The circuitous journey to the patients' bill of rights: winners and losers.

Author:Reece, Sharon
 
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INTRODUCTION

American health care spending underwent uncontrollable growth in the past several decades (1) and by the early 1990s health care costs were increasing exponentially. (2) The government and employers who purchased health care benefits sought measures to contain rising health care costs and to manage the population's increasingly, more complex medical needs. (3) These changes involved new plan designs that included cost containment measures, curtailment of access to medical services, improved technology, and limitations on hospital stays through the use of pre-paid health care plans. (4)

The new pre-paid plans, or managed care organizations (MCOs), use cost containment measures to exert economic control over medical decisions, while restricting patients' freedom of choice over their medical providers. (5) This modus operandum effectively traps participants in a medical care maze where the plan dictates the nature and quantity of services the patients receive. (6) Obviously, weighing cost against human life and quality of life could lead to medical care compromises. (7)

The process begins with an awkward risk assessment, reeking of ethical dilemma. (8) The dilemma ends with a patient, who, either a victim of morbidity or mortality, effectively is left without a remedy under what one must view as a serious and unpredicted "quirk" in the law. (9)

The Employee Retirement Income Security Act of 1974, (10) (ERISA), which Congress primarily designed to protect pension funds from forfeiture or loss caused by employee mismanagement and the like, also extends to employee welfare plans including healthcare plans. (11) Since Congress drafted the statute in reaction to an environment of failed pension plans and the economic dangers associated with mass forfeiture, the statute's design focused upon protecting and harmonizing private pensions under a federal umbrella. (12) Although ERISA directly regulates health plans, it does not provide substantive law for regulating such plans. (13)

To further complicate this conundrum, ERISA preempts state laws which "relate to" such plans (14) and provides a basis for removal to federal court through its preemption of claims. (15) Preemption, therefore, erects a barrier to state court suits or bars state laws from regulating employee benefit plans except under specifically articulated circumstances. (16) Not only is a patient plaintiff often unable to sue in state court with more liberal remedies, but often is unable even to apply state law and is forced to apply ERISA, which lacks extensive remedies. (17)

In an effort to combat these traps and to secure state subject matter jurisdiction, plaintiffs sometimes add state medical malpractice claims, which are typically a matter of state law and usually interpreted as a way of escaping preemption. (18) Courts also have attempted to dodge these traps by searching for ways to avoid preemption and to allow state jurisdiction and state law to apply. (19)

This article examines the solutions that the courts, legislatures, and litigants have chosen in an attempt to disable the ERISA preemption traps and considers the prognosis for the aggrieved patient under legislation in this area, as Congress discusses and votes towards a unified Patients' Bill of Rights. (20) This article argues that since the Supreme Court has closed the avenue to sue MCOs as fiduciaries directly under ERISA provisions, other avenues must be opened in this maze of traps either through legislation or Supreme Court interpretation. (21) Where the MCO is the true tortfeasor--as its financial bottom line and review procedures hamstring physicians' decisions--aggrieved patients should not be forced to assert medical malpractice allegations against physicians merely to provide the flavor of a state law claim to escape preemption under ERISA. Denial of benefits, which lead to quality-of-care compromises, should be analyzed as traditional quality-of-care issues and not as plan administration issues since the denial of benefits, at times, is the only mechanism that leads to the morbidity or mortality. (22) Additionally, courts should be able to hold employers liable for the acts of MCOs chosen to service their employees. In the same way that the choice of an annuity company by an employer to provide pension benefits is a fiduciary decision (23) for which an employer is held accountable, the choice of an MCO to provide healthcare to employees should be a fiduciary decision by the employer for which the employer is held vicariously accountable.

This article is divided into six parts. Part I gives a brief overview of the historic development and current state of health care delivery in the United States, including descriptions of managed care organizations and their cost control methods, which increase the likelihood of quality-of-care lawsuits. (24) Part II addresses theories of liability litigants have used against MCOs. (25) Part III addresses the greatest obstacle to suing plans on those theories and the ERISA barrier of preemption. (26) Part IV addresses how the circuits and the Supreme Court's ultimate rulings on the issues affected litigation over those obstacles. (27) Part V examines a variety of state legislative attempts at a patients' bill of rights. (28) Part VI predicts the winners and the losers under the alternate versions of the current House and Senate Congressional Patients' Bill of Rights. (29)

  1. HEALTH CARE DELIVERY: THEN AND NOW

    1. The History of Health Care Delivery in the United States

      Originally, health care followed a fee-for-service plan model where a fee was paid to the provider for each service provided either directly by the insurance company or directly by the patient and reimbursed by the insurance company. (30) Fee-for-service had advantages for both the physician and the patient, the physician was paid commensurate with the complexity of the case and the patient could change physicians and shop around for the most competitive fee. (31) A procedure or a consultation generated a fee commensurate to the complexity of the case--the more complex the case, the higher the fee. (32)

      Some criticized this arrangement as a significant contributor to the rise in health care costs since provider income was tied to the number of procedures ordered and the cost of the procedures performed. (33) The temptation was to prescribe all care that was of any benefit--even as a precautionary measure--regardless of cost, and with the additional temptation to order or perform procedures in borderline cases. (34)

      Insurance companies also participated in fee-for-service plans either through indemnity plans, service benefits, or fixed fees. (35) In the indemnity plan, a stipulated fee was assigned to each procedure and if the charges exceeded the insurance company's fee, the patient could be billed directly for the balance. (36) Service benefit plans pay for the entire cost of a predetermined quantity of medical care that has been negotiated with the patient at a price that (usually) has also been negotiated with the health care provider. (37) Under a fixed fee plan, the insurance company only reimbursed the physician a fixed fee for each patient's medical treatment, regardless of the specific procedures actually performed. (38)

      The conventional medical insurance plans typically exerted no control over the patient's choice of a physician or over the physician's delivery of care. (39) Doctors placed "the patient's care and treatment above all other considerations, and prescribed "all care that was of any benefit regardless of the cost," (40) and the patient paid a separate fee for each service provided. (41) Physicians could even refer patients to treatment facilities in which he or she had a financial interest. (42) Patients were less concerned about the cost of medical service, since, ostensibly, a third party was actually paying the bill. This lack of concern for prices, combined with other factors, caused health care costs to increase drastically. (43)

      MCOs curtailed these practices by compensating physicians on a per-patient, rather than on a fee-for-service, basis. (44) Under the MCO's system, the physician receives a predetermined fee for each patient, regardless of the care provided. (45) This arrangement is referred to as a capitation rate an actuarially determined prepaid amount that represents the projected health care cost of each plan member for the year. (46) Borderline and unnecessary procedures became unprofitable under the new MCOs since the profit margin and the service costs were embedded in the fixed fee. (47) The new plan style contrasts with the fee-for-service medical insurance plan model that dominated the healthcare industry for the previous three decades. (48)

    2. The Current State of Health Care Delivery

      "Today, most would not recognize Norman Rockwell's portrait of the family doctor." (49) The period during which an independent physician rendered health care to his or her patients has been steadily eclipsed by the proliferation of the managed care structure. (50) In 1999, about 906 HMOs operated in the United States. (51) Statistics reveal that the number of persons enrolled in HMOs increased from approximately 67 million in 1995 to an estimated 104 million in 1999. (52) Consumers became members of managed care plans either because their employer mandated participation, or because the employee determined that the cost was lower than the alternative "indemnity--type" insurance plans. (53) As more and more consumers joined managed care plans, physicians were impelled by the marketplace to participate in managed care organizations. (54)

      The two most popular MCOs are Health Maintenance Organizations, (HMOs) (55) and Preferred Provider Organizations (PPOs). (56) In a PPO, an administrative structure is established whereby the employer purchases health care services for its employees from providers such as physicians and hospitals for a...

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