July 30, 2001

Dear Representative:

There has been a great deal of rhetoric, and more than occasional misrepresentations made, about the two competing managed care reform bills in the House: H.R. 2315, sponsored by Congressman Ernest Fletcher; and H.R. 2563, sponsored by Congressmen Charles Norwood, John Dingell, Greg Ganske, and Marion Berry.

The press and members of Congress have primarily focused on the liability provisions in the two bills, and this is indeed an important area. Consumers need to be able to hold their HMOs legally accountable for the decisions they make. The Norwood-Dingell-Ganske-Berry bill accomplishes this goal; the Fletcher bill falls far short of it.

But there are a number of other flaws in the Fletcher bill that have not received adequate attention in the media or on Capitol Hill. In an effort to highlight the real-life impact of this legislation, enclosed is an analysis entitled "Fletcher's World," which presents many of the difficulties consumers would encounter if the Fletcher bill, or any bill similar to it, became law. This analysis is based on our reading of the legislation, and what its practical impact on patients would be.

We urge you to review this analysis, and to ensure that any bill that the House considers addresses each of the real consumer problems that it identifies.

Sincerely,

July 30, 2001

FLETCHER'S WORLD

The World of Virtual Protections

Here are some examples of the problems that typical consumers could experience if H.R. 2315, managed care legislation introduced by Rep. Ernest Fletcher (R-KY), became law.

Anne can't get direct access to an ob-gyn without giving up her regular doctor.

The Fletcher bill allows HMOs to require a woman to select an ob-gyn as her primary care provider in order to have direct access to the ob-gyn. See § 103(b)(2), H.R. 2315. The Norwood-Dingell-Ganske bill guarantees all women direct access to an ob-gyn. See § 115(b)(2), H.R. 2563.

Bob can't see a doctor outside his HMO, even if he pays the extra cost, because he works for a small company.

The Fletcher bill does not require health plans to offer a "point-of-service" option to consumers whose employer has 25 or fewer employees. See § 102(c), H.R. 2315. The Norwood-Dingell-Ganske bill requires HMOs to give consumers a point-of-service option. See § 111, H.R. 2563.

Carmen & Daniel don't have any protections against their HMO, because they work for the county government.

The Fletcher bill does not cover people who work for state or local governments with self-insured health plans. See § 201, H.R. 2315. The Norwood-Dingell-Ganske bill does cover these employees. See § 201, H.R. 2563.

Emily lost her patient protections because HMOs pressured her state legislature into passing a weaker law, by threatening to leave the state altogether.

Under the Fletcher bill, if a state just claims that its laws are "substantially equivalent" to the federal law, the Secretary of Health and Human Services must withdraw federal protections for that state's residents unless there is "not a reasonable basis" for doing so. See § 151(a)(3)(B), H.R. 2315. The Norwood-Dingell-Ganske bill allows the Secretary to make an independent determination of whether a state law does "substantially comply" with the federal standard. See § 152(c)(3)(A)(ii), H.R. 2563.

Frank had a fatal heart attack 24 hours after his HMO denied his doctor's request to authorize angioplasty. Frank's right to an expedited external appeal was meaningless, because the external reviewer did not reverse the HMO's decision until two days after the heart attack - two days too late to save Frank's life.

Unlike the Norwood-Dingell-Ganske bill (see § 104(e)(1), H.R. 2563), the Fletcher bill does not require that external reviewers make their decisions in accordance with the medical exigencies of each case. Regardless of the patient's circumstances, the Fletcher bill gives reviewers three whole days to render decisions, even in urgent cases, where injury or death may occur. See § 503B(e)(1)(A)(ii), H.R. 2315.

Gita, distracted by her health problems, lost her right to an external review after 90 days.

See § 503B(b)(1), H.R. 2315. The Norwood-Dingell-Ganske bill allows patients 180 days to request an appeal. See § 104(b)(1), H.R. 2563.

Henry is paralyzed for life due to his HMO's negligence. After careful deliberation, a jury determined that $1.5 million in pain & suffering damages were necessary to help Henry make the life adjustments necessary to deal with his condition, but the jury was only allowed to give him one-third that amount, $500,000.

The Fletcher bill caps non-economic damages at $500,000. See § 141(a), H.R. 2315 (adding subsection (n)(4)(A) to § 502 of ERISA). The Norwood-Dingell-Ganske bill has no cap on non-economic damages for federal contract claims, and defers to state law for negligence claims. See § 402(b)(2), H.R. 2563 (adding subsection (d)(1)(A) to § 514 of ERISA). Most states have either no cap or a cap in excess of $500,000.

Inez can't have children, because her HMO falsely claimed her contract did not cover the surgery she needed. The jury wanted to award $3 million in punitive damages, to send a message to the HMO that callous disregard for the desire to have children in order to boost profits is unacceptable behavior, but was not allowed to award a single dime.

The Fletcher bill bars punitive damages. See § 141(a), H.R. 2315 (adding subsection (n)(4)(C) to § 502 of ERISA). The Norwood-Dingell-Ganske bill allows a civil penalty of up to $5 million in federal contract cases. See § 402(a)(1), H.R. 2563 (adding subsection (n)(10)(B) to § 502 of ERISA).

Jamillah was seriously injured due to her HMO's negligence, but she cannot hold her HMO accountable in court because one particular external reviewer sided with the HMO.

The Fletcher bill denies patients access to the courts unless the external reviewer ruled in their favor. See § 141(a), H.R. 2315 (adding subsection (n)(1)(B)(ii)(I) to § 502 of ERISA). The Norwood-Dingell-Ganske bill includes no such restriction, and allows all patients to enforce their rights in court.

Kim received a notice that her health plan has denied her request for treatment for her serious condition, but she can hardly understand a word it says. She cannot appeal what she does not understand.

The Fletcher bill allows an HMO to send a notice of denial written in unintelligible, highly technical language. The Fletcher bill then puts the burden on the patient to seek out an understandable version, at the same time as the deadline is nearing for filing an appeal. See § 503A(a)(4)(A), H.R. 2315.. The Norwood-Dingell-Ganske bill requires the notice to be "written in a manner calculated to be understood" by the patient. See § 102(d), H.R. 2563.

Lamar, who lost his job and is struggling to pay his rent, had to pay $50 to request an external review.

See § 503B(b)(2)(A)(iv), H.R. 2315. The Norwood-Dingell-Ganske bill sets the maximum fee at half that amount. See § 104(b)(2)(A)(iv), H.R. 2563. The Fletcher bill also indexes the $50 fee to inflation, so it will go up every year. See § 104(b)(2)(A)(iv), H.R. 2563. The Norwood-Dingell-Ganske bill includes no such provision. The Norwood-Dingell-Ganske bill also requires the HMO to proceed with the external review even if the patient is not able to pay right away. See § 104(b)(2)(B)(ii)(IV), H.R. 2563.

Mohammed's health insurance stopped covering his diabetic supplies and his children's check-ups.

The Fletcher bill allows for the creation of Association Health Plans (AHPs), which are efforts to evade state regulation of insurance, including minimum benefit requirements. See § 621, H.R. 2315 (adding § 805(b) to ERISA). The Norwood-Dingell-Ganske bill does not allow for the creation of AHPs.

Naomi did not get to see a specialist in time to treat her illness.

Under the Fletcher bill, an HMO is required only to provide "timely coverage" of specialist care; there is no requirement that patients actually get in to see those specialists in a timely manner. See § 105(a)(1), H.R. 2315. The Norwood-Ganske-Dingell bill requires that the HMO provide timely access to specialists. See § 114(a)(1), H.R. 2563.

Oliver's claim was denied by the external reviewer because the reviewer was unable to modify the HMO's decision.

The Fletcher bill allows an external reviewer to affirm or deny - but not modify - the HMO's decision. See § 503B(d)(3)(A)(ii), H.R. 2315. In this way, the Fletcher bill's external appeals section ties the hands of an external reviewer who would like to take a middle ground between the decision of the doctor and the HMO. In contrast, the Norwood-Ganske-Dingell bill allows the external reviewer to affirm, deny, or modify the plan's decision. See § 104(d)(3)(A), H.R. 2563.

Pamela's doctor did not order enough tests to diagnose her Lyme disease, because the HMO gives him bonuses for limiting the number of tests he requests.

Lyme disease is often difficult to diagnose because of false negatives, but if it is not caught early, it can become untreatable. Unlike the Fletcher bill, the Norwood-Dingell-Ganske bill restricts physician incentive plans "that may directly or indirectly have the effect of reducing or limiting services," such as ordering tests. See § 133, H.R. 2563 (borrowing the Medicare+Choice standard from § 1854(j)(4) of the Social Security Act (codified at 42 U.S.C. § 1395w-22(j)(4)). The Fletcher bill only calls for a study of the problem. See § 122, H.R. 2315.

Quentin & Rachel's family used to have insurance with a $250 deductible, but his employer stopped offering it and replaced it with a policy that has a $4,000 deductible.

The Fletcher bill expands medical savings accounts and removes restrictions so that more employers are likely to offer them. See § 601, H.R. 2315. Research shows that over time MSAs are likely to "crowd-out" traditional low-deductible policies. This means that employers who offer MSAs might eventually drop low-deductible coverage, leaving employees like Quentin with no choice but high-deductible coverage. The Norwood-Dingell-Ganske bill proceeds cautiously with MSAs, limiting them to employers with 100 or fewer employees, and requiring careful GAO analysis of possible negative side effects in the insurance marketplace. See § 511, H.R. 2563.

Sam can't see a specialist in his own state.

The Norwood-Dingell-Ganske bill requires that HMOs ensure that specialists are "accessible" to patients. See § 114(a)(1), H.R. 2563. The Fletcher bill includes no such requirement. See § 105(a)(1), H.R. 2315.

Tre had to stop taking his blood pressure medication because he couldn't afford it anymore.

Both the Fletcher bill and the Norwood-Dingell-Ganske bill have a procedure by which consumers can get drugs that are not on the HMO's "formulary." (Note: many HMOs use drug formularies to control costs. Drugs are put on various lists, with different cost-sharing levels, in order to encourage the use of preferred, lower cost, drugs.) However, unlike the Norwood-Dingell-Ganske bill, which limits patients' out-of-pocket payments to the amount that would apply to drugs on the formulary (see § 118(a)(3), H.R. 2563), the Fletcher bill does not limit cost-sharing for off-formulary drugs. See §108, H.R. 2315. This means that under the Fletcher bill, the HMO can force patients to pay all or most of the cost of these drugs.

Ursula & Victor can't get access to a pediatric specialist for their child.

The Norwood-Dingell-Ganske bill requires HMOs to provide access to pediatric specialists. See § 114(d), H.R. 2563. The Fletcher bill has no such requirement. See § 105(d), H.R. 2315.

Willimena was injured when her plan refused to follow the decision of the external reviewer. She brought a suit for damages, but because the plan can hide behind lots of other companies, she could not find the responsible party.

The Fletcher bill allows plans to name multiple "designated decisionmakers" for liability, each of whom would need to be pursued by a patient who has been improperly denied care. See § 141(a), H.R. 2315 (adding subsection (n)(2)(C) to § 502 of ERISA). Pursuit of the wrong decisionmaker would leave the patient without any remedy. The Norwood-Dingell-Ganske bill only allows for one decisionmaker. See § 402(a)(1), H.R. 2563 (adding subsection (o)(1) to § 502 of ERISA).

Xavier and his doctor would like to put him into an FDA-approved clinical trial to treat his HIV infection, but the HMO refuses to pay for it.

The Fletcher bill only requires HMOs to cover FDA-approved clinical trials if they are for cancer treatment. See § 109(d)(1)(C), H.R. 2315. The Norwood-Dingell-Ganske bill requires HMOs to cover all FDA-approved clinical trials. See § 119(d)(1)(B), H.R. 2563.

Yvette is sent home from the hospital after serious complications following a mastectomy. Her doctor wanted her to stay in the hospital for at least three days, but the HMO forced her to leave after only one day.

The Norwood-Dingell-Ganske bill requires HMOs to provide in-patient coverage for whatever length of hospital stay a doctor deems appropriate for a patient undergoing treatment for breast cancer. See § 120, H.R. 2563. The Fletcher bill has no such safeguard.

Zachary was fired by the HMO from his job as a physician's assistant, because he told regulators that the HMO was violating patients' rights.

Unlike the Fletcher bill, the Norwood-Dingell-Ganske bill protects health professionals from this kind of retaliation by HMOs. See § 135, H.R. 2563.