Unintended Consequences Buried in Patients’ Bill of Rights

Published December 1, 2001

Some surprising facets of the bipartisan Patient Protection Act are beginning to emerge.

The House of Representatives, with the backing of the Bush administration, passed its amended version of the patients’ bill of rights (H.R. 2563) just before the August recess. The Senate had passed a companion bill (S. 1052) on June 29.

Both bills would make major changes in the financing and delivery of health insurance, introduce new avenues of litigation in the health care system, and establish a massive level of federal regulation over the operations of private health care plans.

The competing versions of the legislation must be reconciled in a House-Senate conference before a final bill can be presented to both bodies for a vote and sent to the President for his signature.

Competing Interpretations

Congressional supporters of the legislation say it will enable patients to sue abusive HMOs, redress an imbalance of power between physicians and insurance executives, and improve the quality of health care for millions of Americans.

Critics argue the legislation will fuel rising health insurance premium costs for individuals and families, discourage businesses from offering health insurance to employees, and add to the number of Americans who do not have health insurance. Supporters reply these predictions are self-serving exaggerations by insensitive employers and insurance companies opposed to serious reform of managed care.

Combing the Fine Print

Lawyers, lobbyists, health care specialists, and Washington policy analysts will be examining the provisions of these bills and how they interact with one another, and preparing analyses of how these sweeping measures would affect the health care system.

As is often the case, analysts invariably will find provisions that would have unexpected and undesirable consequences. This is especially true with respect to complicated congressional health care measures, such as the House and Senate versions of the patients’ bill of rights legislation.

A First Look

On August 21, The Heritage Foundation sponsored a panel discussion on the recently enacted bills, “The Right Prescription? Assessing the Patients’ Bill of Rights.” Invited panelists included top experts in the field of health care law and policy.

Among them were John Hoff, a prominent Washington attorney specializing in health care law and former senior staff member with the National Bipartisan Commission on the Future of Medicare; and Robert Charrow, a partner with the law firm of Crowell and Moring and principal deputy general counsel at the United States Department of Health and Human Services during the Reagan administration.

The target of the patients’ bill of rights legislation—and the litigation it encourages—is supposed to be abusive managed care companies. But the trial lawyers’ already-long reach may be a bit longer than even many of the proposal’s most ardent supporters, particularly the lobbyists for organized medicine, imagine. Note the remarkable observation by counselor Robert Charrow:

This is what this bill I think ultimately will do: It will demonstrate the principle that liability is like water. Water flows downhill. Liability flows to the deepest pocket.

In some cases, that deep pocket will be the insurance company. In other cases, that deep pocket will be the very people in favor of this legislation, the physicians.

How so? A large number of states have a cap on how much a doctor can be sued for. A large number of states do not have caps, or have very high caps. California, for example, has a $250,000 cap on what a doc can be sued for. In those states, the target of interest is going to be the insurance company. Because under the Senate version, there really is no cap. And under the House version, there is a modest cap but that cap is far higher than the cap on the doctors. So, therefore, the target of interest will be the insurance companies.

Flip to New York. Or a state without meaningful caps. There, it’s the insurance company that’s going to have the benefit of the cap, and the doctor is not going to have the benefit of the cap. In those jurisdictions, we’re going to see the doctors are going to be the targets of interest. And they’re the ones that are going to have to pay.

A Clarification

Asserting the panel chairman’s privilege, I asked for a clarification of Charrow’s point:

I’m going to ask the first question, because this is the first time I’ve ever heard this point raised in this very public debate.

You are saying that members of the medical profession could, under this managed care reform legislation, be liable? That’s clearly not the point of the legislation. I don’t think the American Medical Association acknowledges that, and I don’t think anybody from the medical profession has ever encountered, at least to my knowledge, what you have just told us.

So, my question to you, Counselor Charrow, is this: Have you had any communication with members of the medical profession on this particular issue? Because this is the first time I’ve heard it.

Charrow responded,

No, I haven’t. But look at the very first case involving what I would call HMO liability–which actually was a Medicaid case out of California, Wickline v. State (1986).

In that case, the court said, “You know, when all is said and done, it’s really the bloody doctor’s fault in this case. He’s the one that should have been sued.”

So, the handwriting was on the wall. And if you look at ERISA suits, where the plaintiff tries to get into court, notwithstanding ERISA preemption, the HMO certainly is sued. But also, the physician is sued, the hospital is sued . . . the chart is sued, as we call it. You sue the chart. Any name that appears on that chart becomes a party defendant, irrespective of what role they play. And then you sort it out later.

But if physicians think they are getting a free pass with this legislation, they are sadly mistaken. Quite the opposite is likely to be the case.

Dr. Robert E. Moffit is director of domestic policy studies at the Heritage Foundation.

For more information . . .

The full text of the proceedings of The Heritage Foundation’s August 21, 2001 conference, “The Right Prescription? Assessing The Patients’ Bill of Rights,” will soon be available as a Heritage Lecture. Visit the Heritage Web site at www.heritage.org for more.