When Taking Two Aspirin Won’t Do: A Primer on the Patients’ Bill of Rights

The legislative battle in Washington over the so-called “patients’ bill of rights” is a lot like the packet of brochures you get from your employer describing your medical coverage: It’s complex, confusing, technical, legalistic and more than a little off-putting.

To help clarify some of the key issues, Knowledge@Wharton got in touch with Wharton faculty members who follow the health-care sector and asked them for their views on what provisions the final bill should include.

The patients’-rights debate underscores the difficult job of trying to hold down costs while giving consumers more say in the kind of medical treatment they can obtain, the professors note. They agree that it is necessary to give patients a degree of additional leverage over health maintenance organizations and other managed-care providers, but some are more skeptical than others about the benefits to be derived from giving patients the right to sue HMOs. What is more, they say, the focus on a patients’-rights bill does nothing to address what they see as the more important issues of Medicare reform and insuring the uninsured.

“Patients are getting screwed over left and right by insurers, physicians and everybody in the system,” says Bernard Bloom, research professor of medicine and health care systems at Penn. “It’s not necessarily knowingly. Nobody’s out to do anybody any harm. It’s just that in the course of events people end up getting shafted.”

Mark Pauly, chairperson of the health care systems department, says the backlash against HMOs is often justified. But he notes that the system as a whole is not as bad as anecdotal horror stories of denied referrals and emergency-room treatment would indicate.

“A researcher at the University of California at San Francisco looked at the issue of clinical quality and found that, on average, people in HMOs get neither better nor worse medical care than people with conventional fee-for-service insurance,” Pauly says. “But other studies show there is a lot of consumer dissatisfaction with HMOs. In other words, it’s not that HMOs are killing us, it’s that they’re making us mad.”

On June 29 the Senate approved a bill that lays out a number of rights for patients covered by managed-care plans. For example, the measure guarantees that patients can obtain care at emergency rooms even if the hospitals are not affiliated with the HMO. It also requires that HMOs give patients quicker access to medical specialists. In addition, the bill addresses the issue of patient access to experimental medical treatments.

The most contentious parts of the bill, however, deal with when and where patients can take legal action if they feel that an insurer wrongly denies them care and, as a result, causes them harm.

The bill would allow most patients to sue in federal courts to settle disputes over benefits, co-payments and other non-medical judgments. No limits would be set on damage awards for lost wages or pain and suffering, but there would be a limit of $5 million on punitive damages. In state courts, by contrast, patients would be allowed to file suits if they were denied coverage based on a medical judgment. In state courts, there would be no limits on awards for lost wages, pain and suffering, or punitive damages, unless state law imposed limits.

The right to sue would kick in only after a patient went through a newly established administrative-review process that is outlined in the bill. The review process is designed to provide a way to settle a complaint in lieu of suing. A patient who is able to demonstrate that he or she was irreparably harmed by an insurer’s refusal to pay for treatment must nonetheless wait 31 days before filing suit. During that time, a panel of independent experts would review the case, and the panel’s findings would be admissible in the court where the suit is being heard.

Nine GOP senators joined their Democratic colleagues in voting for the bill even though President Bush and other Republicans opposed the measure, which now will be taken up by the House. Bush fears the bill will cause an explosion of litigation that would cause health-care costs to soar, drive up insurance costs and cause families to lose coverage. The president is pushing to have lawsuits limited to federal courts and to impose caps on damages.

“The lawsuit issue is the one that has attracted the most attention, and the attention it gets strikes me as symptomatic of a breakdown in trust,” says David Asch, executive director of the Leonard Davis Institute of Health Economics. “It tells me that people haven’t found a constructive way to deal with the tensions that exist in health services. We’d like to have some mechanism in place to allow for appropriate cost containment in health-care decision-making and increased accountability of the people in charge of that cost containment. What is the appropriate way to find a compromise? I think it’s a shame that people think lawsuits is the way to do it.”

Pauly says he favors some type of alternative system to resolve disputes. “We know tort law is a terrible way to provide incentives for high product quality,” he says. “It’s hard to believe there isn’t some better way. I’m not as concerned about the level of damages [a plaintiff could be awarded] as the mechanism of ascertaining them.”

Arnold Rosoff, professor of legal studies and health care systems, stresses that the entire issue of managed care is so complex that it does not lend itself to facile analysis or easy solutions. “I have sympathy for health plans and the employers who pay premiums for healthcare coverage,” says Rosoff. “The public wants to cut costs, which inevitably involves rationing care; but then they are outraged when care is rationed. At the same time I think managed care companies have gone to excess in cost containment. There used to be a lot of fat in the health care system – unnecessary surgery and testing, excessive lengths of stays in hospitals, doctors ordering any tests that came to mind, etc. – and price was no object. If a system has fat in it, and if you’re careful and use a scalpel, you can trim the fat without harming muscle or nerves. But some managed care companies have used a meat cleaver to cut out the fat and people have been hurt as a result.”

Rosoff supports allowing lawsuits against HMOs, provided there are safeguards in place to prevent frivolous suits. He notes that proponents of tort reform often exaggerate the dangers posed by such suits; judges already have the ability to throw out such cases before they go to trial. He says tort reformers also exaggerate the extent to which “runaway juries” award big damages that can financially harm insurers. When jury awards are excessive, they can be – and commonly are – pared back by the trial judge or an appeals court.

Neither Rosoff nor Bloom favor the notion of allowing patients to sue their employers, unless an employer played a direct role in deciding whether a patient would receive medical care. “I don’t come down strongly on either side of many of these issues,” Rosoff says. “In general, I favor allowing the right to sue HMOs. And if it was found that an employer played a significant role in making coverage decisions, I would allow that employer to be sued. But I wouldn’t throw everybody into the litigation pot. You should only be sued if you arguably caused harm. I would accept limitations on damages, but I don’t have a simple prescription as to what those limitations should be. I’d favor allowing suits in state courts as well as federal courts, but I would allow the recovery of defense costs when a suit is found to be frivolous. I would set a high standard, though, for determining that a suit is frivolous.”

Asch says increasing the ability of patients to sue an HMO helps ensure a “level playing field.” “But people who think that’s a solution to the problems we face are wrong. The problem is that our desire for health care exceeds our willingness to pay for it. Nothing in the legislation about lawsuits addresses that fundamental problem.”

Nor, says Asch, does the current furor over patients rights address the issue of how policy makers and the private sector can find a way to provide coverage to the 30 million to 40 million Americans who lack health insurance. “As far as I’m concerned, we’ve got bigger issues than this,” Asch says. “It may be important to put health plans on record and say to them ‘You don’t get a get-out-of-jail-free card,’ but it won’t address the important issues.”

Pauly agrees. He says the patients’ bill of rights is attractive to both Republicans and Democrats because it is legislation that largely affects the middle class – not the elderly, who are covered by Medicare, nor the lower-middle class, who largely make up the ranks of the uninsured. “My view is that this is something Congress can do to avoid dealing with the more serious problems of Medicare and insuring the uninsured,” Pauly says. “The patients’ bill of rights allows members of congress to go trolling for votes.”

For his part, Bloom favors a system of universal coverage that provides basic insurance for every citizen; people would then have the option of buying additional coverage. “How do patients protect themselves?” he asks. “The physician is not the patient’s agent anymore. You have parties with very divergent interests. We don’t want to take a comprehensive look at this issue. The answer is a comprehensive system where everyone has coverage that’s fairly broad and deep.”

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