If you want an inkling of what the McCain-Kennedy-Edwards "patients’ bill of rights" would do, consider the cases of some plaintiffs who have already found ways around the federal law shield-which the bill would dismantle-that now protects managed care plans from liability for most coverage decisions.
Nelene Fox of California asked her HMO, Health Net, in 1992 to pay for a costly bone marrow transplant recommended by her physician to treat her advanced breast cancer. Health Net refused, on the advice of an outside advisory panel of medical experts that marrow transplants were an unproven, experimental procedure for such breast cancers and, thus, clearly not covered by the insurance contract. (More-recent studies suggest that bone marrow transplants are of no value in treating breast cancer.) Fox raised enough money to have the transplant anyway. She died eight months later. Her husband sued. A Riverside jury, inflamed by evidence that the Health Net executive who refused coverage could make more if he saved the company money, ordered the HMO in 1993 to pay Fox’s husband and estate $212,000 for the cost of the treatment, another $12 million for "emotional distress"-and $77 million in punitive damages for the HMO’s "bad faith." (The case was later settled for a much smaller, undisclosed sum.)
Karen Johnson of Louisville sued her husband’s HMO, Humana Health Plan, for refusing to pay for a hysterectomy that her doctor said was the surest cure for her cervical cancer. Humana defended its decision as based on the advice of three board-certified gynecologists that a different (and less costly) procedure (conization) would be more effective. Johnson had the conization, which was successful, at Humana’s expense and then paid $14,000 to have the hysterectomy for good measure. A Kentucky jury hit Humana in 1998 for the $14,000, another $100,000 for pain and suffering-and $13 million in punitive damages. (Humana settled the suit in October 2000 for more than $2 million.)
The facts that I have seen suggest Health Net did nothing wrong (I’m less sure about Humana), and neither of these HMOs did Fox or Johnson any real harm.
Some of the HMO horror stories propelling the "patients’ bill of rights" through Congress really do involve erroneous and outrageous denials of coverage by managed care plans: Some patients have been inconvenienced, some have become sicker, and some may have died due to bad decisions by managed care bureaucrats excessively bent on cost-cutting. The "patients’ bill of rights" will make it more costly for managed care plans to say no to such valid claims. So far, so good.
But by opening the way for trial lawyers to shop for state court judges and juries predisposed to crush HMOs with gargantuan damage awards-including unlimited punitive damages-the McCain-Kennedy-Edwards bill would also make it risky for HMOs to say no to millions of invalid claims by people seeking treatments that are not covered by their insurance contracts, are medically inappropriate, or even harmful.
Such massive overkill would aggravate three problems that cause far, far more harm than all HMO denials of coverage put together: resurgent, unsustainable cost inflation; the unaffordability of health insurance for 44 million people; and the pervasive medical malpractice by physicians and hospitals that causes as many as 100,000 preventable deaths a year.
Perhaps, as some experts predict, the impact of this legislation will be modest-a few billion dollars here, a few hundred thousand more uninsured there. But even if the defendants win 90 percent of the lawsuits filed against them, they would still risk being driven into bankruptcy by emotion-driven juries in the other 10 percent. The mere threat of such ruinous litigation may well force managed care plans to say yes to extremely costly treatments of nonexistent, or extremely limited, value. Health care inflation could once again soar, in a reprise of the runaway cost crisis of the 1980s and early 1990s-to which managed care has been a highly successful response, as detailed by Clive Crook in this issue. Costs-by 8 percent last year-are already climbing again, thanks, in large part, to the dozens of new state-law "bills of rights" for patients.
This money does not and will not come out of executive pay or HMO profits (which have been relatively modest). The plans pass them along to employers in the form of higher premiums-4.1 percent higher, according to a conservative Congressional Budget Office estimate. Some employers would pass these costs along to employees in the form of higher premium contributions, co-payments, and deductibles. Others would simply stop offering insurance to their employees. Either course would add hundreds of thousands-probably millions-of people to the ranks of the uninsured. And all this would happen regardless of what the legislation ends up saying about the much-debated side issue of how much individual employers should be shielded from direct liability.
These are not opinions. They are economic facts. The debatable question is the size of the increases in costs, premiums, and numbers of uninsured (or underinsured) people. If, as I suspect, the increases turned out to be very large indeed, before very long the backlash against "greedy HMOs" would give way to a backlash against "greedy doctors and hospitals." And even if the impact turned out to be modest, the costs would likely exceed the benefits received by a tiny minority of all employee-patients courtesy of the "bill of rights."
Empirical studies show that on average, managed care plans serve their patients as well as-and in some cases better than-traditional fee-for-service plans, and at lower cost. And consumer surveys show that most people are satisfied with their own managed care plans. This tends to confirm data suggesting that the horror-story anecdotes affect a tiny and shrinking minority of the 125 million people insured by managed care plans.
Anyone who believes that authorizing multimillion-dollar lawsuits to enforce a "patients’ bill of rights" against managed care plans will make most patients better off should consider the track record of the old-fashioned variety of malpractice litigation that targets doctors and hospitals.
The theory is that malpractice liability will both compensate victims and make doctors and hospitals more careful. But the studies show that the vast majority of malpractice victims don’t sue, and more than half of those who do-and many of those who win-are not victims of malpractice. "Medical malpractice litigation infrequently compensates patients injured by medical negligence and rarely identifies, and holds providers accountable for, substandard care," the landmark Harvard Medical Malpractice Study concluded a decade ago. Judges and juries have simply proven incapable of consistently distinguishing the bad doctors from the good ones. That’s why even the best doctors in many fields must pay as much for malpractice insurance as the worst.
The clearest consequences of malpractice litigation are to pad medical costs and enhance doctors’ incentives both to hide their mistakes (making recurrence more likely) and to waste countless billions on worthless "defensive medicine." Indeed, malpractice litigation may even increase the amount of malpractice. And even if it does some good, more than enough medical malpractice remains to do far, far more harm to patients than the HMO denials of coverage that so fascinate reporters and so enrage voters and jurors. Between 44,000 and 98,000 Americans die each year as a result of medical errors, the prestigious Institute of Medicine estimated in 1999-more than "from motor-vehicle accidents, breast cancer, or AIDS." And contrary to the widespread presumption that any treatment a doctor recommends must be a good idea, ineffective and unnecessarily risky procedures are a very common form of malpractice-and a major reason for the spread of managed care plans, whose vast patient databases are invaluable in assessing the effectiveness of various treatments and whose incentives to hold down costs offset physicians’ incentives to run them up.
We haven’t heard much about this kind of malpractice from the champions of McCain-Kennedy-Edwards. Indeed, "targeting managed care as the cause of all ills has made it more difficult to address the real quality problems which do exist with American medicine and which are largely attributable to the unconstrained discretion previously accorded providers," as Professor David A. Hyman of the University of Maryland School of Law wrote last year. He adds that "there are reasons to wonder about a reform strategy which ignores the overwhelming evidence of quality-based problems with most of American medicine."
If the HMO-bashers succeed in destroying managed care, what political panacea might they offer next-this time for the legislatively induced, litigation-driven cost crisis that they will have helped bring about? Federal cost and price controls, perhaps? A complete federal takeover of medical care? "Bill of rights" supporters such as Sens. Edward Kennedy, D-Mass., and Hillary Rodham Clinton, D-N.Y., would like that.