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Capitol Comment

    Capitol Comment 249 - Hey Congress: Please Don’t Feed the Trial Lawyers! Dingell-Norwood Hurts Patients, Helps Lawyers

    08/25/1999

    The "Bipartisan Consensus Managed Care Improvement Act" (H.R. 2723) is the federal government’s latest misguided attempt at controlling health care. While the bill’s list of sponsors demonstrates that it is bipartisan, if it becomes the consensus approach, Americans in managed care would see few, if any, improvements. It gives them little more than an expanded ability to sue. In reality, this approach will only take money out of consumers’ checkbooks and put it into the pockets of trial lawyers, making health insurance less affordable for all Americans.

    Just before Congress’s August recess began, Rep. Charlie Norwood (R-Ga.), Rep. John Dingell (D-Mich.), and 63 other members introduced this foray into the administration of managed health care plans. The legislation is similar to Sen. Kennedy’s (D-Mass.) "Patients’ Bill of Rights," which the Senate recently rejected.1 The Dingell-Norwood proposal would mandate a host of policies for health plans to follow. In addition, it would expand the opportunity for individuals to sue health plans, the employers who sponsor them, and the employees who administer them.

    Dingell-Norwood gives trial lawyers, judges, and juries control over medicine. If Congress passes this legislation, and in doing so, continues the incremental nationalization of health care, it would delegate much of its newfound authority to the legal system. Further interference from the legal system will not improve the level of medical expertise or the quality of care a patient receives.

    This bill amends ERISA, the federal law that governs self-insured health care plans, to allow lawsuits in state court against these plans. Currently, under ERISA, individuals can sue their health plans in federal court in order to obtain injunctive relief and/or to receive compensatory damages for denying a treatment. Dingell-Norwood would greatly expand these legal remedies – allowing people to file suit against more people for more types of damages in more courts:

    Dingell-Norwood eliminates ERISA preemption of state laws, thereby enabling trial lawyers to exploit more generous state juries and differing state tort laws.

    Under state tort laws, individuals could sue for compensation for pain and suffering and for punitive damages, which could produce scores of multimillion-dollar verdicts.

    Dingell-Norwood allows these lawsuits not only against health plans, but also against employers who purchase health insurance for their employees. In addition, workers at these plans or businesses could be held personally liable as well.

    Dingell-Norwood would cause delays in treating patients. America’s justice system is already slow and overloaded. Creating more litigation would make patients wait longer for the final adjudication of their claims. On the other hand, H.R. 2723 mandates the creation (and the details) of separate internal and external review mechanisms where patients can appeal health plans’ decisions. The bill, however, undermines these mechanisms by (1) failing to make their verdicts binding on these patients and (2) making punitive damages available only to patients who succeeded in external review – giving them the incentive to proceed directly to the courts.

    Dingell-Norwood would make patients pay for services they do not want or need. With H.R. 2723, Congress would decide how health plans must be run, such as mandating access to, and payments for, physicians, prescription drugs, and clinical trials that are not part of a health plan. Congress would even specify how frequently doctors in a plan must talk to each other about their patients; the length of time in which doctors have to decide on a course of treatment; and so forth. Patients would foot the bill, regardless of whether they want these rules.

    Dingell-Norwood would raise premiums and cost people their health insurance. New benefits and litigation are not cost-free. Forcing Americans to buy health insurance with government-specified benefits will, of course, cause their premiums to rise. Judgments, settlements, and trial lawyers’ fees in cases against health insurers would also be passed on to other workers through higher premiums. Businesses’ increased legal costs would be passed along, to the extent possible, through higher prices, lower wages, or fewer benefits. The Congressional Budget Office (CBO) estimates of a similar bill, the "Patients’ Bill of Rights," may provide a useful approximation of the higher costs of this bill. That legislation would have raised liability costs for health plans by 70 percent to 90 percent, and the mandates and liability costs would have caused premiums to rise by 6.1 percent – approximately $350 per American family.2 All of this would be on top of the expected significant inflation in health care costs.

    Making insurance more costly means fewer individuals and employers will pay for it. While it is difficult to predict exactly how many, one study indicates that for every one percent increase in premiums, 300,000 fewer people get employer-sponsored coverage.3 According to the CBO, every 1 percent increase in premiums due to mandated health benefits causes over 100,000 Americans to lose their employer-based health coverage; other studies predict two or three times that many could be affected. Notwithstanding this cost increase, many businesses will stop providing health insurance due to the increased risk of liability alone.

    Instead of giving lawyers and Washington’s bureaucrats more control of health care spending through the misnamed "Bipartisan Consensus Managed Care Improvement Act," the power should be returned to patients. Real reform doesn’t mean more mandates, but giving patients more choices. Congress should make it easier – not harder – for businesses and individuals to afford health insurance.

    1Rep. Dingell is also the sponsor of H.R. 358, the House counterpart of the Patients Bill of Rights (S. 6).

    2U. S. Congressional Budget Office, Cost Estimate of S. 6, Patients’ Bill of Rights Act of 1999 (as introduced), April 23, 1999.

    3See John Sheils, Vice-President, The Lewing Group, testimony before the Subcommittee on Health, Committee on Ways and Means, 106th Cong., 1st Sess., June 15, 1999.