Issue Analysis 95 – Congress Shouldn’t Stick Patients with Higher Medical Bills

The House of Representatives is poised to debate several bills that would refashion health insurance in America. These proposals have many provisions similar to those in the various versions of the “Patients’ Bill of Rights” the Senate debated in July. Some of the legislation would create new tax incentives and mechanisms for purchasing health insurance; others would add new regulations and new lawsuits to the health care system. The list of bills that may be enacted, in whole or part, includes:

H.R. 2723, the Bipartisan Consensus Managed Care Improvement Act, sponsored by Reps. Charlie Norwood (R-GA) and John Dingell (D-MI);

H.R. 2824, the Health Care Quality and Choice Act, sponsored by Reps. Tom Coburn (R-OK) and John Shadegg (R-AZ);

H.R. 2926, the Comprehensive Access and Responsibility in Health Care Act, sponsored by Rep. John Boehner (R-OH);

The Quality Care for the Uninsured Act, sponsored by Rep. Jim Talent (R-MO) (House Resolution number to be designated).

Congress must carefully consider the full consequences of new legislation, starting with these five questions:

1. Should Congress expand the ability of patients to sue their health plan?

No, because this will not improve the quality or promptness of health care. Norwood-Dingell and Coburn-Shadegg would let patients sue self-insured health plans, such as HMOs, in state courts for medical malpractice if they refuse to provide a treatment a patient views as medically necessary. Advocates for these bills assert that health plans sometimes deny costly treatments to patients because the plans are currently immune from lawsuits. But the Employee Retirement Income Security Act (ERISA) already allows Americans to sue for the financial value of the care denied them if they belong to a self-insured health plan (other health plans are regulated at the state level). And patients can sue health care providers in state court for medical malpractice, regardless of their coverage.

Litigation is a lengthy process that will not bring swift treatment to ailing patients. Proponents of eliminating ERISA’s preemption of state laws for self-insured health plans argue that plans will be less likely to deny treatments if they risk large jury awards for compensatory and punitive damages. But health plans could react in other, more detrimental ways, like giving patients any treatment they desire, even if it might be counterproductive, or dropping all coverage for specific illnesses or courses of treatment.

Health plans can be held accountable without forcing patients into the courtroom. For example, the Norwood-Dingell, Coburn-Shadegg, and Boehner bills all contain provisions creating external review panels as alternatives to litigation. Norwood-Dingell and Coburn-Shadegg, however, would eviscerate the agreements signed between employers and health care plans. Arbitration panels set up by these two bills would not have to consider the terms of the health insurance policy to determine if the care denied to a patient was medically necessary. This is a far cry from holding health plans “accountable” to the terms of their contracts.

2. Should Congress give individuals another platform to sue their employer and coworkers?

Businesses should not be punished for offering a benefit to their employees. Norwood-Dingell and Coburn-Shadegg could create even more costly litigation by allowing patients to sue their employer and coworkers under certain conditions. Both of these bills have vague, undefined provisions that will leave employers and health plan administrators uncertain of what actions may cause them to be sued. Exposing businesses to the risk of lawsuits, and the costs of defending against them, will make them far less likely to provide their employees with health insurance.

A Guide for Congress

H.R. 2723

Norwood-Dingell H.R. 2824

Coburn-Shadegg H.R. 2926

Boehner Quality Care for the Uninsured Act

Talent

Increases Affordability through Tax Deductions

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ü

Increases Access to MSAs (Medical Savings Accounts)

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ü

Increases Access to AHPs (Association Health Plans)

ü

ü

Expands Liability of Health Plans

ü

ü

ü

Exposes Employers and Coworkers to Lawsuits

ü

ü

Increases Federal Bureaucracy

ü

ü

ü

ü

3. Should Congress allow federal bureaucrats to micromanage health plans?

Norwood-Dingell would enable the federal government to order health plans to hire additional doctors if they do not meet federal criteria on the number, type, and distribution of physicians in their network. The bill would require health plans to pay for physicians, prescription medicines, or clinical trials that are not part of a plan’s coverage. It would also require plans to make internal review decisions (“second opinions”) in certain cases within three days; Shadegg-Coburn shortens this mandate to two days. The Norwood-Dingell, Coburn-Shadegg, and Boehner bills all have other regulations like these that let government try to run health care plans from afar, instead of letting patients, providers, and employers determine how plans will operate.

4. Should Congress increase the cost of health insurance?

A major reason so many Americans lack health insurance is that the policies available to them, either through their employers or for purchase in the individual market, are too expensive to afford. Incredibly, some of these pieces of “reform” legislation would exacerbate the problem. More litigation and new, government-required benefits are not cost-free. In other words, laws that force providers to offer specific benefits are hidden taxes that increase the price of health care. The cost of judgments, settlements, and trial lawyer fees in cases against health plans would be passed on to other workers through higher premiums. Patients will also foot the bill for government edicts on what features health plans must have, regardless of whether they desire these options.

5. Shouldn’t Congress help Americans choose their own health care?

The Boehner and Talent bills include provisions that make insurance easier to purchase. Under both of these bills, Americans who purchase health insurance on their own would get new and expanded tax deductions for the cost of their health expenses. The self-employed would receive expanded deductions faster than under current law. Small businesses could band together to purchase insurance for their employees in order negotiate lower rates and avoid some variations in state laws and regulations. Non-profit groups, such as professional, trade, or other membership associations could begin to offer health insurance, termed Association Health Plans (AHPs), which would also be regulated at the federal level. Finally, the bills would expand eligibility for Medical Savings Accounts (MSAs), allowing Americans to save money tax-free to pay for any medical bills and premiums.

Conclusion

All of these options would make it easier for consumers to get affordable health insurance. In addition, giving health care consumers more choices of health insurance policies will increase the health plans’ accountability. Instead of forcing dissatisfied patients to go to court, why not let them choose a better health plan? Before making extensive changes to the nation’s tax code, the rules for operating health plans, and the civil court system under the broad rubric of patients’ rights, Congress should realize what health care consumers truly need: more choices, not more regulation.

Will Congress Make It All Better?

Or Prescribe the Wrong Medicine?

Approximately 44 million Americans don’t have health care insurance today.

Of those, 26 million work for small businesses or have a family member who does.

If current trends persist, 53 million Americans will be uninsured by the year 2007.

The liability and benefit mandates in these bills could increase premiums by over 6 percent – on top of cost increases that are predicted to skyrocket over the next five years.

Every 1 percent increase in health insurance premiums forces 100,000 to 300,000 Americans to lose their health care coverage.

Lawsuits already cost the average American $600 in higher premiums, prices, and taxes.

If small businesses could be sued as a result of providing health care insurance, 57 percent would consider no longer providing their employees with this benefit.

Mandated benefits prevent as many as one-fifth of all small businesses that do not offer health coverage from doing so.

Only three percent of health insurance claims are denied by health maintenance organizations each year.