganske) is 
recognized for 60 minutes.
  Mr. GANSKE. Mr. Speaker, I rise tonight to clarify points about HMO 
legislation before Congress for my colleagues, particularly members of 
the conference committee, and to specifically address two memoranda 
that have been recently released by the Heritage Foundation and one by 
the Blue Cross/Blue Shield Association.
  Mr. Speaker, I refer to the Heritage Foundation Backgrounder N1350, 
The Patients' Bill of Rights, Prescription for Massive Federal Health 
Regulation, by John Hoff; to Heritage Foundation Executive Memorandum 
658, Why the Texas HMO Liability Law is Not a Proven Model for 
Congress; and to a letter by Mary Nell Leonard, Senior Vice President 
of Blue Cross/Blue Shield, with accompanying memo, A Regulatory 
Quagmire, Questions and Answers about the Bipartisan Consensus Managed 
Care Improvement Act of 1999.
  Mr. Speaker, these memos are primarily a rehash of previous arguments 
that have been made frequently on the floor. We had several days of 
full debate on the Bipartisan Consensus Managed Care Improvement Act, 
and we debated all of these issues. However, these repackaged arguments 
deserve comment, I think, precisely because they are so specious.
  Let me start with the Backgrounder. It makes three main charges: that 
the House bill would encourage costly litigation, expose employers to 
risk of litigation over benefits, and would impose powerful new Federal 
regulations on private health plans.
  The organization of this paper is clever in that there is a mixture 
of accuracy and distortions in discussing the House bill. But it 
primarily tries to scare conservative legislatures with the bogeyman of 
massive Federal regulation. The summary of this paper bemoans the 
establishment of an intrusive new Federal bureaucracy with new rules on 
utilization review, internal and external review, grievance processes, 
drug formularies, clinical trials, patient information, and doctors' 
incentive arrangements, among others.
  This paper makes it seem as if these rules are proposed just for the 
fun of it, as if these new regulations would be there just for their 
own sake. Well, Mr. Speaker, the gentleman from Georgia (Mr. Norwood), 
the gentleman from South Carolina (Mr. Graham), the gentleman from 
Georgia (Mr. Barr), myself, and many other conservatives do not propose 
regulations just for the hell of it. The paper leaves unmentioned the 
reasons for these rules for HMOs, reasons why 80 percent of the 
American public wants Congress to fix this problem and fix it now.
  Let me give my colleagues some real-life examples of why new rules 
are necessary for HMOs. This little boy lost his hands and his feet 
because an HMO decided he could travel 60 miles to an

[[Page 2753]]

emergency room instead of going to the nearest emergency room. This 
woman lost her life because an HMO gagged her doctors. This woman's HMO 
would not pay her hospital bills because, when she fell off a cliff and 
went to the emergency room, she had not phoned for prior authorization.
  Mr. Speaker, if regulation is bad simply because it is regulation, 
then we can just pack up the Federal and State governments, and we can 
all go home. Of course, we would soon have monopolies controlling 
everything; water we could not drink and buildings that fall down in 
earthquakes.
  Mr. Speaker, a year ago we talked an awful lot on this floor about 
the rule of law. Well, without patient protection legislation, we will 
sure continue to have lawless HMOs. If there are no Federal standards 
in health care, then who does ensure quality and solvency? Who fights 
against fraud in the insurance industry?
  Well, the State should do it, some say. Okay. Then let us repeal 
ERISA, the Employee Retirement Income Security Act, which preempts 
State oversight of employer health plans. Let us turn it back to the 
States. Oh no, would say the group health plans. We do not want State 
oversight. But then again, we do not want Federal oversight either. To 
be quite frank, the HMOs say, we do not want any oversight. So just 
leave ERISA alone, we will police ourselves, thank you.
  Well, Mr. Speaker, maybe we ought to ask that little boy who lost his 
hands and feet, or the family that lost its mother how well self-
imposed standards in the HMO industry work.
  I could give a reasoned rebuttal to every page of this Backgrounder, 
but we do not have time tonight to go over this sentence by sentence. 
So let me just give my colleagues a few examples.
  On page 4 this paper says the House's bill's external appeals board 
is ``biased'' because, and this is from the Backgrounder, ``neither the 
entity nor its members can have what is considered to be a conflict of 
interest or have familial, financial, or professional relationships 
with the insurer, the health plan, the plan sponsor, the doctor who 
provided the treatment involved, the institution at which the care is 
provided, or with the manufacturer or medical supplier involved in the 
coverage decision.'' That is in the Backgrounder.
  This Backgrounder says the board is ``biased'' because it does not 
have a specific statutory language prohibition against one of those 
peer reviewers having a familial relationship with the patient but does 
prohibit a relationship with the HMO. Well, Mr. Speaker, that is just 
plain wrong. The bill that passed on this floor with 275 votes 
specifically says, ``A clinical peer or other entity meets the 
independence requirement of this paragraph if the peer or entity does 
not have a familial, financial, or professional relationship with any 
related party.'' Mr. Speaker, what could be clearer than that?
  Or how about the discussion on the ``medical necessity quandary'' on 
page 5 of this Backgrounder? Now, I have spoken many times on this 
floor about the Employee Retirement Income Security Act and medical 
necessity. Indeed, the Heritage Backgrounder tries to use some of my 
own arguments.
  Under current Federal law, HMOs can define as medically necessary or 
unnecessary anything they want. One HMO, for example, has defined 
medically necessary as ``the cheapest, least expensive care.'' That HMO 
could deny surgical correction of this boy's cleft palate because it 
would be cheaper to just provide a plastic upper denture. Of course, 
his speech would not be very good, but it sure does meet that plan's 
definition of medical necessity. After all, that would be cheap.
  The bipartisan House bill corrects that travesty by giving the 
external appeals board the final say in determining medical necessity, 
as long as the treatment is not explicitly excluded from coverage in 
the contract. The review panel can consider many things in its 
decision, even the plan's own guidelines, but is not ``bound'' by those 
planned guidelines.
  So the author in this Backgrounder rightly states that outcomes data 
can provide valuable guidance but cannot match the characteristics of 
individual patients, thus echoing arguments that I have made on this 
floor many times. Amazingly, he then, the author of this paper, then 
criticizes the House bill's external appeals provision exactly because 
it recognizes that reality and states that the appeals board can 
consider outcome studies but is not bound by them.
  But in the very next paragraph in this paper, we get to what the HMOs 
really do not like about that provision in the Bipartisan Consensus 
Managed Care Improvement Act that passed this House, and that is that 
doctors, not HMO bureaucrats, would be making those medical decisions. 
As this paper states it, ``The legislation would punt these crucial 
questions to the subjective consideration of external reviewers.'' Mr. 
Speaker, note the pejorative words punt and subjective. Where in this 
paper is the criticism of the ``subjective consideration'' of HMOs 
looking at their bottom line?
  The author goes on to say, ``The bill will turn the determination of 
what is covered over to government-controlled external reviewers who 
are directed to make their decision regardless of what the private 
health plan and its enrollees agree upon.'' Once again negative 
adjectives, like government-controlled, show the writer's prejudice. 
For heaven's sake, we have already established that the House bill 
reviewers are independent, not government-controlled. What the HMOs 
really do not like is that the peer reviewers in the bill that passed 
this House are not HMO controlled.
  Furthermore, as I already stated, the external panel cannot overrule 
specifically excluded benefits. But that is rarely where the dispute 
is. It usually involves denial of care for treatment that fit well 
within standards of care.
  To show my colleagues how abusive the HMO industry can be on this 
issue of medical necessity, listen to testimony that a former HMO 
medical reviewer gave before my congressional committee in which she 
admitted that she had made medical decisions for HMOs that had killed 
people. She said, ``I wish to begin by making a public confession.'' 
Mr. Speaker, this is a former HMO medical reviewer. She said, ``In the 
spring of 1987, as a medical reviewer, I caused the death of a man. 
Since that day, I have lived with this act and many others eating into 
my heart and soul. The primary ethical norm is to do no harm. I did 
worse; I did death. Instead of using a clumsy bloody weapon, I used the 
simplest 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 moral qualms 
arose, I was to remember `I am not denying care, I am only denying 
payment.' ''
  This former HMO medical reviewer then listed the many ways that 
managed health care plans deny care to patients, but she emphasized one 
particular point: the right of HMOs 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 necessity denials.

                              {time}  2145

  ``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.''
  Well, Mr. Speaker, I have a complete discussion of this critical 
issue in this Dear Colleague. I will be sending this Dear Colleague to 
every Member of the House and the Senate. I especially hope that the 
conferees, at least, will take the time to read this because this is 
one of the two or three most important issues before the conference.
  The next several pages of this Heritage paper describes some of the 
House bill's provisions, again, without providing a context of the 
problems with HMOs that make these provisions important. The author 
even criticizes the

[[Page 2754]]

prohibition on gag rules that some HMOs have tried to impose on 
doctors.
  For heaven's sake, Mr. Speaker, over 300 Members of the House signed 
on to a bill that would ban HMOs from trying to keep doctors from 
telling patients the whole story about their treatment options.
  Apparently, the Heritage Foundation also does not like the fact that 
Congress has already prohibited Medicare HMOs from paying doctors to 
limit care. This is on page 9 of this Backgrounder.
  The Norwood-Dingell-Ganske HMO reform bill uses the same language 
that the vast majority of Members of this House and the Senate voted on 
for Medicare to prohibit HMOs from paying doctors to limit care.
  I am a physician, and I want to tell my colleagues that there should 
not be a conflict of interest in doctors providing needed care to their 
patients. Yet some HMOs pay a doctor more if he or she withholds 
referrals or treatment.
  Congress has already overwhelmingly said that this practice is 
ethically wrong. So, as an aside, and I hope somebody from the Supreme 
Court, some clerk, is listening to this special order, I think the 
Supreme Court should consider that Congress has already legislated on 
this behavior of HMOs as it considers the Hurdrick case that is 
currently on its docket.
  Well, this paper even calls the bipartisan bill an attack on fee-for-
service coverage. Wrong again. In fact, the House bill recognizes the 
difference between HMOs and fee-for-service plans and exempts those 
fee-for-service plans from requirements that are pertinent to HMOs.
  The House bill would, however, require PPOs and point-of-service 
plans to follow fair utilization reviews, a fair internal and external 
appeals process, and require that enrollees be given adequate 
information about the plan. ERISA plans do not currently have to do 
that. And 275 bipartisan supporters of the House bill do think that 
every plan covering everyone in this country, regardless of the type, 
should follow those minimum requirements.
  Now, the Blue Cross paper, ``a regulatory quagmire,'' tries to make 
some similar points on regulation. So my comment will apply to both. I 
would note that Blue Cross owns HMOs, so caveat emptor.
  Well, how would the House bill work? As in the Health Insurance 
Portability and Accountability Act, the provisions of the House bill 
form a Federal policy floor. States are encouraged to bring their laws 
into compliance. If a State fails to enforce the law, then the Federal 
Government would. Same way under the Health Insurance Portability Act. 
And under the Health Insurance Portability Act, all States except four 
have already complied.
  Now, on the patient protection issue, most States have already 
enacted some of the provisions of the House HMO reform bill into State 
law. For example, 50 States have enacted internal review, 50 States 
have enacted access to information, 46 States gag prohibition, 41 
States emergency care provisions, 32 States external review, 34 States 
direct access to OB-GYNs, 24 States continutity-of-care provisions.
  Mr. Speaker, it will not be hard for those States to comply. But the 
important point to note is that no matter how good a State's patient 
protections law are, these State laws generally do not apply to ERISA 
plans. And that is exactly why we need Federal legislation to protect 
the people who receive their insurance from their employer.
  Now, the HMO industry complains that the Norwood-Dingell-Ganske bill 
would result in dual regulation and be confusing to consumers. But we 
have dual regulation today. We already have complex dual regulation 
that differs from jurisdiction to jurisdiction.
  The Bipartisan Consensus Managed Care Improvement Act will actually 
simplify things for consumers. What is clear today is that the consumer 
in an ERISA health plan, an employer health plan, has basically nowhere 
to go to turn for help. But if our bipartisan House bill would become 
law, the vast majority of consumers would be able to go to their State 
insurance commissioners for questions about their rights because all 
States would have a minimum standard.
  Furthermore, I would point out that it can be hardly valid to 
criticize the House bill for Federal-State conflicts. We have had a 
Federal-State system of regulation of commerce for 200-plus years.
  Yes, if the Norwood-Dingell-Ganske bill becomes law, there will be 
questions of Federal-State jurisdiction to work out, as there is in any 
bill. And I would say, what is new?
  Now, as an example of delay of implementation, the Blue Cross memo, 
the one that says ``quagmire of regulation,'' points out that the 
Health Insurance Portability Act still has not been fully implemented 
on the privacy regulations. Well, I should point out that Congress had 
something to do with that, since Congress did not meet its own deadline 
on legislation for privacy. But I sure do not see any groundswell 
calling for repeal of the Health Insurance Portability Act. In fact, 
Mr. Speaker, I have had many constituents thank me for their health 
insurance portability.
  In any congressional bill, there has to be the right balance between 
prescription and flexibility. The House bill provides a reasonable 
balance. But on page 6, again of this Heritage Backgrounder, the 
legislative language of our bill, the House bill, is criticized for 
being too loose. But then, Mr. Speaker, on page 11, the same bill is 
criticized for being too rigid. There is just no pleasing those 
opponents of HMO reform.
  Let us discuss the liability issue a bit. The HMO community is 
clearly getting nervous that Governor Bush says he supports the Texas 
Health Care Liability Act of 1997. So Heritage came out with a memo 
entitled ``Why the Texas HMO Liability Law is not a Proven Model for 
Congress.''
  However, if you actually read the memo, you will be struck with how 
similar the House bill is to the Texas law, which Governor Bush says is 
working just fine, thank you. No avalanche of lawsuits. No 
extraordinary increase in premiums. No Diaspora of HMOs from Texas.
  Now, the Heritage memo notes that, on September 1, 1997, the Texas 
legislature passed the Texas Health Care Liability Act, according to 
Heritage, by a ``sizable majority.'' Sizable majority indeed. The bill 
passed the Texas Senate unanimously. It passed the Texas House 120-21. 
It was veto proof.
  Well, what did the Texas bill do? According to this Heritage paper, 
it ``created a new cause of action against three entities in the event 
of a failure to exercise ordinary care. These entities are: a health 
insurance carrier, a health maintenance organization, or other managed 
care entity.''
  Mr. Speaker, in plain language, the Texas liability bill allowed 
patients to sue HMOs for negligence, just plain language.
  So what has happened in Texas since the bill was passed? Well, in 
September 1998, Federal judge Vanessa Gilmore refused to void the Texas 
right to sue. On October 18, 1999, the first case was filed ``Plocica 
v. NYLCare.''
  The HMO wanted the case moved to Federal court, but the Federal court 
remanded it back to State court. But it is interesting to know a little 
bit about this case because it makes the case for having a strong 
enforcement provision in a bill that Congress would pass.
  Mr. Plocica was suicidal in a hospital in Texas. His treating doctor 
thought he should stay in the hospital, needed more psychiatric care. 
His HMO, NYLCare, said, no, we are sending you home. Under State law, 
NYLCare should have taken their treatment denial to what Governor Bush 
calls the ``IRO Panel,'' the Independent Review Organization Panel. But 
NYLCare ignored State law, so Mr. Plocica went home. That night he 
drank half a gallon of antifreeze, and he died a horrible death. His 
family has sued NYLCare for breaking Texas law.
  It should be noted that, under current Federal ERISA law, NYLCare 
would be liable for only the cost of care denied, in this case I guess 
the cost of a day or two in the hospital. That is hardly justice to a 
family that has just

[[Page 2755]]

lost its father and hardly a disincentive to an HMO from not following 
the law.
  There have been only a few cases filed under Texas law. Heritage says 
it is too early for this to be accurate. I would point out that Texas 
has a 2-year statute of limitations on these cases.
  What you see is what you have got. If the cases are not filed by now, 
they never will be. The Texas law exempts employers from liabilities 
stating ``this chapter does not create any liability on the part of an 
employer or employer group, purchasing organization, or a pharmacy 
licensed by the State Board of Pharmacy that purchases coverage or 
assumes risk on behalf of its employees.''
  Mr. Speaker, the Norwood-Dingell-Ganske bill is written differently, 
for the following reason: Unlike State-regulated plans, ERISA, the 
Employee Retirement Income Security Act, provides liability preemption 
for self-insured plans, some of which are self-administered or actually 
are HMOs owned by the company.
  Now, I am referring here to section 302(a) of the Bipartisan 
Consensus Managed Care Reform Improvement Act of 1999. This section 
creates a limited exception to ERISA's general ``preemption'' of State 
laws that relate to employee benefit plans. This exception only applies 
to State law causes of action against any person based on personal 
injury or wrongful death resulting from providing or arranging for 
insurance, administrative services or medical services by such person 
to or for a group health plan.
  So that is kind of complicated language. Let me see if I can explain 
this a little simpler. This language does not, let me repeat, ``does 
not'' disturb ERISA preemption of State law actions against a plan 
sponsor except, ``except'' for the exercise of discretion by an 
employer on an employee's treatment that has resulted in a personal 
injury to that patient.

                              {time}  2200

  Other decisions by plan sponsors, including setting up a uniform 
benefit plan, is not, let me repeat, is not affected by section 302(a) 
of the Norwood-Dingell-Ganske bill. Opponents to our legislation claim 
that the bipartisan bill would subject employers to a flood of lawsuits 
in State courts over all benefit decisions and suggest that employers 
would be forced to abandon health insurance benefits.
  Mr. Speaker, according to a memorandum done by one of the leading 
ERISA labor law firms in Washington, Gardner, Carton and Douglas, this 
memorandum, which I will be happy to share with any of my colleagues, 
this is simply not correct. I will be happy to provide this brief to 
anyone who desires a copy.
  The gentleman from Georgia (Mr. Norwood) and I and the gentleman from 
Michigan (Mr. Dingell) have always wanted to protect innocent employers 
from liability. The vast majority of businesses, certainly small 
businesses, simply contract with an HMO to provide health coverage for 
their employees. They do not get involved with the HMO's decisions.
  So we wrote protections for businesses into our bill, the bill that 
passed this House. Those provisions are discussed in this brief, which 
makes four main points in a well-documented and scholarly review.
  First, lawsuits would not be against employers. Under current ERISA 
law, suits seeking State law remedies for injury or death of group 
health plan participants are already allowed in some jurisdictions. 
Those cases show us that suits are normally brought against the HMO, 
not against the employers. Why? Because employers are generally not 
involved in treatment decisions, the type of decisions that lead to an 
employee's injury or death. Ordinary benefits decisions, such as 
setting up a benefit plan, are not affected by our bill.
  Second, employer exposure would be limited. If an employer exercises 
discretion in making a benefit claim decision under its group health 
plan and that decision results in injury or death, then the section in 
our bill makes an exception to the ERISA preemption and would allow an 
employee to sue in State court, but to recover a patient must first 
prove that the sponsor exercised discretion which resulted in the 
injury or death and then must prove all elements of a State law cause 
of action based on the employer's conduct in making the decision on 
that particular claim. The injured patient must have a viable State law 
cause of action because section 302(a) in our bill only creates an 
exception to the preemption and does not create a new cause of action.
  Three, the statute's plain meaning limits employer liability. 
According to a thorough review of the law in this brief, the brief by 
Gardner, Carton and Douglas from September 27, 1999, the liability 
provisions in this House bill that protect employers would be 
interpreted under the Supreme Court's well established, quote, plain 
meaning, unquote, analysis. Such an analysis supports the bill's clear 
intention to continue to prevent any liability suits against employers 
that do not exercise discretion that results in injury or death. 
Specific language in our bill states that other types of discretionary 
employer language would not be affected and would not be subject to 
State tort law claims.
  The Heritage interpretations in this backgrounder simply ignore the 
quote, plain meaning, unquote, language of the Supreme Court.
  Number 4, employer health plans would not be destroyed. The limited 
legal exposure of employers in the House bill will not cause them to 
abandon health insurance for their employees. The experience of 
nonERISA group health plans supports this. A recent study by Kaiser 
Family Foundation compared ERISA health plans to nonERISA employer 
health plans, such as CalPERS or the State of Colorado. That study 
showed that the incidents of lawsuits and costs against nonERISA health 
plans, where an employee can sue the health plan, is very low, in the 
range of 0.3 to 1.4 cases per 100,000 enrollees per year at a cost of 3 
to 13 cents per month per employee.
  Mr. Speaker, am I going to be told that an employer is going to drop 
his health care coverage for an employee for the difference in cost of 
3 to 13 cents per month per employee? I think that a lot of employers 
would soon have no employees if that were the case.
  Furthermore, employees would not need to abandon control, control, 
over a group health plan to remain protected under our bill, the bill 
that passed the House. Having HMOs or other third parties make claims 
decisions as in the case for the vast majority of small businesses, but 
then monitoring the third party would preserve your employer control. 
If they are not doing a good job, you do not sign them up next year.
  An alternative for some self-insured third party administrators would 
be to insure their exposure. If third party administrators truly are 
not making medical decisions like they all claim, then their risk will 
be small and their premiums will be very low.
  Mr. Speaker, in addition, the House bipartisan bill delineates in 
section 514(e)(2)(B) several employer activities which specifically 
will not constitute an exercise of discretionary authority, such as 
decisions to include or exclude any specific benefit from the plan; 
decisions to provide extra contractual benefits outside the plan; 
decisions not to consider the provision of a benefit while an internal 
or external review of a claim is being conducted.
  Contrary to our opponents' claims, these carve-outs further insulate 
employers from State law actions, but I think a bit of legislative 
history is interesting here.
  Mr. Speaker, first business groups complained that without these 
provisions they would not be able to advocate for an employee not being 
treated fairly by their HMO. So the gentleman from Georgia (Mr. 
Norwood) and I put those exceptions into the bill. Then those same 
business groups complained that the exceptions were in the bill. You 
just cannot please some people.
  Now let us talk about the punitive damages protections in the House 
bill. This is another case in point of how you just cannot please some 
people. This provision was suggested to me, as

[[Page 2756]]

a matter of fairness, by members of the industry. They said if we are 
going to be bound by the external review board's decision and if we 
follow the board's decision, then we should not be liable for punitive 
damages, quote/unquote.
  Know what? I agreed, and this provision in my original bill was 
incorporated into the Norwood-Dingell-Ganske bill. Maybe Heritage does 
not think that this provision is significant, but that is not what I 
have heard from the industry. Remember, this punitive damages relief 
would apply to all health plans under our bill, not just to group 
health plans.
  While the Heritage paper closes by saying that the bipartisan House 
bill would result in, quote, a staggering amount of red tape for 
American doctors and patients, unquote, well, Mr. Speaker over 300 
patient and professional organizations have endorsed the bipartisan 
House bill. Spare them your crocodile tears, please.
  The Heritage paper also quotes Professor Alain Enthoven, a health 
policy analyst, from his paper, ``Managed Care: What Went Wrong? Can It 
Be Fixed?''
  Mr. Speaker, the Bipartisan Consensus Managed Care Improvement Act 
will go a long way to fixing the problem that Dr. Paul Ellwood, the 
father of managed care, expounded on at a Harvard conference last year. 
In speaking of the takeover of health care by managed care, Dr. Ellwood 
said, quote, ``Market forces will never work to improve health care 
quality, nor will voluntary efforts by doctors and health plans. It 
does not make any difference how powerful you are or how much you know, 
patients can get atrocious care and can do very little about it.''
  Remember, this is the originator of the concept of managed care. He 
goes on to say, ``I have increasingly felt that we have to shift the 
power to the patients. I am mad,'' he said, ``in part because I have 
learned that terrible care can happen to anyone.''
  Mr. Speaker, the Norwood-Dingell-Ganske bipartisan House bill which 
passed this House with 275 bipartisan votes would shift that power to 
the patient. I sincerely hope that the conference committee gets the 
message.

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